Creel v. Lilly

729 A.2d 385 (1999)

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Nature of the Case

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Facts

Joseph Creel began a retail business selling NASCAR racing memorabilia. After about a year and a half, he decided to raise capital from partners so that he could expand and move into his own space. Joe entered into a partnership agreement with Arnold Lilly and Roy Altizer to form a general partnership called “Joe’s Racing.” The agreement called for a full and accurate accounting of all assets and liabilities to be determined at termination with the debts or profits to be distributed according to listed percentages. Upon the death or illness of a partner, his share will go to his estate. If his estate wishes to sell his interest, they must offer it to the remaining partners first.” Joe died on June 14, 1995, about nine months after the partnership was formed. Mrs. Creel was appointed personal representative of his estate. In this capacity, and acting without the knowledge of the surviving partners, Mrs. Creel and the store’s landlord agreed to shorten the lease by one month so that it expired on August 31, 1995. June, July, and August’s rent was paid by Mr. Lilly and Mr. Altizer. In accordance with § 9-602(4), Joe’s Racing was automatically dissolved upon Joe's death, and because the partnership agreement did not expressly provide for continuation of the partnership nor did his estate consent to its continuation, the surviving partners were required under UPA to wind up the business. Mr. Lilly and Mr. Altizer requested that Mrs. Creel and the bank release the funds in the partnership account ($18,115.93 as of July 13, 1995). Their request was refused, and it was at this point that litigation commenced. The surviving partners, brought an action in the District Court against Mrs. Creel, individually and as personal representative of her late husband’s estate, and First Virginia Bank-Maryland. After 31 August 1995, Messrs. Lilly and Altizer ceased doing business as Joe’s Racing and began doing business together under the name Good Ole Boys Racing. The court rejected Mrs. Creel's assertions (1) that [Mr. Lilly and Mr. Altizer] were obligated to liquidate the partnership assets in order to wind up the partnership; (2) that [Mr. Lilly and Mr. Altizer], instead of winding up the partnership by liquidating its assets, misappropriated partnership assets, i.e., inventory to make a profit, for which they were obligated to account; and (3) that the Estate was entitled to 52% of such profits, the court declared that the Estate was entitled to a total of $21,631.... The Court of Special Appeals affirmed the judgment of the Circuit Court for Charles County, finding that under UPA “winding up” does not always mean “liquidate;” therefore, Joe’s Racing had no duty to sell off all of its assets in a liquidation sale. The court also held that Good Ole Boys was not a continuation of Joe’s Racing, and as such the Creel estate was not entitled to damages equal to a share of the profits allegedly made by the successor partnership. Mrs. Creel filed a petition for certiorari in May 1998, which was granted.