Laddon v. Whittlesey

Lowe, J., delivered the opinion of the Court. —prologue— The Uniform Partnership Act, Md. Code, Corps. & Assocs. Art., Title 9, like most uniform acts, was intended to anticipate problems and simplify solutions within defined areas. Subtitle 6 anticipated the problems of Dissolution and Winding Up of partnerships. Section 9-609 anticipated the problems of applying partnership property upon dissolution in either instance when a surviving partner desires to continue the business with the same name or when the business is both dissolved and terminated.

If dissolution is mutually agreed upon, each partner may have the partnership property applied to discharge its liabilities and the surplus applied to pay in cash the net amount owing each partner. § 9-609 (a). If the dissolution is not mutual and amicably agreed upon; but caused by the wrongful conduct of a partner, the innocent partner is entitled not only to his net share of the surplus after liabilities, but also to damages caused by the wrongdoer. § 9-609 (b). The innocent partners are given a conditional option either to continue the business or to wind it up and terminate it. If they desire to continue the business in the same name, they must, among other things, pay the partner who wrongfully causes the dissolution the value of his interest in the partnership (§ 9-609 (b) (2)), as of the date of dissolution (§ 9-614), less damages recoverable as abovementioned (§ 9-609 (b) (1) (ii)).

If the business is not continued, the innocent partner has the right to wind up the partnership affairs, § 9-608; nonetheless, the partner who caused the dissolution wrongfully is entitled to be paid in cash the net amount of the surplus after repayment of liabilities as any other partner pursuant to § 9-609 (a), although his share is ²¹ subject to diminution for whatever damages were caused by his wrongful breach of the partnership agreement causing dissolution, § 9-609 (b) (3) (i). While all partnership rights to an accounting of any partner’s interest, investment or wrongful cause, accrue at the date of dissolution, § 9-614 and see § 9-609 (b) (2), dissolution does not terminate the partnership. The partnership continues until winding up of partnership affairs is completed, § 9-601. Only in the best of all possible partnership worlds will dissolution and termination coincide, but more often than is desirable a partnership will begin to disintegrate commensurate with a developing animosity between partners.

At some point during that period, dissolution may be caused intentionally or unconsciously by wrongful conduct of a recalcitrant partner, but the “partnership” business limps on. The partners now openly antagonistic may be unable to agree on anything, including whether to carry on or dissolve; whether to wind up completely or have some partners remain and continue the business; or when and how to accomplish any of this. When partnership affairs reach this stage, statutes do not provide easy answers, and even though the Uniform Act tries to anticipate such exigencies, the court is left with the responsibility to decree a dissolution as the solution. By the time the partners are resolved to seek court dissolution as a last resort, much damage has been done, and more may occur before termination because the date the court determines dissolution occurred and the final termination may affect distribution pursuant to § 9-611.

Perhaps, recognizing that there will be times when this arms length period between partners will require business to be conducted for the preservation of the business partnership assets, the Act has provided among its delineation of rights and duties of partners in § 9-401 that: "(2) The partnership must indemnify every partner in respect of payments made and personal liabilities reasonably incurred by him in the ordinary and proper conduct of its business, or for the preservation of its business or property.” ²² In addition thereto, “(3) [a] partner, who in aid of the partnership makes any payment or advance beyond the amount of capital which he agreed to contribute, shall be paid interest from the date of the payment or advance.” Unless there is some agreement for salary for specified services among or between the partners, “(6) [n]o partner is entitled to a remuneration for acting in the partnership business, except that a surviving partner is entitled to reasonable compensation for his services in winding up the partnership affairs.” —facts— • When these pertinent sections of the Act are excised, dissolution of a partnership seems formulized. But when issues are isolated in a dissolution case that has dragged on for four years, replete with the digressions of individuals’ internal infighting, the panoramic partnership perspective may be distorted; the partnership purpose of dissolution digressed from; and the statutory formula misapplied. Such is the case of Laddon and Whittlesey, trading as Woodbine Auto Wreckers and Junk Company. The case at bar, from the Circuit Court for Montgomery County, unfolded in serial-like sequences when appellant Samuel E. Laddon and appellee Robert F. Whittlesey found that their relationship as partners in the junk business was foundering.

The two had purchased this business for $75,000, of which the seller took back a $50,000 deed of trust. The parties then borrowed $50,000 from a bank to be used as capital. These indebtednesses, which were to be repaid in equal periodic payments by the partners, are at the crux of this appeal, although the judge and the parties seem to have lost sight of that fact. The origin, brief life, and ultimate demise of this partnership must be searched for in pleadings, statements and testimony from hearings on various motions made to ²³ compel payment of partnership obligations, extracts of transcripts of unexplained proceedings, stipulations and agreements of the parties before a master-auditor and his reports, hearings on motions to compel a sale, requests for contribution, etc. Even the briefs were of little help in this regard because the parties elected to address the issues narrowly in isolation rather than view the whole picture.

We will not respond in that manner because to do so tends to lead to the same error as that committed by the court below. The primary problem appears to be that the trial judge tried to decide the dollar dispute between the parties without determining the fate of the business. He addressed the personal dispute between the parties rather than the dissolution of the partnership. Although he did determine dissolution had occurred on one date, his accounting appears to have envisioned a date over a year later. —the partnership— It is accepted that the partnership agreement originally comprehended equal contributions and equal rewards.

Laddon testified that there were definite terms agreed upon, however, as to the respective duties of the partners. It was Whittlesey who detailed them in some degree. Whittlesey was to be at the job, “when [he] could”, one half day a weék — presumably without salary. Laddon, however, was to assume a far greater management role for which he would be salaried, although even his time was flexible: “When we went into the business, Laddon had closed his other business, was not operating it and we discussed a salary for him to oversee the operation of the business.

He wanted two hundred dollars a week and I told him that wasn’t enough. We were friends. We settled on three hundred dollars a week. He said he would charge the business for the time he spent in the business if he spent a full week; he would get paid the three hundred dollars.

If he spent less than that, he would scale it down.” ²⁴ During the summer and early fall of 1973 this imbalance of responsibility caused Mr. Laddon to become disenchanted. “Mr. Whittlesey didn’t seem to have any time to devote to the business in accordance with what my understanding of what he was going to do for the business at the inception of the partnership. He wasn’t doing it. I was very unhappy with the fact that I had to shoulder the entire responsibility and make most of the decisions regarding the operation of the business and try to be in a number of places at the same time.” A' partnership meeting was scheduled by Mr. Laddon “[t]o either refresh our arrangements regarding the partnership or to enter into some other agreement, including that of selling the business.” The meeting did not come to pass because of a heart attack suffered by Mr. Laddon. He was unable to resume his duties until approximately April of 1974, when he would participate “two or three hours a day, sometimes four or five hours a day, depending on how [he] felt.” Even this did not last and Laddon’s disenchantment culminated in his realization “[t]hat Mr. Whittlesey and I were hopelessly at odds over the operation of the business and that I couldn’t see any possibility of any sort of reconciliation or continuation of the business.” Whittlesey, on the other hand, picked up the reins while Laddon was indisposed. “When he was in the hospital I talked to him by phone and he was concerned about the business at that time.

Q Was there anything he wanted you to do with respect to the business while he was in the hospital? A No, he wanted me to keep it going. There was not specific duties set out.” ²⁵ Keep it going he did presumably until June of 1974 when Laddon had resumed some of his responsibilities. “A He was there off and on from the time he recuperated from his illness which I don’t know the date of that. He was there in the spring and early summer.

Q Of 1974? A That is correct.” Laddon then struck the final blow: “Q Did there come a time when Mr. Laddon no longer would participate in the on-going business of Woodbine Auto Wreckers? A Yes. I don’t know the date.

Q Approximately, when did that occur? A In June 1974. He told me he was not going to put any more money into the business. I think that is about the extent of it.” —the suit to dissolve— On September 6, 1974, appellee Robert F. Whittlesey filed a bill of complaint to dissolve the partnership, praying further an accounting by Laddon, that Laddon be enjoined from contracting on behalf of the partnership, and that he, Whittlesey, be permitted to continue the business of the Company after dissolution.

Four years later, on December 13, 1978, the court passed the following Memorandum and Order: “The Court has previously concluded that the partnership in this case was dissolved on June 15, 1974. The Court has had numerous hearings and has reviewed the several memoranda submitted by counsel. The following Order is based on a thorough review of all of this data and the presentations of counsel and the ultimate conclusion that the dissolution of the partnership was caused by the wrongful actions of the defendant, Samuel E. Laddon. ²⁶ It is, by the Circuit Court for Montgomery County, Maryland, on this 13 day of December, 1978, ORDERED, that a judgment is entered in favor of the plaintiff, Robert F. Whittlesey, against the defendant, Samuel E. Laddon, in the sum of Nine Thousand Five Hundred Sixty-one Dollars and Eighty-seven Cents ($9,561.87) with interest; and it is further ORDERED, that the defendant, Samuel E. Laddon, shall pay unto the plaintiff, Robert F. Whittlesey, the sum of Eleven Thousand One Hundred Eighty Dollars ($11,180.00) as and for his attorney’s fee; One Thousand Fifty Dollars ($1,050.00) as and for his appraisal fees; and Three Hundred and Fifty Dollars ($350.00) as and for his accountant’s fee; and it is further ORDERED, that prior to any other disbursements that the partnership assets shall be expended to secure total payment of the existing first trust on the real property in Carroll County, Maryland; and it is further ORDERED, that the next priority payment shall be to the plaintiff, Robert F. Whittlesey, in a sum sufficient to defray the judgments entered hereinabove; and it is further ORDERED, that the next priority in payment shall be a distribution of the capital contributions made by the plaintiff and defendant and thereafter the net profits, if any, shall be distributed to the plaintiff and the defendant, and it is finally ORDERED, that the defendant, Samuel E. Laddon, shall pay the costs of these proceedings.” (emphasis added). Appellant has asked five questions which are abstractly meaningless, but contextually indicate error in the court’s conclusions.

Perhaps during the four years between commencement and conclusion, the court was so often carried off in tangents that it lost direction in reaching its ²⁷ conclusions. The parties did little to help keep it on course. Indeed, we frequently found the briefs and issues raised and responded to on appeal more confusing than clarifying. Regrettably, the court also declined the opportunity to assist our review by clarification.

After receiving the Memorandum and Order of December 13, 1978, appellant requested by letter some explanation of the result reached: “My client desires that I entertain an appeal to the Special Court of Appeals, and I would appreciate your supplementing your Memorandum and Order of December 13,1978, with an extended Findings of Fact and Conclusions of Law, in accordance with Maryland Rule 18(c) [sic].” The court responded by a supplemental memorandum that when analyzed simply says, “it’s in the record, you find it”: “This Memorandum supplements the Court’s Memorandum and Order of December 13, 1978, in accordance with Maryland Rule 18 (b). The findings and conclusions filed in my Memorandum and Order of December 13,1978, were based upon the following: 1. The demeanor of the witnesses