Renewal of judgment and effect of release – Michigan

Author: LegalEase Solutions

QUESTION PRESENTED

  1. Other than a formal renewal of judgment, how can a judgment be renewed or extended in Michigan?
  1. Does a settlement agreement and release by the first attorney in the partnership operate to settle and release all claims as to the other two attorneys?

SUMMARY

Brief facts:

Three attorneys constituted a partnership. In 2003, a judgment was entered against one of these attorneys, as partner of the partnership firm. Subsequently, the attorney/the first partner settled the judgment with the judgment holder by a release/settlement agreement. In 2005 or 2006 (facts unclear), the court ordered the attorneys to pay the balance of the judgment. However, no judgment was entered against the other two attorneys in their names. The judgment debtor commenced collection attempts in 2015 (exact date unknown), for the first time, to collect the balance of the judgment from the other two attorneys. However, the statute of limitation on the initial 2003 judgment is ten years.

The memo explores the possibility of a formal renewal of judgment and whether a release by one of the attorneys in a partnership firm operates to settle and release all claims as to the other partners of the firm.

SHORT ANSWER

In Michigan, filing of a complaint is not necessary to bring an action to renew a judgment within the meaning of MCL 600.5809(3). An assertion of a right through a judicial proceeding is sufficient to constitute an action to renew a judgment. Even an ex parte motion constitutes ‘an action’ for this purpose. In addition, court has held that partial payment within the period of limitations also operates to extent the period of limitation. In the instant case, the execution of the settlement agreement by making payments may extend the statute of limitation as it would be deemed as partial payment towards settling the claim.

Further, a contract made within the scope of a partner’s authority and made for the firm’s benefit is binding on the partnership even when executed in the name of one partner only. Therefore, if the settlement agreement is made for the firm, it is binding on the partnership even if it is made by the initial partner.

RESEARCH FINDINGS

  1. Other than a formal renewal of judgment, how can a judgment be renewed or extended in Michigan?

The statutory provision permitting renewal of judgments, such as the judgment previously entered in relation to this case, is found at MCL 600.5809(3).M.C.L. § 600.5809(3); M.S.A. § 27A.5809(3) provides a ten-year period of limitation for suit upon or renewal of a judgment previously obtained.” Schumacher v. Tidswell, 138 Mich. App. 708, 718, 360 N.W.2d 915, 918 (1984). In Schumacher v. Tidswell, the court noted that “[s]ince the Michigan judgment obtained in 1965 was never renewed, the underlying debt lacked enforceability as of October 19, 1975, unless the running of the period of limitation was tolled.” Id. (citing Brownell Realty v. Kelly, 103 Mich. App. 690, 701-702, 303 N.W.2d 871 (1981), lv. den. 413 Mich. 860 (1982)).

MCL 600.2903 provides:

Any judgment in tort heretofore or hereafter rendered and of record in any court of record in this state may be sued on and renewed, within the time and as provided by law, and such renewal judgment or judgments, when obtained, shall likewise be in tort and have the same attributes as the original tort judgment or judgments, with all the rights and remedies of tort judgments attaching thereto.

Van Reken v. Darden, Neef & Heitsch, 259 Mich. App. 454, 457-58, 674 N.W.2d 731, 734 (2003) (quoting MCL 600.2903).

MCL 600.5809(3) states:

Except as provided in subsection (4), the period of limitations is 10 years for an action founded upon a judgment or decree rendered in a court of record of this state … from the time of the rendition of the judgment or decree…. Within the applicable period of limitations prescribed by this subsection, an action may be brought upon the judgment or decree for a new judgment or decree. The new judgment or decree is subject to this subsection.

Id. at 458.

In Van Reken, the plaintiff brought an ex parte motion to renew a judgment within ten years of the entry of the judgment. The court rejected the defendants’ argument that a filing of a complaint was necessary to bring an “action” to renew a judgment within the meaning of MCL 600.5809(3). The Court of Appeals held that by “an action” in MCL 600.5809(3) the Legislature clearly intended actions beyond just civil complaints to extend or renew a judgment. Id. at 460. According to the court, “[t]he phrase ‘an action’ is broader than the phrase ‘civil action,’ which reveals the Legislature’s intent to allow actions beyond a civil complaint to extend a judgment pursuant to MCL 600.5809(3). Id. “Once the intention of the Legislature is discovered, it must prevail regardless of any conflicting rule of statutory construction.” Id. (citing Green Oak Twp. v. Munzel, 255 Mich.App. 235, 240, 661 N.W.2d 243 (2003)). Thus, the court considered the question whether plaintiff’s ex parte motion constitutes “an action” for the purposes of MCL 600.5809(3). According to the court, plaintiff’s ex parte motion, as an ex parte action, constitutes an action sufficient to extend the judgment.

To further clarify the issue, the Court of Appeals referred to CAM Constr. v. Lake Edgewood Condo. Ass’n, 465 Mich. 549, 640 N.W.2d 256 (2002). In this case the Michigan Supreme Court, quoted Black’s Law Dictionary (7th ed), and “used the following definition for ‘action’: “ ‘The process of doing something; conduct or behavior. 2. A thing done…. 3. A civil or criminal judicial proceeding.’” Van Reken, 259 Mich. App. at 460-61 (quoting CAM Constr. v. Lake Edgewood Condo. Ass’n, 465 Mich. at 554). “The Court, then, provided that ‘according to the plain meaning of these words, a claim consists of facts giving rise to a right asserted in a judicial proceeding, which is an action.” Id. (quoting CAM, supra at 555). “In other words, the action encompasses the claims asserted.’” Id. (quoting CAM, supra at 555). “Common words must be understood to have their everyday, plain meaning.” Id. (citing CAM, supra at 554). The Court observed that “[a]pplying the plain meaning of ‘an action’ to this matter, plaintiff’s ex parte motion was ‘doing something’ and was asserting a right in a judicial proceeding, albeit ex parte.” Id. (citing CAM, supra at 554–555; quoting Black’s Law Dictionary (7th ed)).

Thus the court found that “plaintiff’s ex parte motion constituted an assertion of a right through a judicial proceeding and, thus, was sufficient to be considered ‘an action’ under MCL 600.5809(3).” Id. at 461. The ex parte motion and “an order on that motion within the applicable time period provided to renew the judgment.” Id.

In Wayne Cnty. Soc. Servs. Dir. ex rel. Yates v. Yates, 261 Mich. App. 152, 681 N.W.2d 5 (2004), the sole question considered by the Court of Appeals was whether the period of limitations was extended by payments made before the limitations period ran. According to the court, the partial payment within the period of limitations-the income withholding payments made during the 1990s-operated to extend it. Id. at 155. Therefore, “‘any payment on a debt, whether before or after the running of the period of limitations, acts to extend the limitations period.’” Arkin Distrib. Co. v. Jones, 288 Mich. App. 185, 188, 792 N.W.2d 772, 775 (2010) (Wayne Co. Social Servs. Dir. v. Yates, 261 Mich.App. 152, 156, 681 N.W.2d 5 (2004)). The court referred to Yeiter v. Knights of St. Casimir Aid Society, 461 Mich. 493, 607 N.W.2d 68 (2000), in which “the Supreme Court held that partial payments on a debt, ‘some of which were within the limitation period,’ constituted a renewal of the promise to pay the amount owed.” Wayne Cnty. Soc. Servs. Dir. ex rel. Yates v. Yates, 261 Mich. App. 152, 155, 681 N.W.2d 5, 7 (2004). “In Yeiter, the debt was a series of loans that the defendant partially repaid.” Id. 155-56. “However, when the plaintiff sued for the remainder, the defendant claimed that the statute of limitations barred recovery.” Id.

In rejecting the defendant’s statute of limitations argument, the Court pointed out that some of the payments were made less than six years before the filing of the complaint, but were unaccompanied by any declaration or circumstance that would rebut the presumption that they were ‘an acknowledgment of the full obligation.’

Id. at 155-56 (quoting Yeiter, 461 Mich. at 500).

“In discussing the effect of partial payments on the statute of limitations issue, the Court cited Miner v. Lorman, 56 Mich. 212, 216, 22 N.W. 265 (1885), for the proposition that such payment implies a renewal as of the date of the payment of the promise to pay.” Id.  “More specifically, the Court held: “‘[A] partial payment restarts the running of the limitation period unless it is accompanied by a declaration or circumstance that rebuts the implication that the debtor by partial payment admits the full obligation.’” Id. (quoting Yeiter, supra at 497). Although Yeiter did not involve a child support arrearage as in Wayne Cnty., the court adopted its holding that “any payment on a debt, whether before or after the running of the period of limitations, acts to extend the limitations period.” Id.

  1. Does a settlement agreement and release by the first attorney in the partnership operate to settle and release all claims as to the other two attorneys?

 In Michigan, the filing of a complaint is not necessary to bring an action to renew a judgment within the meaning of MCL 600.5809(3). An assertion of a right through a judicial proceeding is sufficient to constitute an action to renew a judgment. Even an ex parte motion constitutes ‘an action’ for the purposes of MCL 600.5809(3). In addition, partial payment within the period of limitations operated to extent the period of limitation. In the instant case, it is understood that the first partner had made payments and executed the settlement agreement. Here we are not sure of the date of the settlement agreement. If the settlement agreement was made after 2003, it may extend the period of limitation from the date of execution of the settlement agreement.

“The UPA defines a partnership as ‘an association of 2 or more persons … to carry on as co-owners a business for profit[.]’” Urbain v. Beierling, 301 Mich. App. 114, 122, 835 N.W.2d 455, 459 (2013) (quoting MCL 449.6). “The gist of the partnership relation is mutual agency and joint liability.” Penner v. De Nike, 288 Mich. 488, 490, 285 N.W. 33, 33 (1939). “It is said that because of this mutual agency existing between copartners, they stand in a fiduciary relation to each other.” Id. “Copartners are accountable between themselves as fiduciaries[.]” Id. (citing 2 Comp.Laws 1929, § 9861 (Stat.Ann. § 20.21)).

M.C.L. § 449.15; M.S.A. § 20.15 provides: “All partners are liable: ‘(a) Jointly and severally for everything chargeable to the partnership under sections 13 and 14; ‘(b) Jointly for all other debts and obligations of the partnership; but any partner may enter into a separate obligation to perform a partnership contract.’” Yenglin v. Mazur, 121 Mich. App. 218, 225, 328 N.W.2d 624, 627-28 (1982) (quoting M.C.L.A. 449.15).

  1. General partnership.

“[A]n agent to a general partnership owes his fiduciary duties to the partnership.” Life Care Centers of Am., Inc. v. Charles Town Associates Ltd. P’ship, 79 F.3d 496, 502 (6th Cir. 1996) (citing 68 C.J.S. PARTNERSHIPS § 150). “[T]his concept would suggest that the partnership is the principal of the agent.” Id. “However, there is also authority which suggests that the agent’s principal in the partnership context is each partner.” Id. (citing Restatement (Second) of Agency § 20, comment e (1957) (“A person acting for an unincorporated group of persons may be an agent either of all members of the group or certain of them. If the one who authorized him to act for all has also been authorized by all of the members or certain of them to appoint him, he is the agent of such persons. Thus, one appointed by a member of a partnership who has been authorized to act to the partnership is the agent of all the partners”).Therefore, it is clear that an agent to a general partnership owes a fiduciary duty to the partnership and the partners.” Id.

“The reason why agents of partnerships owe individual partners a fiduciary duty lies in the distinct nature of the partnership as a business organization.” Id. at 502-03. “Partnerships, unlike corporations, do not have a separate existence from the partners who form the partnership.” Id. (citing Battista v. Lebanon Trotting Ass’n, 538 F.2d 111, 116 (6th Cir.1976) (“A corporation is generally recognized as a separate legal entity from its shareholders, officers and directors, but a partnership is not so considered”). “Instead, partnerships have traditionally existed by virtue of their partners’ existence.” Id. (citing Uniform Partnership Act § 4 (1914)).

  1. Limited partnership.

“Limited partnerships are business organizations in which the limited partners are precluded by law from participating in the operation of the partnership.” Life Care Centers of Am., Inc., 79 F.3d at 503 (citing Revised Uniform Limited Partnership Act (1975)). “In exchange for their abstention from participating in the management of the business, the law provides limited investors with limited liability for the debts of the partnership.” Id. “The operations of the business of the limited partnership are left to the general partner, who, unlike the limited partners, is personally liable for the operation of the partnership.” Id. “A general partner accepts this unlimited form of liability as a trade-off for the limited partners’ investment in the partnership’s business.” Id. “Thus, in a typical situation, a general partner acts much like the management of a corporation, while the involvement of the limited partners is comparable to the shareholders of a corporation.” Id. “In fact, the general partner has the primary responsibility of making the business successful in order to provide a satisfactory return for the partnership, including its limited partners.” Id. “By contrast, the role of the limited partners is very passive, in that it consists of an investment in the partnership with the expectation of obtaining a profitable return.” Id. (citing Klebanow v. New York Produce Exchange, 344 F.2d 294, 297 (2nd Cir.1965) (Friendly, J.) (“[A] limited partner is more like a shareholder, often expecting a share of the profits, subordinated to general creditors, having some control over direction of the enterprise by his veto on the admission of new partners, and able to examine books and have on demand true and full information of all things affecting the partnership….”).

  1. Suits against co-partnership.

“[I]n suits at law, by or against a copartnership, all the partners must be named as plaintiffs or defendants, as the case may be.” Kalamazoo Trust Co. v. Merrill, 159 Mich. 649, 653-54, 124 N.W. 597, 599 (1910). “[A]t the common law, and in all states where the matter is not controlled by statute, the liability of partners is joint and not several, and therefore that a partnership debt cannot be used as a set-off against the claim of a partner individually.” Stewart v. Terwilliger, 177 Mich. 313, 315, 143 N.W. 17, 18 (1913).

  1. Contract executed in the name of one partner.

The Uniform Partnership Act, M.C.L. § 449.1 et seq.; M.S.A. § 20.1 et seq., provides in pertinent part:

Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority. (M.C.L. § 449.9(1); M.S.A. § 20.9(1).

Omnicom of Michigan v. Giannetti Inv. Co., 221 Mich. App. 341, 344, 561 N.W.2d 138, 139 (1997).

“Michigan courts have not addressed the interpretation of M.C.L. § 449.9(1); M.S.A. § 20.9(1).[1]Id. at 345. However, the Michigan Court of Appeals discussed the interpretation of other states that have enacted the Uniform Partnership Act on this issue. Per the Court, “[t]he North Carolina Court of Appeals has held that a contract executed in the name of a partner is binding if the other contracting party can show that the partner was acting on behalf of the partnership or that the partnership ratified the individual’s act.” Id. at 345-46 (citing Messer v. Laurel Hill Associates, 93 N.C.App. 439, 444–445, 378 S.E.2d 220 (1989)). “The Texas Court of Appeals adopted a still broader interpretation when it held that a contract made within the scope of a partner’s authority and made for the firm’s benefit is binding on the partnership even when executed in the name of one partner only.” Id. (citing Corinth Joint Venture v. Lomas & Nettleton Financial Corp., 667 S.W.2d 593, 595 (Tex.App.1984)). Accordingly, the Court of Appeals adopted the broad interpretation of M.C.L. § 449.9(1); M.S.A. § 20.9(1) in Omnicom of Michigan v. Giannetti Inv. Co. to avoid an absurd result of finding that plaintiff had no contract with defendant when it was evident that plaintiff did not intend to contract individually, but rather with the entity.

Conclusion

The nature of partnership is a major aspect in determining the liability of its partners. However, in the instant case, a contract (or a settlement agreement) made within the scope of the first attorney’s authority as the principal partner, and made for the partnership firm’s benefit, is binding on the partnership even when executed in the name of one partner only. Therefore, it would operate to settle and release all claims as to the other two attorneys as well.

[1] Partner agent of partnership as to partnership business.