Crosby v. Bowers

ARNOLD, Judge. Both plaintiff and defendants attack various aspects of the trial and judgment in this case. Assignments of error by both parties have merit and demand that we reverse the judgment of the trial court and remand the case for a new trial. I. Plaintiff contends that the trial court erred in granting defendants’ motion for a directed verdict. We agree. A motion for a directed verdict presents the question whether the evidence, when considered in the light most favorable to the nonmoving party, is sufficient for submission to the jury. Kelly v. International Harvester Co., 278 N.C. 153, 179 S.E. 2d 396 (1971). At trial, plaintiff presented evidence that defendants breached the partnership agreement when they suspended his authority as managing partner, suspended his management fee and cancelled his authority to write checks on the partnership accounts. This evidence is sufficient for submission to a jury for a determination of whether defendants willfully breached the partnership agreement. Defendants, however, assert that the directed verdict was properly granted and list the following alternative reasons in support of their position: 1) plaintiff lacked standing to sue defendants; 2) plaintiff was unable to prosecute the action individually; 3) there was an antecedent breach of the agreement by plaintiff; and 4) there was insufficient evidence of a willful breach by defendants. With respect to the issue of plaintiffs standing to sue, Pugh v. Newbern, 193 N.C. 258, 136 S.E. 707 (1927), is controlling. In Pugh, our Supreme Court stated the general rule that one partner cannot sue another partner at law until there has been a complete settlement of the partnership affairs and a balance struck. The Court added, “[T]here are, however, well established exceptions to the general rule. A partner may maintain an action at law against his copartner upon claims growing out of the following state of facts: ... 3. Claims upon express personal contracts between the partners.” Id. at 261, 136 S.E. at 708-09. The partnership agreement in the present case is an express personal contract between the partners. Thus, plaintiff has the requisite — 345 — standing to maintain an action against defendants. Furthermore, defendants’ position that plaintiff was unable to prosecute the action individually is untenable. Regarding the alleged antecedent breach of the agreement by plaintiff, the general rule governing contracts requires that if either party commits a material breach of the contract, the other party should be excused from the obligation to perform further. Coleman v. Shirlen, 53 N.C. App. 573, 281 S.E. 2d 431 (1981). Whether plaintiff s actions in the present case constitute a breach of the agreement, and whether the alleged breach was material, is an issue of fact that should be determined by the jury on remand if defendants assert antecedent breach as a defense to plaintiffs claim. Additionally, the question whether defendants’ actions constitute a willful, i.e. intentional, breach is a question of fact for the jury. See id. If the jury finds that defendants willfully breached any condition of the agreement, the trial court must then apply section 20 of the agreement in order to determine the rights of the parties. Section 20 provides that a partner shall be dismissed from the partnership if he willfully breaches any condition of the agreement. It further provides that “[u]pon termination for reasons other than a partner’s death, disability or retirement, the partnership shall purchase the partner’s interest in the same manner and upon the same terms as though the partner had died.” Section 19 of the agreement provides a formula for the surviving partners to purchase a deceased partner’s interest. Under the Uniform Partnership Act, “termination” is used to designate the point in time when all the partnership affairs are wound up. 2 Cavitch, Business Organizations § 29.01 (1984). It is clear that the parties in the case sub judice did not use the word “termination” in its technical sense because it would be impossible for a partnership to take any action once it has been terminated. Accordingly, it is obvious that the parties intended “termination” to refer to dissolution. It is a general rule of contract law that a contract must be construed as a whole, considering each clause and word with reference to all other provisions and giving effect to each whenever possible. Marcoin, Inc. v. McDaniel, 70 N.C. App. 498, 320 S.E. 2d 892 (1984), disc. rev. denied, 312 N.C. 797, 325 S.E. 2d — 346 — 631 (1985). With this in mind, section 20 of the agreement is unambiguous and provides that upon dissolution the partnership shall purchase the interest of the withdrawing partner. Therefore, if the jury finds that defendants willfully breached the agreement, plaintiff should be permitted to dismiss defendants from the partnership and purchase their interests pursuant to the agreement. At that point, the partnership would then be dissolved since a partnership consisting of one person cannot continue to exist. G.S. 59-36(a). Under these circumstances, the non-competition covenant would become effective. Even if the jury finds that defendants did not breach the agreement and that plaintiff did not commit an antecedent breach, the inquiry varies only slightly. Since “termination” as used in the agreement actually refers to dissolution, it is clear that defendants could have dissolved the partnership at any time but that they would have been subject to the terms of section 20. Thus, in this situation (unless the trial court dissolves the partnership under G.S. 59-62) plaintiff would also be allowed to purchase defendants’ interests and enforce the non-competition clause. Plaintiffs remaining assignments of error concern the judgment entered by the trial court. Without addressing each assignment individually, we hold that the portion of the judgment in which the trial court made findings of fact and conclusions of law in determining the rights of the partners cannot stand. The trial court found as a fact that “[t]he filing of the Complaint ... by the Plaintiff was an expression of the will of the Plaintiff to dissolve Asheville Hand Center since the relief sought by the Complaint would have resulted in a dissolution of the Partnership.” Findings of fact made by the trial court have the force and effect of a jury verdict and are conclusive on appeal if there is evidence to support them. Henderson County v. Osteen, 297 N.C. 113, 254 S.E. 2d 160 (1979). The above finding of fact, however, is not supported by evidence in the record. Plaintiff filed the complaint with the clear purpose and intent of dismissing defendants from the partnership. There is no evidence that plaintiffs act of filing the complaint expressed his will merely to dissolve the partnership. Plaintiff intended that the partnership be dissolved only after dismissing defendants from the partnerships. — 347 — Therefore, in light of the fact that the directed verdict was improperly granted and in view of the above, the portion of the judgment in which the court made a determination of the rights of the partners is reversed. II. The court submitted issues to the jury concerning defendants’ counterclaim and concluded that defendants were not entitled to a judicial dissolution. Defendants contend that the trial court erred “by instructing the jury that any breach of the partnership agreement on the part of [defendants] precluded judicial dissolution of the Asheville Hand Center and ALOK since the instruction in question was not an accurate statement of the law arising upon the evidence.” We agree. As stated previously, the general rule governing contracts requires that if either party commits a material breach of the contract, the other party should be excused from the obligation to perform further. Coleman, 53 N.C. App. at 573, 281 S.E. 2d at 431. The trial court instructed the jury as follows: Before Bowers and Kuzma can prevail, they must satisfy you, the jury, by the greater weight of the evidence that one or more of the causes provided by North Carolina statutes or law for dissolution by judicial decree exists, and that they, themselves, have fully and fairly performed the partnership agreement, because one who has not has no standing in court to enforce any rights under the agreement. This instruction implies that any breach of the agreement by defendants, whether or not the breach was material, precludes defendants from obtaining a judicial dissolution. Defendants were prejudiced by this instruction. On retrial, the trial court shall instruct the jury that a breach by defendants must be material before defendants are precluded from obtaining a judicial dissolution. Defendants also contend that the trial court erred “by instructing the jury that it could not answer the first or fourth issues in the affirmative unless it found by the greater weight of the evidence that Crosby had breached the partnership agreement since the trial court’s instruction did not constitute an ac — 348 — curate statement of the law arising upon the evidence.” We agree. G.S. 59-62(a)(3) and (4) state: On application by or for a partner the court shall decree a dissolution whenever: (3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business, (4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him. The trial court’s instructions implied that the first and fourth issues submitted to the jury required a breach of the partnership agreement by plaintiff. The statute does not require a breach of the partnership agreement as a prerequisite to judicial dissolution. On retrial, the jury instructions shall be altered to reflect this. Concerning defendants’ remaining assignments of error, we have examined them and have determined them to be without merit. Accordingly, upon remand if the trial court concludes that the facts as determined by the jury entitle defendants to a judicial dissolution under G.S. 59-62, plaintiff would not be able to enforce section 20 even if the jury also finds that defendants willfully breached the agreement. In other words, the only means by which defendants can circumvent section 20 is for the trial court to judicially dissolve the partnership. Otherwise, section 20 governs the rights of the parties. Therefore, the judgment of the trial court is reversed and the case is remanded for a new trial on both parties’ claims. As a final note, the broadside attacks by counsel on each other within their briefs are improper. “The function of all briefs . . . is to define clearly the questions presented to the reviewing court and to present the arguments and authorities upon which the parties rely in support of their respective positions thereon.” App. R. 28(a). We caution counsel that personal attacks and trivial — 349 — verbiage are inappropriate in appellate briefs and should not be repeated. Reversed and remanded. Chief Judge Hedrick and Judge Eagles concur.