Lettunich v. Lettunich

• Decision Date: 29 March 2005
• Docket Number: No. 28619.,28619.
• Citation: 111 P.3d 110,141 Idaho 425
• Parties: Mike LETTUNICH, in his capacity as general partner and limited partner of Lettunich & Sons Limited Partnership, Plaintiff-Respondent, v. Edward LETTUNICH, in his capacity as general partner and limited partner of Lettunich & Sons Limited Partnership, Defendant-Appellant, and Lettunich & Sons Limited Partnership, an Idaho limited liability partnership, pursuant to Idaho Code § 53-300 et seq.; and Ann Lettunich, in her capacity as limited partner in Lettunich & Sons Limited Partnership, Defendants.
• Court: Idaho Supreme Court

111 P.3d 110

141 Idaho 425

Mike LETTUNICH, in his capacity as general partner and limited partner of Lettunich & Sons Limited Partnership, Plaintiff-Respondent, v. Edward LETTUNICH, in his capacity as general partner and limited partner of Lettunich & Sons Limited Partnership, Defendant-Appellant, and Lettunich & Sons Limited Partnership, an Idaho limited liability partnership, pursuant to Idaho Code § 53-300 et seq.; and Ann Lettunich, in her capacity as limited partner in Lettunich & Sons Limited Partnership, Defendants.

No. 28619.

Supreme Court of Idaho, Boise, February 2005 Term.

March 29, 2005.

Rehearing Denied May 4, 2005.

White Peterson P.A., Nampa, for appellant. William A. Morrow argued.

Hawley Troxell Ennis & Hawley, LLP, Boise, for respondent. Merlyn W. Clark argued.

JONES, Justice.

This appeal challenges several orders and the final judgment entered by the district court in an action to dissolve a partnership and to enforce a settlement agreement made by the parties during the course of the action. We affirm the district court, except for two orders, one of which we reverse; the other we vacate and remand for further proceedings.

I. BACKGROUND

In 1969, Peter Lettunich and his family moved to Payette County, Idaho, where they established and operated a cattle ranch situated on the banks of the Payette River. The Lettunich family formed Lettunich & Sons Partnership, a general partnership, to conduct the business. When Peter passed away, his partnership interest passed to his sons Mike and Ed, his wife Anna, and his daughter Tess Ucovich. In 1985, Tess decided to sell her interest in the partnership, so she and her brothers and their wives (who were not partners) executed an agreement for the sale of her interest in the partnership. Tess took a promissory note.

In 1991, the brothers reorganized the partnership into a limited partnership (the Partnership). Anna became a limited partner and Mike and Ed each became both general and limited partners. The brothers ran the business with little formality: they never conducted formal meetings, they used Partnership funds for non-Partnership purposes, and they lived on Partnership property. Neither brother objected to such informalities.

In 1997 the Payette River flooded, forcing the brothers to move their cattle to higher ground. Unfortunately, the cattle escaped the flood only to eat toxic onions, causing the death of some 250 head. The ranch was uninsured so the Partnership had to absorb the financial loss. To keep the business afloat, the Partnership took out several loans. Its financial condition, however, did not improve. The Partnership's bank ceased lending, so in 1998 the brothers each committed some of their own funds to the Partnership. Despite these efforts, the Partnership did not regain financial stability. As the Partnership's financial condition soured, so too did relations between the brothers. Eventually, all communication between them ceased, save for the occasional note or fax transmission.

Things got no better—financially or between the brothers—and Mike considered selling his interest in the Partnership. A sale never materialized. In March 1999, Mike filed an application in the district court for Payette County to dissolve the Partnership. That October, the parties mediated the matter and entered into a "Stipulation of Compromise and Settlement Agreement" (the Compromise), which provided for winding up and terminating the Partnership and authorized a dispersing agent to carry out such provisions. The Partnership hired the dispersing agent shortly thereafter. The court approved the Compromise and retained jurisdiction over the matter to oversee its performance.

Ed wanted Mike's interest in the Partnership so the Compromise included an option for Ed to buy Mike's interest. According to the Compromise, if Ed did not exercise his option, the dispersing agent would liquidate the Partnership's assets. Ed did not exercise his option, so after the option period expired the dispersing agent sold the Partnership's personal property. The dispersing agent also located a willing buyer, Fallon Enterprises, Inc. (Fallon), for the real estate and moved the court for an order authorizing him to sell the property. Ed promptly filed a motion to reject the dispersing agent's motion and moved to authorize sale of the property to him. Mike filed a motion to reject Ed's motion and joined the dispersing agent's motion. After conducting a hearing on the motions, the court concluded the Fallon offer was the better one for the Partnership. It issued an order authorizing the sale of the property to Fallon and set May 1, 2001 as the closing date. The property consisted of eight legally separate parcels. Ed filed a motion to exclude one of them, known as "Parcel H," contending it was not Partnership property. The court found otherwise and denied his motion.

With the sale of the property approaching, Ed filed a bankruptcy petition on behalf of the Partnership on April 18, 2001. He quickly dismissed it, but within days filed a second bankruptcy petition. Upon Mike's motion to dismiss, the bankruptcy court dismissed this petition on May 1, 2001. Meanwhile, the Partnership owed one of its creditors, MetLife, nearly $400,000 and was planning to pay it off with proceeds from the sale of the property. The dispersing agent later testified that MetLife had been willing to waive a prepayment penalty of around $13,000 if the sale had closed on May 1. May 1 came and went, but the sale did not close. Ed filed another motion to reconsider regarding the sale of the property and a motion to compel acceptance of a new offer of his, or an offer his daughter's company, River Cattle Company, had produced. After a hearing the court denied both motions and reset the closing date to June 20, 2001. In the following weeks Ed filed numerous motions, with both the district court and this Court, all seeking in some form or another to halt the impending sale of the property. All were denied and the sale finally closed on September 19, 2001.

The winding-up process spawned many other issues and, over the course of seven days in November 2001, December 2001, and January 2002, the court conducted hearings on the remaining issues. In April 2002 the court issued its Findings of Facts and Conclusions of the Court (Findings and Conclusions). Therein it determined, relevant to this appeal, (1) the Compromise provided for settlement of the partnership capital accounts through October 25, 1999; (2) the Tess Ucovich promissory note was a Partnership obligation and payable immediately from Partnership assets; (3) the MetLife prepayment penalty was to be charged against Ed's capital account; (4) the personal funds committed to the Partnership by Mike and Ed in 1998 were capital contributions, not loans; and (5) the dispersing agent's attorney fees were payable from Partnership funds.

Mike filed an application seeking attorney's fees, which, after a hearing, the court granted. With the final accounting completed and all the property liquidated, the court issued a Judgment and Decree of Partnership Dissolution and Termination (Judgment) on August 2, 2002. This appeal timely followed.

II. STANDARD OF REVIEW

When we consider an appeal from a district court sitting as the fact finder, we do so through our abuse-of-discretion lense; that is, we examine whether the trial court (1) rightly perceived the issues as ones of discretion; (2) acted within the outer boundaries of that discretion and appropriately applied the legal principles to the facts found; and (3) reached its decision through an exercise of reason. Sun Valley Shopping Ctr. v. Idaho Power Co., 119 Idaho 87, 94, 803 P.2d 993, 1000 (1991). In conducting our review, we liberally construe the district court's findings in favor of the judgment. Ervin Constr. Co. v. Van Orden, 125 Idaho 695, 699, 874 P.2d 506, 510 (1993). We will not disturb a district court's findings of fact unless they are clearly erroneous. A court's findings of fact are not clearly erroneous if they are supported by substantial and competent, though conflicting, evidence. Sun Valley Shamrock Resources, Inc. v. Travelers Leasing Corp., 118 Idaho 116, 794 P.2d 1389 (1990); Murgoitio v. Murgoitio, 111 Idaho 573, 576, 726 P.2d 685, 688 (1986); I.R.C.P. 52(a).

III. DISCUSSION

In the ensuing paragraphs, we consider the district court's finding that Parcel H was Partnership property, its order authorizing the sale of the property, its finding on the accounting called for in the Compromise, its order on the Ucovich promissory note, its finding on the funds committed by the brothers to the Partnership in 1998, its order charging Ed with the MetLife prepayment penalty, and its order on attorney fees. We also consider whether to award attorney fees on appeal.

A. Parcel H

Ed contends that Parcel H, which was apparently titled in the names of Anna Lettunich as widow, Ed and Sandra as husband and wife, and Mike and Renee as husband and wife, was not Partnership property.¹ Since Idaho is a community property state, he argues Sandra and Renee held community property interests in the parcel, there was no evidence of transmutation, and thus the district court erred in divesting the wives of their interest without their participation in the case. Under Idaho Code section 53-308, property acquired with partnership funds is partnership property unless a contrary intent is shown. I.C. § 53-308(2) (repealed 2001).² Typically, this is so even if the property is taken in the name of someone not associated with the partnership. Bussell v. Barry, 61 Idaho 350, 102 P.2d 280 (1940); see also Murgoitio, 111 Idaho at 576-577,726 P.2d at 688-689; 59A AM.JUR.2D Partnership § 258 (2003), citing Korziuk v. Korziuk, 13 Ill.2d 238, 148 N.E.2d 727 (1958); Rizzo v. Rizzo, 3 Ill.2d 291, 120 N.E.2d 546, 552 (1954); Einsweiler v. Einsweiler, 390 Ill. 286, 61 N.E.2d 377 (1945). Intent is a question...