CASEY RANCH LTD. PARTNERSHIP v. Casey

#25026-r-SLZ

2009 SD 88

IN THE SUPREME COURT

OF THE

STATE OF SOUTH DAKOTA

* * * *

CASEY RANCH LIMITED PARTNERSHIP
(CRLP), MILLIRON BISON COMPANY,
LLC (MBC), KEVIN CASEY, as CRLP
General and Limited Partner and
MBC Member, BRENDAN CASEY, as MBC
Managing Member and CRLP Limited
Partner, DENNIS CASEY, as CRLP
Limited Partner and MBC Member,
and SEAN CASEY, as CRLP Limited
Partner and MBC Member, Plaintiffs and Appellants,

v.

PAULINE CASEY, Defendant and Appellee,

and

MIKE CASEY, Intervener and Appellee.

* * * *

APPEAL FROM THE CIRCUIT COURT OF
THE SEVENTH JUDICIAL CIRCUIT
PENNINGTON COUNTY, SOUTH DAKOTA

* * * *
HONORABLE JANINE KERN
Judge

* * * *

CONSIDERED ON BRIEFS
ON AUGUST 24, 2009

OPINION FILED 09/23/09
MICHAEL C. LOOS
COURTNEY R. CLAYBORNE of
Clayborne, Loos, Strommen & Sabers, LLP
Rapid City, South Dakota Attorneys for plaintiffs
and appellants.

LON J. KOURI
DAVID A. PFEIFLE of
May & Johnson, P.C.
Sioux Falls, South Dakota Attorneys for appellee,
Pauline Casey.

GARY D. JENSEN of
Beardsley, Jensen and Von Wald, LLP
Rapid City, South Dakota Attorneys for appellee,
Mike Casey.
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ZINTER, Justice.

[¶1.] Casey Ranch Limited Partnership (CRLP) and Milliron Bison

Company, LLP (MBC) commenced this breach of contract action against Pauline

Casey. The suit was based on oral agreements under which Pauline leased CRLP’s

and MBC’s real property and agreed to pay for certain expenses associated with her

use of the property to graze her cattle. The circuit court dismissed. With respect to

MBC, the court concluded that the suit was outside the ordinary course of

partnership business; that actions outside the ordinary course of business required

unanimous consent of the partners; and, not all partners had consented to the suit.

With respect to CRLP, the court concluded that the partnership agreement required

a majority of the general partners to act and one of the two general partners had

not consented to the suit. CRLP and MBC appeal. We reverse.

Facts and Procedural History

[¶2.] This dispute involves the Casey family children, partners in CRLP and

MBC, and their mother Pauline Casey. In 1959, Dennis P. “Doc” Casey married

Pauline. They had seven children: Kevin, Dennis, Brendan, Sean, Shannon, Mike,

and John. In 1972, Doc and Pauline started Bear Country USA, Inc. (Bear

Country), a drive-through wildlife park in Rapid City, South Dakota. Doc Casey

operated this business until his death in 2000. Doc and Pauline’s children were also

involved in the ownership and operation of Bear Country. Before the filing of this

suit, a conflict had apparently developed among the Casey children and a

declaratory judgment action was initiated regarding the corporate governance of

Bear Country. Although the outcome of that action has no legal significance in this

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litigation, it appears that the family split evidenced in that action has carried over

into this litigation.

[¶3.] This suit involves two ranches owned by the Casey children. In 1998,

the seven Casey children formed MBC, a limited liability partnership that owns

real estate for ranching purposes. In 1999, CRLP, a limited liability limited

partnership, was formed. Its principal asset is a 5,200 acre ranch. CRLP was

owned and operated by two general partners (Doc and Pauline Casey) and seven

limited partners (the seven Casey children). Upon Doc’s death, Kevin Casey

succeeded Doc as a general partner.

[¶4.] This suit arose out of oral cattle grazing leases between Pauline and

these two partnerships. The complaint alleges that Pauline failed to pay amounts

due for cattle expenses and lease payments relating to the ranch properties owned

by CRLP and MBC. Pauline and Mike Casey (as an intervenor) moved to dismiss

under SDCL 15-6-12(b)(5). They argued that MBC lacked authority to initiate suit

because the suit to collect the debt was outside the ordinary course of business of

the partnership, unanimous consent was necessary for extraordinary business, and

unanimous consent for the suit had not been obtained. With respect to CRLP, they

argued that Mike Casey was one of two general partners. They contended that

CRLP lacked authority to sue because, under the partnership agreement, a majority

of the general partners were necessary to act and Mike did not consent to the suit.

After considering affidavits and other matters outside the pleadings, the circuit

court agreed and dismissed.

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Issues

1. Whether the circuit court erred in concluding that MBC’s suit to
collect a partnership debt was outside the ordinary course of
business thereby requiring unanimous consent of the partners.

2. Whether the circuit court erred in determining that Mike Casey was
a general partner of CRLP, and therefore, his consent was required
for the partnership to sue.

Standard of Review

[¶5.] Although the circuit court proceedings began on Mike’s and Pauline’s

motions to dismiss, the circuit court considered matters outside the pleadings in

rendering its decision. 1 However, no party objected to the circuit court’s

consideration of those matters. Further, in response to the circuit court’s expressed

skepticism about the procedural posture of the case, the parties assured the court

that the case was correctly postured for disposition by summary judgment.

Therefore:

In determining our standard of review, we observe that
although this matter is before us on a motion to dismiss, both
parties submitted matters outside the pleadings, and the [circuit
court] did not explicitly exclude them. However, we also observe
that neither party objected to the [circuit court’s] consideration
of those matters and neither party raised the issue on appeal.
Therefore, we review the [circuit court’s] ruling as a motion for
summary judgment. Tibke v. McDougall, 479 NW2d 898, 903-
04 (SD 1992) (stating that when the record indicates that
matters outside of the pleadings were considered by the trial

1. CRLP and MBC also request this Court to take judicial notice of related
dissolution proceedings. However, because neither party presented
arguments regarding dissolution below, we decline to consider those matters
on appeal. “We have repeatedly stated that we will not address for the first
time on appeal issues not raised below.” See Hall v. State ex rel. S.D. Dept. of
Transp., 2006 SD 24, ¶ 12, 712 NW2d 22, 26-27.

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court, motions to dismiss are reviewed and disposed of as
motions for summary judgment).

Flandreau Pub. Sch. Dist. No. 50-3 v. G.A. Johnson Const., Inc., 2005 SD 87, ¶ 6,

701 NW2d 430, 433-34.

[¶6.] In reviewing a summary judgment, “we ‘restrict our review to

determining whether the record before us discloses any genuine issues of material

fact and, if not, whether the . . . court committed any errors of law.’” Johnson

Const., 2005 SD 87, ¶ 7, 701 NW2d at 434 (quoting Switlik v. Hardwicke Co., 651

F2d 852, 857-58 (3dCir 1981)). Legal questions concerning interpretation of

partnership agreements are reviewed de novo. In re Dissolution of Midnight Star

Enters., 2006 SD 98, ¶ 7, 724 NW2d 334, 336 (citing Liechty v. Liechty, 231 NW2d

729, 731 (ND 1975)) (noting the agreement is the “law of the partnership”). 2

2. Questions concerning what is in the ordinary course of business can be a
mixed question of law and fact. See In re National Steel Corp., 351 BR 906,
913 (NDIll 2006) (explaining the standard of review for ordinary course of
business under 11 USC § 547(c)(2)). National Steel noted that “[t]he
standards created to define and interpret the phrase ‘ordinary course of
business’ involve questions of law.” Id. (quoting Martino v. First Nat’l Bank
of Harvey, 186 BR 414, 421-22 (NDIll 1995)). “However, what transpired
between the parties both in the ordinary course of their business relationship
and in the transactions at issue is a question of fact.” See id. (citing Martino,
186 BR at 422). This Court, in examining SDCL 54-8A-8(f)(2), has also noted
that “[c]ourts must engage in a ‘peculiarly factual’ analysis” in determining if
a debtor’s payments were in the ordinary course of business. Prairie Lakes
Health Care Sys,, Inc. v. Wookey, 1998 SD 99, ¶ 19, 583 NW2d 405, 415
(citing Lovett v. St. Johnsbury Trucking, 931 F2d 494, 497 (8thCir 1991))
(citations omitted).

Nevertheless, the circuit court decided this issue as a matter of law. Even
the circuit court’s reference to the family disputes in the Bear Country
litigation does not create a disputed question of material fact. The circuit
court specifically stated: “I’ve laid out the ruling very clearly so you can seek
(continued . . .)
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Analysis

1. Authorization for the MBC Suit

[¶7.] The circuit court concluded that initiation of this litigation was outside

the ordinary course of partnership business, and therefore, it could only be

undertaken upon consent of all partners. The circuit court reasoned that the

partnership agreement was not controlling and that because the “initiation of this

litigation [was] outside the ordinary course of business of the partnership, it [was] .

. . subject to unanimous consent requirements under SDCL 48-7A-401(j).” That

statute provides:

A difference arising as to a matter in the ordinary course of
business of a partnership may be decided by a majority of the
partners. An act outside the ordinary course of business of a
partnership and an amendment to the partnership agreement
may be undertaken only with the consent of all of the partners.

SDCL 48-7A-401(j).

[¶8.] On appeal, MBC contends that the circuit court erred because consent

to all business, whether ordinary or extraordinary, is controlled by the partnership

agreement rather than SDCL 48-7A-401(j), and that under the agreement, a mere

majority of the partners’ interests were necessary to conduct any business.
________________________
(. . . continued)
an appeal, if you so desire. It’s a question of law.” We agree. As a matter of
law, the family dispute arising out of the Bear Country litigation is not
material to the question we must decide. The only issue argued to be
influenced by the Bear Country litigation is whether initiation of MBC’s suit
to collect a partnership debt from Pauline was not within the ordinary course
of MBC business because it was a dispute among partners. Pauline,
however, was not a partner in MBC. Therefore, the only material question on
appeal is the legal question whether MBC was authorized to sue under the
partnership agreement. If the suit was authorized as a matter of law, the
motivation for the suit is irrelevant.

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Alternatively, MBC contends that the suit was initiated in the ordinary course of

MBC business, and therefore, a majority was all that was required under either the

partnership agreement or SDCL 48-7A-401(j).

[¶9.] To resolve these contentions, we first consider MBC’s argument that

the partnership agreement controls because it authorized both ordinary and

extraordinary business to be conducted by a simple majority. We consider MBC’s

alternative ordinary course of business argument as two questions. First, was the

underlying lease, which gave rise to the debt, made in the ordinary course of MBC

business? If it was, we then determine whether initiation of suit to collect that debt

was also in the ordinary course of business. If commencing suit to collect the debt

was within the ordinary course of business, then both the partnership agreement

and SDCL 48-7A-401(j) only required a majority to act.

Section 6.1 of the MBC Partnership Agreement

[¶10.] MBC first claims we need not determine whether the lease or filing

suit to collect debt under the lease is within the ordinary course of business because

all business decisions, whether ordinary or extraordinary, are governed by section

6.1 of the partnership agreement and section 6.1 only requires a majority to act.

Section 6.1 provides:

Each partner shall have a voice in the management of the
Partnership business. Except as otherwise provide[d] in this
Agreement, all decisions relating to the Partnership business
shall be made by a vote of the partners who own a majority in
amount of the total capital accounts of all partners.

(Emphasis added.) MBC asserts that if this partnership provision governs all

decisions, whether ordinary or extraordinary, the agreement supplants the default

rule in SDCL 48-7A-401(j). See SDCL 48-7A-103(a) (“[R]elations among the
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partners and between the partners and the partnership are governed by the

partnership agreement.”).

[¶11.] In interpreting partnership agreements, we have stated:

The partnership agreement is a contract between the partners
and effect will be given to the plain meaning of its words.
Liechty, 231 NW2d at 731; see also Pauley v. Simonson, 2006 SD
73, ¶ 8, 720 NW2d 665, 668 (noting the contract is interpreted
using its language). “An interpretation which gives a
reasonable and effective meaning to all the terms is preferred to
an interpretation which leaves a part unreasonable or of no
effect.” Nelson v. Schellpfeffer, 2003 SD 7, ¶ 14, 656 NW2d 740,
744 (citing Restatement (Second) Contracts § 203(a) (1981)). We
must “give effect to the language of the entire contract and
particular words and phrases are not interpreted in isolation.”
Jones v. Siouxland Surgery, 2006 SD 97, 724 NW2d 340
(quoting Hartig Drug Co. v. Hartig, 602 NW2d 794, 797-98
(Iowa 1999)) (internal quotations omitted).

Midnight Star, 2006 SD 98, ¶ 12, 724 NW2d at 337.

[¶12.] To support its interpretation of section 6.1, MBC focuses only on the

“all decisions” language of the section without acknowledging the limiting language

indicating that all decisions are only those “relating to Partnership business.”

Thus, MBC’s interpretation reads a part of section 6.1 in isolation without

considering all language in this section. The language “relating to Partnership

business” modifies “all decisions.” Therefore, when read as a whole, section 6.1 does

not provide that all decisions, whether extraordinary and ordinary, may be made by

a simple majority. On the contrary, the limiting language requires that “all

decisions” must be those “relating to Partnership business;” i.e., ordinary

partnership business. To read the “all decisions” language as contemplating

extraordinary matters would render the phrase “relating to Partnership business”

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meaningless surplusage. 3 See Estate of Fisher v. Fisher, 2002 SD 62, ¶ 14, 645

NW2d 841, 846 (“A contract should not be interpreted in a manner that renders a

portion of it meaningless.” (citing Bowen v. Monroe Guar. Ins. Co., 758 NE2d 976,

980 (IndCtApp 2001))). Moreover, to read the language as MBC suggests would

change the agreement and make extraordinary non-partnership matters ordinary

partnership business. “[I]t is not a function of the court to rewrite the parties’

agreements.” Hisgen v. Hisgen, 1996 SD 122, ¶ 17, 554 NW2d 494, 499 (Amundson,

J., dissenting) (citations omitted). We therefore conclude that section 6.1 governs

only ordinary partnership business.

Ordinary Course of Business

[¶13.] Having concluded that decisions regarding extraordinary matters were

not authorized by majority vote in section 6.1, we must next determine whether the

claim against Pauline for breach of contract arose within the ordinary course of

MBC business. It appears that the circuit court, based on the “acrimony and

bitterness” evidenced in the Bear Country litigation, treated the initiation of this

suit as an action among or against partners rather than a suit to collect a

partnership debt. However, Pauline Casey was not a partner and had no ownership

interest in MBC. Furthermore, the complaint makes no claim regarding

3. MBC’s reliance on J & J Celcom v. AT&T Wireless Services, Inc., No. C03-
2629P, 2005 WL 1126924, at *9 (WDWash 2005) is misplaced. In that case,
the partnership agreement listed different voting requirements for various
matters. After listing the matters for which a supermajority or unanimity
was required, the agreement then provided for a simple majority “for every
other act requiring a vote of the partners.” Id. This broad residuary
language (“every other act”) is unlike the limited language (“decisions
relating to partnership business”) in section 6.1.

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partnership governance, no claim of dispute regarding entitlement to partnership

assets, and no mention of a dispute among the partners. The complaint only seeks

to enforce what is claimed to be a partnership debt owed by a third party. 4

[¶14.] The asserted debt arose from a real estate lease with Pauline, which

was a part of the ordinary course of MBC business. As stated in the “Purpose”

section of the MBC Partnership Agreement, Article I, § 1.2:

[MBC] shall engage in the business of acquiring, owning,
improving, operating, managing, selling, leasing, or mortgaging
the real property . . . and otherwise to deal with said property or
any other properties . . . and to do all other acts which may be
necessary or desirable in order to accomplish any of the
aforementioned purposes.

(Emphasis added.) Considering the express purpose of MBC, the leasing of the

partnership’s ranch property for cattle grazing and care was within its ordinary

course of business. Therefore, Pauline’s obligation under the lease was a

partnership debt that arose in the ordinary course of business.

[¶15.] Additionally, initiating suit to collect a partnership debt is generally

considered to be within the ordinary course of the business of a partnership. SDCL

48-7A-201 provides that “[a] partnership is an entity distinct from its partners.”

Partnerships also have authority to sue in the name of the partnership. SDCL 48-

7A-307(a). Therefore, commencing a lawsuit on behalf of a partnership to enforce a

4. Mike and Pauline mistakenly rely on Heritage Co. of Massena v. La Valle,
605 NYS2d 613, 199 AD2d 1036 (NYAppDiv 1993). In that case, the court
ruled that filing suit against a partner was not in the ordinary course of
business. This case involves an action by partnerships against Pauline
Casey, a third party, non-partner. Although Mike Casey was a partner who
intervened to protect his interests, the complaint does not seek relief from
him on the partnership debt.

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partnership claim incurred in the ordinary course of business is itself a matter in

the ordinary course of business. See Lane v. Krein, 375 SE2d 351 (SCCtApp 1988)

(treating suit against third parties as an ordinary matter); Delbon Radiology v.

Turlock Diagnostic Ctr., 839 FSupp 1388, 1392 (EDCal 1993) (“[E]nforcement of a

partnership’s claim will often be an ordinary matter and subject to [majority rule].”

(quoting Bromberg & Ribstein, Bromberg and Ribstein on Partnership § 5.03(c), at

5:20-21 (1991))). See generally Alan R. Bromberg, Enforcement of Partnership

Rights – Who Sues for the Partnership?, 70 NebLRev 1, 10-13 (1991) (same).

[¶16.] For purposes of summary judgment, it must be assumed that Pauline

Casey grazed her cattle on MBC’s property and failed to pay amounts due on the

governing leases. Considering that one of the purposes of MBC was to lease its

ranch property, we conclude that the initiation of the breach of contract action

against Pauline Casey, a third party, was within the ordinary course of partnership

business. Because the decision to sue was within the ordinary course of business,

and because more than 70% of the MBC partnership interests consented to the suit,

the suit was authorized under the partnership agreement and SDCL 48-7A-401(j). 5

5. Mike and Pauline mistakenly rely on Delbon Radiology and Bromberg and
Ribstein on Partnership for the proposition that if all partners have a conflict
of interest regarding the claim for which a suit is contemplated, then
unanimous consent is required. In Delbon Radiology the court nullified a
partner’s dissenting vote to commence litigation because the partner had a
“contractual relationship with and derive[d] income from [the defendant]”
outside of his capacity as a partner in the partnership. 839 FSupp at 1392.
In this case, there is no assertion that any partner had an extra-partnership
contract with Pauline or that any partner derived any extra-partnership
benefit from the underlying lease with Pauline. The only suggested “conflict”
is the family dispute reflected in the Bear Country litigation. Delbon did not
suggest that business/family disputes are the type of “conflict” that is
(continued . . .)
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For these reasons, the circuit court erred in granting the motion to dismiss as to

MBC.

2. Authorization for the CRLP Suit

[¶17.] The circuit court concluded that Mike Casey was one of two general

partners and he had not consented to this suit as required by the partnership

agreement. Based on this conclusion, the circuit court dismissed CRLP’s claim.

[¶18.] Upon the death of Doc Casey in 2000, Kevin Casey became one of two

general partners of CRLP (Pauline was the other). In 2006, Pauline decided to gift

her interest in CRLP to her seven children (the general and limited partners).

Under the proposed arrangement, Pauline would no longer be a general partner

once she transferred her interests in CRLP. CRLP’s counsel at the time advised

that a new general partner would be required. To facilitate these changes, a

partnership meeting was held on December 19, 2006. At that meeting, the partners

unanimously voted that Mike Casey would become a general partner (joining Kevin

Casey) if Pauline Casey gifted her ownership interest in CRLP to the other partners

within one year.

[¶19.] Pauline gifted her ownership interests in CRLP to the other partners

within the required year. As a result, the December 19, 2006 resolution became
________________________
(. . . continued)
necessary to strip the majority partners of MBC of their voting rights under
section 6.1. Further, the Bear Country litigation is not the type of “conflict”
discussed in Bromberg and Ribstein on Partnership. See Bromberg &
Ribstein, Bromberg and Ribstein on Partnership § 5.04(b), at 5:29 n2 (1998-2
Supp) (citing cases finding a conflict when a partner had a separate contract
with defendant; a partner was an officer of defendant corporation; or, other
circumstances inapposite to the purported “conflict” regarding MBC’s
partners).

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effective and Mike Casey became one of the two general partners of CRLP. In

accordance with this December 19, 2006 resolution, CRLP continued to operate with

Mike and Kevin Casey as general partners. On February 29, 2008, an Amended

Certificate of Limited Partnership was filed with the Secretary of State reflecting

Mike’s status as a general partner. 6

[¶20.] However, questions subsequently arose among one faction of the Casey

children regarding Mike Casey’s appointment as general partner. On March 12,

2008, general partner Kevin Casey, along with limited partners Sean, Brendan and

Dennis Casey, conducted a CRLP meeting. The minutes of that meeting reflect a

concern was expressed that, contrary to the prior legal advice, a replacement

general partner was not required when Pauline had transferred her interest.

Therefore, those partners present at this meeting concluded that Mike Casey should

not have been appointed as a general partner. Although not representing the 70%

of the partnership interests necessary to remove a general partner, those present

voted to remove Mike Casey as a general partner.

[¶21.] The record is not clear whether Mike and Pauline were given notice of

this act. Further, the ability to remove a general partner without 70% of the

partnership’s interests apparently became an issue of concern. Therefore, out of

what a July 28, 2008 partnership resolution described as an “abundance of caution,”

6. We decline to consider CRLP’s argument that the filing of the Amended
Certificate of Limited Partnership reflecting Mike Casey’s appointment was
untimely and therefore invalid under SDCL 48-7-202. “We have repeatedly
stated that we will not address for the first time on appeal issues not raised
below.” Hall, supra n 1.

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Kevin, Sean, Brendan and Dennis Casey purportedly removed Mike Casey again,

this time under a CRLP partnership provision that allowed removal for malfeasance

by a simple majority. A copy of the resolution of removal was offered and received

without objection by the circuit court. Notwithstanding the resolution, the circuit

court concluded as a matter of law that Mike Casey was a general partner whose

consent was required.

[¶22.] CRLP advances two arguments supporting its contention that the

circuit court erred in concluding Mike Casey’s consent was required. First, CRLP

argues that the partnership received erroneous legal advice regarding the need to

replace Pauline as a general partner. CRLP contends that under the partnership

agreement, Pauline was not required to be replaced, and therefore, Mike Casey did

not become a general partner. Alternatively, CRLP contends that even if Mike

became a general partner, he had since been removed for malfeasance.

Mike Casey’s Succession of Pauline Casey as General Partner

[¶23.] CRLP notes that the partnership agreement defines a general partner

as “[t]he Person or Persons designated as General Partners on Schedule A and any

successor General Partners in accordance with the terms of this agreement. . . .”

CRLP Agreement § XVII.V (emphasis added). CRLP points out that the

partnership agreement contains specific terms for withdrawal and succession of

general partners 7 and places limitations on the transferability of CRLP interests. 8

CRLP contends that because Pauline’s interests were not transferred in compliance

7. Under CRLP Agreement § XV.C.2, a new general partner was not required.
That section provides:
(continued . . .)
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with these terms, and because a replacement general partner was not required

under the agreement, the transfer, withdrawal, and succession was not “in

accordance with the terms” of the partnership agreement. Because those terms

were not followed, CRLP argues that Mike’s election as a general partner was void.

________________________
(. . . continued)

If there are multiple General Partners and one or more General
Partners withdraw or cease to serve for any reason and there is
at least one remaining General Partner, the Partnership shall
be automatically reconstituted without being wound-up and the
business of the Partnership shall be carried on by the remaining
General Partner(s) without amending this agreement. If a
General Partner, serving alone, withdraws or ceases to serve for
any reason, then, without amending this Agreement, in the
following priority and succession, the following will serve as the
successor General Partner: Kevin Casey, Brendan Casey, and
Sean Casey (“Designated Successor General Partner”), and the
Partnership shall be automatically reconstituted without being
wound-up and the business of the Partnership shall be carried
on by the successor General Partner(s).

(Emphasis added.)

8. CRLP Agreement § XII.B.2.b requires pro-rata purchase of a withdrawing
general partner’s interests by the remaining general partners. That section
provides:

The General Partner who is not deceased and commits an act of
withdrawal in accordance with SDCL 48-7-402 . . . must sell all
the General Partnership Interest of the withdrawing . . .
General Partner . . . . The General Partnership Interest must
all be purchased by the remaining General Partners pro rata.

Further, assignments of interests “must be in writing, the terms of
which are not in contravention of any of the provisions of the
Agreement, and the assignment must be received by the Partnership
and recorded on the Partnership’s books. . . .” CRLP Agreement §
XII.A.

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[¶24.] For purposes of this appeal we may assume that the partnership

agreement did not require a replacement general partner upon Pauline’s

withdrawal. We also assume that the assignment of interest provisions were not

followed when Pauline’s interests were transferred. We may make these

assumptions because the failure to follow these partnership procedures for

succession and transfer of interest are immaterial. They are immaterial because,

by the December 19, 2006 resolution, the transfer, withdrawal, and replacement

procedures were waived by unanimous consent of the partners. At that meeting, in

electing Mike Casey and approving the proposed transfer, all partners unanimously

adopted the following resolution: “[I]f Pauline gifts all of her partnership interests,

such transfers are approved and such transfers will not constitute a wrongful

withdrawal from the partnership, or a violation of any part of the Partnership

Agreement as pertains to withdrawal by a General partner, or otherwise.”

(Emphasis added.) Consequently, notwithstanding any inconsistent partnership

provisions, Mike Casey’s election as an additional general partner was validated by

the written, unanimous consent of all partners. See SDCL 48-7-401 (stating that

additional general partners may be admitted with the written consent of all

partners). 9

9. The CRLP Agreement contemplated transfers by unanimous consent. The
agreement restricts ownership and transferability of interests in CRLP
stating, “[e]xcept as provided in Section XII.B, neither record title nor
beneficial ownership of a Partnership Interest may be transferred without
the prior written consent of all Partners (“Required Consent”).” CRLP
Agreement § XII.A.

(continued . . .)
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Mike Casey’s Removal as a General Partner

[¶25.] We next determine if Mike Casey was removed as general partner. In

the proceedings below, the circuit court admitted the CRLP removal resolution but

the circuit court’s decision did not mention the removal issue. On appeal, CRLP

again asserts that Mike Casey was removed for malfeasance and therefore his

consent was no longer required.

[¶26.] As previously noted, the motion to dismiss became a motion for

summary judgment. In a summary judgment proceeding, “[t]he burden is on the

moving party to clearly show an absence of any genuine issue of material fact and

an entitlement to judgment as a matter of law.” Dakota Indus., Inc. v.

Cabala’s.com, Inc., 2009 SD 39, ¶ 10, 766 NW2d 510, 513 (quoting Hayes v. N. Hills

Gen. Hosp., 1999 SD 28, ¶ 12, 590 NW2d 243, 247). “While we often distinguish

between the moving and non-moving party in referring to the parties’ summary

judgment burdens, the more precise inquiry looks to who will carry the burden of

proof on the claim or defense at trial.” Id. ¶ 11 (quoting Zephier v. Catholic Diocese

________________________
(. . . continued)
The CRLP Agreement further provided for permissive admission of new
general partners. The agreement provides: “Additional General partners
may be admitted as provided in Section XV.C.” CRLP Agreement § VI.C.
Section XV.C.2 provides in part: “Before all multiple General Partners or a
sole General partner serving without a Designated Successor General
partner withdraw, additional General Partners or Designated Successor
General Partners may be appointed by 70 Percent in Interest.” CRLP
Agreement § XV.C.2. Because the unanimous vote at the December 2006
meeting exceeded the 70% requirement, and because Pauline timely assigned
her interests, it appears that Mike Casey may have been elected as a general
partner under these provisions even without the waiver by unanimous
consent.

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of Sioux Falls, 2008 SD 56, ¶ 6, 752 NW2d 658, 662). Thus, CRLP, as the party

affirmatively asserting Mike’s removal for malfeasance, had the initial summary

judgment burden to establish the absence of genuine issues of material fact and

entitlement to judgment on this issue as a matter of law.

[¶27.] CRLP met their initial burden by introducing the removal resolution

indicating that Mike had been removed for malfeasance. The resolution, dated July

28, 2008, was signed by a majority of the interests in CRLP and cited a host of acts

of alleged malfeasance supporting Mike’s removal. 10 Mike Casey did not dispute

the allegations of malfeasance, and the resolution established a prima facie case of

removal for malfeasance. “A prima facie case is established for summary judgment

purposes when there ‘are facts in evidence which if unanswered would justify

persons of ordinary reason and fairness in affirming the question which the plaintiff

is bound to maintain.’” Dakota Indus., 2009 SD 39, ¶ 14, 766 NW2d at 514 (quoting

Fin-Ag, Inc. v. Pipestone Auction Livestock Mkt., Inc., 2008 SD 48, ¶ 33, 754 NW2d

29, 43) (citation omitted). Thus, CRLP met its initial summary judgment burden

10. While we express no opinion on the validity of the allegations, the July 28,
2008 resolution cites a litany of acts and omissions supporting Mike Casey’s
removal. The referenced acts of malfeasance include: encouraging Pauline
Casey to not make payments on the invoices submitted to her by CRLP and
MBC; advising Pauline Casey to not negotiate or mitigate; failing to involve
himself with CRLP until his termination at Bear Country; interrogating
MBC’s ranch hand; undermining CRLP’s credibility with Farm Credit
Services, insurance providers, and the United States Forest Service; driving
CRLP’s cost higher by intervening in the valid action to collect money due
and owing CRLP; failing to appear at legally noticed ranch meetings;
encouraging and assisting Pauline Casey in removing her cattle once CRLP
began the process of placing a lien on them; cutting chains and removing
locks from gates on CRLP property to move Pauline Casey’s cattle; and,
refusing to return calls or emails regarding CRLP business over the past
year.

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and the burden of production shifted to Mike Casey to identify disputes of facts or

law regarding the removal. Id. (citing SDCL 15-6-56(e)).

[¶28.] In response to CRLP’s prima facie showing, Mike did not dispute or

raise any issue of fact or law contesting malfeasance. He only argued that proper

“procedures” for removal under the CRLP Agreement were not followed, a question

of law we review de novo. Midnight Star, 2006 SD 98, ¶ 7, 724 NW2d at 336.

[¶29.] The CRLP Agreement regarding removal is unambiguous. The

relevant section provides in part: “The General Partner will . . . be removed upon at

least a Majority in Interest agreeing if: . . . the General Partner commits any act or

omission of fraud or malfeasance to the Partnership’s injury.” CRLP Agreement §

VI.D; see also SDCL 48-7-402(3) (“The general partner is removed as a general

partner in accordance with the partnership agreement.”). Further, the July 28,

2008 resolution reflects that 57% of the partnership interests voted for removal for

malfeasance. Mike Casey has not, however, identified (in the trial or this appellate

proceeding) any partnership provision suggesting that the removal procedure was

improper. 11 Because Mike Casey failed to identify any factual dispute regarding

11. On appeal, both Appellants and Appellees have asserted that the opposing
parties were required to utilize CRLP Agreement section XVII, an
alternative dispute resolution (ADR) provision requiring arbitration with
respect to partnership disputes. For the reasons expressed below, we decline
to consider the arbitration issues.

Initially before the circuit court, Mike Casey argued that the ADR provision
was “eschewed” when the Kevin Casey faction attempted to void Mike
Casey’s election as general partner at the March 12, 2008 meeting. Because
we conclude that Mike Casey remained a general partner after that meeting,
he prevailed on the underlying issue and we need not consider his ADR
argument as it could provide no additional relief. Similarly, because CRLP
(continued . . .)
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#25026

malfeasance, and because he has failed to identify any partnership provision

suggesting an improper removal procedure, Mike and Pauline failed to carry their

responsive summary judgment burden. Therefore, the circuit court erroneously

concluded that Mike Casey remained a general partner whose consent to sue was

necessary.

________________________
(. . . continued)
prevails on the issues it contends were subject to ADR, we also decline to
address CRLP’s ADR argument on its issues.

The other procedural irregularity raised by Mike Casey before the circuit
court involved the assertion that CRLP failed to follow the ADR provision
before they voted to remove him by the July 28, 2008 resolution. We believe
that this purported irregularity is without merit.

Mike Casey was removed pursuant to a CRLP vote under CRLP Agreement
section VI.D. See supra ¶ 29. That provision specifically allowed removal for
malfeasance. To require arbitration before conducting a partnership vote
under that controlling partnership removal provision would render
arbitration over removal not ripe for consideration. Until a formal
partnership vote, one could only speculate whether there were sufficient
votes and a bona fide dispute to arbitrate. Moreover, requiring arbitration
before voting under governing partnership provisions would make section
VI.D and all other partnership provisions meaningless. If arbitration were
required before partnership decisions were made as provided in controlling
partnership provisions, all partnership decisions would be governed by an
arbitrator rather than the partnership provision governing the issue. We do
not interpret agreements to make its provisions meaningless or in a manner
that leads to an absurd result. Nelson v. Schellpfeffer, 2003 SD 7, ¶ 12, 656
NW2d 740, 743 (“[T]his Court is constrained from interpreting a contract
literally if doing so would produce an absurd result.” (citation omitted));
Estate of Fisher, 2002 SD 62, ¶ 14, 645 NW2d at 846 (“A contract should not
be interpreted in a manner that renders a portion of it meaningless.”
(citation omitted)).

Mike and Pauline Casey finally argue that the breach of contract claims
against Pauline were subject to ADR. However, this was not argued before
the circuit court. “We have repeatedly stated that we will not address for the
first time on appeal issues not raised below.” Hall, supra n 1.

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Conclusion

[¶30.] MBC’s breach of contract claim against Pauline Casey arose in the

ordinary course of MBC’s partnership business of leasing its real property.

Initiating legal remedies to enforce such a partnership debt against a third party

was a matter within the ordinary course of MBC business. Because the partnership

agreement authorized ordinary course of business acts upon a simple majority vote

of the partnership interests, the circuit court erred in concluding that absent

unanimous consent, MBC’s suit was unauthorized.

[¶31.] Mike Casey became a general partner of CRLP upon the unanimous

vote of the partners and the timely transfer of Pauline Casey’s CRLP interests. Any

CRLP partnership provisions that may have been violated with regard to the

election and transfer were waived. Nevertheless, Mike Casey failed to raise a

disputed issue of fact or law in response to CRLP’s summary judgment showing that

Mike Casey was subsequently removed. Because, for purposes of this summary

judgment proceeding, we must therefore assume that Mike Casey was removed as a

general partner, his consent was not necessary to maintain this suit. Because Mike

Casey’s consent to sue is not necessary, the circuit court erred in concluding that

CRLP’s suit was unauthorized.

[¶32.] Reversed.

[¶33.] GILBERTSON, Chief Justice, and KONENKAMP, MEIERHENRY,

and SEVERSON, Justices, concur.

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