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Cheves v. Williams, 993 P.2d 191, 377 Utah Adv. Rep. 12, 1999 UT 86

Facts

Lee Cheves and David R. Williams formed a partnership in 1962 to operate a communications business called Industrial Communications. Over the years, they expanded their operations and established several corporations using partnership assets. In 1987, Cheves signed articles of incorporation for Industrial Communications, Inc., but no partnership assets were formally transferred to the corporation. Cheves left the partnership in 1990 and requested an accounting in 1991, leading to the current legal action.

Cheves left Industrial Communications in September 1990. He requested a formal accounting of the partnership by letter on March 14, 1991. Cheves filed the current action on April 15, 1991.

Issue

The main legal issues included whether the partnership was dissolved upon the incorporation of Industrial Communications, Inc., whether Cheves was entitled to an accounting, and whether prejudgment interest should be awarded.

Williams raises numerous issues on appeal. First, Williams asserts that the trial court erred in instructing the jury concerning the application of Utah Code Ann. § 78–12–35 (1987) and the discovery rule to toll the statutes of limitations on Cheves' partnership causes of action and erred in accepting the jury's verdict on those issues where the statutes of limitations had in fact run.

Rule

The court applied the legal principles regarding partnership dissolution, emphasizing that incorporation alone does not automatically dissolve a partnership unless there is clear intent from the partners to do so.

To determine whether Industrial Communications dissolved as a matter of law upon the filing of articles of incorporation for a similarly named corporation, we begin by looking at our statutes governing partnerships.

Analysis

The court analyzed the evidence presented at trial, noting that the jury had sufficient grounds to conclude that the partnership continued to exist despite the incorporation of Industrial Communications, Inc. The court also addressed the issue of prejudgment interest, determining that the trial court had erred in awarding it based on the jury's monetary damages.

The evidence in this case is in dispute as to what the parties intended upon incorporation. Williams testified that he and Cheves were never business partners and thus that there was no partnership to dissolve. Alternatively, he asserted that the partnership was dissolved upon incorporation of Industrial Communications, Inc., and Cheves' acceptance of a twenty percent interest in the corporation.

Conclusion

The Supreme Court affirmed the jury's finding of the partnership's existence and the award of $900,000 to Cheves, but reversed the award of prejudgment interest and clarified the legal standards regarding partnership dissolution.

We therefore conclude that Instructions 18 and 19 sufficiently set forth the correct legal principles, for this case, concerning incorporation and dissolution of a partnership.

Who won?

Lee Cheves prevailed in the case, as the jury found in his favor regarding the existence of the partnership and awarded him damages for his interest in the partnership.

The jury returned a Special Verdict Form on February 16, 1995, in which the jury found: that Cheves and Williams were partners in Industrial Communications; that Cheves' claims were not barred by any statute of limitations, laches, estoppel, failure of consideration or waiver; that the partnership included the assets of General Broadcasting, Inc., General Telcourier, Inc., Utah Telcourier, Inc., and Intermountain Broadcasting, Inc.; and that Cheves should receive $900,000 for his interest in the partnership.

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