In re: ANTHONY STEVEN BROWN v. Village Green Management Company

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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2003 FED App. 0315P (6th Cir.)
File Name: 03a0315p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
No. 01-1015
In re: ANTHONY STEVEN
BROWN,
Debtor.
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EASTLAND PARTNERS
LIMITED PARTNERS, et al.,
Plaintiffs-Appellees,
v.
VILLAGE GREEN
MANAGEMENT COMPANY,
Defendant-Appellant,
ANTHONY STEVEN BROWN, et
al.,
Defendants.
No. 01-2500
In re: ANTHONY STEVEN
BROWN,
Debtor.
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Nos. 01-1015/2500
2 In re Brown Nos. 01-1015/2500
EASTLAND PARTNERS
LIMITED PARTNERS,
Plaintiff-Appellant,
v.
VILLAGE GREEN
MANAGEMENT COMPANY,
Defendant-Appellee,
ANTHONY STEVEN BROWN, et
al.,
Defendants.
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N
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 97-70866—Bernard A. Friedman, District Judge.
Argued: October 18, 2002
Decided and Filed: September 3, 2003
Before: BOGGS, SUHRHEINRICH, and CLAY, Circuit
Judges.
_________________
COUNSEL
ARGUED: Stephen F. Wasinger, WASINGER, KICKHAM
& HANLEY, Royal Oak, Michigan, Felice V. Iafrate,
PUZZOULI & HRIBAR, Clinton Township, Michigan, for
Defendants. David R. Parker, CHARFOOS &
CHRISTENSEN, Detroit, Michigan, Mayer Morganroth,
MORGANROTH & MORGANROTH, Southfield, Michigan,

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Nos. 01-1015/2500 In re Brown 3
for Plaintiffs. ON BRIEF: Stephen F. Wasinger, Judith
Sawicki, WASINGER, KICKHAM & HANLEY, Royal Oak,
Michigan, Felice V. Iafrate, PUZZOULI & HRIBAR, Clinton
Township, Michigan, for Defendants. David R. Parker,
CHARFOOS & CHRISTENSEN, Detroit, Michigan, Mayer
Morganroth, Jeffrey B. Morganroth, Jason R. Hirsch,
MORGANROTH & MORGANROTH, Southfield, Michigan,
for Plaintiffs.
_________________
OPINION
_________________
CLAY, Circuit Judge. In Case No. 01-1015, Defendant,
Village Green Management Company (“Village Green”),
appeals from an order entered by the district court on
November 17, 2000, denying Village Green’s motion for
judgment notwithstanding the verdict or for new trial,
following a jury verdict in favor of Plaintiffs, Eastland
Partners Limited Partners, et al. (collectively “Eastland”), and
against Village Green, on Eastland’s breach of contract claim
filed against Village Green. In Case No. 01-2500, Eastland
appeals from the district court’s order entered on October 3,
2001, denying Eastland’s motion for rehearing of an order
declaring Anthony Steven Brown sole managing partner of
Eastland. The two cases have been consolidated on appeal,
and for the reasons set forth below, we AFFIRM the district
court’s order in Case No. 01-1015; and REVERSE the
district court’s order in Case No. 01-2500.
BACKGROUND
Procedural History
Eastland originally filed suit against Village Green and
Brown seeking to recover damages allegedly sustained as a
result of Village Green disbursing monies from Eastland’s
reserve bank accounts to Brown without consent of Brown’s
co-general partner, Eric Lutz. Thereafter, Brown filed a
4 In re Brown Nos. 01-1015/2500
petition for Chapter 7 bankruptcy, and Eastland’s complaint
was refiled as an adversary proceeding. Specifially, Eastland
brought the adversary proceeding against Brown, Brown’s
two companies, Anthony S. Brown Development Company
and ASB Asset Management Company (“ASB”), and Village
Green for breach of contract through negligence, fraud,
misrepresentation, defalcation and breach of fiduciary duty,
essentially arguing that Brown and his two companies
converted funds that were to be used to pay property taxes
and other reserves on behalf of Eastland, thereby causing
Eastland’s apartment complex to be lost in foreclosure to the
mortgage holder. Village Green moved to dismiss the
complaint on the ground that Eastland did not have standing
to commence the lawsuit since Eastland’s sole managing
general partner, JAM Associates (“JAM”)—a co-partnership
comprised of partners Brown and Lutz— had not authorized
the lawsuit. The district court issued an order on October 10,
1997, denying Village Green’s motion to dismiss.
Village Green moved for summary judgment of the tort
claims that Eastland had filed against it. By order entered on
December 7, 1998, the district court dismissed Eastland’s tort
claims against Village Green. Eastland then filed a motion
for clarification, asking whether the district court intended to
dismiss its claims for breach of fiduciary duty and
defalcation. The district court issued an order on January 20,
1999, granting the motion. In its order, the district court
stated that all of Eastland’s tort claims, including those for
breach of fiduciary duty and defalcation, filed against Village
Green were dismissed, and thereby allowed the matter to
proceed against Village Green solely on a breach of contract
claim, but against Brown and his companies on the various
tort claims as well.
A jury trial was held in January of 2000, but ended in a
mistrial when, after deliberating for five days, the jury could
not render a verdict. A second jury trial was held in July of
2000, after which the jury found in favor of Brown and his
companies on all claims, but against Village Green on

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Nos. 01-1015/2500 In re Brown 5
Eastland’s breach of contract claim and thereby awarded
Eastland $250,000 in damages. The district court entered
judgment against Village Green on August 22, 2000 in
accordance with the jury verdict. Village Green then filed a
motion for judgment notwithstanding the verdict or for new
trial. The district court issued an order on November 17,
2000, denying the motion, and it is from the district court’s
order denying Village Green’s motion that Village Green
now appeals in Case No. 01-1015.
Following the jury verdict, Brown filed a motion for
attorneys’ fees and costs. The district court issued an order
on November 17, 2000, granting the motion for costs, but
ordered the parties to brief the issue of whether Brown could
recover attorneys’ fees under Eastland’s Limited Partnership
Agreement (“the Partnership Agreement”). Eastland asserted
in its brief to the district court that under the Partnership
Agreement, only JAM could seek indemnity for attorneys’
fees. Brown asserted in his brief that Eastland’s attorneys
lacked authority to represent Eastland, citing his August 3,
2000 letter notifying the attorneys that they had not been
properly authorized by Eastland to act and their right to act
had been terminated. Brown also asserted that, pursuant to an
agreement with Lutz, he had been the sole managing partner
of JAM, and because JAM acted through him, he was entitled
to indemnity for attorneys’ fees. The district court issued an
order on January 19, 2001, denying Brown’s motion for
attorneys’ fees.
Village Green had also filed a motion requesting that the
district court declare Brown the sole managing partner of
Eastland. On April 18, 2001, the district court orally granted
the motion, and further ordered that the dissolution of
Eastland be supervised and conducted by Brown, although
neither Brown nor Village Green had requested that Eastland
be dissolved. The district court memorialized its ruling on
April 19, 2001.
6 In re Brown Nos. 01-1015/2500
Eastland filed a motion for rehearing of the April 19, 2001
order on the ground that the district court had erroneously
ordered the dissolution of Eastland because neither Brown nor
Village Green had requested such relief, and because in
ordering Eastland’s dissolution the district court erroneously
relied upon a Michigan statute that authorizes a court-ordered
dissolution of a partnership. The district court issued an order
on October 3, 2001, denying Eastland’s motion, and it is from
this order that Eastland now appeals in Case No. 01-2500.
Facts
Eastland is a Michigan limited partnership created in 1984.
As noted, Eastland’s sole general partner is JAM, a Michigan
co-partnership whose two co-partners are Brown and Lutz.
Eastland’s sole limited partner is Eastland Properties.
Eastland Properties’ limited partners are a number of
individuals and entities some of whom were individual
plaintiffs in this case.
Eastland was the owner of an apartment complex known as
Eastland Village Apartments (the “Property”). Eastland
Properties, the sole limited partner of Eastland, entered into
a “Management Agreement” (“the Agreement”) with Village
Green on May 9, 1990 to manage the Property. The
Agreement listed Eastland Properties Limited Partnership as
the “owner” and Village Green Management Company as the
“agent,” and provided a “List of Provisions” for which
Village Green was responsible such as “Disbursements from
Operating (and/or) Reserve Account(s)”and “Financial and
Other Reporting.” (J.A. at 1415.) Also on May 9, 1990, ASB
entered into a management subcontract agreement with
Village Green.
The Property did not perform as projected and Eastland
began experiencing cash flow difficulties in the early 1990’s.
In March of 1991, Eastland filed Chapter 11 bankruptcy.
Eastland did not emerge from bankruptcy until November of
1992.

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Nos. 01-1015/2500 In re Brown 7
After emerging from bankruptcy, Brown, through ASB,
assumed principal responsibility for the on-site daily
management of the Property. Village Green’s role changed
primarily to accounting, reporting, and assisting ASB as
directed by either Brown or ASB, in such matters as
establishing various reserve bank accounts for Eastland. The
owner of these accounts was listed as Eastland Properties
Limited Partnership. Village Green issued a monthly “Cash
Requirement” report to Eastland, in which was listed the cash
available in the accounts, the fixed expenses which needed to
be funded, and an itemization of accounts payable. Each
month Village Green received and followed specific
instructions from Eastland as to which creditors should be
paid based on the available cash. Village Green also issued
a monthly report to Eastland called a “Monthly Operations
Review” which included several subparts including a
“variance report.” The variance report listed each of the
accounts, addressed the reason for any variance between
actual and budgeted amounts, and provided the amount of the
variance. Lutz reviewed the monthly reports prepared by
Village Green and approved the budget.
Beginning in January of 1993, Brown requested that
Village Green disburse money from the accounts it held for
Eastland to him. The requests were made in writing primarily
by Robert Stillings, an officer of ASB. A significant number
of these requests stated that the money was for a “replacement
reserve” account. Village Green honored these requests and
disclosed the disbursements in the Monthly Operations
Review report. At the second jury trial, Terry Schwartz, the
CEO of Village Green, testified that although Village Green
understood that it was disbursing money to Brown, Village
Green continued to record the disbursements as deposits to a
replacement reserve account.
In March of 1994, after reviewing the Monthly Operations
Review report, Lutz learned that Brown was withdrawing
money from Eastland’s accounts. Lutz notified Village Green
by letter that such disbursements were prohibited by the
8 In re Brown Nos. 01-1015/2500
Partnership Agreement and the bankruptcy reorganization
plan under which Eastland was operating. Lutz then
contacted Brown, and Brown admitted that he did not hold
the money in a replacement reserve account and claimed that
he used the money instead to pay Eastland’s expenses,
including a debt that Eastland allegedly owed to him. Brown
specifically admitted to taking all of the real estate tax escrow
fund which totaled more than $700,000.
Because Eastland failed to pay its real estate taxes,
Prudential Insurance filed a complaint seeking to foreclose its
mortgage on the Property, and in June of 1994, Prudential
purchased the Property at a foreclosure sale for
$21,098,866.37. Dean Nelson, a real estate appraiser,
testified on behalf of Eastland that the Property had a value of
$23.5 million in 1992. Nelson projected that the Property
would have a value of approximately $30 million in 2002,
and did not reduce this amount to present value. However,
Rodney Crawford, an accountant, testified on behalf of
Village Green that a proper analysis of Nelson’s future
damage estimate, reduced to present value and properly
accounting for all costs, would have resulted in negative
equity.
At trial, the court appointed expert James McTevia to report
on damages. McTevia testified that he had not determined
whether there had been any wrongdoing by Brown and he
assumed that none of the money disbursed by Village Green
at Brown’s request had been used for partnership expenses.
McTevia also assumed that Eastland would have had
sufficient resources, through capital infusions, to keep the
Property. Based on these assumptions, McTevia testified that
Eastland would have lost approximately $500,000 had the
money not been diverted but instead used for partnership
expenses.

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Nos. 01-1015/2500 In re Brown 9
1The Michigan courts use the terms “directed verdict” and “judgment
notwithstanding the verdict” rather than the term “judgment as a matter
of law” as used in federal court. We shall employ the term “judgment as
a matter of law” as used in Rule 50 throughout this opinion.
DISCUSSION
I. Village Green’s Motion for Judgment Notwithstanding
the Verdict/New Trial (Case No. 01-1015)
A. Standard of Review
Village Green claims that insufficient evidence was
presented upon which a reasonable jury could have found in
favor of Eastland on Village Green’s breach of contract claim.
In a diversity action such as this, a state law standard of
review is applied when a Rule 50(b) motion is based on a
challenge to the sufficiency of the evidence necessary to
support the jury’s verdict. See Morales v. Am. Honda Motor
Co. Inc., 151 F.3d 500, 506 (6th Cir. 1998). The Michigan
Supreme Court has explained the applicable standard as
follows:
In reviewing a trial court’s failure to grant a defendant’s
motion for a directed verdict or judgment
notwithstanding the verdict, we examine the testimony
and all legitimate inferences that may be drawn in the
light most favorable to the plaintiff. If reasonable jurors
could honestly have reached different conclusions, the
motion should have been denied. If reasonable jurors
could disagree, neither the trial court nor this Court has
the authority to substitute its judgment for that of the
jury.
Matras v. Amoco Oil Co., 385 N.W.2d 586, 588 (Mich. 1986)
(footnotes omitted). Said differently, a directed verdict or
judgment notwithstanding the verdict is appropriate under
Michigan law only when there is no factual dispute upon
which reasonable minds could differ.1 Meagher v. Wayne
10 In re Brown Nos. 01-1015/2500
State Univ., 565 N.W.2d 401, 409 (Mich. Ct. App. 1997)
(citation omitted).
In reviewing a district court’s decision to deny a motion for
a new trial in a diversity action, however, this Court applies
federal procedural law. See Webster v. Edward D. Jones &
Co., L.P., 197 F.3d 815, 818 (6th Cir. 1999) (citing Tobin v.
Astra Pharm. Prod., 993 F.2d 528, 541 (6th Cir. 1993)). That
is to say, a district court’s denial of a motion for a new trial is
reviewed for an abuse of discretion. Id. “The district court
must compare the offered evidence and set aside the verdict
only if it is against the clear weight of the evidence as a
whole.” Id.
B. Standing Issue
As a preliminary matter, Village Green argues that because
this lawsuit was not properly authorized by JAM, Eastland
lacked standing to assert its breach of contract claim. Village
Green argues that only JAM, as Eastland’s sole managing
general partner, had the authority to bring this lawsuit on
behalf of Eastland, and because Brown, as co-partner of JAM,
did not consent to the lawsuit, the suit could not go forward.
Eastland argues that it had standing to assert its breach of
contract claim since it has suffered an injury traceable to the
conduct of Village Green, and because it had the capacity to
sue Village Green inasmuch as Michigan law allows limited
partners to sue on their own behalf as well as on behalf of the
partnership. We agree with Eastland.
In Firestone v. Galbreath, 976 F.2d 279, 283 (6th Cir.
1992), we held that a plaintiff has standing if the complaint
alleges an injury in fact traceable to the conduct of the
defendant. We further held that, under Federal Rule of Civil
Procedure 17(b), a plaintiff has the capacity to sue if the law
of the state in which the district court is held allows the

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Nos. 01-1015/2500 In re Brown 11
2Federal Rule of C ivil Procedure 17(b) provides in relevant part:
The capacity of an individual, other than one acting in a
representative capa city, to sue o r be sued shall be determined by
the law of the individual’s do micile. T he capacity of a
corporation to sue or be sued shall be determined by the law
under which it is organized. In all other cases capacity to sue or
be sued shall be determined by the law of the state in which the
district co urt is held . . . .
Fed. R. Civ. P. 17(b).
plaintiff to litigate in federal court.2 Id. The plaintiffs in
Firestone, who were beneficiaries of an inter vivos trust
created by their grandmother, brought state tort and federal
racketeering claims against the trustee and the executor of
their grandmother’s estate on behalf of themselves
individually, the family trust, and the estate. The district court
dismissed the claims on the ground that the plaintiffs lacked
standing to pursue those claims. Id. On appeal, this Court
found that the plaintiffs had standing to sue because the
complaint alleged an injury in fact traceable the conduct of
the trustee and the executor. Id.
In this case, Eastland’s first amended complaint alleges an
injury in fact traceable to Village Green. Specifically, the
complaint alleges that Eastland suffered damages in the
amount of $778,000 as result of Village Green’s actions
associated with diverting monies to Brown. See Firestone,
976 F.2d at 283. Thus, having concluded that Eastland
alleged an injury in fact traceable to Village Green, the next
inquiry becomes whether under Michigan law, Eastland had
the capacity to sue Village Green. Id.
In Adell v. Sommers, Schwartz, Silver & Schwartz, P.C.,
428 N.W.2d 26, 29 (Mich. Ct. App. 1988), the Michigan
Court of Appeals recognized that pursuant to Mich. Comp.
Laws § 449.2001, limited partners have the capacity to sue on
their own behalf and to bring a derivative action on the behalf
of the partnership for wrongs committed against the
12 In re Brown Nos. 01-1015/2500
partnership if the general partners refuse. Thus, Eastland’s
limited partners had the capacity to sue on their own behalf
and on behalf of Eastland without the consent of both general
partners, Brown and Lutz, and Village Green’s contention
that Eastland had no standing is without merit. See id.; see
also Firestone, 976 F.2d at 283.
C. Sufficiency of the Evidence as to Eastland’s Breach
of Contract Claim
Village Green argues that it did not have a contract with
Eastland, but instead entered into a subcontract with ASB,
which had a contract with Eastland. Village Green argues in
the alternative that even if it did contract with Eastland, there
was no evidence of a breach inasmuch as Village Green acted
at the direction of its principal when it disbursed money to
Brown, its monthly reports accurately disclosed that taxes
were not paid on the Property after November 1993 but that
money had been disbursed to the owner, and that the
management subcontract agreement expressly provided that
Village Green could not be held liable for the acts or
omissions of the owner.
Eastland argues that the record indicates that Village Green
entered into the Agreement with Eastland on May 9, 1990,
and that the subcontract with ABS did nothing to negate
Village Green’s obligations to Eastland under the Agreement.
Eastland goes on to argue that there was overwhelming
evidence of Village Green’s breach of the Agreement by way
of Village Green’s disbursing money to Brown upon the
requests of a third person and submitting monthly reports that
unambiguously misrepresented the amount of money held in
the accounts, which was in contravention of the terms of the
Agreement. Furthermore, Eastland maintains that Village
Green took these actions at its own peril because there is no
provision in the Agreement exempting Village Green from
liability. We agree with Eastland.

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Nos. 01-1015/2500 In re Brown 13
To state a breach of contract claim under Michigan law, a
plaintiff must first establish the elements of a valid contract.
See Pawlak v. Redox Corp., 453 N.W.2d 304, 307 (Mich. Ct.
App. 1990). The elements of a valid contract in Michigan are
1) parties competent to contract, 2) a proper subject matter,
3) a legal consideration, 4) mutuality of agreement, and
5) mutuality of obligation. Thomas v. Leja, 468 N.W.2d 58,
60 (Mich. Ct. App. 1990). Once a valid contract has been
established, a plaintiff seeking to recover on a breach of
contract theory must then prove by a preponderance of the
evidence the terms of the contract, that the defendant
breached the terms of the contract, and that the breached
caused the plaintiff’s injury. See Platsis v. E.F. Hutton &
Co., Inc., 642 F. Supp. 1277, 1309 (W.D. Mich. 1986).
The record indicates that the “Agreement [was] made this
9th day of May 1990 by and between Eastland Properties
Limited Partnership (the “Owner”) and Village Green
Management Company (the “Agent”)[,]” wherein Village
Green agreed to provide management services to Eastland in
exchange for Eastland making payments to Village Green for
the services. (J.A. at 1416.) Specifically, the Agreement
provides:
1.1 APPOINTMENT AND ACCEPTANCE
Owner [Eastland] hereby appoints Agent [Village
Green] as sole and exclusive Agent of Owner
[Eastland] to lease and manage the property described
in paragraph 1.2 upon the terms and conditions
provided herein. Agent [Village Green] accepts the
appointment and agrees to furnish the services of its
organization for the leasing and management of the
Premises; and Owner [Eastland] agrees to pay all
expenses in connection with those services.
(J.A. at 1416.) Thus, this bargained for exchange of
mutuality between Eastland and Village Green satisfies
Michigan’s requirements for a valid contract. See Pawlak,
453 N.W.2d at 307. Village Green does not deny the
14 In re Brown Nos. 01-1015/2500
existence of the Agreement or that it is a valid contract under
Michigan law. Rather, Village Green contends that the
Agreement was between Eastland and ASB, and that Village
Green had a subcontract with ASB. The record does not
support Village Green’s contention.
As indicated above, the Agreement clearly states the parties
that entered into the Agreement—Eastland and Village Green.
Although in the Signatures section of the Agreement,
Brown’s name appears with the name “Anthony S.
Development Co., Inc.” thereunder, the Signatures section of
the Agreement also designates “Eastland Properties Limited
Partnership” as the “Owner” and Village Green as the
“Agent” for which Terry B. Schwartz signed as Chief
Executive Officer. (J.A. at 1429.) Thus, the record supports
a finding that reasonable minds could have found that a
contract between Eastland and Village Green existed. See
Pawlak, 453 N.W.2d at 307. As a result, the terms of the
Agreement and whether sufficient evidence was presented for
a reasonable jury to have found that Village Green breached
the terms thereby causing Eastland to suffer an injury are the
next relevant inquiries. See Platsis, 642 F. Supp. at 1309;
Matras, 385 N.W.2d at 588.
As to the terms of the Agreement, among other things,
Village Green was required to collect all accounts receivable
in connection with the management and operation of the
Property, deposit and maintain such funds in reserve bank
accounts, pay all expenses and costs necessary for the proper
management and operation of the Property, and provide
Eastland with accurate and complete monthly reports of costs,
receipts and disbursements. Eastland brought forth evidence
that Village Green breached these obligations by way of
testimony and documentation that Village Green disbursed
money to Brown upon the requests of a third person
unauthorized to make such requests and provided monthly
reports to Eastland that did not accurately reflect the amount
of money held in the accounts. Eastland also brought forth
evidence that it suffered an injury as a result of Village

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Nos. 01-1015/2500 In re Brown 15
Green’s breach of its obligations under the Agreement by way
of the foreclosure and sale that took place following
Eastland’s failure to pay its property taxes.
Village Green argues that because Brown’s knowledge, as
general partner, is imputed to Eastland, Eastland had
knowledge of the disbursements made to Brown and therefore
cannot be allowed to complain that Village Green acted
improperly, i.e., evidence of Village Green’s actions upon
which Eastland relies in support of its breach of contract
claim could not be considered in determining whether a
breach occurred because Eastland was aware of Village
Green’s actions in this regard.
Eastland argues that because Brown acted outside the
ordinary course of business when he withdrew money from
Eastland’s accounts for his personal use, Brown’s knowledge
cannot be imputed to Eastland. In support of its contention,
Eastland points out that Brown’s actions were contrary to the
Partnership Agreement and the Bankruptcy Plan of
Reorganization, and relies upon Michigan’s Uniform
Partnership Act (the “Act”), Mich. Comp. Laws Ann. § 449.1
et seq.
Specifically, Eastland relies upon sections §§ 449.9(1),
449.12, and 449.13 of the Act in support of its claim that the
acts of an individual partner outside the ordinary course of
business of the partnership or acts of fraud cannot impute
knowledge to or liability on the partnership. Section 9 of the
Act provides in relevant part:
Every partner is an agent of the partnership for the
purposes 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, 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
16 In re Brown Nos. 01-1015/2500
dealing has knowledge of the fact that he has no such
authority.
Mich. Comp. Laws Ann. § 449.9(1) (emphasis added).
Section 12 of the Act provides:
Notice to any partner of any matter relating to the
partnership affairs, and the knowledge of the partner
acting in the particular matter, acquired while a partner
or then present to his mind, and the knowledge of any
other partner who reasonably could and should have
communicated it to the acting partner, operates as notice
to or knowledge of the partnership, except in the case of
fraud on the partnership committed by or with the
consent of that partner.
Mich. Comp. Laws Ann. § 449.12 (emphasis added). And
Section 13 of the Act provides:
Where, by any wrongful act or omission of any partner
acting in the ordinary course of the business of the
partnership, or with the authority of the co-partners, loss
or injury is caused to any person, not being a partner in
the partnership, or any penalty is incurred, the
partnership is liable therefor to the same extent as the
partner so acting or omitting to act.
Mich. Comp. Laws Ann. § 449.13 (emphasis added).
In order to determine whether Brown acted outside the
ordinary course of business when he withdrew money from
Eastland’s accounts for his personal use, we must examine the
Partnership Agreement and the Bankruptcy Plan. Section
3.02 of the Partnership Agreement provides in relevant part:
The Operating Cash Flow of the Partnership, for each
fiscal year of the Partnership, to the extent (and only to
the extent) that the General Partner determines, in its sole
and absolute discretion, that the Operating Cash Flow of

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Nos. 01-1015/2500 In re Brown 17
the Partnership for such fiscal year is not required for
Partnership purposes and is available for distribution to
the Partners, shall be distributed to the Partners. All
Operating Cash Flow that is distributed to the Partners
shall be distributed to, and allocated between, the
Partners, 1% to the General Partner and 99% to the
Limited Partner.
(J.A. at 1546.) Section 4.05 of the Partnership Agreement
provides:
The General Partner (and Affiliates of the General
Partner) shall have the right to contract and otherwise
deal with the Partnership and the Real Estate Partnership
with respect to the sale or lease of real and/or personal
property, the rendition of services, the lending of money
and for other purposes, and to receive compensation,
fees, commissions, interest and other forms of
consideration in connection therewith as the General
Partner may determine, without being subject to claims
for self dealing.
(J.A. at 1552.)
In addition, the Bankruptcy Plan provides in relevant part
that Eastland “shall utilize all Excess Cash Flow, if any, as
and when it becomes available to pre-pay the outstanding
balance owing to the holders of allowed claims within Class
7 until such claims have been paid in full.” (J.A. at 2033.)
Because Eastland had no excess cash flow available for
disbursement to partners in 1994, Brown was not entitled to
any disbursements and he acted outside the ordinary course of
business when he withdrew money from Eastland’s accounts
for his personal use without the consent of his co-general
partner, Lutz. Furthermore, had excess cash flow been
available for disbursement to partners, Brown was at most
entitled to 1% of the excess, and by withdrawing more than
$700,000 from Eastland’s accounts, Brown exceeded the 1%
18 In re Brown Nos. 01-1015/2500
3In its reply brief, Village Green argues fo r the first time that it did
not have a duty to use reasonable diligence to determine whether Brown
was acting within the scope of his authority as a general partner when he
requested the disbursal of money from E astland’s acco unts. W e will not
consider this argum ent because it was raised for the first time in Village
Green’s reply brief. See Wright v. Holbrook, 794 F.2d 1152, 1156-157
(6th Cir. 198 6) (ho lding that argum ents raised for the first time in a reply
brief will not be considered on appeal).
cap. Finally, these is no evidence on the record, such as a
loan agreement, to indicate that Brown had loaned Eastland
more than $700,000 and was entitled to repayment despite the
lack of excess cash flow. Thus, Brown had neither actual nor
implied authority to withdrew money from Eastland’s
accounts for his personal use.3
Moreover, Eastland cannot be held to have affirmed
Brown’s unauthorized actions since there is no evidence on
the record to indicate that Eastland received any direct benefit
from such actions. See City Nat’l Bank of Detroit v. Westland
Towers Apartments, 393 N.W.2d 554, 556-57 (Mich. Ct. App.
1986) (holding that a partnership was not liable for a
promissory note signed by a partner because the partnership
received no direct benefit from the partner’s unauthorized
act).
We therefore are not persuaded by Village Green’s
arguments and conclude that Eastland presented sufficient
evidence for a reasonable jury to have found that a contract
existed between Eastland and Village Green, and that Village
Green breached the terms of the contract to the detriment of
Eastland. See Platsis, 642 F. Supp. at 1309. Thus, the district
court did not err in denying Village Green’s motion for
judgment as a matter of law. See Matras, 385 N.W.2d at 588.
And, because the evidence on the record as a whole does not
outweigh the evidence proffered by Eastland in support of its
breach of contract claim, we also conclude that the district
court did not abuse its discretion in denying Village Green’s
motion for a new trial. See Webster, 197 F.3d at 818.

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Nos. 01-1015/2500 In re Brown 19
D. Inconsistent Verdict Claim
As an alternative claim regarding the jury’s verdict in favor
of Eastland on its breach of contract claim, Village Green
argues that the jury’s verdict in favor of Brown exonerated
Village Green. Said differently, Village Green argues that
because the jury found that Brown was not liable, its verdict
finding that Village Green breached the terms of the
Agreement by following Brown’s instructions was
inconsistent.
We are not persuaded by Village Green’s argument in this
regard because, as Eastland points out, at most the jury was
allowed to decide that Brown had not committed intentional
and malicious fraud by clear and convincing evidence. The
jury was not permitted to decide whether Brown’s actions
amounted to other torts, including innocent misrepresentation,
breach of contract, or negligent misrepresentation because
Brown’s pending bankruptcy precluded such a determination.
Thus, the jury’s verdicts in favor of Brown but against
Village Green were consistent since Village Green was shown
to have breached the management agreement by its own
actions. See, e.g., Morales, 151 F.3d at 509 (noting that when
reviewing an inconsistent verdict claim, this Court must “look
for a reasonable way” to view the case). We therefore
conclude that the district court did not abuse its discretion in
denying Village Green’s motion for a new trial on this basis
as well. See id. at 511.
E. Sufficiency of the Evidence as to the Jury’s Award
of Damages
Village Green argues that the jury’s award of damages was
not supported by the evidence since Eastland did not prove
that Village Green caused it any damages with a reasonable
degree of certainty and failed to reduce the alleged damages
to present value as of the date of breach. Village Green also
argues that the jury’s award of damages constituted an
improper compromise verdict.
20 In re Brown Nos. 01-1015/2500
Eastland argues that ample evidence supported the jury’s
award of damages since Eastland presented evidence that had
Village Green properly placed the funds in a replacement
reserve account, as Village Green represented it had done, the
taxes would have been paid in full before the date of
foreclosure; that had Village Green provided accurate and
complete monthly reports of the Property’s financial state,
Eastland would have been able to take corrective action to
prevent foreclosure; and that the money disbursed to Brown
by Village Green was the precise money which would have
been used to pay taxes on the Property. Eastland notes that
McTevia, Nelson, and Lutz all testified that the loss of the
Property was a direct result of Village Green’s breaches of
contract.
To recover for damages under a breach of contract claim,
a plaintiff must prove that the damages arose naturally from
the breach or were in contemplation of the parties at the time
the contract was made. Held Constr. Co., Inc. v. Mich. Nat’l
Bank of Detroit, 335 N.W.2d 8, 10 (Mich. Ct. App. 1983).
Lost profits resulting from a breach of contract may be
considered by a jury in determining damages. Lorenz Supply
Co. v. Am. Standard, Inc., 300 N.W.2d 335, 340 (Mich. Ct.
App. 1980). However, lost profits must be proven with a
reasonable degree of certainty and cannot be based solely on
conjecture and speculation. Id. A jury’s award of lost profits
must be reduced to present value. Coger v. Mackinaw Prods.
Co., 210 N.W. 2d 124, 130-31 (Mich. Ct. App. 1973), rev’d
on other grounds, Horen v. Coleco Indus., Inc., 426 N.W. 2d
794 (1988).
The record indicates that Eastland presented sufficient
evidence to support the jury’s award of damages. McTevia,
Nelson, and Lutz all testified that the loss of the Property
arose naturally from Village Green’s breaches of contract,
Nelson testified as to Eastland’s lost profits in the Property,
based on normal real estate market conditions, and the district
court instructed the jury to reduce damages for lost profits to
present value. Furthermore, there is no evidence of juror

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Nos. 01-1015/2500 In re Brown 21
4In its statement of issues presented, Village Green also raises the
issue of whether the district court erred in permitting a witness to offer
opinion testimony about ultimate legal issues. W e will not co nsider this
issue because Village Green failed to raise any argum ent in sup port of it.
See Bickel v. Korean Air Lines Co. Ltd., 96 F.3d 151, 153 (6th Cir. 1990)
(holding that issues m ust be raised in statement of issues presented and
argued in the legal brief to be considered on appeal).
misconduct to support Village Green’s argument that the
jury’s award of damages constituted an improper compromise
verdict.4
F. Summary
Sufficient evidence was presented for a reasonable jury to
conclude that Village Green breached the terms of its
Agreement with Eastland and that Eastland suffered damages
in the amount awarded by the jury, and the verdict was not
inconsistent or against the great weight of the evidence.
II. Village Green’s Motion Requesting that Brown be
Declared Sole Managing Partner of Eastland (Case
No. 01-2500)
Eastland argues that the district court abused its discretion
in denying its motion for rehearing regarding the court’s order
granting Village Green’s motion to declare Brown Eastland’s
sole managing partner. Eastland contends that Village Green
did not have standing to bring such a motion, that even if
Village Green did have standing, the district court went
beyond the relief sought by Village Green when the court
ordered the dissolution of Eastland under Brown’s control and
supervision, and that it is inequitable to declare Brown to be
Eastland’s sole managing partner inasmuch as Brown has
assigned all of the rights in the management of Eastland to
Village Green, and Village Green will therefore simply
negotiate the judgment debt that it owes to Eastland.
22 In re Brown Nos. 01-1015/2500
A. Standard of Review
We review a district court’s denial of a motion for
rehearing for an abuse of discretion. Curry v. Scott, 249 F.3d
493, 503 (6th Cir. 2001). An abuse of discretion occurs when
the district court relies on clearly erroneous findings of fact,
improperly applies the law, or uses an erroneous legal
standard. Southward v. S. Cent. Ready Mix Supply Corp., 7
F.3d 487, 492 (6th Cir. 1993).
B. Analysis
We agree with Eastland that the district court abused its
discretion in denying Eastland’s motion to reconsider its order
declaring Brown sole managing partner of Eastland for the
purpose of supervising and implementing the dissolution of
Eastland. It is clear that in seeking to declare Brown sole
managing partner of Eastland, Village Green actually was
seeking the dissolution of JAM and a declaration that Brown
have management control over JAM, because this would
allow for the dissolution of Eastland without Lutz’s consent
inasmuch as Brown and Lutz were co-partners in JAM.
However, the district court had no authority to do so because
neither Brown nor Lutz filed a motion requesting a court-
ordered dissolution of JAM.
Village Green acknowledged that the JAM partnership
agreement was controlled by the Act, and the Act provides the
circumstances under which a court may order the dissolution
of a co-partnership while specifically stating that only a
“partner” may apply for dissolution of the partnership. See
Mich. Comp. Laws Ann. § 449.32. Thus, only Brown or Lutz
could move to have their partnership in JAM dissolved,
thereby making Village Green’s efforts to do so by way of its
motion to declare Brown sole managing partner of Eastland
without a basis in Michigan law. Indeed, the district court
relied on Mich. Comp. Laws Ann.§ 449.32 in ordering the
dissolution of Eastland; however, it is clear that the court had

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Nos. 01-1015/2500 In re Brown 23
no authority to do so, particularly where Eastland is a limited
partnership.
In addition, although § 449.1802 of the Act provides
authority for the court to order dissolution of a limited
partnership such as Eastland, the district court had no basis to
order the dissolution of Eastland under § 449.1802 in this
case because no partner of Eastland sought dissolution, and
neither Brown personally nor Village Green had the authority
to do so. Thus, although § 449.1802 provides a legal basis
upon which the district court could have ordered the
dissolution of Eastland, the court would have been without
authority to do so under these facts.
C. Summary
The district court abused its discretion in denying
Eastland’s motion to reconsider the order declaring that
Brown had sole managing authority over Eastland where the
court had no authority to grant Village Green’s motion.
CONCLUSION
For the forgoing reasons, we AFFIRM the district court’s
order in Case No. 01-1015; and REVERSE the district
court’s order in Case No. 01-2500, and REMAND with
instructions that the district court either appoint a neutral
third-party on behalf of Eastland to deal with Village Green,
or establish an escrow subject to further order as the district
court proceeds to determine the rights and remedies of any
party who has an interest in Eastland’s assets.

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