DAVID G BYKER V THOMAS J MANNES
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STATE OF MICHIGAN
COURT OF APPEALS
DAVID G. BYKER,
UNPUBLISHED
February 1, 2000
Plaintiff-Appellee,
v
No. 205266
Kent Circuit Court
LC No. 96-000256-CB
THOMAS J. MANNES,
Defendant-Appellant.
Before: Gage, P.J., and White and Markey, JJ.
PER CURIAM.
Plaintiff David Byker filed an action against defendant Thomas Mannes alleging that the parties
created a “super partnership” in 1985 in which they agreed to split all profits and losses from their
business ventures. Plaintiff sought to enforce the parties’ agreement and demanded that defendant pay
an equal share of capital contributions that had been advanced by plaintiff on behalf of the purported
super partnership. Defendant appeals by right from two orders denying summary disposition to
defendant and from the trial court’s judgment that a super partnership existed between the parties and
that defendant owes plaintiff $76,153, plus interest, costs, and mediation sanctions, as his unpaid share
of partnership debts. We vacate the judgment against defendant and hold that the court erred in its
determinations that a super partnership existed between the parties and that there is a monetary
partnership obligation owing from defendant to plaintiff.
Defendant initially claims that the trial court erred in denying his motions for summary disposition
because as a matter of law defendant is not personally liable for the debts of either the limited liability
partnerships or the corporations. Defendant’s argument misses the mark.
First, we note that plaintiff did not allege and the trial court did not hold that defendant is liable
for the entities’ debts as either a limited partner or a shareholder of a corporation. Rather, plaintiff
alleged that defendant is liable as a general partner in a “super partnership,” under whose protective
umbrella the other entities were organized. Second, the basis of the trial court’s denial of defendant’s
motions for summary disposition was the trial court’s determination that material questions of fact
existed whether such a super partnership existed, with the trial court ultimately resolving those factual
issues against defendant in the bench trial that followed. Because defendant does not address the basis
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of the trial court’s ruling denying defendant’s motions for summary disposition, we need not consider the
issue defendant raises here. Joerger v Gordon Food Service, Inc, 224 Mich App 167, 175; 568
NW2d 365 (1997). Nonetheless, to the extent that defendant’s argument pertains to the factual
question of intent, it will be addressed as part of the discussion below.
Defendant next claims that the trial court erred in finding that a general or super partnership
existed between the parties and that there was a partnership obligation owing from defendant to plaintiff
in the amount of $76,153. We agree.
The parties stipulated that in 1985 they “agreed to engage in an ongoing business enterprise, to
each furnish capital, labor and/or skill to such enterprise, to raise investment funds and to share equally
in the profits, losses and expenses of such enterprise.” The parties thereafter acquired interests in
business ventures that purchased, leased or operated various properties, including the Anchor In
Marina. The parties created at least seven separate entities through which they participated in the
business ventures, including four limited partnerships of which the parties were general partners,1 two
corporations of which the parties were shareholders, and one partnership of which the parties were
general partners.2 Plaintiff and his accounting firm performed accounting services for the business
entities, while defendant found real estate opportunities for investment.
The burden was on plaintiff to prove the existence of the super partnership he alleged existed.
Klein v Kirschbaum, 240 Mich 368, 371; 215 NW 289 (1927); Miller v City Bank & Trust Co, 82
Mich App 120, 123; 266 NW2d 687 (1978). Whether such a partnership existed was a question of
fact, the determination of which we review under the clearly erroneous standard. Barnes v Barnes,
355 Mich 458, 461-462; 94 NW2d 829 (1959); Miller, supra.
The court found the instant parties “began their relationship with a general agreement that they
were partners and would share profits and losses equally,” and that they had a general partnership
whether they understood it or not. In reaching its conclusion, however, the court relied on the Uniform
Partnership Act, § 202(a), 6 ULA 1 (1994), which has not been adopted in Michigan, for the
proposition that “the association of two or more persons to carry on as co-owners of business for profit
forms a partnership, whether or not the persons intend to form a partnership” (emphasis added).
Compare MCL 449.6(1); MSA 20.6(1). The absence of intent to form a partnership contradicts the
established law in this state that the mutual intent of the parties is of prime importance in ascertaining
whether a partnership exists. Barnes, supra; Moore v DuBard, 318 Mich 578, 593-594, 596; 29
NW2d 94 (1947); Lobato v Paulino, 304 Mich 668, 675; 8 NW2d 873 (1943); Klein, supra;
Miller, supra at 124. As noted by the trial court, plaintiff conceded that he did not realize that his
relationship with defendant was a general or super partnership until nine years after the parties entered
into their informal business relationship--specifically, when the Pier 1000 corporation collapsed and
plaintiff’s attorney determined that plaintiff and defendant had formed a super partnership whether or not
it was their intent to do so.
We agree that, in the absence of an express agreement, the court appropriately looked to the
acts and conduct of the parties in relation to the businesses in ascertaining the existence or nonexistence
of a partnership, Van Stee v Ransford, 346 Mich 116, 133; 77 NW2d 346 (1956); Moore, supra at
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595; Miller, supra at 124-126. We conclude that the indicia of a super partnership are lacking in this
case and that the court clearly erred in this regard.
As noted, the parties agreed in 1985 to enter into as yet undefined business ventures and to
share in the profits, losses and expenses of the business ventures. They manifested this agreement by
engaging in agreed-upon business ventures through a structure of interrelated express agreements and
formal limited liability business entities that the parties formed to facilitate their purchase, participation in
and operation of the business ventures. A serious question arises as to why the parties--one an
accountant and the other a businessman--would form the limited liability entities if they intended to be
personally liable for the debts of these entities as general partners of a super partnership. We conclude
the answer is: they did not have this intention.
Objective indicia of a super partnership are absent in this case. The alleged super partnership
had no name and no formal partnership agreement, and no certificate of partnership was filed on its
behalf. See Moore, supra at 592, 595; Lobato, supra at 677; Miller, supra at 126. The super
partnership had no tax identification number and filed no partnership income tax returns. See Moore,
supra at 592. Neither of the parties reported income as received from a super partnership. See
Miller, supra. The super partnership had no bank account, and there was no common fund into which
all of the money the various entities generated was placed for distribution by the super partnership. See
Moore, supra at 595-596; Lobato, supra at 674, 677; Miller, supra. While the parties did split
commissions and other disbursements and equally shared a loss incurred in the sale of BMW
partnership, the sharing of gross returns or profits and losses does not of itself establish a partnership.
MCL 449.7(3)(4); MSA 20.7(3)(4); Lobato, supra at 675, 676. The cash disbursements to the
parties and the payment of syndication and accounting setup fees occurred on a transaction by
transaction basis within the framework of the various limited liability entities and in proportion to the
parties’ ownership of these entities. We conclude that the above indicia fall far short of establishing a
super partnership.
The trial court suggests that the parties’ injection of capital into the marina entities, particularly
Pier 1000, the corporation that actually operated the Anchor In Marina and that was subsequently
reorganized as Riverview 1000, is evidence of their super partnership agreement. It may be; but it is a
minor fact.
The Anchor In Marina involved four separate entities: Pier 1000 Ltd., a corporation; JTD
Properties, Inc., a corporation; JTD Properties Limited Partnership I, a limited partnership; and M & B
Properties Limited Partnership III, a limited partnership, all of which were organized under the laws of
Michigan. Limited partnerships are distinct legal entitles, separate from the individuals who comprise the
partnerships. Lobato, supra at 675-676. As to the limited partnerships here, however, the parties did
not even own a direct interest in the partnerships; rather, they owned 100% of the JTD corporation,
which was the general partner of the limited partnerships. The corporations were close corporations,
owned by plaintiff and defendant as equal shareholders.3 A corporation is a distinct entity from its
shareholders, and the shareholders are not personally liable for its debts, MCL 450.1317; MSA
21.200(317), unless they specifically and expressly assume such personal liability. See, generally, 18A
Am Jur 2d, Corporations, § 850, pp 722-723, § 918, p 782. It is not uncommon for shareholders in a
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close corporation to personally guarantee loans made on behalf of the corporation, as was done here.4
Id. at § 853, p 726. Nor is it uncommon for such shareholders to loan money to the corporation,
perhaps in the form of a promissory note, as was executed in this case by defendant and his wife to Pier
1000 for $21,000. We disagree that such injection of capital into essentially corporate entities
preponderates toward a finding that a formal partnership existed outside the limited liability entities.
Moreover, the fact that equal contributions are made may merely reflect the proportional shareholder
interest—not the existence of an equal partnership.
Where the parties’ spouses were not partners in the purported super partnership and had no
apparent reason to expose themselves to personal liability for debts of the limited liability entities, we
conclude that the parties’ personal guarantees for the loans evidence personal undertakings by the
parties and their respective spouses on behalf of the limited liability entities; they do not evidence that
plaintiff and defendant intended to create a super partnership. Further, although plaintiff unilaterally
injected $92,000 into the marina after defendant refused to make further contributions, plaintiff’s
testimony indicates that his overriding intent in infusing this capital into the marina was to prevent
personal bankruptcy rather than an intent to act out of obligations stemming from a super partnership
agreement with defendant. He feared the banks might call due the personal guarantees on the bank
loans. We conclude that on these facts, the parties’ decisions to contribute capital to the entities was
not reflective of a super partnership agreement between the parties.
We further conclude that the parties’ dealings with plaintiff’s accounting firm, which performed
accounting services for the various entities related to the marina, does not establish the existence of a
super partnership between plaintiff and defendant. The firm had separate files for each of the entities
and separately billed each specific entity for its accounting services. The firm had no file for the
purported super partnership and did not specifically charge a super partnership for accounting services.
Although the firm apparently looked to both plaintiff and defendant as ultimately responsible for payment
of the marina entities’ accounting bills, which the firm allowed to accrue over a period of 6-1/2 years to
an amount in excess of $90,000, the testimony at trial reveals that this understanding was based on
plaintiff’s unilateral representations to the firm that plaintiff and defendant would be responsible for the
payment of the accounting bills.5 As between the instant parties, whether the accounting firm may have
believed that a general partnership existed between plaintiff and defendant does not establish such a
partnership. Lobato, supra at 676.
Additionally, as to payment of the accounting debts, plaintiff could have, but apparently did not,
seek either an informal assurance from defendant or a formal personal guarantee from defendant, as had
been done for bank loans to the marina, that plaintiff and defendant would each be personally liable for
payment of the accounting services if the marina entities could not pay the bills. There is no evidence
that defendant agreed to personal payment of the accounting services for the marina entities apart from
payment by the entities themselves—through which plaintiff enjoyed limited liability due to their
corporate structures. Moreover, plaintiff never involved defendant in the negotiations with his
accounting firm relative to the terms of the buy-out on his withdrawal from the firm, whereby he agreed
to personally pay approximately $90,000 for the accounting services provided to the marina business
entities.6
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Both the accounting firm and plaintiff took the risk that defendant would not make personal
payment for the accounting debts that had been allowed to accrue. Where plaintiff unilaterally decided
to pay this debt, he could not then seek contribution from defendant based on an underlying partnership
unless he established the existence of such a partnership, or he prevailed on a theory of partnership by
estoppel or defendant’s express agreement to pay the debt. There is no evidence that defendant himself
represented or that he consented to plaintiff’s representation to the accounting firm that he and plaintiff
were general partners or were jointly liable for personal payment of the accounting services provided to
the marina entities. Thus, defendant is not estopped to deny personal liability for payment of these
services, either to plaintiff or to the accounting firm based on an alleged super partnership with plaintiff.
MCL 449.16; MSA 20.16; Western Shoe Co v Neumeister, 258 Mich 662, 667; 242 NW 802
(1932); Beecher v Bush, 45 Mich 188, 193; 7 NW 785 (1881).
We hold that the trial court erred when it found that a super partnership existed between the
parties. Although we appreciate the complexity of the task with which the trial court was faced, the trial
court failed to accord due weight to (1) the lack of evidence of the parties’ mutual intent to form such a
partnership, (2) the lack of objective indicia of such a partnership, and (3) the other formalized
structures, i.e., the limited partnerships and corporate entities, through which the parties conducted their
business and limited their liability.
The judgment of the court is vacated, and this matter is remanded for entry of a judgment of no
cause of action against defendant. We do not retain jurisdiction.
/s/ Hilda R. Gage
/s/ Jane E. Markey
1
For two of the limited partnerships, the parties held general partner interests in their individual
capacities. For the other two limited partnerships, the parties did not own a direct interest in the
partnerships; rather, the parties were the shareholders of JTD Corporation, which in turn was the
general partner of the limited partnerships.
2
For this latter entity, the parties had a 66-2/3% general partner interest in BMW Properties, a
Michigan partnership formed in 1991 to acquire a building on Grandville Avenue that was subsequently
sold. This partnership is distinct from the general or super partnership at issue in this case.
3
The parties originally had equal interest in 66-2/3% of the outstanding stock in the corporations,
which increased to equal interest in 100% of the shares of the corporations when the third shareholder
left.
4
The parties and their respective spouses personally guaranteed over $4.5 million in loans to the
marina.
5
Plaintiff testified at trial that the business entities did not have sufficient funds to pay the accounting
invoices and that the firm continued to provide services for the business entities and to allow the
accounting bills to accrue based on plaintiff’s representations to the firm that he and defendant would be
personally liable to pay the outstanding bills.
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6
Based on plaintiff’s testimony regarding the marina entities’ lack of funds to pay the accounting bills,
the accounting bills may have remained uncollectible but for plaintiff’s payment of the accounting bills at
the time he withdrew from the accounting firm.
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