Peacock v. Chegwidden, A99A0020.

• Decision Date: 28 May 1999
• Docket Number: No. A99A0020.,A99A0020.
• Citation: 238 Ga. App. 328,518 S.E.2d 760
• Parties: PEACOCK et al. v. CHEGWIDDEN et al.
• Court: Georgia Court of Appeals

518 S.E.2d 760

238 Ga. App. 328

PEACOCK et al. v. CHEGWIDDEN et al.

No. A99A0020.

Court of Appeals of Georgia.

May 28, 1999.

Cofer, Beauchamp, Stradley & Hicks, Stanley A. Coburn, Calvin P. Jellema, Atlanta, for appellants.

Womble, Carlyle, Sandridge & Rice, Nisbet S. Kendrick III, Atlanta, for appellees.

McMURRAY, Presiding Judge.

Plaintiffs H. Dean Peacock and Peacock Architects, Inc. filed this action for damages, an accounting, and other relief against defendants William E. Chegwidden, Charles E. Holmes, Don R. Dorsey, and CDH Partners, Inc. ("CDH"; collectively "defendants"), alleging that in October 1993, plaintiffs and defendants "combined their separate architectural skills and formed a business entity in the nature of a joint venture [ (`Partnership 1')] to market and perform architectural services within the health care industry." Subsequently, plaintiffs and defendants allegedly entered into another partnership ("Partnership 2"), "whereby revenues and profits from all parties' respective operations were to be pooled and shared on a predetermined basis." But that business was dissolved by the defendants, who "wrongfully retained certain net profits which were earned primarily as a result of Plaintiffs' efforts...." Specifically, in January 1996, defendants advised plaintiffs of their desire to terminate the aforementioned business relationship, and in February 1996, plaintiffs and defendants entered into "a termination agreement [ (`the Dissolution Agreement')] to dissolve the ... business arrangement." Plaintiffs sought $400,000 for the termination of this business relationship. All defendants admitted that plaintiff Peacock was an employee of defendant CDH, and further admitted that all parties discussed various alternative future business arrangements including plaintiff Peacock's possible purchase of stock in CDH from one of the shareholders, but denied the material allegations of a final agreement regarding a partnership or joint venture, or the terms of the eventual termination of their professional relationship. Defendant CDH counterclaimed for conversion of approximately $400,000 in payments to Peacock Architects, Inc. under existing contracts made on behalf of CDH. After discovery, defendants moved for summary judgment on the ground that the alleged partnerships, joint ventures, and so-called Dissolution Agreement lacked mutuality and so were unenforceable. The trial court agreed and granted partial summary judgment as to all theories of liability contained in the complaint before amendment. This appeal followed. Held:

1. "A partnership is an association of two or more persons to carry on as co-owners a business for profit." OCGA § 14-8-6(a). "A partnership results from a contract, either express or implied. Huggins v. Huggins, 117 Ga. 151, 155(1), 43 S.E. 759." Clark v. Schwartz, 210 Ga.App. 678, 679, 436 S.E.2d 759. But the consent of the parties is essential to a contract, and "until each has assented to all the terms, there is no binding contract." OCGA § 13-3-2. Although the record in this case is replete with factual issues as to the existence of CDH & P, a division of CDH, as a joint venture (Partnership 1), we conclude there are no material fact questions about any subsequent partnership and its dissolution (Partnership 2 and the Dissolution Agreement), because plaintiff Peacock admitted there was no final agreement as to essential terms for each subsequent alleged contract.

2. In his deposition, plaintiff Peacock testified he did not need a lawyer's assistance to form a corporation, and that he understood a corporation was a separate legal entity. It was plaintiff Peacock's understanding that Partnership 1 consisted of CDH & P, an unincorporated entity intended to do business as a division of the defendant professional corporation, CDH. Plaintiff Peacock understood he was "a principal and owner of activities related to the operations of CDH & P as an entity," and does not contend he thereby became an owner of defendant CDH. Plaintiff Peacock and the three principals of defendant CDH, defendants Chegwidden, Dorsey and Holmes, desired to "avoid the paperwork and the legal work [necessary] to form a separate legal entity." Plaintiff Peacock's duties were to pursue and manage operations related to that business, acting as the primary client contact. Any profits derived from CDH & P would be split based on a year-end evaluation of activity related to the principals involved with CDH & P, that is, how much activity from defendant CDH was "actually utilized in CDH & P work and expansion, and basically take a yearly look at that to determine a fair agreement on splitting profits." As of November 1, 1993, all individuals who had been employees of Peacock Architects, Inc. became employees of defendant CDH. CDH remained apart from CDH & P activities; there was no merger of the two. But in December 1993, defendant Dorsey and plaintiff Peacock, each signing as a principal of CDH & P, jointly submitted an architectural and engineering proposal to Kennestone Hospital on the stationery of defendant CDH. In his affidavit, plaintiff Peacock deposed that he received a "draw equivalent to that ... [paid the individual defendants, and this payment] was understood to be a draw against profits," as plaintiff Peacock did not have any fixed annual compensation.

"The sharing of gross returns does not of itself establish a partnership." OCGA § 14-8-7(3). But "receipt by a person of a share of the profits of a business is prima-facie evidence that he is a partner in the business," subject to certain exceptions. OCGA § 14-8-7(4). In the case sub judice, evidence that plaintiff Peacock received a salary from defendant CDH is not determinative of the existence vel non of a joint venture in CDH & P. See Gnann v. Cameron, 29 Ga.App. 608, 609, 116 S.E. 338. This is especially true since defendant CDH held plaintiff Peacock out as a principal in CDH & P to prospective customers. "Whether the parties intended to make a contract [for a joint venture] is a question of fact. See 1 Corbin, Contracts, 474, § 106 (1950)." Frey v. Friendly Motors, 129 Ga.App. 636, 637, 200 S.E.2d 467. The evidence authorizes a finding that the division of the profits was not to be equal among all partners but would be pro rata, based on the parties' respective contributions. The trial court erred in granting summary judgment as to claims regarding this alleged oral joint venture, including the claim for an accounting among partners as authorized by OCGA § 23-2-70(5). "Where a fiduciary relation exists, an accounting in equity is proper." Atlanta Trust Co. v. Nat. Bondholders Corp., 188 Ga. 761, 766-767(2), 4 S.E.2d 644.

3. Partnership 2, an equal partnership, allegedly arose on January 1, 1995, when defendant Chegwidden approached plaintiff Peacock with a proposal to "fold both Peacock Architects and CDH & P under one entity, creating a single firm," in which stock would be owned by the existing stockholders or partners, defendants Chegwidden, Dorsey, and Holmes, plus plaintiff Peacock. Plaintiff Peacock understood he would buy the interest of defendant Holmes in CDH for $250,000, paying $25,000 per year out of plaintiff Peacock's share of a specified quarter's profits derived by the new entity. For the first five years, profits would be split four ways, then revert to a three-way split with defendant Holmes accepting a salary but no longer receiving a share of the profits. But in January 1995, the parties were "still resolving and working on specific details...." There was never any writing memorializing the agreement, and the parties never simultaneously acknowledged any agreement. According to plaintiff Peacock, they had an agreement "knowing full well that the specific details of that agreement were yet to be materialized." Specifically, plaintiff Peacock did not yet know the future "legal structure as a whole of CDH, how the ownership would be transferred, what documents would need to be prepared...." The distribution of stock was still outstanding because defendant Holmes "wanted to leave stock to his son[,] an employee of CDH." So as of January 1, 1995, plaintiff Peacock truly "had not 100 percent agreed" to pay defendant Holmes $250,000 as an equity contribution to become a 25 percent shareholder in defendant CDH. Plaintiff Peacock never did pay any portion of the $250,000 for his alleged partnership interest. As for the purchase of the assets of Peacock Architects, Inc., plaintiff Peacock submitted a proposed amount for the assets but never received an express acceptance. Rather, he believed defendants agreed to his proposal because they never raised any objections or...