The Johnson & Henderson P'ship v. Henderson
| Decision Date | 03 August 2022 |
| Docket Number | A173547 |
| Citation | 321 Or.App. 134 |
| Parties | THE JOHNSON AND HENDERSON PARTNERSHIP and Matt Johnson, Plaintiffs-Appellants, v. Patrick HENDERSON and Theresa Henderson, Individually and as Co-Trustees of the Henderson Living Trust, Defendants-Respondents. |
| Court | Oregon Court of Appeals |
Argued and submitted November 18, 2021
Union County Circuit Court 17CV29245; Thomas B. Powers, Judge.
D Zachary Hostetter argued the cause for appellants. Also on the briefs were Benjamin Boyd and Hostetter Law Group, LLP.
J Aaron Landau argued the cause for respondents. Also on the brief was Harrang Long Gary Rudnick P.C.
Before Shorr, Presiding Judge, and Powers Judge, and Sercombe, Senior Judge.
This case arises out of a dispute between plaintiff Matt Johnson and defendants Patrick and Theresa Henderson over the existence of an alleged oral partnership agreement to purchase a vacant lot, build a home, and then rent the property. Johnson, on his own behalf and on behalf of the purported partnership, filed a claim for declaratory judgment seeking a ruling declaring that a partnership existed. Based on the partnership's alleged existence, plaintiffs also filed claims for an accounting, breach of contract, violation and enforcement of partnership duties, and unjust enrichment. Defendants responded with six counterclaims, five of which asserted that no partnership existed between the parties and one alternative claim if the court found that a partnership existed. The trial court granted defendants' motion for summary judgment and dismissed plaintiffs' claims.[1] Plaintiffs now appeal, assigning error to that ruling.
As we discuss below, we conclude that plaintiffs presented sufficient evidence to create a genuine issue of material fact as to whether a partnership was created. Accordingly, we reverse the trial court's grant of defendants' motion for summary judgment and the resulting dismissal of plaintiffs' claims. We otherwise affirm.
We review a trial court's grant of summary judgment to determine whether there is "no genuine issue as to any material fact" and whether the moving parties were "entitled to prevail as a matter of law." ORCP 47 C. We view all facts, and all reasonable inferences that may be drawn from those facts, in the light most favorable to the non-moving parties, here, plaintiffs. Id. We state the facts consistently with that standard. As we discuss later, we take many of the following material facts from a declaration that Johnson filed in the trial court in support of his claims and in opposition to defendants' motion for summary judgment.
Johnson is a general contractor who owns Eagle Cap Construction, LLC and has worked on various construction and repair projects for defendants. In 2011, defendants were in search of real property to purchase and use to build a residential rental unit in Union County, Oregon. Defendants approached Johnson to discuss constructing a rental unit on a vacant lot that defendants were to purchase. In his declaration submitted in opposition to defendants' summary judgment motion Johnson stated that the parties agreed to carry on, as co-owners, a for-profit business called the Johnson and Henderson Partnership. Johnson contended that defendants agreed to contribute land and money for the materials to build the rental unit. Johnson, for his part, agreed to arrange for the rental unit to be built, including by engaging independent contractors, and to cover expenses related to construction and additional material costs not covered by defendants' contribution. The parties agreed to share in the profits and losses of the partnership however the details of that arrangement were not determined until around 2015.
Acting together, the parties identified a vacant lot to purchase. Defendants purchased the property as cotrustees of the Henderson Living Trust for approximately $57,900 and held title to the property in their names. Johnson's declaration acknowledged that title for the property was either held by the trust or by defendants as cotrustees of the trust and not by the partnership. However, he asserts that defendants contributed the property to the partnership.
After purchasing the property, the parties hired Jadato Design, LLC (Jadato) to draft the plans for building the residential unit. Jadato emailed a proposed "Spec-Rental Project" plan to both parties. The plans referred to the client as "HJ Incorporated," which Johnson contended stands for "Henderson Johnson Incorporated." However, the parties never incorporated their business. Furthermore, the parties agree that they never referred to their relationship as "HJ Incorporated," either alone or in the presence of Jadato.
On behalf of the partnership, Johnson hired his own company, Eagle Cap Construction, LLC, as well as two other independent contractors to obtain necessary permits and construct the residential unit. In building permit applications, Johnson listed himself as the owner of the residence and Eagle Cap Construction, LLC as the contractor. Johnson told several individuals involved in the construction that he was building the residential unit with a business partner. Johnson managed the construction project and ensured that all contractors were paid for their work. In total, Johnson asserted that he contributed approximately $100,000 in labor and material costs to build the residential unit. He asserted that he was not paid for that work. Defendants contributed an additional $84,000 to purchase materials to build the residential unit.
In 2012, the parties agreed to rent the property to the Pettys, and the Pettys moved into the residential unit although it was not fully complete. James Petty made an agreement with Johnson that he would trade his labor to complete various projects on the rental unit in exchange for Johnson's 50 percent share of the rental income. The Pettys separately paid defendants $600 per month in rent. After the Pettys vacated the residence in 2014, Johnson secured the Ziers as new tenants. Johnson signed the Ziers' rental agreement as the landlord, acted as the property's manager, and told the Ziers that he owned the property with a partner. The Ziers paid $1,200 in rent directly to Johnson, a rate set by the agreement of the parties.
In 2014, Johnson opened a joint checking account on behalf of the partnership to which Johnson and defendants had signing authority. The account was used by Johnson to deposit rent checks and by Johnson and defendants to withdraw rental income. In July 2014, Johnson withdrew $7,000 from the joint account, with defendants' permission, to settle a debt for prior work he had completed for defendants on a different property unrelated to the alleged partnership.
In March or April of 2015, around the same time that the rental unit was completed, the parties met to discuss how to split profits from the rental income.[2] In his declaration, Johnson stated that the parties agreed to a 60/40 split-defendants would receive a 60 percent ownership interest in the partnership and Johnson would receive a 40 percent interest. Johnson asserted that the parties' agreement was reflected in handwritten notes made by Theresa Henderson during that meeting. Although those notes do contain several references to "60/40," they do not indicate who referred to those percentages or in what context.[3] The parties agreed to deduct $200 for tax and insurance expenses from the total rent amount received each month from the Ziers, and to split the remaining $1,000 in monthly rental income according to their respective 60/40 interests. Following the 2015 meeting, Johnson continued to manage the property and collect rent from the Ziers, in the form of checks made out to Johnson personally.
Throughout that period, Johnson claimed the entire rental income from the property and the expenses for maintaining the rental unit on his personal taxes. Johnson also told his banker that the property was owned in partnership with defendants and submitted financial statements to his bank in which he identified the rental property as an asset with title held in the "Patrick Henderson Trust." Further, Johnson took out a business line of credit against the property, with defendants' permission. The line of credit was used as security for Eagle Cap Construction, LLC for several years.
Money was routinely deposited and withdrawn from the joint bank account until April 2017, when defendants informed Johnson that they no longer wanted to engage in business dealings with him.[4] Subsequently, defendants terminated the rental agreement with the Ziers without Johnson's consent. Defendants later listed the property for sale, again without Johnson's consent.
Johnson, on behalf of himself and the partnership, brought this lawsuit against defendants, in their individual capacities and as cotrustees of the Henderson Living Trust, in July 2017. Plaintiffs alleged six claims for relief, all arising out of the allegation that "[i]n or about February 2011, [Johnson] and defendants associated together and agreed to carry on as co-owners a business for profit by purchasing real property upon which a residence would be constructed in order to produce rental income ***." In their answer, defendants alleged several counterclaims, including breach of contract to construct the rental unit and manage the property, conversion, fraud, and elder abuse. Both defendants and plaintiffs filed motions for summary judgment.
The trial court granted defendants' motion for summary judgment, finding that "[p]laintiffs failed to produce substantial evidence sufficient to raise a genuine issue for trial as to the existence of a partnership between the parties." In reaching its ruling, the court...
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