Bellware v. Wolffis , 154 Mich. App. 715 ( 1986 )

154 Mich. App. 715 (1986) 397 N.W.2d 861

BELLWARE
v.
WOLFFIS

Docket No. 77806.

Michigan Court of Appeals.

Decided September 15, 1986.

Miller & Miller, P.C. (by Jerry L. Miller), for plaintiff.

Annen & Charland (by Ed Annen, Jr.), for defendant.

Before: R.B. BURNS, P.J., and R.M. MAHER and F.D. BROUILLETTE,^[*] JJ.

PER CURIAM.

Plaintiff appeals as of right from a Kalamazoo Circuit Court order granting defendant's motion for accelerated judgment.

Plaintiff's complaint alleges that in October, 1978, he and defendant entered into an agreement to purchase a travel agency and that the business was operated as a partnership until July 29, 1981. In the spring of 1981, plaintiff rejected defendant's offer to purchase plaintiff's interest in the partnership. Plaintiff alleged that in August, 1981, defendant, without plaintiff's knowledge, took exclusive control and possession of the business and the partnership's assets. Plaintiff claimed that defendant used the profits for her use and benefit to the exclusion of plaintiff and denied plaintiff any participation in the management of the business. In Count I, plaintiff sought an accounting. In Count II, plaintiff sought damages for defendant's conversion of partnership assets.

Defendant brought a motion for accelerated judgment pursuant to GCR 1963, 116.1(3), now MCR 2.116(C)(5), arguing that plaintiff lacked the legal capacity to sue since no partnership certificate had been filed as required by MCL 449.101; MSA 20.111. Defendant's motion was granted on June 7, 1983. On March 17, 1984, upon plaintiff's motion for rehearing, the trial court affirmed its decision granting defendant's motion for accelerated judgment.

MCL 449.101; MSA 20.111 (hereinafter referred to as § 1) provides in part:

No two or more persons shall hereafter be engaged in carrying on any business as copartners unless such persons shall first make and file with the county clerk of the county in which such copartnership business is or shall be located, a certificate in writing, to be signed by each, and verified by the affidavit of one of the members of said copartnership, setting forth the full name of each and every person composing the said copartnership, and the residence of each, the name and style of the firm, and the length of time for which it is to continue, if limited by the partnership contract, and also the locality of their place of business; which certificate shall be kept in the office of the said county clerk, as a public document, and open to the inspection of any person.

MCL 449.106; MSA 20.118 (hereinafter referred to as § 6) renders noncompliance with § 1 a misdemeanor and also provides:

... [t]he fact that a penalty is provided herein for noncompliance with the provisions of this act shall not be construed to avoid contracts, but any copartnership failing to file the certificate or renewal certificate required by this act shall be prohibited from bringing any suit, action or proceeding in any of the courts of this state until after full compliance with the provisions of this act.

The purpose of both statutes is to inform the public with whom it is dealing in order to prevent imposition and fraud. Maurer v Greening Nursery Co, 199 Mich. 522; 165 N.W. 861 (1917).

We agree with the trial court that as a general rule contracts in violation of statutes enacted to protect the public against imposition or fraud are void. See e.g. Cashin v Pliter, 168 Mich. 386; 134 N.W. 482 (1912). The general rule, however, is not applicable in this case. Section 6 expressly states that noncompliance with § 1 does not render contracts void. Pursuant to § 6, the contracts are merely unenforceable and remain unenforceable until § 1 has been complied with.

Furthermore, as we construe the statute, § 6 does not bar suit on the underlying partnership agreement. The rules of statutory construction require that we give effect to the intent of the Legislature. Words in the statute must be given their ordinary meanings. Where the language of the statute is clear, it is assumed that the Legislature intended the plainly expressed meaning and the statute must be enforced as written. Bailey v DAIIE, 143 Mich. App. 223, 225; 371 NW2d 917 (1985), lv den 424 Mich. 867 (1986).

The language of § 6 is clear and unambiguous. The statute states that any copartnership which fails to file a certificate is prohibited from bringing suit until § 1 is complied with. Section 6 does not preclude a partner in the noncomplying partnership from bringing an action against another partner. We are persuaded by this Court's reasoning in Community Associates v Meridian Twp, 110 Mich. App. 807, 810-811; 314 NW2d 490 (1981):

The incapacity imposed by [§ 6] for noncompliance is a penalty. A penalty created by statute cannot be extended by implication. Davidow v Wadsworth Manufacturing Co, 211 Mich. 90, 94; 178 N.W. 776 (1920). Strictly construed, the incapacity provision applies only to courts and not to administrative agencies, including the Tax Tribunal.

Likewise, the incapacity provision, when strictly construed, applies only to copartnerships and not to actions by one partner against another. In this case, plaintiff is not acting as an agent of the partnership, but brings this action to enforce his individual rights under the Uniform Partnership Act, MCL 449.1 et seq.; MSA 20.1 et seq. We hold that noncompliance with the filing requirements of § 1 does not bar a partner from enforcing his individual rights against another partner.

The trial court also held that since the partnership involved a "silent partner," the agreement was against public policy and could not be enforced by the courts. In so holding, the trial court relied on Rigo v DeGutis, 341 Mich. 126, 129; 67 NW2d 224 (1954), wherein this Court stated:

That a partnership, to operate a liquor business with a silent partner, is against the public policy of the State, and unenforceable, is clearly suggested in Beemer v Hughes, 179 Mich. 110 [146 N.W. 198 (1914)].

The instant case, however, does not involve a liquor business and, thus, the rule of Rigo is not applicable.

The trial court held that plaintiff's suit is barred by the "clean hands" doctrine. A suit for an accounting invokes the powers of a court of equity. Bondy v Davis, 40 Mich. App. 153, 159; 198 NW2d 418 (1972). "[O]ne who seeks the aid of equity must come in with clean hands." Stachnik v Winkel, 394 Mich. 375, 382; 230 NW2d 529 (1975). Any wilful act concerning the cause of action which transgresses equitable standards of conduct is sufficient cause for the invocation of the clean hands doctrine. Id., p 386.

The trial court did not expressly state why it applied the clean hands doctrine. We surmise from the opinion, however, that the trial court concluded that plaintiff lacked "clean hands" because the partnership certificate had not been filed. We disagree. Even if we characterize the failure to file the partnership certificate as a wilful act, we cannot say that the noncompliance with § 1 is misconduct or bad faith relative to the matter in which he seeks relief. There is no showing of bad faith or improper behavior on plaintiff's part relative to the partnership agreement which would close the doors of equity to plaintiff's right to an accounting.

The trial court also held that an individual partner has no right to an accounting. We disagree. MCL 449.22; MSA 20.22 provides the individual partners with the right to a formal accounting. In Bondy, supra, pp 158-159, this Court stated:

Accounting in equity is an appropriate remedy as between partners, where the suit involves a partnership relation or interest, or partnership property, especially if fraud or concealment is charged, or the partnership affairs or assets are in a complicated condition. In a proper case, suit may be brought by a partner for an accounting as to the firm's assets or business.

The trial court's order for accelerated judgment is reversed.

Reversed and remanded for further proceedings.

NOTES

[*] Circuit judge, sitting on the Court of Appeals by assignment.