Justia.com Opinion Summary: In 1995, David Bushard and Steven Reisman formed a partnership called PressEnter. After Bushard dissolved the partnership in 1999 he withdrew from its day-to-day operations. Reisman continued to run day-to-day operations and to direct PressEnter to pay partnership distributions to both partners. In 2004, Reisman started taking a salary. In 2007, Bushard filed a complaint against Reisman and PressEnter, alleging breach of fiduciary duty and unjust enrichment and demanding a money judgment, including the amount of Reisman's salary. Reisman counterclaimed with two counts of unjust enrichment, damage to business reputation, and breach of the duty of good faith and fair dealing. The trial court concluded that the dissolution of PressEnter resulted in a wind-up, ordered the equal distribution of PressEnter's profits to both partners, and granted summary judgment in favor of Bushard. The court of appeals affirmed. On appeal, the Supreme Court affirmed, holding (1) the distribution of PressEnter's profits and losses was governed by Wis. Stat. 178.15, and Reisman's equitable arguments were insufficient to overcome the plain language of the statute; and (2) because there was no genuine dispute of material fact, the circuit court appropriately ordered summary judgment in favor of Bushard.
Receive FREE Daily Opinion Summaries by Email Download as PDF
Loading PDF...
<![CDATA[
2011 WI 51
SUPREME COURT
CASE NO.:
COMPLETE TITLE:
OF
WISCONSIN
2009AP438
David Bushard,
Plaintiff-Respondent,
v.
Steven A. Reisman and PressEnter, LLP,
Defendants-Appellants-Petitioners.
REVIEW OF A DECISION OF THE COURT OF APPEALS
327 Wis. 2d 798; 788 N.W. 2d 383
(Ct. App. – Unpublished)
OPINION FILED:
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:
SOURCE OF APPEAL:
COURT:
COUNTY:
JUDGE:
June 30, 2011
April 14, 2011
Circuit
Pierce
Robert W. Wing
JUSTICES:
CONCURRED:
DISSENTED:
NOT PARTICIPATING:
ROGGENSACK, J. dissents (Opinion filed).
ATTORNEYS:
For the defendants-appellants-petitioners there were briefs
by J. Drew Ryberg and Michael J. Happe and Ryberg & Happe S.C.
Eau Claire, and oral argument by J. Drew Ryberg.
For the plaintiff-respondent there was a brief by Kay Nord
Hunt, Thomas R. Jacobson, and Diane M. Odeen and Lomme, Abdo,
Cole,
King
&
Stageberg,
Thomas R. Jacobson.
P.A.,
Hudson,
and
oral
argument
by
2011 WI 51
NOTICE
This opinion is subject to further
editing and modification.
The final
version will appear in the bound
volume of the official reports.
No.
2009AP438
(L.C. No.
2007CV391)
STATE OF WISCONSIN
:
IN SUPREME COURT
David Bushard,
FILED
Plaintiff-Respondent,
v.
JUN 30, 2011
Steven A. Reisman and PressEnter, LLP,
Defendants-Appellants-Petitioners.
A. John Voelker
Acting Clerk of Supreme
Court
REVIEW of a decision of the Court of Appeals.
¶1
ANN
WALSH
BRADLEY,
J.
The
Affirmed.
petitioners,
Steven
A.
Reisman and PressEnter, L.L.P., seek review of an unpublished
opinion of the court of appeals that affirmed orders of the
circuit court requiring the equal distribution of PressEnter's
profits
to
both
circuit
court
partners,
determined
Reisman
that
and
Reisman
David
was
Bushard.1
not
entitled
The
to
receive a salary as compensation for the services he rendered in
1
Bushard v. Reisman, No 2009AP438, unpublished slip. op.
(Wis. Ct. App., June 15, 2010), affirming orders of the circuit
court for Pierce County, Robert W. Wing, J.
No.
winding
up
PressEnter.
It
ordered
that
the
2009AP438
wind-up
of
the
partnership be completed.
¶2
Reisman argues that the circuit court erred by failing
to apply equitable considerations when it determined that the
partners were entitled to share equally in the partnership's
profits and losses.
court
erred
by
In addition, he asserts that the circuit
ordering
summary
judgment
without
making
the
threshold determination of whether the dissolution resulted in a
wind-up or a continuation of the partnership.
¶3
In the absence of an agreement to the contrary, we
conclude
that
the
distribution
of
PressEnter's
profits
and
losses is governed by Wis. Stat. § 178.15,2 and that Reisman's
equitable
arguments
are
insufficient
language of the statute.
was
no
genuine
to
overcome
the
plain
We also determine that because there
dispute
of
material
fact,
the
circuit
court
correctly concluded that the dissolution of PressEnter resulted
in a wind-up, and it appropriately ordered summary judgment in
favor of Bushard.
Accordingly, we affirm the court of appeals.
I
¶4
In
PressEnter,
1995,
a
David
partnership
Bushard
and
dedicated
Steven
to
Reisman
providing
internet service to subscribers in western Wisconsin.3
no
written
partnership
agreement.
Bushard
and
formed
dial-up
There was
Reisman
both
2
All references to the Wisconsin Statutes are to the 200910 version unless otherwise indicated.
3
PressEnter
filed
articles
of
partnership
with
Wisconsin Department of Financial Institutions in 1998.
2
the
No.
contributed
$15,000
in
start-up
capital,
and
they
2009AP438
have
been
equal partners since PressEnter's inception.
¶5
It appears that the relationship between the partners
began to deteriorate in 1999.
sent
Reisman
a
document
Through his attorney, Bushard
entitled
"Notice
of
Dissolution
of
Partnership" on August 3, 1999:
Please be advised that Mr. Bushard has chosen to
exercise his right to dissolve the partnership,
PressEnter L.L.P., effective August 31, 1999.
Mr.
Bushard is taking this step because (1) he believes
this is an optimal time for selling the business at
maximum value, and (2) the relationship between the
partners has deteriorated to the point where it is
impracticable for the two of you to manage the
business of the partnership jointly.
The effect of Bushard's letter was to dissolve the partnership,
effective August 31, 1999.4
¶6
The
partnership
letter
could
advised
be
sold
that
for
$3
Bushard
million,
thought
and
it
the
further
advised: "In the event you wish to continue to run the business
either
individually
or
with
a
new
partner
or
partners,
Mr.
Bushard is willing to sell his partnership interest to you for a
comparable amount."
The letter concluded: "Please have your
4
Wisconsin
Stat.
§ 178.25,
partnership defined," provides:
entitled
"Dissolution
(1) The dissolution of a partnership is the change in
the relation of the partners caused by any partner
ceasing to be associated in the carrying on as
distinguished from the winding up of the business.
(2) On dissolution the partnership is not terminated,
but continues until the winding up of the partnership
affairs is completed.
3
of
No.
2009AP438
personal attorney contact me as soon as possible, so that we can
arrange for an orderly wind-up or transition of the business."
¶7
Around
that
potential buyer.
to
purchase
time,
Bushard
courted
Voyager.net
as
a
Initially, Voyager.net expressed a willingness
PressEnter
for
$3.5
million.
Nevertheless,
the
attempt to sell PressEnter to Voyager.net was unsuccessful.
¶8
Bushard
withdrew
from
participation
in
PressEnter.
Reisman continued to run the day-to-day operations, and he made
further attempts to sell the business.
¶9
After
Bushard's
continued
the
1999
withdrawal
to
from
direct
dissolution
its
of
day-to-day
PressEnter
to
(distributions) to both partners.
pay
the
partnership
operations,
and
Reisman
partnership
draws
Ultimately, PressEnter paid
Reisman and Bushard approximately $2.3 million each in postdissolution distributions.
¶10
started
In addition to receiving a partnership draw, Reisman
taking
a
"guaranteed
draw"
(a
salary)
in
2004.
Reisman's salary ranged from $150,000 to $160,000 annually.
total,
Reisman
received
$704,700
in
salary
from
In
PressEnter
between January 2004 and November 2008.5
¶11
In
his
deposition,
Reisman
averred
that
he
had
consulted with an attorney prior to taking a salary, and that
the attorney told Reisman that he could compensate himself for
the work he was doing in furtherance of the business.
5
Reisman
In 2008, Reisman started deferring the majority of his
salary because PressEnter was short of cash on hand.
4
No.
2009AP438
acknowledged that he had not specifically informed Bushard of
his intention to take a salary and that he had not obtained
Bushard's consent prior to doing so.
He explained that he did
not believe Bushard's consent was necessary because Bushard had
withdrawn from the business.
¶12
Bushard first learned that Reisman had been taking a
salary in April of 2006 when he received a letter from Reisman
detailing the efforts made to "keep the company viable in the
face of the demise of [its] core business," dial-up internet
services.
The letter explained that Reisman would forego any
increase in salary.6
The letter further explained: "[L]ooking to
the future, to preserve partner capital and minimize the risk of
incurring debt, each partner's draw will be reduced to $7,500.00
per month, starting with the next distribution."
¶13
Bushard's
attorney
notified
Reisman
by
letter
that
Bushard objected to Reisman taking any salary: "As you should
know,
under
Wisconsin
law,
no
partner
is
entitled
to
remuneration for acting in the partnership business, except with
the express consent of the other partners or when winding up the
partnership affairs."7
6
Reisman's wife was employed as PressEnter's bookkeeper.
The 2006 letter explained that she would also forego a salary
increase.
7
The letter also asserted that as a partner, Bushard was
entitled to full physical access to the company and that he may
be present at the company premises and will participate in the
management and affairs of the company beginning on Wednesday,
October 4, 2006.
According to deposition testimony, Bushard
went to PressEnter for two days in 2006, and then he stopped
going altogether.
5
No.
¶14
2009AP438
In November of 2007, Bushard filed a complaint against
Reisman and PressEnter, alleging breach of fiduciary duty and
unjust enrichment.
business
He demanded an accounting of all partnership
and affairs from
1999
through
present.
He
further
demanded a money judgment against Reisman "in an amount equal to
all
funds
taken
from
the
Partnership
without
authorization,"
including Reisman's salary.
¶15
Reisman answered and counterclaimed with two counts of
unjust enrichment, damage to business reputation, and breach of
the duty of good faith and fair dealing.8
He alleged that he had
8
The dissent asserts that Reisman counterclaimed for "an
assessment" which "can be accomplished by an accounting."
Dissent, ¶63.
It is mistaken.
Neither the word "assessment"
nor the word "accounting" appear in Reisman's counterclaim. See
answer and counterclaim, which is attached to this opinion as
Exhibit A.
In making the assertion that Reisman counterclaimed for an
"assessment,"
the
dissent
appears
to
rely
on
Reisman's
counterclaim for unjust enrichment, which asserted:
[T]o the extent Mr. Reisman was not compensated for
the
valuable services
he
rendered,
and
because
[Bushard] withdrew from the business and contributed
no effort or services to it during the period at
issue, payments to [Bushard] were disproportionately
high and [Bushard] was thereby unjustly enriched in a
sum to be determined by the trier-of-fact.
Alternatively, it may be that the dissent relies on
Reisman's counterclaim for damage to business reputation, which
asserted:
[Bushard] is aware that the filing of
detrimental to the business interest
and Reisman]; to the extent of the
business, [PressEnter and Reisman] are
compensated reasonably.
6
this lawuit is
of [PressEnter
damage to the
entitled to be
No.
2009AP438
not been adequately compensated "for the fruits of his labor
that
produced
massive
sums
paid
to"
Bushard
after
Bushard
dissolved the partnership effective August 31, 1999.
¶16
Reisman then moved for summary judgment.
He asserted
that "Mr. Bushard's dissolution of the partnership caused the
business to be in wind-up mode as no continuation was consented
to."
According to Reisman's brief to the circuit court, "Press
Enter has remained in wind-up mode since August of 1999," the
date that Bushard "unilaterally and irrevocably caused the windup and dissolution of Press Enter, L.L.P."
Reisman contended
that he "did not need the consent of Mr. Bushard under Wisconsin
law in order to draw compensation for his labor in winding up
the partnership following Mr. Bushard's unilateral dissolution
of the partnership."
"Because the business is engaged in wind-
up, not continuation," Reisman argued, "Mr. Bushard will receive
the value of his interest at the date of liquidation or final
settlement which has yet to occur."
¶17
Reisman
argued
that
PressEnter's
dissolution
"is
analogous to a deceased partner scenario" where the surviving
partner
is
compensated
for
his
services
in
winding
up
the
partnership:
The rationale behind the Uniform Partnership Act and
thus the rationale for Wis. Stat. § 178.15(6) is that
it is just and proper that the surviving partner
should receive a reasonable allowance for his skill
There are four counts to Reisman's counterclaim. None can
be
reasonably
interpreted
as
requesting
an
"assessment"
accomplished by an "accounting."
7
No.
2009AP438
and industry in conducting the business, for during
that time the business has not received the care and
labor of the deceased partner, as an equivalent for
such services.
. . . .
The 50/50 split of the partnership has been incredibly
imbalanced
in
Mr.
Bushard's
favor
since
1999.
Although Mr. Bushard is not deceased, he has abandoned
the partnership as though he were, leaving Mr. Reisman
with all of the work in running the business while
simultaneously winding-up Press Enter's affairs.
¶18
In an oral ruling, the circuit court denied Reisman's
motion for summary judgment.
situation, . . . there
is
It concluded: "[T]his is a wind-up
not
a
surviving
partner
situation.
This isn't where one party died and the other partner survived
and continued the business."
It further determined: "The law
says the partner who stays in the partnership during wind-up is
not entitled to compensation, and the law is very clear in that
regard."
entitled
Accordingly, the court concluded that Reisman "is not
to
any
compensation
for
running
the
affairs
of
the
partnership while the partnership is in wind-up status, pursuant
to the Uniform Partnership Law and the law in the state of
Wisconsin."
¶19
ruling.
The parties disagreed on the effect of the court's
Bushard contended that there were no issues left for
trial, and he moved the court for summary judgment and an order
requiring that the wind-up of PressEnter be completed.
contended
that
counterclaim
the
that
court's
Bushard
order
had
been
had
not
unjustly
Reisman's efforts in support of the partnership.
8
Reisman
resolved
enriched
his
by
No.
¶20
court,
2009AP438
In contrast with his earlier assertions in the circuit
Reisman
contended
concerning
whether
simply
continuation
a
Bushard."
that
PressEnter,
that
"[a]
LLP
has
is
been
fact
question
in
wind-up
a
consented
to
exists
mode
or
by
Mr.
Regardless of whether the dissolution had triggered a
wind-up or a continuation, Reisman asserted that Bushard had
been unjustly enriched because he had been overcompensated for
his share of the value of the partnership.
Reisman explained
that the 1999 offer of purchase from Voyager.net evinced that
the value of PressEnter had been approximately $3.5 million at
dissolution.
He argued that Bushard had been amply compensated
for his half of the 1999 value of the partnership by the payment
of partner draws exceeding $2.3 million over the years.
¶21
amended
After hearing arguments, the circuit court entered an
order
that the
dismissing
wind-up
of
Reisman's
PressEnter's
counterclaims
affairs
be
and
ordering
completed.
The
order directed Reisman to pay Bushard $352,350, half the amount
that Reisman had taken in salary over the years.
¶22
foreclosed
The circuit court determined that its earlier order
Reisman
from
arguing
that
dissolution
triggered
continuation rather than a wind-up:
It's my strong opinion that the Court did find that
this is a wind-up situation . . . [I]t was, in fact,
admitted that this was a wind-up situation. The Court
assumed
it
was
a
wind-up
situation
and
found
specifically it was a wind-up situation, so this isn't
a situation where I can now find something different.
That would be inappropriate.
So, this is a wind-up
situation.
9
a
No.
2009AP438
It concluded that under the applicable law, Bushard had not been
unjustly
enriched:
"[T]he
arguments
that
are
presented
by
[Reisman] really are back to arguments that say, I should be
reimbursed, it's not fair I don't get paid for my services.
And
I don't think it's a matter of fairness, it's a matter of law,
and the law says you don't."
¶23
opinion.
The
court
of
appeals
affirmed
an
unpublished
Bushard v. Reisman, No 2009AP438, unpublished slip op.
(Wis. Ct. App., June 15, 2010).
Reisman petitioned this court
for review, setting forth several issues.9
that
in
equitable
principles
required
In essence, he argued
reversal,
and
that
the
circuit court erred by ordering summary judgment without making
9
Specifically, Reisman asserted that the following four
issues required resolution by this court: (1) whether an initial
determination needs to be made about the manner of dissolution
of a partnership in Wisconsin in deciding the appropriate
measure for financial division between the partners; (2)
whether, according to the dictates of Estate of Matteson v.
Matteson, 2008 WI 48, 309 Wis. 2d 311, 749 N.W.2d 557, equity
must be applied in determining the financial disposition between
the parties; (3) whether the real controversy was determined in
this matter where withdrawing partner allowed the continuing
partner to work an eleven-year period, drew $2.3 million in
partnership distributions, initially insisted that a wind-up
occur but later consenting to a continuation and in that eleven
years, the continuing partner tried selling the business to
effect the wind-up, was not able to do so and continued to
operate the business successfully for eleven years, but, for the
last 4.8 years received a salary that was less than market value
for work needed by the partnership; and (4) whether, in the
circumstances where the withdrawing partner is overcompensated
by either the measure for a wind-up or continuation, a
counterclaim for unjust enrichment lie in favor of the
sustaining member who has done all of the work?
10
No.
a
determination
of
whether
the
dissolution
of
2009AP438
PressEnter
resulted in a wind-up or a continuation of the partnership.
II
¶24
To resolve the issues presented by this case, we are
required to interpret the statutes that govern the respective
rights and obligations of partners.
a question of law.
Statutory interpretation is
Estate of Matteson v. Matteson, 2008 WI 48,
¶22, 309 Wis. 2d 311, 749 N.W.2d 557.
We interpret statutes
independently from the interpretations rendered by the circuit
court and the court of appeals.
¶25
Id.
In addition, we are required to determine whether the
circuit court erred by ordering summary judgment without making
a determination of whether PressEnter's dissolution resulted in
a wind-up or a continuation of the partnership.
grant
of
summary
judgment
independently
of
the
We review a
determination
rendered by the circuit court.
Green Spring Farms v. Kersten,
136
N.W.2d 816
Wis. 2d 304,
judgment
is
315-17,
appropriate
401
if
there
are
no
(1987).
genuine
Summary
issues
of
material fact and the moving party is entitled to judgment as a
matter of law.
partner
elected
Wis. Stat. § 802.08(2).
a wind-up
question of fact.
or
Whether the withdrawing
consented
to
continuation is a
Lange v. Bartlett, 121 Wis. 2d 599, 601, 360
N.W.2d 702 (Ct. App. 1984).
¶26
We begin by evaluating Reisman's arguments that the
circuit court erred by failing to apply equitable considerations
when it determined that the
partners
were
entitled
equally in the partnership's profits and losses.
11
to share
We then turn
No.
2009AP438
to evaluating Reisman's assertion that the circuit court erred
by
ordering
summary
judgment
without
making
the
threshold
determination of whether the dissolution resulted in a wind-up
or a continuation of the partnership.
III
¶27
In essence, Reisman urges us to reverse the court of
appeals because the circuit court's application of the Uniform
Partnership
Law
inequitable
result.
statutory
absence
to
mandates
of
an
the
facts
of
Accordingly,
governing
agreement
obligations of partners
to
are
this
we
turn
Wisconsin
the
case
the
partnerships.
contrary,
governed
an
examining
to
achieved
by
the
Wis.
In
the
rights
and
Stat.
Ch.
178,
which codifies the Uniform Partnership Act (UPA).
¶28
1914.
The UPA was enacted by the Uniform Law Commission in
In a Prefatory Note, the Uniform Law Commission explained
that uniformity in the law of partnership was desirable because
"there
exists
an
almost
hopeless
confusion
of
theory
and
practice, making the actual administration of the law difficult
and often inequitable."
Prefatory Note, Uniform Partnership Act
(1914).
¶29
Wisconsin adopted the provisions of the UPA shortly
thereafter.
See § 1, ch. 358, Laws of 1915.
These provisions,
as amended by the Wisconsin legislature throughout the years,
can be found in Wis. Stat. Ch. 178.
Commission
amended
the
UPA
in
enacted those amendments.
12
1997,
Although the Uniform Law
Wisconsin
has
not
yet
No.
¶30
default
2009AP438
The UPA, as currently enacted in Wisconsin, sets forth
rules
partners.10
for
determining
the
See Wis. Stat. § 178.15.
rights
and
duties
of
Subsection (1) provides
that partners share equally in the profits and losses of the
partnership.
Further, subsection (6) sets forth the general
rule that no partner is entitled to remuneration for acting in
the
partnership
business:
"No
partner
is
entitled
to
remuneration for acting in the partnership business, except that
a surviving partner is entitled to reasonable compensation for
his or her services in winding up the partnership affairs."
10
The relevant portions of Wis. Stat. § 178.15 provide:
The rights and duties of the partners in relation to
the partnership shall be determined, subject to any
agreement between them, by the following rules:
(1) Each partner shall be repaid that partner's
contributions, whether by way of capital or advances
to the partnership property and share equally in the
profits and surplus remaining after all liabilities,
including those to partners, are satisfied; and,
except as provided in s. 178.12(2), each partner must
contribute towards the losses, whether capital or
otherwise, sustained by the partnership according to
that partner's share in the profits.
. . .
(5) All partners have equal rights in the management
and conduct of the partnership business.
(6) No partner is entitled to remuneration for acting
in the partnership business, except that a surviving
partner is entitled to reasonable compensation for his
or her services in winding up the partnership affairs.
. . .
13
No.
¶31
2009AP438
Under the default rules set forth in Wisconsin's UPA,
there is only one exception to the general rule that no partner
is
entitled
business.
to
remuneration
for
acting
in
the
partnership
Under this exception, a partner is entitled to extra
compensation if he is a "surviving partner."
¶32
Wisconsin
courts
have
strictly
construed
the
term
"surviving partner" to apply only to those partners who have
survived another partner's death.
We have explained that the
term
contemplate
"surviving
partner"
does
not
a
partner
who
continues to work at the business after another partner retires
or withdraws from the business.
(2008)
("[E]xtra
compensation
Matteson, 309 Wis. 2d 311, ¶62
[may
be]
accorded
to
surviving
partners when a partnership is dissolved due to the death of a
partner, which is not the case here[.]"); see also Gull v. Van
Epps,
185
("Section
Wis. 2d 609,
178.15(6)
625,
allows
517
extra
N.W.2d 531
(Ct.
compensation
App.
only
1994)
when
the
partnership is dissolved due to the death of a partner and there
is a surviving partner.
It appears to be the rule in inter
vivos cases——those in which a partner retires or withdraws——that
the partner who completes the work in progress is not entitled
to any compensation beyond the fee he or she would have received
for that work had the partnership not dissolved.").
¶33
This interpretation of the term "surviving partner" is
consistent with how that term is used in surrounding statutes.
In
the
surrounding
statutes,
the
term
"surviving
partner"
describes a partner who has survived another partner's death.
See, e.g., Wis. Stat. 178.21(3)(d) ("On the death of a partner
14
No.
2009AP438
the partner's right in specific partnership property vests in
the surviving partner or partners[.]"); Wis. Stat. § 178.18(2)
("This section applies also to the representatives of a deceased
partner
engaged
partnership
as
in
the
the
liquidation
personal
of
the
affairs
representatives
of
of
the
the
last
surviving partner.").
¶34
Wisconsin's
interpretation
partner"
is likewise
consistent
interpreted by the majority
UPA.11
An
influential
of
treatise
of
with
states
the
how
that
that
explains
term
"surviving
term
have
that
has
been
adopted
the
"[u]nless
the
partners agree otherwise, UPA § 18(f) [which has been codified
in Wisconsin as Wis. Stat. § 178.15(6)] permits compensation of
partners
for
post-dissolution
services,
when
dissolution is caused by death, but not in other cases."
Alan
11
winding-up
See, e.g., Couri v. Couri, 447 N.E.2d 334, 339 (Ill.
1983) ("Absent an agreement, courts will not attempt to equalize
compensation commensurate with services."); Kennedy v. Kennedy,
433 N.E.2d 1247, 1249 (Mass. App. 1982); Chazan v. Most, 209
Cal. App. 2d 519, 523 (Cal. Ct. App. 1962) ("There is no merit
in Most's contention that he is a 'surviving partner.'
That
term refers to the partner who survives after the death of the
other."); Maus v. Galic, 669 N.W.2d 38, 46 (Minn. App. 2003);
Mehl v. Mehl, 786 P.2d 1173, 1175 (Mont. 1990) ("This statute is
clear.
In the absence of any agreement to the contrary,
partners are not entitled to any wages unless one of the
partners
dies
and
the
surviving
partner
winds
up
the
partnership."); Smith v. Daub, 365 N.W.2d 816, 821 (Neb. 1985).
15
No.
R.
Bromberg
&
Larry
E.
Ribstein,
Bromberg
and
2009AP438
Ribstein
on
Partnership § 7.08(d) (emphasis added.)12
¶35
The
UPA's
hard-and-fast
rule
against
partner
remuneration has been criticized as inequitable by commentators
and
courts
alike.
One
commentator
has
concluded
that
"in
general, U.P.A. case law has been less equitable than pre-U.P.A.
case
law
on
compensation."
Leonard
Charles
Schwartz,
Compensation of A Partner for Services: Problems in Interpreting
the U.P.A. and Partnership Agreements, 19 Sw. U. L. Rev. 1, 2
12
The dissent appears to conclude that each partner's
respective interest in the partnership may fluctuate based on
the comparative value of the "personal services, skill, or
knowledge" that partner has contributed to the partnership at
any given time.
Citing Thompson v. Beth, 14 Wis. 2d 271, 111
N.W.2d 271 (1961), it asserts that "when one partner contributes
personal services, skill, and knowledge to the partnership,
these contributions can be taken into account when valuing that
partner's share of the partnership at termination."
Dissent,
¶85; see also id., ¶62. It concludes that a circuit court can
determine that the partners' shares of the partnership "may no
longer be in the same percentages as they were when the
partnership commenced." Id., ¶86.
The consequences of the dissent's assertion are unsettling.
Imagine the amount of litigation that such a rule would foster
between disgruntled partners.
The dissent's assertion misreads the facts and holding of
Thompson.
In that case, the partners formed a partnership,
agreeing that "Beth was to pick up the option and [Thompson] was
to do the construction work."
14 Wis. 2d at 274.
"On that
basis," the partners agreed that Thompson would have a one-third
share in the partnership. Id. at 274, 275. When Thompson sued
for his partnership interest, he was not asking the court to
revalue his percentage share of the partnership based on his
labor, as the dissent suggests.
Rather, he was seeking "his
one-third partnership interest," that is, one-third of the
profits from the sale of partnership property. Id. at 280.
16
No.
(1990).
rule
2009AP438
Other commentators observe that "the no-compensation
leads
to
inequitable
results
whenever
the
division
of
partnership profits is not proportional to the work load of some
partners
during
the
winding-up
period."
Mark
H.
Epstein
&
Brandon Wisoff, Winding Up Dissolved Law Partnerships: The NoCompensation Rule and Client Choice, 73 Cal. L. Rev. 1597, 1599
(1985).
As a result, some cases have departed from the rule set
forth in the
partners
UPA: "When
would
not
the
expect
circumstances
equal
indicate
division
of
that
work
the
and
compensation on inter vivos dissolution (for example, when a
partner
has
business),
withdrawn
some
compensation."
¶36
In
from
courts
further
have
participation
permitted
in
the
post-dissolution
Bromberg & Ribstein, supra, 7:08(d).13
the
1990s,
the
Uniform
Law
Commission
"spent
significant effort" modernizing the rules governing partnership
breakups.
Prefatory Note, Uniform Partnership Act (1997).
The
Revised Uniform Partnership Act of 1997 provides in part that a
partner
may
receive
reasonable
compensation
for
services
rendered winding up the business of the partnership:
A partner is not entitled to remuneration for services
performed for the partnership, except for reasonable
compensation for services rendered in winding up the
business of the partnership.
13
The dissent cites as examples cases that appear to depart
from the rule set forth in the UPA.
Dissent, ¶¶87-88 (citing
Essay v. Essay, 123 N.W.2d 648 (Neb. 1963); Vangel v. Vangel,
291 P.2d 25 (Cal. S. Ct. 1955)).
Subsequent cases from those
jurisdictions have followed the UPA's rule.
See supra, ¶34,
n.11.
17
No.
2009AP438
Uniform Partnership Act (1997) § 401(h) (emphasis added); see
also Gull, 185 Wis. 2d at 626 (citing the draft of the revisions
that had been promulgated in 1993).
¶37
confirm
The
Uniform
that
this
Law
revision
Commission's
is
prefatory
intended
to
be
a
comments
substantive
change in the law: "Subsection 401(h) deletes the UPA reference
to a 'surviving' partner.
That means any partner winding up the
business
compensation,
is
entitled
to
not
just
a
surviving
partner winding up after the death of another partner."
Uniform
Partnership Act (1997) § 401 cmt. 9.
¶38
The
revisions.
Wisconsin
legislature
has
not
adopted
the
1997
Accordingly, the 1997 revisions are not applicable
to this case.
Rather, the result is governed by Wis. Stat. §
178.15(6) and the Uniform Partnership Act (1914), which provides
that "[n]o partner is entitled to remuneration for acting in the
partnership
business,
except
that
a
surviving
partner
is
entitled to reasonable compensation for his or her services in
winding up the partnership affairs."
¶39
the
In this case, it was Bushard's election to dissolve
partnership,
partnership's
and
not
dissolution.
"surviving partner."
his
death,
Accordingly,
that
led
Reisman
is
to
not
the
a
Under the provisions of the UPA in effect
in Wisconsin, Reisman is not entitled to remuneration for work
performed
in
furtherance
of
the
partnership,
and
entitled to share equally in PressEnter's profits.
§ 178.15(6); Wis. Stat. § 178.15(1).
18
Bushard
is
Wis. Stat.
The circuit court's order
No.
2009AP438
equally dividing PressEnter's profits between the partners is
consistent with the statutory mandates.
¶40 Reisman argues that "the real controversy was not fully
tried"14 because "Mr. Bushard has been overpaid and it is unjust
to
permit
Mr.
Reisman
to
suffer
so
large
a
loss
while
he
continues to be obligated to run the business while attempting
to sell it, all without income for his efforts."
Contrary to
Reisman's assertions, the real controversy in this case is not
what
distribution
of
PressEnter's
under the circumstances.
profits
is
most
equitable
Instead, the real controversy is what
distribution is mandated by the plain language of the statute.
¶41
not
Additionally, we conclude that the circuit court did
err
when
enrichment.
it
dismissed
Reisman's
counterclaim
for
unjust
A claim for unjust enrichment requires Reisman to
show (1) he conferred a benefit on Bushard; (2) Bushard knew of
the benefit; and (3) Bushard accepted or retained the benefit
under circumstances that made it inequitable for him to retain
the benefit.
Staver v. Milwaukee County, 2006 WI App 33, ¶24,
289 Wis. 2d 675, 712 N.W.2d 387.
Here, where the benefit that
was conferred on Bushard is mandated by the statute, no claim
for unjust enrichment may lie.
¶42
We
are
cognizant
that
the
result
mandated
by
the
statute appears to be inequitable under the facts of this case.
14
Wisconsin Stat. § 751.06 permits this court to reverse a
judgment of the circuit court if "the real controversy has not
been fully tried, or that it is probable that justice has for
any reason miscarried."
19
No.
2009AP438
Nevertheless, a court "may not exercise its equitable authority
if such exercise would ignore a statutory mandate."
GMAC Mortg.
Corp. v. Gisvold, 215 Wis. 2d 459, 480, 572 N.W.2d 466 (1998).
¶43
public
Wisconsin
policy
partners
in
choices
the
absence
the
to
Ch.
of
178
reflects
the
about
above,
discussed
revisions
Stat.
rights
agreements
Uniform
the UPA
that
Law
would
the
and
to
legislature's
obligations
of
contrary.
As
the
Commission
ameliorate
the
has
adopted
harsh
result
reached in this case.
Nevertheless, the Wisconsin legislature
has
revisions.
not
adopted
these
As
the
court
of
appeals
concluded in Gull, "if the rule against extra compensation is to
be modified, we believe the legislature must revise § 178.15(6),
Stats."
¶44
Gull, 185 Wis. 2d at 626.
The
underscores
apparent
the
value
inequity
of
a
that
results
written
in
partnership
this
case
agreement.
Commentators have explained that "the partnership statute is, to
a large extent, a standard form agreement that can be varied by
the parties.
results,
Because the standard form often produces unwanted
partners
are
well
advised
to
give
careful
advance
consideration to dissolution and its consequences and to draft
explicit agreements."
¶45
If
the
Bromberg & Ribstein, supra, § 7.01(c).
provisions
of
the
UPA
are
unsatisfactory,
partners can and should protect their interests by agreeing to
20
No.
different terms.15
2009AP438
In the absence of an agreement modifying the
provisions of the UPA, a court should decline from fashioning an
after-the-fact remedy in pursuit of an equitable result when
that remedy contravenes the public policy choices established by
the legislature.16
15
"An agreement that one partner shall receive compensation
for personal services to the partnership must be established by
clear and satisfactory evidence. . . . Under the terms of the
contract and the statute no implied obligation could arise."
Wales v. Wightman, 247 Wis. 238, 244, 19 N.W.2d 243 (1945).
16
We recognize that some dissolution cases have discussed
the
circuit
court's
discretion
to
perform
an
equitable
accounting in a partnership dissolution.
In Gull v. Van Epps,
185 Wis. 2d 609, 626-27, 517 N.W.2d 531 (Ct. App. 1994), the
court of appeals asserted that "the trial court has broad
discretion to accomplish a fair accounting between the parties
because an action for the dissolution of a partnership and the
liquidation of its affairs is a proceeding in equity." In Lange
v. Bartlett, 121 Wis. 2d 599, 606, 360 N.W.2d 702 (Ct. App.
1984), the court of appeals asserted that "a court can take into
account the substantial labor and management services made by
the continuing partner and deduct that amount before arriving at
the figure of what profit is due the former partner."
21
No.
¶46
profits
We
conclude
and
losses
that
is
the
distribution
governed
by
Wis.
of
2009AP438
PressEnter's
Stat.
§ 178.15.
Reisman's arguments about equity are insufficient to overcome
the plain language of the statute.
IV
¶47
We turn next to examining Reisman's assertion that the
circuit court erred by ordering summary judgment in favor of
Bushard without making the threshold determination of whether
the
dissolution
resulted
in
a
wind-up
or
a
continuation.
Reisman contends that the dissolution of PressEnter resulted in
a
continuation,
distributions
in
and
that
excess
of
Bushard
the
has
already
continuation
value
received
of
his
interest in the partnership.
We
agree
that
judicial
dissolution
proceedings
are
equitable in nature.
Nevertheless, a circuit court's equitable
authority is circumscribed by the statutes, and a court
erroneously exercises its discretion if it orders relief in
contravention of the statutes.
In Matteson, 2008 WI 48, ¶20,
309 Wis. 2d 311, 749 N.W.2d 557, this court explained that
judicial dissolution is a proceeding in equity in which "circuit
courts have broad discretion in achieving a fair accounting
between the parties involved."
The Matteson court explained
that the circuit court's exercise of discretion would be upheld
if it "examined the relevant facts, applied a proper standard of
law, and, using a demonstrated rational process, arrived at a
conclusion that a reasonable judge could reach." Id. The above
cases should not be read as granting a court equitable powers to
contravene the plain language of a statute. Whatever equity may
be injected into a dissolution proceeding, a circuit court must
apply a proper standard of law.
Here, the applicable statute
provides that in the absence of an agreement to the contrary,
"[n]o partner is entitled to remuneration for acting in the
partnership business." Wis. Stat. § 178.15(6).
22
No.
¶48
Distinguishing
in
the
instance
first
2009AP438
whether
dissolution resulted in a wind-up or a continuation is critical
because the settlement of the former partner's account differs
depending on whether it is a wind-up or a continuation.
121 Wis. 2d at 602.
Lange,
One significant difference between wind-up
and continuation is the date on which each partner's interest in
the partnership is valued.
When there is a continuation, the
departing partner's interest in the partnership is valued on the
date of dissolution.
When there is a wind-up, by contrast, the
value of the partnership on the date of dissolution is less
significant.
when
the
The important date is the date of termination,
winding
up
of
the
partnership's
affairs
has
been
See Estate of Schaefer v. Schaefer, 91 Wis. 2d 360,
completed.
422, 283 N.W.2d 410 (Ct. App. 1979).
¶49
Reisman contends that since the date of dissolution,
Bushard
has
received
semi-monthly
amounting to $2.3 million.
partner
distributions
He asserts that these payments have
exceeded "the value of [Bushard's] interest in the dissolved
partnership" on the date of dissolution.
Accordingly,
Reisman
asserts,
if
Wis. Stat. § 178.37.
dissolution
resulted
in
a
continuation, the partnership dividends paid to Bushard "were
tantamount
to
buying
out
his
interest
in
the
business."
Further, because Bushard would no longer be a partner, he would
have
no
right
to
complain
about
any
remuneration
Reisman
received from PressEnter.
¶50
Under the UPA, a partnership is generally dissolved
when a partner chooses to leave the partnership.
23
Wis. Stat.
No.
§ 178.25.
"It is at this juncture, the point of dissolution,
that the [departing] partner makes an election."
Wis. 2d at 601.
Lange, 121
The departing partner has two primary options:
wind-up or continuation.17
¶51
2009AP438
Matteson, 309 Wis. 2d 311, ¶25.
"Every partnership dissolution causes a wind-up rather
than a continuation unless the outgoing partner 'consents' to a
continuation."
Lange, 121 Wis. 2d at 602.
This court recently
explained that it is improper for a circuit court to conclude
that the dissolution of a partnership resulted in a continuation
simply because the partnership's business actually continued.18
17
Wind-ups are governed by Wis. Stat. §§ 178.32-.33.
A
wind-up may involve selling the business as a going concern, or
it may involve liquidation of the partnership's assets.
Matteson, 309 Wis. 2d 311, ¶24. In a wind-up, the creditors are
paid first, and then the remaining value of the partnership on
the date of termination is distributed to the partners. Id.
By contrast, continuations are governed by Wis. Stat.
§ 178.37.
When
the
departing
partner
consents
to
a
continuation, that partner opts to permit the business to
continue and elects to "receive[s] as an ordinary creditor an
amount equal to the value of the [departing] partner's interest
in the dissolved partnership."
Wis. Stat. § 178.37.
The
withdrawing partner is also entitled to interest or, "in lieu of
interest, the profits attributable to the use of the retired or
deceased partner's right in the property of the dissolved
partnership." Id.
18
See Matteson, 309 Wis. 2d 311, ¶29 (disapproving of
"[t]he court's interpretation of § 178.37 'continuation' as a
default statutory scheme that applies when wind-up has not yet
occurred rather than something requiring the exiting partner's
affirmative consent"); see also id., ¶34 n.18 ("The parties
appear to remain confused about continuation being something a
court 'finds' after a business takes too long to wind up rather
than continuation being something the exiting party must clearly
consent to and elect in lieu of wind-up at the time of
dissolution.").
24
No.
2009AP438
Rather, the Matteson court reaffirmed that the relevant inquiry
is whether the departing partner consented to continuation in
lieu of wind-up at the time of dissolution.
309 Wis. 2d 311,
¶¶31, 34 n.18.
¶52
Here,
the
circuit
court
twice
determined
that
the
dissolution of PressEnter resulted in a wind-up rather than a
continuation.
In
both
instances,
the
circuit
court's
determination was made in the context of a motion for summary
judgment.
Summary
judgment
is
appropriate
if
"there
is
no
genuine issue as to any material fact and [] the moving party is
entitled
to
a
judgment
as
a
matter
of
law."
Wis.
Stat.
§ 802.08(2).
¶53
The
circuit
court
first
determined
that
the
dissolution of PressEnter resulted in a wind-up when Reisman
filed a motion for summary judgment.
In his brief and argument
to the circuit court, Reisman repeatedly asserted that Bushard
had
not
consented
to
a
continuation,
and
therefore,
dissolution of PressEnter resulted in a wind-up.19
the
During the
hearing, Bushard's attorney observed: "[N]either side contends
that this is a situation where Mr. Bushard chose continuation."
19
Although Reisman now asserts that his statements in the
circuit court were hypothetical, this assertion is not supported
by the record of the actual proceedings. In his briefs to the
circuit court, Reisman asserted that Bushard "unilaterally and
irrevocably caused the wind-up and dissolution of Press Enter,
L.L.P.," that "Press Enter has remained in wind-up mode since
August of 1999," and that "Mr. Bushard's dissolution of the
partnership caused the business to be in wind-up mode as no
continuation was consented to."
These statements are not
hypothetical in nature.
25
No.
Because
the
facts
were
undisputed,
the
2009AP438
circuit
court
appropriately determined: "[T]his is a wind-up situation[.]"
¶54
judgment.
He
Several days later, Bushard filed a motion for summary
At that point, Reisman's view of the facts changed.
asserted
that
"a
fact
question
exists
concerning
whether
PressEnter, LLP is in a wind-up mode or simply a continuation
that has been consented to by Mr. Bushard."20
20
During oral argument to this court, Reisman's attorney
asserted that Wisconsin case law lacks clarity regarding the
differences between wind-up and continuation:
Counsel: I am uncertain, your honor, as to the context
in which the case lies. I know that the court said it
is a wind-up.
Court: Didn't you stipulate?
Counsel: On summary judgment I said that. I looked at
those cases, the four seminal cases.
The Schaefer
case, the Lange case, the Gull case, the Matteson
case. It is hard to know what happened in those cases
because, for example in Schaefer the fellow thought
that he was seeking a wind-up, but it was a
continuation.
In the Lange case, the court concluded
there that it was a wind-up, but then divided it up on
a continuation basis.
In the Gull case, the
continuation occurred to wind up the partnership, and
in the Matteson case every single argument talked
about wind-up but the decision sounded entirely on the
issue of continuance . . . .
To the extent that counsel's assertion is correct and the
guidance provided by our case law is less than clear, it
underscores the importance of a departing partner making a clear
election at the time of dissolution.
When the partner's
election at the time of dissolution is known by both parties,
the parties' rights and obligations are certain and not subject
to after-the-fact dispute.
26
No.
¶55
Despite
his
allegation
that
a
question
2009AP438
of
fact
remained, Reisman set forth no facts supporting his assertion
that Bushard had consented to a continuation at the time of
dissolution.
Reisman acknowledged that "[n]ominally, the notice
of dissolution spoke to a wind-up[.]"
there
was
an
inference
that
However, he asserted that
Bushard
had
consented
to
a
continuation because the partnership had, in fact, continued:
"Mr.
Bushard's
practice
has
been . . . in
the
vein
of
continuation. . . . Mr. Bushard continued to receive partnership
payments in the ensuing nine years . . . .
He elected to have
this be a continuation or at least there is a strong inference
of that."
¶56
The circuit court rejected Reisman's bare allegation
that the dissolution resulted in a continuation.
Our review of
the record reveals that the circuit court was not presented with
any evidence that Bushard consented to a continuation at the
time of dissolution.
It appears from Reisman's argument that no
such evidence exists.21
¶57
inference,
Rather,
that
the
undisputed
Bushard
did
not
21
facts
support
consent
to
a
the
opposite
continuation.
Reisman now argues that the dissolution of PressEnter has
"turned into either a continuation or a hybrid" because the
partners were unable to sell the business and "[o]f necessity,
the business continued."
The dissent appears to advance the
same argument. Dissent, ¶98. As we explained above, consent of
the departing partner is necessary for dissolution to result in
a continuation.
It is improper to conclude that there was a
continuation simply because the business took too long to wind
up. Matteson, 309 Wis. 2d 311, ¶24.
27
No.
After
the
dissolution,
partnership
Reisman
distributions.
persisted
Had
in
Bushard
paying
consented
2009AP438
Bushard
to
a
continuation, he would not have been entitled to partnership
distributions.
Rather, his 50 percent share of PressEnter would
have been fixed on the date of dissolution, and he would have
received that amount as a creditor.
¶58
Because there was no genuine dispute of material fact,
the circuit court correctly concluded that the dissolution of
PressEnter resulted in a wind-up.
The court's entry of summary
judgment in favor of Bushard was appropriate.
¶59
Although the circuit court ordered that the wind-up of
the affairs of the partnership be completed, we are unable to
determine from the record the current status of the wind-up.
If
further
be
action
is
warranted,
this
opinion
should
not
construed to limit the authority of the circuit court to conduct
an accounting as long as it is consistent with the conclusions
of this opinion and the statutory requirements for an accounting
are met.
¶60
contrary,
See Wis. Stat. § 178.15(6).
In
we
sum,
in
conclude
the
that
absence
the
of
an
agreement
distribution
of
to
the
PressEnter's
profits and losses is governed by Wis. Stat. § 178.15, and that
Reisman's equitable arguments are insufficient to overcome the
plain language of the statute.
We also determine that because
there was no genuine dispute of material fact, the circuit court
correctly concluded that the dissolution of PressEnter resulted
in a wind-up, and it appropriately ordered summary judgment in
favor of Bushard.
Accordingly, we affirm the court of appeals.
28
No.
By
the
Court.—The
decision
affirmed.
29
of
the
court
of
2009AP438
appeals
is
No.
30
2009AP438
No.
31
2009AP438
No.
32
2009AP438
No.
¶61
PATIENCE
DRAKE
ROGGENSACK,
J.
2009AP438.pdr
(dissenting).
This
case arises from a notice of dissolution issued 11 years ago in
a two-person partnership.
The notice requested wind-up based on
the retiring partner's anticipation of the sale of the parties'
business, PressEnter, L.L.C., to Voyager.net for $3.5 million.
Due
to
the
fault
of
purchase PressEnter.
neither
partner,
Voyager.net
did
not
Although efforts to sell the business were
ongoing for 11 years, it is undisputed that a purchaser has
never been found.
¶62
David Bushard (Bushard) worked for PressEnter for only
seven days during the 11-year period subsequent to his giving
notice of dissolution.
full-time
basis
conclude
that
for
Steven Reisman (Reisman) worked on a
PressEnter
Wis.
Stat.
during
§ 178.15(1)
those
11
years.
(2009-10)1
I
permits
consideration of the 11 years of service that Reisman provided
to PressEnter as a contribution from him to the value of the
partnership.
Moreover,
I
conclude
that
Wis.
Stat.
§ 178.19
requires an accounting to determine the interest of each partner
in
the
partnership
prior
to
liquidation
so
that
it
may
be
determined what part of the profits earned after dissolution are
due
to
the
partnership.
use
of
each
partner's
contribution
to
the
Although the considerations above are not driven
by whether the partnership was in wind-up, continuation or some
combination thereof for the 11 years subsequent to Bushard's
1
All subsequent references to the Wisconsin Statutes are to
the 2009-10 version unless otherwise indicated.
1
No.
2009AP438.pdr
notice of dissolution, the determination of whether it took 11
years
for
a
wind-up
or
whether
Bushard
acquiesced
to
continuation when the sale to Voyager.net did not materialize is
a fact question that cannot be determined on summary judgment.
Accordingly, I would remand for an accounting of what is due to
each partner, specifically, an accounting that will consider the
relative
contributions
of
each
partner
to
the
value
of
the
partnership, in light of Thompson v. Beth, 14 Wis. 2d 271, 111
N.W.2d 171 (1961).
in
wind-up
or
I also conclude that whether PressEnter was
continuation
for
the
11
years
subsequent
to
dissolution rests on disputes of material fact and accordingly,
it should not have been decided on summary judgment.
On remand,
the circuit court should hold an evidentiary hearing and revisit
its conclusion that PressEnter was in wind-up for 11 years.
¶63
I dissent from the majority opinion for at least three
reasons:
First, the majority opinion does not correctly analyze
Wis. Stat. § 178.15(1) in light of the claims of both Bushard
and Reisman relative to their partnership contributions.
The
majority opinion employs § 178.15(1) only in light of Bushard's
claim.
Second, Reisman has counterclaimed for an assessment of
the value that his efforts contributed to PressEnter over the 11
years
subsequent
to
Bushard's
participation in the business.
withdrawing
from
active
This can be accomplished by an
accounting, to which Reisman has a statutory right pursuant to
Wis. Stat. § 178.19.
money,
Reisman
as
Bushard
money
A remand may show Reisman owes Bushard
claims,
because
or
it
Bushard
2
may
has
show
been
that
Bushard
overpaid
for
owes
his
No.
partnership
interest
contributions.2
majority
relative
partnership
Thompson, 14 Wis. 2d at 277-79.
Third, the
opinion
based
affirms
the
on
his
2009AP438.pdr
circuit
court's
factual
finding
that this was an 11-year wind-up, which is a fact question that
cannot be
decided
on
the
summary
judgment
record
before
us.
Accordingly, I respectfully dissent.
I.
¶64
in
the
BACKGROUND
The background underlying this review is ably set out
majority
opinion.
Therefore,
I
relate
only
what
is
necessary to understand this dissent.
¶65
In
1995,
Reisman
and
Bushard
formed
PressEnter,
a
partnership aimed at providing internet service to communities
in western Wisconsin.
At PressEnter's inception, Reisman and
Bushard each contributed $15,000 to the partnership.
entered into
a written
partnership
agreement.
They never
They
ran
the
partnership as equal partners, each with a 50 percent interest.
¶66
In August of 1999, following dissention between the
partners, legal counsel for Bushard sent Reisman a notice of
dissolution of partnership.
The notice advised Reisman that:
Mr. Bushard has explored the possibility of the
sale of the business to third parties.
He believes
that a cash sale in the neighborhood of $3,000,000 is
achievable, and that closing of such a sale could take
place in a very short period of time.
In the event
you wish to continue to run the business either
individually or with a new partner or partners, Mr.
2
The majority opinion holds that the profits of PressEnter,
L.L.C., specifically those following the August 1999 notice of
dissolution,
were
rightfully
distributed
equally
between
Reisman and Bushard. Majority op., ¶1.
3
No.
2009AP438.pdr
Bushard is willing to sell his partnership interest to
you for a comparable amount.
Moreover, at one point in the letter, Bushard called the postdissolution period the "winding up" of the partnership.
he stated:
Namely,
"Please be assured that, during the winding up of
the partnership, Mr. Bushard intends to cooperate fully in the
interim management of the business."
¶67
However,
Voyager.net
participating
was
their
effort
unsuccessful.
in
running
to
sell
Bushard
PressEnter.
PressEnter
then
withdrew
According
to
to
from
Bushard's
2008 deposition testimony, in the nine-year period from August
of 1999 to the fall of 2008, Bushard performed services for
PressEnter on approximately seven days.3
¶68
Despite
his
lack
of
participation
in
PressEnter,
Bushard continued to receive 50 percent of the net profits in
PressEnter.
In
the
initial
nine-year
period
following
the
notice of dissolution, Bushard received at least $2.3 million in
cash distributions, for which he worked a total of seven days.
¶69
However, during these nine years, Reisman worked full-
time managing PressEnter.
He took very little vacation and, at
times, worked 60-70 hours per week.
that
Reisman's
technical
PressEnter's success.4
expertise
Even Bushard acknowledged
was
a
critical
factor
in
Reisman continued to attempt to find a
3
Bushard considered his greatest contribution to PressEnter
to be staying away and doing nothing for the partnership.
4
During his deposition, Bushard was asked:
"From a
technical aspect in the conduct of the technical parts of the
business of PressEnter, has Mr. Reisman done a brilliant job?"
Bushard answered this question affirmatively:
"To the best of
my knowledge and belief, yes."
4
No.
buyer
for
PressEnter.
In
2004,
Reisman
himself for the work he was doing.
began
2009AP438.pdr
compensating
From 2004 to 2008, Reisman
took a salary of between $150,000 and $160,000 per year.
¶70
More than eight years after sending the 1999 notice of
dissolution,
Bushard
commenced
the
present
lawsuit
against
Reisman and PressEnter, requesting liquidation of PressEnter, an
accounting from 1999 to the present and a money judgment against
Reisman for taking a salary for four years without Bushard's
consent.
Reisman
and
PressEnter
counterclaimed
for
unjust
enrichment based on Bushard's receipt of 50 percent of the net
profits
of
PressEnter,
when
Reisman's
contributions
to
the
partnership had vastly exceeded Bushard's contributions.
¶71
on
the
On November 21, 2008, the circuit court held a hearing
parties'
summary
judgment
motions.
At
the
hearing,
neither party put forth arguments as to whether PressEnter was
in wind-up or continuation.
Bushard's counsel simply asserted
that "neither side contends that this is a situation where Mr.
Bushard chose continuation."
Reisman's counsel also used the
term "wind-up" at one point.5
¶72
After hearing arguments from the parties, the court
concluded that Reisman was not entitled to compensation.
The
court stated:
The only issue I had, as I see it, before me is:
Given the fact this was a dissolution, that this is a
5
When arguing that this is a matter of equity, Reisman's
attorney stated, "And the equities of this case allow and should
permit that Mr. Reisman receive the salary that he does; and
that, in fact, that wind-up should allow——or, be continued so
that a sale can occur."
5
No.
2009AP438.pdr
wind-up situation, that the surviving——there is not a
surviving partner situation.
This isn't where one
party died and the other partner survived and
continued the business.
The law is very clear. The law says the partner
who stays in the partnership during wind-up is not
entitled to compensation . . . .
So the Court finds that Mr. Reisman is not
entitled to any compensation for running the affairs
of the partnership while the partnership is in wind-up
status.
¶73
Bushard.6
No.
Having
so
concluded,
the
court
The court of appeals affirmed.
2009AP438,
unpublished
slip
op.
ruled
in
favor
of
Bushard v. Reisman,
(Wis.
Ct.
App.
June 15,
2010).
II.
A.
¶74
DISCUSSION
Standard of Review
Statutory interpretation is a question of law subject
to our independent review; however, we benefit from the analyses
in previous courts' discussions.
Spiegelberg v. State, 2006 WI
75, ¶8, 291 Wis. 2d 601, 717 N.W.2d 641.
¶75
Summary judgment is appropriate only when there is no
genuine issue of material fact.
Oneida Cnty. Dep't of Social
Servs. v. Nicole W., 2007 WI 30, ¶8, 299 Wis. 2d 637, 728 N.W.2d
652.
It is fundamental that a court is not to find issues of
fact on summary judgment.
Preloznik v. City of Madison, 113
Wis. 2d 112, 116, 334 N.W.2d 580 (Ct. App. 1983).
court's
job
is
to
determine
"only
6
whether
a
Rather, the
factual
issue
Following some confusion about the effect of the ruling at
the November 21 hearing, the court held a second hearing on
January 23, 2009, in which it reaffirmed its ruling in favor of
Bushard.
6
No.
2009AP438.pdr
exists, resolving doubts in that regard against the party moving
for summary judgment."
B.
¶76
Wisconsin
Id.
Partnership Principles
has
adopted
the
Uniform
Partnership
Act
(UPA) and has made amendments to it throughout the years.
The
UPA, as amended by the Wisconsin legislature, is found in Wis.
Stat. ch. 178.
In the absence of a partnership agreement, ch.
178 creates a framework for the rights and duties of partners in
a partnership.
¶77
This case involves the dissolution of a partnership
that had no written partnership agreement.
change
in
§ 178.25.
the
relationship
of
the
Dissolution is a
partners.
Wis.
Stat.
Dissolution can occur by an act of a partner, by
bankruptcy of a partner, by the death of a partner or through
judicial process.
¶78
Wis. Stat. § 178.26; Wis. Stat. § 178.27.
Judicial decisions that address disputes subsequent to
dissolution often discuss the "wind-up" of a partnership or the
"continuation" of a partnership.
See, e.g., Estate of Matteson
v. Matteson, 2008 WI 48, ¶24, 309 Wis. 2d 311, 749 N.W.2d 557;
Lange v. Bartlett, 121 Wis. 2d 599, 601, 360 N.W.2d 702 (Ct.
App.
1984).
Wind-up
concludes
when
all
the
debts
of
the
partnership are paid and all of the net assets are liquidated by
distribution to the partners in cash or in kind.
Gull v. Van
Epps, 185 Wis. 2d 609, 617-18, 517 N.W.2d 531 (Ct. App. 1994).
Whether
wind-up
is
occurring
or
whether
continuation mode is a question of fact.
7
the
business
is
in
First Nat'l Bank of
No.
2009AP438.pdr
Kenosha v. Schaefer, 91 Wis. 2d 360, 378, 283 N.W.2d 410 (Ct.
App. 1979).
¶79
Discussion of the concepts of wind-up and continuation
subsequent
to
dissolution
often
lack
the
precision
in
terminology that would be helpful to understanding what the law
requires
and
when
it
requires
it.
Estate
of
Matteson,
309
Wis. 2d 311, ¶29 (explaining the confusion that can exist when
courts use some form of the word "continue" without determining
whether a Wis. Stat. § 178.37 continuation has occurred).
Some
of the problem seems to arise from Wis. Stat. § 178.25(2), which
states, "On dissolution the partnership is not terminated, but
continues
until
completed."
¶80
the
winding
up
of
partnership
affairs
is
(Emphasis added.)
When a partnership is in wind-up, the value of the
withdrawing partner's account is not fixed until liquidation.
The
withdrawing
partner
takes
his
share
of
the
profits
and
losses between dissolution and liquidation based on his relative
"contributions, whether by way of capital or advances to the
partnership property."
Wis. Stat. § 178.15(1); see also Wis.
Stat. § 178.33(1); Lange, 121 Wis. 2d at 601.
¶81
If the withdrawing partner consents to continuation of
the business, he claims as a creditor of the partnership with
the value of the withdrawing partner's interest fixed at the
date of dissolution.
In addition, he can obtain interest on
that amount until termination of the partnership, or he can take
a share of "the profits attributable to the use of [his] right
in
the
property
of
the
dissolved
8
partnership."
Wis.
Stat.
No.
§ 178.37.
2009AP438.pdr
Acquiescence in the continuation of the business is
sufficient for consent under Wis. Stat. § 178.36(3).
Schaefer,
91 Wis. 2d at 378.
¶82
That
consent
to
continuation
does
not
have
to
be
explicit was addressed in Shepherd v. Griffin, 929 S.W.2d 336
(Tenn. Ct. App. 1995).
There, the Court of Appeals of Tennessee
evaluated
Tennessee
whether
the
circuit
court
had
erred
in
finding that the departing partner "impliedly consented to the
continuation
desire
to
of
wind
the
up
quotation omitted).
business
and
by
acting
liquidate."
inconsistent
Id.
at
341
with
a
(internal
In concluding that the circuit court did
not err, the court of appeals highlighted the fact that the
departing partner allowed the other partner, "without objection,
to continue to run the business of the former partnership after
its dissolution."
Id.
Other courts have similarly opined that
consent to continuation can be implied.
See, e.g., Timmermann
v. Timmermann, 538 P.2d 1254, 1261 (Or. 1975) (stating that the
departing partner can either force a wind-up and termination or,
alternatively, he "may allow the business to continue or accept
9
No.
2009AP438.pdr
the fact that it has continued") (emphasis added); Cauble v.
Handler, 503 S.W.2d 362, 366 (Tex. Civ. App. 1973) (same).7
C.
¶83
The
majority
Application
opinion
concludes
that
wind-up
has
occurred, but it does not recognize that this determination does
not
address
Reisman
has
the
issue
asserted
presented
that
by
Bushard
Reisman's
was
overpaid;
counterclaim.
whether
the
partnership was in continuation or in wind-up, this contention
must be addressed.
¶84
Reisman
asserts
that
Bushard
was
overpaid
because
Bushard does not have a 50 percent ownership in the partnership.
Stated otherwise, Bushard and Reisman both contributed $15,000
cash to the partnership; however, Reisman has contributed 11
years
of
skilled
services
to
PressEnter
contributed only seven days of such services.
withdrawing
termination
partner's
interest
of the partnership
is
when
not
and
Bushard
has
In wind-up, the
determined
wind-up is
until
complete.
A
partner's interest that will be returned to him is described in
Wis. Stat. § 178.15(1) as "Each partner shall be repaid that
7
At the time Shepherd v. Griffin, 929 S.W.2d 336 (Tenn. Ct.
App. 1995), Timmermann v. Timmermann, 538 P.2d 1254 (Or. 1975),
and Cauble v. Handler, 503 S.W.2d 362 (Tex. Civ. App. 1973) were
decided, the respective states had adopted and were applying
some form of the Uniform Partnership Act.
See Tenn. Code Ann.
§ 61-1-1205 (West 2002) (repealing the Uniform Partnership Act
as previously adopted in Tennessee and replacing it with the
Revised Uniform Partnership Act); Thompson v. Coughlin, 997 P.2d
191, 194-95 & n.7 (Or. 2000) (noting that Oregon Legislature
adopted the Revised Uniform Partnership Act in 1997, thereby
repealing the Uniform Partnership Act previously in effect);
Cauble, 503 S.W.2d at 366.
10
No.
2009AP438.pdr
partner's contributions, whether by way of capital or advances
to the partnership property and share equally in the profits and
surplus
remaining
after
all
liabilities,
including
those
to
partners, are satisfied."
¶85
In Thompson, Thompson asserted that the value of his
interest in the partnership included the work that he did to
further the partnership's business.
277.8
In
meeting
this
claim,
§ 178.15(1).
Id. at 278-79.
in
is
the
case
whether,
Thompson, 14 Wis. 2d at
we
interpreted
Wis.
Stat.
We stated that "[t]he real issue
under
the
following
statutes,
the
plaintiff's labor in the construction of the buildings comes
within the definition of the words "contribution" and "capital"
as used in [§ 178.15(1)]."
absence
of
contributes
an
agreement
"personal
Id. at 278.
to
the
services,
We held that in the
contrary,
skill,
and
when
one
knowledge"
partner
to
the
partnership, these contributions can be taken into account when
valuing that partner's share of the partnership at termination.
Id. at 279 (citation omitted).
In so holding, we distinguished
§ 178.15(6) because we concluded that subsec. (6) did not apply
when
what
partnership.
¶86
was
contributed
increased
the
value
of
the
Id. at 278-79.
In Lange, the court of appeals instructed that if, on
remand, the circuit court finds that wind-up has occurred, the
court should then "make its decision of the value of the former
partner's share."
Lange, 121 Wis. 2d at 605.
8
This is another
At the time of Thompson v. Beth, 14 Wis. 2d 271, 111
N.W.2d 171 (1961), the relevant statutory provisions in Wis.
Stat. § 178.15 were found in Wis. Stat. § 123.15.
11
No.
2009AP438.pdr
way of directing courts to examine the relative contributions of
the
partners
to
the
value
of
the
partnership
and
when
the
partnership is terminated, recognizing that their interests may
no longer be in the same percentages as they were when the
partnership commenced.
If the partner conducting wind-up of the
partnership business also contributes additional value to the
partnership, then his contribution in kind must be added to any
financial contribution he originally made.
In that regard, the
court said, "we feel the better reasoned view is that one who
continues
a
contributes
partnership
substantial
business
labor
and
after
management
entitled to compensation for that effort."
¶87
dissolution
services
and
is
Id. at 606.
The rule set out in Thompson and Lange that when a
partner's labor and skill subsequent to dissolution increases
the
value
of
the
partnership
business,
that
partner
has
increased the value of his share in the partnership, is followed
in many jurisdictions.
For example, in Essay v. Essay, 123
N.W.2d 648 (Neb. 1963), the Nebraska Supreme Court instructed
that although partners may have been eligible to share equally
in profits prior to dissolution, "Where the profits earned after
dissolution and before a final accounting are attributable in
part to the personal skill or services of a partner, it is a
factor to be considered in the apportioning of the shares of the
partners."
¶88
Id. at 649.
In Vangel
v. Vangel,
291
P.2d
25
(Cal.
1955),
the
California Supreme Court explained that an equal division of
partnership assets may not be equitable "when the contribution
12
No.
2009AP438.pdr
to profits from capital is relatively minor in comparison to the
contribution from the skills or services of one conducting the
business.
In such a case, the managing partner may be entitled
to a greater share of the profits."
¶89
of
Id. at 28.
In Estate of Matteson, we recognized that "the portion
the
profits
ownership
attributable
interest
must
to
be
the
[departing
distinguished
from
partner's]
the
portion
attributable to the skill, time, efforts, and diligence of the
remaining partners."
Estate of Matteson, 309 Wis. 2d 311, ¶59
(citation omitted).
¶90
In the case before us, Bushard contends that Reisman's
efforts for 11 years counted no differently in increasing the
worth of the partnership than did his efforts for seven days.
Bushard
so
technical
contends
skills
PressEnter.
even
and
though
knowledge
he
admits
increased
that
the
Reisman's
value
of
The relative values of each partner's contributions
to the partnership should be determined on remand, valuing both
their financial contributions and their skill and services that
created
increased
value
in
the
partnership.
Thompson,
14
Wis. 2d at 277; Lange, 121 Wis. 2d at 605.
¶91
a
final
Once the values of these contributions are determined,
accounting
of
this
partnership
is
necessary
to
accurately determine each partner's interest in the partnership
from dissolution to liquidation.
accounting
should
take
partner's
contributions
into
that
Wis. Stat. § 178.19.
consideration
increased
partnership.
13
the
the
This
value
of
each
value
of
the
No.
¶92
or
2009AP438.pdr
In addition, because the question of whether wind-up
continuation
occurred
during
the
11
years
subsequent
to
dissolution is a question of fact on which there are material
disputes, the circuit court should hold a fact finding hearing
and then revisit its prior determination in regard to whether
wind-up or continuation occurred.
¶93
As
aforementioned,
summary
judgment
is
appropriate
only when there is no disputed genuine issue of material fact,
and a court is not to find issues of fact on summary judgment.
Preloznik, 113 Wis. 2d at 116.
Rather, the court's job is to
determine "only whether a factual issue exists, resolving doubts
in that regard against the party moving for summary judgment."
Id.
¶94
First, there is no denying that whether PressEnter was
in wind-up or continuation for 11 years is a genuine issue of
fact.
As the law set forth above underscores, this often is a
threshold determination.
Consequently, one issue on remand is
whether the wind-up/continuation determination was disputed at
the circuit court.
In other words, whether a factual dispute on
this issue existed.
¶95
the
In granting summary judgment in favor of Bushard at
January 23,
whether
2009
PressEnter
hearing,
was
in
the
circuit
continuation
or
court
found
wind-up
disputed based on the court's previous finding.
was
that
not
Specifically,
the court opined that it had previously "found specifically"
that PressEnter was in wind-up, not continuation.
circuit
court
did
not
identify
14
when
it
made
Although the
this
previous
No.
2009AP438.pdr
finding, assumedly the court is referring to its statement at
the November 21, 2008 hearing.
At that hearing, the court, in
its conclusion, stated:
The only issue I had, as I see it, before me is:
Given the fact this was a dissolution, that this is a
wind-up situation, that the surviving——there is not a
surviving partner situation.
This isn't where one
party died and the other partner survived and
continued the business.
The law is very clear. The law says the partner
who stays in the partnership during wind-up is not
entitled to compensation . . . .
So the Court finds that Mr. Reisman is not
entitled to any compensation for running the affairs
of the partnership while the partnership is in wind-up
status.
¶96
Given that the November 21 hearing was a hearing on
summary judgment, it would have been improper for the circuit
court to make findings of fact.
Rather, the court is to decide
whether factual issues actually exist.
at 116.
whether
Preloznik, 113 Wis. 2d
At the November 21 hearing, the court did not decide
a
factual
issue
existed
regarding
the
status
of
PressEnter, namely, whether it was in wind-up or continuation.
Instead, at the November 21 hearing, the court seems to assume
that
PressEnter
is
in
wind-up.
However,
the
court
did
not
explain why it so assumes or cite to any evidence in the record
15
No.
proving that PressEnter was in wind-up.9
2009AP438.pdr
To the contrary, the
court saw "the only issue" as whether Reisman was entitled to
take a salary.
¶97
Moreover, my review of the record indicates that at
the time of the summary judgment hearings, the circuit court was
aware that PressEnter remained in operation from dissolution to
the time of the hearing, a period spanning more than nine years.
Moreover, the court knew that following the unsuccessful sale of
PressEnter to Voyager.net in September of 2009, Bushard stopped
participating in the partnership.
This included Bushard ceasing
any efforts to sell PressEnter to potential buyers.
¶98
The withdrawing partner can consent to continuation by
acquiescing
to
the
continuation
of
the
partnership
or
can
impliedly consent by acting inconsistent with a desire to windup the partnership's business
and
liquidate
its
assets.
I,
therefore, conclude that there were enough facts presented to
the
circuit
court
to
create
a
genuine
issue
of
fact
as
to
whether PressEnter was in wind-up or continuation, i.e., whether
Bushard
had
consented
to
continuation.
Therefore,
summary
judgment should not have been granted.
9
I acknowledge that there was some indication by both
parties at the November 21 hearing that they thought PressEnter
was in wind-up. See supra ¶71 & n.5. However, an entire review
of the November 21 transcript shows that the issue being
discussed was whether Reisman was entitled to take a salary in
addition to his share of the profits. Neither party focuses on
the threshold issue of whether PressEnter was in wind-up or
continuation.
16
No.
III.
¶99
2009AP438.pdr
CONCLUSION
In conclusion, it is undisputed that Bushard worked
for PressEnter for only seven days during the 11-year period
subsequent to his giving notice of dissolution.
Reisman worked
on a full-time basis for PressEnter during those 11 years.
I
conclude that Wis. Stat. § 178.15(1) permits consideration of
the 11 years of service that Reisman provided to PressEnter as a
contribution
from
Moreover,
conclude
I
him
to
the
value
of
that
Wis.
Stat.
§ 178.19
accounting to determine
the
interest
of
the
each
partnership.
requires
partner
in
an
the
partnership prior to liquidation so that it may be determined
what part of the profits earned after dissolution are due to the
use of each partner's contribution to the partnership.
the
considerations
partnership
thereof
was
for
in
the
11
above
are
wind-up,
years
not
driven
continuation
subsequent
to
or
by
Although
whether
some
the
combination
Bushard's
notice
of
dissolution, the determination of whether it took 11 years for a
wind-up or whether Bushard acquiesced to continuation when the
sale to Voyager.net did not materialize is a fact question that
cannot be determined on summary judgment.
remand
for
an
specifically,
accounting
an
of
accounting
what
that
is
will
Accordingly, I would
due
to
each
partner,
the
relative
consider
contributions of each partner to the partnership, in light of
Thompson.
I also conclude that whether PressEnter was in wind-
up or continuation for the 11 years subsequent to dissolution
rests on disputes of material fact and accordingly, it should
not
have
been
decided
on
summary
17
judgment.
On
remand,
the
No.
2009AP438.pdr
circuit court should hold an evidentiary hearing and revisit its
conclusion
that
PressEnter
was
Accordingly, I respectfully dissent.
18
in
wind-up
for
11
years.
No.
1
2009AP438.pdr
]]>
