DAVID G BYKER V THOMAS J MANNES
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Michigan Supreme Court
Lansing, Michigan 48909
_____________________________________________________________________________________________
C hief Just ice
Justices
Maura D . Corrigan
Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
Opinion
____________________________________________________________________________________________________________________________
FILED MARCH 26, 2002
DAVID G. BYKER,
Plaintiff-Appellant,
v
No.
116380
THOMAS J. MANNES,
Defendant-Appellee.
________________________________
BEFORE THE ENTIRE BENCH
MARKMAN, J.
This Court granted leave in this case to consider whether
Michigan partnership law, MCL 449.6(1), requires a subjective
intent to form a partnership or merely an intent to carry on,
as co-owners, a business for profit.
The trial court found
that a partnership is formed by persons whose intent is to
carry on as co-owners a business for profit, regardless of
their subjective intention to be partners.
On the basis of
this definition, the court determined that a partnership
existed.
The Court of Appeals, in a split opinion, reversed,
finding that no partnership existed because of, among other
factors, the lack of evidence of the parties’ subjective
intent to form a partnership. We disagree with the definition
of
partnership
applied
by
the
Court
of
Appeals.
In
determining whether a partnership exists, the focus is not on
whether
individuals
subjectively
intended
to
form
a
partnership, that is, it is unimportant whether the parties
would have labeled themselves “partners.”
Instead, the focus
is on whether individuals intended to jointly carry on a
business for profit within the meaning of the Michigan Uniform
Partnership Act, MCL 449.1 et seq., regardless of whether they
subjectively intended to form a partnership.
Accordingly, we
reverse the Court of Appeals decision and remand this matter
for further consideration.
I. FACTS
AND
PROCEEDINGS
This case arises out of an alleged partnership between
plaintiff David Byker and defendant Tom Mannes.
plaintiff was doing accounting work for defendant.
In 1985,
The two
individuals talked about going into business together because
they had complementary business skills—defendant could locate
certain properties because of his real estate background and
plaintiff could raise money for their property purchases.
Indeed, the parties stipulated the following:
[T]he Plaintiff . . . and Defendant . . .
agreed to engage in an ongoing business enterprise,
2
to 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. . . . In order to facilitate investment
of limited partners, Byker and Mannes created
separate entities wherein they were general
partners or shareholders for the purposes of
operating each separate entity.
Over a period of several years, the parties pursued
various business enterprises.
They have stipulated that the
following business entities were created during this time:
a. A 100% general partner interest in M & B
Properties Limited Partnership, a Michigan limited
partnership, which limited partnership owns a 50%
partnership interest in Hall Street Partners, a
Michigan partnership.
b. A 100% general partner interest in M & B
Properties Limited Partnership-II, a Michigan
limited partnership, which limited partnership owns
a 50% partnership interest in Breton Commercial
Properties, a Michigan partnership.
c.
A 66-2/3% of the issued and outstanding
shares of the common stock of JTD Properties, Inc.,
a Michigan corporation, which is the general
partner of JTD Properties Limited Partnership I, a
Michigan limited partnership, and which is also the
general partner of M & B Properties Limited
Partnership-III, a Michigan limited partnership.
The interest was later increased to 100% when John
Noel left the partnership.
d.
A 66-2/3% of the issued and outstanding
shares of the common stock of Pier 1000 Ltd., a
Michigan corporation.
The interest was later
increased to 100% when John Noel left the
partnership.
e. A 66-2/3% general partner interest in BMW
Properties, a Michigan partnership.
With regard to these entities, the parties shared equally in
3
the commissions, financing fees, and termination costs.
parties
also
personally
guaranteed
loans
from
The
several
financial institutions.
The business relationship between the parties began to
deteriorate after the creation of Pier 1000 Ltd., which was
created to own and manage a marina.
Shortly after the
creation of Pier 1000 Ltd., the marina encountered serious
financial difficulties.
To address these difficulties, the
parties placed their profits from M & B Limited Partnership
II
into
Pier
1000
Ltd.
and
borrowed
money
from
several
financial institutions.
Eventually, defendant refused to make any additional
monetary contributions. Plaintiff, however, continued to make
loan payments and incurred accounting fees on behalf of Pier
1000 Ltd., as well as on behalf of other business entities.
Plaintiff also entered into several individual loans for the
benefit of Pier 1000 Ltd.
These business transactions were
performed without defendant’s knowledge.
The marina was eventually returned to its previous owners
in
exchange
for
their
assumption
of
plaintiff’s
and
defendant’s business obligations. At this point, the business
ventures between plaintiff and defendant ceased.
Plaintiff
then
approached
defendant
with
regard
to
equalizing payments as a result of the losses incurred from
4
the various entities.
Defendant testified that this was the
first
had
time
concerning
that
any
he
received
outstanding
notice
payments,
and
from
plaintiff
that
he
was
“absolutely dumbfounded” by plaintiff’s request for money.
After
unsuccessfully
seeking
reimbursement
from
defendant, plaintiff filed suit for the recovery of the money
on the basis that the parties had entered into a partnership.1
Specifically, plaintiff asserted that the obligations between
him and defendant were not limited to their formal business
relationships established by the individual partnerships and
corporate entities, but that there was a “general” partnership
underlying all their business affairs. In response, defendant
asserted that he merely invested in separate business ventures
with plaintiff and that there were no other understandings
between them.
The case proceeded to a bench trial where the trial court
determined
that
partnership.2
the
parties
had
created
a
general
The court observed that, although Michigan had
1
The parties stipulated that the alleged partnership
was never memorialized in a written partnership agreement, had
no formal name, no tax identification number, and no income
tax filings.
2
The trial court and the Court of Appeals termed the
alleged partnership at issue a “super” partnership. The trial
court defined such a partnership as one that, although not
entailing a formal business relationship by the parties, is a
“general partnership between them underlying all of their
(continued...)
5
not formally adopted § 202 of the 1994 Uniform Partnership Act
(1994 UPA),3 the law in Michigan is that parties must merely
have an intent to carry on a business for profit, not a
subjective intent to create a partnership. On this basis, the
trial court concluded that the parties had maintained a
business relationship that constituted a partnership.
It
stated:
Having
weighed
the
credibility
of
the
witnesses, principally plaintiff and defendant, we
conclude that they began their relationship with a
general agreement that they were partners and would
share profits and losses equally.
Whether
understood or not they had a general or super
partnership.
The evidence supports that both
understood it.
Defendant
reversed.
appealed
to
the
Court
of
Appeals,
which
Unpublished opinion per curiam, issued February 1,
2000 (Docket No. 205266).
In part, the Court of Appeals
stated that the trial court incorrectly relied on § 202 “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
2
(...continued)
business affairs.” Because the statutory and case law merely
define a “partnership,” this Court will simply use that term
without embellishment.
3
The Uniform Partnership Act, originally adopted in
1914, is a statement of partnership law drafted by the
National Conference of Commissioners on Uniform State Laws and
is intended to contribute to the uniformity of state laws.
6
partnership.’”
Slip
op
at
2
(emphasis
in
original).
Further, it stated that “[t]he 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.”
original).
Id. (emphasis in
Upon review of the facts, the Court of Appeals
determined that the parties clearly did not intend to form a
partnership.4
Judge
Id. at 3.
White
dissented.
She
stated
that,
although
Michigan had not adopted § 202, the trial court correctly
recognized that Michigan’s existing definition of partnership
was consistent with that provision.
White, J., concurring in
part and dissenting in part, slip op at pp 2-3.
Pursuant to
Michigan law, “intent of the parties is determinative, whether
or not they attached the term ‘partnership’ to that intent.”
Id. at 2.
Thus, in Judge White’s view, “[t]here is no
necessity that the parties attach the label ‘partnership’ to
their relationship as long as they in fact both mutually agree
to assume a relationship that falls within the definition of
a partnership.”
Id. at 3.
We agree with Judge White’s
reasoning.
4
A significant factor in the Court of Appeals finding
was the fact that the parties were unaware that they had
formed a partnership until nine years after the parties
entered into their informal relationship.
7
II.
STANDARD OF REVIEW
Whether Michigan partnership law, MCL 449.6(1), requires
a subjective intent to form a partnership or merely an intent
to carry on as co-owners a business for profit is a question
of law.
This Court reviews questions of law under a de novo
standard of review.
Kelly v Builders Square, Inc, 465 Mich
29, 34; 632 NW2d 912 (2001).
III.
DISCUSSION
A. UNIFORM PARTNERSHIP ACTS
In 1917, the Michigan Legislature drafted the Michigan
Uniform Partnership Act.
1917 PA 72.
In this act,
a
partnership was defined as “an association of two [2] or more
persons to carry on as co-owners a business for profit . . .
.”
Id. at § 6, codified in 1929 CL 9846.
Over the years, the
definition has remained essentially constant.5 At present,
partnership
is
defined
as
“an
association
of
2
or
more
persons, which may consist of husband and wife, to carry on as
co-owners a business for profit . . . .”
MCL 449.6(1).
This
definition, as well as its predecessors, was modeled after the
definition of partnership set forth in the 1914 UPA. See MCLS
and MCLA 449.6 (Historical Notes); 1929 CL 9841; 1948 CL
5
For example, the second statutory definition stated
that “a partnership is an association of 2 or more persons,
which may include husband and wife, to carry on as co-owners
a business for profit . . . .” 1948 CL 449.6(1).
8
449.1.
In 1914, the UPA had defined a partnership as “an
association of two or more persons to carry on as owners a
business for profit.”
Uniform Partnership Act of 1914, § 6.
In construing § 6, courts had “universal[ly]” determined that
a partnership was formed by “the association of persons whose
intent is to carry on as co-owners a business for profit,
regardless of their subjective intention to be ‘partners.’”
See Uniform Partnership Act of 1994, § 202, Comment 1.
In 1994, however, the UPA definition of partnership was
amended by the National Conference of Commissioners.
The
amended definition stated that “the association of two or more
persons to carry on as co-owners a business for profit forms
a partnership, whether or not the persons intend to form a
partnership.”
Section 202 (emphasis added).
Although the
commissioners were apparently satisfied with the existing
judicial construction of the definition of partnership, the
commissioners added the new language “whether or not the
persons intend to form a partnership” in order to “codif[y]
the universal judicial construction of UPA Section 6(1) that
a partnership is created by the association of persons whose
intent is to carry on as co-owners a business for profit,
regardless of their subjective intention to be ‘partners.’”
Section 202 (Comment 1).
The commissioners emphasized that
“[n]o substantive change in the law” was intended by the
9
amendment of § 6.
Id.
To date, Michigan has not adopted the
amended definition of partnership.
B. MCL 449.6(1)
Although Michigan has not adopted the amended definition
of
partnership
as
set
forth
in
§
202
of
the
Uniform
Partnership Act of 1994, we believe nonetheless that MCL 449.6
is consistent with that amendment.
As stated numerous times
by this Court, it is essential that this Court discern and
give effect to the legislature’s intent. In doing so, we must
examine the language contained within the applicable statutory
provision.
If the language is clear and unambiguous, this
Court will presume that the Legislature intended the meaning
plainly expressed and will enforce the statute as written.
Wickens v Oakwood Healthcare Systems, 465 Mich 53, 60; 631
NW2d 686 (2001).
As
already
noted,
a
partnership
in
Michigan
is
statutorily defined as “an association of 2 or more persons,
which may consist of husband and wife, to carry on as co
owners a business for profit . . . .”
MCL 449.6(1).
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
10
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.
Further, the Court of Appeals emphasis upon subjective
intent as being of “prime importance in ascertaining whether
a partnership exists,” slip op at 2, belies the absence in the
statute of even a reference to such “intent” as a factor for
consideration.
Indeed,
MCL
449.7,
entitled
“Rules
for
determining existence of a partnership,” contains a listing of
items to be specifically considered in this process and the
subjective intent of the parties is conspicuously absent.6 It
6
MCL 449.7 provides, in relevant part:
(1) [P]ersons who are not partners as to each
other are not partners as to third persons;
(2) Joint tenancy, tenancy in common, tenancy
by the entireties, joint property, common property,
or part ownership does not of itself establish a
partnership, whether such co-owners do or do not
share any profits made by the use of the property;
(3) The sharing of gross returns does not of
itself establish a partnership, whether or not the
persons sharing them have a joint or common right
or interest in any property from which the returns
are derived;
(4) The receipt by a person of a share of the
profits of a business is prima facie evidence that
he is a partner in the business, but no such
inference shall be drawn if such profits were
received in payment:
(continued...)
11
is a well-established rule of statutory construction that this
Court will not read words into a statute.
Omelenchuk v City
of Warren, 461 Mich 567, 575; 609 NW2d 177 (2000).
We decline
here to rewrite or embellish the statute.
C. COMMON LAW
Although the provisions of MCL 449.6(1) set forth the
standard
for
determining
whether
a
partnership
has
been
formed, we note that the Court of Appeals relied heavily on
several of our earlier cases that, in the Court’s view,
focused this inquiry on whether the parties mutually intended
to form a partnership.
However, upon further examination of
these cases, we respectfully disagree with the Court of
Appeals.
Rather, we find that, despite language that could
potentially lead to such a conclusion, these cases, in fact,
contemplated an examination of all the parties’ acts and
conduct in determining the existence of a partnership.
6
(...continued)
(a) As a debt by installments or otherwise,
(b) As wages of an employee or rent to a
landlord,
(c) As an annuity to a widow or representative
of a deceased partner,
(d) As interest on a loan, though the amount
of payment vary with the profits of the business,
(e) As the consideration for the sale of the
good-will of a business or other property by
installments or otherwise.
12
When the Legislature initially drafted MCL 449.6(1) the
definition of partnership was well established in our common
law, and is consistent with the interpretation that we give it
today.
See Beecher v Bush, 45 Mich 188, 193-194; 7 NW 785
(1881); McDonald v Fleming, 178 Mich 206, 209; 144 NW 519
(1913).7
Indeed, judicial interpretations of the Michigan
Uniform Partnership Act have regularly referenced the common
law definition.
564-565;
189
NW
See, e.g., Runo v Rothschild, 219 Mich 560,
183
(1922)
(citing
the
definition
of
a
partnership from the statute and referencing the common-law
test of partnership found in Beecher, supra); Van Stee v
Ransford, 346 Mich 116, 133; 77 NW2d 346 (1956) (stating that
“‘in the absence of an express agreement, . . . acts and
conduct in relation to the business are the test to be used in
determining if a partnership exists.’”).
7
Additionally, there is some statutory evidence that the
Legislature intended to maintain this definition. Subsection
2 of MCL 449.6 provides that
any association formed under any other statute of
this state, or any statute adopted by authority,
other than the authority of this state, is not a
partnership under this act, unless such association
would have been a partnership in this state prior
to the adoption of this act . . . . [Emphasis
added.]
This provision, although applicable to organizations formed
under statutes other than the Michigan Uniform Partnership
Act, implies that the common-law definition of a partnership
is to assist in determining what constitutes a partnership.
13
Pursuant to this common law, individuals would be found
to have formed a partnership if they acted as partners,
regardless of their subjective intent to form a partnership.
Speaking
through
Justice
Cooley,
this
Court
stated
the
following with regard to the law of partnership:
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. [Beecher, supra at 193-194 (emphasis
added); see also McDonald, supra.]
Justice
Cooley’s
statements
clearly
express
that,
in
determining the existence of a partnership, the focus of
inquiry is on the parties’ actual conduct in their business
arrangements, as opposed to whether the parties subjectively
intend that such arrangements give rise to a partnership.
Thus, one analyzes whether the parties acted as partners, not
whether they subjectively intended to create, or not to
create, a partnership.
The Court of Appeals in the instant
case rejected the trial court’s reliance on the proposition
that a partnership may be created where persons carry on as
14
co-owners a business for profit regardless of their subjective
intent to be partners.
The Court emphasized that “[t]he
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.”
Slip op. at 2 (emphasis in original).
However, the cases relied on by the Court of Appeals do not
hold that, standing alone, the absence of subjective intent to
create a partnership is determinative of the question of the
existence of a legal partnership.8
Rather, it is one factor
to consider in deciding if the parties did, in fact, carry on
as co-owners a business for profit.
This proposition has been consistently adhered to by this
Court,
although
our
decisions
on
occasion
have
utilized
imprecise language and, therefore, created the possibility for
some confusion.
For example, in Morrison v Meister, 212 Mich
516, 519; 180 NW 395 (1920), this Court first began to refer
to “the intention of the parties[as being] of prime importance
[in
determining
the
existence
of
a
partnership].”
Unfortunately, this language read out of context could lead
8
Although Justice Cooley stated that the “doubtful” case
must be resolved in favor of “intent,” warning that “otherwise
we should ‘carry the doctrine of constructive partnership so
far as to render it a trap to the unwary,’” Beecher, supra at
194, this does not mean that the absence of subjective intent
is dispositive to whether a partnership exists.
15
one to the conclusion that the intent referred to was not the
intent to carry on as co-owners a business for profit, but the
intent
to
form
a
legal
partnership
per
se.
That
this
misunderstanding should be avoided can be seen by the fact
that Morrison, even while stating “that there was no intention
on the part of the defendants to form a partnership,” went on
to clarify that statement by predicating its holding on the
fact that very few of the other indicia of a partnership were
present.
Id.
That is, the Court surveyed generally the
parties’ actions and intentions to essentially conclude that
they had not wanted to, nor did they in fact, carry on as co
owners a business for profit.
Thus, Morrison considered far
more than merely whether the parties subjectively labeled
themselves partners.
Likewise, in Lobato v Paulino, 304 Mich
668, 675-676; 8 NW2d 873 (1943), there is similarly imprecise
language.
In Labato, this Court observed that “[t]he factual
situation now before us is quite like that in Morrison v
Meister . . . where this court said: ‘the record is convincing
that there was no intention on the part of the defendants to
form a partnership.”
Id. at 676-677.
The Court, as in
Morrison, went on to find that “[t]he vagueness of the whole
arrangement . . . renders it improbable that any partnership
arrangement was mutually agreed upon by the parties.”
677.
Id. at
Plainly stated, Lobato turned on the fact that the
16
business arrangements of the parties, as well as their intent,
afforded no evidence that they wished to jointly carry on as
co-owners a business for profit.
See also Block v Schmidt,
296 Mich 610, 616; 296 NW 698 (1941); Moore v DuBard, 318 Mich
578, 593-594; 29 NW2d 94 (1947).
In addition, we note that there are numerous other cases
that expressly indicate that the focus of inquiry is on the
parties’ intent to “carry on as co-owners a business for
profit,” MCL 449.6(1), and on whether that intent is manifest
in the actual agreement formed.
Rothschild,
supra
at
564,
this
For example, in Runo v
Court
identified
the
partnership statute and stated that “[w]hile the law has
always considered the partnership relation one of contract and
intention, it makes determination of the status of the parties
from their agreement, and draws their intention from their
acts.”
(Emphasis added.)
“agreement
between
[the
The Court concluded that the
plaintiff]
constitut[ed] them co-partners . . . .”
and
the
defendant
Id. at 565.
Similarly, in Klein v Kirschbaum, 240 Mich 368; 215 NW
289 (1927), this Court determined that the relevant evidence
did not establish a partnership relation.
In so concluding,
the Court focused on the parties’ intent to carry on as co
owners a business for profit.
Specifically, it stated:
17
Have they established the fact of their
association with Kirschbaum under an agreement to
carry on as co-owners the tailoring business for
mutual
profit?
As
between
plaintiffs
and
Kirschbaum the question of whether there was a
partnership
depended
upon
intention
mutually
entertained to be established by facts and
circumstances. [Id. at 371.]
In Gleichman v Famous Players-Lasky Corp, 241 Mich 266, 272;
217 NW 43 (1928), this Court again referenced the partnership
statute, “appl[ied] the law as thus stated,” and concluded
that the “indicia” of a partnership were absent.
Further, in
Western Shoe v Neumeister, 258 Mich 662, 665; 242 NW 802
(1932), the Court stated, on the matter of ascertaining the
existence of a partnership, that “[i]f a partnership existed,
it must have been created by consent of the parties either
orally expressed or by conduct in connection with the business
sufficient in law to constitute such a relation.”
(Emphasis
added.) Similarly, in Van Stee, supra at 133, the Court noted
that, absent an express agreement, “‘the test to be used in
determining if a partnership exist[s]’” is to examine the
“acts and conduct in relation to the business.”
Quoting
Western Shoe, supra.
Accordingly, we believe that our prior case law has,
consistent
with
MCL
449.6(1),
properly
examined
the
requirements of a legal partnership by focusing on whether the
parties intentionally acted as co-owners of a business for
18
profit, and not on whether they consciously intended to create
the
legal
relationship
of
“partnership.”
We
emphasize,
however, that any future development of case law regarding
partnership in our state must take place in accord with the
provisions of the Michigan Partnership Act.
IV. CONCLUSION
With the language of the statute as our focal point, we
conclude that the intent to create a partnership is not
required if the acts and conduct of the parties otherwise
evidence that the parties carried on as co-owners a business
for profit.
MCL 449.6, 449.7.
Thus, we believe that, to the
extent that the Court of Appeals regarded the absence of
subjective intent to create a partnership as dispositive
regarding whether the parties carried on as co-owners a
business for profit, it incorrectly interpreted the statutory
(and the common) law of partnership in Michigan.
Pursuant to MCL 449.6(1), in ascertaining the existence
of a partnership, the proper 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
subjectively intended to form a partnership.
the
parties
To the extent
that Morrison and its progeny are read to suggest that the
absence
of
subjective
intent
to
form
a
partnership
is
dispositive of the question whether a partnership exists, we
19
believe that such interpretations are in error.9
Accordingly, we remand this matter to the Court of
Appeals for analysis under the proper test for determining the
existence
of
a
partnership
under
the
Michigan
Uniform
Partnership Act.
CORRIGAN , C.J., and CAVANAGH , WEAVER , KELLY , TAYLOR , YOUNG , and
MARKMAN , JJ., concurred.
9
We emphasize that while intent may be of “prime
importance in considering whether a partnership exists,”
Lobato, supra at 675, the focus of that intent is not on
whether the parties intended to form a partnership, but on
whether the parties intended to carry on as co-owners a
business for profit, and whether they in fact did carry on
such a business.
20
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