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Mundhenke v. Holm

August 11, 2010

WILLIAM MUNDHENKE, PLAINTIFF AND APPELLEE,
v.
STEVEN HOLM, DEFENDANT AND APPELLANT.



APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT BROWN COUNTY, SOUTH DAKOTA, HONORABLE TONY L. PORTRA Judge.

The opinion of the court was delivered by: Gilbertson, Chief Justice

ARGUED JANUARY 13, 2010

[¶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 years. 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 owner 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 SDCL ch. 48-7A (Count 2). In his answer, Holm denied the existence of a partnership and demanded a jury trial on the matter. Mundhenke moved for summary judgment on the issue of whether a partnership existed and resisted Holm's demand for a jury trial. Holm opposed the motion and argued a right to a jury trial existed on the factual issue of whether the partnership had been formed. In the alternative, Holm argued that Mundhenke sought a declaration that the partnership existed and that the right to a jury trial existed for such declaratory judgment actions.

[¶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 concluded 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 SW2d 80 (MoCtApp 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 court 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 disposition of partnership property, and a settlement of partnership accounts.

[¶10.] Holm appeals raising the following two issues:

1. Whether the circuit court erred when it denied Holm's demand ...


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