William MUNDHENKE, Plaintiff and Appellee, v. Steven HOLM, Defendant and Appellant.
No. 25236.
Supreme Court of South Dakota.
Decided Aug. 11, 2010.
2010 S.D. 67
Argued Jan. 13, 2010.
[¶ 6.] Based on the record, we find no abuse of discretion in granting a new trial on damages. A trial court can grаnt a new trial under
[¶ 7.] The order for a new trial on damages is affirmed.
[¶ 8.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER, and SEVERSON, Justices, concur.
Richard L. Russman of Richardson, Wyly, Wise, Sauck & Hieb, LLP, Aber-
GILBERTSON, Chief Justice.
[¶ 1.] William Mundhenke (Mundhenke) filed a complaint seeking an accounting, dissociation, and dissolution of a business he claimed was operated as a partnership with Steve Holm (Holm). Holm denied the existence of a partnership and argued that Mundhenke‘s complaint was a request for legal relief for which a right to a jury trial existed, rather than a request for equitable relief for which there is no right to a jury trial. The circuit court denied Holm‘s request for a jury trial on the issue of whether a partnership existed. Holm appeals. We reverse and remand.
FACTS
[¶ 2.] In the late 1980s, Mundhenke enlisted Holm and Terry Boyle (Boyle) to start a garbage hauling business in Aberdeen, South Dakota, to compete with Dependable Sanitation, an established local business. The three men operated the business without a written agreement or a definite term. Each performed an equal share of the work soliciting and servicing accounts and driving the garbage truck routes.
[¶ 3.] Mundhenke would later testify that despite each of the three men having a one-third share in the business, at his suggestion they decided to put the business in Holm‘s name. The business was represented as a sole proprietorship in Holm‘s name for the procurement of licenses, permits, and insurance. In addition, Holm filed his tax returns claiming the income, expenses, and depreciation generated from A-1‘s business activities as a sole proprietor. Boyle subsequently withdrew from the business after six months.
[¶ 4.] After Mundhenke stepped away from day-to-day operations in 1990, Holm referred to Mundhenke as his “silent partner” or partner several times over the next few yeаrs. Mundhenke and Holm both represented that their informal arrangement involved Holm handling the day-to-day operations and Mundhenke as the “behind the scenes guy.”
[¶ 5.] In 2000 and 2002, Dependable Sanitation offered to purchase A-1. Mike Erickson, the оwner of Dependable Sanitation, spoke with both Mundhenke and Holm about purchasing A-1. During the 2002 negotiations, Erickson met several times with Mundhenke and Holm both separately and together. During the negotiations and discussions, Holm did not indicate a desire to dissociate from the business or claim that Mundhenke no longer had a partnership stake in A-1.
[¶ 6.] In 2005, Mundhenke scheduled a meeting with Holm and an attorney to discuss incorporating A-1. At that meeting, Holm for the first time indicated his desire to dissociate from the business. Holm and Mundhenke could not agree in subsequent discussions on a division of assets and routes.
[¶ 7.] Mundhenke eventually filed a three-count complaint demanding an accounting (Count 1) and a dissociation, dissolution, and other equitable remedies under
[¶ 8.] On July 10, 2008, the circuit court denied Mundhenke‘s motion for summary judgment. It then entered its ruling on Holm‘s demand for a jury trial on the issue of whether the partnership existed. The circuit court cоncluded that an equitable claim was before it despite the need to determine the factual issue of whether a partnership existed. Citing Meyer v. Lofgren, 949 S.W.2d 80 (Mo.Ct.App.1997), for the proposition that the determination of the existence of a partnership in a suit for an accounting is “part and parcel of the equitable proceeding,” the circuit court concluded no right to a jury trial existed and denied Holm‘s demand for a jury trial.
[¶ 9.] On August 20 and 21, 2008, a bench trial was held on the matter. The circuit сourt entered its findings of fact and conclusions of law in which it determined a partnership existed between Mundhenke and Holm from the time the two men and Boyle started the business in the late 1980s up until 2005 when Holm for the first time expressed a desire to dissolve the business in the meeting with Mundhenke and the attorney. The circuit court further concluded Mundhenke was entitled to a full accounting of the income and expenditures, assets and liabilities, contributions of the partners, accrual and disрosition of partnership property, and a settlement of partnership accounts.
[¶ 10.] Holm appeals raising the following two issues:
- Whether the circuit court erred when it denied Holm‘s demand for a jury trial.
- Whether the circuit court erred when it concluded Mundhenke and Holm formed a partnership and that no de facto dissolution occurred before the 2005 meeting.
STANDARD OF REVIEW
[¶ 11.] A circuit court has broad discretion in an equitable action to determine whether to grant or deny a jury trial. Fox v. Burden, 1999 SD 154, ¶ 32, 603 N.W.2d 916, 924. We will not disturb the circuit court‘s decisiоn absent an abuse of discretion. Id.
ANALYSIS AND DECISION
[¶ 12.] 1. Whether the circuit court erred when it denied Holm‘s demand for a jury trial.
[¶ 13.] Holm argues he had the right to a jury trial under Article VI, Section 6 of the South Dakota Constitution and
[¶ 14.] Article VI, Section 6 of the South Dakota Constitution guarantees
[¶ 15.] A jury trial is permitted between partners when the complaint on its face prays for an accounting, but the factual pleadings show a legal claim for fraud and misappropriation and requests money damages instead of an accounting and dissociation. Baum v. Stephenson, 133 Mo.App. 187, 113 S.W. 225, 229 (1908). Actions at law between partners are also permitted when the “bookkeeping process whereby debits and credits are balanced or a balance of mutual accounts is struck,” is not necessary, such as when the damages from a single contract are easily ascertainable and the relief requested is an amount certain. Thompson v. Coughlin, 329 Or. 630, 997 P.2d 191, 195 (2000) (quoting Carey v. Hays, 243 Or. 73, 409 P.2d 899, 902 (1966)). However, the general rule is that one partner cannot maintain an action at law against another partner to recover an amount claimed by the first partner by reason of partnership transactions until there has been a final settlement of the affairs of the partnership through a claim to a court of equity for an aсcounting and dissolution. Munce v. Munce, 77 S.D. 594, 96 N.W.2d 661, 663-64 (1969). But, “[t]he partnership relation is the basis of the ... cause of action for an accounting.” Id. at 664.
[¶ 16.] However, when a case presents both a request for equitable relief and legal relief, the proper course of action is for the trial court to bifurcate the issues and try the equitable claims to the court and the legal claims to a jury. Brookside Townhouse Ass‘n v. Clarin, 2004 SD 79, ¶ 15, 682 N.W.2d 762, 768 (quoting Durkee v. Van Well, 2002 SD 150, ¶ 11, 654 N.W.2d 807, 812). Under our previous rule known as the incidental rule, when the disposition of the equitable claims resolvеd any legal claims presented as a matter of law, the “dismissal of the legal claims [did] not violate the right to a jury trial.” Id. ¶ 16. However, that rule was abrogated in First Western Bank, 466 N.W.2d at 856, which adopted the United States Supreme Court‘s rejection of the incidental claim rule in Dairy Queen, Inc. v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962).
[¶ 17.] Despite overruling the incidental claim rule in First Western Bank, we applied it in Brookside Townhouse Ass‘n, 2004 SD 79, 682 N.W.2d 762, and Durkee v. Van Well, 2002 SD 150, 654 N.W.2d 807. We did so because thе parties in those cases limited their arguments to that rule and did not argue entitlement to a jury trial under the holdings of Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959); Dairy Queen, Inc., 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44; and First Western Bank, 466 N.W.2d at 856. In this case, Holm relies on Dairy Queen. We take this opportunity to reiterate that the incidental claim rule has been abrogated in South Dakota to the еxtent it is inconsistent with Beacon Theatres and Dairy Queen. See First Western Bank, 466 N.W.2d at 856. Therefore, although Brookside and Durkee ap-
[¶ 18.] Holm‘s answer specifically denied that a partnership existed. With that denial, Holm asked for a determination of legal rights, i.e., whether a valid partnership existed under
[¶ 19.] 2. Whether the circuit court erred when it concluded Mundhenke and Holm formed a partnership and that no de facto dissolution occurred before the 2005 meeting.
[¶ 20.] Because of our holding on Issue 1, we vacate the trial court‘s ruling on Issue 2 and remand for a jury trial on these issues.
[¶ 21.] Reversed and remanded for further proceedings consistent with this opinion.
[¶ 22.] KONENKAMP, ZINTER, MEIERHENRY, and SEVERSON, Justices, concur.
GILBERTSON, Chief Justice.