Court Opinion

ID: 9534743
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:42:32.253797+00
Date Added: 2024-06-11T13:31:45.652366
License: Public Domain

URBIGKIT, Chief Justice,
dissenting.
Analysis of the facts of this case reveals that, by denial of a motion for leave to amend to delete inappropriately admitted and clearly erroneous allegations, the trial court tried a case that factually did not exist. This majority then, in misinterpreting the documents and details, misconstrues the issues presented. Since the citations of authorities are inappropriately applied by a misunderstanding of the basic transaction, the result achieved is just plain wrong. Consequently, whether or not the local resident doctor should be repaid what he lost in his inopportune partnership venture, the basis for decision here is legally erroneous. I consequently dissent.
Dr. Alfred William Paulsen, a Gillette optometrist, became the owner of a twenty acre tract of Gillette, Wyoming real estate upon which he wanted to build a motel. For that purpose, Energy Inn Partnership was formed in 1976, a Holiday Inn franchise was obtained and a motel built, in which partnership he acquired a twenty-five percent interest.1 The great Gillette oil and coal boom came to subside and was followed in this enterprise by partnership calls for capital infusion. The record reflects that the initiating promissory note for this litigation was signed by the partnership and the partners on September 1, 1984, in the amount of $150,000 in order to cover Dr. Paulsen’s partnership deficiency call required to provide additional capital for the venture.
By 1986, Dr. Paulsen wanted to get out and release the tiger, with the partnership then obviously in financial distress with the *364local recession economy. He entered into a sales agreement where, in direct effect, he sold 24/25ths percent of his partnership interest and twenty-five percent of its loss write-off constituent in consideration of the buyer’s assumption of the balance remaining due on the September 1, 1984 note which, by 1987, still totalled about $81,250. As life is wont to be, this transaction did not achieve for him either a partnership or a personal release of the liability which he originally incurred by becoming a partner in 1976 and more directly documented by his execution of the note in 1984 with subsequent renewals.2
Obviously, the lender bank was disinclined to release the local “solvent” obli-gor and, consequently, in November of 1987, Dr. Paulsen signed the extension note for the balance then remaining of $76,250. The partnership, which by then consisted in fact of High Country Corporation, ninety-nine percent, and Dr. Paulsen, one percent, had made interest payments and a modest principal reduction. Unfortunately, further payments were not made. In 1988, the lender called upon Dr. Paulsen, who had signed the 1987 note as an individual and then served as “an advisory director” of the lender bank, to pay off the note. He did, took an assignment of the note from the bank and, by this lawsuit, sued the partnership — High Country Corporation, which had purchased 24/25ths percent of his partnership interest, a former partner in the enterprise, SDKD, Ltd., and appellant Stephen R. Narans, who was a principal in both High Country Corporation and SDKD, Ltd.
The complexity of this litigation was-engendered by appellants’ inappropriate admission in their answers to the complaint. In the complaint, Dr. Paulsen alleged, as relevant to this issue:
2. SDKD and High Country Corporation are partners of Energy Inn Partnership.
******
5. Energy Inn Partnership and its partners High Country Corporation and SDKD have defaulted on the note, Exhibit “A” hereto.
The answers stated:
2. Defendant admits the allegations contained in paragraph 2 of Plaintiff’s Complaint.
* * * * * *
5. Defendant admits that Energy Inn Partnership, a Partnership consisting of High County Corporation, SDKD, Ltd., and the Plaintiff, have defaulted on the note, a copy of which has been attached as Exhibit A to Plaintiff’s Complaint.
There is no question within the record and the documentation provided that earlier than the 1986 buy-out transaction, SDKD, Ltd. had ceased to be a partner in the venture. As of December 30, 1986, the only partners were High Country Corporation, seventy-five percent, and Dr. Paulsen, twenty-five percent, which, after the buyout, resulted in a partnership interest of High Country Corporation, ninety-nine percent, and Dr. Paulsen, one percent, general although limited by the profit/loss attribution clause.
The complaint was filed December 29, 1988 and the answers were filed January 26, 1989. On October 5, 1989, appellants moved to amend to withdraw an incorrect factual admission. That motion was denied and the trial court proceeded to try the case as if SDKD, Ltd. was a partner and *365Dr. Paulsen was not a partner, neither of which is or was factually true.
Although I recognize that the “discovery” of the error in pleading came late in the proceeding, I find singular error and abuse of discretion in denial of a motion which essentially would have been no different than one presented during the trial to conform to the evidence which would relate the case to its actual facts. Holding a litigant to an erroneous and incorrect admission which is seasonably discovered and an effort at correction made does not comply with the justice proviso of W.R.C.P. 1 and the freely given concept for amendment provided in W.R.C.P. 15. See Beaudoin v. Taylor, 492 P.2d 966 (Wyo.1972). I agree, as Justice Guthrie so appropriately said in Beaudoin in direct application to this case, “[w]e merely observe it does not serve the spirit, philosophy, and purpose of the civil rules to adhere to the cause of action concept.” Id. at 970.
Since the facts of this case were really not in conflict and the only conflict was engendered by the erroneous admission, neither delay in proceeding nor due prejudice is observed. Bush v. Duff, 754 P.2d 159 (Wyo.1988); Johnson v. Aetna Cas. & Sur. Co. of Hartford, Conn., 608 P.2d 1299 (Wyo.1980). Abuse of discretion exists with amendment denial when it should have been allowed in the furtherance of justice. Bush is directly applicable here. The trial court should have heard the real case and then, within the question of the constituency of the partnership, any assertion or conclusion that Dr. Paulsen had not continued as a partner is just factually wrong.
If Dr. Paulsen had not been a partner in 1987, if SDKD, Ltd. had been a partner in 1987, and if the 1984 transaction had not involved funds acquired to serve the benefit, both direct and indirect, of Dr. Paulsen relative to the partnership financial problems and his delinquency in partnership calls, then I would concur with this majority’s decision. I do not differ with the analysis as clearly defined in written agreements that the partnership and its partner, defendant High Country Corporation, intended to save Dr. Paulsen harmless from the bank indebtedness by providing him money as a characterized buy-out sum from which he could make the bank payments on the note. When the venture and its general partner, High Country Corporation, did not provide those payments, the agreement was breached and Dr. Paulsen was entitled to sue on its indemnity provisions but not on the assigned note to secure repayment. The error in result in the initial decision and instant opinion results in an improper judgment against SDKD, Ltd., a prior co-partner with Dr. Paulsen and the principal in SDKD, Ltd., Stephen R. Narans.
Further synthesized, the error in the majority opinion is the assumption that the 1984 loan, when accommodating a partnership deficiency call against a partner, is “not for [the partner’s] direct benefit.” The rule generally stated is no benefit3 but, in any event, the factual circumstances clearly meet any of the stated tests. This majority’s conclusion that follows that the partner in this circumstance was only an “accommodation maker” is factually inaccurate and erroneous as a matter of law.
If Dr. Paulsen had not been a partner in 1984 when he executed the note and had not at least arguably executed it for his direct or indirect benefit to assist a floundering business, I could also accept the authorities presented by this majority in support of the present decision. However, reading those decisions, Mooney v. GR and Associates, 746 P.2d 1174 (Utah App.1987); Utah Farm Production Credit Ass’n v. Watts, 737 P.2d 154 (Utah 1987); El-Ce Storms Trust v. Svetahor, 223 Mont. 113, 724 P.2d 704 (1986); Holcomb State Bank v. Adamson, 107 Ill.App.3d 908, 63 Ill.Dec. 704, 438 N.E.2d 635 (1982); and South Side *366Bank & Trust Co. v. Yorke, 15 Ill.App.3d 948, 305 N.E.2d 367 (1973), are unconvincing that this partner’s execution of that note at that time provides justification for the present assertion that in 1984, Dr. Paulsen was only an “accommodation maker.” I further conclude that if he was a co-maker with the partners in 1984, he then continued to be a co-maker with last renewal in 1987 by virtue of his endorsed responsibility on the obligation by continued execution of the renewal note which debt had been originally incurred for his specific benefit, both direct and indirect.
Consequently, I dissent.

. Undoubtedly, the motel interest depreciation as a real estate investment afforded a significant tax offset to Dr. Paulsen’s medical practice income.

. The retention by Dr. Paulsen of a one percent interest by his request within the 1986 buy-out transaction causes unnecessary confusion in trial court consideration and present court decision.
The subject addressed in the record is clearly understandable as the pervasive tax issue of partnership participation when depreciation recapture "possibilities” exist if a partner has achieved a negative partnership equity through depreciation tax benefit and then terminates his interest in the partnership and receives a third-party assumption of the outstanding indebtedness.
To get out of a real estate partnership which has been losing money can, when done in the wrong way such as by foreclosure or sale, become very expensive in additional income from recaptured depreciation. What Dr. Paulsen did reflects not only reasonable but apparent sophisticated tax advice or information.

. Utah Farm Production Credit Ass’n v. Watts, 737 P.2d 154 (Utah 1987) states the rule as direct or indirect benefit, but generally the test standard provided by the cases is unfettered "benefit." Farmers State Bank of Oakley v. Cooper, 227 Kan. 547, 608 P.2d 929 (1980); Riegler v. Riegler, 244 Ark. 483, 426 S.W.2d 789 (1968); Commerce Union Bank v. Davis, 581 S.W.2d 142 (Tenn.App.1978).