Title: Weisbrod v. Ely

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Weisbrod v. Ely1989 WY 11767 P.2d 171Case Number: 88-24Decided: 01/10/1989Supreme Court of Wyoming
HARRY 
WEISBROD, APPELLANT (PLAINTIFF),

 
 
v.

 
 
NANCY ELY, 
APPELLEE (DEFENDANT).

 
 
Appeal from 
the District Court, TetonCounty, John D. Troughton, 
J.

 
 
Bret F. 
King of King & King, Jackson, for 
appellant.

 
 
David R. 
Hansen, Jackson, 
for appellee.

 
 
Before CARDINE, C.J., THOMAS and MACY, JJ., and 
GUTHRIE and BROWN*, JJ., 
Ret.

 
 

* Retired 
June 30, 1988.

 
 

CARDINE, Chief 
Justice.

 
 

[¶1.]     This was an action by 
appellant Harry Weisbrod seeking a judicial winding up and termination of a 
partnership, appointment of a receiver, and a formal accounting. After a bench 
trial, the court found the value of Weisbrod's interest in the partnership to be 
$1,511 and entered a judgment against appellee Nancy Ely, his former partner, 
for that amount plus interest. Weisbrod now appeals from that judgment and 
raises the following issues:

 
 
"1. Whether 
the District Court was correct in its refusal to order a winding up and 
termination of the partnership affairs.

 
 
"2. Whether 
the District Court was correct in its refusal to grant Appellant 
post-dissolution profits of the partnership.

 
 
"3. Whether 
the District Court was correct in its refusal to grant Appellant a formal 
accounting of the partnership affairs.

 
 
"4. Whether 
the District Court was correct in its finding that Appellant was not wrongfully 
excluded by Appellee from participating in the winding up and termination of the 
partnership.

 
 
"5. Whether 
the District Court was correct in valuing Appellant's interest in the 
partnership as of December 31, 1984, to be $1,511.00."

 
 

[¶2.]     We 
affirm.

 
 
FACTS

 
 

[¶3.]     In the spring of 1981, 
Weisbrod and Ely executed a written partnership agreement forming a partnership 
to conduct a property management business. Under the agreement the parties were 
to share in profits and losses in proportion to their ownership interests. 
Weisbrod initially contributed $2,000 and Ely $8,233 for ownership interests of 
20% and 80%, respectively. The partnership later bought a truck for 
approximately $3,400. Each partner paid one-half the cost of the 
truck.

 
 

[¶4.]     The agreement provided 
that Ely was to be the sole managing partner. As such, Ely conducted the 
day-to-day business of the firm, while Weisbrod's role was limited to sharing of 
profits and losses. The partnership continued in business under the agreement 
until late 1984 when Ely informed Weisbrod that the partnership would terminate 
on December 31, 1984, and that she would continue the business on her own. 
Weisbrod objected, indicating that he wished to continue the partnership. At 
that time, there was no discussion or agreement concerning winding up or 
termination of the partnership.

 
 

[¶5.]     In January of 1985, Ely 
offered to buy Weisbrod's 20% share in the partnership for $993.30 and tendered 
to him a check in that amount. Weisbrod rejected the offer, indicating that he 
considered the $933.30 offer inadequate. Each party obtained a separate 
appraisal of the value of the partnership as of December 31, 1984. Weisbrod's 
appraisal valued the partnership at $22,000. Ely's appraisal showed a value of 
$5,305.

 
 

[¶6.]     In February 1985, Ely 
tendered a check for $1,511 as payment for Weisbrod's 20% partnership interest. 
Weisbrod rejected the $1,511 check and countered with an offer to sell his 20% 
for $3,000, or, in the alternative, to purchase Ely's 80% for $3,794. Ely 
responded by reoffering $1,511, which she characterized as her final offer. In 
late March 1985, Weisbrod reiterated his offer to purchase Ely's share for 
$3,794, revoked his offer to sell for $3,000, and offered to sell for 
$4,000.

 
 

[¶7.]     Following the failure 
of the parties to agree on the value of the partnership, this litigation was 
commenced by Weisbrod in January of 1986. Ely continued to operate the business 
from December 1984 to the time of trial with Weisbrod's consent. At trial, both 
parties introduced conflicting evidence concerning the value of the partnership. 
The court found the value of Weisbrod's share in the partnership to be $1,511 
and entered a judgment in favor of Weisbrod for that amount, plus interest for 
the period of January 1, 1985, until date of judgment.

 
 
DISCUSSION

 
 

[¶8.]     The partnership 
agreement covered dissolution by mutual agreement of the partners and by 
retirement or death of a partner. It did not provide a method for resolving the 
dispute that arose when Ely unilaterally sought to terminate the partnership and 
continue the business. Thus, we look to Wyoming's codification of the Uniform 
Partnership Act, W.S. 17-13-101 through 17-13-615, which provides the applicable 
rule: "Dissolution is caused * * * [b]y the express will of any partner when no 
definite term or particular undertaking is specified." W.S. 17-13-603(a)(i)(B). 
By summary judgment prior to trial, the court found that dissolution occurred on 
December 31, 1984.

 
 

[¶9.]     Dissolution of a 
partnership is defined as "the change in the relation of the partners caused by 
any partner ceasing to be associated in the carrying on as distinguished from 
the winding up of the business." W.S. 17-13-601. Dissolution is the first of 
three stages in the ending of a partnership. The next two stages are winding up 
and termination. Simpson v. Kistler Inv. Co., 713 P.2d 751 (Wyo. 1986). Winding up is 
the process of settling partnership affairs after dissolution. Matter of Trust 
Estate of Schaefer, 91 Wis.2d 360, 283 N.W.2d 410 (Ct.App. 1979); Uniform 
Partnership Act § 29, 6 U.L.A. 364 (comment) (1969). Termination is the point in 
time when all the partnership affairs are wound up. Thickman v. Schunk, 391 P.2d 939 (Wyo. 
1964); W.S. 17-13-602.

 
 

[¶10.]  Generally, winding up encompasses the 
liquidation of partnership assets, collection and payment of debts, and 
distribution of the surplus to the partners. Gibson v. Deuth, 270 N.W.2d 632 
(Iowa 1978). 
Liquidation of assets, however, is not the only option following dissolution. 
The partnership business may be continued with the consent of the outgoing 
partner. Neither party here contests the finding by the trial court that Ely 
continued the business with Weisbrod's consent after 
dissolution.

 
 

[¶11.]  The parties agreed that W.S. 17-13-614 
determines the rights of Weisbrod, and the trial court relied on the statute to 
render its decision; therefore W.S. 17-13-614 became the law of the case. See 
Caldwell v. Yamaha Motor Co., Ltd., 648 P.2d 519 
(Wyo. 1982). 
We do not decide whether W.S. 17-13-614 applies to a partner who is excluded 
from the partnership by unilateral dissolution pursuant to W.S. 
17-13-603(a)(i)(B), as that question is not presented. W.S. 17-13-614 provides 
in relevant part that when a business is continued, an outgoing 
partner

 
 
"may have 
the value of his interest at the date of dissolution ascertained, and shall 
receive as an ordinary creditor an amount equal to the value of his interest in 
the dissolved partnership with interest, or, at his option * * *, in lieu of 
interest, the profits attributable to the use of his right in the property of 
the dissolved partnership * * *."

 
 
I

 
 

[¶12.]  In his first argument, Weisbrod claims 
error by the trial court because it did not appoint a receiver to take control 
of the partnership assets to conduct the winding up and termination of the 
business. He contends this constitutes a "refusal" by the court to wind up and 
terminate the partnership, despite the court's order for Ely to pay him the 
value of his share of the partnership.

 
 

[¶13.]  Weisbrod misconstrues the effect of the 
trial court's disposition. In this case, winding up was completed when the court 
determined the amount due Weisbrod under W.S. 17-13-614 and entered judgment 
ordering that amount be paid. Upon completion of winding up, the partnership was 
terminated. W.S. 17-13-609 provides that any partner, for cause shown, may 
obtain winding up by the court. Appointment of a receiver is not required by 
W.S. 17-13-609, but is within the discretion of the trial court, controlled by 
the circumstances of each case. Barrett v. Green River & Rock Springs Live 
Stock Co., 28 Wyo. 379, 205 P. 742 (1922).

 
 

[¶14.]  A matter which is left to the discretion 
of the trial court will not be disturbed on appeal in the absence of a 
demonstrated abuse of discretion. Urich v. Fox, 687 P.2d 893 (Wyo. 1984). We have 
defined judicial discretion as

 
 
"a 
composite of many things, among which are conclusions drawn from objective 
criteria; it means a sound judgment exercised with regard to what is right under 
the circumstances and without doing so arbitrarily or capriciously." Martin v. 
State, 720 P.2d 894, 897 (Wyo. 1986).

 
 
Under the 
circumstances presented here, we find no abuse of discretion in the court not 
appointing a receiver.

 
 
II

 
 

[¶15.]  Weisbrod argues that he is entitled to a 
20% share of the profits earned by the business during the period between 
dissolution and trial. He bases this claim on the language of W.S. 17-13-614, 
which allows an outgoing partner to chose between

 
 
"an amount 
equal to the value of his interest in the dissolved partnership with interest, 
or, at his option * * *, in lieu of interest, the profits attributable to the 
use of his right in the property of the dissolved 
partnership."

 
 
The trial 
court found no post-dissolution profits attributable to Weisbrod's rights in the 
partnership property. It determined that the profits were attributable to the 
personal services of Ely.

 
 

[¶16.]  The testimony at trial indicated that the 
initial contributions of capital by the partners were used to acquire furniture 
and fixtures for the office of the business. Later contributions financed the 
purchase of a truck. These items of personal property were used by the business 
after dissolution and were the assets which were the basis of the valuation of 
Weisbrod's interest in the partnership. The issue presented, then, is the amount 
of profits that can be attributed to the use of Weisbrod's right in this 
property. Several cases from other states have dealt with the "profits 
attributable" language of § 42 of the Uniform Partnership Act, which is 
equivalent to W.S. 17-13-614. The majority position, which we adopt, is that 
when profits earned after dissolution and before a final accounting are 
attributable in part to the personal skill or services of a partner, it is a 
factor to be considered in apportioning the shares of the partners. Essay v. 
Essay, 175 Neb. 730, 123 N.W.2d 648 (1963); 
Hilgendorf v. Denson, 341 So. 2d 549 (Fla. App. 1977); Schoeller v. Schoeller, 497 S.W.2d 860 (Mo. Ct. App. 1973); Timmermann v. Timmermann, 272 Or. 613, 538 P.2d 1254 (1975); Bracht v. Connell, 313 Pa. 397, 170 A. 297 (1933). The court should 
determine the fair value of such services by considering the nature of the work, 
the time spent, and the skill involved. Bracht, supra.

 
 

[¶17.]  It is undisputed that Weisbrod did not 
contribute services to the partnership. The evidence presented established that 
Ely conducted all of the business, provided all services, and profits earned 
were attributable to her labor rather than to the existence of office furniture. 
The business of property management in this case differs from businesses 
involving sale of goods and materials. In the latter case, an outgoing partner 
who has invested in inventory would be entitled to his proportionate share of 
any profits derived from their subsequent sale. In contrast, in a service 
business all that is sold to produce income are the services of the firm - here, 
the property management services of Ely. We conclude that it was not error for 
the trial court to find that there were no post-dissolution profits attributable 
to the property rights of Weisbrod.

 
 

[¶18.]  Weisbrod also argues that he is not 
required to elect whether to receive profits in lieu of interest until after 
valuation of his interest and the profits attributable to it. We agree with the 
proposition that the right of election under W.S. 17-13-614 is not a meaningful 
right unless the outgoing partner knows the value of his respective choices. 
Moseley v. Moseley, 196 F.2d 663 (9th Cir. 1952); Lange v. Bartlett, 121 Wis.2d 599, 
360 N.W.2d 702 (1984). The trial court in this case entered a final judgment 
which awarded Weisbrod interest without allowing an opportunity for election 
between interest and profits. After Ely was compensated for her services, there 
were no post-dissolution profits attributable to Weisbrod's interest. In light 
of the trial court's finding that there were no profits in which Weisbrod could 
share, the failure to provide for election between profits and interest was 
harmless error. We will not reverse in the absence of a showing of prejudice to 
substantial rights of appellant. Anderson v. 
Bauer, 681 P.2d 1316 (Wyo. 1984).

 
 
III

 
 

[¶19.]  In his third argument, Weisbrod contends 
that the district court refused to grant him a formal accounting and that this 
refusal was error. He bases this contention on W.S. 17-13-405, which provides, 
inter alia, that a partner has a right to a formal account when he has been 
wrongfully excluded from the partnership or when a partner is accountable as a 
fiduciary under the provisions of W.S. 17-13-404. It is not necessary to 
consider the possible application of W.S. 17-13-405 in this instance because the 
right to an account described therein is merely supplemental to the right to an 
account under W.S. 17-13-615.

 
 

[¶20.]  W.S. 17-13-615 
provides:

 
 
"The right 
to an account of his interest shall accrue to any partner, or his legal 
representative, as against the winding up partners or the surviving partners or 
the person or the partnership continuing the business, at the date of 
dissolution, in the absence of an agreement to the 
contrary."

 
 
Under this 
statute, Weisbrod's right to an accounting accrued when the partnership was 
dissolved. That there was a right to an accounting, however, does not establish 
that an accounting was refused.

 
 

[¶21.]  In the context of a partnership 
dissolution, an accounting is an action to determine the rights and liabilities 
of the partners. "An accounting generally imports an adjustment of the dealings 
or accounts of the parties." Fitzpatrick v. Rogan, 28 Wyo. 231, 247, 203 P. 245, 250 (1922). The effect of this litigation was an accounting in the trial 
court. The major issues were determination of Weisbrod's interest in the 
partnership and his right to profits. The parties introduced into evidence the 
income and expense statements of the partnership for all the relevant years, 
conflicting appraisals of the value of the business, and testimony concerning 
the business affairs of the partnership. While Weisbrod disagrees with the 
findings of the court based upon that evidence, we find no basis to hold that he 
was denied his right to "an account of his interest" granted by W.S. 
17-13-615.

 
 

[¶22.]  Weisbrod appears to argue that the 
procedure used was not correct, as witnessed by his insistence that a "formal" 
accounting is required. He does not present his interpretation of what a formal 
accounting consists of, but his argument suggests that it is something other 
than a proceeding conducted by the district judge. While the district court may 
appoint a master as defined in Rule 53(a), W.R.C.P. to conduct an accounting, it 
is not required to do so. Such action is within the discretion of the court, to 
be taken after consideration of the complexity of the issue and the potential 
expense and delay a reference to a master might involve. See Adventures in Good 
Eating, Inc. v. Best Places to Eat, Inc., 131 F.2d 809 (7th Cir. 1942). Given 
the relatively simple nature of the accounting here, we find no abuse of 
discretion.

 
 
IV

 
 

[¶23.]  In Weisbrod's fourth argument, he 
disagrees with the trial court's finding that he was not wrongfully excluded 
from participation in the winding up of the partnership. He argues that Ely's 
actions contravened a section of the partnership agreement dealing with 
dissolution by mutual agreement, and "the provisions of the Uniform Partnership 
Act." He continues by stating that "[t]he evidence has clearly shown" that he 
was prevented from participating in the winding up and termination of the 
business.

 
 

[¶24.]  This perfunctory argument does not rise 
to the level of cogent argument supported by pertinent authority, which we have 
stated many times is a requirement for consideration by this court. Kipp v. 
Brown, 750 P.2d 1338 (Wyo. 1988). Further, vague references to the 
Uniform Partnership Act and "the evidence" do not comply with Rule 5.01, 
W.R.A.P., which states that the argument section of a brief shall contain 
"citations to the authorities, statutes and parts of the record relied on." Rule 
5.01(4), W.R.A.P. Therefore, we decline to consider this contention. Rule 1.02, 
W.R.A.P.

 
 
V

 
 

[¶25.]  In Weisbrod's fifth and final argument, 
he asserts error in the trial court's valuation of his interest in the 
partnership. His assertion is based on a claim of conflict between an oral 
statement made by the judge during trial and written findings made by the court 
in its final judgment. He also contends that the appraisal introduced by Ely was 
not properly calculated. When an inconsistency exists, express written findings 
will supersede informal oral remarks made from the bench. Gill Mortuary v. 
Sutoris, Inc., 207 Kan. 557, 485 P.2d 1377 
(1971); Newton v. State Road Comm'n, 23 
Utah 2d 350, 463 P.2d 565 (1970); cf. McAteer 
v. Stewart, 696 P.2d 72 (Wyo. 1985) (written order takes precedence 
over prior oral order).

 
 

[¶26.]  The value of Weisbrod's interest in the 
partnership is a question of fact. When reviewing a factual issue on appeal, we 
accept the evidence of the prevailing party as true, leaving out entirely the 
evidence presented in conflict therewith, giving every favorable inference which 
may be fairly and reasonably drawn from the prevailing party's evidence. 
Pancratz Company, Inc. v. Kloefkorn-Ballard Constr./Dev., Inc., 720 P.2d 906 
(Wyo. 1986). 
Although judgment was granted in favor of Weisbrod, the court had accepted Ely's 
appraisal of the value of the partnership, and she was the prevailing party on 
this issue. Anderson v. Foothill Industrial Bank, 
674 P.2d 232 (Wyo. 1984). While there was conflicting 
evidence presented at trial, the evidence presented by Ely supported the finding 
of the trial court. The trial court's findings are presumed correct and will not 
be disturbed on appeal unless they are inconsistent with the evidence, clearly 
erroneous, or contrary to the great weight of the evidence. Pancratz, supra. We 
find no error in the value determined by the trial court.

 
 

[¶27.]  The judgment of the trial court is 
affirmed.