Bob Best, Jr. v. Larry Jess McCachren, Jr.
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IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2008-CA-01547-COA
BOB BEST, JR.
APPELLANT
v.
LARRY JESS MCCACHREN, JR.
DATE OF JUDGMENT:
TRIAL JUDGE:
COURT FROM WHICH APPEALED:
ATTORNEY FOR APPELLANT:
ATTORNEYS FOR APPELLEE:
NATURE OF THE CASE:
TRIAL COURT DISPOSITION:
DISPOSITION:
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
APPELLEE
03/31/2008
HON. PERCY L. LYNCHARD JR.
YALOBUSHA COUNTY CHANCERY
COURT
ADAM A. PITTMAN
JAMIE W. HOWELL JR.
JEFFERSON DAVIS GILDER
CIVIL - CONTRACT
DISSOLVED PARTNERSHIP AND
PARTITIONED CERTAIN PROPERTY
REVERSED AND REMANDED - 06/29/2010
BEFORE MYERS, P.J., BARNES AND MAXWELL, JJ.
BARNES, J., FOR THE COURT:
¶1.
This is an appeal from the judgment of the Yalobusha County Chancery Court entered
on April 18, 2008, dissolving the partnership of Larry Jess McCachren Jr. and Bob Best Jr.
McCachren filed a complaint on December 6, 2006, to dissolve the partnership and to
partition property that he owned with Best. After dissolving the partnership, the chancellor
awarded McCachren not only Best’s entire interest in the partnership property, but also a
money judgment against Best in the amount of $35,071.39. Finding this disposition not
supported by substantial evidence, we reverse and remand for further proceedings.
SUMMARY OF FACTS
¶2.
Best owned a store known as “Enid Lake Trading Post” located on approximately 2.9
acres at a crossroads in Yalobusha County. After a fire partially destroyed the store building,
Best moved the store into a smaller building on the property. He and McCachren entered
into a partnership agreement on January 14, 2004, to build a larger convenience store on the
property, and they continued using the same name as Best’s previous store. Under the terms
of the agreement, both partners owned fifty percent of the land, building, inventory, and “all
assets of the business.” Best conveyed a one-half interest in the land to McCachren and
construction began on the site. McCachren stated that he valued the property at $10,000;
however, Best valued the land at $30,000, stating that he would not “take less than [$]10,000
per acre.” The costs of construction were paid by McCachren, who provided receipts at trial
that he claimed proved that he paid $106,642.79 for the construction. Although Best
contends that this amount was “over-inflate[d],” we find no evidence to dispute the
chancellor’s reliance on McCachren’s calculation.
¶3.
After the building was finished, Best contributed inventory from his existing store;
he also contributed inventory from his deceased father and inventory given to him by his
mother, Diane Jenkins. Best testified that he managed and worked at the store for the first
year of the partnership. Subsequently, the partners agreed to hire a third party, Sandra
Flowers, to manage the store. However, Best terminated Flowers’s services after, in his
opinion, she spent too much on unneeded labor, extended store credit to inappropriate people,
and allowed the outstanding credit accounts to grow too large. After Best’s firing of
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Flowers, McCachren gave Best thirty days to purchase McCachren’s interest. Best offered
McCachren $80,000 for his interest, but McCachren refused, stating that he would not take
less than $100,000 for his share in the partnership. McCachren then removed the power
meter, cut the internal power wires, and welded shut the doors to the store. There was
testimony from an electrical contractor that the cost would be more than $7,500 to repair the
damage done to the building’s electrical system. Best testified that he collected store credits
of approximately $6,000 to $8,000 after the store closed and placed these amounts in a
separate bank account. Best also testified that he spent the money on partnership debts;
however, he did not produce any canceled checks or documents to show how the money was
spent.
¶4.
On December 6, 2006, McCachren filed a complaint to dissolve the partnership and
to receive an equitable division of the partnership debts and assets, a judgment against Best
for one-half of the partnership debts, a partition of the property jointly owned by Best and
McCachren, a lien on Best’s one-half interest of the real property to secure indebtedness
owed by Best, and the sale or award of the portable building on the property in order to
satisfy Best’s share of the debt. After receiving testimony at trial, the chancellor awarded
the partnership’s entire property to McCachren, gave Best an offset of $5,000 (for one-half
the value of the partnership property), and awarded McCachren a judgment for $35,071.39,
representing Best’s one-half of the partnership debt. This judgment amount was derived as
follows:
$106,642.79 (capital contribution by McCachren)
- 26,500.00 (less value of Best’s contributions of real estate and inventory)
80,142.79
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÷
2
40,071.39 (50% interest in property)
- 5,000.00 (value of Best’s one-half of the partnership property)
$ 35,571.39
Best appeals, claiming that: (1) the chancellor’s findings as to the respective capital
contributions of the parties, as well as the valuations of the property, were not supported by
substantial, credible evidence, and (2) the chancellor committed manifest error by failing to
order the judicial sale of the property and assessing the respective capital accounts of the
parties against the proceeds. Finding error, we reverse and remand the case for further
proceedings.
STANDARD OF REVIEW
¶5.
In property partition cases, this Court will affirm the ruling of the chancellor unless
there is manifest error. Georgian v. Harrington, 990 So. 2d 813, 815-16 (¶7) (Miss. Ct. App.
2008) (citing Lynn v. Lynn (In re Will of Lynn), 878 So. 2d 1052, 1055 (¶11) (Miss. Ct. App.
2004)). “This Court will not disturb the chancellor’s opinion when supported by substantial
evidence unless the chancellor abused his discretion, was manifestly wrong, clearly
erroneous, or an erroneous legal standard was applied.” Holloman v. Holloman, 691 So. 2d
897, 898 (Miss. 1996).
I.
¶6.
WHETHER THE CHANCELLOR’S VALUATIONS OF THE
JOINTLY OW NED PROPERTY AND CAPITAL
CONTRIBUTIONS ARE SUPPORTED BY SUBSTANTIAL
EVIDENCE.
Property valuation is a question of fact. Messer v. Messer, 850 So. 2d 161, 170 (¶42)
(Miss. Ct. App. 2003) (citing Ward v. Ward, 825 So. 2d 713, 719 (¶21) (Miss. Ct. App.
2002)). As long as “some evidence” exists to support a chancellor’s valuation judgment, this
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Court will uphold the decision. Id. at (¶43) (citing Dunaway v. Dunaway, 749 So. 2d 1112,
1121 (¶29) (Miss. Ct. App. 1999)).
¶7.
We find the chancellor’s assignment of value to the jointly owned property is in error
as it is not supported by the evidence. The chancery court found that it was “stuck” with a
value of $10,000 for the partnership’s real estate, as there was no evidence offered as to the
present value of the improved real property. We disagree. The chancellor found that
McCachren contributed $106,642.79 to the construction of the convenience store, based on
the McCachren’s testimony and the invoices and receipts submitted,1 yet in effect, found that
the value of the real estate had not been increased by the construction. This Court certainly
understands the chancellor’s frustration over not being provided detailed and accurate
valuations by the parties, but a determination that the construction of a $106,000 convenience
store on the property did not increase the valuation of the partnership’s property is clear
error.
¶8.
Further, Best testified that the partnership received an offer of $150,000 from a third
party for the improved property, which McCachren rejected. Best also attempted to purchase
McCachren’s share of the partnership for $100,000, but could only obtain financing for
$80,000. McCachren rejected this reduced offer, showing that McCachren’s estimation of
the value of the partnership was over $160,000. Therefore, we find the chancellor’s
valuation of the partnership property at $10,000 was an abuse of discretion and not supported
1
Best argues that the amount overstates what was paid as it includes double
contributions, including both the invoice and the check payment. However, we find nothing
in the record to support Best’s claim.
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by the evidence. Thus, we reverse and remand for a re-evaluation of the partnership’s
improved real property.
¶9.
As to the value of Best’s contributions to the partnership, the chancellor determined
that Best contributed real property valued at $10,000; inventory from his previous store of
$4,000; and inventory from his deceased father’s store in the amount of $12,500. The
inventory received from Best’s mother was not included in the valuation as the chancellor
found that the inventory was from when Best had his own business and “was not involved
in the partnership with [McCachren].” As to the value of Best’s contribution of real estate
to the partnership, the chancellor stated:
There is no evidence whatsoever as to the present value of the store or the
land. The plaintiff testified that the land prior to the construction was $10,000.
The defendant disputed that when he gave no value as to it himself. He
testified that if he were to sell it, he wouldn’t take less than 30,000, but what
he will take and what the property is worth [are] two entirely different matters.
Therefore, the Court is stuck with that value of $10,000.
We find that the chancellor was within his discretion to assign $10,000 as the value of Best’s
contribution of real estate to the partnership in 2004, prior to the construction of the new
store building.
¶10.
Further, we cannot find that the chancellor erred in his valuation of the inventory from
Best’s store or from his father’s store. The chancery court gave Best a credit of $4,000 for
the inventory transferred from his existing business. Best testified that the inventory of his
prior store was approximately $10,000. Best’s sister testified that the value was between
$5,000 and $6,000 wholesale, but she also admitted that she did not have “any actual
knowledge of what he actually took [from his store] and put into the new store.” No
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accounting or inventory list was provided to support Best’s estimation. Therefore, we find
no error in the chancery court’s reliance upon the lower valuation, and even discounting it,
due to the approximations used.
¶11.
Best testified that the value of his father’s inventory was “somewhere in the
neighborhood of $14,000.” Best’s sister “estimat[ed]” that the value of her father’s inventory
was $15,000 wholesale and $20,000 retail. She also testified that approximately fifty percent
of the inventory had a one-hundred-percent markup. Based on this testimony, we find that
the chancellor’s valuation of $12,500 for the father’s inventory was supported by the
evidence.
¶12.
We do find error, however, in the chancellor’s decision to exclude all value as to the
inventory of novelty items received from Best’s mother. According to Best, the inventory
from Jenkins was “somewhere around maybe $10,000”; Jenkins valued the inventory at
$11,000. The court did not include this inventory of novelty items in its valuation, stating
that it “was contributed during the period of time in which [Best] maintained his own
business and was not involved in the partnership with the plaintiff.” The testimony by Best
and Jenkins was that this inventory was received after Best and McCachren began their
partnership. Jenkins testified that her inventory went into the new store and that McCachren
was with Best on at least one of the trips to get the stock. Also, Jenkins stated that she saw
“some of the stuff that [she] had given them was in that store when it was closed down.”
McCachren never contradicted the testimony of Best or Jenkins that the inventory from
Jenkins went directly into the new partnership’s property. Furthermore, we find that the
chancellor’s statement that this inventory was transferred prior to the partnership is not
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supported by evidence. The partnership agreement was dated January 15, 2004. However,
Jenkins testified that the inventory was transferred in the summer of 2004, after Best and
McCachren had entered into the partnership agreement and during construction on the
property. As McCachren has not contradicted the testimony in this regard, we find that the
chancellor’s decision not to include this inventory was reversible error.
¶13.
Best also asserts error in the chancellor’s failure to consider an adjustment for the
“devaluation of the partnership property done by McCachren.” This refers to the incident
where McCachren unplugged the electrical meter to the building and cut the wires to the
meter box. An expert in electrical repair testified that it would cost approximately $7,500
to repair the building. Best admitted that McCachren gave him meat from the store, valued
at approximately $1,000, before it could spoil. We find that to the extent the valuation of the
improved real property was decreased as a result of McCachren’s actions, it should be taken
into consideration on remand.
II.
¶14.
WHETHER THE CHANCELLOR ERRED IN NOT ORDERING
A PARTITION BY SALE OF THE PROPERTY.
The chancellor was asked by the parties to dissolve the partnership and partition the
jointly owned property. Although he dissolved the partnership, the chancellor did not
partition the property as requested but, rather, fashioned a unique remedy not sought by the
parties. When asked by the chancellor, both parties agreed that it would be extremely
difficult to partition the property in kind. However, Best contends that it was error for the
chancellor not to order a partition by sale.
¶15.
Best cites to Murphree v. Cook, 822 So. 2d 1092 (Miss. Ct. App. 2002), where this
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Court held that the chancellor’s failure to partition the property was an abuse of discretion.
We stated:
[I]n every case that the chancellor proposes to subvert the detailed statutory
procedures for a partition in favor of some ad hoc means of sale, especially
when it is undertaken over the strenuous objection of one of the co-tenants,
that decision would be subject to being set aside on appeal on an abuse
discretion standard. See McNeil v. Hester, 753 So. 2d 1057, 1063 (¶21) (Miss.
2000). In this case, the chancellor set the price to divest Murphree of his
interest as the original purchase price of the property. The purchase had
occurred some three and one-half years prior to the commencement of the
partition action and there was no evidence that this figure accurately reflected
the market value of the property at the relevant time. We conclude that this
means of valuing the co-tenants’ respective interests in the property was
entirely arbitrary and, thus, an abuse of discretion.
Because, under Cheeks v. Herrington, [523 So. 2d 1033 (Miss. 1988),]
Murphree’s right to have his interest in the property set apart to him by a
partition conducted according to the applicable statutes would seem to be
preferred over some alternate plan devised by the chancellor, we find it
necessary to reverse that portion of the chancellor’s judgment ordering
Murphree to be divested of his fractional title by a procedure of the
chancellor’s own making.
Id. at 1098-99 (¶¶21-22) (emphasis added).
However, the situation in Murphree is
distinguishable from the present case, as the property was not a partnership asset but, rather,
held by the parties as tenants in common without any agreement as to how the property was
to be divided. Here, the property is undeniably an asset of the partnership.
¶16.
To the extent that the procedure for winding-up partnership affairs is not set out in the
partnership agreement, Mississippi statutory law controls.2 In this case, there is nothing in
2
Mississippi Code Annotated section 79-13-103(a) (Rev. 2009) provides that:
“Except as otherwise provided in subsection (b), relations among the partners and between
the partners and the partnership are governed by the partnership agreement. To the extent
the partnership agreement does not otherwise provide, this chapter governs relations among
the partners and between the partners and the partnership.” Mississippi Code Annotated
9
the partnership agreement as to how the assets of the partnership were to be valued or
liquidated upon the dissolution of the partnership. Further, neither party has provided any
argument as to the proper interpretation of Mississippi Code Annotated section 79-13-807
(Rev. 2009), part of the Mississippi Uniform Partnership Act (1997), to this case. Section
79-13-807 states, in pertinent part, that:
(a) In winding up a partnership’s business, the assets of the partnership,
including the contributions of the partners required by this section, must be
applied to discharge its obligations to creditors, including, to the extent
permitted by law, partners who are creditors. Any surplus must be applied to
pay in cash the net amount distributable to partners in accordance with their
right to distributions under subsection (b).
(b) Each partner is entitled to a settlement of all partnership accounts upon
winding up the partnership business. In settling accounts among the partners,
profits and losses that result from the liquidation of the partnership assets must
be credited and charged to the partners’ accounts. The partnership shall make
a distribution to a partner in an amount equal to any excess of the credits over
the charges in the partner’s account. A partner shall contribute to the
partnership an amount equal to any excess of the charges over the credits in the
partner's account but excluding from the calculation charges attributable to an
obligation for which the partner is not personally liable under Section 306.
(Emphasis added).
¶17.
Although there are no cases on point in Mississippi that interpret this statute, the issue
was addressed in Horne v. Aune, 121 P.3d 1227 (Wash. Ct. App. 2005), where the
Washington Court of Appeals considered the property division of a partnership under that
state’s applicable statute governing the dissolution or “winding-up” of a partnership. We
Section 79-13-807 (Rev. 2009), regarding the winding-up of partnership affairs, “is not one
of the non-waivable provisions listed” in subsection (b), although 79-13-103(b)(10) provides
that the agreement may not “restrict rights of third parties[.]” See generally Bromberg and
Ribstein on Partnership, Vol. II, § 7.10(d) n.23, 7:148 (2006).
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find the Washington statute discussed in that case to be essentially identical to Mississippi’s
section 79-13-807. In that case, the central issue was whether the statute required “a public
sale of partnership property to wind up a partnership[,] . . . .as opposed to permitting a
partner to purchase the property, with cash payment to the other partner of his interest.” Id.
at 1231-32 (¶¶29, 39). The appellate court determined that the “phrase ‘liquidation of the
partnership assets,’ guarantees partners the right to receive, in cash, the fair value of their
property interest upon winding up and dissolution of the partnership. But that result may be
achieved by means other than forced sale.” Id. at 1234 (¶49). The court in Horne noted that
sometimes “liquidation equaled forced sale because that was deemed the most accurate
method of valuing partnership assets.” Id. Therefore, while a forced sale is certainly a viable
remedy for the liquidation of assets, especially when an accurate valuation of the assets is
difficult to determine, it not required under the statute.
¶18.
Accordingly, we reverse the chancery court’s judgment and remand this case for a
liquidation of the partnership real estate pursuant to section 79-13-807, which may
necessitate a forced sale of the improved real property. The further “winding-up” of the
partnership shall take into consideration the additional partnership contribution by Best of
his mother’s inventory and any decrease in value to the real estate due to McCachren’s
cutting of the electrical lines and removal of the meter box.
¶19. THE JUDGMENT OF THE CHANCERY COURT OF YALOBUSHA
COUNTY IS REVERSED, AND THIS CASE IS REMANDED FOR FURTHER
PROCEEDINGS CONSISTENT WITH THIS OPINION. ALL COSTS OF THIS
APPEAL ARE ASSESSED TO THE APPELLEE.
KING, C.J., LEE AND MYERS, P.JJ., IRVING, GRIFFIS, ISHEE, ROBERTS,
CARLTON AND MAXWELL, JJ., CONCUR.
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