DCM INVEST. CORP. v. PINECREST INVEST. CO.

• Decision Date: 19 October 2001
• Docket Number: No. 990717, No. 990745.
• Citation: 34 P.3d 785,2001 UT 91
• Parties: DCM INVESTMENT CORPORATION, Plaintiff and Appellant, v. PINECREST INVESTMENT CO., a Utah limited partnership, G.F.I., Ltd., a Utah limited partnership, Walt Gasser & Associates, Inc., G. Walter Gasser, an individual, Defendants and Appellees.
• Court: Utah Supreme Court

34 P.3d 785
2001 UT 91

DCM INVESTMENT CORPORATION, Plaintiff and Appellant,
v.
PINECREST INVESTMENT CO., a Utah limited partnership, G.F.I., Ltd., a Utah limited partnership, Walt Gasser & Associates, Inc., G. Walter Gasser, an individual, Defendants and Appellees

Nos. 990717, 990745.

Supreme Court of Utah.

October 19, 2001.

34 P.3d 786

Philip R. Fishler, Dennis M. Astill, H. Burt Ringwood, Shawn T. Welch, Salt Lake City, for plaintiff

Max D. Wheeler, Michael R. Carlston, Rodney R. Parker, Salt Lake City, for defendants.

DURHAM, Justice:

¶ 1 DCM Investment Corporation (DCM) appeals from an order of summary judgment holding that an assignment to DCM of a debtor's joint venture interest by a bankruptcy court triggered a right of first refusal belonging to the debtor's co-venturer. DCM

34 P.3d 787

contends that the assignment by the debtor as part of a settlement transaction did not constitute a bona fide offer of purchase within the meaning of the joint venture agreement, that the right of first refusal was not properly exercised, and that the district court erred in its valuation of the joint venture interest at $36,102. We affirm

BACKGROUND

¶ 2 On May 31, 1984, Sheltered Acquisitions Limited IV (SAL IV), a limited partnership, entered into a joint venture agreement with Pinecrest Investment Company (PIC) to own and operate the Pinecrest Shopping Center in Logan, Utah under the name "Pinecrest Associates." SAL IV provided initial capital of between $500,000 and $600,000 for a fifty-percent interest in the joint venture. At that time, the property was valued at $3,350,000 and was managed by property management entities under the direction of defendant PIC.

¶ 3 On September 3, 1992, Candler & Associates (Candler) obtained a jury verdict of $199,940 against SAL IV and its individual partners in a lawsuit arising out of a dispute over commissions due on the sale of various aircraft. Prior to the formal entry of judgment, SAL IV filed for protection under chapter 11 of the U.S. Bankruptcy Code; SAL IV's only asset was its fifty percent undivided interest in Pinecrest Associates.

¶ 4 On December 22, 1992, Candler filed a complaint against the limited partners of SAL IV seeking to collect its judgment. To avoid further creditor action and to terminate the pending litigation against the individual limited partners of SAL IV, the SAL IV partners decided to assign their interest in Pinecrest Associates to Candler. On March 11, 1993, SAL IV and Candler signed a "Settlement Agreement" assigning SAL IV's interest in Pinecrest Associates to DCM, Candler's assignee, for a $10,000 credit against Candler's bankruptcy claim against SAL IV. The agreement also provided for discounts of twenty-five percent on the individual obligations of the SAL IV limited partners, independent of the assignment of the joint venture interest, if they paid fifty-one percent of the aggregate debt within thirty days. The assignment of SAL IV's interest in Pinecrest Associates involved only rights to distributions, voting rights, and indemnification; it did not include assumption by DCM of any debts or liabilities associated with the interest.

¶ 5 On April 6, 1993, PIC received a letter from SAL IV informing it of the proposed assignment and settlement agreement, and of a hearing scheduled in the bankruptcy court for approval of the settlement agreement. PIC filed an objection to the proposed settlement agreement, claiming that it did not comply with the requirements of the joint venture agreement and with state partnership law. At the hearing before the bankruptcy court, the settlement was approved. Subsequent to the hearing, PIC gave notice to SAL IV that it intended to exercise its right of first refusal under section 10.2 of the joint venture agreement. In response, DCM claimed that the settlement agreement did not trigger a right of first refusal. Accordingly, on May 21, 1993, PIC informed SAL IV that, if for any reason it was unable to exercise its right of first refusal under section 10.2, it intended to purchase the interest SAL IV was attempting to assign to DCM under the default provision of section 9 of the joint venture agreement. Nevertheless, the joint venture continued to operate, and on February 6, 1996, DCM filed this lawsuit seeking recognition as a full joint venture partner. PIC filed a counterclaim seeking declaratory relief on its claim to a right of first refusal. Eventually, PIC filed a motion for partial summary judgment, which was granted on January 29, 1999. The district court held that the written instrument transferring SAL IV's interest to DCM was in contravention of the joint venture agreement and that PIC was entitled to exercise its right of first refusal. Pursuant to a motion for judgment establishing the amount to be paid by PIC to Candler for the interest in the joint venture, an order was entered on August 12, 1999 finding that the value of the interest in the joint venture was $36,102.

STANDARD OF REVIEW

¶ 6 This case comes before the court after the district court granted summary

34 P.3d 788

judgment in favor of PIC. "In reviewing a grant of summary judgment, we view the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party." Dixon v. Pro Image, Inc., 1999 UT 89, ¶ 12, 987 P.2d 48. In addition, we give the trial court's legal decisions no deference, reviewing them for correctness. Dairy Prod. Servs. Inc. v. City of Wellsville, 2000 UT 81, ¶ 15, 13 P.3d 581

ANALYSIS

¶ 7 Before us are the following issues: (1) what...