614 N.E.2d 1136 | Ohio Ct. App. | 1992
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *380 This is a consolidated appeal from judgments of the Wood County Court of Common Pleas in an action involving claims and counterclaims for breach of a partnership agreement.
Appellants set forth eight assignments of error:
"I It constituted error to grant a judgment for monetary damages.
"II It constituted error to find that plaintiff owns an undivided one-half interest in the real estate.
"III It constituted error to award plaintiff punitive damages.
"IV The award of punitive damages is against the manifest weight of the evidence.
"V It constituted error to find that defendants' breach of contract was antecedent to plaintiff's breach of contract, and that defendants waived plaintiff's breach of contract.
"VI It constituted error not to award damages to defendants on their counterclaim.
"VII It constituted error not to order a dissolution of the partnership.
"VIII It constituted error to grant plaintiff judgment for the amount of compensatory damages awarded."
The facts that are relevant to a determination of the issues raised by this appeal are as follows. Prior to July 31, 1989, defendants-appellants, David J. and Bonnie Vollmar, owned and operated a tavern in Dunbridge, Ohio, which they called the "Central Inn." They also owned the land on which the Central Inn was located. On July 31, 1989, the Vollmars entered into a land installment contract ("LIC") and a sale and purchase agreement ("SPA") with plaintiff-appellee, Kenneth R. Kruse. Pursuant to those agreements, Kruse was to pay $17,500 ($5,000 in down payment and the rest in monthly installments) in exchange for an undivided one-half interest in the real estate and an equal partnership in the tavern, respectively. The SPA provided further "* * * that all business profits and losses shall be divided in the same percentage as owned by the parties." The parties verbally agreed that Kruse would provide one-half of the labor necessary to operate the business by hiring an employee at his own expense to work during the week and by personally working on Saturdays. Almost immediately, a number of disputes and arguments concerning the business took place between Kruse and the Vollmars. On December 2, 1989, during one such argument, Kruse told David Vollmar that "I was either going to buy him out or I wanted him to buy me out * * *" and that "I was taking my stuff *382 * * *." That night Kruse removed all of his personal belongings from the tavern "* * * except a couple of items * * *." Thereafter, the parties attempted to reach an agreement by which the Vollmars would purchase Kruse's interest in the partnership. When this proved unsuccessful, the Vollmars locked Kruse out of the business premises and eliminated his name from the business checking account, after which Kruse continued to insist that he was still a partner and the Vollmars continued to accept Kruse's monthly payments.
On July 23, 1990, Kruse filed his complaint in which he set forth two claims for relief. His first claim is that the Vollmars willfully and wantonly breached the LIC and SPA by failing to distribute profits of the business or provide an accounting as to business receipts and expenditures. His second claim is that the Vollmars willfully and wantonly breached their fiduciary duties "* * * under principles of partnership law * * *" by not distributing or accounting for profits and by denying him access to the business premises and records. The complaint demanded judgment on the first claim for relief for an unspecified amount of compensatory and punitive damages and on the second claim for relief for "* * * a full written accounting * * *"; the complaint, however, did not contain a demand for dissolution of the partnership. On August 30, 1990, the Vollmars filed an answer and a counterclaim which alleged three claims for relief: (1) breach of partnership obligations; (2) conversion of partnership property; and (3) interference with partnership business. The counterclaim demanded judgment for compensatory and punitive damages and sought "* * * an order judicially dissolving the partnership agreement * * *."
On September 14, 1990, Kruse filed an amended complaint which in all relevant respects was the same as his original complaint. On September 19, 1990, the Vollmars filed their answer to Kruse's amended complaint but no counterclaim.
On May 30, 1991, the case preceded to trial to the court. On July 11, 1991, the trial court filed its decision and judgment entry which awarded judgment to Kruse on his first claim for relief in the amount of $5,631.88 for compensatory damages, $2,000 for punitive damages and $3,000 for attorney fees; the court found further that although "* * * it is in the best interest of the partnership that this business entity cease as a partnership, * * * the plaintiff did not seek the dissolution of the partnership and the Court does not order it" as part of its decision. The trial court also included the following relevant findings:
"* * * [T]he Vollmars did exclude the plaintiff from management decisions. This conduct has violated the terms of the purchase agreement.
"* * * The plaintiff stated he was through and walked out of the business taking with him his own personal items from the bar. This act violated terms of the agreement although his act was precipitated by breach of the contract by the defendants. *383
"* * * [T]he defendants waived any breach by the plaintiff and confirmed the continuing interest of the plaintiff by receiving the plaintiff's purchase checks monthly, but the defendants violated the agreement by excluding the plaintiff * * *.
"* * *
"* * * Generally punitive damages are not recoverable in breach of contract law suits but an exception is made when the breach amounts to an independent willful tort. [Citation omitted.]
"Under the facts of this case when the one partner was refused permission to participate in the business, the door locks were changed, the checking accounts were changed, but the partner's monthly payments still were demanded and received, punitive damages are authorized."
On August 12, 1991, the Vollmars filed their appeal from this judgment.
Since the trial court's July 11, 1991 decision and judgment entry did not dispose of Kruse's second claim for relief or the Vollmars' counterclaim, on March 3, 1992, it filed a "SUPPLEMENTAL AND FINAL JUDGMENT ENTRY," which ordered that:
"1. The judgment entry of July 11, 1991 is reaffirmed.
"2. The defendants are ordered to, within thirty days, account to the plaintiff for receipts and expenditures of the business since December 31, 1990.
"3. The defendants' counter-claim seeking a dismissal of the plaintiffs' [sic] claim, compensatory damages and dissolution of the partnership by the Court is denied and is dismissed."
The trial court additionally found that R.C.
On March 11, 1992, the Vollmars filed their appeal from this judgment.
On March 19, 1992, this court filed a decision and journal entry in which we sua sponte consolidated the two appeals. This case is now before this court on the consolidated appeal from the July 11, 1991 and March 3, 1992 judgments.1 *384
In support of their fifth assignment of error, the Vollmars argue that Kruse was the first to breach the SPA by failing to work on Saturdays; that Kruse expressed a desire to dissolve or terminate the partnership on December 2, 1989; that Kruse's actions precluded him from participating further in the partnership; that Kruse's "* * * antecedent failure to work on Saturdays justified Defendants' excluding him from management decisions"; and that their acceptance of payments from Kruse under the LIC did not waive Kruse's breach under the SPA.2
In support of their seventh assignment of error, the Vollmars argue that the trial court should have recognized that a dissolution occurred ipso facto either on or prior to December 2, 1989, by the actions of the parties, or on August 30, 1990, when they filed their counterclaim, and that as of either of these dates Kruse was no longer entitled to share in the partnership profits.
Although the trial court did not specifically address the issue of whether any of the parties' actions caused a dissolution of the partnership, it did find that their acts and conduct after December 2, 1989 were inconsistent with a recognition on their part that they considered the partnership to have been dissolved ipso facto on that date. The issue, therefore, is whether the partnership should have been dissolved by the court and, if so, as of what date.
"A partnership is an association of two or more persons to carry on as co-owners a business for profit." R.C.
In determining whether to decree a dissolution, a court is not limited to considering only those events listed in R.C.
"The dissolution of a partnership is the change in the relation of the partners caused by the partner's ceasing to be associated in the carrying on as distinguished from the winding up of the business." R.C.
Where appropriate, equity will enjoin a dissolution for a time. Id. at 598-599. It is particularly appropriate in cases where the acts and conduct of the partners claiming dissolution are inconsistent with a recognition upon their part that they considered the partnership to have been dissolved ipso facto on the date of a breach or exclusion, or where the partnership agreement contained no clause conferring upon them the power to expel. Zeibak v. Nasser (1938),
Upon consideration of the entire record of proceedings that was before the trial court and the law as set forth above, this court finds: (1) it is undisputed that the Vollmars want to dissolve their partnership relationship with Kruse; (2) the partnership must be dissolved; (3) the cause of the dissolution must be determined in the first instance by the trial court and will, in turn, determine the rights and liabilities of the parties pursuant to R.C.
Accordingly, the Vollmars' fifth and seventh assignments of error are well taken as to the dissolution of the partnership.
Kruse responds that he is entitled to punitive damages on the basis of the Vollmars' actions in breaching the contract, not on the basis of breach of a fiduciary duty; and that the Vollmars' actions in summarily excluding him from the business constitutes an independent, willful tort.
The general rule in Ohio is that irrespective of the motive on the part of the defendant and no matter how willful the breach, punitive damages are not recoverable in an action for breach of contract. Digital Analog Design Corp. v. N. SupplyCo. (1989),
This court has recognized an exception to the general rule, however, and held that where the actions which constitute the breach of contract also amount to an independent, willful tort, punitive damages may be recovered upon the necessary showing of malice. Ali v. Jefferson Ins. Co. (1982),
Subsequently, in Hoskins v. Aetna Life Ins. Co. (1983),
"The imposition of the duty of good faith upon the insurer is justified `because of the relationship between the * * * [insurer and the insured] and the fact that in the insurance field the insured usually has no voice in the preparation of the insurance policy and because of the great disparity between theeconomic positions of the parties to a contract of insurance;
and furthermore, at the time *387
an insured party makes a claim he may be in dire financial straits and therefore may be especially vulnerable to oppressive tactics by an insurer seeking a settlement or a release. See, also, Motorist Mut. Ins. Co. v. Trainor,
In Suver v. Personal Serv. Ins. Co. (1984),
In Deist v. Timmins (1986),
While there is some limited support for the proposition that punitive damages are recoverable where a partner summarily excludes his copartner from the partnership business, see,e.g., Freund v. Murray (1909),
Upon consideration of the foregoing, this court finds that the trial court was without legal authority to award punitive damages and attorney fees in this case and erred in so doing. *388
Accordingly, the Vollmars' third and fourth assignments of error are well taken.
In Bishop v. Grdina (1985),
In Moore v. Sweda (1985),
Although the complaint in Moore sought to have the partnership dissolved, as well as an accounting, there is no indication by the court that a dissolution is required in order for the exception to apply. R.C.
Upon consideration of the foregoing, this court finds that the trial court did not err in awarding monetary damages to Kruse in excess of that demanded in his complaint.
As to the Vollmars' alternative argument that we should find the award of punitive damages and attorney fees to be beyond the reach of the accounting exception, this argument is rendered moot by our findings on their third and fourth assignments of error.
Accordingly, the Vollmars' first assignment of error is not well taken.
"[T]he total agreement between the [paties] * * * included the land contract for a 1/2 interest in the real estate and a purchase and sale agreement for 1/2 of the personal property involved in the business including fixtures [sic] equipment and the inventory * * *. The agreement further provided that * * * Mr. Kruse was to receive one-half of the net profits of the business if any and one-half of the losses would be assessed to him.
"* * *
"Kenneth Kruse owns an undivided 1/2 interest in the real estate * * *."
In support of their second assignment of error, the Vollmars seem to argue that the purchase of the land and assets is a separate transaction from the agreement to form a partnership and, therefore, under the terms of the LIC, Kruse does not acquire a one-half undivided interest in the real estate until he pays the purchase price in full.
Where a contract is clear and unambiguous, its interpretation and construction are a matter of law to be determined by the court. Inland Refuse Transfer Co. v. Browning-Ferris Industriesof Ohio, Inc. (1984),
R.C.
Upon consideration of the foregoing, this court finds: (1) the LIC and SPA were executed as part of the same transaction and must be read together; (2) when read together, the LIC and SPA are clear and unambiguous as to the parties' intent that the purchase and sale of the real property and assets of the business, and the agreement to divide profits and losses, are part of a single agreement to form a partnership, and that the real property is the property of the partnership; (3) pursuant to R.C.
Accordingly, the Vollmars' second assignment of error is well taken.
"Although it was known that Mr. Kruse had a full time trucking job, he promised to work Saturdays in the business. Mr. Kruse has not worked the number of hours promised originally. Therefore Mr. Kruse must be required to deduct from his portion of the profits as a distribution to him of almost all of Mr. Evans' salary whether he worked weekdays or Saturdays."
In support of their sixth assignment of error, the Vollmars argue that, in light of this finding, the trial court should "* * * have determined the amount Plaintiff must be `required to deduct,' * * * [and] render judgment against Plaintiff and in favor of Defendants in that amount on the counterclaim."
Kruse responds that the Vollmars' counterclaim was not properly before the court and, even if it was, the trial court did account for the salary deduction.
As to the Vollmars' argument that the trial court did not determine the amount to be deducted from Kruse's profits for Evans' salary, the trial court specifically found that:
"Ken Kruse was charged with a cash draw of 7,022.00 [sic] for 1990. Kruse should be charged with up to $100.00 per week for Robin's wages or his successor's wages. The Court finds Kruse must be charged with $5,200.00 draw for wages and Kruse was therefore shorted $1,822.00 as a distribution for 1990 and credit must be given to him as he received no cash draws." *391
As to the Vollmars' argument that judgment should have been entered on their counterclaim for the amount of Evans' salary chargeable to Kruse, this was neither alleged as part of their counterclaim nor argued as such and, in any event, to require the trial court to do so would result in double recovery.
Accordingly, the Vollmars' sixth assignment of error is not well taken.
This court has reviewed the entire record of proceedings that was before the trial court. Upon consideration thereof, this court finds that the award of compensatory damages is supported by competent, credible evidence.
Accordingly, the Vollmars' eighth assignment of error is not well taken.
On consideration whereof, this court finds that substantial justice has not been done the party complaining, and the judgment of the Wood County Court of Common Pleas is reversed in part and affirmed in part as set forth above. This case is remanded to said court to enter an order dissolving the partnership and for a final accounting, and for further proceedings and orders not inconsistent with this opinion. Costs are assessed against appellee. Judgment reversed in part and affirmed in part.
Judgment reversed in part,affirmed in partand cause remanded.
GLASSER, P.J., and SHERCK, J., concur.
"A judgment by default shall not be different in kind from or exceed in amount that prayed for in the demand for judgment. Except as to a party against whom a judgment is entered by default, every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled; however, a demand for judgment which seeks a judgment for money shall limit the claimant to the sum claimed in the demand unless he amends his demand not later than seven days before the commencement of the trial. Additional service of process is not necessary, upon such amendment." *392