Court Opinion

ID: 8203565
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:49:35.304676+00
Date Added: 2024-06-11T08:49:04.938140
License: Public Domain

PATIENCE DRAKE ROGGENSACK, J.
¶ 61. (dissenting). This case arises from a notice of dissolution issued 11 years ago in a two-person partnership. The notice requested wind-up based on the retiring partner's anticipation of the sale of the parties' business, PressEnter, L.L.C., to Voyager.net for $3.5 million. Due to the fault of neither partner, Voyager.net did not purchase PressEnter. Although efforts to sell the business were ongoing for 11 years, it is undisputed that a purchaser has never been found.
¶ 62. David Bushard (Bushard) worked for PressEnter for only seven days during the 11-year period subsequent to his giving notice of dissolution. Steven Reisman (Reisman) worked on a full-time basis for PressEnter during those 11 years. I conclude that Wis. Stat. § 178.15(1) (2009-10)1 permits consideration of the 11 years of service that Reisman provided to PressEnter as a contribution from him to the value of the partnership. Moreover, I conclude that Wis. Stat. § 178.19 requires an accounting to determine the interest of each partner in the partnership prior to liquidation so that it may be determined what part of the profits earned after dissolution are due to the use of each partner's contribution to the partnership. Although the considerations above are not driven by whether the partnership was in wind-up, continuation or some combination thereof for the 11 years subsequent to Bushard's notice of dissolution, the determination of whether it took 11 years for a wind-up or whether Bushard acquiesced to continuation when the sale to Voyager.net did not materialize is a fact question that cannot be determined on summary judgment. *605Accordingly, I would remand for an accounting of what is due to each partner, specifically, an accounting that will consider the relative contributions of each partner to the value of the partnership, in light of Thompson v. Beth, 14 Wis. 2d 271, 111 N.W.2d 171 (1961). I also conclude that whether PressEnter was in wind-up or continuation for the 11 years subsequent to dissolution rests on disputes of material fact and accordingly, it should not have been decided on summary judgment. On remand, the circuit court should hold an evidentiary hearing and revisit its conclusion that PressEnter was in wind-up for 11 years.
¶ 63. I dissent from the majority opinion for at least three reasons: First, the majority opinion does not correctly analyze Wis. Stat. § 178.15(1) in light of the claims of both Bushard and Reisman relative to their partnership contributions. The majority opinion employs § 178.15(1) only in light of Bushard's claim. Second, Reisman has counterclaimed for an assessment of the value that his efforts contributed to PressEnter over the 11 years subsequent to Bushard's withdrawing from active participation in the business. This can be accomplished by an accounting, to which Reisman has a statutory right pursuant to Wis. Stat. § 178.19. A remand may show Reisman owes Bushard money, as Bushard claims, or it may show that Bushard owes Reisman money because Bushard has been overpaid for his partnership interest based on his relative partnership contributions.2 Thompson, 14 Wis. 2d at 277-79. Third, the majority opinion affirms the circuit court's factual finding that this was an 11-year wind-up, which *606is a fact question that cannot be decided on the summary judgment record before us. Accordingly, I respectfully dissent.
I. BACKGROUND
¶ 64. The background underlying this review is ably set out in the majority opinion. Therefore, I relate only what is necessary to understand this dissent.
¶ 65. In 1995, Reisman and Bushard formed PressEnter, a partnership aimed at providing internet service to communities in western Wisconsin. At PressEnter's inception, Reisman and Bushard each contributed $15,000 to the partnership. They never entered into a written partnership agreement. They ran the partnership as equal partners, each with a 50 percent interest.
¶ 66. In August of 1999, following dissention between the partners, legal counsel for Bushard sent Reisman a notice of dissolution of partnership. The notice advised Reisman that:
Mr. Bushard has explored the possibility of the sale of the business to third parties. He believes that a cash sale in the neighborhood of $3,000,000 is achievable, and that closing of such a sale could take place in a very short period of time. In the event you wish to continue to run the business either individually or with a new partner or partners, Mr. Bushard is willing to sell his partnership interest to you for a comparable amount.
Moreover, at one point in the letter, Bushard called the post-dissolution period the "winding up" of the partnership. Namely, he stated: "Please be assured that, during the winding up of the partnership, Mr. Bushard intends to cooperate fully in the interim management of the business."
*607¶ 67. However, their effort to sell PressEnter to Voyager.net was unsuccessful. Bushard then withdrew from participating in running PressEnter. According to Bushard's 2008 deposition testimony, in the nine-year period from August of 1999 to the fall of 2008, Bushard performed services for PressEnter on approximately seven days.3
¶ 68. Despite his lack of participation in PressEnter, Bushard continued to receive 50 percent of the net profits in PressEnter. In the initial nine-year period following the notice of dissolution, Bushard received at least $2.3 million in cash distributions, for which he worked a total of seven days.
¶ 69. However, during these nine years, Reisman worked full-time managing PressEnter. He took very little vacation and, at times, worked 60-70 hours per week. Even Bushard acknowledged that Reisman's technical expertise was a critical factor in PressEnter's success.4 Reisman continued to attempt to find a buyer for PressEnter. In 2004, Reisman began compensating himself for the work he was doing. From 2004 to 2008, Reisman took a salary of between $150,000 and $160,000 per year.
¶ 70. More than eight years after sending the 1999 notice of dissolution, Bushard commenced the present lawsuit against Reisman and PressEnter, requesting liquidation of PressEnter, an accounting from *6081999 to the present and a money judgment against Reisman for taking a salary for four years without Bushard's consent. Reisman and PressEnter counterclaimed for unjust enrichment based on Bushard's receipt of 50 percent of the net profits of PressEnter, when Reisman's contributions to the partnership had vastly exceeded Bushard's contributions.
¶ 71. On November 21, 2008, the circuit court held a hearing on the parties' summary judgment motions. At the hearing, neither party put forth arguments as to whether PressEnter was in wind-up or continuation. Bushard's counsel simply asserted that "neither side contends that this is a situation where Mr. Bushard chose continuation." Reisman's counsel also used the term "wind-up" at one point.5
¶ 72. After hearing arguments from the parties, the court concluded that Reisman was not entitled to compensation. The court stated:
The only issue I had, as I see it, before me is: Given the fact this was a dissolution, that this is a wind-up situation, that the surviving—there is not a surviving partner situation. This isn't where one party died and the other partner survived and continued the business.
The law is very clear. The law says the partner who stays in the partnership during wind-up is not entitled to compensation....
So the Court finds that Mr. Reisman is not entitled to any compensation for running the affairs of the partnership while the partnership is in wind-up status.
*609¶ 73. Having so concluded, the court ruled in favor of Bushard.6 The court of appeals affirmed. Bushard v. Reisman, No. 2009AP438, unpublished slip op. (Wis. Ct. App. June 15, 2010).
II. DISCUSSION
A. Standard of Review
¶ 74. Statutory interpretation is a question of law subject to our independent review; however, we benefit from the analyses in previous courts' discussions. Spiegelberg v. State, 2006 WI 75, ¶ 8, 291 Wis. 2d 601, 717 N.W.2d 641.
¶ 75. Summary judgment is appropriate only when there is no genuine issue of material fact. Oneida Cnty. Dep't of Social Servs. v. Nicole W., 2007 WI 30, ¶ 8, 299 Wis. 2d 637, 728 N.W.2d 652. It is fundamental that a court is not to find issues of fact on summary judgment. Preloznik v. City of Madison, 113 Wis. 2d 112, 116, 334 N.W.2d 580 (Ct. App. 1983). Rather, the court's job is to determine "only whether a factual issue exists, resolving doubts in that regard against the party moving for summary judgment." Id.
B. Partnership Principles
¶ 76. Wisconsin has adopted the Uniform Partnership Act (UPA) and has made amendments to it throughout the years. The UPA, as amended by the Wisconsin legislature, is found in Wis. Stat. ch. 178. In *610the absence of a partnership agreement, ch. 178 creates a framework for the rights and duties of partners in a partnership.
¶ 77. This case involves the dissolution of a partnership that had no written partnership agreement. Dissolution is a change in the relationship of the partners. Wis. Stat. § 178.25. Dissolution can occur by an act of a partner, by bankruptcy of a partner, by the death of a partner or through judicial process. Wis. Stat. § 178.26; Wis. Stat. § 178.27.
¶ 78. Judicial decisions that address disputes subsequent to dissolution often discuss the "wind-up" of a partnership or the "continuation" of a partnership. See, e.g., Estate of Matteson v. Matteson, 2008 WI 48, ¶ 24, 309 Wis. 2d 311, 749 N.W.2d 557; Lange v. Bartlett, 121 Wis. 2d 599, 601, 360 N.W.2d 702 (Ct. App. 1984). Wind-up concludes when all the debts of the partnership are paid and all of the net assets are liquidated by distribution to the partners in cash or in kind. Gull v. Van Epps, 185 Wis. 2d 609, 617-18, 517 N.W.2d 531 (Ct. App. 1994). Whether wind-up is occurring or whether the business is in continuation mode is a question of fact. First Natl Bank of Kenosha v. Schaefer, 91 Wis. 2d 360, 378, 283 N.W.2d 410 (Ct. App. 1979).
¶ 79. Discussion of the concepts of wind-up and continuation subsequent to dissolution often lack the precision in terminology that would be helpful to understanding what the law requires and when it requires it. Estate of Matteson, 309 Wis. 2d 311, ¶ 29 (explaining the confusion that can exist when courts use some form of the word "continue" without determining whether a Wis. Stat. § 178.37 continuation has occurred). Some of the problem seems to arise from Wis. Stat. § 178.25(2), which states, "On dissolution the partnership is not *611terminated, but continues until the winding up of partnership affairs is completed." (Emphasis added.)
¶ 80. When a partnership is in wind-up, the value of the withdrawing partner's account is not fixed until liquidation. The withdrawing partner takes his share of the profits and losses between dissolution and liquidation based on his relative "contributions, whether by way of capital or advances to the partnership property." Wis. Stat. § 178.15(1); see also Wis. Stat. § 178.33(1); Lange, 121 Wis. 2d at 601.
¶ 81. If the withdrawing partner consents to continuation of the business, he claims as a creditor of the partnership with the value of the withdrawing partner's interest fixed at the date of dissolution. In addition, he can obtain interest on that amount until termination of the partnership, or he can take a share of "the profits attributable to the use of [his] right in the property of the dissolved partnership." Wis. Stat. § 178.37. Acquiescence in the continuation of the business is sufficient for consent under Wis. Stat. § 178.36(3). Schaefer, 91 Wis. 2d at 378.
¶ 82. That consent to continuation does not have to be explicit was addressed in Shepherd v. Griffin, 929 S.W.2d 336 (Tenn. Ct. App. 1995). There, the Court of Appeals of Tennessee evaluated whether the Tennessee circuit court had erred in finding that the departing partner "impliedly consented to the continuation of the business by acting inconsistent with a desire to wind up and liquidate." Id. at 341 (internal quotation omitted). In concluding that the circuit court did not err, the court of appeals highlighted the fact that the departing partner allowed the other partner, "without objection, to continue to run the business of the former partnership after its dissolution." Id. Other courts have similarly opined that consent to continuation can be im*612plied. See, e.g., Timmermann v. Timmermann, 538 P.2d 1254, 1261 (Or. 1975) (stating that the departing partner can either force a wind-up and termination or, alternatively, he "may allow the business to continue or accept the fact that it has continued") (emphasis added); Cauble v. Handler, 503 S.W.2d 362, 366 (Tex. Civ. App. 1973) (same).7
C. Application
¶ 83. The majority opinion concludes that wind-up has occurred, but it does not recognize that this determination does not address the issue presented by Reisman's counterclaim. Reisman has asserted that Bushard was overpaid; whether the partnership was in continuation or in wind-up, this contention must be addressed.
¶ 84. Reisman asserts that Bushard was overpaid because Bushard does not have a 50 percent ownership in the partnership. Stated otherwise, Bushard and Reisman both contributed $15,000 cash to the partnership; however, Reisman has contributed 11 years of skilled services to PressEnter and Bushard has contributed only seven days of such services. In wind-up, the *613withdrawing partner's interest is not determined until termination of the partnership when wind-up is complete. A partner's interest that will be returned to him is described in Wis. Stat. § 178.15(1) as "Each partner shall be repaid that partner's contributions, whether by way of capital or advances to the partnership property and share equally in the profits and surplus remaining after all liabilities, including those to partners, are satisfied."
¶ 85. In Thompson, Thompson asserted that the value of his interest in the partnership included the work that he did to further the partnership's business. Thompson, 14 Wis. 2d at 277.8 In meeting this claim, we interpreted Wis. Stat. § 178.15(1). Id. at 278-79. We stated that "[t]he real issue in the case is whether, under the following statutes, the plaintiffs labor in the construction of the buildings comes within the definition of the words "contribution" and "capital" as used in [§ 178.15(1)]." Id. at 278. We held that in the absence of an agreement to the contrary, when one partner contributes "personal services, skill, and knowledge" to the partnership, these contributions can be taken into account when valuing that partner's share of the partnership at termination. Id. at 279 (citation omitted). In so holding, we distinguished § 178.15(6) because we concluded that subsec. (6) did not apply when what was contributed increased the value of the partnership. Id. at 278-79.
¶ 86. In Lange, the court of appeals instructed that if, on remand, the circuit court finds that wind-up has occurred, the court should then "make its decision of the value of the former partner's share." Lange, 121 Wis. 2d *614at 605. This is another way of directing courts to examine the relative contributions of the partners to the value of the partnership and when the partnership is terminated, recognizing that their interests may no longer be in the same percentages as they were when the partnership commenced. If the partner conducting wind-up of the partnership business also contributes additional value to the partnership, then his contribution in kind must be added to any financial contribution he originally made. In that regard, the court said, "we feel the better reasoned view is that one who continues a partnership business after dissolution and contributes substantial labor and management services is entitled to compensation for that effort." Id. at 606.
¶ 87. The rule set out in Thompson and Lange that when a partner's labor and skill subsequent to dissolution increases the value of the partnership business, that partner has increased the value of his share in the partnership, is followed in many jurisdictions. For example, in Essay v. Essay, 123 N.W.2d 648 (Neb. 1963), the Nebraska Supreme Court instructed that although partners may have been eligible to share equally in profits prior to dissolution, "Where the 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 the apportioning of the shares of the partners." Id. at 649.
¶ 88. In Vangel v. Vangel, 291 P.2d 25 (Cal. 1955), the California Supreme Court explained that an equal division of partnership assets may not be equitable "when the contribution to profits from capital is relatively minor in comparison to the contribution from the skills or services of one conducting the business. In such a case, the managing partner may be entitled to a greater share of the profits." Id. at 28.
*615¶ 89. In Estate of Matteson, we recognized that "the portion of the profits attributable to the [departing partner's] ownership interest must be distinguished from the portion attributable to the skill, time, efforts, and diligence of the remaining partners." Estate of Matteson, 309 Wis. 2d 311, ¶ 59 (citation omitted).
¶ 90. In the case before us, Bushard contends that Reisman's efforts for 11 years counted no differently in increasing the worth of the partnership than did his efforts for seven days. Bushard so contends even though he admits that Reisman's technical skills and knowledge increased the value of PressEnter. The relative values of each partner's contributions to the partnership should be determined on remand, valuing both their financial contributions and their skill and services that created increased value in the partnership. Thompson, 14 Wis. 2d at 277; Lange, 121 Wis. 2d at 605.
¶ 91. Once the values of these contributions are determined, a final accounting of this partnership is necessary to accurately determine each partner's interest in the partnership from dissolution to liquidation. Wis. Stat. § 178.19. This accounting should take into consideration the value of each partner's contributions that increased the value of the partnership.
¶ 92. In addition, because the question of whether wind-up or continuation occurred during the 11 years subsequent to dissolution is a question of fact on which there are material disputes, the circuit court should hold a fact finding hearing and then revisit its prior determination in regard to whether wind-up or continuation occurred.
¶ 93. As aforementioned, summary judgment is appropriate only when there is no disputed genuine issue of material fact, and a court is not to find issues of fact on summary judgment. Preloznik, 113 Wis. 2d at *616116. Rather, the court's job is to determine "only whether a factual issue exists, resolving doubts in that regard against the party moving for summary judgment." Id.
¶ 94. First, there is no denying that whether PressEnter was in wind-up or continuation for 11 years is a genuine issue of fact. As the law set forth above underscores, this often is a threshold determination. Consequently, one issue on remand is whether the windup/continuation determination was disputed at the circuit court. In other words, whether a factual dispute on this issue existed.
¶ 95. In granting summary judgment in favor of Bushard at the January 23, 2009 hearing, the circuit court found that whether PressEnter was in continuation or wind-up was not disputed based on the court's previous finding. Specifically, the court opined that it had previously "found specifically" that PressEnter was in wind-up, not continuation. Although the circuit court did not identify when it made this previous finding, assumedly the court is referring to its statement at the November 21, 2008 hearing. At that hearing, the court, in its conclusion, stated:
The only issue I had, as I see it, before me is: Given the fact this was a dissolution, that this is a wind-up situation, that the surviving—there is not a surviving partner situation. This isn't where one party died and the other partner survived and continued the business.
The law is very clear. The law says the partner who stays in the partnership during wind-up is not entitled to compensation....
So the Court finds that Mr. Reisman is not entitled to any compensation for running the affairs of the partnership while the partnership is in wind-up status.
*617¶ 96. Given that the November 21 hearing was a hearing on summary judgment, it would have been improper for the circuit court to make findings of fact. Rather, the court is to decide whether factual issues actually exist. Preloznik, 113 Wis. 2d at 116. At the November 21 hearing, the court did not decide whether a factual issue existed regarding the status of PressEnter, namely, whether it was in wind-up or continuation. Instead, at the November 21 hearing, the court seems to assume that PressEnter is in wind-up. However, the court did not explain why it so assumes or cite to any evidence in the record proving that PressEnter was in wind-up.9 To the contrary, the court saw "the only issue" as whether Reisman was entitled to take a salary.
¶ 97. Moreover, my review of the record indicates that at the time of the summary judgment hearings, the circuit court was aware that PressEnter remained in operation from dissolution to the time of the hearing, a period spanning more than nine years. Moreover, the court knew that following the unsuccessful sale of PressEnter to Voyager.net in September of 2009, Bushard stopped participating in the partnership. This included Bushard ceasing any efforts to sell PressEnter to potential buyers.
¶ 98. The withdrawing partner can consent to continuation by acquiescing to the continuation of the *618partnership or can impliedly consent by acting inconsistent with a desire to wind-up the partnership's business and liquidate its assets. I, therefore, conclude that there were enough facts presented to the circuit court to create a genuine issue of fact as to whether PressEnter was in wind-up or continuation, i.e., whether Bushard had consented to continuation. Therefore, summary judgment should not have been granted.
III. CONCLUSION
¶ 99. In conclusion, it is undisputed that Bushard worked for PressEnter for only seven days during the 11-year period subsequent to his giving notice of dissolution. Reisman worked on a full-time basis for PressEnter during those 11 years. I conclude that Wis. Stat. § 178.15(1) permits consideration of the 11 years of service that Reisman provided to PressEnter as a contribution from him to the value of the partnership. Moreover, I conclude that Wis. Stat. § 178.19 requires an accounting to determine the interest of each partner in the partnership prior to liquidation so that it may be determined what part of the profits earned after dissolution are due to the use of each partner's contribution to the partnership. Although the considerations above are not driven by whether the partnership was in wind-up, continuation or some combination thereof for the 11 years subsequent to Bushard's notice of dissolution, the determination of whether it took 11 years for a wind-up or whether Bushard acquiesced to continuation when the sale to Voyager.net did not materialize is a fact question that cannot be determined on summary judgment. Accordingly, I would remand for an accounting of what is due to each partner, specifically, an accounting that will consider the relative contributions *619of each partner to the partnership, in light of Thompson. I also conclude that whether PressEnter was in wind-up or continuation for the 11 years subsequent to dissolution rests on disputes of material fact and accordingly, it should not have been decided on summary judgment. On remand, the circuit court should hold an evidentiary hearing and revisit its conclusion that PressEnter was in wind-up for 11 years. Accordingly, I respectfully dissent.

 All subsequent references to the Wisconsin Statutes are to the 2009-10 version unless otherwise indicated.

 The majority opinion holds that the profits of PressEnter, L.L.C., specifically those following the August 1999 notice of dissolution, were rightfully distributed equally between Reisman and Bushard. Majority op., ¶ 1.

 Bushard considered his greatest contribution to PressEnter to be staying away and doing nothing for the partnership.

 During his deposition, Bushard was asked: "From a technical aspect in the conduct of the technical parts of the business of PressEnter, has Mr. Reisman done a brilliant job?" Bushard answered this question affirmatively: "To the best of my knowledge and belief, yes."

 When arguing that this is a matter of equity, Reisman's attorney stated, "And the equities of this case allow and should permit that Mr. Reisman receive the salary that he does; and that, in fact, that wind-up should allow—or, be continued so that a sale can occur."

 Following some confusion about the effect of the ruling at the November 21 hearing, the court held a second hearing on January 23, 2009, in which it reaffirmed its ruling in favor of Bushard.

 At the time Shepherd v. Griffin, 929 S.W.2d 336 (Tenn. Ct. App. 1995), Timmermann v. Timmermann, 538 P.2d 1254 (Or. 1975), and Cauble v. Handler, 503 S.W.2d 362 (Tex. Civ. App. 1973) were decided, the respective states had adopted and were applying some form of the Uniform Partnership Act. See Tenn. Code Ann. § 61-1-1205 (West 2002) (repealing the Uniform Partnership Act as previously adopted in Tennessee and replacing it with the Revised Uniform Partnership Act); Thompson v. Coughlin, 997 P.2d 191, 194-95 & n.7 (Or. 2000) (noting that Oregon Legislature adopted the Revised Uniform Partnership Act in 1997, thereby repealing the Uniform Partnership Act previously in effect); Cauble, 503 S.W.2d at 366.

 At the time of Thompson v. Beth, 14 Wis. 2d 271, 111 N.W.2d 171 (1961), the relevant statutory provisions in Wis. Stat. § 178.15 were found in Wis. Stat. § 123.15.

 I acknowledge that there was some indication by both parties at the November 21 hearing that they thought PressEnter was in wind-up. See supra ¶ 71 & n.5. However, an entire review of the November 21 transcript shows that the issue being discussed was whether Reisman was entitled to take a salary in addition to his share of the profits. Neither party focuses on the threshold issue of whether PressEnter was in wind-up or continuation.