This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2000).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C3-01-2162

 

Investment Management, Inc., et al.,

Plaintiffs,

 

vs.

 

Jordan Realty, Inc., et al.,

Defendants,

 

Patricia J. Jordan,

Appellant,

 

PBR Partnership, et al.,

Respondents,

 

C.R. Development LLP, et al.,

Third-Party Defendants.

 

Filed July 30, 2002

Affirmed in part, reversed in part, and remanded
Foley, Judge
*

 

Hennepin County District Court

File No. CT99008260

 

Kyle J. Hegna, Todd J. Baumgartner, Wilkerson & Hegna, P.L.L.P., 7300 Metro Boulevard, Suite 300, Edina, MN 55439 (for appellant)

 

Thomas J. Hunziker, Dunkley, Bennett & Christensen, P.A., 701 Fourth Avenue South, Suite 700, Minneapolis MN 55415 (for respondents)

 

            Considered and decided by Randall, Presiding Judge, Stoneburner, Judge, and Foley, Judge.

U N P U B L I S H E D   O P I N I O N

FOLEY, Judge

            Respondents asked the district court to dissolve a general partnership operated by the parties, the assets of which consisted of units in two limited partnerships.  Appellant contends that the court abused its discretion in ordering her to sell her proportionate share of the general partnership assets to respondents as part of the partnership dissolution.  Appellant argues that (1) the court erred in failing to construe her third-party complaint as requesting an “in-kind” division of partnership assets; (2) the court’s finding that it was not reasonably practicable for appellant to remain an owner was clearly erroneous; and (3) the partnership agreement authorized an “in-kind” disposition, and in the alternative, the presence of partnership debt required that the partnership assets be sold and converted to cash.  Respondents, on notice of review, contend that this court may modify the judgment of the district court to include the sale to respondents of units individually owned by appellant in one of the limited partnerships.  Because the district court granted the relief originally requested by appellant in her third-party complaint, and because the court’s finding that the discord between the parties made it not reasonably practicable for appellant to remain a direct owner of the component limited partnerships was not clearly erroneous, we affirm on the issue of the sale of the general partnership assets.  We reverse and remand, however, on the single issue of the disposition of appellant’s individually owned shares in one of the limited partnerships.

FACTS

            In September 1994, appellant Patricia Jordan, along with respondents Richard Pogin and Bruce Lambrecht, created a general partnership, PBR Partnership (PBR).  At all times, Jordan was a 50% owner/general partner of PBR; Pogin and Lambrecht were each 25% owners/general partners.  At the time of trial, PBR’s only assets consisted of the ownership of 9.41667 limited partnership units in Land Partners II Limited Partnership (LP II) and 5.74 limited partnership units in Minikahda Ministorage Limited Partnership (Mini I).  PBR also maintained partnership debt in the amount of $226,576.51, the result of a promissory note secured from Associated Bank for PBR’s purchase of the limited partnership units of LP II and Mini I.

            LP II is a limited partnership owning and operating a vacant approximate 11-acre parcel of real estate located just west of the Target Center in downtown Minneapolis.  At its inception, LP II had 37 separate investors owning 100 limited partnership units.  By the time of trial, there were more than 60 separate limited partners owning both whole and fractional limited partnership units in LP II.  At the time of this action, LP II operated the vacant parcel as a parking lot; however, the parcel has been recently promoted for other development possibilities, including as a possible site for a new Minnesota Twins baseball stadium. 

            Mini I is a limited partnership organized in 1984 for the sole purpose of developing and operating a mini-storage facility in St. Louis Park, Minnesota.  At its inception, there were 54 separate investors in Mini I with a total of 51 individual ownership units.  In 1996, Jordan, in her own name and separate from PBR, purchased an additional 1.5 partnership units in Mini I.   At the time of trial, there existed more than 40 separate limited partners, owning both whole and fractional limited partnership units, in Mini I. 

            Investment Management, Inc. (IMI) is a Minnesota corporation in the business of, among other things, commercial property management.  Respondents Pogin and Lambrecht are each 50% owners, as well as officers, of IMI.  IMI, a general partner for LP II, is in charge of managing the parking facility operated on the property owned by LP II in downtown Minneapolis.  IMI also manages the mini-storage operations of Mini I.  

            In May 1999, after a deterioration in the business relationship between the parties, respondents sued Jordan Realty and Patricia Jordan for the dissolution of three other partnerships in which they shared an interest.[1]   Jordan Realty and Patricia Jordan then filed an amended counterclaim and third-party complaint, asking the court to order “the equitable division, or other appropriate remedy at law or equity, of  PBR Partners and Minikahda Ministorage I, by requiring [IMI] to buy out Defendants consistent with their respective ownership interests.”  Respondents initially filed a reply to the counterclaim and third-party complaint denying the need to dissolve the PBR and Mini I partnerships because PBR and Mini I were limited partnerships, and Jordan, as a limited partner, lacked standing to question management activity.  Respondents then, however, changed their mind and filed an amended reply to the third-party complaint, admitting that relations between Jordan, Lambrecht, and Pogin had broken down such that it was not reasonably practicable to carry on the functions of PBR and Mini I, and asking for the equitable division of PBR and Mini I by requiring Jordan to buy out respondents consistent with their various ownership interests.

            Mini I then retained separate counsel and brought a Rule 12 motion to dismiss the claim seeking dissolution of Mini I, on the ground that it was a successful limited partnership, and that Jordan could identify no respect in which the partnership was rendered incapable of continuing under its partnership agreement.  The court granted this motion, dismissing the third-party claim only as to Mini I.  Shortly before trial, the parties settled their disputes as to the 2356 University Avenue, Mini VI, CR Development Partners LLP (another partnership in which the parties shared an interest), and Oakdale Properties.

            At trial, Lambrecht and Pogin’s counsel moved the court for a determination as to the status of the pleadings with respect to PBR.  Jordan argued that her third-party complaint, which sought the “equitable division” of PBR, should be construed as seeking an “in-kind” distribution of partnership assets as the most fair and equitable method of distribution.  Lambrecht and Pogin, on the other hand, argued that because Jordan had earlier sought leave of the court to serve the third-party complaint, asking for the specific equitable relief that Lambrecht and Pogin be required to purchase her interest in PBR at market value, the sole issue at trial should be the valuation of the partnership property.  The court reserved ruling on the motion.        

            At trial, Pogin provided two different valuations for the PBR partnership:  (1) a value of 7.5 million dollars for the property as of the date it was last refinanced in 1997; and (2) an appraisal, dated October 1, 2000, which had been originally performed at Jordan’s request by Jeff Johnson.  That appraisal indicated a value of $10 million for the property.  In sending out information to the investors of the partnership in 2000, Pogin had used the figures from the Johnson appraisal to arrive at a per unit partnership value of $39,000.  Jordan chose to present no evidence at trial as to the valuation of the partnership.  Although evidence was submitted concerning the property’s viability as a site for a new Minnesota Twins stadium, the special session of the 2001 legislature adjourned without a resolution of the stadium issue.

            Becky Spartz, the comptroller for IMI, testified at trial as to a difficult working relationship with Jordan since late 1998.  Problems included (1) the receipt of multiple faxes daily from Jordan, questioning minor actions of IMI; (2) Jordan’s refusal to sign or to delegate for signature the 1999 and 2000 federal and state tax returns; and (3) a complaint filed against Pogin with the Department of Commerce, later found to be groundless.  Most of Jordan’s actions related to the other entities in which she held a substantial interest with Pogin and Lambrecht.

            On June 28, 2001, Jordan filed a new lawsuit against Mini I, which was consolidated with the present action.  That matter came before the district court on Jordan’s request for a temporary restraining order to enjoin Mini I from putting new roofs on the storage units.  Jordan agreed to dismiss that case after the district court issued an order denying the temporary restraining order.      

            On October 25, 2001, the district court issued its Findings of Fact, Conclusions of Law, and Order, citing language in the memorandum supporting Jordan’s amended complaint that referred to a buy-out of her interest by Lambrecht and Pogin.  The court found that Jordan had never amended her pleading to eliminate that request for relief. 

            The court further found that because of the discord between the parties, it was not reasonably practicable for Jordan to remain a partner in PBR, a direct owner of Mini I, or a direct owner of LP II.  Interpreting the pleadings to be a prayer for Lambrecht and Pogin to buy out their interest in PBR, the court found that Pogin and Lambrecht should be allowed to purchase Jordan’s shares.  The court noted that Jordan’s actions had become extremely disruptive not only to PBR, but also to the LP II and Mini I partnerships in which PBR held an interest.  Jordan’s argument that she could cause no disruption to the partnership as a passive limited partner was refuted by her subsequent lawsuit against Mini I. 

            Thus, the only remaining issue for trial was the valuation of the shares.  In unrebutted testimony, Pogin had used the figures from Jeff Johnson to arrive at a value of $10 million for the LP II property, and used that figure in calculating the price per share of that partnership.  The court noted that at no time did Jordan choose to present numbers concerning valuation, nor did she request a continuance to allow further expert testimony on valuation, although she was given numerous opportunities to supplement the record with information on changes in valuation and information on potential sales, particularly as it related to possible use of the property for a new Twins stadium.  

             In accordance with the evidence presented at trial, the court found that the current market value for one unit of Mini I was $87,500.  Jordan owned 1.5 units directly and another 2.87 units via her 50% ownership of PBR, for a total of 4.37 units, worth $382,375.  The current market value of one limited partnership unit in LP II was $39,500.  Jordan owned 4.708335 units of LP II via her 50% ownership of PBR, for a total value of $185,979.  Her current share of the $18,000 assessment in LP had a value of $28,517.

            The court then concluded that the business relationship between Jordan and Pogin and Lambrecht concerning the PBR partnership must be dissolved, and that the equitable dissolution of the PBR general partnership was warranted.  The court therefore granted the prayer in the pleadings that requested dissolution, and that Pogin and Lambrecht purchase Jordan’s shares, since it was no longer opposed.  The court also granted Pogin and Lambrecht’s pretrial motion to determine there was no longer a justiciable issue concerning those matters based on the pleadings.  The court directed PBR to wind up its business operations, satisfy all debts, and terminate the partnership.  The court concluded that Pogin and Lambrecht should be allowed to purchase the ownership units of LP II and Mini I that Jordan owned via her partnership in PBR at the predetermined valuation levels.  The court also stated that all parties should satisfy their joint indebtedness to Associated Bank by Jordan paying off 50% of the indebtedness, and Pogin and Lambrecht each paying 25% of the indebtedness.  Finally, the court concluded that such allocation of assets was the most fair, advantageous, and equitable division that could be made for the parties.

            The court ordered specifically that (1) Pogin and Lambrecht purchase Jordan’s shares of PBR in the amount of $185,979 for LP II, plus the assessment for LP II in the amount of $28,517; (2) Pogin and Lambrecht purchase Jordan’s 2.87 unit shares of Mini I at $87,500 per unit share, for a total of $251,125; and (3) the parties pay the outstanding debts of the partnership, including that owed to Associated Bank, in proportion to their ownership share of PBR.  The court, however, made no order regarding the 1.5 units of Mini I owned by Jordan on an individual basis.    

            This appeal followed. 

D E C I S I O N

I.

            Appellant Patricia Jordan first contends thatthe district court erred by construing her pleadings as a request for respondents to buy out her interests in PBR and Mini I.  Courts must construe pleadings in order to do “substantial justice.”  Minn. R. Civ. P. 8.06.  One major purpose of pleading is

to give fair notice to the adverse party of the incident giving rise to the suit with sufficient clarity to disclose the pleader’s theory upon which his claim for relief is based.

 

Northern States Power Co. v. Franklin, 265 Minn. 391, 394, 122 N.W.2d 26, 29 (1963)).  In reviewing pleadings, courts should examine them as a whole.  Basich v. Bd. of Pensions of Evangelical Lutheran Church in Am., 493 N.W.2d 293, 295 (Minn. App. 1992).  This court reviews de novo the legal sufficiency of a claim.  Stead-Bowers v. Langley, 636 N.W.2d 334, 338 (Minn. App. 2001), review denied (Minn. Feb. 19, 2002). 

            The district court may consider all of the issues raised in the pleadings.  Septran, Inc. v. Ind. Sch. Dist. No. 271, Bloomington, Minn., 555 N.W.2d 915, 920 n.1 (Minn. App. 1996), review denied (Minn. Feb. 26, 1997).  Pleadings are interpreted according to their plain meaning and the general rules of pleading.  See Moreno v. Crookston Times Printing Co., 610 N.W.2d 321, 327 (Minn. 2000) (holding that plain language and general rules of pleading indicated that plaintiff pleaded facts sufficient to place entire newspaper article at issue in defamation suit). 

            Here, the district court found that a plain reading of the existing third-party complaint and counterclaim indicated that the request for “other equitable relief” was intended to be an alternative to equitable division, not to the request for respondents to buy out appellant.  Thus, the district court interpreted the pleadings of appellant to be a prayer for respondents to buy out her interest in PBR.  This finding was not in error. 

            Appellant initially alleged in her third-party complaint that relations between the parties had broken down so that it was not reasonably practicable to carry on the functions of the PBR and Mini I partnerships.  Specifically, in her prayer for relief, appellant asked the court to order

the equitable division, or other appropriate remedy at law or equity, of PBR Partners and Minikahda Ministorage I, by requiring Plaintiffs to buy out Defendants consistent with their respective ownership interests.

 

Further, discussing a proposed structure for relief in the memorandum of law accompanying the third-party complaint, appellant noted that

[a]dding in the entities in which the expected remedy is a buy out of Defendant Jordan by Plaintiffs Pogin and Lambrecht will allow the cash to be paid by Ms. Jordan to be offset by the cash to be paid by Messrs. Pogin and Lambrecht. 

 

Although they initially contested the dissolution of the PBR partnership, respondents later filed an amended reply, admitting that relations between the parties had broken down such that it was not reasonably practicable to carry out the functions of the partnerships, and asking that appellant buy out respondents’ interests in the partnerships.    

            At some point before trial, appellant attempted to shift her position and argue that she would not accept a proposed buyout, but only the equitable division of the partnership assets so that she could retain her interest in the partnership.  At trial she presented no evidence as to valuation of the partnership, testifying that she had no intention of selling her ownership interest in PBR, but merely intended to seek an “in-kind” division of partnership assets as the most equitable means of division.  Appellant never, however, amended her complaint to eliminate the request for a buyout.  Therefore, the district court was free to read the complaint according to its plain language, which was never rescinded, and to order the relief requested.

II.

            Appellant next argues that the court committed error by finding that it was not reasonably practicable for her to remain an owner of Mini I and LP II.  Factual findings of the court will not be reversed unless they are clearly erroneous.  Minn. R. Civ. P. 52.01.

            A partnership is dissolved, and its business must be wound up if, on application by a partner, the court determines that

            (ii)    another partner has engaged in conduct relating to the partnership business which makes it not reasonably practicable to carry on the business in partnership with that partner; or

 

            (iii)  it is not otherwise reasonably practicable to carry on the partnership business in conformity with the partnership agreement.

Minn. Stat. § 323A.8-01(5) (2000).[2]

            The district court found that throughout this litigation, appellant’s actions had become extremely disruptive to both PBR and the partnerships in which PBR held an interest, diminishing their value to the other limited partners, as well as to appellant, Pogin, and Lambrecht.  This finding does not appear to be clearly erroneous.  At trial, the comptroller of IMI testified as to the difficulty the company had in meeting appellant’s constant, minor demands.  Those actions resulted in a complaint to the Department of Commerce, which was found to be groundless, as well as the inability to file business tax returns in 1999 and 2000.  Although appellant points out that these actions mostly related to other partnerships in which she was an active general partner, as opposed to PBR, in which she held, through the general partnership, only passive limited partnership interests, they do not augur well for a continued successful business relationship between the parties in any capacity.  As the district court pointed out, any hopes that appellant could cease from causing disruption to the partnership as a passive investor were dashed when, after trial, she filed a lawsuit against Mini I to enjoin roof repair on the storage units.  Based on these factual findings, the district court did not err in ordering the dissolution of the PBR general partnership. 

III.

            Appellant also states that under Minnesota law, the presence of partnership debt mandates that partnership property be converted into cash by sale, and that therefore the district court erred by ordering a sale without converting all of the partnership property to cash.  Minn. Stat. § 323A.8-07 (2000) provides, in relevant part:

            (a)    In winding up a partnership’s business, the assets of the partnership, including the contributions of the partners required by this section, must be applied to discharge its obligations to creditors, including, to the extent permitted by law, partners who are creditors.  Any surplus must be applied to pay in cash the net amount distributable to partners in accordance with their right to distributions under subsection (b).

 

            (b)    Each partner is entitled to a settlement of all partnership accounts upon winding up the partnership business. 

 

Minn. Stat. § 323A.1-04(a) provides that “[u]nless displaced by particular provisions of this chapter, the principles of law and equity supplement this chapter.”

            Here, the district court ordered the payment of partnership debt before liquidation and ordered payment in cash to appellant, for her partnership interest.  Using its equitable powers, however, the district court chose to preserve the partnership assets of Pogin and Lambrecht, rather than ordering those assets sold and converted to cash.  We do not read the statute in question so narrowly as to preclude such a resolution.  The assets of PBR Partnership consisted of shares in the LP II and Mini I limited partnerships; these partnerships were not dissolved and remained going concerns.  Pogin and Lambrecht’s property management firm, IMI, was responsible for the business management of Mini I and LP II, running those businesses for numerous other limited partners.  Ordering the sale of all of Pogin and Lambrecht’s units in Mini I and LP II, over and above the amount necessary to pay PBR creditors and to settle the partnership account with appellant, could have resulted in business disruption and substantial prejudice to the innocent limited partners of the component limited partnerships.  

            Granting equitable relief is within the sound discretion of the district court.  The decision of the court will not be reversed absent a clear abuse of that discretion.  Nadeau v. Cty. of Ramsey, 277 N.W.2d 520, 524 (Minn. 1979).  Appellant cited Bagg v. Osborn, 169 Minn. 126, 127, 210 N.W. 862, 863 (1926) for the proposition that each partner has the right to have partnership property sold.  More recently, however, in a case upholding a district court’s order for sale of one partner’s assets to another partner, the Minnesota Supreme Court recognized the principle that “[t]he trial court should exercise its powers to find the most advantageous plan which will not prejudice the rights of either party.”  Maras v. Stilinovich, 268 N.W.2d 541, 544 (Minn. 1978); see, e.g., Swogger v. Taylor, 243 Minn. 458, 466-67, 68 N.W.2d 376, 383 (1955) (in partition action, court’s equitable determinations are not restricted to methods of partition enumerated in partition act, but court may also resort to most advantageous plan to effect partition without prejudice to parties); Jeckell v. Arkell, 374 N.W. 2d 503, 506 (Minn. App. 1985) (district court did not err in ordering that silo operated by partners be sold when parties could not work together, given animosity between them).  In this case, the court did not err by devising an equitable remedy that compensated appellant for the partnership property, at a value presented by her own expert, but did not force the parties to maintain an untenable working relationship.

            Appellant argues, in the alternative, that the district court improperly determined that the partnership agreement did not apply in this court-ordered liquidation.  Appellant points out that the partnership agreement does not distinguish between a liquidation by agreement of the partners and a court-ordered liquidation, and that in each situation the partnership properties may be distributed in kind.  However, section 11.2 of the partnership agreement states:

            If the person or person in charge of the liquidation shall elect to distribute Partnership properties in kind, a valuation shall be made of all properties by a person or persons agreeable to the Partners.   

(Emphasis added.)  The plain language of this section provides that the person in charge of the liquidation has the optionof distributing partnership properties in kind, rather than requiring such a distribution.  Therefore the district court’s finding that the partnership agreement did not apply in the case of court-ordered liquidation, if erroneous, appears to be harmless error.

IV.

            The remaining issue before this court is respondents’ request, on notice of review, to modify the district court’s order and judgment to include the provision that appellant be ordered to sell her 1.5 individually owned units of Mini I to respondents.  The district court found that appellant owned 1.5 shares of Mini I, and that because of the discord between appellant and Pogin and Lambrecht, it was not reasonably practicable for her to remain a direct owner of Mini I.  The court, however, failed to include a provision reflecting these findings in its conclusions of law, order for judgment, or judgment.   By failing to do so, the district court implicitly denied that request for relief.  

            On appeal, error is never presumed.  Loth v. Loth, 227 Minn. 387, 392, 35 N.W.2d 542, 546 (1949).  Therefore, we cannot presume that the district court committed error by failing, in its order, to include reference to the 1.5 units individually owned by appellant.  However, the district court’s earlier dismissal of the Mini I limited partnership from this lawsuit does not preclude the court from using its equitable powers to order appellant to sell her 1.5 individually owned units in Mini I to Pogin and Lambrecht.  In fact, the district court made findings of fact that would warrant such an order.  Therefore, we reverse and remand to the district court on the single issue of determining appellant’s interest in her individually owned shares of Mini I.

            Affirmed in part, reversed in part, and remanded. 

 

 



* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

[1] These partnerships were Ministorage Investors VI Limited Partnership, 2356 University Avenue Limited Partnership, and Oakdale Property, a de facto limited partnership.  In each of these three partnerships, Jordan (or Jordan Realty, Inc.) was the majority general partner, and Pogin and Lambrecht (or Investment Management, Inc.) were minority general partners.

[2] After January 1, 2002, the Uniform Partnership Act of 1994 governs all Minnesota partnerships, regardless of when they were formed.  Minn. Stat. § 323A.12-02(b) (Supp. 2001).  This action was originally commenced in 1999.  However, “[t]he general rule * * *  is that an appellate court must apply the law in effect at the time it renders its decision.”  Olsen v. Special School Dist. No. 1, 427 N.W. 2d 707, 710(Minn. App. 1988) (quoting Thorpe v. Housing Authority of Durham, 393 U.S. 268, 281, 89 S. Ct. 518, 525-26 (1969) (footnote omitted)).