Byker v. Mannes

641 N.W. 2d 210 (2002)

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Nature of the Case

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Facts

P did accounting work for D. They talked about going into business together because they had complementary business skills. D could locate certain properties because of his real estate background, and P could raise money for their property purchases. They stipulated the following: The Plaintiff . . . and Defendant . . . agreed to engage in an ongoing business enterprise, 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. 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. The marina encountered serious financial difficulties. P and D placed their profits from M & B Limited Partnership II into Pier 1000 Ltd. and borrowed money from several financial institutions. D refused to make any additional monetary contributions. P continued to make loan payments and incurred accounting fees on behalf of Pier 1000 Ltd., as well as on behalf of other business entities. P also entered into several individual loans for the benefit of Pier 1000 Ltd. These business transactions were performed without D's knowledge. The property was eventually returned to its previous owners in exchange for their assumption of the business obligations. Ventures between P and D ceased. P then wanted equalizing payments as a result of the losses incurred from the various entities. D was 'absolutely dumbfounded.' P filed suit for the recovery of the money on the basis that the parties had entered into a partnership. The trial court determined that the parties had created a general partnership. 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. D appealed to the Court of Appeals, which reversed. Judge White dissented: 'there is no necessity that the parties attach the label 'partnership' to their relationship as long as they both mutually agree to assume a relationship that falls within the definition of a partnership.' P appealed.