Lutz v. Schmillen

• Decision Date: 18 July 1995
• Docket Number: No. 94-5,94-5
• Citation: 899 P.2d 861
• Parties: Kennis LUTZ, Marsha Lutz, Loren Lutz and Marion Lutz d/b/a Elk Track Ranch and Sheriden Trails, and Elk Track, Inc., a Wyoming business corporation, Appellants (Defendants), v. Scott SCHMILLEN and Josephine Schmillen, Appellees (Plaintiffs).
• Court: Wyoming Supreme Court

Page 861

899 P.2d 861

Kennis LUTZ, Marsha Lutz, Loren Lutz and Marion Lutz d/b/a Elk Track Ranch and Sheriden Trails, and Elk Track, Inc., a Wyoming business corporation, Appellants (Defendants), v. Scott SCHMILLEN and Josephine Schmillen, Appellees (Plaintiffs).

No. 94-5.

Supreme Court of Wyoming.

July 18, 1995.

Rehearing Denied Aug. 16, 1995.

Lawrence B. Hartnett, Jackson, for appellants.

Andrew L. Breffeilh, Jackson, for appellees.

Before GOLDEN, C.J., and THOMAS, MACY, TAYLOR and LEHMAN, JJ.

MACY, Justice.

Appellants Kennis Lutz, Marsha Lutz, Loren Lutz, Marion Lutz, and Elk Track, Inc. appeal from the findings of fact, conclusions of law, and order for accounting and appointing master; from the district court's judgment; and from the master's final report which was adopted in the district court's judgment.

We affirm.

Issues

Appellants present five issues for our review:

A. The trial court erred in finding that the Goosewing Ranch was an asset of the partnership.

B. In the alternative, assuming that the Goosewing Ranch is partnership property, the trial court erred in adopting the finding of the master that the appellees were entitled to one-half of the profits of the post dissolution sale of the Goosewing Ranch, rather than the right to elect to receive one-half of the profits, if any, derived from the use of the appellees' interest in the Goosewing Ranch in operation of the partnership business, in lieu of interest.

C. Assuming that the appellees are entitled to one-half of the post-dissolution profit from the sale of the Goosewing Ranch, the trial court erred in adopting the findings of the master as to the amount of such profit, as the master ignored the clear undisputed evidence regarding the liabilities of the partnership in determining the amount of any such profit.

D. The trial court erred in not finding that the value of the appellants' capital contributions to the partnership was $540,000.00 and by not requiring the master to determine the value of appellees' interest in the partnership on October 31, 1989.

E. The trial court erred in adopting the findings of the master that the amount of the capital contribution of the appellees was $270,000.00

Facts

Loren Lutz and Marion Lutz, husband and wife, owned Elk Track Ranch, Inc. They formed that corporation when they acquired the title to the Elk Track Ranch located in Teton County.

At all times relevant to this appeal, another Wyoming corporation existed which was known as Elk Track Ranch Outfitters, Inc. and which conducted a hunting and outfitting business at the Elk Track Ranch. Loren owned fifty-one percent of the Elk Track Ranch Outfitters shares, and Kennis Lutz, Loren's and Marion's son, owned the remaining forty-nine percent of the corporation shares. Kennis had the authority to bind Loren, Elk Track Ranch, Inc., and Elk Track Ranch Outfitters, Inc. in the transaction with the Schmillens.

Scott Schmillen and Josephine Schmillen, husband and wife, met Kennis at a sports show in Anaheim, California, where Kennis was promoting the hunting business operated at the Elk Track Ranch. Thereafter, the Schmillens saw Kennis every year at the sports show, and they became friends.

Sometime in 1985, the Schmillens told the Lutzes that they might be interested in investing in some manner in the Elk Track Ranch operation. In January 1986, Loren and Kennis met with the Schmillens at the Schmillens' home in Long Beach, California. At that meeting, the parties more seriously discussed the possibility of the Schmillens becoming investors. The Schmillens said that they could not make an immediate commitment because Josephine had just accepted a new position at Dean Witter Reynolds and wanted to work in this position for the experience but that they could commit to moving to Wyoming in two years. Kennis wanted the Schmillens to give him a monetary commitment in the amount of $25,000, which the Schmillens agreed to do.

In July 1986, the Schmillens again met with the Lutzes. The parties agreed that the Schmillens would contribute $270,000 in return for one-half of the interest in five acres of the Elk Track Ranch along with various buildings located thereon, the total of which was valued at $540,000. Josephine drafted a document which contained the parties' agreement on the basis of their discussions at this meeting. Kennis and the Schmillens signed this document.

In May 1988, the Schmillens moved to Jackson. The parties agreed that, because of Josephine's experience with Dean Witter Reynolds, she would keep the books for the partnership. Kennis and Scott began to work at the Elk Track Ranch.

By September 1988, virtually all the money had been spent, and the improvements which the parties had planned for the Elk Track Ranch in order to make it operable had not been completed. At about this time, Loren learned that the Goosewing Ranch was for sale at a reduced price. The Goosewing Ranch was located about five miles from the Elk Track Ranch and was a fully operational facility. The parties thought that the acquisition of the Goosewing Ranch could help the economic situation at the Elk Track Ranch because they could use some of the income derived from the Goosewing Ranch to further improve the Elk Track Ranch.

The Schmillens and the Lutzes attempted to find investors to enable them to acquire the Goosewing Ranch. Kennis was ultimately successful in raising the money which was needed to buy the Goosewing Ranch. Kennis and Marsha closed on the Goosewing Ranch purchase in May 1989. Later that month, the Schmillens met with Loren and Kennis. Kennis proposed that they determine the value of the Schmillens' interest in the Elk Track Ranch and use that value to calculate their proportionate share of the combined value of the Elk Track Ranch and the Goosewing Ranch, which would result in the Schmillens having a smaller ownership interest in the combined properties. The Schmillens rejected this proposal.

Later that year, the Schmillens informed the Lutzes that they wanted to sell their interest to the remaining partners, but the parties could not agree on how their affairs should be settled. The Schmillens filed this lawsuit on December 29, 1989, and the Lutzes sold the Goosewing Ranch in April 1991.

After holding a bench trial, the district judge entered his findings of fact, conclusions of law, and an order for accounting and appointed a master. The district judge found that, even though "the agreement [did] not mention the word 'partnership[,'] ... the testimony at the trial [was] uncontroverted that the parties intended to form a partnership and did form a partnership." He determined what the parties' agreements were with respect to their partnership and ordered the master to wind up the partnership affairs. The master filed his final report on October 29, 1993, and the district judge simultaneously filed his judgment in which he adopted the master's final report in its entirety and granted a money judgment in favor of the Schmillens. This appeal followed.

Standard of Review

In resolving the questions presented by the Lutzes, we must determine whether sufficient admissible evidence supported the findings made by the district court and the special master. We assume that the evidence in favor of the successful party is true. We leave out of consideration entirely the evidence presented by the unsuccessful party which conflicts with the successful party's evidence, and we afford every favorable inference to the successful party's evidence which may be reasonably and fairly drawn from that evidence. Sannerud v. Brantz, 879 P.2d 341, 344 (Wyo.1994). "The findings of a master, to the extent that the court adopts them, shall be considered as the findings of the court." W.R.C.P. 52(a).

In accordance with W.R.C.P. 52(a), this Court will not set aside a district court's findings of fact unless the findings are clearly erroneous. Hopper v. All Pet Animal Clinic, Inc., 861 P.2d 531, 538 (Wyo.1993). " 'A finding is "clearly erroneous" when[,] although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.' " Id. (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)). Stated alternatively: "[A] determination that a finding is against the great weight of the evidence means a finding will be set aside even if supported by substantial evidence." Id. See also Samuel v. Zwerin, 868 P.2d 265, 267 (Wyo.1994). We review a district court's conclusions of law de novo on appeal. Hopper, 861 P.2d at 538.

McNeiley v. Ayres Jewelry Co., 886 P.2d 595, 597 (Wyo.1994).

Status of Goosewing Ranch

The Lutzes contend that the district court erred by finding that the Goosewing Ranch was a partnership asset. The Schmillens argue that the Lutzes have failed to show that the district court's finding was clearly erroneous or contrary to the great weight of the evidence. We agree with the Schmillens.

Courts have generally found that, when they are deciding whether property is partnership property, they must determine the parties' intent. King v. Evans, 791 S.W.2d 531, 533 (Tex.Ct.App.1990); Shumway v. Shumway, 679 P.2d 1133, 1139 (Idaho 1984); Gorger v. Gorger, 276 Or. 267, 555 P.2d 1, 9 (1976). The courts may consider the partners' acts and course of conduct in determining the partners' intention with regard to specific property. State Automobile and Casualty Underwriters v. Johnson, 766 S.W.2d 113, 122 (Mo.Ct.App.1989); Sneed v. Kanelos, 150 Cal.App.2d 684, 310 P.2d 706, 709 (1957). The courts may also consider the use which has been made of the property. In re Estate of Kruse, 19 Wash.App. 242, 574 P.2d 744, 747 (1978). Finally, the courts can consider whether, at the time the property was acquired, the reason for the acquisition was to devote the property to partnership purposes. Price v. McFee, 196 Md. 443, 77 A.2d...