Kelly v. Kelly
2011 ND 167
| N.D. | 2011Background
- Gerald and Gary Carlson operated a farming/ranching partnership in North Dakota from 1971–2007; land titled individually but costs paid by the partnership.
- Partnership funded personal and family expenses (travel, housing, tuition, etc.) and paid expenses on partners’ personal credit cards.
- In 1990s, brothers sold individually owned land to reduce partnership debt; Gerald sold 3 parcels, Gary sold 1; proceeds largely paid toward debt.
- In 2003, lender required land conveyances; Gerald conveyed 300 acres (except his homestead), Gary conveyed 600 acres (including his homestead) to lender; Gary’s land later re-acquired by Gary and then transferred to his wife, Marlys.
- In 2002–2005, partnership carried life insurance policies on both partners; Gary’s policy lapsed in 2005 due to nonpayment while Gerald continued paying his own.
- Gerald sued in 2007 seeking dissolution and capital account credits for land sales to pay partnership debt and for personal credit card payments; Gary and Marlys counterclaimed for accounting and breach of fiduciary duty.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether unequal real estate contributions require an accounting or credit | Gerald argues credits should reflect land sale contributions. | Partnership arrangement allowed unequal contributions without accounting. | Not clearly erroneous; no accounting or credit mandated by agreement. |
| Whether Gerald is entitled to credit for personal credit card charges | Credits should reflect partnership-paid personal/household charges. | Evidence insufficient to show business purpose for charges. | Remanded for clarification due to inconsistent findings; credits not affirmed. |
| Whether Gary's land transfer to Marlys violated the Uniform Fraudulent Transfer Act | Transfer could be voidable if fraudulent under 13-02.1. | Transfer not properly actionable as a present creditor issue. | Vacate the fraudulent transfer finding; advisory opinion improper. |
| Whether Gerald breached fiduciary duty by failing to pay Gary’s life insurance premiums | Gerald had fiduciary duty to fund premiums as partnership remittance. | Gary personally owned the policy; partnership payment not required. | Gerald liable for breach of fiduciary duty; remand for damages and potential contributory fault. |
Key Cases Cited
- Jahner v. Jacob, 515 N.W.2d 183 (N.D. 1994) (valid, presently enforceable debt essential to fraudulent transfer action)
- In re Estate of Thomas, 532 N.W.2d 676 (N.D. 1995) (long-term failure to account supports non-equalization intent)
- American Bank Center v. Wiest, 793 N.W.2d 172 (N.D. 2010) (finding of unclear or inconsistent findings may be remanded for clarification)
- Tulintseff v. Jacobsen, 615 N.W.2d 129 (N.D. 2000) (remedial standards for remand and clarification of findings)
- Hagel v. Hagel, 721 N.W.2d 1 (N.D. 2006) (remand for clarification of inconsistent findings)
- Red River Wings, Inc. v. Hoot, Inc., 751 N.W.2d 206 (N.D. 2008) (fiduciary duty and partnership matters governed by good faith and loyalty)
- Akerlind v. Buck, 671 N.W.2d 256 (N.D. 2003) (partnership relations governed by agreement; default rules apply only if not addressed)
- Isaacson v. Isaacson, 777 N.W.2d 886 (N.D. 2010) (advisory opinions not permitted; controversy must be real)
- Cavendish Farms, Inc. v. Mathiason Farms, Inc., 792 N.W.2d 500 (N.D. 2010) (standard for reviewing factual findings and clear error)
- Svihl v. Gress, 111 Syll. 1 (N.D. 1974) (N.D. 1974) (fiduciary duties in partnership context recognized)