Business Associations, Pages 200–203

Kay v. Gitomer

Court of Appeals of Maryland, 1969

Facts:

Defendants Kay and Eckles were brothers-in-law who started a plumbing and contracting business as partners. They also pooled their money to buy five lots. Four they mortgaged and had an office on, but the fifth was not clearly used by the partnership and was rented out as a parking lot.

After facing some loss, they told a realtor that they were looking to sell if they could get the right price. They later said that this was $45,000 with 29% in cash. Plaintiff Gitomer offered to meet these terms. Eckles was out of town for the week when the offer was made however, so Kay agreed to sell and signed both of their names. Defendants' wives were also on the deed however and refused to join in the deed until plaintiff paid the entire price.

Procedural History:

Trial court granted plaintiff's request for specific performance upon finding that title to the lot was held by defendants as tenants in partnership and that Kay bound this partnership.

Issues:

  • Was lot 5 owned by the defendants as tenants in partnership?

  • Did the contract of sale signed by Kay bind the partnership?

Rules:

  • LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 201, Bottomish
    UPA § 8(1)

    "All property originally brought into the partnership stock or subsequently acquired, by purchase or otherwise on account of the partnership is partnership property."

    LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 201, Bottom

    [T]he Uniform Act does not prevent a partnership from acquiring real estate by having the partners take title as cotenants, and that where record title to real estate was in the name of the partners as tenants in common, ". . . The criterion of whether property not held in the partnership name is partnership property is the intention of the parties to devote it to partnership purposes, to be found from the facts and circumstances surrounding the transaction considered in connection with the conduct of the parties in relation to the property."

    Note:

    This is very different than the newer rule in RUPA, which concerns intent very little.

  • LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 203
    UPA § 10(4)

    "Where the title to real property is in the name of one or more or all the partners, . . . a conveyance executed by a partner in the partnership name, or in his own name, passes the equitable interest of the partnership, provided the act is one within the authority of the partner. . ."

Reasoning:

  • Kay testified that when he purchased they purchased the lot, they had hoped that it would be a good place to work from for their business. The partnership reported the land in its valuation, included the rental income on its tax return, and paid the taxes on the lot. This was sufficient evidence for the trial court to find that the lot was owned by the partnership. It did not have to have been paid for by the partnership itself. Those funds constituted contribution to partnership capital.

  • Eckles had participated in previous negotiations and had authorized Kay to act at this price. Kay's doing so therefore binds the partnership.

Holding:

The lot was owned by the partnership and Kay bound it to sell it. Affirmed with costs.


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