Cheves v. Williams

• Decision Date: 10 September 1999
• Docket Number: No. 950404.,950404.
• Citation: 1999 UT 86,993 P.2d 191
• Parties: Lee CHEVES, individually and derivatively on behalf of Industrial Communications, Inc., Plaintiff and Appellee, v. David R. WILLIAMS, Deanna M. Williams, and Industrial Communications, Inc., a Utah Corp., Defendants and Appellants.
• Court: Utah Supreme Court

993 P.2d 191

1999 UT 86

Lee CHEVES, individually and derivatively on behalf of Industrial Communications, Inc., Plaintiff and Appellee, v.David R. WILLIAMS, Deanna M. Williams, and Industrial Communications, Inc., a Utah Corp., Defendants and Appellants.

No. 950404.

Supreme Court of Utah.

September 10, 1999.

Steven G. Crockett, Milo Steven Marsden, Wesley D. Felix, Salt Lake, for plaintiff.

Mary Anne Q. Wood, Kathryn O. Balmforth, Salt Lake, for defendants.

DURHAM, Associate Chief Justice.

¶ 1This case is before us on appeal from a jury verdict and various district court orders in favor of the appellee, Lee Cheves, on his claim against the appellant, David R. Williams, for a partnership accounting and for one-third of the assets belonging to that partnership.We affirm in part and reverse in part.

BACKGROUND

¶ 2 In reviewing a jury verdict, this court views the facts, and all reasonable inferences therefrom, in a light most favorable to that verdict.SeeState v. Dunn,850 P.2d 1201, 1205(Utah1993).We present the facts accordingly.

¶ 3Lee Cheves met David R. Williams in 1958 or 1959, while Cheves was a student at New Mexico State University in Las Cruces, New Mexico.At the time, both Cheves and Williams worked at the White Sands Missile Range in White Sands, New Mexico.Cheves began working for Williams in two small businesses that Williams operated out of his home, and the two became good friends.They soon began talking about going into business together and, by 1962, Cheves had accepted Williams' offer to become partners in a communications business.Under their agreement, Williams would own a two-thirds interest in the business because Williams was the one putting up the money and had greater experience in the communications field, and Cheves would own a one-third interest in the business.

¶ 4 The two thus formed Industrial Communications.Williams opened the business in Vernal, Utah, on April 1, 1963.Cheves joined Williams in Vernal in June 1963, after graduating from college.Each party agreed to take only so much money out of the business as each needed for support, with Williams taking about twice as much as did Cheves.All other profits would remain with the company.Partnership tax returns were filed throughout this period, which indicated that Williams and Cheves were co-partners in Industrial Communications.

¶ 5 Over the next several years, Industrial Communications expanded its operations into northern Utah and Wyoming.The company opened an office in Salt Lake City in 1966.Williams managed the Salt Lake office; Cheves remained in Vernal.Williams and his wife maintained the company's records at the Salt Lake office and were responsible for signing company checks.Neither Williams nor his wife kept track of how much money they took out of the partnership as personal income.

¶ 6 In 1981, assets from Industrial Communications were used to establish a corporation called General Broadcasting, Inc., which operated an AM radio station in North Salt Lake City.Two other corporations, Utah Telcourier, Inc. and Intermountain Broadcasting, Inc., were also established using Industrial Communications' assets.

¶ 7 Industrial Communications, Inc., was incorporated on January 5, 1987.Cheves signed the corporation's articles of incorporation and a document indicating that he was to receive twenty percent of the corporation's shares.Cheves trusted Williams to make up the difference between Cheves' one-third interest in the partnership and the twenty percent interest given him in the corporation.No partnership assets were ever formally transferred into Industrial Communications, Inc.

¶ 8 Also in 1987, Williams expanded the business to Hawaii, forming a corporation named General Telcourier, Inc.By 1988, Williams was spending approximately eight months of the year in Hawaii.

¶ 9 Cheves left Industrial Communications in September 1990.He requested a formal accounting of the partnership by letter on March 14, 1991.

¶ 10 Cheves filed the current action on April 15, 1991.In his first amended complaint, Cheves requested a declaratory judgment regarding the existence of a partnership, as well as an equitable or statutory accounting of the business for the period from June 1963 to the present.Cheves' complaint also stated causes of action for breach of fiduciary duty, breach of contract, fraud and conspiracy to commit fraud, fraudulent transfer of assets and conspiracy to commit such fraudulent transfers, and conversion.

¶ 11 On December 6, 1991, the trial court heard argument on Williams' motion to disqualify the law firm of Giauque, Crockett, Bendinger & Peterson ("Giauque") from representing Cheves.Giauque had represented some of the partnership's affiliated corporations for a period in the mid-1980's, and Williams argued that such representation required Giauque's disqualification in this case.The trial court denied Williams' motion, stating orally that it did "not find there was a substantially [sic] factual relationship between this present action and any other prior discussions that would have occurred between counsel for the plaintiff in this case and Mr. Williams" and "that there would likely be no information that would have been discussed in those matters that would have formed a basis for use by plaintiff's counsel to the disadvantage of Mr. Williams."

¶ 12 On July 21, 1992, the trial court heard argument on Williams' motion for partial summary judgment, in which Williams asserted that Cheves had waived his right to an accounting by failing to request it promptly.On August 19, 1994, the trial court heard argument on Williams' motion for final partial summary judgment regarding the existence of a partnership.The court denied both motions.

¶ 13 On January 17, 1995, the trial court heard argument on a motion relating to the burden of proof on the existence of a partnership, on the accounting, and on a motion relating to prejudgment interest.The court ruled that, because

"the books and records of Industrial Communications were maintained under the virtually exclusive control of the Defendants[,]... if Mr. Cheves proves that a partnership exists, the burden of proof regarding whether partnership funds were used to acquire assets that the Williams [sic] claim are [personal] property ... shifts to the Defendants.Likewise the Court rules that the burden of proof for an accounting shifts to the Defendants."

The court further ruled that "if prejudgment interest is proper in this case, it is to be assessed by the Court and not the jury.However, the parties may submit to the jury a special interrogatory to determine the date from which prejudgment interest begins to run under the facts of this case."(Emphasis added).

¶ 14 Trial on Cheves' complaint began on January 31, 1995, and continued until February 15, 1995.The jury returned a Special Verdict Form on February 16, 1995, in which the jury found: that Cheves and Williams were partners in Industrial Communications; that Cheves' claims were not barred by any statute of limitations, laches, estoppel, failure of consideration or waiver; that the partnership included the assets of General Broadcasting, Inc., General Telcourier, Inc., Utah Telcourier, Inc., and Intermountain Broadcasting, Inc.; and that Cheves should receive $900,000 for his interest in the partnership.In a judgment dated March 13, 1995, the court ordered that Cheves recover costs plus $900,000, with postjudgment interest.On March 23, 1995, Cheves filed a Motion to Amend Judgment, requesting that the court, pursuant to section 48-1-39 of the Utah Code, add prejudgment interest to the award running from the date Cheves first demanded an accounting.Orders restraining the Williams and Industrial Communications, Inc., from disposing of any nonexempt property were dated March 28, 1995.A Praecipe was signed March 29, 1995.On July 17, 1995, Williams filed a Motion for Stay of Judgment Pending Appeal and for Establishment of Amount of Approved Security.

¶ 15 On July 18, 1995, the trial court heard argument on Cheves' motion to amend the judgment and on Williams' motion for new trial.The court granted Cheves' motion, awarding prejudgment interest to be calculated from April 15, 1991; the court denied Williams' motion for new trial.On August 10, 1995, Williams objected to the proposed order because it allowed for calculation of postjudgment interest on prejudgment interest.The court denied the objection.Williams filed a notice of appeal on September 11, 1995.

¶ 16 On November 6, 1995, the trial court heard argument on Williams' motion for a stay of judgment pending appeal.At that time, Cheves apparently moved for an order allowing the issuance of writs of execution and garnishment directly against property held in the names of Industrial Communications, General Broadcasting, Inc., General Telcourier, Inc., Utah Telcourier, Inc., and Intermountain Broadcasting, Inc.On November 20, 1995, the court denied Williams' motion for a stay and granted Cheves' motion for writs of execution to be issued directly against the corporations.

ANALYSIS

¶ 17 Williams raises numerous issues on appeal.First, Williams asserts that the trial court erred in instructing the jury concerning the application of Utah Code Ann. § 78-12-35(1987) and the discovery rule to toll the statutes of limitations on Cheves' partnership causes of action and erred in accepting the jury's verdict on those issues where the statutes of limitations had in fact run.Second, Williams contends that the trial court erred in entering a money judgment against him where Cheves prevailed only on his accounting claims and where the jury was never instructed concerning how to conduct a partnership accounting.Third, Williams asserts that the trial court improperly awarded prejudgment interest on the jury's award and that the court improperly included that prejudgment interest in the base amount upon which...