Mandate-Rule Remands and RUPA Default Winding Up: No Implied Override, No In-Kind Inventory Distribution

Case: Ziemann v. Grosz, 2026 ND 6 Court: Supreme Court of North Dakota Date: 2026-01-15

I. Introduction

Ziemann v. Grosz returns to the Supreme Court of North Dakota after a prior appeal, Ziemann v. Grosz, 2024 ND 166, 10 N.W.3d 801 (“Ziemann I”), which held that the district court erred by failing to apply North Dakota’s statutory default partnership winding-up provisions. On remand, the district court applied the default capital-account and winding-up rules, credited Juanita Grosz for property she contributed, found Jason Ziemann made minimal credited contributions, denied Grosz an in-kind distribution of remaining inventory, and ordered dissolution and winding up.

The central issues in this second appeal/cross-appeal were (1) whether the district court complied with the Supreme Court’s limited remand mandate; (2) whether the partners had an express or implied agreement overriding statutory default rules on capital accounts and dissolution; (3) whether Ziemann’s “sweat equity” could be treated as a capital contribution under an agreement; and (4) whether Grosz could receive remaining partnership inventory in kind or obtain a buyout opportunity.

II. Summary of the Opinion

The Supreme Court affirmed. It held the district court carried out the narrow mandate from Ziemann I by applying default partnership winding-up provisions absent proof of a contrary agreement. The Court upheld the district court’s factual findings that no dissolution/winding-up agreement existed (express or implied) to override the default capital-account rules. It also affirmed that Grosz was not entitled to an in-kind distribution of inventory under N.D.C.C. § 45-16-02, absent agreement otherwise. Finally, it treated the attempted appeal from an order as an appeal from a subsequently entered consistent judgment.

III. Analysis

A. Precedents Cited

1. Ziemann v. Grosz, 2024 ND 166, 10 N.W.3d 801 (“Ziemann I”)

Ziemann I supplied both the governing legal framework and the remand instruction. The Court previously held the district court erred by not applying N.D.C.C. § 45-20-07 default winding-up provisions and emphasized that these are default rules that do not apply if partners agreed otherwise (referencing N.D.C.C. § 45-13-03). Importantly, Ziemann I stated: “Ziemann has not identified any evidence the parties discussed or agreed to specific winding up provisions that differ from the statutory defaults.”

In 2026 ND 6, that statement becomes decisive: the district court’s post-remand fact-finding (no agreement to override defaults) is aligned with the Supreme Court’s earlier observation and thus withstands clear-error review.

2. Roth v. Meyer, 2025 ND 116, 23 N.W.3d 131 and Walstad v. Walstad, 2013 ND 176, 837 N.W.2d 911

These cases anchor the “mandate rule,” described as a specific application of law of the case. Roth v. Meyer (quoting Walstad v. Walstad) supplies the principle that, on remand, the district court must follow appellate directions and carry the mandate into effect according to its terms. In Ziemann, the Court uses these authorities to frame the inquiry narrowly: not whether the Supreme Court prefers a different outcome, but whether the district court faithfully implemented the remand instruction.

3. Carlson v. Carlson, 2011 ND 168, 802 N.W.2d 436

Carlson v. Carlson supports the standard of review and the core evidentiary question: whether partners agreed to override default statutory rules is a factual finding reviewed for clear error. The Court in Ziemann deploys Carlson to reinforce that, even if alternative interpretations of the parties’ conduct exist, appellate intervention is constrained unless the finding is clearly erroneous.

4. Taylor v. Taylor, 2022 ND 39, 970 N.W.2d 209

Procedurally, the parties first appealed from an order rather than a judgment. The Supreme Court issued a limited remand so the district court could enter judgment. Citing Taylor v. Taylor, the Court treated the attempted appeal from an order for judgment as an appeal from a subsequently entered consistent judgment. This preserves appellate review without penalizing a common procedural misstep, so long as a consistent final judgment is later entered.

5. Petersen v. Petersen, 169 N.W.2d 228 (Minn. 1969)

The district court referenced Petersen v. Petersen when explaining that conduct may show a partnership exists without establishing an equal division of total assets. While not a controlling North Dakota decision, it illustrates a key analytical separation: “formation/operation” evidence does not automatically prove a specific dissolution or liquidation entitlement.

B. Legal Reasoning

1. The mandate rule constrained the remand inquiry

The Supreme Court emphasized that the remand in Ziemann I was “narrow”: apply statutory default winding-up rules and enter judgment consistent with that decision. Under Roth v. Meyer and Walstad v. Walstad, the district court’s task was not to relitigate the entire partnership arrangement, but to settle accounts and direct winding up under the statute unless a contrary agreement existed.

2. Default statutory framework: capital accounts and cash settlement

The Court reaffirmed the mechanics described in Ziemann I:

• N.D.C.C. § 45-16-01(1) establishes default “capital account” credits/charges (credits for contributed money/property net of liabilities; charges for losses and distributions).
• N.D.C.C. § 45-20-07 governs winding up: after obligations, any surplus must be applied to pay in cash the net amount distributable; partners are entitled to settlement of accounts; liquidation profits/losses are credited/charged; distributions equal the excess of credits over charges.
• N.D.C.C. § 45-13-03 confirms these are default rules that yield to a contrary partnership agreement.

The legal fulcrum is evidentiary: did the parties agree to override these defaults for dissolution/winding up? The district court found no such agreement, and the Supreme Court found no clear error.

3. “Sweat equity” argument: legally plausible, factually unproven here

Ziemann pressed a conceptual distinction: the statute’s prohibition on “remuneration” for services is not necessarily a bar to partners agreeing that services count as capital. The Supreme Court did not definitively resolve the abstract proposition because it found the predicate fact missing: the district court did not find an express or implied agreement treating Ziemann’s labor/management/expenses as a capital contribution to be credited upon dissolution.

The Court also accepted the district court’s practical distinction between (a) an operational profit-sharing arrangement “to the last sale” during business operations and (b) a dissolution/winding-up agreement changing statutory liquidation accounting. Evidence supporting the former does not compel a finding of the latter.

4. No implied agreement to override defaults: clear-error deference

Ziemann argued the “great weight” of evidence compelled finding an implied agreement that capital accounts would reflect a 70/30 allocation tied to ultimate sales. The Supreme Court treated this as a classic fact dispute committed to the district court on remand and held the no-implied-agreement finding was not clearly erroneous on this record—particularly given Ziemann I’s earlier observation that Ziemann had identified no evidence of specific winding-up provisions.

5. In-kind distribution barred absent agreement

On Grosz’s cross-appeal, the Court relied on N.D.C.C. § 45-16-02: “A partner has no right to receive, and may not be required to accept, a distribution in kind.” The Court bolstered this reading with comments to RUPA § 402 and § 807 emphasizing an “in-cash” rule that avoids valuation disputes inherent in unwanted in-kind distributions. Absent a contrary agreement, the district court correctly denied Grosz an in-kind inventory award.

C. Impact

• Stronger practical force for default winding-up rules: The decision underscores that, in partnership dissolutions under North Dakota’s RUPA-based statutes, courts will apply default capital-account and cash-settlement rules unless parties can point to concrete evidence of alternative dissolution terms.
• Formation/operations evidence is not enough: Even years of operating with a certain split may not establish a dissolution/winding-up override. Parties who want a non-default liquidation formula should document dissolution provisions explicitly.
• “Sweat equity” must be proven as an agreed capital term: The Court signals that arguments about service-as-capital live or die on proof of agreement; absent that, statutory account-credit rules will likely treat services differently than property contributions.
• Cash is the default exit mechanism: The reaffirmation of N.D.C.C. § 45-16-02 makes clear that in-kind distributions are disfavored absent agreement, reducing post-dissolution valuation and allocation battles over unique or hard-to-value assets like inventory.
• Remand discipline: By centering the mandate rule, the opinion warns litigants that once the Supreme Court defines the remand scope, the case will not be reopened beyond that scope; appellate review will focus on compliance, not re-argument.

IV. Complex Concepts Simplified

• “Mandate rule” / “law of the case”: Once an appellate court decides an issue and sends the case back, the trial court must follow that instruction. The trial court cannot redo issues the appellate court settled, and the appellate court will later review whether the mandate was followed.
• “Default rules” (N.D.C.C. § 45-13-03): Statutory partnership rules are fallback terms that apply only when partners have not agreed to something different.
• “Capital account” (N.D.C.C. § 45-16-01): A running ledger for each partner: credits for what the partner put in (money/property) and charges for losses and what the partner took out. On dissolution, partners settle up based on net balances.
• “Winding up” (N.D.C.C. § 45-20-07): The process of closing the partnership: pay debts, liquidate assets, and distribute remaining value by settling partner accounts—typically in cash.
• “In-kind distribution” (N.D.C.C. § 45-16-02): Receiving property (like inventory) rather than cash. The statute generally forbids a partner from demanding property instead of cash unless the partners agreed otherwise.
• “Clearly erroneous” review: Appellate courts do not re-try facts. If the district court’s finding is plausible on the record, it stands even if another view is possible.

V. Conclusion

Ziemann v. Grosz, 2026 ND 6 is primarily a remand-compliance and default-rules decision. The Supreme Court affirmed because the district court implemented Ziemann I by applying statutory default capital-account and winding-up provisions in the absence of a proven contrary dissolution agreement, and by enforcing the statutory preference for cash (not in-kind) distributions. For partners and practitioners, the decision highlights the practical necessity of expressly addressing dissolution terms—especially when one partner claims “sweat equity” or when parties expect asset-by-asset outcomes rather than a cash accounting settlement.