United States Court of Appeals
For the First Circuit
No. 05-1435
PHILIP L. TROPEANO, PETER TROPEANO AND CAROLYN PATTON,
Plaintiffs, Appellants,
v.
CHARLENE DORMAN, BIANCA DORMAN, LYDIA DORMAN, TODD DORMAN,
T&N REALTY TRUST AND CAPTAIN PARKER ARMS PARTNERSHIP,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Torruella, Circuit Judge,
Campbell, Senior Circuit Judge,
and Howard, Circuit Judge.
Thomas M. Ciampa with whom Ciampa & Associates was on brief
for appellants.
Gary C. Crossen with whom Rubin and Rudman LLP was on brief
for appellees.
March 24, 2006
CAMPBELL, Senior Circuit Judge. Plaintiffs-appellants
Philip L. Tropeano, Peter Tropeano, and Carolyn Patten appeal from
the dismissal of their complaint and denial of their motion for
summary judgment against defendants-appellees Charlene Dorman,
Bianca Dorman, Lydia Dorman, Todd Dorman, T&N Realty Trust and
Captain Parker Arms Partnership, in the United States District
Court for the District of Massachusetts.
I. Background and Facts
The undisputed facts of the case are as follows. On
January 8, 1964, Alfred Tropeano, Louis Tropeano, Joseph Tropeano,
Philip Tropeano and Wilbur Nylander created the Captain Parker Arms
Partnership (the "Partnership") by means of a two-page Agreement
(the "Partnership Agreement"). The partners agreed therein to
"become and remain partners in the business of acquiring the title
[to a specific piece of land in Lexington] . . . to construct
apartments on said land, for the term of thirty years from the date
hereof." A nominal trust, T&N Realty Trust (the "Trust"), was
created to hold the real estate for the partners' benefit. The
Partnership Agreement provided that "[a]ll applicable provisions
and sections of [Massachusetts] General Laws Chapter 108A [enacting
the Uniform Partnership Act] are herein incorporated by reference
and made a part hereof."
Sometime after the formation of the Partnership and the
Trust, Joseph Tropeano died. His death caused the remaining
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partners to execute an agreement modifying the Partnership
Agreement (the "Modification"). The Modification provided in
relevant part as follows:
* * *
WHEREAS, Joseph C. Tropeano is now deceased.
NOW, THEREFORE, this Modification and affirmation of the
Partnership by the surviving partners Alfred P. Tropeano,
Wilbur C. Nylander, Louis Tropeano and Philip Tropeano
agree:
1. Co-Partners. That the partnership agreement dated
January 8, 1964, was not dissolved or terminated by the
surviving partners when Joseph C. Tropeano died, has been
and is in full force with exception of Joseph's interest.
2. Rights of Deceased Former Partner. The 15% interest
of the late Joseph C. Tropeano is to be paid or
distributed as provided in his will allowed for probate.
3. Death of an Existing Partner. The death of an
existing partner shall not terminate the Partnership and
his interest will be held by the persons or entities set
forth on the deceased partner's schedule attached and
made a part hereof which bears his signature and they
shall have all the rights of the deceased partner. Said
person or entities shall be to those set forth in 5
hereunder.
Upon the death of a partner, the partners herein
agree and so instruct the Trustees to execute whatever
documents may be necessary to permit said representative
to borrow money to pay estate taxes.
If there is sufficient cash held by the Trustees,
the partners agree that the Trustees may loan monies to
the representative of the deceased partner who have or
will file Federal and State Estate Tax forms bearing
interest at the then prime interest rate of Shawmut
Boston plus 1%. Said loan shall be paid back to the
Trust or deducted from the distributive share of said
deceased partner.
4. Termination. The partnership can be terminated by a
vote of not less than 60% interest of 100% and upon such
vote the partners shall so notify the Trustees to
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liquidate the assets and distribute the net principal and
accumulated income as provided by number 8 hereunder.
5. Partner's Rights to Assign or Sell to Certain
Individuals. Any partner shall have the right to assign
or to sell any portion of his interest to his wife or his
children or grandchildren, without the consent of the
other partners, who may take title in their own name or
a separate entity in which they will be the sole
beneficiary.
6. Partner's Right to Assign or Sell to Others. Prior
to any assignment or sale of any partner's interest or
those having his interest to those than the aforesaid,
the assigning or selling partner shall offer the same in
writing with a certified copy of the terms offered to him
by the proposed assignee or purchaser. The partners
shall have thirty (30) business days to accept or reject
the offer. If they do not accept the offer, the
assignment or sale to the third party shall only be made
with the consent of the other partners and those claiming
through them which consent will not be unreasonably
withheld.
7. Voting Minors Interest. If any holder of an interest
in the partnership is a minor, his interest during
minority shall be voted by his father and if no father,
by his mother and if no mother, by his legal guardian.
8. Distribution on Termination. In the event of the
dissolution and termination of the partnership, the
Trustees shall be instructed to proceed to the
liquidation of the partnership and the proceeds of the
liquidation shall be applied and distributed in the
following order of priority:
(a) Debts. To the payment of the debts and
liabilities of the partnership . . . .
(b) Reserves. To the setting up of any
reserves which the partners may deem reasonably necessary
for any contingent or unforeseen liabilities or
obligations of the partnership . . . .
(c) Partner loans. To the repayment of any
loans or advances that may have been made by any of the
partners to the partnership . . . .
(d) Balance. Any balance remaining shall be
distributed among all partners as follows according to
their percentage holding . . . .
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Except as herein modified, the said partnership is hereby
affirmed, dated this 11th day of March, 1987.
The Modification thus specified three ways for the partners, while
alive, either to terminate and liquidate the Partnership or else to
transfer individual interests to others. Termination leading to
liquidation could be accomplished by a 60% percent interest vote.
A partner could, as of right, assign or sell any section of his
interest to specified family members but could not assign or sell
to any others except with the consent of the other partners after
first offering them refusal rights. Several partners thereafter
transferred their interests to family members, as permitted,
including many of the current parties. Since the Modification,
there have been no further revisions to the Partnership Agreement,
and through the bringing of the present lawsuit in November 2003,
the Partnership has continued to operate even though the 30-year
term specified in the Partnership Agreement came to an end on
January 8, 1994. As the district court found, "Not only did the
Partnership continue to manage its rental property without
interruption after the 30-year term expired, but many of the
plaintiffs and defendants acceded to their interest in the
Partnership through assignments made after the expiration date
pursuant to ¶ 5 of the Modification."
On August 21, 2003, Philip, Peter and Carolyn Tropeano,
holding collectively a 42.86% interest in the Partnership, served
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written notice on the defendants that they intended to retire,
effective October 1, 2003, according to the provisions of Mass.
Gen. Laws ch. 108A, § 42. The notice stated that "[p]ursuant to
the provisions of M.G.L. Ch. 108A, Sec. 29, the change in our
relationship effected by our retirement from the partnership is to
be treated as dissolution of the partnership. Pursuant to the
provisions of Chapter 108A, Section 42, as retiring partners we
wish to have the value of our interests ascertained as of the date
of dissolution (that is, October 1, 2003)." The notice stated that
the retiring partners understood that a complete termination of the
Partnership required a 60% vote of the partners but that after the
leaving partners retired, the remaining members could also continue
on as the sole partners. The letter stated:
We recognize that in order to terminate the partnership,
a vote of 60% of the partners is required . . . . If you
wish to terminate the partnership, we would participate
in that vote in the affirmative.
The plaintiffs sought to be paid their respective interests of the
value of the Partnership's assets. They valued their collective
interest in the Partnership's assets (totaling $18.8 million) at an
appraised value of $6,600,000.
The defendants responded that the plaintiffs were not
entitled to withdraw and receive from the Partnership the
liquidation value of their respective interests in the Partnership.
The defendants, however, offered to purchase the plaintiffs'
minority interest for $2,750,000 under paragraph 6 of the
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Modification. In a letter to plaintiffs' then-counsel from counsel
for defendant Charlene Dorman, the defendants explained their
offer, saying:
on your client's management watch, the partner
distributions to your clients have averaged $174,119 over
the last four years per Kennedy & Kennedy's financial
statements. If a yield of 6.4% on Mrs. Dorman's offer of
$2,750,000 was achieved (a very reasonable figure) your
clients would be in an identical pre-tax position having
converted their illiquid minority interest to cash.
After efforts to compromise failed, plaintiffs brought this action
in the district court in November of 2003.
In their initial complaint, the plaintiffs asserted a
right to retire from the Partnership pursuant to Mass. Gen. Laws
ch. 108A, § 42 and to secure the partnership accounting outlined in
that provision. Defendants moved to dismiss, and plaintiffs filed
an opposition, to which defendants replied. The defendants also
successfully moved to disqualify the plaintiffs' counsel, who had
previously represented the Partnership.
After obtaining new counsel, the plaintiffs filed an
amended complaint. Besides the relief originally sought, the
amended complaint requested, inter alia, declaratory judgments that
(1) the Partnership was a partnership at will and therefore
terminable by any partner, at any time, for any reason; (2) the
plaintiffs had lawfully terminated the Partnership; and (3) the
plaintiffs' termination of the Partnership required the winding up
of the Partnership's business, the liquidation of the Partnership's
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assets, and the distribution of the liquidation proceeds to the
partners according to their respective partnership interests.
The defendants moved to dismiss the plaintiffs' amended
complaint or, in the alternative, for summary judgment. The
plaintiffs filed a consolidated pleading opposing the motion to
dismiss and cross-moving for summary judgment and for declaratory
judgments on the three above-mentioned points on which they sought
declarations. Defendants opposed the plaintiffs' cross-motion, and
the plaintiffs filed a reply brief. The district court heard oral
argument on December 2, 2004.
The plaintiffs argued to the district court that the
express Partnership had terminated on January 8, 1994 when the 30-
year term of the Agreement had expired. Thereafter, they said, the
Partnership became a partnership at will by operation of law under
Mass. Gen. Laws ch. 108A, § 23(1), which states:
When a partnership for a fixed term or particular
undertaking is continued after the termination of such
term or particular undertaking without any express
agreement, the rights and duties of the partners remain
the same as they were at such termination, so far as is
consistent with a partnership at will.
Under the plaintiffs' theory, any restrictions expressed in the
Modification to the Partnership Agreement could not affect their
ability to retire from, and in effect dissolve, the Partnership,
since once the partnership became one at will, any partner could
terminate the partnership at any time for any reason. See, e.g.,
Meehan v. Shaughnessy, 404 Mass. 419, 428 (1989). Plaintiffs
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argued that when a partner in a partnership at will retires, his or
her withdrawal triggers an accounting pursuant to the terms of the
Uniform Partnership Act ("UPA") as codified in Mass. Gen. Laws ch.
108A, § 42.
The defendants disagreed. In their view, the
Modification supplanted the 30-year term with an agreement to
continue the Partnership, unless or until a 60% liquidation vote
was achieved. The defendants asserted that the Modification
substituted a new structure for that under the old Agreement:
rather than being subject to a fixed term of thirty years, the
property would be maintained indefinitely under the Agreement until
a dissolution occurred by a 60% vote. Alternatively, the
defendants argued that even if the Partnership had become a
partnership at will, no accounting was called for under § 42 as the
accounting provision did not come into effect if the parties had
otherwise agreed to a different course of action. Thus, § 42
provides that
[w]hen any partner retires or dies, and the business is
continued . . . without any settlement of
accounts . . . unless otherwise agreed, he or his legal
representative as against such persons or partnership may
have the value of his interest at the date of dissolution
ascertained, and shall receive as an ordinary creditor an
amount equal to the value of his interest in the
dissolved partnership with interest . . . (emphasis
supplied).
Here, defendants argued, the partners had, in the Modification,
agreed otherwise by limiting a partner's withdrawal or retirement
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to the three options described therein (i.e., termination by 60%
vote; assignment to a family member; or third-party sale subject to
the partners' consent). Any other interpretation, the defendants
said, would render meaningless the restrictions agreed to in the
Modification, including the 60% termination requirement.
In response, plaintiffs insisted that defendants were
wrong to assert that the partners' rights upon retirement, as
conferred in § 42, were lessened or eliminated by something said in
the Modification. They argued that there is no provision that
"otherwise agrees" as to how a retiring partner's share is to be
valued. No formula is set forth in the Modification for valuing a
retiring partner's interest. Accordingly, the accounting described
in § 42 must be utilized.
The district court ruled against defendants' contention
that the Modification had substituted for the 30-year term an
agreement to continue the Partnership until terminated by a 60%
vote. It agreed with plaintiffs that nothing in the Modification
eliminated the original 30-year term, hence, after January 8, 1994,
the Partnership became one at will by operation of § 23(1) of Mass.
Gen. Laws ch. 108A. Nonetheless, the court found for defendants on
the ultimate issue, finding the partners had "otherwise agreed" to
a method of valuation such as defendants proposed. Because the
parties had agreed upon an alternative means, the method of
valuation called for in § 42 of the UPA did not apply, the
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plaintiffs being restricted, in these circumstances, to terminating
and valuing their interest pursuant to paragraph 6 of the
Modification.
While thus holding for the defendants, the court
observed as an aside that the "easy thing for the court to do would
be to pronounce an ambiguity in the intent of the original partners
in crafting the Modification and proceed to a trial."
Nevertheless, the court found no such ambiguity, hence made no such
pronouncement. As a further reason for avoiding a trial, the court
noted there was no disinterested person alive who could testify as
to the partners' intent in modifying the agreement. The court
granted the motion to dismiss and denied the plaintiffs' cross-
motion for summary judgment.
II. Discussion
A. Standard of Review
We review de novo the district court's denial of the
cross-motion for partial summary judgment and the granting of the
motion to dismiss. Centro Medico Del Turbo, Inc. v. Feliciano De
Melecio, 406 F.3d 1, 5 (1st Cir. 2005).
The question of whether a contract is ambiguous is one
for the courts. ITT Corp. v. LTX Corp., 929 F.2d 1258, 1261 (1st
Cir. 1991). All of the contract's terms should be construed
together to find a coherent whole. As such, a court may look to
related provisions of a contract to cast light on the meaning of
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disputed language. Nadherny v. Roseland Property Co., Inc., 390
F.3d 44, 49 (1st Cir. 2004).
The intent of contracting parties is
"generally . . . deemed a material issue of fact" precluding
summary dismissal. Blanchard v. Peerless Ins. Co., 958 F.2d 483,
488 (1st Cir. 1992).
B. Analysis
The question now on appeal is whether, under Mass. Gen.
Laws ch. 108A, § 42, each of the plaintiffs is entitled to receive
the full value of his or her shares in the Partnership as
determined upon liquidation, or rather must accept the much-reduced
value offered by the remaining partners purportedly under their
powers to approve sales to third parties under paragraph 6, supra,
of the Modification. The plaintiffs-appellants make two arguments.
First, they argue that the Partnership became a partnership at will
after the expiration of the 30-year term; that as partners at will
they enjoyed an absolute right to dissolve the Partnership; and
that nothing in the Modification constitutes an agreement otherwise
for the valuing of their partnership shares upon retirement.
Second, and alternatively, they argue that at the very least, the
Modification is ambiguous and thus its meaning leaves a question of
fact open to be decided by a jury. We agree with the first
argument and therefore reverse the judgment of the district court.
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i. Nature of the Partnership
Mass. Gen. Laws ch. 108A, which the partners expressly
referenced in the Partnership Agreement and which enacts the UPA,
governs the formation, conduct, and liquidation of partnerships in
Massachusetts. Under ch. 108A, § 29, a "change in the relation of
the partners caused by any partner ceasing to be associated in the
carrying on . . . of the business" results in the dissolution of the
partnership. Dissolution may occur by the express will of any
partner at any time, even in contravention of the agreement between
the partners, where the circumstances do not otherwise permit
dissolution. Mass. Gen. Laws. ch. 108A, § 31(b)(2). Where,
however, a partnership agreement provides that the partnership is
to continue indefinitely or without the specification of a
particular undertaking, and the partnership is therefore "at will,"
a partner has the right to dissolve the partnership, and the
dissolution opted for by the partner occurs "[w]ithout violation of
the agreement between the partners." Id. at § 31(1). The statute
further provides that:
When a dissolution is caused in any way, except in
contravention of the partnership agreement, each partner,
as against his co-partners and all persons claiming
through them in respect of their interests in the
partnership, unless otherwise agreed, may have the
partnership property applied to discharge its
liabilities, and the surplus applied to pay in cash the
net amount owing to the respective partners.
Id. at § 38(1) (emphasis supplied).
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From the foregoing we glean the following: if a partner
withdraws from a partnership at will, thus causing its dissolution,
the dissolution is not regarded in law as contravening the agreement
between the partners, even if the terms of that agreement provide
otherwise. Thereupon, the partner is entitled under § 38(1) to his
full share of the partnership net assets unless otherwise agreed.
This contrasts with the situation in which a partner withdraws from
a term or other partnership not at will, where the partnership
agreement similarly disallows or restricts withdrawal. In the
latter case (unless there are other factors), the restrictive terms
of the partnership agreement may be dispositive.
Clearly, therefore, it is of considerable importance
whether the Partnership here was or was not at will when plaintiffs
withdrew.1 If it was at will, withdrawal was lawful, and the
withdrawing partners were entitled to their net shares unless some
other method of distribution could be found to have been otherwise
agreed to. But if the Partnership was not at will, plaintiffs'
right to withdraw from the enterprise was arguably barred altogether
1
A more simplistic view of the difference between a
partnership at will and one for a term can be drawn from Black's
Law Dictionary, which describes a "partnership at will" as "a
partnership that any partner may dissolve at any time without
thereby incurring liability" and a "partnership for a term" as "a
partnership that exists for a specified duration or until a
specified event occurs. Such a partnership can be prematurely
dissolved by any partner, but that partner may be held liable for
breach of the partnership agreement." Black's Law Dictionary, 1153
(8th ed. 2004).
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(although we need not finally decide) by paragraph 4 of the
Modification, which required a 60% vote for termination, resulting
in a significantly stronger argument for limiting plaintiffs to the
distribution being proposed by defendants under paragraph 6.
It is, therefore, of importance to determine initially
whether the Partnership was "at will" when the plaintiffs sought to
withdraw. We turn first to that issue, answering in the
affirmative.
ii. Whether when Plaintiffs Retired, the Partnership was
"At Will."
The plaintiffs argue, and the district court so found,
that when the partners continued to operate the Partnership after
the expiration of the original 30-year term on January 8, 1994, it
ceased to be a partnership for a fixed term and became a partnership
at will. They base this assertion on the language in Mass. Gen.
Laws ch. 108A, § 23(1) that,
[w]hen a partnership for a fixed term or particular
undertaking is continued after the termination of such
term or particular undertaking without any express
agreement, the rights and duties of the partners remain
the same as they were at such termination, so far as is
consistent with a partnership at will.
The district court adopted plaintiffs' analysis, and we agree. The
30-year term was expressly provided for in the original agreement
and was not mentioned, much less stricken or modified, in the
Modification. The Modification states at the end that, "[e]xcept
as herein modified, the said Partnership is hereby affirmed." The
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Modification further states that its purpose is to continue the
original agreement in "full force with exception of Joseph
[Tropeano's] interest." Defendants would nonetheless have us hold
that the Modification sub silentio struck out the 30-year term.
They argue that paragraph 4 of the Modification, stating in part
that, "[t]he partnership can be terminated" by a 60% interest vote
implicitly eliminated the 30-year term provision contained in the
original Agreement, and substituted an agreement to continue the
Partnership indefinitely unless or until a 60% liquidation vote was
achieved.
Like the district court, however, we believe defendants'
contention exceeds any reasonable reading of the relevant
instruments. To adopt it would necessitate revising the plain
language of both the Partnership Agreement and the Modification
itself. When the Modification was executed, seven years yet
remained of the 30-year term. Seven years was not such a brief
remaining period as to make it unreasonable for the parties to have
left intact the original 30-year term. It would have been easy
enough for them to have executed an extension any time prior to
January 8, 1994, in order to continue the term partnership and avoid
the at-will consequences of § 23(1). Had the parties intended, when
they executed the Modification, to eliminate the 30-year term
provision, leaving the Partnership to continue until terminated by
a 60% vote, as defendants suggest, one would expect them to have so
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stated in the Modification, given the express affirmance therein of
the original partnership, "[e]xcept as herein modified." We thus
affirm the district court's conclusion that the 30-year term
provision forming part of the original Partnership Agreement was not
deleted by the Modification.
Defendants argue in the alternative that, even if the 30-
year term provision remained and the 30 years expired, the 60%
provision made the partnership venture a "particular undertaking,"
so as to keep the Partnership from becoming one at will under §
23(1) when the 30 years was up. We disagree. The defendants rely
on Girard Bank v. Haley, 460 Pa. 237, 244, 332 A.2d 443, 447 (1975),
to support their argument that the 60% termination provision turned
the Partnership into a "particular undertaking," noting that the
Pennsylvania Supreme Court had ruled that "a 'particular
undertaking' under the statute must be capable of accomplishment at
some time, although the exact time may be unknown and
unascertainable at the date of the agreement." Id. The Girard
court, however, immediately went on to undermine defendants'
argument, writing of the partnership agreement at issue in that case
that
[t]he agreement contains no provision fixing a definite
term, and the sole 'undertaking' to which it refers is
that of maintaining and leasing real property. Leasing
property, like many other trades or businesses, involves
entering into a business relationship which may continue
indefinitely; there is nothing 'particular' about it.
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Id. at 244. Business activities which may continue indefinitely are
not "particular" in nature and do not constitute particular
undertakings. Miami Subs Corp. v. Murray Family Trust, 142 N.H.
501, 509, 703 A.2d 1366, 1371 (1997). The defendants rely also on
Osborne v. Workman, 621 S.W.2d 478, 273 Ark. 538 (1981), for the
principle that a partnership agreement which provided that it could
only be "dissolved mutually or by law" was not terminable at will
by an individual partner (though the plaintiff was permitted to
withdraw from the partnership and receive the value of his
partnership interest as specified in the agreement). Id. at 479.
The analogy is tenuous at best. The Osborne court focused on the
specific nature of the partnership, a coalition of medical doctors
which had provided expressly for the valuation of a withdrawing
partner's share, and emphasized the idea that partnerships among
professionals often require agreements that promote continuity and
longevity. Here, the partnership is not one of professionals, and
there is no provision expressly for the valuation of a withdrawing
partner's interest.
Defendants emphasize that the Agreement as modified
defines not just the particular undertaking of the management of a
real estate property but also the particular undertaking that the
partnership would terminate when 60% of the partnership voted to do
so. As already noted above, however, the Modification explicitly
stated both that the Partnership was affirmed by the Modification
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and that the original Agreement was to be continued in full force
and effect, indicating that the 30-year term was very much alive and
well through the Modification. The 60% provision -- which states
merely that the Partnership "can" be terminated by a 60% interest
vote, not that this alone will allow its termination -- does not
replace that term either as a time limitation or a particular
undertaking under the terms of Mass. Gen. Laws § 23.
Hence, the Partnership was an "at will" partnership when
plaintiffs announced their decision to retire. As such, it was
subject to the provisions of Massachusetts law relative to such
partnerships, including the absolute right of one or more of the
partners to retire and dissolve the partnership at will. Mass. Gen.
Laws ch. 108A, § 31(1), supra. Meehan, 404 Mass. at 428.
iii. Whether the Partners "Otherwise Agreed."
The district court concluded that, notwithstanding the
Partnership's at will status, it remained subject to the special
requirements agreed to in the Modification, i.e., that the valuation
of the share of a partner opting out with less than the 60% vote
required for dissolution be determined under the third-party sale
provision of paragraph 6 of the Modification (sale or assignment to
a close family member under paragraph 5 not being involved).
Paragraph 6 does not, however, address the Partnership's purchase
or valuation of a retiring partner's share but rather merely gives
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it refusal and veto rights over the sale of a partner's share to a
third party.
Under Mass. Gen. Laws ch. 108A, § 42,
[w]hen any partner retires or dies, and the business is
continued . . . without any settlement of
accounts . . . unless otherwise agreed, he or his legal
representative as against such persons or partnership may
have the value of his interest at the date of dissolution
ascertained, and shall receive as an ordinary creditor an
amount equal to the value of his interest in the
dissolved partnership with interest . . . . (emphasis
supplied).
Defendants, like the district court, focus on the "unless otherwise
agreed" language, asserting that the parties here "otherwise agreed"
on a way other than that outlined in § 42 for establishing the value
of a retiring partner's share. According to defendants, only
dissolution pursuant to the 60% vote in clause 4 would allow a
distribution at the full valuation provided in section 42. In
support of their position, defendants cite to case law. See
Diranian v. Diranian, 773 N.E.2d 462, 466, 55 Mass. App. Ct. 605,
609-10 (2002) ("Partners may use a written partnership agreement to
provide for different distributions from those required pursuant to
the statutory provisions of G.L. c. 108A, §§ 29-43, in the event of
a dissolution."); Devlin v. Rockey, 295 F.2d 266, 268 (7th Cir.
1961) ("It is implicit in Section 42 of the [Uniform Partnership
Act], in the use of the words 'unless otherwise agreed,' that
partners may provide by agreement the amounts to be paid to retiring
partners by the surviving partnership.").
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But while we have no doubt that, even where there exists,
as here, a partnership at will, apt language in the original
agreement may still control the character and amount of the
distribution upon dissolution, we do not believe the cited
paragraphs in the Modification, in particular paragraph 6, reflect
an agreement that falls within the "otherwise agreed" proviso of §
42. Paragraph 6 deals with a partner's limited right, while the
Partnership continues, to assign or sell his interest to others than
the family members cited in paragraph 5. The partner must first
offer the interest to the remaining partners at presumably the same
price, and if they do not accept the offer, the assignment or sale
to the third party shall be made only with the partners' consent,
which will not be unreasonably withheld. Nowhere in paragraph 6 is
it suggested that that procedure is to be followed in the event an
at-will partner retires, thus effecting a dissolution of the
Partnership as a matter of law. The only paragraph pertaining to
share valuation upon dissolution and termination of the Partnership
is paragraph 8, which calls for pro-rata distribution to all
partners.
Defendants argue that paragraph 4, providing for
termination of the Partnership by 60% or more of the partners, does
not necessarily rule out termination by other means. This may be
so. But the absence of any other express avenue to terminate,
coupled with the very limited options for sale or assignment of
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shares in paragraphs 5 and 6,2 suggest that, except for dissolution
of the Partnership by a super-majority vote, no other means to
withdraw or to dissolve were actively contemplated when the
Modification was drafted. No right is mentioned for individual
partners to opt out and sell their shares back to the remaining
partners, nor is a means of valuation provided for such an
occurrence. To hold that paragraph 6, which gives partners a very
constricted right, subject to partnership first refusal and veto,
to offer their shares to third parties, should now be read as the
agreed means to value the shares of partners retiring as of right
under the at will provisions of the UPA, reads more into paragraph
6 than is there.
This is not to say that had plaintiffs sought to retire
during the 30-year term of the partnership, paragraphs 4, 5, and 6
might not have limited the valuation of their shares as now claimed.
Liability in the form of reduced or even no value under paragraph
6 might, arguably, be imposed for what paragraph 4 suggests would
be the premature withdrawal by partners absent the 60% vote. Once,
however, the term expired and the Partnership became a partnership
at will, it is considerably harder to argue that paragraph 6 can
2
Paragraph 3 of the Modification, providing for disposition of
Partnership assets upon the death of a partner, set out a fourth
way of disposal, albeit one presently irrelevant. It is noteworthy
that the death provision is written so as to preclude termination
of the Partnership. Rather the designees of the deceased will
continue to hold his or her shares as members of the ongoing
partnership.
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reasonably be read to serve the purpose defendants now contend.
While perhaps a suitable vehicle to sharply curtail partnership
withdrawal during the term of the Partnership, it is not worded as
a yardstick to value the shares of retiring at-will partners, who
are now legally entitled both to withdraw and to dissolve the
partnership.
In the latter situation, the provisions of the
Modification seem capable of only two interpretations, neither of
which helps defendants. The first is that paragraph 6, by its
terms, is simply irrelevant to the valuing of a retiring partner's
interest here. Paragraph 6 nowhere mentions the retirement or
withdrawal of a partner, much less the dissolution of the
Partnership. It provides a method for a partner to sell or assign
his interest to persons other than the close relatives listed in
section 5: to do so, the partner must first offer his interest to
the remaining partners at an equivalent price, and even if they
refuse to purchase it, they may veto the sale or assignment to
another, although in so doing they must act reasonably. On its
face, paragraph 6 was not written so as to determine the value for
purchase by the remaining partners of the interest of a partner
retiring as of right. Thus we believe it cannot reasonably be
interpreted as coming within the "otherwise agreed" language of §
42.
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Alternatively, one can, with greater confidence perhaps,
read paragraph 8 of the Partnership Agreement as providing an
express basis for valuing the plaintiffs' shares where plaintiffs'
action has the legal effect of lawfully dissolving the
Partnership.3 That paragraph says in part,
Distribution on Termination. In the event of the
dissolution and termination of the partnership, the
Trustees shall be instructed to proceed to the
liquidation of the partnership and the proceeds of the
liquidation shall be applied and distributed in the
following order of priority . . .
* * *
(d) Balance . . . to be distributed among all
partners . . . according to their percentage
holding . . .
Paragraph 8 deals specifically with distribution on termination.
Its method of valuation, however, appears substantially the same as
that outlined in § 42. While arguably intended to be used following
termination by 60% vote under paragraph 4, it is not so limited by
its own terms and is on its face the most relevant provision in the
Modification for distribution where, as here, dissolution of the
3
Defendants make much of the fact that in the letter from
their former counsel, plaintiffs initially distinguished their
plans to retire from an attempt to terminate the partnership, which
former counsel at one point seemed to acknowledge required the 60%
vote of the partners. This statement had no binding effect on the
plaintiffs, who, after they acquired new counsel, filed an amended
complaint expressly seeking a declaration that they could terminate
the partnership as of right. To the extent that the former
counsel's letter can be interpreted to acknowledge that termination
could be brought about only upon a 60% vote, it simply reflected an
unrelied-upon misapprehension of the law. Meehan, 404 Mass. at
428.
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partnership at will can be and was effectuated as a matter of legal
right.
Hence, given that the plaintiffs, as a matter of law, are
entitled to retire and force the dissolution of the partnership at
will notwithstanding their non-compliance with the 60% voting
requirement of paragraph 4, we do not believe that paragraph 6,
which is part of the same restricted regime imposed by paragraphs
3, 4, and 5, can reasonably be regarded as the partners' agreement
for valuing plaintiffs' interests in these very different
circumstances. Only by vastly stretching its language can paragraph
6 be read to govern the valuation of partners' interests in an at-
will retirement situation such as the present one. We are unable
to find that it reflects an express agreement to value plaintiffs'
shares differently from the accounting called for in § 42.4
4
Section 23(1) of Mass. Gen. Laws ch. 108A reinforces our
position in this regard. It provides that, after termination of a
fixed-term partnership, as here, "the rights and duties of the
partners remain the same as they were upon such termination, so far
as is consistent with a partnership at will" (emphasis added).
Paragraphs 4 (super-majority can vote to dissolve) and 6 (sale of
partner's interest to third party subject to partners' first
refusal and veto), if applied to the valuation of an at-will
partner's retirement share, may well be provisions that would not
be consistent with a partnership at will, hence contrary to §
23(1). A partner at will is legally entitled to retire without the
vote of his partners and, except as otherwise agreed, to receive
full value for his interest. It thus might seem questionable--
although we do not decide--whether a provision like paragraph 6,
tailored to the concept that a partner is not free to retire except
following a super-majority vote, can properly be imposed to value
a retiring at-will partner's share. Given, however, that the
language of paragraph 6 does not in any event aptly apply to
valuation of a partner's interest in the present situation, we need
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The defendants cite a number of cases to support the
proposition that the terms of a partnership agreement may trump the
valuation provisions of the UPA. We do not dispute that, on
appropriate facts, that is so. But all of the cited cases, save
one, which we discuss below, involved agreements where there were
provisions specifically governing how the partnership interest of
a deceased or withdrawing partner was to be valued, which is not the
case here. See Devlin, 295 F.2d at 267 (article providing for
withdrawal of partners and division of earnings); Robbins v. Salem
Radiology, 764 A.2d 885, 888, 145 N.H. 415, 418 (2000) (article
limiting any departing partner's interest to the accumulated and
undistributed fees of the partnership); Wood v. Gunther, 201 P.2d
874, 876, 89 Cal. App. 2d 718, 721-22 (1949) (agreement explicitly
stated that "[s]hould any of the partners desire to sell his
interest in the partnership or to withdraw from the
partnership, . . . he shall do so only upon the following
terms . . . ."); In re Eddy's Estate, 49 N.E.2d 628, 290 NY 677
(1941) (agreement contained specific formula for setting price at
which surviving partner could buy interest of deceased partner);
Heath v. Spitzmiller, 663 S.W.2d 351, 354-55 (Mo. App. S.D. 1983)
(agreement provided that withdrawing partner was entitled to his
share of partnership assets, valued "by multiplying the billings to
not decide the legality of such a provision were it expressly
applicable.
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clients for the twelve months preceding the date of withdrawal times
150% and adding it to the fair market value of the partnership's
'equipment' and 'Capital Investment'").
The defendants also cite Balafas v. Balafas, 117 N.W.2d
20, 263 Minn. 267 (1962), where the court held that the UPA
provisions did not preclude an agreement between partners to dispose
of partnership assets in a manner contrary to the UPA provisions
which would have been controlling in the absence of the agreement.
That case involved the court's implying an "otherwise agreement"
into an oral partnership agreement on the basis of extrinsic
evidence demonstrating that two brothers in a partnership had
clearly intended to have the share of the first deceased partner
become the property of the surviving partner. Id. at 277. It is
easily distinguished from the instant case because of the unique
facts in Balafas and because we are dealing here with a written
agreement, not an implied oral partnership. The court in Balafas
implied a contract in fact from the absence of a written partnership
agreement involving two immigrant brothers who were not familiar
with partnership law and, the court found, considered their property
to be joint between the two of them. Here we are dealing with a
written partnership agreement which specifies a valuation provision
for dissolution comparable to that in § 42 but did not demonstrate
an "otherwise agreement" for withdrawal or retirement.
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iv. Whether the Intent of the Parties in the Agreement
is a Triable Issue of Fact
As we have agreed with the plaintiffs' first argument on
appeal, we need not reach their claim in the alternative that the
Modification was ambiguous and thus that we should reverse so that
a jury could rule on the factual issue of the parties' intent
regarding the issue of partners' withdrawal. We note briefly,
however, our agreement with the district court that the Modification
was not ambiguous.
As noted above, the intent of contracting parties is
"generally [] deemed a material issue of fact" precluding summary
dismissal. Blanchard, 958 F.2d 488. See also Boston Five Cents
Sav. Bank v. Department of Housing & Urban Dev., 768 F.2d 5, 8 (1st
Cir. 1985) ("an argument between parties about the meaning of a
contract is typically an argument about a 'material fact,' namely
the factual meaning of the contract"). Only in limited
circumstances is it appropriate for a court to choose one meaning
of a disputed agreement over another. Such limited circumstances
occur only where "no 'reasonable person' could differ about what the
contract means, either because the language is unambiguous or the
supporting evidence is sufficiently one-sided." Boston Five Cents
Sav. Bank, 768 F.2d at 8. On the other hand, "the words of a
contract may be so clear themselves that reasonable people could not
differ over their meaning." Id.
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The Modification clearly expressed the will of the
partners to continue the Partnership after the death of one of the
founding partners and, as part of that affirmation of the continued
Partnership, expressly delineated the ways in which the Partnership
and individual Partnership interests could be terminated but failed
to provide a valuation provision for either dissolution prior to the
60% vote of the partnership or withdrawal. Without such a
provision, the UPA valuation provisions dictate the value of the
withdrawing partners' shares. The Modification is not ambiguous,
and there is no occasion for a jury to resolve its meaning.
III. Conclusion
The district court's judgment is therefore reversed, and
the case remanded for further disposition in accordance herewith.
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