Robertson v. Jacobs Cattle Co. , 285 Neb. 859 ( 2013 )

Nebraska Advance Sheets
ROBERTSON v. JACOBS CATTLE CO. 859
Cite as 285 Neb. 859
Richardson’s conviction and sentence. We remand the cause to
the Court of Appeals with directions to reverse Richardson’s
conviction and sentence and to remand the cause to the district
court for a new trial.
R eversed and remanded with directions.
James E. Robertson et al., appellants and cross-appellees,
v. Jacobs Cattle Company, a partnership, et al.,
appellees and cross-appellants.
___ N.W.2d ___
Filed May 10, 2013. No. S-12-370.
1. Partnerships: Accounting: Appeal and Error. An action for a partnership dis-
solution and accounting between partners is one in equity and is reviewed de
novo on the record.
2. Equity: Appeal and Error. On appeal from an equity action, an appellate court
resolves questions of law and fact independently of the trial court’s determina-
tions. But when credible evidence is in conflict on material issues of fact, an
appellate court considers and may give weight to the fact the trial court observed
the witnesses and accepted one version of the facts over another.
3. Statutes. Statutory interpretation presents a question of law.
4. Partnerships. The interpretation of a partnership agreement presents a question
of law.
5. Judgments: Appeal and Error. An appellate court independently reviews a
lower court’s rulings on questions of law.
6. Partnerships: Time. The Uniform Partnership Act of 1998 applies to any
Nebraska partnership, including those formed prior to January 1, 1998.
7. Partnerships. Under the Revised Uniform Partnership Act, the dissociation of a
partner does not necessarily cause a dissolution and winding up of the partner-
ship’s business. Generally, the partnership must be dissolved and its business
wound up only upon the occurrence of one of the events listed in § 801 of the
Revised Uniform Partnership Act, upon which Neb. Rev. Stat. § 67-439 (Reissue
2010) is based.
8. ____. Where a court determines that the conduct of one or more partners
constitutes grounds for dissociation by judicial expulsion under Neb. Rev.
Stat. § 67-431(5)(c) (Reissue 2010) and dissolution under Neb. Rev. Stat.
§ 67-439(5)(b) (Reissue 2010), and there are no other grounds for dissolution, the
court may in its discretion order either dissociation by expulsion of one or more
partners or dissolution of the partnership.
9. Statutes: Appeal and Error. The language of a statute is to be given its plain and
ordinary meaning, and an appellate court will not resort to interpretation to ascer-
­
tain the meaning of statutory words which are plain, direct, and unambiguous.
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10. Partnerships: Words and Phrases. The phrase “date of dissociation” as used in
Neb. Rev. Stat. § 67-434(2) (Reissue 2010) refers to the date of the event which
resulted in the dissociation.
Appeal from the District Court for Valley County: Karin
L. Noakes, Judge. Affirmed in part as modified, and in part
reversed and remanded for further proceedings.
Patrick J. Nelson, of Law Office of Patrick J. Nelson,
L.L.C., for appellants.
David A. Domina and Jason B. Bottlinger, of Domina Law
Group, P.C., L.L.O., and Gregory G. Jensen for appellees.
Connolly, Stephan, McCormack, and Cassel, JJ.
Stephan, J.
Jacobs Cattle Company is a family partnership which owns
agricultural land in Valley County, Nebraska. Four of its six
partners sought dissolution and liquidation of the partnership.
One of the other two partners then sought a judicial dissocia-
tion of those four partners. The district court refused to dis-
solve and liquidate the partnership, but it dissociated the four
partners and ordered that the partnership buy out their interests
in the partnership. In this appeal, the four partners (collectively
appellants) contend the district court erred in not dissolving
the partnership and further erred in determining the proper
buyout price. The other two partners and the partnership cross-
appeal, contending the court erred in determining the date of
asset valuation. We conclude that dissociation was proper, but
reverse, and remand for recalculation of the buyout price and
imposition of the proper rate of interest.
I. FACTS
Jacobs Cattle Company is a family partnership that was
formally organized on January 1, 1979. The original partners
were Leonard Jacobs and his wife, Ardith Jacobs; their chil-
dren Dennis Jacobs, Duane Jacobs, and Patricia Robertson;
and the respective spouses of those children, Debbie Jacobs,
Carolyn Sue Jacobs, and James E. Robertson. At some point,
Debbie withdrew from the partnership and Dennis acquired
her interest.
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Leonard died in March 1997. Probate proceedings deter-
mined that his capital interest in the partnership at the time of
his death was 34 percent.
1. Partnership Agreement
The operative partnership agreement became effective on
June 19, 1997. The partners were identified as Ardith, in her
capacity as trustee of the Leonard Jacobs Family Trust and in
her capacity as trustee of the Ardith Jacobs Living Revocable
Trust; Duane; Carolyn; Patricia; James; and Dennis.
Pertinent provisions of the agreement include the following:
4. TERM
. . . This Partnership shall continue until terminated
by mutual agreement, operation of law or as hereinaf-
ter provided.
....
7. MANAGEMENT
Ardith Jacobs, Trustee of the Ardith Jacobs Living
Revocable Trust shall have general management author-
ity to conduct day to day business on behalf of the
Partnership, and Ardith Jacobs shall have the authority
to bind the Partnership; provided however, a vote of 6
Partners shall have authority to override a decision made
by Ardith Jacobs. Votes can be cast by Partners as fol-
lows: [Ardith and Dennis each have two votes; Patricia,
James, Duane, and Carolyn each have one vote.]
Matters that cannot be agreed upon shall be submitted
to Arbitration as established hereinbelow.
....
11. PROFITS AND LOSSES
The net profits and net losses of the Partnership shall
be distributable or chargeable, as the case may be, to
each of the Partners in proportion to the votes they have
herein as set forth in paragraph 7. The term “net profits”
and “net losses” shall mean the net profits and net losses
of the Partnership as determined by generally accepted
accounting principles. . . .
....
17. QUARTERLY MEETING
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A quarterly meeting of all Partners shall be held on the
first Monday following the close of the preceding quarter.
The purpose of the meeting is to discuss business opera-
tions, profits, losses, capital accounts, income accounts,
and all other Partnership business. . . .
....
19. MISCELLANEOUS
....
(c) . . . . The books of account shall be examined, and
reviewed as of the close of a fiscal year by a Certified
Public Accountant agreeable to all Partners, who shall
make a report thereon.
2. Partnership Business
The partnership owns approximately 1,525 acres of land in
Valley County. The land is mostly farmland and pasture and
is unencumbered. A real estate appraiser valued the land as
of January 1, 2011, at $4,545,000, and as of September 20,
2011, at $5,135,000. The $590,000 increase in appraisal value
represented a 12.98 percent increase, which when annualized
amounted to an 18.02 percent increase.
The partnership rented its land to others. Patricia and James,
Dennis, and Duane and Carolyn all rented land from the part-
nership, although James did not sign a lease. At least some of
the land was rented for less than its fair rental value.
Since June 19, 1997, the partnership has not returned a
profit and there have been no distributions of net profits to
the partners. Since Leonard’s death, no partner has contributed
new land or capital to the partnership.
3. Partnership Issues
In July 2004, the attorney for the partnership sent a letter to
the partners informing them that none of the tenants had paid
their rent for 2004. There were no partnership meetings after
January 2005. In late 2004 or early 2005, Ardith terminated
the services of Robert D. Stowell as the attorney for the part-
nership. In April 2005, Ardith retained a new attorney for the
partnership. In 2005, Ardith terminated the services of Mick
Puckett as the accountant for the partnership and hired a new
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accountant. Puckett was the last certified public accountant
agreeable to all of the partners, and Stowell was the last attor-
ney agreeable to all partners.
In March 2005, Dennis and Patricia were involved in a
physical altercation. As a result, Dennis pled no contest to
criminal assault charges. On April 28, Patricia and James were
served with a notice to quit the leased premises for nonpay-
ment of rent. Around the same time, Duane was also notified
that he needed to quit the premises he was leasing due to non-
payment of rent. Duane eventually paid his rent, but on May
4, the partnership sued Patricia and James for rents due for the
years 2003 and 2004. Ardith alone made the decision to file
the lawsuit. On August 11, a court entered judgment against
Patricia for unpaid rent. The court did not enter judgment
against James because his name was not on the lease. The land
which the partnership had leased to Patricia was later rented
to Dennis.
II. PROCEDURAL HISTORY
1. P leadings
In July 2007, appellants filed the operative amended com-
plaint for dissolution of the partnership against the partnership,
Ardith, and Dennis (collectively appellees). The complaint
sought a dissolution and winding up of the partnership under
the Uniform Partnership Act of 19981 (1998 UPA). Appellees
filed an answer in September. A December 2010 amended
answer and counterclaim, styled as an amended cross-claim,
alleged that dissociation of appellants, not dissolution of the
partnership, was the proper remedy.
2. September 20, 2011,
Interlocutory Order
After conducting a bench trial, the district court entered an
order on September 20, 2011. The court concluded that appel-
lants did not prove the occurrence of events authorizing dis-
solution under § 67-439(5) because (1) nothing had occurred
to interfere with the partnership’s ability to buy, own, and rent
1
Neb. Rev. Stat. §§ 67-401 to 67-467 (Reissue 2009).
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land; (2) no partners took steps to override decisions made by
Ardith and “[j]ust because a partner does not like the deci-
sion of the managing partner does not make it impracticable
to continue the partnership with that partner”; and (3) Ardith
had not acted beyond the partner restrictions specified in the
partnership agreement. The court reasoned that nothing had
occurred to make the partnership agreement difficult or impos-
sible with which to comply, and it dismissed appellants’ dis-
solution claims.
However, the court found that appellants’ failure to pay rent
in a timely manner supported appellees’ request that appellants
be dissociated from the partnership under § 67-431(5)(a) and
(c). The court reasoned that because the primary purpose of
the partnership was to rent land, appellants’ delinquency in
paying rent materially and adversely affected the partnership
business and made it not practicable for the partnership to
carry on with appellants as partners. The court thus ordered
dissociation of appellants by judicial expulsion pursuant to
§ 67-431(5)(a) and (c) and ordered the partnership to purchase
appellants’ interests in the partnership as required by § 67-434.
The court specifically ordered the parties to prepare buyout
proposals and found that the value of partnership assets was
“to be determined as of the date of the dissociation, which is
the date this judgment is filed.”
3. Final Judgment
On November 4, 2011, the partnership filed a buyout pro-
posal with the district court. The proposal set out the value
of the partnership based on its assets and liabilities, including
the value of the appreciated land, and then proposed that each
appellant be paid $275,941.96. Although the proposal did not
contain mathematical calculations, it stated that this sum repre-
sented each appellant’s “equal partnership fractional interest.”
This mathematically equates to each appellant’s 5.33 percent
capital account ownership.
Appellants filed written objections to the proposed buyout
on December 5, 2011. One objection was that the proposed
buyout did not “contain either (a) an analysis or calcula-
tion of the profits that would result from the liquidation of
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the Partnership’s assets on September 20, 2011, or (b) how
such profits would be allocated to each of the partners in
the Partnership.” Another objection was that the buyout pro-
posal did not “provide for the distribution to [appellants] of
their respective portions of the profits of the Partnership to
which [they] would be entitled under §§ 67-434 and 67-445.”
Appellants submitted an alternative buyout proposal which
included the analysis and calculation they argued was missing
from the partnership’s proposal. The alternative proposal did
not include mathematical calculations, but it generally calcu-
lated the buyout price based on the provision in paragraph 11
of the partnership agreement allocating profit percentages to
the partners’ income accounts. The alternative buyout proposal
generally requested that each appellant receive 12.5 percent of
the partnership’s liquidation value.
In a January 4, 2012, journal entry, the district court found it
would “not consider” the objections raised by appellants. The
court granted appellants leave to submit written offers of proof
in support of their objections, but ruled appellants could not
present testimony on the objections. A formal hearing on the
amount of the buyout was held on March 6.
At that hearing, appellants offered exhibit 118 as an offer
of proof in support of their objections. The exhibit stated
that if allowed to, Patricia would testify that she is a certified
public accountant who is familiar with the meanings of the
terms “net profits” and “net losses” as determined by generally
accepted accounting principles. It further noted that Patricia
had prepared a written statement of the book basis of the
capital accounts of the partnership based upon a liquidation of
assets on September 20, 2011, and attached her calculations.
According to Patricia’s calculations, the proper allocation of
each partner’s interest in the partnership was approximately
12.5 percent of the total value. This percentage was calculated
after considering how profits from the hypothetical sale of the
land required by §§ 67-434(2) and 67-445(2) would be allo-
cated under the partnership agreement.
The partnership submitted a written objection to this offer
of proof, but the district court did not rule on the objection
on the record. In its final order, however, the court noted that
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all “[o]bjections [had been either] taken under advisement
or ruled upon on the record.” It then expressly stated that
“[o]bjections to all items of evidence taken under advisement
are overruled.”
The district court ultimately approved the partnership’s pro-
posed buyout, with minor alterations not related to appellants’
stated objections. In computing the amount appellants were
entitled to as a result of the required buyout, the district court
arrived at a liquidation value for the partnership by subtracting
the partnership’s liabilities from its assets. The assets included
the appreciated value of the partnership’s land. The court then
distributed the liquidation value to each partner based on his or
her capital account, so appellants each received 5.33 percent
of the total liquidation value. The court stated that if the sums
were not paid by the 30th day, interest would accrue at the
judgment interest rate of 2.056 percent.
III. ASSIGNMENTS OF ERROR
Appellants assign, restated and summarized, that the dis-
trict court erred in (1) failing to dissolve the partnership
under § 67-439(5); (2) determining that James, Duane, and
Carolyn failed to pay rent to the partnership and that all appel-
lants engaged in wrongful conduct and should be dissociated
from the partnership under § 67-431(5); (3) determining the
amount of the buyouts of appellants and failing to include
in the buyout amount of each appellant one-eighth of the net
profits which would have resulted from capital gains arising
from the liquidation of the partnership’s assets; (4) failing to
determine that interest on all buyouts payable to appellants
commenced accruing on September 20, 2011; and (5) deter-
mining that the interest rate to be paid to appellants on their
respective buyouts was the judgment rate rather than a market
rate of interest.
On cross-appeal, appellees assign that the district court erred
in (1) holding the date of dissociation was September 20, 2011,
rather than May 2005, when appellants failed to pay their rents,
and (2) determining the value of the partnership assets as of
September 2011 instead of May 2005.
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IV. STANDARD OF REVIEW
[1,2] An action for a partnership dissolution and accounting
between partners is one in equity and is reviewed de novo on
the record.2 On appeal from an equity action, we resolve ques-
tions of law and fact independently of the trial court’s determi-
nations.3 But when credible evidence is in conflict on material
issues of fact, we consider and may give weight to the fact the
trial court observed the witnesses and accepted one version of
the facts over another.4
[3-5] Statutory interpretation presents a question of law.5
The interpretation of a partnership agreement presents a ques-
tion of law.6 An appellate court independently reviews a lower
court’s rulings on questions of law.7
V. ANALYSIS
[6] The legal framework for our analysis is the 1998 UPA,
which is Nebraska’s counterpart to the model act known as
the Revised Uniform Partnership Act (RUPA).8 The 1998 UPA
applies here even though the partnership was formed in 1997,
because after January 1, 2001, the 1998 UPA became applica-
ble to any Nebraska partnership, including those formed prior
to January 1, 1998.9
The 1998 UPA replaced the original Uniform Partnership
Act10 and brought about significant changes in partnership law.
2
Shoemaker v. Shoemaker, 275 Neb. 112, 745 N.W.2d 299 (2008).
3
Id.
4
Id.
5
Id.
6
Id.
7
See Blakely v. Lancaster County, 284 Neb. 659, 825 N.W.2d 149 (2012).
8
See Shoemaker, supra note 2 (citing Introducer’s Statement of Intent,
L.B. 523, Banking, Commerce, and Insurance Committee, 95th Leg., 1st
Sess. (Feb. 18, 1997); Prefatory Note, Unif. Partnership Act (1997), 6
(part I) U.L.A. 5 (2001).
9
§§ 67-464 and 67-467; Shoemaker, supra note 2.
10
See Neb. Rev. Stat. §§ 67-301 to 67-346 (Reissue 2003). See Shoemaker,
supra note 2.
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Prior law required an at-will partnership to dissolve upon any
partner’s expressed will to dissolve the partnership.11 RUPA,
on which the 1998 UPA is based, sought to avoid manda-
tory dissolution of partnerships by making a partnership a
distinct entity from its partners.12 As we noted in Shoemaker
v. Shoemaker,13
“RUPA’s underlying philosophy differs radically from
[the original Uniform Partnership Act], thus laying the
foundation for many of its innovative measures. RUPA
adopts the ‘entity’ theory of partnership as opposed to the
‘aggregate’ theory that the [original Uniform Partnership
Act] espouses. Under the aggregate theory, a partner-
ship is characterized by the collection of its individual
members, with the result being that if one of the partners
dies or withdraws, the partnership ceases to exist. On the
other hand, RUPA’s entity theory allows for the partner-
ship to continue even with the departure of a member
because it views the partnership as ‘an entity distinct from
its partners.’”
RUPA, as embodied by our 1998 UPA, provides gap-filling
rules that control only when a question is not resolved by the
parties’ express provisions in an agreement.14 The parties agree
that this case must be resolved by application of the statutory
principles of the 1998 UPA.
1. Dissociation or Dissolution?
The parties are in general agreement that they cannot con-
tinue in partnership with each other. They differ as to the
appropriate remedy to be employed in ending their relation-
ship. Appellants contend that the partnership should have been
dissolved. Appellees argue that the district court correctly dis-
sociated appellants from the partnership because this allows
the partnership itself to continue with Ardith and Dennis as its
remaining partners.
11
See, § 67-331; Shoemaker, supra note 2.
12
Shoemaker, supra note 2.
13
Id. at 125, 745 N.W.2d at 309-10 (citations omitted).
14
Shoemaker, supra note 2.
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The statutory provisions governing dissociation and dis-
solution are similar but not identical. Dissolution of a part-
nership is governed by § 67-439, which provides that “[a]
partnership is dissolved, and its business must be wound up,
only upon the occurrence of any of the following events,”
which include
(5) On application by a partner, a judicial determina-
tion that:
(a) The economic purpose of the partnership is likely to
be unreasonably frustrated;
(b) 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
(c) It is not otherwise reasonably practicable to carry
on the partnership business in conformity with the part-
nership agreement[.]
The district court concluded that none of these circumstances
existed because (1) nothing had occurred which would frus-
trate the partnership’s ability to buy, sell, or own land, and
(2) Ardith, as managing partner, had authority on behalf
of the partnership to take the actions with which appel-
lants disagreed.
Dissociation is a new concept introduced by RUPA “to
denote the change in the relationship caused by a partner’s
ceasing to be associated in the carrying on of the business.”15
Under RUPA, “the dissociation of a partner does not necessar-
ily cause a dissolution and winding up of the business of the
partnership.”16 Section 67-431 lists events which may trigger a
partner’s dissociation, including
(5) On application by the partnership or another part-
ner, the partner’s expulsion by judicial determination
because:
(a) The partner engaged in wrongful conduct that
adversely and materially affected the partnership business;
15
Unif. Partnership Act (1997), supra note 8, § 601, comment 1 at 164.
16
Id.
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(b) The partner willfully or persistently committed a
material breach of the partnership agreement or of a duty
owed to the partnership or the other partners under sec-
tion 67-424; or
(c) The partner engaged in conduct relating to the
partnership business which makes it not reasonably
practicable to carry on the business in partnership with
the partner.
In this case, the district court concluded that the grounds for
dissociation stated in § 67-431(5)(a) and (c) were met by the
failure of appellants to pay timely rent for the land leased from
the partnership.
With these principles in mind, we first consider appellants’
argument that the district court erred in determining that there
were grounds to dissociate them from the partnership. Given
that the sole business of the partnership was to own farmland
which it leased to others, we have no difficulty concluding that
the failure of appellants who executed leases to pay timely
rents constituted wrongful conduct that adversely and materi-
ally affected the partnership business and made it not reason-
ably practical to carry on the partnership business with the
existing partners. And we are not persuaded by the argument
that James bore no responsibility for the nonpayment of rent
because he had not signed a lease. Patricia initially testified
that she and James had rented land from the partnership from
1997 through 2004. Later in her testimony, when shown a copy
of the lease and asked if James had “ever been a tenant under
a lease with Jacobs Cattle Company,” she responded, “Not
according to the lease agreements.” But James testified that he
owed money to the partnership prior to 2010. There is a rea-
sonable inference that James knew that rent had not been paid
to the partnership of which he and Patricia were both partners.
Thus, regardless of whether he was legally obligated on the
lease, James engaged in conduct which satisfied the grounds
for dissociation stated in § 67-431(5)(a) and (c) to the same
extent as the other appellants.
Next, we consider whether the district court erred in con-
cluding that appellants failed to establish grounds for dis-
solution of the partnership. Appellees argue the district court
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correctly decided this issue because no wrongdoing on the
part of Ardith or Dennis has been proved. But even appellees
acknowledge that “much acrimony exists between and among
the parties.”17 At oral argument, appellees’ counsel conceded
that there were unspecified grounds for dissolution of the
partnership, but argued that dissociation was nevertheless the
appropriate remedy. We perceive this concession as agree-
ment that the somewhat autocratic manner in which Ardith
conducted the affairs of the partnership in recent years, even
if not in violation of the partnership agreement, would consti-
tute grounds for dissolution under § 67-439(5)(b), i.e., “con-
duct relating to the partnership business which makes it not
reasonably practicable to carry on the business in partnership
with that partner.” We find no other possible grounds for dis-
solution. As we have noted, such conduct is also grounds for
dissociation under § 67-431(5)(c), and the record supports the
district court’s determination that appellants engaged in such
conduct. Thus, we conclude that there are grounds for dissolu-
tion of the partnership under § 67-439(5)(b) and dissociation of
appellants under § 67-431(5)(a) and (c).
[7] Under the RUPA model upon which our statutes are
based, the dissociation of a partner does not necessarily
cause a dissolution and winding up of the partnership’s
business.18 Generally, the partnership must be dissolved and
its business wound up only upon the occurrence of one of
the events listed in § 801 of RUPA, upon which Nebraska’s
§ 67-439 is based.19 The question we must resolve is whether
dissolution is mandatory where the conduct of multiple part-
ners constitutes grounds for dissolution under § 67-439(5)(b)
and also constitutes grounds for dissociation pursuant to
§ 67-431(5)(c).
We have found no authority on this precise point. But the
decision of the Supreme Court of Connecticut in Brennan v.
17
Brief for appellees at 24.
18
See, Unif. Partnership Act (1997), supra note 8, § 601, comment 1;
Warnick v. Warnick, 76 P.3d 316 (Wyo. 2003).
19
See Unif. Partnership Act (1997), supra note 8, § 601, comment 1, and
§ 801.
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Brennan Associates20 provides helpful guidance. In that case,
the court concluded that a single partner’s conduct fell within
Connecticut’s statutory equivalents of our §§ 67-431(5)(c) and
67-439(5)(b) such that it was not practicable for the remaining
partners to carry on the business of the partnership with that
partner. The court rejected an argument that the conduct would
justify judicial dissolution of the partnership but not dissocia-
tion of the offending partner, concluding that “an irreparable
deterioration of a relationship between partners is a valid basis
to order dissolution, and, therefore, is a valid basis for the
alternative remedy of dissociation.”21 A Kansas appellate court
in Giles v. Giles Land Co., L.P.22 followed the reasoning of
Brennan in concluding that a court did not err in dissociating a
partner where the evidence established that his conduct would
justify either dissociation or dissolution under that state’s coun-
terparts to our §§ 67-431(5)(c) and 67-439(5)(b).
[8] We perceive no good reason to apply a different rule
where the conduct of multiple partners makes it “not reason-
ably practicable to carry on the business in partnership” with
each other.23 Construing the dissolution remedy as mandatory
in this circumstance would be contrary to the entity theory of
partnership embodied in RUPA. As we noted in Shoemaker,24
a main purpose of RUPA is “to prevent mandatory dissolu-
tion” of a partnership. Accordingly, we hold that where a
court determines that the conduct of one or more partners
constitutes grounds for dissociation by judicial expulsion under
§ 67-431(5)(c) and dissolution under § 67-439(5)(b), and there
are no other grounds for dissolution, the court may in its dis-
cretion order either dissociation by expulsion of one or more
partners or dissolution of the partnership.
We conclude that dissociation by judicial expulsion of
appellants is an appropriate remedy under the facts of this
20
Brennan v. Brennan Associates, 293 Conn. 60, 977 A.2d 107 (2009).
21
Id. at 81, 977 A.2d at 120.
22
Giles v. Giles Land Co., L.P., 47 Kan. App. 2d 744, 279 P.3d 139 (2012).
23
§ 67-431(5)(c).
24
Shoemaker, supra note 2, 275 Neb. at 130, 745 N.W.2d at 312.
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case. Individually and in trust, Ardith and Dennis have a
capital interest in the partnership of approximately 78 percent.
Pursuant to the partnership agreement, Ardith has general man-
agement authority to conduct the day-to-day business on behalf
of the partnership. We agree with the finding of the district
court that there is no apparent reason why the partnership can-
not continue to exist and function in accordance with the part-
nership agreement with Ardith and Dennis as its sole partners.
Accordingly, we conclude that the first and second assignments
of error as restated above are without merit.
2. Issues P ertaining to
Buyout P rice
The remaining issues pertain to the district court’s calcula-
tion of the buyout price which the dissociated partners are to
receive for their interests in the partnership. This price is gov-
erned by § 67-434(2), which provides:
The buyout price of a dissociated partner’s interest is the
amount that would have been distributable to the disso-
ciating partner under subsection (2) of section 67-445 if,
on the date of dissociation, the assets of the partnership
were sold at a price equal to the greater of the liquidation
value or the value based on a sale of the entire business
as a going concern without the dissociated partner and
the partnership were wound up as of that date. Interest
must be paid from the date of dissociation to the date
of payment.
Section 67-445(2) provides in pertinent part:
Each partner is entitled to a settlement of all partnership
accounts upon winding up the partnership business. In
settling accounts among the partners, profits and losses
that result from the liquidation of the partnership assets
must be credited and charged to the partners’ accounts.
The partnership shall make a distribution to a partner
in an amount equal to any excess of the credits over the
charges in the partner’s account. A partner shall contrib-
ute to the partnership an amount equal to any excess of
the charges over the credits in the partner’s account but
excluding from the calculation charges attributable to an
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874 285 NEBRASKA REPORTS
obligation for which the partner is not personally liable
under section 67-418.
(a) Date of Dissociation
The district court determined the date of dissociation was
September 20, 2011, the date it entered its order that appellants
were dissociated by judicial expulsion pursuant to § 67-431(5).
In their cross-appeal, appellees contend that the court should
have found the date of dissociation to be in May 2005, when
the nonpayment of rent which the district court determined to
be grounds for dissociation occurred. Due to the appreciation
of the land owned by the partnership, using the earlier date to
calculate the partnership’s assets would result in a substantially
lower buyout price.
Appellees urge us to adopt the reasoning of two pre-RUPA
partnership dissolution cases from other jurisdictions, King v.
Evans25 and Oliker v. Gershunoff.26 King involved a dissolution
caused by the nonjudicial expulsion of a partner, while Oliker
involved a dissolution resulting from a partner’s withdrawal
from the partnership. In each case, partnership assets were val-
ued as of the date of dissolution, i.e., the partner’s nonjudicial
expulsion in King and the partner’s withdrawal in Oliker. But
we find both cases distinguishable because neither involves a
dissociation of a partner by judicial expulsion under a statute
based on the RUPA model.
[9,10] The language of a statute is to be given its plain
and ordinary meaning, and an appellate court will not resort
to interpretation to ascertain the meaning of statutory words
which are plain, direct, and unambiguous.27 Clearly, the phrase
“date of dissociation” as used in § 67-434(2) refers to the date
of the event which resulted in the dissociation. The events
which may result in dissociation are listed in § 67-431. Some
of these, such as a partner’s withdrawal28 or expulsion pursuant
25
King v. Evans, 791 S.W.2d 531 (Tex. App. 1990).
26
Oliker v. Gershunoff, 195 Cal. App. 3d 1288, 241 Cal. Rptr. 415 (1987).
27
See Pittman v. Western Engineering Co., 283 Neb. 913, 813 N.W.2d 487
(2012).
28
§ 67-431(1).
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to the partnership agreement,29 occur without any judicial
intervention. But in this case, the dissociation occurred as
a result of expulsion by judicial determination pursuant to
§ 67-431(5). Appellants were not dissociated from the partner-
ship until the district court determined that they had engaged in
conduct described in § 67-431(5)(a) and (c). We find nothing
in § 67-431 or § 67-434 which would make the dissociation
retroactive to the date of the conduct which was judicially
determined to be grounds for expulsion, and we will not read
into a statute a meaning that is not there.30 Accordingly, we
conclude that the district court did not err in calculating the
buyout price as of September 20, 2011, the date of dissociation
by judicial expulsion.
(b) Appellants’ Share of Appreciated
Value of Land
The land owned by the partnership is a capital asset. Under
the operative partnership agreement, the partners each had a
capital account. The value of the capital account was “directly
proportionate to [each partner’s] original Capital contributions
as later adjusted for draws taken from the Partnership.” At
the time of dissociation, the capital account of each appel-
lant was approximately 5.33 percent of the total capital in
the partnership.
Each partner also had an income account under the part-
nership agreement. Net profits and net losses of the partner-
ship were to be “credited or debited to the individual income
accounts [of each partner] as soon as practicable after the close
of each fiscal year.” The agreement provided that the “term[s]
‘net profits’ and ‘net losses’ shall mean the net profits and net
losses of the Partnership as determined by generally accepted
accounting principles.” It further noted that “[t]he net profits
and net losses of the Partnership” were distributable or charge-
able “to each of the Partners in proportion to the votes they
have.” Under the agreement, Ardith had two votes (one as
29
§ 67-431(3).
30
Blakely v. Lancaster County, supra note 7; Butler Cty. Sch. Dist. v.
Freeholder Petitioners, 283 Neb. 903, 814 N.W.2d 724 (2012).
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trustee for each trust), Dennis had two votes, and appellants
each had one vote, for a total of eight votes. Thus, appellants
each had a 12.5 percent share of net profits and losses in their
income account.
The district court expressly found that appellants’ “inter-
ests in the partnership shall be purchased by the partnership
as required by Neb.Rev.Stat.Sec. 67-434.” In its ruling, the
district court considered the value of the partnership’s assets,
including the appreciated value of the land, less the partner-
ship’s liabilities, and arrived at a liquidation value for the
partnership. It then accepted appellees’ argument that the
proper buyout price was calculated by applying each partner’s
capital account percentage to the partnership’s total liquida-
tion value.
On appeal, appellants agree the buyout was to be calculated
pursuant to § 67-434 and agree with the district court’s liq-
uidation value of the partnership. But they argue the district
court erred in calculating the buyout price because it did not
consider how the hypothetical capital gain realized from treat-
ing the land as though it had been sold on the date of disso-
ciation would flow to each partner based on the partnership
agreement’s allocation of net profits and losses. Appellants
contend the proper calculation results in each of them receiv-
ing a buyout equal to 12.5 percent of the liquidation value of
the partnership.
Appellants’ argument rests on two premises: (1) that a
capital gain would be realized upon a hypothetical selling of
the partnership land pursuant to § 67-434(2), which would
constitute “profits” within the meaning of § 67-445(2), and
(2) that the hypothetical profit would constitute “net profits”
within the meaning of paragraph 11 of the partnership agree-
ment. Section 67-434(2) provides that the buyout price of a
dissociated partner’s interest is to be based on the amount that
“would have been distributable to the dissociating partner”
under § 67-445(2) “if, on the date of dissociation, the assets of
the partnership were sold at . . . liquidation value . . . and the
partnership were wound up as of that date.” Section 67-445(2)
then provides that “profits and losses that result from [such]
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liquidation of the partnership assets must be credited and
charged to the partners’ accounts.”
It is clear from the plain language of § 67-434(2) that the
proper calculation must be based upon the assumption that the
partnership assets, here the land, were sold on the date of dis-
sociation, even though no actual sale occurs. Here, the initial
question is whether selling the partnership land on the date of
dissociation would result in a capital gain and “profits” in the
context of § 67-445(2). We consider this to be a question of
statutory interpretation.
The term “capital gain” means “profit realized when a
capital asset is sold or exchanged.”31 The term “profit” is
generally defined as the “excess of revenues over expendi-
tures in a business transaction.”32 We are required to give
the language of a statute its plain and ordinary meaning.33
Accordingly, we conclude that the capital gain which would
be realized upon a hypothetical liquidation of the part-
nership’s land on the date of dissociation (as required by
§ 67-434(2)) would constitute “profits” within the meaning
of the phrase in § 67-445(2).
The remaining question is how those “profits” should be
“credited and charged to the partners’ accounts”34 in this par-
ticular situation. Appellants contend that it must be done pur-
suant to paragraph 11 of the partnership agreement, which
specifically states how “net profits” and “net losses” “as deter-
mined by generally accepted accounting principles” are to be
distributed to the partners. But there is no expert testimony
equating this type of capital gain to “net profits” under “gen-
erally accepted accounting principles.” Appellants attempted
to introduce Patricia’s testimony on this issue to explain how
such a characterization would affect the ultimate distribution
of the partnership assets, but the district court refused the evi-
dence and instead allowed only an unsworn offer of proof. We
31
Black’s Law Dictionary 237 (9th ed. 2009).
32
Id. at 1329.
33 See Pittman v. Western Engineering Co., supra note 27.
34
See § 67-445(2).
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conclude that the district court erred in refusing to consider
evidence on this issue, and we reverse that portion of its order
calculating the amount of the buyouts and remand the cause
with directions for the court to reconsider the buyout calcula-
tions after receiving appellants’ evidence on this issue. In this
respect, we note that RUPA
eliminates the distinction in [the original Uniform
Partnership Act] between the liability owing to a partner
in respect of capital and the liability owing in respect
of profits. Section 807(b) [of RUPA] speaks simply of
the right of a partner to a liquidating distribution. That
implements the logic of RUPA Sections 401(a) and
502 under which contributions to capital and shares
in profits and losses combine to determine the right
to distributions.35
(c) Interest
The district court determined that the amounts due appel-
lants for their partnership interests should be paid within 30
days of the final order entered April 18, 2012, and that if not
paid within that period, interest would accrue at the judgment
rate. Appellants argue that the interest actually began to accrue
on September 20, 2011, the date the court determined that
appellants were dissociated from the partnership. We agree.
Section 67-434(2) specifically provides that interest on the
buyout price of a dissociated partner’s interest “must be paid
from the date of dissociation to the date of payment.” As we
have noted, the “date of dissociation” was September 20, 2011.
Appellants are entitled to interest on the buyout price from that
date until the date of payment.
Appellants also contend that the district court erred in
ordering that interest should be computed at the “judgment
interest rate.” They contend that they are instead entitled to
interest at the higher “market rate.”36 We agree in part with
this argument.
35
Unif. Partnership Act (1997), supra note 8, § 807, comment 3 at 207
(emphasis supplied).
36
Brief for appellants at 15.
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Neb. Rev. Stat. § 45-103 (Reissue 2010) is the source of the
district court’s “judgment interest rate.” It specifies the inter-
est rate to be paid on judgments for the payment of money.
However, § 45-103 provides that its rate shall not apply to “(1)
[a]n action in which the interest rate is specifically provided
by law.” Here, § 67-434 specifically provides that interest is to
be paid from the date of dissociation until the date the buyout
payment is made. And § 67-405 provides that “[i]f an obliga-
tion to pay interest arises under [the 1998 UPA] and the rate is
not specified, the rate is that specified in section 45-104.01 . .
. .” And Neb. Rev. Stat. § 45-104.01 (Reissue 2010) provides
that interest be assessed at a rate of 14 percent per annum. We
conclude that it is this rate, and not the judgment rate, that
applies in this case.
VI. CONCLUSION
Based upon our de novo review and for the reasons dis-
cussed, we conclude that the district court did not err in disso-
ciating appellants from the partnership by judicial expulsion as
of September 20, 2011. We also conclude that the district court
did not err in declining to dissolve the partnership. However,
we conclude the district court erred in failing to allow appel-
lants to introduce evidence on the proper calculation of the
buyout price and further erred in its determination with respect
to interest. We modify the judgment to provide that interest
on the amounts due appellants should accrue at 14 percent per
annum from September 20, 2011, until paid, and we reverse the
judgment and remand the cause for further proceedings on the
proper calculation of the buyout price.
Affirmed in part as modified, and in part reversed
and remanded for further proceedings.
Heavican, C.J., and Miller-Lerman, J., participating on
briefs.
Wright, J., not participating.