Estate of Matteson v. Matteson

• Citation: 749 N.W.2d 557,2008 WI 48
• Decision Date: 29 May 2008
• Docket Number: No. 2005AP2607.,2005AP2607.
• Parties: ESTATE OF James H. MATTESON, Plaintiff-Respondent-Cross-Appellant, v. Robert R. MATTESON, Nancy L. Matteson and Matteson Communications, Defendants-Appellants-Cross-Respondents-Petitioners.
• Court: United States State Supreme Court of Wisconsin

749 N.W.2d 557

2008 WI 48

ESTATE OF James H. MATTESON, Plaintiff-Respondent-Cross-Appellant, v. Robert R. MATTESON, Nancy L. Matteson and Matteson Communications, Defendants-Appellants-Cross-Respondents-Petitioners.

No. 2005AP2607.

Supreme Court of Wisconsin.

Argued November 28, 2007.

Decided May 29, 2008.

For the defendants-appellants-cross-respondents-petitioners there were briefs by Stephen L. Morgan, Jennifer M. Krueger, and Murphy Desmond S.C., Madison, and oral argument by Stephen L. Morgan.

For the plaintiff-respondent-cross-appellant there were briefs by Charles J. Hertel, Daniel J. Posanski, and Dempsey, Williamson, Kelly & Hertel, LLP, Oshkosh, and oral argument by Charles J. Hertel and Daniel J. Posanski.

¶ 1 LOUIS B. BUTLER, JR., J

Robert Matteson, Nancy Matteson, and Matteson Communications (collectively, Robert) seek review of a published court of appeals opinion¹ that affirmed in part, reversed in part, and remanded a decision of the Fond du Lac County Circuit Court, the Honorable Robert J. Wirtz presiding, related to the dissolution of a business partnership.

¶ 2 Robert and James Matteson, who are half-brothers, owned Matteson Communications, a business that sold and serviced radios and related equipment. The dissolution of their business partnership began when James sent Robert a notice of dissolution in May 2001 which described the partnership as dissolved, subject only to winding up, but which also contained an apparent offer to allow the business to continue under certain conditions. After the Mattesons were unsuccessful in resolving a dispute over the amount due James for his share of the business, James sent Robert a formal Notice of Dissolution in November 2001 demanding a wind-up of the partnership. Following James' death, the Estate of James Matteson (the Estate) filed suit against Robert in December 2001 on various grounds, seeking relief including a wind-up.

¶ 3 After a bifurcated trial, the circuit court, applying the Wis. Stat. § 178.37 (2003-04)² continuation statute rather than the Wis. Stat. §§ 178.32-178.33(1) wind-up statutes, awarded the Estate a net judgment of $119,735.35, which reflected calculations of James' interest on the date of dissolution, business profits attributable to that share, interest, and costs. Both parties appealed.

¶ 4 The court of appeals affirmed in part, reversed in part, and remanded the cause to the circuit court with directions to modify the judgment. Specifically, the court of appeals affirmed the circuit court's application of Wisconsin's continuation, rather than wind-up, statutes; the circuit court's calculations under that statute related to application of a predissolution profit sharing ratio; and the circuit court's order requiring payment of one year's interest as a condition of stay of execution. The court of appeals, however, reversed the circuit court's rulings regarding Robert's compensation for his labor efforts.

¶ 5 Robert petitioned this court for review, raising the issues of the appropriate burdens of proof and method of calculating "profits attributable" under Wis. Stat. § 178.37, and challenging the aspect of the court's stay of execution order requiring payment of one year's worth of interest at 12 percent along with the judgment.

¶ 6 We conclude that the Estate, representing the retired partner, has the burden under Wis. Stat. § 178.37³ of proving the profits attributable to the business's use of the retiring partner's right in the property, and that the circuit court erred in applying a predissolution profit-sharing ratio as the basis for postdissolution division of profits under § 178.37. However, we conclude that the circuit court did not err in conditioning a stay of execution of judgment upon Robert's depositing with the court the judgment amount plus 12 percent interest for one year. We therefore affirm in part, reverse in part, and remand this matter to the circuit court for further proceedings consistent with this opinion.

I

¶ 7 Matteson Communications was created in 1950 by Ralph S. Matteson, the father of half-brothers James and Robert. The business involves the servicing and sales of two-way radios and related equipment. James, who joined the business in the early 1960s, was a licensed communications engineer; Robert, who joined the business in the mid-1970s, is not. When their father retired in the late 1970s, James and Robert continued the business as a partnership. For the most part, James performed the service, installation, and repair work, and Robert handled customer service and sales. The business was conducted out of James' residence, and there was no written agreement formalizing the partnership. However, from 1987 until the partnership's dissolution, the agreed upon annual profit-sharing arrangement was for James to receive 55 percent and Robert to receive 45 percent, with losses as well as profits divided on that 55/45 percent basis.

¶ 8 In July 2000, James advised Robert of his intention to leave the business and retire, but disputes arose regarding dissolution of the partnership. Negotiations were unsuccessful, and in a letter dated May 31, 2001, James' attorney advised Robert's attorney that James was providing notice of dissolution of the partnership effective as of May 31, 2001, subject only to winding up, and that James (and his wife, Darlene) would no longer be working for the business. The letter also stated that James did not want the business to shut down "because of the concern that this might cause damage to the goodwill and continuing business[,]" and offered a settlement. Upon James' request but without a wind-up, Robert transferred the business's equipment, inventory and other assets from James' residence; Robert then continued operating Matteson Communications, restructuring it as a limited liability company, and using the same business assets, product lines, inventory, bank accounts, equipment, vendors, and customers.

¶ 9 On November 12, 2001, James issued a Notice of Dissolution pursuant to Wis. Stat. § 178.26, electing that the affairs of Matteson Communications be wound up forthwith.⁴ A month later, on December 11, James died. On December 20, 2001, his estate sued Robert and Matteson Communications, seeking, in relevant part, a winding up and distribution of wind-up proceeds pursuant to Wis. Stat. § 178.32; payment of 55 percent of the profits earned between January 1, 2001, and November 12, 2001, as well as those earned during wind-up; an accounting of the business; the appointment of a receiver to manage and conduct the partnership's business during the winding up process, to liquidate assets, and to take other necessary actions; and damages and injunctive relief. The complaint also alleged breach of fiduciary duties, failure to provide partnership documents, violations of Wis. Stat. § 178.15, unjust enrichment, and bad faith. An amended complaint added Nancy Matteson, Robert's wife, as a defendant.

¶ 10 During the trial, the Estate stipulated to the dismissal of its claims for appointment of receivership and for information, but it did not dismiss its other claims, including claims for winding up and accounting. Following the trial, each side submitted post-trial briefs.⁵ The Estate's post-trial brief asked the court to determine whether the business of the partnership was continued by Robert, or whether the partnership was "in a wind-up," setting forth requested remedies for each scenario. The brief also stated that the Estate had the right to choose either continuation or wind-up remedies because Matteson Communications had "continued on after it dissolved on an uninterrupted basis [and therefore the] Estate elects to claim against the continuing business of Matteson Communications as a creditor."

¶ 11 Robert's post-trial brief was in the form of a letter containing various exhibits, which Robert described as establishing that damages flowing directly from the partnership far exceeded the company's existing assets at the time of dissolution. In contrast with the Estate's brief, Robert's letter brief identified the court's request as being limited to a request for the calculations Robert provided rather than the type of legal analysis provided by the Estate's brief.⁶

¶ 12 The court issued two separate sets of findings of facts and conclusions of law. In the first set of findings and conclusions, dated August 9, 2004, the court found that the partnership dissolved on May 31, 2001, but that there had not yet been a wind-up of the affairs of the partnership, and that in light of the partnership's continuation, Wis. Stat. § 178.37 was the applicable statute.⁷ The court concluded that the Estate was entitled to $68,641, which the court describes as the value of James' 55-percent share of the partnership as of May 31, 2001, minus 55 percent of the fee for a court-ordered accountant. The court found that, pursuant to Wis. Stat. § 178.37, the Estate was additionally entitled to an election of either (1) interest on that amount, or (2) 55 percent of the business's profits from May 31, 2001, through the date such profits were paid to the Estate. In its second set of findings, the circuit court ruled, without apparent objection by the parties, that the Estate chose the second option, which it described as an election of "the 55% share of such profits that are attributable to the plaintiff."⁸

¶ 13 The circuit court retained jurisdiction over the determination of the amounts of interest and profits, noting that the parties agreed that accountant Dave Haas would conduct a valuation of profits. The court also reserved a ruling on whether Robert was entitled to compensation for his work that occurred after May 31, 2001. The court then held a separate trial on these issues, during which Haas's partner, Kenneth Stephani, CPA, testified about the business's profits after May 31, 2001. He gave two figures for the profits accrued between June 1, 2001, and February 28 2005,...