Brenden v. Anderson
| Decision Date | 15 December 1982 |
| Docket Number | No. 13530,13530 |
| Parties | Harold BRENDEN and Edithe Brenden, Plaintiffs and Appellees, v. Marvin G. ANDERSON and Delores J. Anderson, Defendants and Appellants. |
| Court | South Dakota Supreme Court |
Charles Rick Johnson of Johnson, Johnson & Eklund, Gregory, for plaintiffs and appellees.
Ronald L. Schulz of Oviatt, Green, Schulz & Roby, Watertown, for defendants and appellants.
HENDERSON, Justice (on reassignment).
ACTION
Harold and Edithe Brenden (appellees) brought an action against Marvin and Delores Anderson (appellants) seeking damages on the sale of a partnership interest dated December 20, 1978, based upon false representations at the time of sale. Both parties consented to a trial before a Codington County jury. Although appellees sought $15,446.72, a general verdict of $6,250.00 was returned by the jury in favor of appellees. This appeal ensued. We affirm.
FACTS
Appellees and appellants entered into a written partnership agreement to sell mobile homes in Watertown, South Dakota. According to the partnership agreement, appellees were to receive a $900.00 monthly draw and appellants a $1,400.00 monthly draw from the company. However, appellees only received their monthly draw twice, for a total of $1,800.00, while appellants, during the period in question, received $10,600.00 in draws. Appellees apparently allowed this discrepancy to exist because they did not have full knowledge of appellants' draw and appellants had represented to appellees that sufficient cash did not exist for draws. A March 3, 1979, financial statement revealed that the partnership had profits of $38,347.38 from March 20, 1978, through December 20, 1978. In May 1979, appellees made inquiry of this profit matter. Appellant Mr. Anderson indicated that this discrepancy would be taken care of, but this eventuality did not occur.
It appears that money did exist for appellees' draws, but appellants (who were in control of the books and financial matters) chose to use company profits for other matters. Appellees, believing that the partnership was no longer beneficial, sold their interest to appellants. Sometime after the sale, a partnership tax return came to appellees' attention. This tax return revealed significant discrepancies in draws and led appellees to institute this action. Five separate issues are treated herein.
ISSUES
WAS THE VERDICT RENDERED BY THE JURY SUFFICIENT TO SUPPORT THE JUDGMENT BELOW? WE HOLD THAT IT WAS.
DID THE TRIAL COURT ERR IN ALLOWING A TAX RETURN AND FINANCIAL STATEMENT INTO EVIDENCE? WE HOLD THAT IT DID NOT.
WAS THE JURY PROPERLY INSTRUCTED BY THE TRIAL COURT? WE HOLD THAT IT WAS.
WERE DEPOSITION COSTS PROPERLY TAXED BELOW? WE HOLD THAT THEY WERE.
VWAS THE TRIAL COURT CORRECT IN DENYING APPELLANTS' MOTIONS FOR SUMMARY JUDGMENT, DIRECTED VERDICT, TO STRIKE, IN LIMINE, JUDGMENT NOTWITHSTANDING THE VERDICT, AND NEW TRIAL? WE HOLD THAT IT WAS.
DECISION
Initially, we address the validity of the jury verdict in this action on the basis of our holding in Black v. Gardner, 320 N.W.2d 153 (S.D.1982) (Black ). A question exists as to whether appellees sought relief in law or equity. Although appellees' complaint and brief alleged that appellants breached fiduciary obligations, appellees' complaint also sought damages based upon false representations at the time of sale of the partnership interest and the jury awarded the remedy of damages.
As we held in Black, in light of SDCL 15-6-39(c), 1 the law or equity question has lost its paramount role in regard to jury verdicts based on consensual jury trials. In Black, we addressed a jury verdict on an equity action and held:
We now hold that SDCL 15-6-39(c) should be given full effect and that the verdic rendered by the jury after the parties had consented to a jury trial is all that is necessary to support the judgment. To the extent that this holding is inconsistent with [State v. Nieuwenhuis, 49 S.D. 181, 207 N.W. 77 (1926) ] and the decisions based thereon, they are specifically overruled.
Black, 320 N.W.2d at 157. Therefore, the jury verdict herein need not be set aside in favor of findings of fact and conclusions of law by the trial court.
However, another aspect of the law or equity question lingers. In Munce v. Munce, 77 S.D. 594, 598, 96 N.W.2d 661, 663-64 (1959) (Munce ), we held:
As a general rule in the absence of statute one partner cannot maintain an action at law against the other to recover an amount claimed by him by reason of partnership transactions until there has been a final settlement of the affairs of the concern by discharging its liabilities, collecting its assets, and ascertaining the share to which each is entitled and up to that time a partner's only remedy is to apply to a court of equity for dissolution and accounting. Ellenbecker v. Volin, 75 S.D. 604, 71 N.W.2d 208 [1955]. Exceptions to this general rule are set out in a supplementing annotation in 168 A.L.R. 1088.
The rationale for the general rule of Munce is drawn from 68 C.J.S. Partnership Sec. 110 (1950) and Ellenbecker v. Volin, 75 S.D. 604, 609, 71 N.W.2d 208, 210-11 (1955) (Ellenbecker ), wherein we held:
.
Here, our factual pattern presents a sale of partnership assets, which is a different factual setting than envisioned by the general rule in Munce, Ellenbecker, and the C.J.S. section quoted above. Indeed, our holding in Munce took cognizance of the sale of a partnership as a distinction when we quoted with authority the following passage from Crockett v. Burleson, 60 W.Va. 252, 257, 54 S.E. 341, 342 (1906):
[W]here a purchasing partner discovering that his former partner fraudulently represented the status of the account between them brought an action for fraud, the court said:
Munce, 77 S.D. at 599, 96 N.W.2d at 664.
Since our past decisions quote C.J.S., it is helpful to examine that authority in light of the facts at bar. 68 C.J.S. Partnership Sec. 102 (1950) addresses the transfer of an interest to a copartner by stating:
A purchase in good faith by a partner of his copartner's interest in the firm vests the ownership of the firm property in the purchasing partner, and the right to the purchase price in the selling partner or his assignee, for which, as discussed infra Sec. 110b, an action at law may be maintained.... The agency of one partner for the other in the transaction of the partnership business does not exist in a transaction by which one of the partners purchases the interest of another.
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... A partner having sold his interest to a copartner, the confidential relationship is at an end and further dealings between the parties are at arm's length. (Emphasis supplied.)
68 C.J.S. Partnership Sec. 110(b) (1950), then further reflects:
A partner may sell his interest to his copartners and recover the purchase price in an action at law, and it is immaterial whether or not such interest is encumbered by the terms of the partnership or whether its amount is fixed or the price agreed on.
Thus, C.J.S. establishes that an action at law may be had for the purchase price of the sale of a partnership even if the amount is not fixed.
Here, appellees contend that their price was artificially low because appellants misrepresented the value of appellees' interest. C.J.S., supra, Sec. 110(c) then further reveals:
An action at law will lie for the balance thus ascertained to be due when an accounting and settlement have been had, or where the affairs of the partnership have been so settled that the jury can, without an equitable accounting, ascertain the amount due as the balance owing by one partner to the other under a settlement made by them, and the creditor partner cannot maintain a bill in equity for relief unless he can show fraud or mutual mistake in the settlement. If the fraud consists in false representations as to the state of the firm accounts or in dishonest appropriation of firm property by defendant partner an action at law for damages will lie against him. (Emphasis supplied.)
We hold that the jury was able, without an equitable accounting, to determine the amount of damages. Explicit portions of the partnership agreement, tax return information, sale agreement, and testimony at trial, provided sufficient legal grist for the jury to mold their damages remedy.
Appellants contend that the trial court erred by allowing a partnership tax return and financial statements into evidence because these documents did not exist at the time of the sale. We disagree. Appellants fail to cite any authority, and we have been unable to find any authority, for the proposition that such business records are excludable because they were not formulated in time for the sale of a business. We are unable to see how the jury could have been prejudiced by these routine records...
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