Gibson v. Gibson Family Ltd. P'ship
| Decision Date | 23 March 2016 |
| Docket Number | No. 27476.,27476. |
| Citation | 877 N.W.2d 597 |
| Parties | Michael A. GIBSON, Plaintiff and Appellant, v. GIBSON FAMILY LIMITED PARTNERSHIP and Delores Gibson, Defendants and Appellees. |
| Court | South Dakota Supreme Court |
Alex M. Hagen, Shawn M. Nichols of Cadwell, Sanford, Deibert & Garry, LLP Sioux Falls, South Dakota, Attorneys for plaintiff and appellant.
Edwin E. Evans of Evans, Haigh & Hinton, LLP, Sioux Falls, South Dakota, Attorneys for defendants and appellees.
, Justice.
[¶ 1.] A limited partner sued the limited partnership and general partner claiming that the general partner breached her fiduciary duty. The limited partner also sought dissociation from the partnership for value. A jury rendered a defense verdict on the fiduciary claim, and the circuit court denied the limited partner's request for dissociation. The limited partner appeals the court's refusal to enter an order of dissociation. In the alternative, the limited partner requests a new trial on the breach of fiduciary duty claiming evidentiary errors. We affirm.
[¶ 2.] In 2002, Delores Gibson and her two sons, Michael and Greg Gibson, created the Gibson Family Limited Partnership (GFLP) as an estate-planning tool for Delores's estate. Michael and Greg each own a 45.8% interest, and Delores owns the remaining 8.4% interest. Neither Michael nor Greg paid for their interests in the partnership. Delores serves as the general partner, and Michael and Greg are limited partners. As the sole general partner, Delores is responsible for management of the partnership. Under the partnership agreement, Delores has sole authority to decide with whom the partnership conducts business and whether to distribute income. As limited partners, Michael and Greg have no significant duties.
[¶ 3.] GFLP property includes 2,060 acres of land that Delores deeded to the partnership. Michael and Greg jointly farmed and ranched on the 2,060 acres until 2006. In 2006, the brothers split and each started his own cattle and farming operation. In April 2007, GFLP loaned Greg $350,000. That same month Michael filed suit against GFLP, Delores, and Greg, asserting various claims, including a claim that Delores breached her fiduciary duty as GFLP's general partner.1 In September 2008, GFLP leased the 2,060 acres to Champaygn Ranch, Inc., a business owned by Greg and his wife. In December 2009, the 2007 suit went to trial. The jury rejected Michael's claims that Delores breached her fiduciary duty by making the loan and leasing the property to Greg.
[¶ 4.] In December 2010, GFLP renewed the lease with Champaygn Ranch for a twenty-year term. In March 2011, GFLP entered into a contract for deed to sell 830 acres of the leased property to Greg for $1,100,000, a price based on an appraisal that Michael disputed at trial.2 GFLP and Greg also amended the twenty-year lease to remove the 830 acres purchased under the contract for deed. Greg continued to lease the remaining 1,230 acres of partnership property.
[¶ 5.] In June 2011, Michael commenced this action asserting six claims against GFLP and Delores in her capacity as general partner.3 Michael again claimed that Delores breached her fiduciary duty to GFLP based in part on the partnership's land transactions with Greg. Michael contended that he was "frozen out" out of the partnership and that he was incurring tax liabilities without receiving partnership distributions to pay them.
[¶ 6.] The case was tried before a jury over four days. At the close of evidence, the court granted Michael's motion to amend his complaint to also seek equitable relief in the form of dissociation from GFLP for value. The parties stipulated that the court would decide Michael's equitable dissociation claim after the completion of the jury trial. The jury returned a defense verdict on the fiduciary duty claim, and the remaining claims were either dismissed or have not been appealed.
[¶ 7.] After post-trial briefing, the court denied Michael's dissociation claim. He subsequently moved to reconsider based on newly discovered evidence. The court denied the motion and entered findings of facts and conclusions of law denying dissociation.
[¶ 8.] Michael appeals raising three issues:
[¶ 9.] Michael first argues that he was entitled to dissociate for value. There is no dispute GFLP is a limited partnership; Michael was not entitled to withdraw under the limited partnership agreement; and therefore, Michael was not entitled to withdraw under South Dakota's version of the Uniform Limited Partnership Act (ULPA), SDCL chapter 48–7. However, Michael points out that "dissociation"4 is not mentioned in ULPA. Therefore, Michael claims entitlement to dissociation under South Dakota's version of the Uniform Partnership Act, commonly referred to as the Revised Uniform Partnership Act (RUPA), SDCL chapter 48–7A, which recognizes events resulting in dissociation. He asserts that RUPA applies under a ULPA linking statute, SDCL 48–7–1105
, which provides: "In any case not provided for in [ULPA], the provisions of [RUPA] govern."
[¶ 10.] Assuming that the linking provision applies, Michael claims entitlement to dissociation under two RUPA provisions. He relies on SDCL 48–7A–601(7)(iii)
, which recognizes dissociation if a partner can no longer perform his or her duties under the partnership agreement. Michael also claims entitlement to dissociation under SDCL 48–7A–104, which authorizes principles of equity to supplement RUPA under certain circumstances. Although the parties have devoted substantial briefing and argument to the linking question—whether dissociation applies under RUPA because ULPA prohibits "withdrawal" but not "dissociation"—we do not reach that question in this case. We do not reach it because even if we assume that limited partners may dissociate under RUPA, Michael cannot dissociate under either of the two RUPA provisions upon which he relies.
[¶ 11.] Michael first claims dissociation under SDCL 48–7A–601(7)(iii)
. That statute provides that dissociation occurs upon a "judicial determination that the partner has otherwise become incapable of performing the partner's duties under the partnership agreement[.]" SDCL 48–7A–601(7)(iii)
. Michael does not, however, identify the "partner's duties" that he is incapable of performing under the GFLP agreement. Moreover, the circuit court found that Michael has no significant duties under the GFLP agreement, and Michael has not appealed that finding. At oral argument, Michael admitted that his position in the limited partnership is like that of a passive investor. Accordingly, even if RUPA applies via the linking provision of ULPA, Michael is not entitled to dissociation under SDCL 48–7A–601(7)(iii).
[¶ 12.] Michael also has no claim to dissociation under SDCL 48–7A–104(a)
. That statute provides that "[u]nless displaced by particular provisions of this chapter, the principles of law and equity supplement this chapter." SDCL 48–7A–104(a). Michael argues that he is entitled to dissociate on supplemental grounds of equity because no provision in RUPA precludes a court from compelling a partner's dissociation on equitable grounds. We disagree with Michael's reasoning. Because SDCL 48–7A–601 enumerates all of the grounds for dissociation and "equity" is not included, see Rev. Unif. P'ship Act § 601 cmt. 1 (Unif. Law Comm'n 1997), general equitable grounds have been displaced by the statutory enumeration in SDCL 48–7A–601. Consequently, assuming without deciding that RUPA applies, Michael's claim for dissociation on supplemental principles of equity under SDCL 48–7A–104 is not permitted.5 Further, because a stand-alone claim of equitable dissociation is not permitted, we need not address Michael's second issue—whether the court erroneously considered Michael's unclean hands in denying equitable dissociation. We affirm the circuit court's denial of dissociation.
[¶ 13.] In his final issue, Michael contends that the court erred in two evidentiary rulings in the jury trial. He also contends that the court erred by refusing to reconsider dissociation based on newly discovered evidence.
[¶ 14.] The first evidentiary issue involved the $350,000 loan to Greg. Prior to trial, the circuit court ruled that evidence of the loan was precluded by res judicata because the propriety of the loan had been previously litigated in the 2007–2009 case. Michael, however, claims that the loan became admissible during this trial to impeach Delores after she testified that she had not made any distributions "because the money is not there." Michael also introduced a GFLP balance sheet showing that the loan existed. Michael argues this evidence "opened the door" to impeach Delores's statement that she did not make distributions because the partnership was illiquid. He points out that the loan to Greg was part of the illiquidity problem.
[¶ 15.] An evidentiary ruling will not be overturned unless error is shown to be prejudicial. McDowell v. Citibank, 2007 S.D. 52, ¶ 26, 734 N.W.2d 1, 10
. "Error is prejudicial when, in all probability, it produced some effect upon the final result and affected some rights of the party assigning it." Id. Michael contends that the court's refusal to allow the loan evidence prejudiced his breach of fiduciary duty claim because the evidence would have shown that Delores's favorable partnership loan to Greg caused her failure to make distributions. However, under the partnership agreement, Delores was not required to make distributions and she had complete discretion to decide with whom and how to...
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