Maine v. Stewart

• Decision Date: 29 July 1993
• Docket Number: Nos. 23430,23556,s. 23430
• Citation: 857 P.2d 755,109 Nev. 721
• Parties: Dewitt C. MAINE and Gayle J. Maine, and Maine Incorporated, Appellants, v. Michael B. STEWART, Respondent. Dewitt C. MAINE and Gayle J. Maine, and Maine Incorporated, Appellants, v. Michael B. STEWART, Respondent.
• Court: Nevada Supreme Court

Page 755

857 P.2d 755

109 Nev. 721

Dewitt C. MAINE and Gayle J. Maine, and Maine Incorporated, Appellants, v. Michael B. STEWART, Respondent.

Dewitt C. MAINE and Gayle J. Maine, and Maine Incorporated, Appellants, v. Michael B. STEWART, Respondent.

Nos. 23430, 23556.

Supreme Court of Nevada.

July 29, 1993.

[109 Nev. 722] Steve E. Wenzel, Reno, for appellants.

Petersen & Petersen, Reno, for respondent.

OPINION

PER CURIAM:

These consolidated appeals involve various claims which stem from a partnership dissolution agreement. Partial summary judgment was entered as to two of appellants' claims and a third claim was dismissed pursuant to the district court's pretrial determination of issues of law. We conclude that genuine issues of material fact remain which preclude a summary disposition of appellants' claims. In view of our conclusion regarding summary judgment and its potential impact on the issues which were decided by the district court and the jury, we of necessity also reverse the pretrial determination of issues of law and vacate the jury verdict and award of attorney's fees and costs, and remand for a new trial on the merits.

FACTS

Appellant Dewitt Maine was the limited partner in a partnership known as "M-S Company, a Limited Partnership." Respondent Michael B. Stewart was the general partner. Disharmony eventuated and Dewitt filed an action for dissolution of the partnership, for the appointment of a receiver and for an accounting. Dewitt alleged that Michael misappropriated partnership assets and engaged in self-dealing to the detriment of the partnership. Settlement negotiations ensued culminating in an agreement to dissolve the partnership without litigation. The agreement was memorialized in a document entitled "Agreement of Dissolution of M-S Company, a Nevada Limited Partnership and Mutual Release of All Claims."

Among other things, the agreement provided for the allocation of the two businesses owned by the partnership, the Sunrise Feed Lot, an operation which boarded beef and dairy cattle, and Lyon County Farm Supply, Inc. ("Farm Supply"), a retail agricultural supply company. Michael received the partnership's ownership interest and the liabilities of Farm Supply; Dewitt received the assets and liabilities of Sunrise Feed Lot, minus the "seed" cattle housed at the feed lot which were allocated to Michael.

The partnership's other assets and obligations were allocated between Dewitt and Michael in accordance with schedules appended to the agreement. Significantly, Michael represented and warranted that the schedules contained "a complete and accurate listing of each and all of the assets, debts and obligations of the limited partnership as of the date of execution of this agreement." The agreement provided that Michael's "absolute obligation of full disclosure" existed notwithstanding the Maines' retention of an accountant to conduct an independent review of the partnership books and records.

The dissolution agreement contained a "mutual release" clause under which each party agreed to release the other from all claims which the parties had from the "beginning of time" to the close of escrow. The agreement was signed in April, 1987, but it specified that the ending date for accounting purposes would be March 31, 1987. Escrow closed on October 16, 1987, and, in accordance with the agreement, Dewitt stipulated to the dismissal of the dissolution action with prejudice.

Rather than bringing finality to the litigation between the partners, the dissolution agreement spawned three more lawsuits. The first action was filed by Donald Steneri, a creditor of Sunrise Feed Lot, for the cost of goods sold to that entity in early April, 1987--after the ending date specified in the agreement but before Dewitt actually assumed operations of the feed lot. Dewitt and Michael denied responsibility for the debt, thus precipitating cross-claims, counterclaims and third-party complaints between and among Michael, Dewitt and his wife, appellant Gayle Maine, and appellant Maine, Inc. (collectively "the Maines"), for indemnification.

Michael instigated the second action against the Maines for accrued payroll taxes, an obligation which Dewitt had agreed to assume in the dissolution agreement. The Maines responded with a counterclaim which eventually contained nine claims for relief. The eighth and ninth claims alleged that Michael had misrepresented the extent of the partnership's obligations with the intent to defraud the Maines. Specifically, the Maines alleged that the $175,000 indebtedness to the Farmers Home Administration ("FHA") which Dewitt agreed to assume had been disclosed as a partnership obligation in the agreement when in fact it was Michael's personal debt. Michael denied liability and asserted the mutual release clause and res judicata as affirmative defenses to the eighth and ninth claims.

The third action was filed by Gayle and Dewitt against Farm Supply, whose stock was solely owned by Michael. The complaint alleged that Farm Supply had converted approximately $200,000 which it had received from the sale of crops belonging to the Maines by virtue of an assignment executed by Farm Supply in September, 1986. In response, Farm Supply asserted that the assignment had been extinguished by the mutual release contained in the dissolution agreement. The three cases were consolidated for trial.

Approximately one month before trial, Michael moved for partial summary judgment regarding the Maines' eighth and ninth claims. Michael contended that the mutual release clause barred "any claims based upon allegations of conduct prior to the close of escrow, October 16, 1987." Michael also asserted that the Maines' eighth and ninth claims were barred by the doctrine of res judicata because they were "allegations of self-dealing" which were raised or could have been raised in the dissolution action. In support of his motion, Michael quoted from the dissolution agreement's mutual release provisions and attached copies of the 1987 complaint and the stipulation for dismissal of that action. No other supporting documentation was included.

In opposition to the motion for partial summary judgment, the Maines argued that the release and the res judicata argument were improper bases for entering summary judgment because their counterclaim raised issues of fraud in the inducement of the dissolution agreement. In support of their opposition, the Maines attached a copy of the dissolution agreement and the affidavit of Ronald Simpkins, a certified public accountant. Simpkins attested that the information upon which he relied in conducting his audit of the partnership was provided by Michael or his representatives. The Maines subsequently submitted the affidavit of their counsel, Milos Terzich, which essentially described his review of the documentation produced during discovery and which, in his opinion, supported the Maines' allegations of fraud. Unfortunately, none of the documents to which Mr. Terzich referred were appended to his affidavit.

The district court granted summary judgment against the Maines on their eighth and ninth claims. The district court ruled that the Maines had failed to present evidence sufficient to create an issue of material fact and that the mutual release clause and res judicata barred the Maines' eighth and ninth claims.

The Maines immediately moved for reconsideration. Appended to their motion was a copy of an affidavit previously submitted by Gayle Maines in connection with a motion to amend their counterclaim. Unfortunately, Gayle's affidavit also referred to documents she believed demonstrated defalcations by Michael but no documents accompanied the affidavit. The district court denied the Maines' motion for reconsideration and ordered Terzich's and Gayle's affidavits stricken as untimely and/or inadmissible under NRCP 56(e).

Before the commencement of trial, the district court, upon Michael's motion, determined several issues as a matter of law concerning various provisions in the dissolution agreement. The court thus determined that the dissolution agreement unambiguously provided that Dewitt was responsible for the $175,000 FHA obligation and that the Maines had released all claims between the parties, particularly their claim against Farm Supply based upon the September 1986 assignment. Because the 1...