Rhoades v. Barcal, Docket No. 21977

• Decision Date: 28 October 1975
• Docket Number: Docket No. 21977
• Citation: 65 Mich.App. 315,237 N.W.2d 306
• Parties: Deo RHOADES and Betty Rhoades, Plaintiffs-Appellants, v. Howard S. BARCAL, Jr., et al., Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

Page 306

237 N.W.2d 306

65 Mich.App. 315

Deo RHOADES and Betty Rhoades, Plaintiffs-Appellants, v. Howard S. BARCAL, Jr., et al., Defendants-Appellees.

Docket No. 21977.

Court of Appeals of Michigan.

Oct. 28, 1975.

Released for Publication Jan. 23, 1976.

James, Dark & Craig by Richard M. James, Kalamazoo, for plaintiffs-appellants.

Globensky, Gleiss, Henderson & Bittner, St. Joseph, for defendants-appellees.

Before KAUFMAN, P.J., and R. B. BURNS and DENEWETH, ^* JJ.

R. B. BURNS, Judge.

Plaintiffs appeal the decision of the trial judge that the relationship between plaintiffs and defendants did not constitute a partnership, and that plaintiffs are not entitled to additional compensation for their labors on behalf of defendants' Melody Lanes, a bowling and dining facility in South Haven, Michigan.

This is an unfortunate and difficult case, with many disputed questions of fact. Those that are not disputed are as follows.

In early 1967 Deo Rhoades was operating a gas station in South Haven. His business was about to end because the state had condemned the property. Mr. Rhoades was interested in finding a new occupation. It also appears that at that time Howard Barcal was interested in finding someone to manage the bowling alley (which includes a snack bar, liquor bar, and attached restaurant/cocktail lounge, the 'Red Carpet') of which he was the owner. Mr. Barcal needed extra cash to invest in Melody Lanes. With this in mind, Barcal and Rhoades discussed the formation of a partnership.

Deo Rhoades did not have any funds immediately available in April, 1967, when he began working at Melody Lanes. Nor was there a written agreement. However, at the end of May, 1967, Rhoades tendered a check for $5,000 to Barcal and a written agreement was then signed on June 29, 1967. This inelegantly drafted agreement contains a 'Partnership Purchase Plan', which indicates that Deo Rhoades could 'elect' in an unspecified manner to accumulate 'volume increase credits', a portion of the increased profits of the business, towards payment of his recited capital share of $150,000. This document, as drawn by Howard Barcal, does not purport to set up an existing partnership.

Plaintiffs and defendants worked together for 5 1/2 years until November, 1972. Plaintiff's had tendered an additional $5,000 to Howard Barcal by two checks written in August and September of 1970. One day in November, 1972, Howard Barcal came up to Deo Rhoades in the bowling alley and indicated that they no longer agreed on the management of the business and that Rhoades would be terminated at the end of the year.

In January, 1973, plaintiffs commenced this action for a dissolution of the partnership and for an accounting or for additional compensation for services rendered. The trial revealed extensive evidence in support of both plaintiffs' and defendants' versions, and the judge found for defendants on both claims.

Much circumstantial evidence indicated the nonexistence of a partnership. The liquor license of the establishment was in Howard Barcal's name, and was never changed to include Deo Rhoades. In 1969, the Barcals signed a land contract to purchase the real estate on which the bowling alley is located. Although plaintiffs witnessed this document, they did not have and do not claim an interest in the real estate. No partnership papers or partnership income tax returns were filed, and there are no other government documents that would indicate that the business was run as a partnership. A Van Buren County enforcement officer for the Michigan Liquor Control Commission had interviewed both Barcal and Rhoades and testified that, as far as he could determine, Rhoades had no interest in the establishment. Similar testimony was offered by an independent land developer.

Plaintiff's circumstantial case is also attractive. Numerous employees of the business testified that the Rhoades were looked upon as part owners in the business, both from the standpoint of the nature of their work and by direct statements of Howard Barcal to the effect that Deo Rhoades was his partner. The yellow pages advertisement for the business contained the names Deo and Betty Rhoades and Bud and Fran Barcal. Deo Rhoades worked very long hours, often upwards of 100 hours per week, and involved himself in virtually all phases of the business. He appeared to have full managerial authority. The Rhoades' investment of $10,000 and a pickup truck can be seen as a capital contribution. Betty Rhoades signed the paychecks for the business. Further, the 1967 agreement contains numerous indications of something other than an employer-employee relationship, E.g., the last paragraph: 'The spirit of this agreement is to enable the parties involved to * * * build assets over a period of years for themselves and their estates * * *.'

The trial judge, sitting in equity, found 'that no partnership ever existed between plaintiffs and defendants', and that Deo Rhoades never exercised his 'option to purchase an interest'. Plaintiffs' cash advances were viewed as a loan, and ordered repaid with accumulated interest per the 1967 agreement. The requested accounting was denied.

While we cannot be wholly satisfied with this relatively mechanical disposition, we must approach this appeal with self-restraint. Our duty is to review the record De novo. In re Hartman's Estate, 51 Mich.App. 192, 215 N.W.2d 202 (1974); Cerling v. Hedstrom, 51 Mich.App. 338, 214 N.W.2d 904 (1974). However, '(w)hether an action is in law or...