Havelick v. Chobot

• Court: Idaho Court of Appeals
• Writing for the Court: WALTERS; SWANSTROM, J., and SILAK, J.
• Citation: Havelick v. Chobot, 851 P.2d 1010, 123 Idaho 714 (Idaho App. 1993)
• Decision Date: 28 April 1993
• Docket Number: No. 18730,18730
• Parties: L.J. "Frank" HAVELICK and Virginia Havelick, husband and wife, Plaintiffs-Respondents, v. Edwin F. CHOBOT, Jr., Defendant-Appellant.

Page 1010

851 P.2d 1010

123 Idaho 714

L.J. "Frank" HAVELICK and Virginia Havelick, husband and wife, Plaintiffs-Respondents, v. Edwin F. CHOBOT, Jr., Defendant-Appellant.

No. 18730.

Court of Appeals of Idaho.

April 28, 1993.

Robert E. Covington, III, Coeur d'Alene, argued for defendant-appellant.

Charles F. Bean, Coeur d'Alene and Charles M. Anderson, Spokane, WA, argued for plaintiffs-respondents.

WALTERS, Chief Judge.

Edwin Chobot appeals from a denial of a motion for an accounting and a judgment entered on a jury verdict awarding damages to Chobot's partners in a beer and wine distributorship, Frank and Virginia Havelick. Chobot asserts that the district court erred when it held that an accounting of the partnership was not necessary because one had been performed in the partnership's bankruptcy proceedings, and that the court wrongly submitted to the jury issues relating to breach of a fiduciary duty and liability for alleged tortious interference with a contract. We affirm.

Facts and Procedural Background

In 1975, the Havelicks and Chobot formed a partnership to operate a beer and wine distributorship known as "Frank's Distributors," in the Sandpoint area. Frank Havelick became the managing partner. Chobot, a physician, acted only as an investor, living outside of Idaho much of the time and not concerning himself with the daily affairs of the business. The two primary assets of the business were wholesale equity agreements with Anheuser-Busch and the G. Heilman Brewing Company, which authorized the sale of products provided by those companies.

As part of the wholesale equity agreement with Anheuser-Busch the partnership was required to provide a refrigerated storage facility for beer and wine. The Havelicks, using their own money and credit, purchased land and constructed a suitable warehouse. Chobot did not invest in the building or participate in its construction because he did not believe it was a good investment. Thereafter, the Havelicks leased the building to the partnership.

The business lost money in the early 1980s and in 1985 Chobot sued the Havelicks alleging that Frank Havelick was physically disabled because of a stroke he had suffered and that Chobot was entitled to acquire the Havelicks' interest in the business under the partnership agreement. Chobot also sought to have a receiver appointed, arguing that the Havelicks had mismanaged the business, had taken financial advantage of the partnership for personal gain, and had caused significant financial losses. In September, 1985, an interim order was entered directing that an accountant conduct a financial review of the business, and that the partners exercise mutual control and management. An "audit accounting" was performed regarding several years of partnership business. No irregularities were found.

Faced with insolvency in 1985, the partners negotiated a sale of the partnership to Bill Jones Distributors (Jones), a local beer and wine distributor with thirty years experience. Anheuser-Busch approved of the sale, a prerequisite dictated by Anheuser-Busch and the only way its wholesale equity agreement could be transferred. In fact, Jones became the only approved purchaser. Ultimately, the Havelicks, Chobot, and Jones executed two "Asset Purchase Agreements." Chobot signed both agreements. Later, however, he refused to sign the closing documents, citing alleged irregularities and a desire to buy the distributorship for himself. His attempt to buy the distributorship was nullified when Anheuser-Busch stated that it would not approve of a sale to him because he did not have the necessary experience. Still, he refused to execute the closing documents.

In September, 1986, the Havelicks instituted the instant action against Chobot, seeking specific performance of the second of the two purchase agreements with Jones, dated March 19, 1986. The Havelicks also alleged that Chobot had engaged in misrepresentation, breach of fiduciary duty, intentional interference with the purchase agreement and the Havelicks' business opportunity, wanton, willful and malicious conduct, and defamation. The complaint also requested that the partnership be dissolved and that the court supervise the winding up of partnership affairs.

The Havelicks moved for a bifurcated trial. The court granted the motion and entertained the specific performance issue first. In October, 1986, the court issued a memorandum decision directing specific performance of the March 19, 1986, purchase agreement. The decision was based in part on the following factors: (1) no other adequate remedy was available; (2) Frank's Distributors was insolvent and threatened with litigation by creditors; (3) the wholesale equity agreements with Anheuser-Busch and the G. Heilman Brewing Company, the foundations of the distributorship, would be lost should bankruptcy occur; and (4) Jones, the only approved purchaser, was ready, willing and able to perform. The day the court entered its decision, Chobot, without notice to the Havelicks, placed the partnership in involuntary bankruptcy.

At the bankruptcy court, the Havelicks and Chobot appeared as creditors of the partnership. The court approved the sale of the assets to Jones, and the funds from the sale were distributed to satisfy the partnership debts. Chobot challenged certain claims as not representing actual partnership debts due to Frank Havelick's alleged mismanagement, but those claims apparently were not allowed. In December, 1987, the bankruptcy court issued an order confirming the plan of reorganization, and the business was ordered sold to Bill Jones.

Thereafter, a trial was scheduled in the state district court for the Havelicks' remaining claims. At one time the partners decided to enter a stipulated settlement, but on the day specified Chobot informed the court that he felt an accounting should be performed. He then moved for an accounting, and the Havelicks moved to enforce the parties' settlement agreement and for sanctions.

The court denied the motions. Addressing Chobot's demand for an accounting, the court held that the proceedings in bankruptcy court completely encompassed whatever accounting was required by statute or warranted by the facts. A jury trial was held on the Havelicks' claims of tortious interference with the contract with Bill Jones, breach of fiduciary duty, and defamation. The jury returned a verdict for the Havelicks, awarding them $275,894 in damages. Judgment was entered for that amount plus costs and attorney fees. Chobot moved for a new trial, which was denied. He appeals, asserting that the court erred when it denied his motion for an accounting and wrongly submitted issues to the jury as to (1) the Havelicks' "premature" claim of breach of fiduciary duty; and (2) Chobot's liability for tortious interference with the Bill Jones contract.

Standard of Review

The errors Chobot asserts present mixed issues of law and fact. As an appellate court, we will defer to findings of fact based upon substantial evidence, but we will review freely the conclusions of law reached by stating legal rules or principles and applying them to the facts found. Staggie v. Idaho Falls Consol. Hospitals, 110 Idaho 349, 715 P.2d 1019 (Ct.App.1986). Thus, we will uphold factual findings made by the district court so long as they are not "clearly erroneous." Id. We will review freely any statements of law and the court's conclusion that the facts as found did not entitle Chobot to relief. Id.

Request for Accounting

Chobot's primary argument is that the court erred when it determined that he was not entitled to an accounting because one had already been completed in the bankruptcy proceeding which dissolved the partnership and distributed its assets. We find no error.

Before discussing Chobot's argument, we find it helpful to address the Havelicks' contention that Chobot's motion for an accounting was improper because he did not assert a counterclaim for an accounting. We point out that the Havelicks did not specifically demand an accounting in their complaint, but asked the court "to direct dissolution of the partnership ... and to supervise the winding up of its affairs." However, an accounting is an integral part of ending a partnership. See Ramseyer v. Ramseyer, 98 Idaho 47, 558 P.2d 76 (1976). The district court correctly construed the complaint as requesting an accounting. The Havelicks' contention that Chobot was required to assert a counterclaim for an accounting is not persuasive.

The ordinary rule in equity that affirmative relief will not be granted to a defendant unless he makes claim to it by a cross bill or counterclaim has been held inapplicable in an action for an accounting.

1 AM.JUR.2D Accounts and Accounting § 61 (1962). This rule exists because a complaint requesting an accounting essentially represents an offer to pay any balance that may be found against the plaintiff. An accounting results in a rendering of judgment for the balance ascertained to be due. 1 AM.JUR.2D Accounts and Accounting § 44 (1962). Upon an accounting both parties are actors, and either the plaintiff or defendant is entitled to the aid of the court to recover the balance that may be found in a party's favor. Id. at § 61. The exception to the general rule that affirmative relief must be requested in a counterclaim is inapplicable, however where the relief granted is beyond the scope of the complaint. Id. at note 9. In the instant case, the relief granted was within the scope of the Havelicks' complaint, so the exception applies. ¹

Although the right to an accounting may arise as prescribed in I.C. § 53-322, an accounting is generally held to be an equitable proceeding, designed to comprehensively investigate partnership transactions and adjudicate the rights of the partners. Arnold v. Burgess, 113 Idaho 786, 747 P.2d 1315 (Ct.App.1987). Its goal is to ascertain the value of a partner's interest in the partnership as of...