HomeMy WebLinkAbout92-1229 CivilATHANASIOS SAKKAS, IN THE COURT OF COMMON PLEAS OF
Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA
V. CIVIL ACTION - LAW
KOSTANTINOS DRAKOS, ,
Defendant NO. 1229 CIVIL 1992
IN RE: ADJUDICATION
BEFORE OLER, J.
ORDER OF COURT
AND NOW, this 1st day of November, 1993, following a non jury trial in the
above -captioned case, the Court finds in favor of Plaintiff and against Defendant in the
amount of $23,026, with interest at the legal rate from December 21, 1991; in addition,
conditioned upon Plaintiff's indemnification of Defendant as to all obligations of the
partnership, including obligations as to the real estate at 245-247 Hummel Avenue,
Lemoyne, Pennsylvania, Plaintiff may purchase Defendant's interest in the
partnership, including his interest in the said real estate, for the sum of $32,206.60,
plus interest at the legal rate from December 21, 1991, and may use the aforesaid
award of damages in Plaintiffs favor as a set-off.
BY THE COURT,
J{Vesley Olerdir. J.
Robert E. Yetter, Esq.
P.O. Box 93
Harrisburg, PA 17108-0093
Attorney for Plaintiff
Kostantinos Drakos, Defendant
20-51 23rd Street
Astoria, New York 11102
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ATHANASIOS SAKKAS,
Plaintiff
v.
KOSTANTINOS DRAKOS,
Defendant
Oler, J.
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW
NO. 1229 CIVIL 1992
IN RE: ADJUDICATION
BEFORE OLER. J.
OPINION AND ORDER OF COURT
This case arises out of a partnership agreement between Plaintiff and Defendant
entered into in 1991. Plaintiff alleges that Defendant made material
misrepresentations in inducing him to enter into the agreement, misapplied money
contributed by Plaintiff, abandoned the business, and left Plaintiff to discharge the
enterprise's liabilities. A non jury trial was held before the undersigned judge on
Monday, October 25, 1993. Based upon the record, including the evidence presented
at trial, the following Findings of Fact, Discussion and Order of Court are made and
entered.
FINDINGS OF FACT
1. Plaintiff is Athanasios Sakkas, an adult individual residing at 245-247
Hummel Avenue, Lemoyne, Cumberland County, Pennsylvania.
2. Defendant is Kostantinos Drakos, an adult individual presently residing at
20-51 23rd Street, Astoria, New York.
3. On November 15, 1990, Defendant entered into an agreement of sale to
purchase a restaurant at 245-247 Hummel Avenue, Lemoyne, Cumberland County,
No. 1229 Civil 1992
Pennsylvania, for $270,000.1 He paid $70,000 on the purchase price at settlement,
agreeing to pay the balance of $200,000.00 by monthly payments to the seller of
$1,233.14 and monthly payments to a prior seller of $1,054.00.2
4. Thereafter, Defendant operated the restaurant, known as the "Lemoyne
Family Restaurant," as a sole proprietorship.
5. At some time prior to May 30, 1991, Defendant entered into negotiations
with Plaintiff, who was the manager of a restaurant in the neighboring county of
Franklin, for Plaintiffs joinder in the business as a partner.
6. Defendant advised Plaintiff that he had no financial records. According to
Plaintiff, he was also told that the business was making a profit of $9,000 per week;
according to Defendant, he made no representation as to profits and Plaintiff was
uninterested in such matters.
7. Defendant advised Plaintiff that the business was essentially without debt.
8. The parties reached an accord that Plaintiff would become a partner in the
business in return for a payment of $20,000 to Defendant personally and a
contribution of $20,000 to the business.
9. On May 30, 1991, the parties executed two written agreements: a
1 Plaintiff's Exhibit 4.
2 Id.
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No. 1229 Civil 1992
Partnership Agreements and a purchase Agreement."
10. The Partnership Agreement provided that the business would be conducted
as the "Lemoyne Family Restaurant," that the principal place of business would be at
the 245-247 Hummel Avenue, Lemoyne, address, that the terms of the purchasing
Agreement were incorporated by reference, that each partner was making an equal
contribution, that each partner would share equally in profits and losses, that
partnership property was to be owned equally, that the partnership could "be
terminated at any time mutually agreed upon by the Partners, or on the withdrawal
of a Partner, or on the death of a Partner if the remaining Partner [did] not choose
to continue the partnership business," and that upon termination the assets would be
divided equally after payment of partnership liabilities.'
11. The purchasing Agreement provided that Defendant was selling to Plaintiff
a one-half interest in the real estate and restaurant business, that Plaintiff was paying
$20,000 to Defendant and assuming responsibility as a partner for the aforesaid real
estate debt, and that existing debts and inventory would be reconciled as to the
parties. Plaintiff warranted, inter alia, that all taxes had been paid and that all
3 Plaintiffs Exhibit 2.
4 Plaintiffs Exhibit 3.
' Plaintiff's Exhibit 2.
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commitments of the business had been honored.6
12. On or about June 3, 1991, Plaintiff paid $40,000 to Defendant, $25,000 by
check? and $15,000 in cash.
13. As it developed, the business was not netting anywhere near $9,000 per
weeks and there were substantial existing real estate tax and other liabilities, totaling
about $13,026.9
14. Defendant utilized all $40,000 paid by Plaintiff for his own purposes,
notwithstanding the fact that $20,000 of the payment was to be a contribution to the
business.
15. Defendant gradually decreased his participation in the operation of the
business, and on or about December 21, 1991, less than six months after accepting
Plaintiff's money, he simply left Pennsylvania and moved to New York.
16. Plaintiff has continued to operate the business, with the help of family
members, but he claims to be losing money.lo
17. Liability on the real estate being purchased as of the formation of the
6 Plaintiff's Exhibit 3.
Plaintiffs Exhibit 1.
8 See Plaintiff's Exhibit 10.
9 Plaintiff's Exhibits 7, 8, 14.
io See Plaintiffs Exhibits 10-13.
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No. 1229 Civil 1992
partnership was $193,923;11 as of Defendant's departure it was $188,906.'
18. Each partner's equity interest in the partnership when it was formed was
$34,656.50 (without accumulated depreciation);13 as of Defendant's departure, it was
$32,206.60 (with accumulated depreciation).14
19. Defendant effected a wrongful dissolution of the partnership when he
abandoned the enterprise in December of 1991; Plaintiff elected to continue to operate
the business after the wrongful dissolution.
DISCUSSION
Statement of law. As a general rule, '[t]here is a fiduciary relationship between
partners.... One should be allowed to trust his partner, to expect that he is pursuing
a common goal and not working at cross-purposes." Clement v. Clement, 436 Pa. 466,
468, 260 A.2d 728, 729 (1970). When a wrongful dissolution of a partnership occurs,
the innocent partner is entitled to relief. Remic v. Berlin, 284 Pa. Super. 489, 426
A.2d 153 (1981). In the case of dissolution, the value of a partner's interest is
established as of the date of dissolution. Stainton v. Tarantino, 637 F. Supp. 1051,
1074 (E.D. Pa. 1986).
11 Plaintiffs Exhibit 15.
12 Plaintiffs Exhibit 16.
13 See Plaintiff"s Exhibit 14.
14 See Plaintiffs Exhibit 15.
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No. 1229 Civil 1992
With respect to awards of interest, (i.e., in the monetary sense, such as
compound or simple) in partnership dissolution cases, it has been said that " Whe safest
and fairest way for a court to decide questions pertaining to interest is according to a
plain and simple consideration of justice and fair dealing." Remic v. Berlin, 284 Pa.
Super. 489, 492, 426 A.2d 153, 154 (1981).
Under Section 8360(b) of the Associations Code, it is provided as follows:
When dissolution is caused in contravention of the
partnership agreement, the rights of the partners shall be
as follows:
(1) Each partner who has not caused
dissolution wrongfully shall have ...
(ii) The right, as against
each partner who has caused the
dissolution wrongfully, to
damages for breach of the
agreement.
(2) The partners who have not caused the
dissolution wrongfully, if they all desire to
continue the business in the same name either
by themselves or jointly with others, may do
so, during the agreed term for the partnership,
and for that purpose may possess the
partnership property, if they secure the
payment by bond approved by the court, or
pay to any partner who has caused the
dissolution wrongfully the value of his interest
in the partnership at the dissolution, less any
damages recoverable under paragraph (1) (ii),
and in like manner indemnify him against all
present or further partnership liabilities.
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(3) A partner who has caused the
dissolution wrongfully shall have:...
(ii) If the business is
continued under paragraph (2),
the right, as against his
copartners and all claiming
through them in respect of their
interests in the partnership, to
have the value of his interest in
the partnership, less any
damages caused to his copartners
by the dissolution, ascertained
and paid to him in cash, or the
payment secured by bond
approved by the court, and to be
released from all existing
liabilities of the partnership but,
in ascertaining the value of the
interest of the partner, the value
of the goodwill of the business
shall not be considered.
Act of December 21, 1988, P.L. 1444, §103, 15 Pa. C.S. §8362(b) (1993 Supp.).
Thus, after a wrongful dissolution, it has been said that
if the remaining partners wish to continue the business
they may do so and thereby avoid liquidation. This ...,
consequence may ... have the important results of
precluding any use of partnership property by the
wrongfully dissolving partner and enabling the remaining
partners effectively to purchase the interest of the
withdrawing partner. [In addition ], if the remaining
partners do not liquidate the assets but instead continue the
business, the settlement of the dissolving partner's account
may be at a discount, for it need not include his or her
proportionate share of the goodwill of the partnership.
Hillman, The Dissatisfied Partnership in the Solvent Business Venture: A Consideration
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No. 1229 Civil 1992
of the Relative Permanence of Partnerships and Close Corporations, 67 Minn. L. Rev.
1, 12-13 (1982).
Application of law to facts. In the present case, the conduct of Defendant with
respect to his partnership with Plaintiff has been in breach of his fiduciary and
contractual obligations. While the Court has refrained from making a finding that
misrepresentations on his part have been proven to have induced Plaintiff to enter into
the Partnership Agreement and purchasing Agreement, he is clearly in breach of his
obligations in that he failed to apply $20,000 to the partnership, failed to prepay at
least $13,026 in debts, and effected a dissolution of the partnership by decreasing the
degree of his participation and then disappearing, while his partner attempted to deal
with the liabilities. His conduct with respect to the partnership bears a resemblance
to his participation in this litigation, where he refused to comply with discovery
without a court order, failed to cooperate with his attorney to the point that the
attorney withdrew, and arrived late for trial.
In his trial brief, Plaintiff's counsel requests that, "if [the] Court orders
dissolution, ... [Plaintiff] be permitted to purchase the business for [Defendant's equity
as of December, 1991,] less damages caused by [Defendant].i15 This remedy seems
consistent to the Court with the foregoing authority, although the determination of
is Trial Memorandum on Behalf of Plaintiff Athanasios Sakkas, at 14.
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No. 1229 Civil 1992
Plaintiff's damages will not coincide precisely with Plaintiff s view,18 and additional
conditions consistent with the requirements of the Associations Code will be imposed.
ORDER OF COURT
AND NOW, this 1st day of November, 1993, following a non jury trial in the
above -captioned case, the Court finds in favor of Plaintiff and against Defendant in the
amount of $23,026, with interest at the legal rate from December 21, 1991; in addition,
conditioned upon Plaintiffs indemnification of Defendant as to all obligations of the
partnership, including obligations as to the real estate at 245-247 Hummel Avenue,
Lemoyne, Pennsylvania, Plaintiff may purchase Defendant's interest in the
partnership, including his interest in the said real estate, for the sum of $32,206.60,
plus interest at the legal rate from December 21, 1991, and may use the aforesaid
award of damages in Plaintiffs favor as a set-off.
BY THE COURT,
J. Wesley Oler, . ' J
Robert E. Yetter, Esq.
P.O. Box 93.
Harrisburg, PA 17108-0093
Attorney for Plaintiff
is Plaintiff has sought damages for a number of items, such as services of Plaintiff and
family members, which will not be awarded.
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No. 1229 Civil 1992
Kostantinos Drakos, Defendant
20-51 23rd Street
Astoria, New York 11102
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