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Clevenger v. Rehn

2003 WL 718412 (Neb.App.)

NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT.R. OF PRACT. 2E.


Court of Appeals of Nebraska.
Sandra K. CLEVENGER, Appellee and Cross-Appellant,

v.

Vicky L. REHN, Appellant and Cross-Appellee.


Mar. 4, 2003.
SIEVERS and INBODY, Judges.
SIEVERS, Judge.
Sandra K. Clevenger brought suit against Vicky L. Rehn, seeking dissolution of their partnership, an accounting, and damages, and Rehn counterclaimed for the same. The district court for Red Willow County, Nebraska, entered judgment in favor of Clevenger and against Rehn in the amount of $9,468, finding that their partnership "effectively terminated" on February 19, 1999, and that Rehn continued the business thereafter as a sole proprietorship. The trial court's judgment was based on Clevenger's accountant's opinion of the value of the parties' capital accounts at the end of February 1999. Rehn appeals, and we reverse, because while the partnership dissolved in February, it was not wound up or terminated until later.
FACTUAL BACKGROUND
In early to mid-August 1998, Clevenger and Rehn, who are sisters, began work on opening an antique shop in McCook, Nebraska, which shop would include a "lunchroom" or "tearoom." They decided to form an equal partnership, sharing "equal responsibilities [and] equal profits" in a business called The Porcelain Rose Tearoom (Porcelain Rose). While they prepared a written "Partnership Agreement," it was never signed by either party.
By the end of August 1998, Clevenger and Rehn started attending antique auctions and craft fairs in order to buy supplies and inventory for the Porcelain Rose. Around this same time period, the parties also opened a Porcelain Rose bank account at AmFirst National Bank (bank) in McCook. Clevenger initially contributed $300 to the account, and Rehn contributed $230. Expenses started to mount, so Clevenger decided to cash in an IRA worth approximately $5,000, and she deposited the entire amount in the Porcelain Rose account.
On November 15, 1998, Clevenger and Rehn entered into an agreement for a lease until mid-August of the following year with McCook Townhouse, Inc. (Townhouse). Clevenger and Rehn agreed to rent two small rooms on the main floor of the Townhouse building for their business. The front room was the sales room, where the parties sold homemade crafts, figurines, woodwork, gifts, baskets, and antiques, and the back room was where the parties provided "two dinner hours a day five days a week" in a room with four tables for four people each.
In addition to purchasing inventory for the business, the parties contributed some of their own antiques and crafts. Clevenger also provided utensils, pans, and cookbooks, and she purchased a deep freeze, a buffet, a kitchen sink, faucets, and other miscellaneous items for the kitchen out of her own personal bank account. On February 2, 1999, the sales portion of the Porcelain Rose opened. A little over a week later, on February 11, the parties realized that they were going to have to borrow some money in order to continue operating the business, so they jointly borrowed $5,034 from the bank, and the bank deposited the entire amount in the Porcelain Rose account.
On February 16, 1999, the tearoom section of the Porcelain Rose opened. Approximately 2 days later, on February 18, Clevenger and Rehn got into an argument at the shop regarding who was going to be the cook and who was going to be the "out front" person dealing with the customers. Clevenger, "rather than fight with [Rehn] in front of the customers," walked out of the kitchen on two separate occasions that day to have "a couple of cigarettes" and to "cool off." Clevenger testified that after work, she went home and talked with her husband about getting out of the partnership altogether.
The next day, on February 19, 1999, when Clevenger came back to work at approximately 8:30 a.m., both parties were still upset about the previous day's argument, so Clevenger decided to leave and stated to Rehn, "I'm going home." Clevenger testified that as she left, she took her cookbooks, the master inventory sheet, and her smokeless ashtray. Rehn testified that Clevenger did not come back that day, so Rehn and a waitress at the Porcelain Rose served lunch.
Rehn testified that during the day on which Clevenger walked out, the wind was blowing "really hard," and it blew the front door of the shop back and into an antique trunk situated at the front of the store. This caused the key, which was in the door, to snap off. Rehn and her husband subsequently replaced the locks that evening. Clevenger testified that later on that night, she returned to the shop and found that the locks had been changed and that she could not obtain entry into the store. Clevenger testified that on February 21, 1999, she came back to the store with her husband to obtain various store receipts and to ask for a key. Rehn denied that Clevenger asked for a key on that day or any other. Clevenger also testified that she intended on returning to work after she left on February 19, because she "had an interest in the business." This testimony is apparently designed to assign some sort of "blame" for Clevenger's departure from the Porcelain Rose.
On February 22, 1999, Rehn closed the Porcelain Rose bank account and transferred the entire balance, $3,096.83, to her personal account to prevent Clevenger from incurring any additional liabilities. A few days later, Rehn transferred the entire balance to a new Porcelain Rose account. Around this same time period, Clevenger and Rehn attempted to resolve their differences regarding the partnership. Both parties obtained legal representation, and after initial negotiations, a meeting was held with both parties and their counsel. While some of Clevenger's personal items were returned to her at this meeting, the record reflects that a resolution which would equate to a termination of the partnership was not obtained. Clevenger also testified that she received a letter from Rehn around this same time period, wherein Rehn offered to buy out Clevenger's portion of the business; however, nothing resulted from it.
On April 29, 1999, Clevenger received by mail a letter entitled "Statement of Dissolution," which stated in pertinent part:
Vickie [sic] Rehn, a partner in The Porcelain Rose, a general partnership consisting of Vickie [sic] Rehn, Murray Rehn and Sandra Clevenger, with its place of business in Red Willow County, Nebraska, hereby makes this statement of dissolution and confirms that the aforementioned partnership dissolved effective February 19, 1999, and is winding up its business.
The letter was signed by Rehn and dated April 29, 1999. A day later, on April 30, a "Notice" was published in the McCook Gazette newspaper, which stated:
Notice To Whom It May Concern: Vicky Rehn and Sandra Clevenger ceased operating The Porcelain Rose Tea Room as Partnership effective 2/19/99.

The Porcelain Rose Tea Room has been operated as a sole proprietorship by Vicky Rehn since that date. Sandra Clevenger has no authority to act on behalf of Vicky Rehn DBA The Porcelain Rose Tea Room effective 2/19/99.


Rehn testified that the notice in the newspaper was placed on the advice of her attorney to protect her from Clevenger's buying items on the business account. As will be detailed later, under partnership law, the two documents are inconsistent with each other. Approximately a month later, on May 31, 1999, Rehn shut down the Porcelain Rose and transported most of the shop inventory to her garage for storage, where it remained as of the trial date. Some of the fixtures apparently remain at the Townhouse building.
LAWSUIT AND TRIAL
On November 4, 1999, Clevenger filed a petition in the Red Willow County District Court seeking (1) dissolution of the Porcelain Rose partnership; (2) payment equal to Clevenger's capital contribution to the partnership; (3) one- half share of all partnership profits and inventory; (4) an accounting of all dealings and transactions of the partnership; and (5) sale of any remaining partnership property, with the proceeds to be divided equally between the parties. Rehn answered and counterclaimed for essentially the same relief.
Trial was had on August 11, 2000. Clevenger testified that after she walked out of the store on February 19, 1999, she had absolutely no involvement in the Porcelain Rose; she paid no bills, sold no merchandise, purchased no inventory, obtained no profits, and withdrew no money from the business account, but she felt she still had an interest in the Porcelain Rose. She also testified that Rehn solely retained the entire shop inventory after February 19, and therefore Clevenger should be entitled to approximately $10,000 after the dissolution and termination of the partnership.
Robert C. McChesney, a certified public accountant, testified on behalf of Clevenger. McChesney stated that on February 28, 1999, the total asset value of the Porcelain Rose was $20,803, of which $17,550 was in supplies and inventory, and the balance was cash in the bank. McChesney further stated that Clevenger's equity in the partnership as of that date was $9,468 and that Rehn's was $6,335. McChesney made a special point of making it clear that he was not opining that Rehn should pay Clevenger $9,468--which incidentally is the amount of the trial court's judgment in Clevenger's favor against Rehn. On cross- examination, McChesney testified that his totals did not take into consideration any "winding up" of the partnership. McChesney's valuation came from his review of materials provided by the parties and their attorneys, and he cut off the valuation as of the end of February and did not take into consideration what happened thereafter with the business.
Rehn testified that she did not think that Clevenger permanently left the business partnership on February 19, 1999. Rehn stated, "I didn't think that [Clevenger] could walk away from it. We had a loan, we had bills, we had insurance, we had inventory, [and] we had food that was perishable."
On cross-examination, Rehn testified that after February 19, 1999, she continued serving meals, ordered more inventory, and continued to make merchandise sales for the Porcelain Rose. She further testified that she obtained the assistance of her cousin and another sister to help run the shop. Rehn continued to pay rent as well as make the monthly loan payments to the bank. Her undisputed evidence was that she had reduced the loan balance from $5,000 in February to $2,748 as of the date of trial, August 11, 2000.
Ron Smith, a certified public accountant, testified on behalf of Rehn. Smith's valuation used many of the same documents as did McChesney, as well as the valuation prepared by McChesney, but he ran his calculation out to August 31, 1999, the end of the partnership's first fiscal year, even though no business had been conducted after May 31. In Smith's testimony, Rehn's capital account in the partnership was $4,695, whereas Clevenger's capital account was a negative $3,016. Smith testified that he took into consideration the cost of goods and sales and that his capital account figures included the contributions of the parties as well as the "statement of revenues and expenses," which revealed that for the fiscal year ending August 31, the Porcelain Rose lost $19,640. McChesney did not address whether the partnership was making or losing money.
On October 5, 2000, the trial court made the following orders and findings:

1. [Clevenger] and [Rehn] formed a partnership known as the "Porcelain Rose." [Clevenger] and [Rehn] each contributed time and property to the partnership. [Clevenger] also contributed monies consisting of a few hundred dollars and an additional $5,000.00 from an I.R.A. [Rehn] contributed a few hundred dollars and the parties obtained a loan of $5,000.00 from the AmFirst Bank.

2. The parties opened for business on February 2, 1999 and on February 19, 1999, [Clevenger] walked out of the business effectively terminating the partnership. [Rehn] continued to operate the business until 5/31/99 and closed the business on that date.

3. [Rehn] published a notice of the partnership termination, showing that the partnership terminated on 2/19/99 and was operated as a sole proprietorship since that date (see Ex. 5).

4. The other evidence presented shows that [Rehn] continued to produce food items and inventory for resale after 2/19/99 and the court is convinced that [Rehn] intended to operate the business as a sole proprietorship and not just wind down the affairs of a business that ran only for a short period of time.

5. The court finds based upon the evidence that the partnership terminated as of 2/19/99 and that is the date to be used for determining each part[y's] share.

6. The expert for [Clevenger] valued the business as of 2/19/99, the expert for [Rehn] valued the business as of 8/31/99, a date that appears to have little, if any, relevance to any significant date for [Clevenger] or [Rehn].

7. The court finds, based upon the evidence presented, that the partnership should be valued at the date of 2/19/99 and the partnership's shares determined as of that date.

8. [Clevenger]'s expert did just that and in his opinion the value of [Clevenger]'s interest as of 2/19/99 was $9,468.00.

9. The court enters judgment in favor of [Clevenger] and against [Rehn] in the amount of $9,468.00 plus interest at the rate of 7.241% per annum until paid in full. The costs of the action are taxed to [Rehn]. The court orders each party to pay his or her own attorney fees.



Rehn timely appealed. On January 19, 2001, because the order was not final, we dismissed that appeal for lack of jurisdiction pursuant to Neb. Ct. R. of Prac. 7A(2) (rev.2000). On June 4, the Red Willow County District Court and counsel got together in response to our mandate, and the record of those proceedings shows that both counsel were of the view that the trial court's failure to deal with the outstanding debt, given that an accounting had been prayed for, was the reason we had found that its order was not final. By agreement of counsel, the record reveals that the $2,748 owing to the bank at the time of trial had been fully paid by June 4--50 percent by each party-- after the bank sued them. Counsel agreed that the court could respond to our dismissal and remand by entering an order that "each party pay one-half of the outstanding [bank] indebtedness as of the trial date, that being August 11, 2000."
Rehn appealed. Clevenger cross-appealed, assigning error to the order we have just quoted, on the basis that half of the loan balance to the bank should have been added on to Clevenger's judgment against Rehn--a claim never mentioned to the district court on June 4, 2001.
ASSIGNMENTS OF ERROR
Rehn asserts, summarized and restated, that the district court abused its discretion in (1) finding that the business partnership between Clevenger and Rehn in the Porcelain Rose "terminated" on February 19, 1999, (2) finding that Rehn intended to operate the Porcelain Rose as a sole proprietorship after February 19, (3) misapplying existing statutory business partnership law, (4) determining Clevenger's financial interest in the partnership was $9,468 and awarding her that amount, and (5) using August 11, 2000, as opposed to the date of the termination of the partnership or the date of the winding up of the business affairs as the date from which each party should be responsible for one-half of the bank debt.
STANDARD OF REVIEW
An action for the dissolution of a partnership and an accounting between partners is one in equity and is reviewed by the appellate courts de novo on the record. Badran v. Bertrand, 214 Neb. 413, 334 N.W.2d 184 (1983); Bass v. Dalton, 213 Neb. 360, 329 N.W.2d 115 (1983). In an appeal of an equitable action, we try factual questions de novo on the record, reaching a conclusion independent of the findings of the district court. Bowers v. Dougherty, 260 Neb. 74, 615 N.W.2d 449 (2000). However, where credible evidence is in conflict on a material issue of fact, we will consider and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another. Id.
ANALYSIS

When Did Porcelain Rose Partnership "Terminate"?
In Rehn's first four assignments of error, she argues that the trial court erred in finding that the general partnership between Clevenger and Rehn in the Porcelain Rose "terminated" on February 19, 1999. Specifically, Rehn asserts that after Clevenger left the store on February 19, the Porcelain Rose partnership dissolved; however, the partnership was not terminated until the "winding up" of the partnership affairs was completed. After our de novo review, we agree. Our reasoning follows.
Partnerships are formed by the mutual agreement of all partners, and may be altered, modified, or dissolved by like agreement. 59A Am.Jur.2d Partnership § 823 (1987). See, e.g., Essay v. Essay, 175 Neb. 689, 123 N.W.2d 20 (1963), modified on denial of rehearing 175 Neb. 730, 123 N.W.2d 648. In the present case, Clevenger and Rehn orally agreed to form the Porcelain Rose as an equal partnership in which they would each work, and they would share equally.
The first step in the analysis of this case involves the dissolution of the Porcelain Rose. Under Nebraska law, the term "dissolution" does not signify the end of a partnership's legal existence. Essay v. Essay, supra. Dissolution, according to Neb.Rev.Stat. § 67-329 (Reissue 1996), is simply a change in the relationship of the partners "caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business." This is clearly an apt description of the Clevenger's departure from the Porcelain Rose, regardless of reason or fault, and we do not need to fix blame for this situation in order to decide the case. Upon dissolution, the partnership is not terminated but continues until the winding up of partnership affairs is completed. Essay v. Essay, supra. See, also, Bass v. Dalton, 218 Neb. 379, 381, 355 N.W.2d 225, 227 (1984) ("dissolution of a partnership is but a preparatory step to its termination; a partnership continues after dissolution.") Neb.Rev.Stat. § 67-331 (Reissue 1996) of the Uniform Partnership Act (UPA), as enacted in Nebraska, provides the following: "Dissolution [of a partnership] is caused: (1) Without violation of the agreement between the partners ... (b) By the express will of any partner when no definite term or particular undertaking is specified ....)"
The evidence reveals that there was no definite term or particular undertaking specified in the oral partnership agreement, or even in the unsigned written agreement, which would have restricted either Clevenger or Rehn from dissolving the partnership at will. Therefore, based upon our de novo review, and using the uncontroverted facts of this case, the partnership between Clevenger and Rehn in the Porcelain Rose dissolved on February 19, 1999.
We find that after February 19, 1999, Clevenger ceased to be associated with the business and did not carry her share of the workload as she had agreed to do. Thus, there was a change in the relationship of the partners, which in legal terms is a dissolution.
One of the keys to this appeal is the fact the terms "dissolution," "winding up," and "termination," as employed by the Nebraska UPA, are not synonyms and have different meanings. See Walker v. Walker, 854 F.Supp. 1443 (D.Neb.1994). Dissolution neither terminates the partnership nor completely ends the authority of the partners. See Essay v. Essay, supra. The order of events to end a partnership as a business entity is (1) dissolution, (2) winding up, and (3) termination. See Centerre Bank of Kansas City v. Angle, 976 S.W.2d 608 (Mo.App.1998). It is not until "termination," after the "winding up" of the partnership is completed, that the partnership's legal existence ends and authority of the partners is extinguished. See id. Therefore, the trial court's finding that the partnership was "effectively terminated" on February 19, 1999, does not accurately reflect partnership law, because there was simply no evidence that the partnership was also wound up on that date. In fact, the evidence shows that the two parties got together with their attorneys several weeks after Clevenger's departure and tried to resolve the outstanding issues (i .e., wind up), but they were unsuccessful.
The Nebraska UPA refers to "winding up" in several sections, but neither Nebraska case law nor the Nebraska UPA defines the term "winding up" of partnership affairs; but it is a concept which we think largely "speaks for itself." Winding up is the process by which the business affairs of the partnership are brought to an end, which would involve such things as paying creditors, collecting accounts payable, disposing of inventory and the property used in the business, including converting such to cash and then dividing any remaining property or cash among the partners, or if there were no equity, arranging for the payment of the debts of the partnership. See, Centerre Bank of Kansas City v. Angle, supra; Ben-Dashan v. Plitt, 58 A.D.2d 244, 396 N.Y.S.2d 542 (1977); Horton, Davis & McCaleb v. Howe, 85 Ill.App.3d 970, 407 N.E.2d 766, 41 Ill.Dec. 268 (1980). All of these things needed to be done when Clevenger left on February 19, 1999. The district court's decision fails to recognize this reality. Because the record reveals, and our holding confirms, that the Porcelain Rose partnership dissolved on February 19, under Nebraska law, both Clevenger and Rehn were entitled to an accounting at that time. See, Neb.Rev.Stat. § 67-343 (Reissue 1996); Walker v. Walker, supra. Obviously, resort to the court for such accounting occurs when the parties cannot do on their own what the law requires to be done to end the legal entity that is a partnership.
It appears that Clevenger was of the mistaken impression that if she "bowed out" of the business, that Rehn would simply "buy her out" as of February 19, 1999, when Clevenger "quit" the Porcelain Rose partnership. However, the winding up of a partnership is not that simple, unless the remaining partner agrees to such, which did not happen. Moreover, it appears to us that the trial judge's decision rests in no small part on the notice published in late April, in which Rehn said that as of February 19, she was operating the Porcelain Rose as a sole proprietorship. But, in the notice sent to Clevenger at the same time, Rehn said she was winding up. But, again, a partnership does not terminate (and convert into another legal entity such as a sole proprietorship) unless it has first been wound up and terminated. Thus, the notice of April 30 was of no real meaning unless the Porcelain Rose partnership had been wound up, which it obviously had not. To the extent that Rehn thought the business was now hers, that notion was as faulty as Clevenger's thought that if she abandoned the enterprise, Rehn would have to "buy her out." By the time of trial, Rehn's testimony was that she was winding up during the time after February 19 until the closing on May 31. At trial, Rehn made no claim that the business was being operated as a sole proprietorship after February 19. The fact that after February 19, Rehn purchased more inventory and food supplies for the store, continued merchandise sales, obtained the help of her cousin and her sister to assist, including serving meals, is simply evidence that the business had not terminated, and we take it simply as evidence of the windup process. Admittedly, she changed the locks on the business and created a new business bank account and transferred funds to it from the old partnership account, but these things to us simply show that Rehn (as is likewise true of Clevenger) was unaware of the legal ramifications of the entity which the parties created and did not know how to legally end what the parties had started. Rehn closed the Porcelain Rose on May 31, and the remaining inventory of the partnership ended up in her garage--where it remained as of the time of trial. The trial court's decision fails to expressly resolve the question of the disposition of the inventory, although by implication, we suspect that the judge intended that it be awarded to Rehn.
There is no set period of time within which a winding up must be accomplished. See Schoeller v. Schoeller, 497 S.W.2d 860, 867 (Mo.App.1973) ("dissolved partnerships may continue in business for a short, long or indefinite period of time, so long as the rights of creditors are not jeopardized and so long as none of the partners insist on a winding up and final termination of the partnership business"). In Centerre Bank of Kansas City v. Angle, 976 S.W.2d 608 (Mo.App.1998), the plaintiff also brought an action, inter alia, for dissolution of a partnership and an accounting. The Missouri Court of Appeals stated: "Where ... the partnership business was wound up rather than continued, then each partner's net interest is determined upon the winding up of the partnership and 'the accounting must encompass the life of the partnership down to and including the winding up of the business.' " (Emphasis supplied.) 976 S.W.2d at 618-19 (quoting Stein v. Jung, 492 S.W .2d 139 (Mo.App.1973)).
In the instant case, the trial judge based his decision on the testimony of McChesney (Clevenger's certified public accountant) that as of the end of February 1999, the parties' equity was $9,468 for Clevenger and $6,335 for Rehn. But, these figures have no meaning if the partnership had not been wound up then. Having concluded that the trial court's finding that the partnership was terminated as of February 19 was wrong, we obviously reject the use of McChesney's accounting. Thus, we turn to the testimony of Rehn's accountant Smith, and we recall that Smith relied on essentially the same "pile of paper" generated by the parties as did McChesney, albeit it was updated to reflect what happened after Clevenger left.
We point out that we have no illusion, nor should the parties, that "perfect justice and equity" will be accomplished here. We are constrained by a confusing record, the nature of this small business which was a family partnership (which has now resulted in two sisters no longer speaking to each other, despite living within several houses of each other), and the less than precise nature of the records, as well as highly uncertain valuations of numerous miscellaneous small items of merchandise brought by the parties into the business or purchased for use in it. Finally, while two accountants testified, and it is clear that they each prepared a written report, their reports were not offered in evidence, and we are somewhat handicapped by their absence. Nonetheless, by using our powers of de novo review in an equitable case, we believe the case can be resolved.
The trial court was critical of Smith's valuations, saying that his date of August 31, 1999, had "little, if any, relevance to any significant date" for either party. We disagree. Smith said that he ran his calculation out to this date because it was the end of the partnership's first fiscal year, explaining that he did so even though nothing really happened after the business closed for good on May 31. We find this makes perfect sense, given that the parties were never able to wind up the partnership or properly accomplish (e .g., by agreement as part of a wind up) a conversion of the business to a sole proprietorship, even though Rehn might have mistakenly thought she had done so, or used that term upon the advice of her former counsel.
Because Smith's final figures are unchallenged by Clevenger (other than being on an irrelevant date), we need not detail his methodology, except that we understand his testimony to be that he used much of the same data as did McChesney, but Smith factored in the expenses and receipts for March, April, and May, 1999, and he produced and relied upon a "statement of revenues and losses"--showing a loss of $19,640. Unless the partnership was dissolved, wound up, and terminated on February 19, 1999, this is a loss which the parties must share and Clevenger cannot avoid. The trial court's judgment in favor of Clevenger ignores this fundamental principle of partnerships by finding that the Porcelain Rose partnership was "effectively terminated" on February 19, a finding that of necessity means that the trial judge concluded that there had been a winding up on that date--a finding which is completely at odds with the record.
Clearly, both Clevenger and Rehn requested a judicial accounting. Pursuant to Neb.Rev.Stat. § 67-337 (Reissue 1996), the parties to a partnership may obtain an accounting by the court. The trial court, in this case, rendered only a monetary judgment, said nothing about an accounting, and did not deal with whether the remaining inventory should be sold, and if so, how and what should be done with the proceeds.
OUR ACCOUNTING
Smith puts Clevenger's capital account at a negative $3,016 and Rehn's at a positive $4,695 as of August 31, 1999, which accounting we assume reflects the loss the partnership ultimately incurred, the inventory and fixtures remaining in Rehn's possession, and the fact that at the outset, the parties made disparate contributions. We are forced to make such assumptions because both Smith and McChesney testified to conclusionary capital account figures without objection and without any offer into evidence of their reports. To complete the accounting, we must add the two capital accounts together, which produces a positive $1,679 ($4,695 minus a negative $3,016). Clevenger testified that "it was going to be a partnership, an equal partnership, with equal responsibilities, equal profits. The whole thing, it was split in half." Thus, we split "it" in half and treat both parties equally. Thus, there is a positive $1,679 left, which presumably is represented by the inventory and fixtures, meaning that in this equal partnership, each party is entitled to $839.50--but only in theory. There is no money left in the partnership, and they agreed to share profits, and losses, equally. Any money must come from either the conversion of the fixtures and the inventory to cash, an agreed-upon division of the property, or a forced liquidation under the supervision of the court. In settling upon our resolution of this case, we recall the holdings of Janke v. Chace, 1 Neb.App. 114, 115, 487 N.W.2d 301, 302 (1992):
Where a situation exists which is contrary to the principles of equity and which can be redressed within the scope of judicial action, a court of equity will devise a remedy to meet the situation....

*10 A court of equity which has acquired jurisdiction of a matter for any purpose will retain jurisdiction for the purpose of administering complete relief with respect to the subject matter....

Equity looks through forms to substance; a court of equity goes to the root of a matter and is not deterred by forms....



Where a court dealing in equity has property or money under its jurisdiction, it has power to appropriately direct its application in order to carry out justice.
Thus, in keeping with the teachings of Janke v. Chace, supra, we devise a remedy which follows. First, we reverse the trial court's judgment because it does not reflect partnership law or the evidence. Next, the inventory in Rehn's garage and the fixtures at the Townhouse building, where space was leased for the business and where some items still remain, shall be disposed of by sale-- relief both parties requested and which was unaddressed by the district court either at trial or upon remand.
Recognizing the reality that this failed small business partnership is "broke," we provide that if within 30 days of our mandate, the parties have agreed upon, and completed, a division of the inventory and other property on their own and have filed mutual satisfactions of judgment, the sale shall not occur. See Parker v. Parker, 1 Neb.App. 187, 492 N.W.2d 50 (1992) (discussing remedy of forced disposition of married couple's antiques versus voluntary resolution after mandate). But, if the parties have not completely resolved the disposition of the inventory and fixtures between themselves within the time given and filed mutual satisfactions of judgment, then the trial court shall within 10 days appoint an appropriate special master, who shall collect the property and sell it at open auction within 75 days of our mandate, upon the typical conditions determined by the master for the sale and disposal of personal property, such as in estate sales of household goods. The parties may buy anything they wish at the auction, but only under the advertised conditions of sale.
The master shall within 14 days of the sale file his or her written accounting of the costs of sale, the fees the master proposes to charge, and the remaining balance of sale proceeds, if any, which shall be applied to the taxable court costs of this action to wind up the partnership (which shall not include attorney fees for either party), after which the remaining balance, if any, of the proceeds shall be paid over in equal shares to the parties, for which they shall each file a satisfaction of judgment.
Bank Debt and Counterclaim.
After we dismissed this case for lack of jurisdiction on June 4, 2001, the trial court upon remand and with the agreement of the parties ordered Clevenger and Rehn to pay one-half of the outstanding bank indebtedness as of August 11, 2000. Rehn now asserts in her appeal that the district court erred in using August 11, 2000, as the date to determine the split of the debt, arguing that February 19, 1999, is the more appropriate date.
Clevenger, on the other hand, argues that the bank loan had already been subtracted from the value of the partnership assets to compute the value of Clevenger's partnership share in McChesney's accounting adopted by the trial court. Specifically, Clevenger contends that the trial court erred by accepting that portion of McChesney's partnership valuation as of February 19, 1999, which subtracted the loan balance from the partnership assets, and then later ordering Clevenger to pay half of the debt.
We find that the trial court did not err in its order of June 6, 2001, that each party pay half of the debt, because the record establishes that by the time of the remand, suit had been filed on the parties' promissory note at the bank and that at the time of the trial court's hearing after our dismissal of the first appeal, each party had paid half of the outstanding indebtedness which had been reduced to judgment--the principal amount of which had not changed since the trial in this case. Thus, the trial court's order had the effect of ordering the parties to do what they had already done and was a meaningless order, since there was then no debt because they had each paid one- half of it. In an equal partnership, such payment has no effect on the final accounting or outcome. Accordingly, we reverse the order of January 25, 2001. We note that the testimony of the certified public accountant Smith in valuing the parties' capital accounts, which testimony we used in our resolution of this matter, had already taken into account the payments made by Rehn on the promissory note after Clevenger departed.
CONCLUSION
For the reasons set forth above, after our de novo review, we hold that the Porcelain Rose partnership did not dissolve, wind up, and terminate on February 19, 1999, as found by the district court. We reverse the judgment in favor of Clevenger and against Rehn in the amount of $9,468. The remaining partnership property must be disposed of before this accounting can be completed, which must happen to complete the wind up and bring about termination of this partnership. The proceeds of such liquidation shall be used as we detailed above. We also reverse the trial court's order requiring each party to pay one- half of the outstanding bank indebtedness, understanding that under the facts, such order is unnecessary and meaningless. That said, the matter is remanded to the district court for further proceedings in accordance with our opinion.
REVERSED AND REMANDED WITH DIRECTIONS.
HANNON, Judge, participating on briefs.




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