1.Partnerships--existence--sufficiency of evidence
The trial court did not err by determining that defendants
were partners in the Lowgap Grocery and Grill, which they had
purchased for their daughter to run, where defendants owned the
building, the land, the inventory, and the equipment; defendants
opened the bank account for the business and had authority to
draw on this account at all times; defendants invested additional
money on various occasions; defendants purchased the business in
their own names and invited their daughter to participate rather
than making loans directly to her; defendant Brenda Case took out
an insurance policy which identified her as doing business as the
Lowgap Grocery and Grill; defendant Albert Case executed a power-
of-attorney in connection with the sale of the business which
gave his daughter the authority to transfer “my” business in
Lowgap, North Carolina; each defendant signed the closing
statement for the sale of the business; defendants received the
profits from the sale of the business; and both defendants
testified to their status as partners, Albert describing himself
as a “silent partner” and Brenda describing herself as a “sleeper
partner.” Defendants' ownership did not terminate simply because
their daughter took over management of the business.
2. Interest--purchase of fuel by store--open-ended account--
notice
The trial court did not err by concluding that plaintiff was
entitled to interest on an amount due for fuel purchased by a
store where there was only an oral agreement for the delivery of
gasoline, but defendants received statements on a regular basis
and an invoice upon each delivery, each of which contained a
detailed and specific provision regarding the imposition of
finance charges.
Faw, Folger, Johnson & Campbell, L.L.P., by Fredrick G.
Johnson and Hugh B. Campbell, III, for plaintiff-appellee.
Harry B. Crow, Jr., for defendants-appellants.
HUDSON, Judge.
Plaintiff filed a complaint on 7 November 1995 alleging that
the four named defendants were jointly and severally liable, as co-
owners of Lowgap Grocery & Grill (the business), for a debt arising
from outstanding payments on the purchase of fuels from plaintiff.
The trial court held that John Stanley was entitled to a directed
verdict because he was not a partner in the business, and that the
remaining defendants, Albert Case, Brenda Case, and Elizabeth Case
Stanley, were jointly and severally liable to plaintiff in the
amount of $48,880.06. Albert Case and Brenda Case appeal from that
judgment.
The evidence before the trial court tended to show the
following. In November of 1991, Albert and Brenda Case
(defendants), a married couple, purchased the business, including
the building in which the store was located, the property on which
it was situated, and all equipment and inventory. Defendants owned
the business through November of 1994, at which time they sold the
business to Jerry Hodges. During the time that defendants owned
the business, Elizabeth Case Stanley (Ann), defendants' daughter,
ran the business, and defendants worked at the business
approximately one day a week. Brenda testified that she and Albert
had purchased the business with the intention that Ann would run
and operate the store, and with the hope that Ann would eventually
own the store.
In approximately December of 1992, Joe Harrell, who owns and
operates the Harrell Oil Company of Mount Airy (plaintiff), reached
a business agreement with Brenda. Pursuant to this agreement,defendants purchased gas tanks, pumps, and related equipment from
plaintiff, and plaintiff installed the equipment. Plaintiff then
delivered gas each week on consignment, the business sold the gas,
and the business paid plaintiff the cost of the gas plus one half
of the profit. Brenda acted as the spokesperson and contact person
on behalf of the business. There was no written contract setting
forth the terms of the agreement, only an oral agreement between
Harrell and Brenda. The first delivery of gas by plaintiff
occurred in February of 1993, and the final delivery occurred in
October of 1994.
In approximately June of 1993, Harrell was notified by Ann
that she would be in charge of the store and that plaintiff should
deal with Ann regarding the business relationship rather than
Brenda. From that point until the fall of 1994, Harrell testified
that his business dealings occurred through Ann. Also beginning in
June of 1993, the business fell behind on its payments to
plaintiff. By the fall of 1994, the business had a significant
unpaid balance. In approximately September of 1994, Brenda
contacted Harrell and stated that she wanted to sell the business.
After the business was sold, Brenda contacted Harrell again and
told him that the business had been sold, and that she had $8,000
remaining after paying the outstanding bills. Brenda offered to
give Harrell this sum in exchange for releasing defendants from
their debt. Harrell declined, and offered to accept $20,000 for
the debt that was due, which offer was not accepted by Brenda.
On 7 November 1995, plaintiff filed a complaint alleging that
the four named defendants were jointly and severally liable toplaintiff for the sum of $29,743.67, plus interest from 1 August
1995 at the rate of 18% per year. The four named defendants filed
answers denying liability to plaintiff. The trial court found that
the business was operated as a partnership from February of 1993
until November of 1994 by defendants and Ann, and that the
partnership is indebted to plaintiff in the principal amount of
$26,054.16 for purchases of motor fuels and kerosene. The trial
court further found that plaintiff is entitled to interest on the
principal amount, due at the rate of 1.5% per month from November
of 1994 until the date of judgment, and thereafter at the legal
rate. Thus, the trial court found defendants and Ann jointly and
severally liable for a total of $48,880.06, plus interest thereon
at the legal rate from the day of judgment.
[1]On appeal, defendants raise seven assignments of error
condensed into two arguments for our review. Defendants first
argue that the trial court erred in determining that defendants
were partners in the business and are liable to plaintiff on this
basis. We note in addressing this issue that Ann has not appealed
from the judgment of the trial court and, for this reason, her
status as a partner in the business is unchallenged.
The Uniform Partnership Act defines a partnership as “an
association of two or more persons to carry on as co-owners a
business for profit.” N.C.G.S. § 59-36(a) (1999). This Court has
defined a “partnership” as “a combination of two or more persons,
their property, labor, or skill in a common business or venture
under an agreement to share profits or losses and where each party
to the agreement stands as an agent to the other and the business.” G. R. Little Agency, Inc. v. Jennings, 88 N.C. App. 107, 11
0, 362
S.E.2d 807, 810 (1987). Determination of whether a partnership
exists involves examining all the circumstances. See Peed v. Peed,
72 N.C. App. 549, 553, 325 S.E.2d 275, 279, cert. denied, 313 N.C.
604, 330 S.E.2d 612 (1985). Where a partnership is found to exist,
“all partners are jointly and severally liable for the acts and
obligations of the partnership.” N.C.G.S. § 59-45(a) (1999).
It is well-established that “co-ownership and sharing of any
actual profits are indispensable requisites for a partnership,” and
that “[f]iling a partnership tax return is significant evidence of
a partnership.” Wilder v. Hobson, 101 N.C. App. 199, 202, 398
S.E.2d 625, 627 (1990). Defendants argue that they were not
partners in the business for three reasons. First, defendants
contend that during the time the debt in question accrued, they
were not co-owners of the business because Ann had taken full
control of the business. Second, defendants contend that there was
no agreement to share profits. Third, defendants contend that the
existence of tax returns filed by defendants defining the business
as a “proprietorship,” as well as the absence of any partnership
tax returns for the business, support the conclusion that the
business was not a partnership. Defendants contend that the
circumstances in the case at bar are similar to the circumstances
in McGurk v. Moore, 234 N.C. 248, 67 S.E.2d 53 (1951).
In McGurk, the defendant was the sole owner and operator of
the business, and the plaintiff merely made advances and loans of
money to the defendant for use in the business. See id. at 253, 67S.E.2d at 56. The only indication of a partnership was the fact
that the plaintiff and the defendant shared profits. See id. The
Court found that the plaintiff's share of the profits was received
simply as compensation or interest for the use of his money by the
defendant. See id. The Court explained that, pursuant to N.C.G.S.
§ 59-37 (1999), such profit-sharing does not constitute prima facie
evidence of a partnership. See McGurk, 234 N.C. at 253, 67 S.E.2d
at 56. Thus, the Court held there was no partnership between the
parties.
The instant case is distinguishable from McGurk in a number
of crucial ways. First, evidence of defendants' ownership interest
in the business here is overwhelming. For the entire period in
question, defendants owned the building, the property, the
inventory, and the equipment. Defendants opened the bank account
for the business and at all times had authority to draw on this
account. Defendants invested additional money on various occasions
to pay for expenses incurred by the business, such as building
payments and inventory. Brenda also took out an insurance policy,
which policy identified her as the owner of the policy, doing
business as Lowgap Grocery and Grill. In October of 1994, a month
prior to selling the business, Albert executed a “Power of
Attorney” appointing Ann as his “attorney-in-fact,” and
specifically giving Ann the authority to transfer to Hodges, the
buyer, “my business located in Lowgap, North Carolina.” Albert and
Brenda each signed the closing statement for the sale of the
business in November of 1994. The defendants clearly owned thebusiness and, despite defendants' contentions to the contrary, for
which they provide no authority, this ownership did not terminate
simply because Ann took over the management of the business in June
of 1993. Furthermore, although defendants may have intended that
Ann would eventually become the owner of the business, they did not
make loans directly to her for her to invest in the business, as
did the plaintiff in McGurk. Rather, defendants purchased the
business in their own names, and invited Ann to participate in the
business by helping to manage the store.
Second, despite the absence of an express agreement to share
profits or losses, and despite the apparent absence of actual
profits during the operation of the business, it is undisputed that
when defendants sold the business, they collected and deposited the
proceeds, paid the outstanding debts and taxes, and then deposited
the remaining $8,000.00 into their own personal checking account.
Thus, the evidence indicated that defendants received the profits
from the sale of the business. Third, both defendants testified as
to their status as partners in the instant case. Albert testified
that he was a “silent partner,” and Brenda testified she was a
“sleeper partner.” In sum, the evidence overwhelmingly establishes
that defendants were partners in the business and, therefore, the
trial court did not err in concluding that defendants are jointly
and severally liable, along with Ann, to plaintiff.
[2]Defendants' second and final argument is that the trial
court erred in determining that plaintiff is entitled to interest
on the principal amount due at the rate of 1.5% per month since
November of 1994. A creditor who extends customer credit on anopen-end credit account or similar plan may impose finance charges
“at a rate in the aggregate not to exceed one and one-half percent
(1½%) per month,” N.C.G.S. § 24-11 (1999), provided that the debtor
is given proper notice that the creditor intends to impose such
finance charges, Insurance Agency v. Noland, 30 N.C. App. 503, 506,
227 S.E.2d 169, 171 (1976). Proper notice requires the creditor to
notify the person to whom the credit is extended of all the details
and circumstances pertaining to the imposition of finance charges.
See id. Such notification is sufficient if it occurs at the time
the credit is initially extended, see id., or if it occurs at any
point prior to the time when the amounts on which the finance
charges are applied become due, see Hedgecock Builders Supply Co.
v. White, 92 N.C. App. 535, 544, 375 S.E.2d 164, 171 (1989). G.S.
§ 24-11 also requires that a bill for the balance due on an account
“must be mailed to the customer at least 14 days prior to the date
specified in the statement as being the date by which payment of
the new balance must be made in order to avoid the imposition of
any finance charge.” G.S. § 24-11(d).
According to the trial court's fifth finding of fact, “each
sales ticket and invoice that Harrell Oil delivered to Defendants
for payment contained the following provision: 'NOTE: Bookkeeping
and Service charges of 1½% per month will be added on all bills
past due, plus reasonable attorney's fees if legal assistance is
necessary to collect any past due balance.'” The evidence supports
this finding, and, in fact, defendants have not assigned error to
this finding. The evidence also showed that the first delivery ofgas by plaintiff occurred in February of 1993, while the first time
a finance charge was imposed was in June of 1993, and the
significant finance charges in question did not actually begin to
accrue until October of 1994. Thus, defendants had been receiving
statements on a regular basis, and invoices upon each gas delivery,
each containing a specific and detailed provision regarding the
imposition of finance charges, for approximately four months before
any finance charges were imposed, and for well over a year before
the significant finance charges in question began to be imposed.
Finally, Harrell testified that finance charges were never imposed
on unpaid amounts until at least one entire month after the charges
came due, and there was no evidence to contradict this testimony.
The trial court did not err in concluding that plaintiff is
entitled to interest on the amount due at the rate of 1.5% per
month since November of 1994.
Affirmed.
Judges GREENE and McCULLOUGH concur.
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