Vigneau v. Storch Engineers

Facts

D is a consulting engineering firm, operating as a partnership. P was hired by D as an architect for its Hartford office in 1980 and became a partner in 1983 when he acquired one partnership point or a one percent interest in the partnership. P funded additional partnership points by executing promissory notes in favor of Herbert Storch, the managing partner, and the partnership. P accumulated 3.071 points of ownership in the partnership, and the original principal balance of $175,155.85 on his promissory notes was reduced to $117,472.26 when he ceased payment in March 1988. D's net billings in Connecticut increased from $884,523 to $2,014,661. The partnership agreement provides that each partner shall (c) diligently attend to the business of the partnership and devote his whole time and attention thereto unless otherwise determined and authorized by the Managing Partner; (d) be just and faithful to the other partners and at all times give the other partners full information and truthful explanations of all matters relating to the affairs of the partnership and afford every assistance in his power to carry on the business for the mutual advantage of his partners. Joseph Merluzzo, head of D's Connecticut operations, recruited P to invest with him in a real estate development partnership known as Highview Condominium Associates (hereinafter HCA). P became a general partner with a 22% interest. The was a secret from D. HCA hired D to do the architectural and engineering work for its project and P was D's architect-in-charge. The fees were negotiated by Merluzzo and P acting in dual roles as secret partners of HCA, and as representative of D., The court believed that the $34,000 charged was reasonable and in accordance with market rates. P made a profit in 1984 from his interest in HCA of $28,059, which he never revealed or accounted for to D. Merluzzo initiated another real estate partnership, called Grandford Associates, to build an office building in Hartford. P became a general partner in that partnership with an 8.33% share. Merluzzo and P posted a job announcement that D would do the architectural and engineering work on the Grandford project. Again P negotiated secretly to establish the fees. The court believed P's testimony that those fees were reasonable and in accordance with market rates. Grandford suffered reverses and was unable to pay D's bills totaling $114,000. P participated in decisions of Grandford to pay other creditors rather than D. Merluzzo, and P falsely assured D the bill would be paid by Grandford's “professional” partners obtaining bank financing. P, in his capacity as D's architect-in-charge, wrote to Grandford formally requesting payment of D's long-overdue bill. P was concealing his Grandford involvement. Grandford was taken over by another firm, and in October 1986 the D bill was fully paid with interest. P lost $22,000 on the Grandford deal. Merluzzo resigned when his participation in Grandford was discovered by D. He said P's involvement in Grandford was “minimal.” P promised to divest himself of his entire interest in Grandford. He attempted to do so but could find no takers. D demanded to see the transactions. In February 1989 D got the documents and saw the full and true picture of P's self-dealing in those two projects. 

The Agreement provides that the partnership “shall purchase for the price and in the manner hereinafter set forth, the interest of (a) any partner desiring to sell his interest, or (b) any ••• retired partner.” The Agreement provides in paragraph 23: For the purpose of any purchase of a partner's interest by the partnership, the value thereof shall be an amount equal to the sum of (a) the amount of his capital account, (b) the amount of his loan to the partnership, if any, ••• and (c) his percentage of distribution of profits or losses applied to the average annual net dollar volume for the last three (3) full years next preceding the date as of which such partner's interest is to be valued, ••• The partner's interest so calculated shall be reduced by the amount of any obligation or indebtedness of such partner to the partnership unpaid at the time of such valuation, whether or not due at that time. The Agreement also provides at paragraph 24 that the amount due a selling or retired partner shall be paid in 75 equal monthly installments for a partner whose partnership interest was five percent or less, with interest on the unpaid balance at the annual rate of 8%.

P resigned from D by letter dated May 1, 1987, effective as of June 30, 1987. The reasons for the resignation were poor health and dissatisfaction with the direction of the partnership. He continued to pay on his promissory notes and D continued to accept his payments until March 1988, some nine months after he resigned. P demanded that his partnership interest be purchased and paid for by the partnership pursuant to the Agreement. D has refused to do so. Ps interest was redistributed and sold to the other partners. The interest had a value at the time of his resignation of $167,794.50. D contends it is not obligated to pay it because P violated the partnership agreement and its fiduciary duty to the partnership.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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