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05/19/86 JOHN GILROY v. ROBERT CONWAY

May 19, 1986

JOHN GILROY, PLAINTIFF-APPELLEE,
v.
ROBERT CONWAY, D/B/A CONWAY STUDIOS, DEFENDANT-APPELLANT



Shepherd, P.j., and R. M. Maher and W. R. Peterson,* JJ.

The opinion of the court was delivered by: Peterson

Defendant cheated his partner and appeals from the trial court's judgment granting that partner a remedy.

Plaintiff was an established commercial photographer in Kalamazoo who also had a partnership interest in another photography business, Colonial Studios, in Coldwater. In 1974, defendant became plaintiff's partner in Colonial Studios, the name of which was changed to Skylight Studios. Under the partnership agreement, defendant was to be the operating manager of the partnership, in return for which he would have a guaranteed draw. Except for the guaranteed draw, the partnership was equal in ownership and the sharing of profits.

Prior to defendant's becoming a partner, the business had acquired a small contractual clientele of schools for which the business provided student portrait photographs. The partners agreed to concentrate on this type of business, and both partners solicited schools with success. Gross sales, which were $40,000 in 1974, increased every year and amounted to $209,085 in 1980.

In the spring of 1981, defendant offered to buy out plaintiff and some negotiations followed. On June 25, 1981, however, plaintiff was notified by the defendant that the partnership was dissolved as of July 1, 1981. Plaintiff discovered that defendant: had closed up the partnership's place of business and opened up his own business; had purchased equipment and supplies in preparation for commencing his own business and charged them to the partnership; and had taken with him the partnership employees and most of its equipment.

Defendant had also stolen the partnership's business. He had personally taken over the business of some customers by telling them that the partnership was being dissolved; in other cases he simply took over partnership contracts without telling the customers that he was then operating on his own. Plaintiff also learned that defendant's deceit had included the withdrawal, without plaintiff's knowledge, of partnership funds for defendant's personal use in 1978 in an amount exceeding $11,000.

The trial Judge characterized the case as a "classic study of greed" and found that defendant had in effect appropriated the business enterprise, holding that defendant had "knowingly and wilfully violated his fiduciary relationship as a partner by converting partnership assets to his use and, in doing so, literally destroying the partnership." He also found that the partnership could have been sold as a going business on June 30, 1981, and that after a full accounting, it had a value on that date of $94,596 less accounts payable of $17,378.85, or a net value of $77,217.15. The division thereof, after adjustments for plaintiff's positive equity or capital and defendant's negative equity or capital, resulted in an award to plaintiff for his interest in the business of $53,779.46. *fn1

Defendant argues that the finding of the trial Judge as to the value of the business as of June 30, 1981, was not supported by the proofs at trial. The gist of the argument, however, is not that there were no proofs to substantiate the finding as to value, but that the witness whose testimony was the basis for the finding was less credible than defendant's accountant who gave the opinion that the business had no value except for its cash on hand and the value of equipment and fixtures. The expert upon whose testimony the trial Judge relied had substantial experience in the field of school portrait photography and was in fact an expert brought to trial by the defendant whose valuation testimony was brought out by cross-examination. The weight and credence to be given to the testimony of the experts was for the trial Judge to determine, Sampson v Veenboer, 252 Mich 660; 234 NW 170 (1931); Coats v Bussard, 94 Mich App 558; 288 NW2d 651 (1980), and a review of the record does not persuade us that his Conclusions were clearly erroneous. GCR 1963, 517.1, now MCR 2.613(C); Precopio v Detroit, 415 Mich 457; 330 NW2d 802 (1982).

Defendant also claims that the trial court committed error in excluding the testimony of one Jack Dehn as to his opinion on the valuation of the partnership. The qualification of a witness to testify is a preliminary question to be determined by the trial Judge, MRE 104(a). The trial court found that the witness was not qualified as an expert and we find no abuse of discretion in his ruling. Elsasser v American Motors Corp, 81 Mich App 379; 265 NW2d 339 (1978).

We do, however, acknowledge the accuracy of defendant's claim that the findings of the trial Judge failed to take into account equipment left at the place of business, which plaintiff took into his possession on July 1, 1981, and checks from customers deposited in the trust account of plaintiff's attorney. Since the trial Judge's award was based on the total value of the partnership business on June 30, 1981, defendant claims that he is entitled to credit for one-half the value of such property and checks. Plaintiff makes no response to this claim.

There is no difficulty in ascertaining from the record the amount of the checks which plaintiff's counsel acknowledged. They total $2,851.33. There is more difficulty determining the value of the equipment left behind by defendant since the trial judge made no finding pertaining thereto. Defendant had prepared a listing of those items of equipment in which listing he placed a valuation thereon. That valuation is clearly highly inflated and is unsubstantiated by any evidence. Plaintiff testified that he sold a phone system for $1,500, but that many of the items listed by defendant were not found, that others were obsolete or out of repair, and that the total value of those items was roughly $690. That testimony was not contradicted and we take it as accurate. Defendant is thus entitled to credit for one-half of the total value of such checks and equipment, $5,041.33, or $2,520.66, and the judgment may be modified accordingly.

Plaintiff also sought exemplary damages. Count II of the complaint alleged that defendant's conduct constituted a breach of defendant's fiduciary duty to his partner under §§ 19-22 of the Uniform Partnership Act, *fn2 and Count III alleged conversion of partnership property. Each count contained allegations that defendant's conduct was wilful, wanton and in reckless disregard of plaintiff's rights and that such conduct had caused injury to plaintiff's feelings, ...


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