Opinion ID: 1161642
Heading Depth: 2
Heading Rank: 1

Heading: statute of limitations termination of partnership

Text: ¶ 18 Williams argues on appeal that the trial court erred in its instructions to the jury regarding the application of the statutes of limitations to Cheves' causes of action. Williams claims that the statutes of limitations on Cheves' partnership claims began to run when the partnership was dissolved, that the latest date on which dissolution occurred was when Industrial Communications, Inc., was incorporated on January 5, 1987, and that no tolling provision applied to extend Cheves' causes of action beyond the four years stated in Utah Code Ann. § 78-12-35. Thus, according to Williams, Cheves' complaint, filed on April 15, 1991, was barred by the statutes of limitations. ¶ 19 Cheves responds that Williams' statutes of limitations argument is meritless because the district court specifically indicated to Williams that he could request that the jury determine the specific date on which the partnership was dissolved, because Williams failed to make that request, and because the trial court's subsequent determination that the dissolution occurred at the time of Cheves' filing his complaint was proper under Rule 49(a) of the Utah Rules of Civil Procedure. [1] ¶ 20 We review challenges to jury instructions under a `correctness' standard. Steffensen v. Smith's Management Corp., 862 P.2d 1342, 1346 (Utah 1993). However, to reverse a trial verdict, this court must find not a mere possibility, but a reasonable likelihood that the error affected the result. Id. at 1347. Furthermore, we will not reverse a jury verdict where there is sufficient evidence in the record to support the jury's verdict on legally sound grounds, particularly where the complaining party essentially invited the alleged error by failing to avail itself of the opportunity  offered at trial  to avoid such error. See State v. Anderson, 929 P.2d 1107, 1109 (Utah 1996); State v. Dunn 850 P.2d 1201, 1220 (Utah 1993). We have held repeatedly that on appeal, a party cannot take advantage of an error committed at trial when that party led the trial court into committing the error. Dunn, 850 P.2d at 1220 (footnote omitted). Such a rule discourages parties from intentionally misleading the trial court so as to preserve a hidden ground for reversal on appeal. Id. (citations omitted). ¶ 21 In this case, Williams challenges the jury's finding that the statutes of limitations had not run on Cheves' partnership claims. It is generally accepted that a statute of limitations begins to run upon the occurrence of the last event required to form the elements of the cause of action. Williams v. Howard, 970 P.2d 1282, 1284 (Utah 1998). Instruction 37 set forth this principle and defined the following applicable statutes of limitation: 1. Accounting. The applicable statute of limitations requires a plaintiff to file a suit for an accounting within four years after the date the partnership was dissolved. 2. Partnership Claim. The applicable statute of limitations requires a plaintiff to file suit alleging the existence of a partnership within four years after he knew or should have known facts indicating that a partnership did not exist. Although generally objecting that the trial court did not accept his proposed instructions, Williams did not specifically object to Instruction 37. Williams did, however, object to Instructions 38 and 39. Instruction 38 provided: Regardless of when a cause of action accrues, under Utah law statutes of limitations do not run during periods of time when the Defendant is not in the State of Utah. Thus, if a Defendant is outside the State of Utah eight (8) months per year, the statute would run only during the remaining four (4) months per year when the Defendant was in the State of Utah. Williams claimed that this instruction incorrectly provided for tolling of the statutes of limitations whenever Williams was absent from the state, regardless of whether Williams was amenable to personal service under Utah law during his absence. [2] ¶ 22 Instruction 39 provided: The statute of limitations does not begin to run until the party against whom the statute is asserted knows or has reason to know of the facts forming the basis for the cause of action. Similarly, concealment or misleading a party prevents that party from relying on the statute of limitations. Williams claimed that this instruction incorrectly provided that the discovery rule could apply to Cheves' partnership claims. ¶ 23 Finally, in connection with his statutes of limitations argument, Williams claimed error in Instructions 18 and 19. Instruction 18 provided: If you find that Mr. Williams and Mr. Cheves formed a partnership, then you must decide the date it was dissolved. A partnership may be dissolved at any time by the express will of one partner or by the will of all the partners. If a partnership is incorporated, then the partnership is normally dissolved on the date of incorporation and the parties cease to be partners on that date. You have been informed through evidence that Articles of Incorporation were filed on January 5, 1987, and that a Certificate of Incorporation was issued on that date. Under Utah law, a Certificate of Incorporation is conclusive proof of the creation of a corporation. At trial, Williams objected to the normally dissolved language in this instruction, arguing that case law supported his contention that a partnership is automatically dissolved on the date of incorporation. ¶ 24 Instruction 19 provided: As a general rule, when partners organize a corporation to operate the business of the partnership and transfer the assets of the partnership to the corporation, the partnership is dissolved. The partnership may continue for purposes of winding up of partnership affairs. This may include the process of settling the partnership accounts, and transferring partnership assets to the corporation in exchange for corporate stock. Williams objected to this instruction at trial, again primarily because it conflicted with his assertion that a partnership dissolves and terminates upon incorporation. ¶ 25 Notwithstanding Williams' objection to these jury instructions, Williams did not request, in either of his two proposed special verdict forms, that the jury identify the specific date of the partnership's dissolution or any other facts that might clarify the facts upon which the jury relied in finding the statutes of limitations inapplicable. With regard to the dissolution date question, we find this failure particularly disturbing, because the trial court had (in its ruling on the determination of prejudgment interest) specifically stated that the parties may submit to the jury a special interrogatory to determine the date from which prejudgment interest begins to run under the facts of this case. Because the date from which prejudgment interest begins to run is at least potentially the same date from which the statutes of limitations would have begun to run, and because a factual finding regarding the date would likely have clarified the basis of the jury's conclusions regarding the running of the statutes of limitations, Williams' failure to include such a question on his proposed special jury forms is significant. In light of this failure, we conclude that Williams' argument on appeal survives only if we can conclude as a matter of law that the statutes of limitation on Cheves' causes of actions began running no later than the latest date asserted by Williams  the date upon which Industrial Communications, Inc., was incorporated. Such a conclusion would render Instructions 18 and 19 so erroneous that Williams' failure to request a specific date of dissolution would not allow us to avoid the question of whether there is a reasonable likelihood that any alleged errors in Instructions 38 and 39 affected the jury's verdict. See Steffensen, 862 P.2d at 1347. ¶ 26 As Williams contends, section 48-1-40 of the Utah Code provides that [t]he right to an account of his interest shall accrue to any partner or his legal representative as against the winding-up partners or ... the person or partnership continuing the business, at the date of dissolution in the absence of any agreement to the contrary. Utah Code Ann. § 48-1-40 (1989). Williams then asserts that any partnership existing between Williams and Cheves dissolved, as a matter of law, when Industrial Communications, Inc., was incorporated. ¶ 27 To determine whether Industrial Communications dissolved as a matter of law upon the filing of articles of incorporation for a similarly named corporation, we begin by looking at our statutes governing partnerships. Section 48-1-26 of the Utah Code defines dissolution 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. Id. § 48-1-26. Sections 48-1-28 and 48-1-29 of the Code then set forth how dissolution may occur. Section 48-1-28 provides that dissolution is caused: (1) Without violation of the agreement between the partners: (a) By the termination of the definite term or particular undertaking specified in the agreement. (b) By the express will of any partner when no definite term or particular undertaking is specified. (c) By the express will of all the partners who have not assigned their interests, or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking. (d) By the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners. (2) In contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this section, by the express will of any partner at any time. (3) By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership. (4) By the death of any partner. (5) By the bankruptcy of any partner or the partnership. (6) By decree of court under Section 48-1-29. Id. § 48-1-28. Section 48-1-29 provides: (1) On application by or for a partner the court shall decree a dissolution whenever: (a) A partner has been declared a lunatic.... (b) A partner becomes in any other way incapable of performing his part of the partnership contract. (c) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business. (d) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him. (e) The business of the partnership can only be carried on at a loss. (f) Other circumstances render dissolution equitable. (2) On the application of the purchaser of a partner's interest.... Id. § 48-1-29. ¶ 28 Neither of these provisions provides that the incorporation of a like-named corporation definitively or automatically establishes the dissolution of a partnership. Rather, the statutes focus on the express intent of one or more partners to achieve dissolution and the action taken by such partner(s) to obtain that objective. ¶ 29 The cases from other jurisdictions upon which Williams relies do not contradict this reading. They do not establish a rule of automatic dissolution, but merely recognize that incorporation alone may be sufficient evidence for the factfinder to conclude that the partners expressly and mutually agreed to transform their partnership into a corporation. See, e.g., Charles M. Woods Co. v. Armstrong, 101 Cal.App. 664, 282 P. 19, 19 (1929) (rejecting appellant's contention that without any proof of the transfer to the corporation of the partnership assets or without proof of dissolution we must assume that the copartnership ceased to exist on the date of the incorporation; stating that copartnership for one reason or another might have continued to exist for a considerable period of time subsequent to the incorporation); Hooper v. Yoder, 737 P.2d 852, 858 (Colo. 1987) (en banc) (stating general rule that when partners organize a corporation to operate the business of the partnership and transfer the assets to the corporation, the partnership is dissolved and explaining that [t]his is so because such action usually reflects the express will of the parties that the partnership be dissolved (emphasis added)); id. (finding no support in the record for a finding that the parties intended that the partnership would continue after the corporation was organized); Adkins v. Hash, 190 Va. 86, 56 S.E.2d 60, 63 (1949); Box v. Crowther, 3 Wash.App. 67, 473 P.2d 417, 421-22 (1970); see also 59A Am.Jur.2d Partnership § 841 at 651-52 (1987) (The mere incorporation... without further action to transfer some or all of the partnership assets and business to the corporation will not dissolve the partnership.). ¶ 30 The evidence in this case is in dispute as to what the parties intended upon incorporation. Williams testified that he and Cheves were never business partners and thus that there was no partnership to dissolve. Alternatively, he asserted that the partnership was dissolved upon incorporation of Industrial Communications, Inc., and Cheves' acceptance of a twenty percent interest in the corporation. Cheves, on the other hand, testified that he participated in the incorporation of Industrial Communications, Inc., only upon the understanding that the partnership's assets would be rolled into the corporation and that he would receive compensation for his interest in the partnership over and above the twenty percent of corporate stock he received. Furthermore, Cheves testified that he did not leave the company until 1990 and that even at that time he believed he had the rights of a partner in the business. Finally, the evidence indicated that none of the partnership's assets had been transferred to the corporation prior to Cheves' filing his complaint. Thus, it was for the jury to decide whether the changes that occurred after incorporation of Industrial Communications, Inc., constituted a change in the relationship of the partners caused by any partner ceasing to be associated in the carrying on, as distinguished from the winding up, of the business. Utah Code Ann. § 48-1-26. We hold that there was sufficient evidence in this case for the jury to conclude that dissolution of the partnership did not occur at the time of the corporation's incorporation, but rather occurred at a later date that placed Cheves' complaint within the statutes of limitations. ¶ 31 We therefore conclude that Instructions 18 and 19 sufficiently set forth the correct legal principles, for this case, concerning incorporation and dissolution of a partnership. The first sentence of Instruction 18 correctly sets forth the means of dissolution defined under section 48-1-28. The remaining portions of Instruction 18 and the whole of Instruction 19 then set forth the type of evidence relevant to determining the partners' will under the first sentence of Instruction 18. ¶ 32 Although we agree with Williams that, because the jury was not required to specify the date of the partnership's dissolution, there is no way to verify that the dissolution date found by the jury actually fell within the statutes of limitations, we conclude that Williams could have avoided the uncertainty of which he now complains, and we will presume the accuracy of the jury verdict. As previously noted, the trial court specifically informed the parties in its pre-trial ruling on prejudgment interest that, although the court would reserve for itself calculation of prejudgment interest, the parties would be free to include questions relevant to the starting date for such interest on the special jury form. This ruling was an open invitation to request that the jury specifically resolve the question of the date of dissolution of the partnership. Williams did not avail himself of that invitation. By not doing so, Williams not only arguably invited the error he now claims but also failed to provide this court with a sufficient record to reach his claim. Under these circumstances, and where the evidence supports the finding of a dissolution date within the statutes of limitations, we reject Williams' argument.