MacKay v. Hardy
| Decision Date | 11 December 1998 |
| Docket Number | No. 970251,970251 |
| Citation | 973 P.2d 941 |
| Parties | 358 Utah Adv. Rep. 20 Keith MacKAY and State Stone, Inc., Plaintiffs, v. Roy E. HARDY and Rex L. Jackson, Defendants, Appellants, and Cross-Appellees, and The Joseph Earl Jones Family Trust and Carol Anne Earl, aka Carol J. Earl, and Jillyne Nunley, joint trustees, Defendants, Appellees, and Cross-Appellants. |
| Court | Utah Supreme Court |
Weston J. White, F.L. Thomas, Jr., M. Kent Christopherson, St. George, for appellants.
James L. Barker, Salt Lake City, for appellees.
INTRODUCTION
Defendants Roy E. Hardy and Rex L. Jackson appeal for the second time in this case. The original action included a cross-claim by J. Earl Jones 1 against Hardy and Jackson for an accounting and winding up of a dissolved partnership. The district court entered judgment in Jones's favor, and Hardy and Jackson appealed, claiming, inter alia, that the court erred in awarding Jones post-dissolution profits realized by the partnership on Jones's share of partnership assets. That appeal came before this court in 1995. See MacKay v. Hardy, 896 P.2d 626 (Utah 1995) ("MacKay I "). We remanded the case to the district court to determine the post-dissolution value of services and contributions by Hardy and Jackson, if any, in apportioning the partnership's post-dissolution profits among Hardy, Jackson, and Jones. The district court then found that the total services and contributions to which Jackson and Hardy were entitled equaled $8,355.10, and it amended the original judgment accordingly. Hardy and Jackson appealed from the amended judgment, and Jones cross-appealed. We affirm.
Our prior opinion sets out the facts of this case in detail. We summarize the pertinent facts necessary to understand the issues raised on this appeal.
In 1983, Jones and Hardy entered into an oral partnership agreement for the purpose of developing land located in Washington County, Utah. In June of 1986, the partnership began experiencing financial problems. Consequently, Jones and Hardy associated Jackson as a partner, giving him a fifty percent interest in the partnership in exchange for his agreement to arrange additional financing for the project. Jones's and Hardy's respective interests in the partnership were reduced to twenty-five percent.
The Jones/Hardy/Jackson partnership continued until June 27, 1988, when Jones withdrew from the partnership. 2 Thereafter, Hardy and Jackson continued to run the business (the "Hardy/Jackson" partnership), which included the development project. Then, in December of 1992, Jones brought a cross-claim 3 for an accounting and winding up of the Jones/Hardy/Jackson partnership affairs pursuant to sections 48-1-34 and 48-1-40 of the Utah Code.
After a four-day bench trial, the district court entered judgment against Hardy and Jackson, jointly and severally, for $76,673.23, an amount which the court concluded represented Jones's interest in the partnership. In their appeal from that judgment, Hardy and Jackson alleged three district court errors warranting reversal. We affirmed in part but reversed and remanded for further proceedings, concluding that "the district court erred by failing to consider Hardy and Jackson's alleged post-dissolution capital contributions and services in apportioning the partnership's post-dissolution profits." MacKay I, 896 P.2d at 631. We reasoned that the district court's failure in this regard resulted in an improper windfall to Jones, because it awarded him not only those post-dissolution profits attributable to his share of partnership assets but also those attributable to Hardy's and Jackson's efforts. Id.
On remand, the district court heard testimony and received other evidence during several hearings relating to Hardy's and Jackson's post-dissolution contributions and services. During this time, the court had pending before it two separate lawsuits that had been filed against Hardy and Jackson relating to their development project. One suit was filed by Ellen T. Green (the "Green" suit) involving damages caused by the ground settlement problems of a townhouse unit she had purchased from the partnership. The other suit was filed by Heritage Home Furnishings (the "Heritage" suit) involving a stock subscription agreement whereby the partnership could purchase appliances and floor coverings at a discount. The Green and Heritage suits were eventually settled, and Hardy and Jackson argued on remand of this case that the expenses associated with that settlement should be considered in apportioning the partnership's post-dissolution profits.
In its written findings of fact on remand, the district court determined that Jones was not responsible for any costs or expenses relating to the Green and Heritage suits, because neither Jones nor the partnership was a party to those actions. The court also determined that the total post-dissolution capital contributions and services to which Hardy and Jackson were entitled equaled $8,355.10 ($7,002.99 for Jackson and $1,352.11 for Hardy). The court then reduced the original judgment to $75,249.47 and calculated the interest awarded by the original judgment to be $12,957.93.
In this second appeal, Hardy and Jackson claim that the district court committed four errors on remand. Jones cross-appealed, also alleging four errors. We first address
the Hardy/Jackson appeal and then discuss Jones's cross-appeal.
In reviewing the lower court's post-remand decision regarding Hardy's and Jackson's alleged post-dissolution contributions and services, this court will review the lower court's findings of fact under the clearly erroneous standard and its conclusions of law under a correctness standard. See Drake v. Industrial Comm'n, 939 P.2d 177, 181 (Utah 1997). With respect to mixed questions of law and fact, we will review the underlying facts under the deferential clear error standard; however, the legal effect of those facts is within the province of the appellate court, and "no deference need be given a [lower] court's resolution of such questions of law." Id.
Hardy and Jackson first argue that the district court erred in failing to apply the value of their post-dissolution services in apportioning the division of the partnership's net profits. Specifically, they state that the district court found the value of their post-dissolution services to be $320,028.94. However, the district court's written findings of fact on remand reveal that their assertion could hardly be further from the truth.
Addressing Hardy's and Jackson's credibility and the credibility of their evidence on remand, the district court stated in its findings:
2. The defendants lack any credibility in now claiming that the Jones-Hardy-Jackson partnership never existed.
3. The exhibits presented by the defendants pursuant to post-remand discovery and hearings were prepared in anticipation of those hearings, after the trial of this matter, and years after the defendant's exhibits and testimony presented at trial. Those post-remand exhibits have no credibility and do not provide the preponderance of proof necessary to show that defendant's [sic] are entitled to credit for any post-dissolution services allegedly performed by them. These post-remand exhibits are in direct conflict with defendants' accounting presented at trial ... prepared by defendants' accountant which shows that at the time of the [conclusion] of the partnership business the partnership did not owe any money to the defendants or to any other entity.
(Emphasis added.) The court then listed the post-dissolution expenditures that were supported by competent evidence and concluded, "The total post-dissolution capital contributions and services to which defendants are entitled are: Jackson $7,002.99, Hardy $1,352.11." However, the court determined that "any other claims of defendants for post-dissolution capital contributions or services are not supported by credible evidence." (Emphasis added.)
The court's findings could not have been more clear, and we cannot comprehend how appellants' attorneys can assert in their brief that "[t]he District Court found the value of [Hardy's and Jackson's] services to be $320,028.34 and then erred in failing to apply them in reapportionment of Jones' share." If a lower court has erred in its written findings of fact, the proper procedure is for the complaining party to challenge those findings on appeal under our clearly erroneous standard of review. See Drake, 939 P.2d at 181; In re Estate of Bartell, 776 P.2d 885, 886 (Utah 1989). Appellants, however, have not even challenged the lower court's written factual findings on appeal. Therefore, we cannot conclude that those findings were clearly erroneous. Furthermore, the above representation of counsel warrants consideration of whether sanctions and/or disciplinary action is appropriate. See Utah R.App. P. 40(b) (1998); Utah R. Prof. Conduct 3.3(a)(1). 4
Hardy and Jackson next argue that the district court erred in not receiving evidence of the expenses they incurred in settling the Green and Heritage suits. 5 To support their argument that those expenses should have been considered as capital contributions, they rely on section 48-1-15(1) of the Utah Code, which provides, "Each partner shall be repaid his contributions, whether by way of capital or advances to the partnership property ... [and] must contribute towards the losses, whether of capital or otherwise, sustained by the partnership according to his share in the profits." They also cite section 48-1-15(2), which provides, "The partnership must indemnify every partner in respect of payments made and personal liabilities reasonably incurred by him in the ordinary and proper conduct of its business, or for the...
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