### IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE May 9, 2001 Sess

ion PETER KUDEREWSKI, ET AL 

### . v. ESTATE OF HOOVER HOBBS , ET AL 

### .

Appeal from the Chancery Court for Sullivan County No. 27731-B Richard E. Ladd, Chancellor, by Interchange

FILED JULY 30, 2001
No. E2000-02515-COA-R3-CV

Peter Kuderewski and David Sanchez (“Plaintiffs”) sued Hoover Hobbs (“Defendant”), alleging they had animplied partnership during the beginning phases of a now-d

efunct plan to ope

n a family fun center in Kingsport, T ennes see (“Project” ). Plaintiff arg

ues the parties ha

d agreed to use property (“Pro pert y”) already owne d by Defendant for the Project. A portion of the Property was later sold, and Plaintiffs sought to recover 50% o

f the sale price

pursuant to

their claimed respective partnership

interests. Alternatively, Plaintiffs claim they were entitled to recover, under a theory of unjust enrichment money spent toward i mproving D efendant’s Property in anticipation of the Project. After a bench trial, the Trial Court denied

both of Plaintiffs’ claims. Pl aintiffs a ppeal. We affirm.

Tenn. R. App. P. 3 Appe al as of Right; Judgme

nt of the Circuit Cour

t Affirmed.

D. M ICHAEL S WINEY , J., delivered the opinion of the court, in which H ERSCHEL P. F RANKS , J. and C HARLES D

. S USANO , J R ., J., joined.
Kenneth R. Worley, Kingsport, Tenn essee, for the Appellants, Pe ter Kuder ewski and David San

chez.
David S. Haynes, Bristol, Tennessee, for the Appellees, Estate of Hoover Ho bbs , and its coadm ini str ato rs, San dra H obb s Ma nn a nd Li sa M ont gome ry.

OPINION Background1 Before this mat ter went to t

rial, Hobbs died, a

nd this act

ion was re vived by Pl

ainti ffs ag ainst the est

ate of Hoover Hobbs and its co-administrators, Sandra Ho bbs Mann and Lisa Mo ntgomery. For simplicity’s sa k e, we refer to Hoo ver Hob bs as the De fendant.

2 Although Plaintiff Kuderewsk i testified that two of his corporate charters were am ended to refl ect na me change s for the Project, the record contains only one Articl es of Amendment to Charter of Incorporation for o ne o f Plaintif f Kuderewski’s

existing corporations whi

ch covers Fasinat

ion Station,

Inc. -2- In 1994, Plaintiff Kuderewski and Defendant discussed building a family fun cente r composedof activities like putt-putt golf, go- cart race track, arcade games, and a deli on the Pro pert y. It is disputed whose idea the Project was originally. The family f un center was to be locatedon Defendant’s Pr operty in Kingsport, Tennessee, which Defendant purchased for $250,000 in 1993. The Property contained two structures, inclu

ding an old

Elk’s building ("Elk’s Building"), andapproximately

8.5 acres. 1 Thereafter, Kuderewski contacted his nephew, Sanch

ez, who was in the vending machine

business in New Yor

k, and asked him to p

articipate in

and contribute

money toward the Projec

t.
The exact chronolog

y of events

is somewhat unclear from the record. During August 1994, accor ding to P laintiffs, the parties agreed to make the following contributions: Defendant would contribute the Property; Plaintiff Kuderewski, already the owner

of anothe r restaurant business, would contribute h is la b or and expertise; a

nd Plaintiff Sanche

z would make a cash contribution in the amount of $250,000.

Plaintiffs contend the parties agree d to form a partners

hip in which Defen

dant would have a 50% interest and each Plaintiff would have a 25% interest. Around this time, Defendant’s then-fiance, Gwen Hobbs, who did bookkeeping for the Project, prepared a document entitled “LIMITED

PART NERSHIP” (“Limited Partnershi p Document”) whic h is consistent with Pl

aintiffs’ contention regarding e

ach party’ s relative partne rship interest. Th

e Limited Partn

ership Document, however, is n eit her d ate d no r si gned by an y of th e parties. Moreo ver, the Property

remained in Defendant’s na

me throughout the

parties’ dealing

s.
On August 24, 1994, the parties, with the assistan ce o f an attorney, amended the corporate charter of one o

f Plaintiff Kuder

ewski’s exist

i ng corporations to rename it Fasination Station, Inc. 2 The parties however, did not fol low a ny corporate formalities such as issuing stock
or naming a board o

f directors.Defendant filed an Application for Employer Identification Number,
a Form SS-4, for Fasination Station, Inc., in which he listed himself as the “principal officer, general partner, grantor, owner or trustor” and indicated that the business was a corporation. Thereafter, the parties opened a checking account with a local bank for Fasination Station, I nc.
It appears from the record that during August and September 199 4, th e parties traveled to Florida

to visit other family

fun centers,

attended a games convention in Las Vegas, and3 Accord ing to Plaintiff San chez’s trial t estimony, Def

endant arrived i

n Las Vegas with hi

s then-f iancé, Gwen Hobb s, but immed iately got on an other plane to leave Las Vegas d ue to an argu ment he had with Gwen H obbs.

4 It is unclear from the record on appe al how San dra Ho bbs M ann obtain ed from D efendant p rior to his dea th in 1998 the power to sell the Pro perty. -3- attendedauctions in Tennessee and Texas where they purchased game and resta

urant equipment. 3 The record shows that this equipment was purchased using Sanchez’scash and checks drawn on the account of Fasination Station, Inc., and another account belonging to another business owne d by Defendant. Kuderewski testified that the parties had pu

rchased approxima

tely seven tractor-trailer loads of equipment

f or the Project. Th

e parties also be

gan making impr

ovements to the Prop

erty using Sanchez’s money. Plaintiffs claim that Sanchez contributed $220,000 toward the Project, a portion of which was cash or cashier’s checks.

At Plaintiff Kuderewski’s insistence, the parties obtained the services of an architect to determine the e

stimated cost of imp

roving the Prope

rty for the Project. Kuderewski testified at trial that he learned from

his past restaurant

business experience to obtain a forecast of cost before entering into a project. The pr oof in the rec ord shows that Defendant estimated that the Project would cost approximately $370,000. The architect' s report received by the parties in December 1994, however, put the c

ost at no less

than $1.2 million. The parties stopped the Project due to this unexpectedly high cost estimate.

In late December 1994, Defendant presented a document entitled “ Agreemen t” to Plaintiff Kuderewski in whi

ch Defendant re

ferred to the Pro

perty as his

but also acknowledged the debt owed to Sanchez for improvement s made to hi s Property. Defendant did not, however, acknowledge the existence of a partnership or that he owed any money to Plaintiff Sanchez for the purchase of equipment. The

Agreement sta

tes that it was the intent of

the parties “to incorporate a family fun center known as Fasination Station, Inc. . . . ,” on Defendant’s Property. Defendant and Plaintiff Kuderewski signed the Agreement, but Plaintiff Sanchez did not.

After the parties abandoned the Project, Plaintiff Sanchezrecovered $7,500from the Project’s assets and $19,000 from the sale of equipment. At trial, Plaintiff Kuderewski testified he
was unable to sell all

of the equipment that was purchased for the Project and has had to store it since the parties abandoned the Project in late 1994.

One of the co-adminis trators of Defendant’s estate, Sandra Hobbs Mann, sold the Elk’s Building to

a third party, Williams Electric, in late 1997 for $250,000. Mann testified at trial that Will iams E lectr ic gut ted an d comp letel y remod eled t he Elk ’s Bui ldin g. In Novem ber 1998, Defendant died. 4

Plaintiffs claim that pursuant to the purported partnership agreement, they eac h are entitled to receive 25%, or 50% total, of the proceeds from the sale of the Elk’s Building and th e rema ining par tnership property. Plaintiffs alternatively contend tha t they are entitled to recovery under the theory of unjust enrichment for the amount of improvements they made to t he P rop ert y.-4-

Defendant

filed a Counterclaim for

damages result

ing from Plaintiff

s’ failure to promptly remove the equipment from Defendant’s Property and from another building that De fendant owned.
After a bench trial, the

Trial Court held tha

t the parties did not have a partnership, either express or implied, and that even if a partnersh

ip existed, the partnership did not have any assets. The Trial Court, when r endering its

opinion from the bench, instead held that the parties were “going to have a corporation . . . .” With respect to Plaintiffs' unjust enrichment claim, the Trial Courtheld that although there was unjust enrichment to Def endant, there was no proof of any enhancement

of the value of the

Property or any other proof of damages. The Trial Court awa rded nominal damages in the amount of $1 for Plaintiffs’ unjust enrichment claim. The Trial Court also held that the remaining equipment belonged to Plaintiff Sanchez. Defendant’s Counterc lai m was dismissed by th

e Trial Court. Plain

tiffs appeal. We a

ffirm.
Discussion
Plaintiffs address the follo wing issues on app

eal: 1) the Trial C

ourt erred in determining that there was no partnership between the parties because the proof shows that the parties’ actions support a finding that a partnership existed; and 2) the Trial Court erred

in denying Plaintiffs’ claim

for unjust enrichment

since the Elk’s Building was sold in 1997 for the same price that Defendant paid for the entire Property in 1993. Defendant ra ises no issues on appeal. “[W]hat will constitute a partnership is a matter of law, but whether a partnershi p exists under conflicting evidence is one of fact.” Wyatt v. Brown, 281 S.W.2d 64, 68 (Tenn. Ct. App. 1955); Messer Griesheim

Indus., Inc. v. Cryotech of Kingsport, Inc. , 45 S.W. 3d 588, 605 (T enn. Ct. App. 2001). Accordingly, since we are asked by Plaintiffs to review the Trial Court’s determination that there was no par

tn ership between the par ties, our review i

s de novo upon the record, accompanied

by a presumption of

correctness of the findings of fact of the Trial Court, unless the preponderance

of the evi dence is otherwise. Tenn. Rule App. P. 13(d); Alexander v. Inman, 974 S.W.2d 689, 692 (Tenn. 1998). TheTrial Court’s conclusions of law are subject to a de novo review with no presumption of correctness. Ganzevoort v. Russell, 949 S.W.2d 293, 296 (Tenn. 1997).

The Uniform

Partnership Act defines a partnership as “an association of two (2) or more persons to carry on as coowners a business for profit . . . .” Tenn. Code Ann. § 61-1-105(a). A partnership

agreement does not have

to be written but can be implied. In re Taylor & Assoc., L.P. , 249 B.R. 474, 479 (E.D. Tenn. 1998). General principles of contract l aw apply to p artnership agreements

since to be

“‘an enf orceable contract [, ] i t must, among other

elements, result f

rom a meeting of the minds in mutual a ssent to terms , must be based upon sufficient consideration, and must be sufficiently de

finite .’” Id. (quoting Wheeler v. Haley , No. 91-267-I, 1993 WL 398489 , a t * 5 (Tenn. Ct . App. Oct. 1, 1993)) (a lteration s in origi nal). When a p artnership agreement is not written, the proponent of the partnership must prove the existence of the pa rt nership by clear and convincing evidence. Id

. ; see also Wheeler v. Haley , 1993 WL 398489, at * 4 (holding that “‘the [triers] of fact are required to c arefully scrutinize and weigh the evidence, and should be satisfied of its existence by clear and conv incing proo f’”) (quoti ng Johnson v. Graves , 15 Tenn.App. 466, 481 (1933)).-5- When as certaining whether a partnership existed, courts must determine the inten tio n of the parties “and

the controlling i

ntention in this

regard is that ascertainable from the acts of the parties.” Bass v. Bass , 814 S.W.2d 3 8, 4 1 (Tenn. 1991). Our Supreme Court has provided the following explanation regarding formation of a partnership:

In determining whether one is a partner, no one fact or circumstance may be pointedto as a conclusive test, but each case must be decided upon consideration of all relevant facts, actions, and conduct of the parties. * * * * * * [I]t is not essential that the parties actually intend to become partners

. . . . The existence of

a partnership is n

ot a question of the

parties’ undisclosedintention or even the termino logy they use to describe their relationship, nor is it necessary that the parties have an understanding o

f the legal eff

ect of their

acts . . . . It is t

he intent to do the things which constitute a partnership that determines whether individuals are partners, regardless if it is their purpose to create or avoid the re lation ship . . . . Stated another way, the existence of a partnership

may be implied from the circumstances where it appears that the individuals involved have entered in to a business relatio

nship for profit, combining their property, labor, skill, experience, o r mon ey.
Id. (citations omitted).

Plaintiffs contend there wa s a partnership. D

efendant conte

nds there was o

nly an agreement

to investigate

the feasability

of the Project, and to proceed as a corporation if the Project
was feasible. The proof in the record does not preponderate against the Trial Court’s determination tha t no partnership existed. Kuderewski’s testimony establishes that whether the Project was actually going to get off of the ground was contingent

upon the architect’s report. See Thompson, Ventulett, Stainback & Assoc., Inc. v. The Bob EvansGroup, Inc. , 952 F.2d 403, 1992 WL 1680, at * 2-3 (6 th Cir. Jan. 7, 1992) (per curiam) (finding that under Tennessee law,the parties did not have
a partnership or a joint venture since the project at issue was contingent upon finan cing d espite plaintiff having performed a substantial amount of work toward the project). We find no error with the Trial Court’s determination that the parties had no partnership but, instead, intended to operate, if at all, as a corporation. The proof in the record shows that the Project was to be operated as a corporation if, and only if, the Project was feasible.

We understandPlaintiff Sanchez’s frustration expressed at trial regarding the loss of his money for a project which never came t o fruition and for the purchase of equipment that he characterized

as “junk.” It is true that the parties improved the Property and pur chased equipment using funds of Plaintiff Sanchez. This proof, neverthe less, d oes not satisfy Plaintiffs’ burden of showing by clear and convincing evidence that a partnership existed. Instead, the proof in the record is that the parties had a corp orate entit y ready for use if the Project was feasible. In fact, Plaintiff-6-

Kuderewski testified at trial that he insisted upon obtaining an estimate from an archite

ct because experience taught him first to determine thecost of a project, to look before leaping so to s peak. In addition, the parties had opened a checking account

in the corporation’s name and used the checking account to purchase equipment. It is also noteworthy that Defende nt never transferred the

Pro pert y. At most, ac cording to the proof in the record, the parties’ conduct shows they had
a corporation to use for

the Project if

it went forward. We find no error by the Trial Court on th

is issue. We hold that the evidence in the reco rd on appeal does not preponderate against the Trial Court’s determination that Plaintiffs failed to satisfy their burden of showing that the parties had an implied partnership. In fact, we find that the evidence preponderate s in favor of the Trial Court’s determination.
We nex t turn to Plaintiffs’ claim of unjust enr ichment. To establ

ish this quasi

contractual theory in which courts will “impose a contractual obligation w here o ne does not exist . . .,” there must be pro of of the fol lowing:

(1) there isno contract betw een the parties o

r a contract has

become unenforceable or invalid; and (2) the defendant wi

ll be unjustly

enriched absent a quasi-contractual obligation.
Whitehaven

Cmty. Baptist Church v. Holloway , 973 S.W.2d 592, 596 (Tenn. 1998). In addition, a plaintiff’s recovery

for unjust enrich

ment for improveme

nts the Plaintiff made to another person’s landis the “amount by which the improvements enhance the value of the land.” Simpson v. Davis , No. W199 9-00689-COA-R3- CV, 2000 WL 13466

09, at * 4 (Tenn. Ct.

App. Sept. 15, 2000) ; se e also Simpson v. Bicente

nnial Volunteers, Inc. , No. 01A01-9809-CV -00493,1999 WL 4

30497, at * 2 (Tenn. Ct. App. June 29, 1999) (holding that “[t]he amount of recovery [in an unjust enrichment claim] is the value of the benefit conferred, not the cost to the furnisher”). Co

urts will not award a recovery for unjust enrichment if the plaintiff does not submit proof of the “reasonable value of the goods or services” provided. See Doe v. HCA Health Serv. of Tennessee, Inc. , 46 S.W.3d 191, 198 (Tenn. 2001).
Plaintiffs contend that Defendant was u

njustly enriched by the improvements made to his Property, improvements funded by Plaintiff Sanchez. Plaintiffs point to th e 1997 sale

of the Elk’s Building by Sandra Mann for the same price that Defendant p aid for the entire

Property in 1993, $250,000, as proof that the value of t he Proper ty incr eased due to the impr

ovements.

We disagree.
The proof in the record shows that any improvements made to the Elk’s Building by Plaintiffs did not enhance the value of the building since the p urchaser of t he Elk’s Bui lding, Williams Electric, completely gutted and remodeled the bu ilding. As discussed, the measure of damages in this unjust enrichment claim is the amount the Property’s value was en hanced by the improvements,

not the amount of mon

ey that Plain

ti ff Sanchez spent on the improvements. See Simpson v. Davis , 2000 WL 1346609, at * 4. The Trial Court found that Plaintiffs failed to present-7-

sufficient evidence to show a

ny increas

e in the value of th

e Property r

esulting from t

hes e improvements.After a complete review of the record, we hold that the evidence does not preponderate

against the Tria

l Court’s finding t

hat Plaintiffs fai

l ed to p rove the improvem ents enhanced the value of the Property.
Conclusion

The judgment of the Trial Court is affirmed and this cause is remanded to the Trial Courtfor such further proceedings as may be required, if any, consistent with this Opinion, and for collection of the costs below . The costs on appe al are assess

ed aga inst the Appellants, Peter Kud erew ski and Dav id S anch ez, and the ir s uret y.

___________________________________ D. MICHAEL SWINEY, JUDGE