Sit v. T & M Properties

• Decision Date: 23 June 1987
• Docket Number: No. C7-87-147,C7-87-147
• Citation: 408 N.W.2d 182
• Parties: Eugene C. SIT, Appellant, v. T & M PROPERTIES, et al., Respondents.
• Court: Minnesota Court of Appeals

Page 182

408 N.W.2d 182

Eugene C. SIT, Appellant, v.T & M PROPERTIES, et al., Respondents.

No. C7-87-147.

Court of Appeals of Minnesota.

June 23, 1987.

Syllabus by the Court

1.Trial court did not err in concluding investor entered partnership when he invested in the partnership project.

2.Trial court did not err in concluding investment was not induced by fraud or misrepresentation.

Michael L. Perlman, Nodland, Conn, Nordaune & Perlman, St. Louis Park, for appellant.

David A. Bailly, Daniel E. Fobbe, Cragg & Bailly, Ltd., St. Louis Park, for respondents.

Considered and decided by POPOVICH, C.J., and WOZNIAK and LESLIE, JJ., with oral argument waived.

OPINION

POPOVICH, Chief Judge.

This appeal is from an order denying amended findings and a new trial and restating a prior conclusion appellant is not entitled to rescind a partnership investment.Appellant claims the trial court erred because (1)the parties did not intend appellant to become a partner in respondents' partnership and (2)appellant's investment was induced by fraud and misrepresentation.We affirm.

FACTS

In January 1982, respondentsHerbert F. Thomas and George Mellon entered into a partnership known as T & M Properties for the purpose of acquiring a 24-unit apartment building in Minneapolis.Respondents each contributed $30,000 toward the down payment and financed the balance with an eight-year contract for deed.Although title to the property was taken in respondents' individual names, respondents purchased the property with partnership funds and intended the property to be partnership property.

In spring 1984, appellantEugene C. Sit approached respondent Thomas, whom appellant had known for approximately 18 years, and inquired about investment opportunities.Beginning in June and continuing through August, respondent Thomas and appellant met periodically to discuss appellant's possible investment in respondents' property.On one occasion, appellant accompanied James Larson, a professional real estate developer and manager, to inspect the property and other properties managed by Larson.Negotiations were proceeding to involve Larson as project manager and a local bible college as a tenant and additional investor.

On August 27, 1984, respondent Thomas informed appellant the project needed funds and asked appellant to send a $30,000 investment.Appellant sent a check for that amount and enclosed a note requesting the partnership agreement and relevant information regarding the property be sent to appellant at respondent Thomas' earliest convenience.Shortly after his investment, appellant went away on business.

At the time of appellant's investment, real estate taxes and contract for deed payments on the apartment building were delinquent.A few days after appellant's investment, the partnership was notified of the contract for deed's cancellation, but appellant was not.When appellant returned from his business trip, he learned Larson was no longer interested in the project and requested an October meeting.There, he proposed respondents raise additional capital to rescue the project and again requested partnership documents and financial information.Recognizing the project was likely to fail, appellant sought legal counsel within one week after the October meeting.Thereafter, the parties dealt exclusively through their attorneys.

In November 1984, a fire damaged the building and insurance proceeds were paid to T & M Properties.In early December, respondents sold the building to a third party.None of these facts were communicated directly to appellant.That same month appellant sued respondents for the recovery of his $30,000 investment.

On August 21, 1986, a court trial was held where all three parties testified.Appellant testified his partnership with respondents was conditioned upon his obtaining partnership documents and relevant financial information which he never received.Appellant, a certified public accountant and charter financial analyst, testified he was experienced in investing generally but was not well-acquainted with real estate investments.On cross-examination, appellant admitted he had entered into previous partnerships investing in real estate.Typically, these investments initially resulted in losses that provided tax savings and later turned around to provide a profit.Appellant also admitted partnership documents were sometimes sent after his initial investment.

Appellant claimed respondents did not treat him as an equal partner and further committed fraud by failing to inform him of the project's financial condition before he invested.Had appellant known the omitted facts, he testified he would not have invested.In addition, appellant claimed respondents misrepresented facts subsequent to his investment by failing to inform him of the contract cancellation, fire and sale of the property.Further, he claimed respondents falsely asserted facts by stating appellant's investment would be used for capital improvements rather than to pay off debt and that Larson and the bible college were definitely, not tentatively, committed to the project.

Respondent Thomas testified appellant initially wished to be a silent partner.Further, appellant's absence on business and the parties' later dealings beginning in late October made only through their attorneys prevented direct communication of partnership information.Respondent Thomas further denied he represented appellant's investment would be used only for capital improvements and claimed appellant knew the project was operating under a negative cash flow.In addition, respondent Thomas denied he represented Larson and the bible college were definitely committed to the project.

In its September 24, 1986 findings of fact, conclusions of law and order for judgment, the trial court concluded appellant became a partner in T & M Properties when he invested in the project, and was not induced to invest by fraud or misrepresentation.In an attached memorandum, the court explained:

[Appellant's] intention to join the partnership is evidenced by his request for partnership documents.Moreover, to find, as [appellant] claims, that his intent to join was conditioned on his receipt of partnership documents would be contrary to reason and common experience.Had the project been successful, [appellant] undoubtedly would have considered himself entitled to a share of the profits, whether or not he had received the documents.The note accompanying the check merely asked [respondent] Thomas to mail the documents at his earliest convenience.A condition precedent cannot be inferred from such language.

The court also stated while appellant's exclusion from partnership affairs may give him a right to an accounting, it does not negate the existence of the partnership.

The court also discussed each allegation of fraud.Regarding appellant's claim of omitted material facts, the court stated:

Given [appellant's] experience with investment, his knowledge of the project, as well as his opportunity to ascertain the truth of the complained-of omissions before investing, the conduct does not rise to the level of fraud.

The court also said the trial testimony does not support appellant's allegation he was told the money would be used only for capital improvements, nor was he told involvement by Larson and the bible college was definite.

In October 1986, appellant moved for amended findings or a new trial.Appellant sought to amend the court's findings to state the use of his investment check was conditioned upon receipt of partnership documents.Appellant further requested amended findings regarding a definite commitment of Larson as project manager and added findings regarding material omissions of fact by respondents.

The court denied appellant's motion.Regarding appellant's claim his check was to be used conditionally, the court stated:

Given that the physical evidence does not indicate that the check was conditioned on receipt of the documents, the only evidence to support a finding that the investment was conditional is [appellant's] testimony.As the Court noted in the memorandum accompanying the earlier order, this testimony was given little weight.[Appellant] obviously had an interest in so testifying, and the testimony was weakened by the lack of any objective evidence supporting it.Although [appellant] is not experienced in real estate matters, he is an experienced and successful investor, and certainly sophisticated enough to state a condition expressly.Indeed, it is difficult to see how [respondents] would have been aware that the check was conditioned on receipt of the documents, given that the note accompanying the check merely requested that they be sent at [respondent's]"earliest convenience."

The court also stated while appellant was under a "definite assumption" Larson would be involved, review of the testimony does not support a finding respondents specifically stated Larson would in fact be involved.

Regarding appellant's proposed additional findings, the court stated:

[T]he proposed additional findings would not change this Court's Conclusions of Law because, as noted in the previous memorandum, [appellant's] exclusion from partnership affairs does not negate the existence of a partnership.Moreover, the exclusion in this case...