Gibson v. Gibson Family Ltd. Partnership
877 N.W.2d 597, 2016 S.D. 26, 2016 SD 26 (2016)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A limited partner cannot compel dissociation for value from a limited partnership under the Revised Uniform Partnership Act's (RUPA) general equitable principles (SDCL 48-7A-104(a)) because specific statutory grounds for dissociation enumerated in SDCL 48-7A-601 displace such general equity. Furthermore, a limited partner with no significant duties under the partnership agreement cannot dissociate under SDCL 48-7A-601(7)(iii) on grounds of being incapable of performing duties.
Facts:
- In 2002, Delores Gibson and her two sons, Michael Gibson and Greg Gibson, created the Gibson Family Limited Partnership (GFLP) as an estate-planning tool for Delores’s estate.
- Michael and Greg each owned a 45.8% interest without paying for them, and Delores owned the remaining 8.4% interest, serving as the general partner with sole authority over management and distributions; Michael and Greg had no significant duties.
- GFLP property included 2,060 acres of land that Delores deeded to the partnership.
- In April 2007, GFLP loaned Greg $350,000.
- In September 2008, GFLP leased the 2,060 acres to Champaygn Ranch, Inc., a business owned by Greg and his wife.
- In December 2010, GFLP renewed the lease with Champaygn Ranch for a twenty-year term.
- In March 2011, GFLP entered into a contract for deed to sell 830 acres of the leased property to Greg for $1,100,000, and amended the twenty-year lease, with Greg continuing to lease the remaining 1,230 acres.
- Michael contended he was 'frozen out' of the partnership and was incurring tax liabilities without receiving partnership distributions to pay them.
Procedural Posture:
- In April 2007, Michael Gibson filed suit against GFLP, Delores Gibson, and Greg Gibson in a state trial court, asserting various claims, including a claim that Delores breached her fiduciary duty.
- In December 2009, the 2007 suit went to trial, and the jury rejected Michael's claims that Delores breached her fiduciary duty.
- In June 2011, Michael commenced this action against GFLP and Delores in her capacity as general partner in the Circuit Court of the Third Judicial Circuit, Deuel County, South Dakota, again claiming breach of fiduciary duty and seeking other relief.
- The circuit court granted GFLP and Delores summary judgment on Michael's declaratory judgment and cancellation of instrument actions.
- The case was tried before a jury over four days.
- At the close of evidence, the circuit court granted Michael’s motion to amend his complaint to also seek equitable relief in the form of dissociation from GFLP for value.
- The parties stipulated that the circuit court would decide Michael’s equitable dissociation claim after the completion of the jury trial.
- The jury returned a defense verdict on the fiduciary duty claim.
- After post-trial briefing, the circuit court denied Michael’s dissociation claim.
- Michael subsequently moved the circuit court to reconsider based on newly discovered evidence.
- The circuit court denied the motion and entered findings of facts and conclusions of law denying dissociation.
- Michael appealed the circuit court's decision to the South Dakota Supreme Court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Can a limited partner compel dissociation for value from a limited partnership under the Revised Uniform Partnership Act (RUPA) either on the grounds of being incapable of performing duties when no significant duties exist, or under general principles of equity when specific statutory grounds for dissociation are enumerated?
Opinions:
Majority - Zinter, Justice
No, a limited partner cannot compel dissociation for value from a limited partnership under the Revised Uniform Partnership Act (RUPA) on either the grounds of being incapable of performing duties when no significant duties exist, or under general principles of equity when specific statutory grounds for dissociation are enumerated. The Court assumed, without deciding, that the ULPA linking statute (SDCL 48-7-1105) permits RUPA (SDCL chapter 48-7A) provisions to apply to limited partnerships for dissociation. However, Michael could not dissociate under SDCL 48-7A-601(7)(iii) because he had no significant duties under the GFLP agreement, a finding he did not appeal, and he admitted his role was that of a passive investor. Michael also could not dissociate under SDCL 48-7A-104(a) for 'supplemental principles of equity' because SDCL 48-7A-601 specifically enumerates all grounds for dissociation, thereby displacing general equitable grounds. The Court found Michael's cited authorities to be inapposite. Therefore, the denial of dissociation was affirmed. The Court also affirmed the circuit court's evidentiary rulings regarding the loan to Greg and expert testimony, finding no prejudicial error. Furthermore, the denial of Michael's motion for reconsideration based on newly discovered evidence was affirmed, as the evidence was not material to the dissociation question under SDCL 48-7A-601(7)(iii) and would not have likely produced a different decision.
Analysis:
This case clarifies the limited applicability of RUPA's dissociation provisions to limited partnerships, particularly when a linking statute connects the two acts. It reinforces the principle that where a statute enumerates specific grounds for a legal action, those specific provisions displace general equitable relief. This decision emphasizes a strict construction of partnership statutes regarding partner exit mechanisms and highlights the distinction between a limited partner's passive role and the active duties required for certain statutory dissociation claims. Future cases will likely be restricted to the enumerated dissociation grounds in RUPA, even when applied to ULPA, unless a partner can demonstrate significant, active duties that they are truly incapable of performing.
