KAY INVESTMENT CO LLC V BRODY REALTY I LLC
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STATE OF MICHIGAN
COURT OF APPEALS
KAY INVESTMENT COMPANY, LLC,
FOR PUBLICATION
December 28, 2006
9:15 a.m.
Plaintiff-Appellee,
v
No. 263549
Wayne Circuit Court
LC No. 04-436963-CZ
BRODY REALTY I, LLC,
Defendant-Appellant,
and
GEORGE BRODY TRUST and ROBERT
BRODY,
Official Reported Version
Defendants.
Before: Whitbeck, C.J., and Saad and Schuette, JJ.
SCHUETTE, J. (dissenting).
This case involves the disputed ownership of real property and the question whether a
"joint venture" initially created among four individuals from two families—the two Brody
brothers and the two Kaufman brothers—evolved over time into a relationship as co-owners of a
business for profit, evidencing a partnership under MCL 449.6.
A review of pertinent Michigan case law reveals a fine line and a thin distinction between
what constitutes a partnership or a joint venture. My distinguished and thoughtful colleagues in
the majority have determined that the business relationship of the parties and the ownership of
the real estate, a shopping center, indicate a joint venture. I disagree.
I respectfully conclude that the conduct and actions of the parties over the course of their
business relations established a partnership because they "carr[ied] on as co-owners a business
for profit." MCL 449.6(1); see also Byker v Mannes, 465 Mich 637, 645-646; 641 NW2d 210
(2002).
Our Supreme Court in Byker held that the subjective intent among individuals to create a
partnership is not required if their actions and conduct demonstrate the intent or desire to carry
on a business for profit. Id. at 653. Keeping a statutory focus firmly in mind, Justice Markman
stated: "Pursuant to MCL 449.6(1), in ascertaining the existence of a partnership, the proper
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focus is on whether the parties intended to, and in fact did, 'carry on as co-owners a business for
profit' and not on whether the parties subjectively intended to form a partnership." Id.
The Byker decision provides instruction and guidance to this case. As Justice Markman
expressed, past decisions of our Supreme Court have used "imprecise language" and caused
some "confusion" regarding what constitutes a partnership. Id. at 650-651. The starting point in
any analysis must commence with a review of the pertinent statutory provisions, MCL 449.6 and
449.7. The subjective intent of the parties is conspicuously absent in the enumerated items to be
considered when determining whether a partnership exists. See MCL 449.7.
That is, if the parties associate themselves to "carry on" as co-owners a
business for profit, they will be deemed to have formed a partnership relationship
regardless of their subjective intent to form such a legal relationship. The
statutory language is devoid of any requirement that the individuals have the
subjective intent to create a partnership. Stated more plainly, the statute does not
require partners to be aware of their status as "partners" in order to have a legal
partnership. [Byker, supra at 646.]
Justice Cooley, quoted extensively in Byker, clearly outlined the differences between
individuals' subjective intent and their conduct in a business relationship:
"If parties intend no partnership the courts should give effect to their
intent, unless somebody has been deceived by their acting or assuming to act as
partners; and any such case must stand upon its peculiar facts, and upon special
equities.
"It is nevertheless possible for parties to intend no partnership and yet to
form one. If they agree upon an arrangement which is a partnership in fact, it is
of no importance that they call it something else, or that they even expressly
declare that they are not to be partners. The law must declare what is the legal
import of their agreements, and names go for nothing when the substance of the
arrangement shows them to be inapplicable." [Byker, supra at 648-649, quoting
Beecher v Bush, 45 Mich 188, 193-194; 7 NW 785 (1881).]
Likewise, in McCormick v McCormick, 342 Mich 525, 530; 70 NW2d 706 (1955), our Supreme
Court held that disputed property was owned by a partnership, explaining that it was the parties'
behavior that led to that conclusion, and "[i]t was not essential that [the parties] should call
themselves partners . . . [or] that the record title should stand in the names of all partners."
In this case, in 1969, the parties commenced their business relations in the form of a joint
venture, for a specific term of ten years, with the stated plan to construct a shopping center. The
shopping center was completed by the late 1970s, and the mortgage was paid off in 1985.
Interests of the original joint venturers were transferred to trusts or other companies, as one of
the Kaufman brothers died and successors to the original contracting parties assumed ownership
roles in the business. The record reflects that the parties filed Schedule K-1 forms each year on
their federal income tax returns, declaring each partner's share of income, credits, deductions,
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etc. The record also reflects that each founder declared his profits or losses in an amount equal
to his share of the business.
The parties' conduct over time, Justice Cooley's admonition, and the Byker holding cause
me to conclude that the parties carried on a business for profit, giving rise to a partnership
specific to the ownership of the property in dispute. The parties' conduct and actions, not their
subjective intent or whether they considered themselves partners, is the core determination to be
made in this case. See Byker, supra at 649.
I would affirm the trial court's decision.
/s/ Bill Schuette
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