Berbos v. Berbos

#28570-a-DG
2018 S.D. 82
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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JOE BERBOS and LISA BERBOS,
individuals,

JOE BERBOS REAL ESTATE
LIMITED PARTNERSHIP, a
South Dakota Limited Partnership,
and
JOE BERBOS MANAGEMENT,
LLC, a South Dakota Limited
Liability Company, Plaintiffs and Appellees,

v.

NICK BERBOS, an individual,

BERBOS FARMS GENERAL PARTNERSHIP,
a South Dakota General Partnership,

NICK BERBOS REAL ESTATE
LIMITED PARTNERSHIP, a
South Dakota Limited Partnership, Defendants and Appellees,

NICK BERBOS MANAGEMENT, LLC,
a South Dakota Limited Partnership,
and
VICTORIA PERRY, individually, and CRAIG
PERRY and JAMES PERRY, Surviving Trustees
of the Trust created by the Last Will and Testament
of Gerald Perry, Deceased, Applicants and Appellants.

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APPEAL FROM THE CIRCUIT COURT OF
THE FIFTH JUDICIAL CIRCUIT
BROWN COUNTY, SOUTH DAKOTA
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THE HONORABLE RICHARD A. SOMMERS
Judge
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CONSIDERED ON BRIEFS
ON OCTOBER 1, 2018
OPINION FILED 12/12/18
SANDER J. MOREHEAD of
Woods, Fuller, Shultz & Smith, P.C.
Sioux Falls, South Dakota Attorneys for plaintiffs and
appellees.

REED RASMUSSEN of
Siegel, Barnett & Schutz, LLP,
Aberdeen, South Dakota Attorneys for defendants and
appellees.

CARLYLE RICHARDS of
Richards, Tonner, Oliver,
Fischbach & Dell, LLP,
Aberdeen, South Dakota Attorneys for applicants and
appellants.

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GILBERTSON, Chief Justice

[¶1.] Landowners Victoria Perry, Craig Perry, and James Perry (Appellants)

entered into a farm lease/cash rent agreement with Berbos Farms General

Partnership (Berbos Farms). Joe and Lisa Berbos and Nick Berbos were partners

in Berbos Farms. Appellants sued Berbos Farms to recover unpaid cash rent under

the lease for the year 2015. During discovery in that litigation, Appellants realized

Joe and Lisa had filed a separate action in circuit court to dissolve Berbos Farms.

Appellants moved to intervene in the partnership dissolution action seeking to

preserve their right to payment of the 2015 cash rent in case Berbos Farms was

dissolved. The circuit court denied the Appellants motion and they appeal. We

affirm.

Facts and Procedural History

[¶2.] Appellants own and manage approximately 900 acres of cropland in

Edmunds County. On January 4, 2013, Appellants entered into a farm lease/cash

rent agreement with Berbos Farms. Nick signed the one-page lease on behalf of

Berbos Farms. Berbos Farms took possession of the farmland for three years: 2013,

2014, and 2015. Appellants claim Berbos Farms made timely payments on all cash

rent required by the lease until November 1, 2015. At that time, Appellants claim

Berbos Farms failed to pay the agreed cash rent of $56,196.

[¶3.] Appellants sued Berbos Farms and Nick and Joe individually to

recover the 2015 cash rent payment. Appellants commenced discovery and deposed

Joe and Lisa. During Joe’s deposition on March 30, 2017, Appellants discovered

that: (1) Nick was no longer representing Berbos Farms in obtaining rental land in

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South Dakota; (2) the relationship between Nick and Joe had become tense; and (3)

Joe and Lisa had commenced a lawsuit to dissolve Berbos Farms in April 2014.

Appellants moved for summary judgment, but the circuit court denied the motion on

October 5, 2017. As of the date of this appeal, the action to recover the cash rent is

still pending in circuit court.

[¶4.] Based on the information obtained in Joe’s deposition, the Appellants

moved to intervene as a matter of right pursuant to SDCL 15-6-24(a)(2) and

attached a proposed complaint in the Berbos Farms partnership dissolution lawsuit

on January 16, 2018. The proposed complaint in intervention raised the same

claims as the Appellants asserted in the lawsuit to recover the unpaid cash rent.

Joe and Nick opposed the motion to intervene. On March 2, 2018, the circuit court

held a hearing and denied the motion because: (1) there was a pending lawsuit that

had no relation to the partnership dissolution; (2) allowing the intervention would

open the door to any creditor or individual with claims against Berbos Farms to join

the dissolution lawsuit; and (3) permitting the intervention would allow Appellants

to unnecessarily discover the net worth and financial holdings of Berbos Farms. On

March 9, 2018, the circuit court entered a written order denying the motion.

Appellants appeal the circuit court’s order and ask this Court to review whether the

circuit court abused its discretion in denying the motion to intervene.

Analysis & Decision

[¶5.] We review a circuit court’s denial of a motion to intervene for an abuse

of discretion. In re Estate of Olson, 2008 S.D. 126, ¶ 4, 759 N.W.2d 315, 318. “An

abuse of discretion refers to a discretion exercised to an end or purpose not justified

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by, and clearly against reason and evidence.” O’Day v. Nanton, 2017 S.D. 90, ¶ 17,

905 N.W.2d 568, 572 (quoting Kaiser v. Univ. Physicians Clinic, 2006 S.D. 95, ¶ 29,

724 N.W.2d 186, 194).

[¶6.] “South Dakota’s court rule SDCL 15-6-24(a)(2) is almost identical to

Federal Rule of Civil Procedure 24(a) . . . . [and] governs intervention as a matter of

right . . . .” Olson, 2008 S.D. 126, ¶ 5, 759 N.W.2d at 318 (citations omitted).

SDCL 15-6-24(a)(2) provides:

Upon timely application anyone shall be permitted to intervene
in an action:
...
(2) When the applicant claims an interest relating to the
property or transaction which is the subject of the action and he
is so situated that the disposition of the action may as a
practical matter impair or impede his ability to protect that
interest, unless the applicant’s interest is adequately
represented by existing parties.

[¶7.] “The purpose of this rule is ‘to obviate delay and multiplicity of suits by

creating an opportunity to persons directly interested in the subject matter to join

in an action or proceeding already instituted.’” Olson, 2008 S.D. 126, ¶ 5,

759 N.W.2d at 318 (quoting In re D.M., 2006 S.D. 15, ¶ 4, 710 N.W.2d 441, 443).

“Intervention is strictly procedural and ‘intervention standards are flexible,

allowing for some tailoring of decisions to the facts of each case.’” Id. (quoting D.M.,

2006 S.D. 15, ¶ 4, 710 N.W.2d at 443). “[SDCL 15-6-24(a)(2)] is construed liberally,

and we resolve all doubts in favor of the proposed intervenors.” Id. (quoting United

States v. Union Elec. Co., 64 F.3d 1152, 1158 (8th Cir. 1995)). In applying this rule,

this Court utilizes the following tripartite test:

1) the party must have a recognized interest in the subject
matter of the litigation; 2) that interest must be one that might
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be impaired by the disposition of the litigation; and 3) the
interest must not be adequately protected by the existing
parties.

Id. (quoting D.M., 2006 S.D. 15, ¶ 5, 710 N.W.2d at 444).

[¶8.] Appellants argue that their motion to intervene should have been

granted under SDCL 15-6-24(a)(2). They claim that they have adequately shown an

interest in the partnership dissolution proceeding because they are owed unpaid

cash rent from the partnership. Appellants claim their ability to protect that

interest may be impaired or impeded by dissolution of the partnership and

disbursement of its assets. Appellants also argue that the circuit court’s findings

had no legal basis and that the findings improperly extended the requirements of

the statute.

[¶9.] To the contrary, Appellees argue that Appellants have failed to show:

(1) an interest relating to the partnership dissolution proceeding; and (2) a way in

which that interest would be impaired or impeded through the disposition of the

partnership dissolution proceeding. Appellees also contend that there is no need for

Appellants to intervene in the partnership dissolution suit because they already

possess a proper remedy to pursue their claim in the ongoing separate suit to obtain

the unpaid cash rent.

[¶10.] Appellants have shown a recognized interest in the partnership

dissolution lawsuit. As noted by the Appellees, “the issue in [the partnership

dissolution] litigation is whether Berbos Farms should be dissolved and, if so, how

its affairs should be wound up.” (Emphasis added.) The record indicates that

Berbos Farm partners Joe and Lisa sought to dissolve Berbos Farms. The

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dissolution suit is therefore governed by SDCL 48-7A-801(5), which provides in

pertinent part:

A partnership is dissolved, and its business must be wound up,
only upon the occurrence of any of the following events:
...
(5) On application by a partner, a judicial determination
that:
(i) The economic purpose of the partnership is
likely to be unreasonably frustrated;
(ii) Another partner has engaged in conduct
relating to the partnership business which makes it
not reasonably practicable to carry on the business
in partnership with that partner; or
(iii) It is not otherwise reasonably practicable to
carry on the partnership business in conformity
with the partnership agreement[.]

(Emphasis added.)

[¶11.] Notably, the statute provides that when a partnership is judicially

dissolved, the affairs of the partnership must be wound up. By placing the cash

rent farm lease in the record, the Appellants have shown that the partnership, at

least allegedly, has an obligation to pay them rent for 2015. Appellants also claim

that they never received the 2015 rent payment. Therefore, resolving all doubts in

favor of the Appellants, it is likely that the Appellants have an interest in the

partnership dissolution action as a creditor to Berbos Farms.

[¶12.] The Appellants have made no definite showing, however, that their

interest might be impaired by the disposition of the partnership dissolution

litigation. Appellants argue that if the assets of the partnership are inadequate to

cover its obligations to all creditors, the Appellants claim is in danger of being left

unpaid. However, the Appellants have failed to make any showing, either in their

complaint accompanying the motion to intervene or on appeal, that the partnership
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assets are insufficient to satisfy the claim for 2015 cash rent. This is particularly

true because the claim for cash rent remains disputed and unliquidated as it has

yet to be reduced to judgment. Additionally, the Appellants maintain the ability to

pursue their claim for unpaid rent—both against Berbos Farms and against Joe and

Nick as individuals—in the parallel litigation. See SDCL 48-7A-306; Action Mech.,

Inc. v. Deadwood Historic Pres. Comm’n, 2002 S.D. 121, ¶ 51, 652 N.W.2d 742, 756

(stating that individual partners generally remain jointly and severally liable for all

debts of a general partnership).

[¶13.] Finally, the operation of SDCL 48-7A-807 suggests that the Appellants’

interest will be protected—not impaired—in the event of Berbos Farms’ dissolution.

The clear and unambiguous text of SDCL 48-7A-807(a) provides that a dissolving

partnership’s assets, including the contributions of the partners, “must be applied to

discharge its obligations to creditors[.]” (Emphasis added.) Therefore, the

Appellants’ interest is as protected as that of any other similarly situated claimant

without regard to intervention in the dissolution action.

[¶14.] Because the Appellants have not shown that the claim for unpaid cash

rent might be impaired by the disposition of the partnership dissolution lawsuit, the

Appellants have failed to meet the tripartite test necessary for intervention as a

matter of right under SDCL 15-6-24(a)(2). The circuit court therefore did not abuse

its discretion in denying Appellants motion to intervene. We affirm.

[¶15.] KERN, JENSEN and SALTER, Justices, concur.

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