Ziegler v. Dahl

• Decision Date: 19 January 2005
• Docket Number: No. 20040146.,20040146.
• Citation: 691 N.W.2d 271,2005 ND 10
• Parties: Michael ZIEGLER and Jack Kitsch, Plaintiffs and Appellants v. Steve DAHL, David Tronson, and James Legacie, Defendants and Appellees.
• Court: North Dakota Supreme Court

691 N.W.2d 271

2005 ND 10

Michael ZIEGLER and Jack Kitsch, Plaintiffs and Appellants v. Steve DAHL, David Tronson, and James Legacie, Defendants and Appellees.

No. 20040146.

Supreme Court of North Dakota.

January 19, 2005.

Douglas L. Broden (argued), Broden Law Office, and Douglas A. Goulding (appeared), Devils Lake, ND, for plaintiffs and appellants.

Nicholas B. Hall, Hodny Currie Lawyers, Grafton, ND, for defendants and appellees.

SANDSTROM, Justice.

[¶ 1] Michael Ziegler and Jack Kitsch appeal a summary judgment dismissing their claim that they were in a partnership with Steve Dahl, David Tronson, and James Legacie and are entitled to an accounting upon the winding up of the partnership. We affirm the district court's summary judgment.

I

[¶ 2] Dahl, along with Tronson and Legacie, began marketing an ice fishing guide service on Devils Lake after the 1996-1997 ice fishing season. In the spring of 1997, Dahl conceived the name "Perch Patrol" for the guide service when he was asked by the local chamber of commerce to guide a camera crew from Midwest Outdoors Television. Dahl testified in his affidavit that each member of Perch Patrol agreed to be an independent contractor, each responsible for obtaining his own license and equipment. Dahl claimed they retained their own fees, but equally shared clients and marketing expenses.

[¶ 3] Dahl asked Ziegler and Kitsch to help Perch Patrol guide ice fishermen on Devils Lake for the last part of the 1998-1999 ice fishing season. Ziegler testified in his affidavit that he considered Kitsch and himself employees of Perch Patrol for the remaining portion of the 1998-1999 season. They were paid for drilling holes in the ice, setting up shelters, and ensuring that the ice fishing clients were properly equipped. Neither Ziegler nor Kitsch had any client contact during that year.

[¶ 4] Dahl presented Ziegler and Kitsch with a document titled "Perch Patrol Expansion" in the spring of 1999. The document contained sections called "Employee Proposal" and "Partnership Proposal." Under the "Employee Proposal," Ziegler and Kitsch would receive 50 percent of the number of clients over six per day, and Dahl, Tronson, and Legacie would provide all of the fishing equipment. Under the "Partnership Proposal," Ziegler and Kitsch would "be their own separate entity under the Perch Patrol" and both parties would be "responsible for providing their own gear including fish houses, heaters, vexilars, augers, chairs, bait lunches, ect [sic]." The partnership proposal also provided that both "parties shall share equally in both the costs and the efforts in these endeavors." The parties did not adopt either proposal.

[¶ 5] The parties later agreed, but never reduced their agreement to writing, that Dahl, Tronson, and Legacie had the right to guide and receive fees from the first six clients, Ziegler and Kitsch had the next four, and Dahl, Tronson, and Legacie had clients 11, 12, 15, 16, 19, and 20. The agreement was later changed to split the fees received from each client after the first ten, and they agreed to divide equally among the five members the tips received by the guides.

[¶ 6] In November 1999, Dahl registered the trade name Perch Patrol with the North Dakota Secretary of State. On November 20, 1999, Ziegler and Kitsch each wrote a check payable to Dahl in the amount of $813.97. Ziegler and Kitsch claim the checks were an initial capital investment in a partnership, and Dahl claims they were for future marketing expenses. Dahl stated in his affidavit that he was responsible for all administrative activities for Perch Patrol, including establishing marketing agreements and plans with resorts, promoting the venture in promotional media, booking all reservations, distributing clients to guides, handling all funds, and planning each day's activities. All the parties attended at least some trade shows to promote the Perch Patrol guide service prior to the start of the 1999 ice fishing season.

[¶ 7] On August 8, 2000, Dahl, Tronson, and Legacie informed Ziegler and Kitsch they could no longer guide with them. Dahl, Tronson, and Legacie continue to operate under the name Perch Patrol, which has been registered to Dahl with the Secretary of State as a Limited Liability Partnership since 2002.

[¶ 8] The district court granted the motion for summary judgment dismissing Ziegler and Kitsch's claim that they were in a partnership, stating there was insufficient evidence to support a finding that a partnership was created.

[¶ 9] The district court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27-05-06. The appeal was timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, § 2, and N.D.C.C. §§ 27-02-04 and 28-27-01.

II

[¶ 10] The district court ordered a summary judgment dismissing Ziegler and Kitsch's claim that they were in a partnership with Dahl, Tronson, and Legacie and are entitled to an accounting of the business assets.

[¶ 11] "Summary judgment is a procedure for promptly resolving a controversy without a trial if the evidence shows there are no genuine issues as to any material fact and any party is entitled to judgment as a matter of law." Gratech Co., Ltd. v. Wold Engineering, P.C., 2003 ND 200, ¶ 8, 672 N.W.2d 672; N.D.R.Civ.P. 56(c). "Even if a factual dispute exists, summary judgment is proper if the law is such that resolution of the factual dispute will not change the result." Id. (citations omitted). "A de novo standard of review is used to determine whether a district court erred in granting summary judgment." Id."On appeal, we view the evidence in the light most favorable to the non-moving party." Id. "The existence of a partnership is a mixed question of law and fact, and the ultimate determination of whether a partnership exists is a question of law." Tarnavsky v. Tarnavsky, 2003 ND 110, ¶ 7, 666 N.W.2d 444.

III

[¶ 12] A partnership is "an association of two or more persons to carry on as coowners a business for profit...." N.D.C.C. § 45-13-01(18). The formation of a partnership in North Dakota is governed by N.D.C.C. § 45-14-02, which provides:

1. Except as otherwise provided in subsection 2, the association of two or more persons to carry on as coowners a business for profit forms a partnership, whether or not the persons intend to form a partnership.

2. An association formed under a statute other than chapters 45-13 through 45-21, a predecessor statute, or a comparable statute of another jurisdiction is not a partnership under chapters 45-13 through 45-21.

3. In determining whether a partnership is formed, the following rules apply:

a. Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not by itself establish a partnership, even if the coowners share profits made by the use of the property.

b. The sharing of gross returns does not by itself establish a partnership, even if the persons sharing them have a joint or common right or interest in property from which the returns are derived.

c. A person who receives a share of the profits of a business is presumed to be a partner in the business, unless the profits were received in payment:

(1) Of a debt by installments or otherwise;

(2) For services as an independent contractor or of wages or other compensation to an employee;

(3) Of rent;

(4) Of an annuity or other retirement benefit to a beneficiary, representative, or designee of a deceased or retired partner;

(5) Of interest or other charge on a loan, even if the amount of payment varies with the profits of the business, including a direct or indirect present or future ownership of the collateral, or rights to income, proceeds, or increase in value derived from the collateral; or

(6) For the sale of the goodwill of a business or other property by installments or otherwise.

A

[¶ 13] Ziegler argues the district court erred as a matter of law by requiring intent as an element of a partnership.

[¶ 14] One of the most important tests of whether a partnership exists between two persons is the intent of the parties. 59A Am. Jur. 2d Partnership § 136 (2003). North Dakota adopted the Revised Uniform Partnership Act in 1995, adding the words "whether or not the persons intend to form a partnership" to the definition of a partnership. 1995 N.D. Sess. Laws. ch. 430, § 4. The drafters of the uniform law did not intend any substantive changes in the current law when they added the additional phrase to the definition of a partnership. Uniform Partnership Act § 202, cmt. 1 (1997); Byker v. Mannes, 465 Mich. 637, 641 N.W.2d 210, 214 (2002).

The addition of the phrase, "whether or not the persons intend to form a partnership," merely codifies the universal judicial construction of UPA Section 6(1) that a partnership is created by the association of persons whose intent is to carry on as co-owners a business for profit, regardless of their subjective intention to be "partners." Indeed, they may inadvertently create a partnership despite their expressed subjective intention not to do so. The new language alerts readers to this possibility.

Uniform Partnership Act § 202, cmt. 1 (1997). The National Conference of Commissioners on Uniform State Laws amended the definition even though they were satisfied with the existing judicial construction of the definition of partnership. Byker, 641 N.W.2d at 214. "The commissioners emphasized that `[n]o substantive change in the law' was intended by the amendment." Id. (quoting Uniform Partnership Act § 202, cmt. 1 (1994)). This means the focus is not on whether individuals subjectively intended to form a partnership, but on whether the individuals intended to jointly carry on a business for profit. Id. at 211. In interpreting Florida's adoption of the revised uniform act, a Florida appeal court said the formation of a partnership does not require the "showing that the parties subjectively intended to create a...