Patrick Schaffer, et al., Respondents,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A22-1393

Patrick Schaffer, et al.,
Respondents,

vs.

Curt Haler, et al.,
Appellants,

Vermillion Acres, LLC, et al.,
Defendants.

Filed March 13, 2023
Affirmed
Connolly, Judge

Dakota County District Court
File No. 19HA-CV-17-3360

Cory A. Genelin, Jonathan M. Janssen, Gislason & Hunter LLP, Mankato, Minnesota (for
respondents)

John P. Boyle, Bryant D. Tchida, Justin S. Boschwitz, Moss & Barnett, P.A., Minneapolis,
Minnesota (for appellants)

Considered and decided by Connolly, Presiding Judge; Jesson, Judge; and Slieter,
Judge.

2
NONPRECEDENTIAL OPINION
CONNOLLY, Judge
On appeal from judgment following a bifurcated trial on partnership-related claims,
appellants challenge the district court’s denial of their motion for a new trial, arguing that
the court erred in (1) allocating the partnership’s profits and losses; and (2) determining
the partnership property. We affirm.
FACTS
This case arises from a large-scale farming operation carried on between appellants
Curt Haler and Paul Beskau, and respondents Patrick Schaffer (P. Schaffer) and Wilbert
Schaffer (W. Schaffer). 1 Beskau and Haler have operated many businesses. Haler owns
appellant Vermillion Acres, LLC (VA), and both Haler and Beskau own Team Dairy, LLC;
Vermillion Cattle (VC); and Vermillion Prairie Park, LLC. Beskau once owned a company
called Empire House, LLC, owns appellant Ger-Bes Enterprises, L.L.P. (GBE) with his
wife, and owns appellant Beskau Farms, LLC (BF) with his mother. Beskau also formed
Beskau Properties, LLC with his mother and five brothers.
By the end of December 2007, Beskau had over $6 million in debt. In 2008,
Beskau’s bank called his note, and by the end of the crop year in 2008, no bank would
consider working with Beskau. In 2009, Beskau still had $2.7 million in debt, his farm
assets had been liquidated, and as of planting in 2009, he had a negative net worth.

1 P. Schaffer’s spouse Sarah Schaffer and W. Schaffer ’s spouse Carol Schaffer are also
respondents on this action. P. Schaffer and W. Schaffer are collectively referred to as “the
Schaffers,” and the Schaffers and their spouses are collectively referred to as
“respondents.”
3
Beskau was also barred from receiving payments from Farm Services Agency
(FSA) programs. Around the time the parties formed their business arrangement, GBE was
being audited by the FSA. The FSA accused GBE of a scheme against the government to
avoid FSA payment limitations and, after the audit was completed, the FSA required GBE
to pay back $130,000. Beskau’s financial position also had consequences for Haler
because GBE custom farmed for Haler and leased equipment to Haler. Because Haler
relied on GBE for equipment, Haler had no supplier of equipment.
In early 2009, Haler and Beskau discussed forming a business relationship with the
Schaffers. At the time, the Schaffers were aware of Beskau’s financial situation, which put
them on notice that Beskau had very little to contribute to any business arrangement. In
fact, as respondents point out, Beskau and Haler entered into the business arrangement
“with five pieces of equipment, $2.7 [million] in bad debt, $1.2 [million] in judgments, no
credit, a prohibition from working with the FSA, and in mental collapse.” But the
formation of a business relationship with Beskau and Haler would, among other things,
provide the Schaffers with more land to farm and, as P. Schaffer testified, the opportunity
to make additional profits.
The parties’ business relationship ended in 2016, after the Schaffers received an
anonymous letter from an employee who claimed that Beskau and Haler had been stealing
from the Schaffers for years. Respondents then brought this action against appellants,
asserting various claims. Appellants answered and counterclaimed, alleging that the
parties’ farming operation constituted a partnership. Appellants also asserted various
4
claims against respondents, including application for winding up and dissolution of the
partnership.
The case was bifurcated into two trial phases. The first phase (Trial I) was tried to
a jury on the issue of whether the farming operation between Haler, Beskau, and the
Schaffers constituted a general partnership. The jury returned a verdict concluding that a
partnership agreement existed, beginning in February 2009, and ending in September 2016.
The second phase (Trial II) was tried to the district court 2 on issues related to the
terms of the partnership agreement and the assets and liabilities of the partnership.
Following Trial II, the district court found:
This case presents an unusual legal challenge of the
highest order of complexity. The parties through their actions,
and more importantly inaction, have created what can be
charitably described as a legal “mess.” They engaged in a long
running relationship over approximately 7 ½ years, involving
the farming of 10,000 acres of land, generating millions of
dollars, with countless transactions involving the sale and lease
of land, the purchase, sale, and acquisition of personal
property, as well as distributions themselves, all without any
agreement or writing as to the terms of what they were doing.

The district court found that during initial discussions related to the formation of the
partnership, Beskau and Haler requested a yearly payout from the partnership of $95,000,
but ultimately agreed to receiving $72,000 per year from the partnership. And the district
court found no indication that Haler and Beskau received anything more than this amount
in the form of draw/wages. The district court determined that “[n]early eight years of

2 After Trial I, the case was assigned to a different district court judge, who presided over
Trial II.
5
performance is sufficient to establish an implied contract” between the partners, and that
Beskau and Haler “received $72,000 per year regardless of the profits or losses of the
Partnership.” The district court, therefore, ordered that Beskau and Haler “receive a
guaranteed return of $72,000 of Partnership profits per year, regardless of each year’s profit
or loss. Any amount not distributed to them shall be credited to their capital accounts.”
With respect to partnership contributions, the district court found that the “initial
contributions” of the Schaffers were “significantly larger” than Beskau and Haler’s. For
example, the district court found that the Schaffers contributed over $300,000 before the
partnership began, and over $4 million in 2009 alone. The district court also found that the
Schaffers contributed to the partnership, without compensation, the use of 1,451 acres of
farmland; their 488,00 0-bushel-capacity grain facilities; 133,512 square feet of shop,
office, and other facilities; and over $2.5 million worth of equipment. And the district
court found that the Schaffers purchased additional land, facilities, and equipment in their
names during the existence of the partnership, which they contributed to the partnership.
Conversely, the district court found that Beskau and Haler’s contributions to the
partnership were insignificant, as “Beskau lacked any significant assets to contribute,” and
Haler contributed only five pieces of equipment. In light of this disparity, the district court
determined that “[t]here was never any evidence, intent, or terms from the outset that this
be an ‘equal’ deal” because “[a]t its inception, the financial contributions ranged from
millions from the Schaffers to nothing from Beskau.”
In addition to their lack of tangible contributions to the partnership, the district court
found that, despite agreeing to provide an equal amount of labor to the partnership as
6
respondents, Beskau and Haler “did not work for the Partnership full time.” Instead,
Beskau and Haler “devoted themselves to ventures other than the Partnership,” including
five other businesses. The district court found that “[g]iven the wide disparity in
contributions and financial commitment, a finding of equality in ownership, liability for
losses, and rights to profits would be unfair.” The district court then ordered that the
Schaffers “would bear all risk of the Partnership’s losses,” and that Beskau and Haler’s
“failure to assume any risk from the Partnership is in part an equitable justification for the
unequal distributions that will arise from this ruling.”
The unequal distributions are also reflected by the district court’s determination that
“[t]he land, facilities, equipment, and improvements purchased by Haler, Beskau, and [the]
Schaffers during the Partnership period are not Partnership assets.” In making this
determination, the district court found that appellants cannot show that any of the “titled
equipment at issue” was purchased with partnership profits because the “record suggests
that these assets were purchased with [the] Schaffers’ personal debts.” The district court
also found that appellants cannot show that any of the land at issue was purchased with
partnership profits because the record suggests that the land was purchased with the
Schaffers’ personal debts, and there is “no indication on the title that any interest was taken
by” appellants, the Schaffers’ business Cedar Ridge Enterprises (CRE), or the partnership.
The district court concluded that “the objective behavior of all parties indicates that the
Partnership Agreement included an agreement that each partner was free to make personal
purchases of property without said property being Partnership property, even when that
property was used for Partnership purposes.” The district court then ordered that the
7
partnership owes (1) the “Schaffers for the rental value of their land, facilities, and
equipment in calculation of any Partners hip profit or loss,” and (2) “Haler for the rental
value of his equipment in calculation of any Partnership profit or loss.”
Finally, the district court found that the “Partnership had no debt other than the
Partnership’s debts to partners for their con tributions.” In so finding, the district court
rejected appellants’ claim that the Vermillion State Bank Line of Credit (VSBLOC) was
partnership debt because the VSBLOC existed before and after the partnership, was in the
names of all four respondents, and was secured by a mortgage over W. Schaffer and Carol
Schaffer’s land. The district court also found that respondents used the VSBLOC to cover
checks from their personal checking accounts for contributions to the partnership, as well
as for “snowmobiles, vacations, a cabin, donations to their church, and a loan to a family
member.” And the district court found that the VSBLOC was not acquired in the name of
the partnership and was never transferred to Beskau and Haler despite the Schaffers’
repeated invitations for Beskau and Haler to take liability for it. Thus, the district court
ordered that, because the “VSBLOC and other purchase money debts at issue in this matter
are the debts of [respondents] and not of the Partnership,” the partnership “capital account
. . . for the Schaffers should reflect the increase in their debt . . . over the term of the
Partnership for the contributions of cash made by [the] Schaffers.”
Appellants moved for amended findings and a new trial.
3 The district court denied
the motion, concluding that the order, consistent with the “purpose” of Trial II, “filled in

3 After the district court issued its order following Trial II, the presiding judge retired, and
the case was assigned to a third district court judge.
8
the blanks of the partnership agreement and [the] findings and conclusions are supported
by the evidence and are not contrary to law.” This appeal follows.
DECISION
Appellants challenge the denial of their motion for a new trial, arguing that the
district court erred in (1) allocating the profits and losses of the partnership, and (2)
determining the partnership property.4 “A district court may grant a new trial for errors of
law occurring at the trial or when the verdict is not justified by the evidence, or is contrary
to law.” Christie v. Estate of Christie, 911 N.W.2d 833, 838 (Minn. 2018) (quotations
omitted). We review a district court’s decision to grant or deny a motion for a new trial
for an abuse of discretion. Id. “A district court abuses its discretion by making findings
of fact that are unsupported by the evidence, misapplying the law, or delivering a decision
that is against logic and the facts on record.” Woosley v. Woosley, 975 N.W.2d 502, 506
(Minn. 2022) (quotation omitted). But when a district court exercises no discretion and
decides a motion for a new trial because of an error of law, a de novo standard of review
applies. Halla Nursery, Inc. v. Baumann-Furie & Co., 454 N.W.2d 905, 910 (Minn. 1990).
I.
In Minnesota, partnerships are governed by the Minnesota Uniform Partnership Act
(MUPA) of 1994. See Minn. Stat. §§ 323A.0101-.1203 (2022). Under MUPA, a
partnership is defined as “an association of two or more persons to carry on as co- owners

4 Appellants acknowledge that they have not challenged the district court’s denial of their
motion for amended findings. They have also not argued that any of the findings are clearly
erroneous.
9
a business for profit.” Minn. Stat. § 323A.0101(8). “Each partner is entitled to an equal
share of the partnership profits and is chargeable with a share of the partnership losses in
proportion to the partner’s share of the profits.” Minn. Stat. § 323A.0401(b). “Unless
displaced by particular provisions of [MUPA], the principles of law and equity supplement
[it].” Minn. Stat. § 323A.0104(a).
Appellants argue that, because the jury found that the parties formed a partnership
by implication, “MUPA governs all aspects of the partnership” unless otherwise agreed
upon by the partners. Appellants contend that, because the parties all admitted that there
was no agreement to alter MUPA’s rules governing the sharing of profits and losses,
MUPA required that the partne rs all share equally in the profits and losses of the
partnership. Appellants further contend that the district court committed a “fundamental
error of law” by deviating from this rule and “divid[ing] the assets pursuant to the court’s
own sense of equity,” including “assigning a fixed sum to [Beskau and Haler] rather than
have them share in the profits and losses of the partnership .” Thus, appellants argue that
the district court abused its discretion in denying their motion for a new trial.
We disagree. “The general rule is that partners may by agreement determine their
rights and duties to the partnership.” Maus v. Galic, 669 N.W.2d 38, 44 (Minn. App. 2003).
As this court stated in In re L-tryptophan Cases, “[p]artners may change their statutory and
common law duties by incorporating such changes into their partnership agreement, as long
as the major purpose of the change is not to shield wrongdoers from liability.” 518 N.W.2d
616, 620 (Minn. App. 1994) (recognizing that “[p]artners are free to vary many aspects of
their relationship but they are not free to destroy its fiduciary character”); see Seattle-First
10
Nat’l Bank v. Marshall, 641 P.2d 1194, 1199 (Wash. Ct. App. 1982) (“One of the salient
characteristics of partnership law is the extent to which partners may write their own ticket.
Relations among them are governed by common law and statute, but almost invariably can
be overridden by the parties themselves.”), rev. denied, 97 Wash.2d 1023 (Wash. 1982).
The general rule that partners may “write their own ticket” is codified in MUPA,
which provides: “Except as otherwise provided in subsection (b), relations among the
partners and between the partners and the partnership are governed by the partnership
agreement. To the extent the partnership agreement does not otherwise provide, this
chapter governs relations among the partners and between the partners and the
partnership.” Minn. Stat. § 323A.0103(a) (emphasis added). Subpart (b) of section
323A.0103 then provides a list of terms that are prohibited by a partnership agreement.
Minn. Stat. § 323A.0103(b). There is nothing in this subpart that prohibits partners from
agreeing to the distribution of unequal shares of the partnership’s profits and losses. See
id. As such, the plain language of MUPA indicates that partners may, by agreement,
deviate from the general rule that partners are entitled to share equally in a partnership’s
profits and losses.
Turning to appellants’ claim that the default provisions of MUPA apply because the
parties had no agreement related to profits and losses, we note that MUPA defines a
“[p]artnership agreement” as an “agreement, whether written, oral, or implied, among the
partners concerning the partnership, including amendments to the partnership agreement.”
Minn. Stat. § 323A.0101(9) (emphasis added). The implied terms of a partnership
agreement can be proven at trial. See Tuller v. Swift, 129 N.W. 572, 576 (Minn. 1911).
11
In Tuller, the supreme court recognized the general rule that
[t]he profits of a partnership are to be divided equally between
the partners, however unequal may be their contributions of
capital or of service, in the absence of an agreement express or
implied to the contrary, or unless some fact or circumstance
exists from which it may be inferred that the partners intended
that the profits should be divided in unequal proportions.

Id. at 575 (quotation omitted and emphasis added). The court then added that “[w]here
there is no proof of an agreement between the partners as to apportionment, the
presumption will be that both profits and losses were to be divided equally.” Id. (quotation
omitted). But the court stated that this “presumption may be rebutted by evidence of
circumstances showing that the partners intended differently. It is a question of intention,
to be determined by a consideration of all the facts available for the construction of the
contract.” Id. (quotation omitted). The court went on to hold that the evidence and the
facts found by the district court overcame any presumption that the stock at issue was to
be equally divided between the parties. Id. at 576.
Here, the district court found that “[u]neven division [of profits] can be inferred”
from the facts and circumstances of this case. In reaching this finding, the district court
noted that Beskau and Haler “received $72,000 per year regardless of the profits or losses
of the Partnership,” which “continued for nearly five years.” The district court also
recognized that the following behavior by Beskau and Haler is “incompatible with equality,
but compatible with a partner whose share was unequal”: (1) Beskau and Haler “spent
considerable time, efforts, and capital on their five other businesses”; (2) Beskau and Haler
“started VC during the Partnership”; (3) Beskau and Haler “executed personal guaranties
12
for their other businesses, illustrating their dedication to these ventures”; and (4) Beskau
purchased BF during the partnership, and “subleased (and later leased) properties to the
Partnership for rates more than double what he was leasing them for, thus moving potential
profits out of the Partnership and into other companies.” In addition, the district court
referenced the Schaffers’ behavior, such as (1) behaving as if Beskau and Haler were due
their $72,000 annually and nothing more; (2) taking the remaining partnership profits and
suffering losses; (3) never providing financial, profit, or loss information to Beskau and
Haler; and (4) making no attempt to conceal the fact that they were taking money out of
the partnership at will. Finally, the district court explained that “[g]iven the wide disparity
in contributions and financial commitment, a finding of equality in ownership, liability for
losses, and rights to profits would be unfair.”
Because the district court found that the parties’ conduct created an implied
agreement not to share the partnership profits and losses equally, MUPA’s default
provision that partnership profits and losses be shared equally does not apply. See Minn.
Stat. § 323A.0103(a) (“Except as otherwise provided in subsection (b), relations among the
partners and between the partners and the partnership are governed by the partnership
agreement. To the extent the partnership agreement does not otherwise provide, this
chapter governs relations among the partners and between the partners and the
partnership.” (emphasis added)). Although appellants claim that “there is no evidence in
the record that the Partners entered into any agreements that would otherwise govern the
Partnership,” they do not challenge the sufficiency of the evidence to support any of the
district court’s findings to the contrary. Instead, they simply assert that there was no
13
agreement, and that because there was no agreement, the district court was legally obligated
to allow Beskau and Haler to equally share in the partnership’s profits and losses under
MUPA. But the district court found that there was an agreement as to the terms of the
allocation of the partnership profits and losses, and the district court’s unchallenged
findings related to the parties’ conduct and their inferred agreement are extensive and well
supported by the record. And to the extent that there is conflicting evidence related to the
parties’ intentions, the district court did not find this evidence to be credible, which is a
determination that we give deference. See Landmark Cmty. Bank, N.A. v. Klingelhutz, 927
N.W.2d 748, 755 (Minn. App. 2019) (stating that appellate courts “do not reweigh the
evidence that was before the district court, and . . . defer to a district court’s credibility
determinations”). The district court did not err in finding that the parties agreed not to
share the partnership profits and losses equally.
Appellants further argue that “a ‘fixed return’ partnership does not exist as a matter
of law under . . . MUPA or Minnesota common law.” Appellants claim that, instead,
“[p]ayment of a fixed amount, unrelated to a partnership’s actual profits or losses,
constitutes a wage paid to an independent contractor or employee, not a sharing of profits.”
Thus, appellants contend that the district court erred by assigning a fixed sum to Beskau
and Haler rather than have them share in the profits or losses of the partnership.
Again, we disagree. MUPA is clear that partners can agree to any partnership terms
they desire, provided the terms do not appear on the list of prohibitions contained in section
323A.0103(b). A review of that section supports respondents’ position that there is nothing
in MUPA prohibiting a fixed-return partnership. See Minn. Stat. § 323A.0103(b). Because
14
a fixed-return partnership is not prohibited by MUPA, the district court was free to use its
equitable powers to fashion an order consistent with the evidence presented at trial. See
Minn. Stat. § 323A.0104 (“U nless displaced by particular provision of this chapter, the
principles of law and equity supplement this chapter.”). Based on the unique facts and
circumstances of this case, the district court exercised its equitable powers to conclude that
Beskau and Haler “would receive a guaranteed return of $72,000 of Partnership profits per
year, regardless of each year’s profit or loss.” Indeed, the district court’s decision allows
Beskau and Haler to share in the profits of the partnership. Therefore, appellants have not
shown that the district court erred in allocating the profits and losses of the partnership.
II.
Appellants also challenge the district court’s determination of the partnership
property. They argue that the district court erred by (A) determining that certain land,
equipment, and assets did not belong to the partnership; (B) awarding the Schaffers rent
for land used by the partnership in the absence of a rental agreement; and (C) treating a
line of credit obtained by respondents as a capital contribution rather than a liability of the
partnership.
A. Determination that certain property is not partnership property
MUPA provides that “[p]roperty acquired by a partnership is property of the
partnership and not of the partners individually.” Minn. Stat. § 323A.0203. “Property is
partnership property if acquired in the name of: (1) the partnership; or (2) one or more
partners with an indication in the instrument transferring title to the property of the person’s
capacity as a partner or the existence of a partnership but without an indication of the name
15
of the partnership.” Minn. Stat. § 323A.0204(a). Similarly, “Property is acquired in the
name of the partnership by a transfer to: (1) the partnership in its name; or (2) one or more
partners in their capacity as partners in the partnership, if the name of the partnership is
indicated in the instrument transferring title to the property.” Minn. Stat. § 323A.0204(b).
“Property is presumed to be partnership property if purchased with partnership
assets, even if not acquired in the name of the partnership or of one or more partners with
an indication in the instrument transferring title to the property of the person’s capacity as
a partner or of the existence of a partnership.” Minn. Stat. § 323A.0204(c). However,
“Property acquired in the name of one or more of the partners, without an indication in the
instrument transferring title to the property of the person’s capacity as a partner or of the
existence of a partnership and without use of partnership assets, is presumed to be separate
property, even if used for partnership purposes.” Minn. Stat. § 323A.0204(d).
Here, the district court found that it “is not aware of any item, asset, or debt exactly
matching” the description set forth in section 323A.0204(a), and that the “record contains
no asset or debt exactly matching” the description established in section 323A.0204(b).
The district court also found that “[i]t is doubtful there is much equipment intended or
provable by any party to have been . . . solely purchased and used while the partnership
was in existence, exclusively for the Partnership.” The district court, therefore, determined
that the “Partnership was an operating entity” that “used land, facilities, and equipment
belonging to others, including partners.”
Appellants argue that the district court’s decision is erroneous “[a]s a matter of law”
because “[p]roperty purchased with partnership funds is partnership property under . . .
16
MUPA.” Appellants then assert that numerous partnership assets, including farmland and
equipment, with an appraised value of roughly $4.3 million, were purchased using
partnership proceeds. Appellants contend that because these partnership assets were
purchased with partnership proceeds, the district court erred in concluding that the
partnership did not own any assets.
We disagree. Appellants’ argument assumes that the property at issue is partnership
property. But the district court found otherwise, and appellants do not challenge the
sufficiency of the evidence to support any of the district court’s findings. Although
appellants’ arguments related to this issue make references to the “[e]vidence presented at
Trial II,” and what that evidence purportedly “established,” appellants’ challenge related
to the evidence at trial is inconsistent with their arguments related to the standard of review,
which they claim is de novo since their “Motion for a New Trial is based on fundamental
errors of law, including the district court’s radical departure from . . . MUPA.” In other
words, because the district court found that the property at issue is not partnership property,
and appellants do not specifically challenge any of these related findings, appellants have
not met their burden to show that the district court erred as a matter of law in applying
MUPA to the property at issue.
Moreover, to the extent that appellants do challenge the evidence supporting the
district court’s findings that the property at issue is not partnership property, appellants are
unable to establish that a reversal is warranted. As respondents point out, the district court
made numerous findings that the property at issue is not partnership property. For example,
the district court found that appellants failed to show that any of the “titled equipment at
17
issue” was purchased with partnership profits because the “record suggests that these assets
were purchased with [the] Schaffers’ personal debts.” The district court also found that
appellants failed to show that any of the land at issue was purchased with partnership profits
because the record suggests that the land was purchased with the Schaffers’ personal debts,
and there is “no indication on the title that any interest was taken by [appellants], . . . or the
Partnership.” And the district court found that appellants’ expert “did not testify that any
specific asset was purchased with Partnership profits.” These findings are supported by
the record. Although appellants contend that evidence at Trial II “established that proceeds
from the Partnership were used to purchase” certain property “during the course of the
Partnership,” appellants fail to point to any evidence supporting this assertion.
Furthermore, as stated above, “[p]artners may change their statutory and common
law duties by incorporating such changes into their partnership agreement, as long as the
major purpose of the change is not to shield wrongdoers from liability.” L -tryptophan
Cases, 518 N.W.2d at 620 (recognizing that “[p]artners are free to v ary many aspects of
their relationship but they are not free to destroy its fiduciary character”). Here, the district
court found that the parties had a partnership agreement by implication, and that the implied
terms of the agreement were that “all parties were free to acquire assets outside of the
Partnership, even if those assets were used by the Partnership.” Appellants do not
challenge the district court’s findings related to the parties’ agreement, and they make no
argument, nor can they establish, that the parties’ partnership agreement is contrary to law.
Therefore, appellants cannot show that the district court erred in determining that the
property at issue was not partnership property.
18
B. Rent for land used by the partnership
Appellants also challenge the district court’s decision to award the Schaffers the
rental value of their contributions to the partnership. Specifically, the district court’s order
states: “[The] Schaffers would contribute the use of their land, facilities, and equipment
[to the partnership]. The Partnership owes [the] Schaffers for the rental value of their land,
facilities, and equipment in the calculation of any Partnership profit or loss.”
Appellants assert that “[i]f an asset was ‘contributed’ to the Partnership, then [absent
some written agreement to the contrary] that asset became Partnership property.”
Appellants also assert that the “record is wholly devoid of any rental agreement that entitled
[the Schaffers] to collect rents from the Partnership for the use of land or equipment titled
in [the Schaffers’] names.” As such, appellants argue that the “district court’s
determination that [the Schaffers] are entitled to collect rent from the Partnership for the
use of land, facilities, and equipment . . . in the absence of any rental agreement, is directly
contrary to law.”
We are not persuaded. Appellants fail to cite any binding precedent demonstrating
that the district court’s decision is legally erroneous. Moreover, the partnership dissolution
process is equitable in nature. See Maus, 669 N.W.2d at 42 (recognizing that the division
of partnership property is an equitable decision). And a district court sitting in equity has
wide discretion to fashion a remedy based on the unique facts of a particular case. Gabler
v. Fedoruk, 756 N.W.2d 725, 730 (Minn. App. 2008).
Here, the district court was placed in the unenviable position of deciphering the
terms of a partnership agreement involving a large-scale farming operation where none of
19
the terms of the partnership were placed in writing. In performing this task, the district
court considered both parties’ claims that they made contributions to the partnership and
that they are entitled to compensation for those contributions. The district court then
crafted an order that allowed both the Schaffers and Beskau and Haler to collect the rental
value of their contributions. But because the district court found that the Schaffers’
contributions to the partnership were much more significant than Beskau and Haler’s
contributions, the rental value of the Schaffers’ contributions is much higher than the rental
value of Beskau and Haler’s contributions. T he district court’s decision is supported by
the court’s numerous findings and is equitable in light of the Schaffers’ significant
contributions to the partnership. And appellants are unable to show that the decision to
award the Schaffers rent for their partnership contributions runs afoul with MUPA.
Therefore, under the unique facts of this case, we conclude that the district court did not
abuse its discretion in awarding the Schaffers rent for their contributions to the partnership.
C. Line of credit as a capital contribution rather than a partnership liability
Next, appellants challenge the district court’s decision to award respondents a credit
toward their capital accounts for the line of credit the partnership utilized during its
operations. Specifically, appellants argue that the VSBLOC is a partnership liability as a
matter of law because it was used for partnership purposes and replenished with partnership
revenues. Appellants contend that because there “is no evidence in the record which
establishes that the parties agreed to alter the default provisions of . . . MUPA,” the district
court erred in determining that the VSBLOC was not partnership debt. We disagree.
20
“It is settled law that partners are jointly and severally liable for the debts chargeable
to the partnership.” Bedow v. Watkins, 552 N.W.2d 543, 546-47 (Minn. 1996). But as
respondents point out, appellants “misread the order as to the lines of credit” because the
district court “found that there is no Partnership line of credit.” In other words, appellants’
argument assumes that the VSBLOC is a partnership liability when the district court found
otherwise. Although respondents agree that appellants’ legal arguments are “valid,”
respondents contend that these arguments fail because these “valid legal principles act only
upon debts which are proven to be partnership debts,” and the district court here explicitly
found that there are no partnership debts.
Respondents’ position is supported by the district court’s order. Indeed, the district
court found that the VSBLOC was (1) “in place since 2002”; (2) “in the name of all four”
respondents; (3) “signed by the four [respondents] and secured by a mortgage over land by
[William] and Carol Schaffer”; and (4) “in place before and after the Partnership.” In
addition, the district court found that respondents were debtors and signers on the
VSBLOC, and the loan documents named the respondents individually as debtors. And
the district court found that the VSBLOC was not acquired in the name of the partnership
and was never transferred to Beskau and Haler despite the Schaffers’ repeated invitations
for Beskau and Haler to take liability for it. Thus, the district court determined that the
VSBLOC is not within the partnership and is not partnership debt because appellants failed
to meet their burden of proving that the VSBLOC is a partnership asset or partnership debt.
And, in fact, the district court found that appellants “have not met their burden of proving
that any debt pertaining to assets purchased during the Partnership is a Partnership debt.”
21
Moreover, as respondents point out, the district court’s findings that there was no
partnership debt is supported by additional findings, including: (1) “there was no talk of
debt at the pre-formation meetings”; (2) Beskau and Haler recounted their debts many
times to judgment creditors and banks, even under oath, and made no mention of any such
debt; (3) Beskau and Haler “did not consider any of the debt at issue to be Partnership
debt”; (4) Beskau and Haler “did not consider the VSBLOC or other debt in the name of
[respondents] to be Partnership debt”; (5) the parties understood and intended that the
VSBLOC debt “be separate debt of the four [respondents] and not Partnership debt”; and
(6) “[t]he conduct and course of dealing of the parties shows their understanding and intent
that [the alleged] debts be separate debt of the four [respondents] and not Partnership debt.”
Appellants do not challenge any of these findings. And to the extent that appellants’ expert
testified that the VSBLOC was used for partnership purposes and replenished with
partnership revenues, the district court did not find the expert’s testimony to be credible
and, instead, found that the evidence presented by respondents on this issue to be credible.
The finder of fact is in the best position to weigh the evidence and we defer to the district
court’s credibility determinations. See Klingelhutz, 927 N.W.2d at 755. Thus, the district
court did not err in finding that the VSBLOC, or any other alleged debts, were partnership
debts.
Appellants further argue that because the VSBLOC was in the name of at least one
of the partners, and was paid down with partnership revenues, it “must be apportioned to
every partner equally” and cannot “be credited to any individual partner’s capital account.”
But there is no finding that the partnership used respondents’ line of credit. Instead, the
22
district court found that respondents used the VSBLOC to make contributions to the
partnership. As the district court found: “All of [the partnership’s] expenses were paid out
of the VSBLOC. All of these expenses were contributions made by [the] Schaffers.”
Therefore, the district court did not conclude that respondents are entitled to a capital credit
for the partnership’s use of respondents’ line of credit.
Finally, appellants argue at length in their reply brief that “[i]f allowed to stand, the
district court’s decision would result in a grossly inequitable result.” But appellants did
not argue the inequities of the district court’s decision in their main brief. It is well settled
that issues not raised or argued in an appellant’s principal brief cannot be raised in a reply
brief. Moorhead Econ. Dev. Auth. v. Anda, 789 N.W.2d 860, 887 (Minn. 2010); see Minn.
R. Civ. App. P. 128.02, subd. 3 (providing that an appellant’s reply brief must be confined
to a new matter raised in the brief of the respondent). Thus, appellants’ argument related
to the inequities of the district court’s order is not properly before us.
Moreover, as discussed above, appellants cannot establish that the district court’s
order is inequitable. The district court’s order, which is 69 pages long, contains 255
findings of fact, and 32 conclusions of law, thoroughly and thoughtfully analyzed the
extensive amount of evidence presented, as well as the applicable law. The evidence
presented established the unusual facts and circumstances of this case, and reflected the
significant contributions made by the Schaffers, which are contrasted by the lack of
contributions made by Beskau and Haler. The district court then weighed the equities and
reached a conclusion that is consistent with MUPA and the evidence presented at trial. In
light of the evidence presented, the district court’s order is supported by the record and
23
reflects an appropriate exercise of its equitable authority under the circumstances.
Accordingly, appellants cannot establish that the district court abused its discretion in
denying their motion for a new trial.
Affirmed.