978-1285770178 Case Printout Case CPC-02-06

Mich.App.,2011.

Horvath v. HRT Enterprises

Thomas, City Steel I, Namisco, and its parent Clockner, as defendants. Although Rüsen testified that the lawsuit was frivo-

lous, Clockner nonetheless settled for $200,000. Despite this falling out, plaintiff remained a partner of HRT during the pro-

same month, Merkur executed a 5-year sublease with City Steel II to rent an area of the plant for $12,000 a month. In Febru-

ary 1997, Merkur executed a 5-year sublease with Merkur Technical Services (Merkur Technical) to rent an area of the plant

and annex for $7,500 a month. Rüsen and Thomas had a substantial ownership interest in Merkur Technical. In December

2001, HRT executed another five-year lease Merkur for the entire subject property for $13,000 a month. The same subtenants

executed subleases with Merkur with the same terms as the previous subleases.

ating, maintenance and repair costs (referred to as net-net-net leases or triple net leases). Plaintiff also elicited evidence that

when City Steel I operated in the plant, Namasco paid for improvements. In response to the claim that the lease did not obli-

gate Merkur to make improvements, defendants maintained it was not necessary because “[i]t was a lease between a company

that [Rüsen and Thomas] owned and another company that [Rüsen and Thomas] owned.” Plaintiff maintained that this sub-

lease arrangement simply allowed for Rüsen and Thomas to avoid having to pay HRT the actual rent that was paid to Merkur,

After the bench trial, the trial court noted that “[t]he main issue in this lawsuit is whether or not [plaintiff] received–

should have received the income from the subtenant[s] on this industrial complex.” In this regard, the court held:

The payment of the two subtenants wasn’t paid directly to HRT, which would be the appropriate entity to receive the net

income from those buildings because of the Partnership Agreement. Instead, the money was paid to Merkur Steel. And the

Court believes that was legally incorrect. That the partnership, HRT, should have received the income from the subleases.

On appeal, defendant maintains that plaintiff at trial waived any claim arising from a breach of fiduciary duty. We disa-

gree.

During pre-trial proceedings, plaintiff indicated that he was asserting two claims. Specifically, plaintiff indicated he was

litigating a partnership accounting claim, to which there is no right to a jury trial, and a breach of fiduciary duty claim, to

which he asserted a right to a jury trial. Just prior to the commencement of trial, plaintiff counsel stated “what we will do is

withdraw our jury demand in this case and so we will proceed as a bench [trial].” During plaintiff’s opening statement plain-

tiff nonetheless argued that Rüsen and Thomas violated their fiduciary duty to plaintiff. However, during defendants’ opening

statement, defense counsel stated that “I’m a little confused I guess is the right word about the mention of a breach of fiduci-

ary duty claim by [plaintiff counsel] in his opening statement. My understanding is that the only claim that remains in the

case is the partnership accounting claim.” The court replied, “[t]hat’s correct.”

On appeal, defendants claim that plaintiff “voluntarily dismissed his claims for breach of fiduciary duty.” However, the

record only literally supports the assertion that plaintiff intentionally waived his right to a jury trial on the breach of fiduciary

Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without

the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partner-

ship or from any use by him of its property. [MCL 449.21.]

Second, case law supports the conclusion that a partnership accounting claim can include claims similar to those made

here based on a breach of fiduciary duty. See i.e., Bondy v. Davis, 40 Mich.App 153, 198 NW2d 418 (1972) (the plaintiff

those made here based on a breach of fiduciary duty. “Since all activities related to the partnership are subject to scrutiny, a

wide variety of matters may be determined, for example … [q]uestions of fiduciary duty, such as whether a partner must ac–

count for profits from an outside transaction….” Crane and Bromberg, Law of Partnership, Right To An Account, § 72. This

conclusion is supported in that Michigan partnership law largely follows the Uniform Partnership Act. Accordingly, we agree

with plaintiff that an equitable partnership accounting claim may include claims based on a breach of fiduciary duty.

statute of limitations and laches. We disagree.

Defendant first argues that because the Michigan Partnership Act does not contain a statute of limitations, MCL

600.5805(10) applies a general 3-year statute of limitations. However, in regard to a partnership accounting action, MCL

449.43 provides, “[t]he right to an account of his interest shall accrue to any partner, or his legal representative, as against the

winding up partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution,

in the absence of any agreement to the contrary.” See, also, Reindel v. Reindel, 253 Mich. 680, 682-683; 235 NW 861 (1931)

(holding that the applicable statute of limitations does not begin to run in a suit for an accounting and dissolution until disso-

lution occurs or there has been a settlement or accounting of partnership dealings). Here because the partnership had not been

dissolved at time of trial and the partnership agreement does not contain a provision barring the action, the partnership ac-

counting action is not barred by any statute of limitations.

Defendants next argue that laches bars plaintiff’s accounting claim. We disagree.

Laches is an affirmative defense based primarily on circumstances that render it inequitable to grant relief to a dilatory

plaintiff. The doctrine of laches is triggered by the plaintiff’s failure to do something that should have been done under the

circumstances or failure to claim or enforce a right at the proper time. The doctrine of laches is founded upon long inaction

449.43. “It is fundamental that equity follows the law.” LaBour v. Michigan Nat Bank, 335 Mich. 298, 302; 55 NW2d 838

(1952). Nonetheless, defendants specifically maintain that laches is appropriate because plaintiff refused to participate in the

partnership for over twenty years and could have readily discovered the subleases. Notably, however, all of the cases cited by

defendant involving laches and partnership accounting actions are distinguishable because they were brought either after the

dissolution of the partnership or involve the formal abandonment of the partnership. Further, there is no record evidence that

that plaintiff counsel only discovered the subleases shortly before trial through discovery, and thus, we cannot impute that

plaintiff could have earlier discovered the subleases.

Last, for the reason cited above, even if MCL 600.5805(10) applied, a breach of fiduciary duty claim accrues when a

plaintiff knew or should have known of the breach. Prentis Family Foundation, Inc v. Barbara Ann Karmanos Cancer Inst,

266 Mich.App 39, 47, 698 NW2d 900 (2005); Bay Mills Indian Community v. Michigan, 244 Mich.App 739, 751; 626 NW2d

clude there is sufficient evidence that defendants engaged in self-dealing, which as previously addressed, can be asserted as

in a partnership accounting action as a breach of fiduciary duty.

Partners have rights and duties that arise from a partnership in general. A partnership is “an association of 2 or more per-

sons, …, to carry on as co–owners a business for profit” MCL 449.6. The duty of the general partners is based on two provi-

clude the trial court erred in finding Rüsen jointly and

severally liable for the entire amount of evaluation sanc-

The existence and interpretation of a contract are

questions of law reviewed de novo. Bandit Industries, Inc

v. Hobbs Int’l, Inc (After Remand), 463 Mich. 504, 511;

620 NW2d 531 (2001). The construction and application

2008, plaintiff’s former attorney, Brian Nettleingham,

stated in e-mail:

After much discussion, Mr. Horvath is agreeable to the

settlement proposal made by Mr. Thomas at our last

On January 19, 2008, defense counsel Demorest pur-

portedly reduced the terms of the Settlement Agreement

to writing and e-mailed it to Nettleingham, and requested

for entry shortly.”

In a February 25, 2008 email, Nettleingham sent the

final settlement agreement to Demorest, and indicated that

he had been attempting to contact plaintiff. Plaintiff never

the lawsuit in exchange for a release of all possible

claims.” The plaintiff’s attorney sent an e-mail to the de-

fendants attorney, stating: “I confirmed with Mr. Kloian

that he will accept the payment of $48,000 in [ex]change

The defendant’s attorney sent a response the same day

stating: “I have the check and Domino’s agreement to a

mutual release. I need to revise the prior release and get it

to you.”

The plaintiff did not sign the settlement agreement,

settle the lawsuit, and, in exchange, he would promise

to release all possible claims against defendant. On the

basis of this interpretation of plaintiff’s offer, we con-

clude that defendant’s acceptance was unambiguous and

mality of acquiring plaintiff‘s signature.

However, plaintiff is correct that the instant case is

distinguishable from Kloian, 273 Mich.App 449. Here,

plaintiff was subject to conservatorship and MCR 2.420 is

applicable. Under MCR 2.420(b), “a proposed consent

judgment, settlement, or dismissal pursuant to settlement

must be brought before the judge to whom the action is

assigned and the judge shall pass on the fairness of the

proposal.” The court rules clearly establish a particular

procedure for those subject to conservatorship to enter

into a settlement agreement. The Michigan Supreme

Court has the exclusive authority to promulgate rules

governing practice and procedure in Michigan courts.

award of case evaluation sanctions. We do not retain ju-

risdiction. No taxable costs pursuant to MCR 7.219, nei-

ther party having prevailed in full.