Plaintiff appeals as of right from a judgment and order of November 23, 1983, of no cause of action on his claim for damages against defendant Maisel & Associates of Michigan. Plaintiff challenged the propriety of Maisel’s final accounting of the partnership assets of Harrisburg Properties and sought to recover for certain alleg
On July 2, 1979, Harrisburg Properties was formed as a Michigan copartnership. The captioned parties in this dispute, along with 11 other individuals, constituted the members of this general partnership. Plaintiff held an 8.246% interest in the partnership and Maisel held a 1% interest. All of the partners aside from Maisel were employees of Malan Contruction Company in 1979.
Maisel develops shopping centers from the initial acquisition of vacant land to constructed, fully-leased and permanently-financed facilities. Malan is a Michigan corporation, with 90% of its shareholders being the general partners of Maisel. Malan is Maisel’s general contractor, construction manager and property manager for its shopping center projects. Malan performs similar services for E. N. Maisel & Associates, another incarnation of Maisel which contains a slightly different mix of partners.
In 1978, E. N. Maisel purchased approximately 13 acres of land in Harrisburg, Illinois. On September 28, 1978, E. N. Maisel assigned the property and purchase agreement to Maisel in consideration for the remibursement of amounts already paid on the property as well as the assumption of the responsibility for future payments. Invididuals at Malan, inсluding plaintiff, prepared a feasibility study for a shopping center on the site, and by the end of 1978, Maisel decided to go forward with the shopping center.
Maisel also decided to reward certain long-term, key employees at Malan with partnership interests in the Harrisburg project. Without contributing cash or property, the employees received various partnership interests in the Harrisburg project, but, as general partners, they also assumed liabil
Substantial construction on the project, known as Shawnee Square Shopping Center, began in the summer of 1979, with Malan serving as general contractor for a fee of total costs plus 8% for construction of a Kmart store and the site work. For the other tenant stores, Malan ultimately subcontracted construction, serving only as construction manager for a 2% fee. Maisel itself financed approximately $1.2 million in 1979 for initial construction, prior to securing funding frоm third-party lenders. The Harrisburg partnership claimed a net operating loss during this developmental period in 1979 of $59,704.60.
Maisel continued to advance funds to the partnership for construction even after loans were secured from its third-party lenders, Kmart Corporation and Michigan National Bank-Detroit, in February and March, 1980. By late 1980, interest on the Michigan National Bank-Detroit loan had increased to thе point where the Harrisburg carrying costs exceeded the project’s income from rents. Without consulting the other partners, Maisel sold the Kmart building portion of the project. The sale resulted in a net profit of approximately $808,000 with net cash proceeds to Harrisburg amounting to $669,819.
Plaintiff objected to the timing of the sale which generated $830,175 of short-term capital gain to the partnership, of which his share was $68,456 taxable fully as ordinary income. Except for plaintiff, who by this time was no longer employed at Malan, Maisel made interest-free loans to the
On April 30, 1982, Maisel was ordered to file an accounting of Harrisburg’s partnership affairs from its inception through its dissolution. The initial accounting was filed on August 13, 1982. A supplemental accounting containing additions and corrections was filed on March 30, 1983.
Plaintiff’s claims for equitable relief and for damagеs in the lower court alleged accounting errors and breach of fiduciary duty. In its opinion of August 22, 1983, the trial court found that plaintiff failed to meet his burden of proving that fees paid to Malan for overhead and profit were unreasonable, and that plaintiff had not shown such an identity of interest between Malan and Maisel to conclude that one entity was merely the instrumentality of the other. The court further rеjected plaintiff’s contention regarding usury and his assertion that the land and developmental and carrying costs of the project were either a gift or a capital contribution to the other partners from Maisel. This appeal has ensued. We affirm.
On April 30, 1982, the trial court ordered Maisel
This difference first came to light, according to Maisel, in January, 1983, in plaintiff’s answers to Maisel’s interrogatories inquiring into the amount of damages sought by plaintiff. On March 28, 1983, following an adjournment to allow Maisеl to "amplify” the accounting, a supplemental accounting was filed. The supplemntal accounting consisted of nine pages of corrections and supplements to Maisel’s original accounting and 29 pages of annexed schedules. Plaintiff moved to strike the supplemntal accounting on the basis that the court had not granted leave to file a supplemental accounting. Subsequently, plaintiff also argued prejudice on grounds that the supplemental accounting was not simply an amplification of the basis for reimbursements contained in the original accounting and that Maisel failed to identify the source of the information contained in its summary schedules as required by MRE 1006.
We perceive no merit to plaintiff’s arguments. In Crane & Bromberg, Law of Partnership (1968),
"A formal account or (as it is sometimes called) an accounting is more than a presentation of financial statements. It encompasses a review of all transactions, including alleged improprieties, which should be reflected in the financial statements. It resembles a trustee’s accounting.
"If a partner asks his co-partners for an account and does not get it, or is not satisfied with it, he may bring an action for an accounting. This is a comprehensive investigation of transactions of the partnership and the partners, and an adjudication of their relative rights. It is conducted by the court or, more commonly, by an auditor, referee or master, subject to the court’s review. Equitable throughout most of its long history, this action is well adapted to the complexity of partners’ relations. But its origins lie in the mutual fiduciary obligations of the partners.
"An accounting action is designed to produce and evaluate all testimony relevant to the various claims of the partners. ” (Emphasis added; footnotes omitted.)
Additionally, 18 Michigan Law & Practice, Partnership, § 102, p 402, states that in a suit for a partnership accounting "evidence may be admitted which is pertinent and relevant to the issues framed by the pleadings”. See, also,
Equitable Trust Co v Karos,
We are persuaded here that the presentation to the court of Maisel’s supplemental accounting and annexed schedules served to facilitate the court’s comprehensive review of all of the partnerships’ sometimes complex and complicated transactions. Once Maisel became aware that plaintiffs claim for damages asserted specific complex financial and bookkeeping improprieties in this case, it
Next, plaintiff urges that the managing partner, as a fiduciary, must prove the propriety of its actions. Thus, plaintiff contends that, even though Maisel had the burden of establishing the correctness of each disputed disbursement, the lower court nevertheless required him to prove as improper the charge for the cost of land, the alleged loans from or through Maisel, and charges for Malan’s overhead and profit. We find this contention to be without merit.
Preliminarily, wе note that our reveiw of an equitable accounting is
de novo,
although the lower court’s findings will not be disturbed unless the evidence clearly preponderates in the other direction.
Mousseau v Walker,
Plaintiff contends that all doubts as to the accounting must be resolved against the managing partner. However, this rule applies only where the partnership’s business records are incomplete. 68 CJS, Partnership, § 432(a), p 970. In the instant case, the lower court expressly found that Maisel had established the accuracy and correctness of its accounting. Upon that showing, the burden of proof as to the controverted entries then shifted to the plaintiff. We now turn to plaintiff’s specific challenges to the accounting.
Plaintiff asserts that the 13-acre site for the
"there was no testimony or evidence presented at trial which would have established by a preondernance of the evidence that Maisel & Associates of Michigan had the requisite donative intent to gift the land to Hаrrisburg properties. Such an advance, therefore, cannot consitute a gift”.
Although no written partnership agreement was executed for Harrisburg which might evidence the nature of Maisel’s contribution of the land to the partnership, the facts do not support plaintiffs argument that the land was either a gift or a capital contribution. Harrisburg’s 1979 statement of financial position clearly supports Maisel’s assertion that Maisel intended to give the Harrisburg partners the Harrisburg project subject to outstanding liabilities. The statement showed the partnership’s liability as a loan payable to Maisel in the amount of $1,709,780, including fixed assets of construction and value of the land. Plaintiff did not dispute the correctness of this statement of financial position at the time, and, in fact, used the figures to take an individual tax loss for the 1979 tax year.
Plaintiff erroneously represents to this Court that there was no direct testimony on the question of whether the land was a gift, and references to the deposition testimony of Hiram Dorfman are taken completely out of context. In fact, five of the individual partners testified that the land was not a gift.
Plaintiff also attempted to show that certain loans by Maisel were never made, or that, if they were made, they were unnecessary and the interest charged was excessive. While plaintiff concedes that Maisel provided necessary funds to Harrisburg in the early stages, he asserts that by March, 1980, the partnership had sufficient funds to pay back Maisel, but that Maisel, as managing partner, continued to make (or claimed to make) loans amounting to some $580,920.
The trial court found that the supplemental
The burden of proof was properly placed on plaintiff. See
Levy v Leavitt,
As to plaintiffs usury claim, the lower court rejected such based upon the usury statute, MCL 438.32; MSA 19.15(2), which protects the "borrower” and empowers him to maintain an action to recover on an usurious interest rate. Since plaintiff was not the "borrower”, the court found that he could not unilaterally maintain an action for the partnership. Maisel charged Harrisburg interest on funds it advanced to the project after January 1, 1979, at a rate between 2 and 2.5% above prime. We agree with the lower court that plaintiff was not entitled to maintain an action for usury.
Usury is a personal defense which can only be asserted by the "borrower” of the funds.
Tuxedo Enterprises, Inc v Detroit Trust Co,
"Any difference arising as to ordinary matters connected with the partnership business may be decided by a mаjority of the partners; but no act in contravention of any agreement between the partners may be done rightfully without the consent of all the partners.”
Certainly, Maisel’s decision, as managing partner with control over the ordinary matters of the partnership business, to incur debt is subject to majority vote and control rather than requirements for unanimity. Likewise, any attempt to avoid repayment based on usury claims would also be a matter of majority control. To give credence to plaintiff’s privity argument would upset this established partnership principle of majority rule in ordinary business matters. Accordingly, we reject plaintiff’s usury claim.
Plaintiff’s penultimate contention on appeal is that the lower court erred in finding no identity of interest between Maisel and Malan and in upholding certain fees paid to Mаlan. More specifically, plaintiff complains that the payment of Malan’s fee for "overhead and profit” for services as a general contractor and construction manager on the Harrisburg project was, in substance, compen
The lower court reviewed trial testimony which established that Malan received fees for overhead and profit at 8% as general contractor on the Kmart project and 2% as construction manager for the tenant stores. The court found no evidence that Malan and Maisel were anything but separate and distinct legal entities and opined that plaintiff had not come forward with evidence to support a finding that Malan was merely an instrumentality of Maisel. These findings are supported by the evidence. We will not overturn them on appeal.
In any event, this Court has recently held in
Maki v Copper Range Co,
Finally, plaintiff seeks attorney fees, positing
The lower court granted summary judgment in favor of Maisel, dismissing plaintiffs claim for recovery on behalf of all the Harrisburg partners. The trial court noted below that all of the individuals except plaintiff had filed an affidavit accepting the supplemental accounting and releasing all claims against Maisel. Thus, even if plaintiffs underlying cоntention were valid, he never represented the partnership or any of the other partners and never filed a class action or a derivative suit as a representative, so that it is clear that, from the outset, plaintiff alone opposed the majority in the partnership transactions. Under these circumstances, the other partners should not bear the cost of attorney fees.
Affirmed.