## Facts

- Charles H. Schlobohm and Joneen Lou Schlobohm (husband and wife) were in the food-distribution business and held distributorship/franchise rights.
- Robert M. Volpe and Edward R. Wright were also in the same line of business and held their own franchise rights.
- On January 28, 1978, the Schlobohms, Volpe, and Wright met to discuss forming a partnership; Joneen Schlobohm took notes during the meeting.
- Those notes later formed the basis of a written partnership agreement.
- The parties accepted and agreed to the written agreement on February 1, 1978, but the document was never signed.
- The agreement did not specify which specific franchises were included as partnership property.
- At the time the partnership began operating, the Schlobohms and Wright each had Pepperidge Farms franchises, and Volpe had a Stella D’Oro franchise.
- A dispute developed over whether the Pepperidge Farms franchises were contributed as partnership assets: Volpe believed they were included; the Schlobohms and Wright asserted the Pepperidge Farms franchises were excluded.
- Despite the disagreement, revenues connected with the franchises were deposited into the partnership account and distributed among the partners according to their percentage interests.
- In June 1978 (about four months after formation), Wright withdrew from the partnership and took his Pepperidge Farms franchise with him.
- The Schlobohms purchased Wright’s partnership interest with their own funds.
- After Wright’s withdrawal, Volpe asserted a right to a portion of Wright’s partnership assets and profits, and the parties’ disagreement continued.
- The Schlobohms sued Volpe seeking rescission of the partnership agreement (or, alternatively, declaratory relief concerning the parties’ rights).
- Volpe counterclaimed for dissolution, an accounting, damages, and other relief.
- After a bench trial, the trial court rescinded the partnership agreement, vested title to all partnership assets in the Schlobohms, ordered that Volpe take nothing on his counterclaims, and awarded Volpe $54,083.60 as the stipulated value of his 30% interest if rescission was proper.

## Issues

1. Whether the trial court properly granted equitable rescission of the partnership agreement based on a mutual mistake about a material matter—whether the Pepperidge Farms franchises were partnership assets.
2. Whether the trial court’s rescission remedy (vesting partnership assets in the Schlobohms while awarding Volpe the stipulated value of his 30% interest and denying his counterclaims) was supported by the evidence and within the court’s equitable authority.

## Decision

- The court of appeals affirmed the trial court’s judgment.
- Rescission of the partnership agreement was upheld based on evidence supporting a mutual mistake about whether the Pepperidge Farms franchises were included as partnership property.
- The remedy was upheld: title to partnership assets was vested in the Schlobohms, and Volpe was awarded $54,083.60 as the stipulated value of his 30% partnership interest upon rescission.
- Volpe took nothing on his counterclaims for dissolution, accounting, and damages.

## Legal Principles

- A partnership agreement may be formed and treated as effective when the parties accept its terms and operate under it, even if a contemplated writing is never signed.
- Rescission is an equitable remedy available when a mutual mistake concerns a material aspect of the transaction such that the agreement does not reflect the parties’ actual shared understanding.
- Whether particular property was intended to be contributed to a partnership is a fact question that can turn on conflicting testimony and the parties’ conduct in operating the business.
- On appeal from a bench trial, the reviewing court generally defers to the trial court’s resolution of disputed facts and witness credibility when supported by the record.
- When rescission is granted, the court may unwind the relationship and award compensation intended to return the parties to a fair position, including use of a stipulated valuation of a partner’s interest.

## Conclusion

Volpe v. Schlobohm affirmed rescission of an accepted-but-unsigned partnership agreement where the evidence supported a mutual mistake about whether the Pepperidge Farms franchises were part of the partnership, and it approved an equitable unwind that vested partnership assets in the Schlobohms while paying Volpe the stipulated value of his 30% interest and denying his dissolution-based counterclaims.


Volpe v. Schlobohm, 614 S.W.2d 615 (1981)