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Knudson v. Kyllo

Supreme Court of North Dakota

June 19, 2013

Shawn Knudson, Individually, and as a Partner of Tri-K Farms, Plaintiff and Appellee
v.
Randy Kyllo, Individually, and as a Partner of Tri-K Farms, Defendant and Appellant

Appeal from the District Court of Traill County, East Central Judicial District, the Honorable Steven L. Marquart, Judge.

Ronald H. McLean (argued), Peter W. Zuger (on brief), and Ian McLean (appeared), for plaintiff and appellee.

Michael T. Andrews, for defendant and appellant.

OPINION

Kapsner, Justice.

[¶ 1] Randy Kyllo, individually and as a partner of Tri-K Farms, appeals from a district court order denying his claim against Shawn Knudson, individually and as a partner of Tri-K Farms, for usurpation of a partnership opportunity. We affirm.

I

[¶ 2] Kyllo began farming with his stepfather, Michael Knudson, near Clifford in the late 1970s. Shawn Knudson, Michael Knudson's son and Kyllo's half brother, began farming with them in the 1980s. In 1992, Michael Knudson stopped farming, and in 1994, Kyllo and Shawn Knudson formed a general partnership, Tri-K Farms, to conduct their farming operation. Knudson and Kyllo did not execute a written partnership agreement, but they operated Tri-K Farms as an equal partnership, with each partner making equal contributions of land, equipment, and labor and splitting income and expenses equally. Both partners separately owned land the partnership farmed. By the mid 1990s, the partnership was farming about 4, 000 acres of land the partners owned or the partnership leased. One of the parcels of land Tri-K Farms leased was the "Fougner" land, which Knudson separately purchased by contract for deed in May 2005, in part, with partnership funds. In March 2006, Knudson and Kyllo met with an attorney about dissolving the partnership. The attorney prepared a written partnership dissolution agreement to dissolve the partnership and distribute the partnership assets, but neither Knudson nor Kyllo signed the agreement.

[¶ 3] In 2008, Knudson sued Kyllo, asserting various claims related to the partnership operation and seeking an accounting and dissolution of the partnership. Kyllo answered, seeking an accounting and dissolution of the partnership. He also counterclaimed for damages for usurpation of a partnership opportunity relating to Knudson's purchase of the Fougner land. After a bench trial, the district court resolved the parties' claims regarding the partnership operation, provided an accounting for partnership assets and liabilities, dissolved the partnership, and after offsets, ordered Knudson to pay Kyllo $24, 703.97.

[¶ 4] Knudson appealed and Kyllo cross-appealed. Kyllo argued the court erred in awarding him only $1, 526.97 on his counterclaim for usurpation of a partnership opportunity related to Knudson's individual purchase of the Fougner land. This Court affirmed the district court's findings of fact related to the dissolution of the partnership, but reversed the court's decision on Kyllo's claim for usurpation of a partnership opportunity, holding the court failed to make appropriate findings on the claim, and remanded for consideration of that issue. Knudson v. Kyllo, 2012 ND 155, 819 N.W.2d 511.

[¶ 5] On remand, the district court entered an order finding Kyllo failed to establish by a preponderance of the evidence that Knudson improperly usurped a partnership opportunity. The court found Knudson did not usurp a partnership opportunity because the partnership never intended to purchase the property, owning the land was not within the scope of the partnership's business, the partnership was allowed to continue to farm the land after the sale, and the income from the lease went to the partnership.

II

[¶ 6] Kyllo argues the district court erred in deciding Knudson did not usurp a partnership opportunity. Kyllo claims the sale of the Fougner property was a partnership opportunity, Knudson breached his fiduciary duty to the partnership, Knudson had a statutory duty to provide information regarding prospective partnership opportunities, and the court's finding that the partnership never intended to purchase the property is clearly erroneous.

[¶ 7] In an appeal from a bench trial, the court's findings of fact are reviewed under the clearly erroneous standard. N.D.R.Civ.P. 52(a)(6). "'A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after reviewing all the evidence, we are left with a definite and firm conviction a mistake has been made.'" Niles v. Eldridge, 2013 ND 52, ¶ 6, 828 N.W.2d 521 (quoting Fladeland v. Gudbranson, 2004 ND 118, ¶ 7, 681 N.W.2d 431). The court's conclusions of law are fully reviewable. Niles, at ¶ 6. We give due regard to the district court's opportunity to judge the witnesses' credibility. N.D.R.Civ.P. 52(a)(6). "A district court's choice between two permissible views of the weight of the evidence is not clearly erroneous, and simply because we may have viewed the evidence differently does not entitle us to reverse the district court." Knudson, 2012 ND 155, ¶ 9, 819 N.W.2d 511.

[¶ 8] A partner owes fiduciary duties of loyalty and care to the partnership and the other partners. Sandvick v. LaCrosse, 2008 ND 77, ¶¶ 15-16, 747 N.W.2d 519. Section 45-16-04, N.D.C.C., ...


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