Knudson v. Kyllo
2013 ND 102
N.D.2013Background
- Shawn Knudson and Randy Kyllo operated Tri-K Farms as an equal, unwritten general partnership from 1994 until dissolution proceedings; each partner owned separate farmland and the partnership farmed those and leased lands.
- In 2005 Shawn purchased the “Fougner” parcel by contract for deed, using some partnership funds; Tri-K Farms continued to farm the Fougner land and lease income flowed to the partnership.
- In 2008 Knudson sued Kyllo seeking accounting and dissolution; Kyllo counterclaimed for damages, alleging Shawn usurped a partnership opportunity by purchasing Fougner.
- The district court dissolved the partnership, made an accounting, and initially awarded Kyllo limited damages on the usurpation claim; this Court reversed and remanded for specific findings on usurpation.
- On remand the district court found Kyllo failed to prove by a preponderance that Shawn usurped a partnership opportunity, reasoning farming the land was a partnership opportunity but owning it was not, and the partnership’s relationship to the land did not change after purchase.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Shawn usurp a partnership opportunity by buying the Fougner land? | Knudson: purchase was a partnership opportunity; Shawn breached fiduciary duty by buying without offering it to the partnership. | Kyllo: purchase was individual; partnership’s business was farming (not land ownership), partnership continued to farm and received lease income. | Court: No usurpation — farming the land was within partnership scope but owning it was not; Kyllo failed to prove usurpation. |
| Whether owning farmland was within the partnership’s scope of business | Knudson: acquisition of farm land is related to farming operations and should be offered to partnership. | Kyllo: partnership historically did not own land; partners individually owned land that partnership farmed. | Court: Partnership never owned real property; buying land was not within partnership scope. |
| Whether partnership’s continued farming of Fougner negates usurpation | Knudson: continued farming does not cure wrongful usurpation of the opportunity. | Kyllo: continuation of farming and lease proceeds to partnership show no adverse effect. | Court: Continued farming and lease income to partnership support finding no usurpation. |
| Standard of proof and deference to trial court findings | Knudson: trial court’s findings earlier were insufficient (on remand argued for usurpation). | Kyllo: factual findings are supported by evidence; appellate deference applies. | Court: Findings were supported by evidence and not clearly erroneous; appellate deference applies. |
Key Cases Cited
- Sandvick v. LaCrosse, 747 N.W.2d 519 (N.D. 2008) (partners owe duties of loyalty and care)
- Fladeland v. Gudbranson, 681 N.W.2d 431 (N.D. 2004) (standard for clearly erroneous factual findings)
- Niles v. Eldridge, 828 N.W.2d 521 (N.D. 2013) (appellate review and deference to district court credibility determinations)
- Knudson v. Kyllo, 819 N.W.2d 511 (N.D. 2012) (prior opinion remanding for explicit findings on usurpation of partnership opportunity)
- Brandt v. Somerville, 692 N.W.2d 144 (N.D. 2005) (characterizing opportunity ownership questions as largely factual)