Walsh v. Ellingson Agency

No. 14946 I N THE SUPREME COURT OF THE STATE O M N A A F OTN 1980 G E O Y J. WALSH, RG R P l a i n t i f f and Respondent, ELLINGSON AGENCY, a Montana C o r p o r a t i o n , and F U SEASONS M T R I N N , O R OO a Montana C o r p o r a t i o n , Defendant and A p p e l l a n t . Appeal from: D i s t r i c t Court of t h e Eleventh J u d i c i a l D i s t r i c t , Honorable R o b e r t H o l t e r , J u d g e p r e s i d i n g . Counsel o f Record: For Appellant: Murray, Kaufman, V i d a l and Gordon, K a l i s p e l l , Montanp ., --, - - ./'*.;'/ . r- . , F o r Respondent: Warden, C h r i s t i a n s e n and J o h n s o n , K a l i s p e l l , Montana S u b m i t t e d on b r i e f s : A p r i l 2 5 1980 ~ e c i d e d :J u l y 2 2 , 1980 Filed: Clerk Mr. Chief J u s t i c e Frank I. Haswell d e l i v e r e d t h e Opinion of the Court. Plaintiff-respondent G r e g o r y Walsh b r o u g h t this action f o r s p e c i f i c performance of a real estate sales contract in the F l a t h e a d County D i s t r i c t Court. The c o u r t awarded s p e c i f i c p e r - f o r m a n c e and t h e two c o r p o r a t e d e f e n d a n t s a p p e a l . I n l a t e F e b r u a r y o r e a r l y March o f 1977 G r e g o r y Walsh c o n t a c t e d Chet E l l i n g s o n a t t h e E l l i n g s o n Agency, a n i n s u r a n c e and real estate corporation, c o n c e r n i n g a n a d v e r t i s e d p a r c e l of real estate. A f t e r f i n d i n g t h e p r i c e p r o h i b i t i v e on t h i s p i e c e of property, he d e t a i l e d h i s needs t o Mr. Ellingson. Walsh was looking for a l o t 150' by 300' or larger located near a grocery store i n order to construct an apartment complex. Mr. Ellingson showed Walsh a l o t t h a t he t h o u g h t m i g h t meet W a l s h l s n e e d s . The l o t was on t h e s o u t h e a s t s i d e o f K a l i s p e l l n e a r R o s e a u r s ' and t h e Outlaw Inn. E l l i n g s o n t o l d W a l s h t h a t h e owned t h e p r o p e r t y w i t h II some p a r t n e r s 1 ' a n d t h a t i t was f o r s a l e f o r $ 3 0 , 0 0 0 . On M a r c h 1 7 , 1 9 7 7 , W a l s h r e t u r n e d t o t h e E l l i n g s o n A g e n c y and t o l d Chet E l l i n g s o n t h a t h e w i s h e d t o buy the property for $29,000 cash. A buy-sell a g r e e m e n t was d r a f t e d and s i g n e d by both parties, and G r e g Walsh g a v e E l l i n g s o n $ 1 , 0 0 0 i n e a r n e s t money. A c l o s i n g d a t e of A p r i l 5 , 1977 was s e t . P r i o r t o March 17 t h e o t h e r owners of t h e p r o p e r t y had not been disclosed. Walshls testimony reveals that on t h e d a y h e f i r s t saw t h e p r o p e r t y Chet E l l i n g s o n s a i d , " I a n d my p a r t n e r s own t h e p i e c e o f property" and " t h a t [ $ 2 9 , 0 0 0 ] was the l o w e s t we c a n go." Ellingson testified, "I h a d t o l d him [Walsh] t h a t I d i d h a v e some p a r t n e r s a n d I j u s t s a i d I thought i t would be okay." Mr. Ellingson a l s o t e s t i f i e d t h a t he never t o l d Gregory Walsh t h a t he had a u t h o r i t y t o bind o t h e r s and t h a t he implied that corporate resolutions from t h e o t h e r people were necessary. - 2 - S h o r t l y a f t e r March 1 7 , 1 9 7 7 , Walsh r e c e i v e d a t i t l e i n s u r a n c e p o l i c y which r e v e a l e d t h a t t h e p r o p e r t y was owned by t h e E l l i n g s o n Agency and F o u r S e a s o n s Motor I n n a s t e n a n t s in common. This i s the f i r s t t i m e t h a t W a l s h l e a r n e d who t h e o t h e r "partners" were. On A p r i l 5 , 1 9 7 7 , G r e g o r y Walsh went to the Ellingson Agency and t o l d M r . E l l i n g s o n t h a t h e was r e a d y t o w r i t e a c h e c k pursuant t o the buy-sell agreement. Mr. E l l i n g s o n t o l d Walsh t h a t he could not get h i s partners t o s e l l , and he o f f e r e d t o r e t u r n the $1,000. Walsh would n o t a c c e p t t h e r e t u r n of h i s e a r - n e s t money. T h e F o u r S e a s o n s M o t o r I n n i s a c o r p o r a t i o n owned b y three brothers, C o n , Dan a n d E v e r e t t L u n d g r e n . Con L u n d g r e n , a vice-president and d i r e c t o r of Four Seasons, t e s t i f i e d t h a t Chet E l l i n g s o n h a d no a u t h o r i t y t o s e l l t h e p r o p e r t y and h a d n e v e r approached Four Seasons concerning a s a l e of the property. C h e t E l l i n g s o n a l s o t e s t i f i e d t h a t h e h a d no a u t h o r i t y t o act f o r t h e Four Seasons b u t that he thought t h e s a l e would be acceptable t o t h e Four Seasons. He a l s o s t a t e d t h a t h e n e v e r t o l d Walsh t h a t h e would h a v e t o d e a l o r t a l k t o h i s co-owner to make a r r a n g e m e n t s f o r t h e s a l e a s f a r a s t h e b u y - s e l l agreement i s concerned. Mr. Ellingson further testified t h a t he is a l i c e n s e d r e a l e s t a t e broker and t h a t he has been i n b u s i n e s s i n t h e K a l i s p e l l a r e a f o r twenty years. T e s t i m o n y was a l s o a d d u c e d c o n c e r n i n g a p r i o r land h o l d i n g b e t w e e n E l l i n g s o n Agency and F o u r S e a s o n s . According t o the testimony, t h e two c o r p o r a t i o n s h a d p u r c h a s e d a n o t h e r p a r c e l of l a n d w h i c h was s o l d i n 1 9 7 5 . C h e t E l l i n g s o n was a p p r o a c h e d b y a n i n d i v i d u a l c o n c e r n i n g t h e s a l e of the f i r s t parcel. He t e s t i f i e d t h a t h e t a l k e d i t o v e r w i t h Con L u n d g r e n a n d t h e y d e c i d e d on a p r i c e t o o f f e r t h e p r o s p e c t i v e buyer. The o f f e r was a c c e p t e d and t h e proceeds were e q u a l l y d i v i d e d between the E l l i n g s o n Agency and t h e F o u r S e a s o n s . Ellingson testified that both r e a l e s t a t e d e a l i n g s were investments f o r p r o f i t between long-time friends. The s u b j e c t p r o p e r t y a l s o h a s a b u i l d i n g on i t which i s suitable for a residence. Chet E l l i n g s o n t e s t i f i e d t h a t h e mana- ges the property, "so t o speak." He r e c e i v e s rent and keeps l e d g e r s of t h e r e c e i p t s which a r e used t o pay t a x e s and maintenance. Plaintiff G r e g o r y Walsh f i l e d a c o m p l a i n t on November 18, 1977, s e e k i n g t h e e x e c u t i o n and d e l i v e r y of a warranty deed t o t h e s u b j e c t p r o p e r t y o r i n t h e a l t e r n a t i v e a q u i t c l a i m deed of Ellingson's interest i n t h e p r o p e r t y and a c t u a l damages a s reim- bursement for expenses occasioned a s a r e s u l t of the defendants' r e f u s a l t o perform. Plaintiff a l l e g e d t h a t Chet E l l i n g s o n repre- s e n t e d t h a t h e was t h e agent of t h e o t h e r o w n e r s a n d was authorized t o contract t o s e l l the property. I t was further a l l e g e d t h a t Chet E l l i n g s o n had apparent a u t h o r i t y t o s e l l t h e p r o p e r t y by r e a s o n of h i s s t a t u s a s t h e p r e s i d e n t of Ellingson Agency and a s a l i c e n s e d r e a l e s t a t e b r o k e r . The t r i a l b e f o r e t h e D i s t r i c t C o u r t , s i t t i n g without a jury, was c o n c l u d e d on A p r i l 5 , 1979. The c o u r t ' s f i n d i n g s and c o n c l u s i o n s w e r e e n t e r e d o n May 2 3 , 1979. The c o u r t made t h e following relevant f i n d i n g s and c o n c l u s i o n s : t h a t Chet E l l i n g s o n made r e f e r e n c e t o h i s o w n e r s h i p o f the property with h i s "partners" without i d e n t i f y i n g them; that plaintiff d i d n o t know nor could he i n f e r t h a t the "partners" referred t o were "persons or e n t i t i e s extraneous t o E l l i n g s o n Agency"; that the buy-sell a g r e e m e n t was d r a f t e d by C h e t E l l i n g s o n and was d u l y e x e c u t e d and I1 a p p e a r s c l e a r and complete on i t s f a c e and does not appear t o require t h e s i g n a t u r e of any a d d i t i o n a l party"; that plaintiff tendered t h e $28,000 b a l a n c e due under t h e b u y - s e l l agreement but Mr. Ellingson refused t o t e n d e r a deed t o t h e p r o p e r t y ; that the defendants "are engaged i n a partnership involving the purchase of r e a l e s t a t e on a p a r c e l by p a r c e l b a s i s for later sale at a profit"; t h a t Chet E l l i n g s o n a c t e d a s a n a g e n t of the partnership and had t h e " o s t e n s i b l e authority" of both defendants to contract t o s e l l the subject property; that the buy-sell agreement is c o m p l e t e on i t s f a c e and s p e c i f i c a l l y e n f o r c e a b l e a s a g a i n s t - 4 - t h e i n t e r e s t s of b o t h d e f e n d a n t s i n t h e s u b j e c t p r o p e r t y . J u d g m e n t w a s e n t e r e d a g a i n s t t h e d e f e n d a n t s o n May 3 0 , 1979. The d e f e n d a n t s were o r d e r e d t o s p e c i f i c a l l y p e r f o r m t h e terms of the buy-sell a g r e e m e n t by c o n v e y i n g t h e i r interests in t h e s u b j e c t p r o p e r t y by w a r r a n t y deed. Two i s s u e s a r e p r e s e n t e d o n a p p e a l : ( 1 ) Whether t h e r e was s u f f i c i e n t e v i d e n c e t o s u p p o r t a f i n d i n g t h a t defendants were a p a r t n e r s h i p as tenants i n common owners of certain real property; and (2) Whether Chet E l l i n g s o n had a u t h o r i t y t o c o n t r a c t to s e l l t h e s u b j e c t p r o p e r t y on b e h a l f of both defendants. If t h e D i s t r i c t C o u r t was c o r r e c t in concluding that a p a r t n e r s h i p e x i s t s between t h e a p p e l l a n t s , the second i s s u e i s a n s w e r e d by s e c t i o n 3 5 - 1 0 - 3 0 1 ( 1 ) , MCA, which p r o v i d e s : "Every p a r t n e r i s an a g e n t of t h e p a r t n e r s h i p f o r t h e purpose of i t s b u s i n e s s , and t h e a c t of every partner, including the execution i n the p a r t n e r s h i p name o f a n y i n s t r u m e n t , f o r a p p a r e n t l y c a r r y i n g o n i n t h e u s u a l way t h e b u s i n e s s of t h e p a r t n e r s h i p of which he i s a member b i n d s t h e p a r t n e r s h i p u n l e s s t h e p a r t n e r s o a c t i n g h a s i n f a c t no a u t h o r i t y t o a c t f o r t h e p a r t n e r s h i p i n t h e p a r t i c u l a r m a t t e r and t h e p e r s o n w i t h whom h e i s d e a l i n g h a s k n o w l e d g e o f t h e f a c t t h a t h e h a s no s u c h a u t h o r i t y .'I Chet Ellingson represented t h a t he and h i s p a r t n e r s owned t h e p r o p e r t y , a n d t h e r e s p o n d e n t h a d no k n o w l e d g e t h a t h e did not have a u t h o r i t y t o s e l l the property. Thus, if a partnership exists, i t i s bound by t h e c o n t r a c t d r a f t e d and s i g n e d by Chet E l l i n g s o n on b e h a l f of t h e E l l i n g s o n Agency. Consequently, we m u s t a d d r e s s t h e s o l e i s s u e o f w h e t h e r o r n o t t h e r e was s u b s t a n t i a l e v i d e n c e t o s u p p o r t t h e t r i a l c o u r t ' s d e t e r m i n a t i o n of t h e e x i s t e n c e of a partnership. It i s w e l l e s t a b l i s h e d t h a t a p a r t n e r s h i p may b e c r e a t e d f o r t h e p u r c h a s e and s a l e of real estate for a profit. Harmon v. Martin (19471, 7 1 N.E.2d 74, 395 Ill. 595; 68 C.J.S. Partnership 56. Pursuant t o s e c t i o n 35-10-202(2), MCA, t h e h o l d i n g of pro- perty as tenants i n common i s n o t in itself sufficient to e s t a b l i s h t h e e x i s t e n c e of a partnership, however, "it is well settled, that a p a r t n e r s h i p c a n a c q u i r e r e a l e s t a t e by h a v i n g t h e partners take t i t l e as cotenants." R o b e r t s o n v. Robertson (19781, Mont. , 5 9 0 P.2d 1 1 3 , 1 1 6 , 35 St.Rep. 1889, 1892. In general a partnership r e q u i r e s an agreement between t h e p a r t i e s w h i c h may b e o r a l o r w r i t t e n , e x p r e s s o r i m p l i e d by c o n d u c t . G u s t a f s o n v. Taber (19511, 1 2 5 Mont. 225, 2 3 4 P.2d 471; Robertson v. Robertson, supra. T h e r e n e e d b e no p a r t n e r s h i p name a n d a p a r t n e r s h i p w i l l be found i f persons engage i n a venture for t h e i r mutual benefit or p r o f i t , C u t l e r v. Bowen ( U t a h , 19751, 543 P.2d 1349, and i f persons e n t e r i n t o an informal agreement to p u r c h a s e a n d l a t e r s e l l l a n d t h e r e n e e d b e no e v i d e n c e t h a t they d i s c u s s e d any terms of the agreement o t h e r than equal ownership of the property purchased for l a t e r sale. S e e M a t h i s v. Meyeres ( A l a s k a 1 9 7 8 1 , 574 P.2d 447. The e v i d e n c e r e v e a l s t h a t the appellant c o r p o r a t i o n s had previously bought and s o l d a n unimproved lot. The p r o p e r t y was held a s a tenancy i n common a n d t h e c o r p o r a t i o n s m a d e e q u a l c o n t r i b u t i o n s and r e c e i v e d e q u a l d i s t r i b u t i o n s of the proceeds. T h e s u b j e c t p r o p e r t y was a l s o owned b y t h e a p p e l l a n t s a s t e n a n t s i n common w i t h e a c h c o n t r i b u t i n g e q u a l s h a r e s o f the purchase price. The p u r p o s e o f b o t h p u r c h a s e s was to s e l l the property for a profit, and Chet E l l i n g s o n r e p r e s e n t e d t h a t he and "partners" owned t h e s u b j e c t p r o p e r t y . The E l l i n g s o n Agency collected rent from t h e s u b j e c t p r o p e r t y and k e p t r e c o r d s of the amounts c o l l e c t e d . The r e n t p r o c e e d s w e r e u s e d t o pay p r o p e r t y t a x e s and m a i n t a i n t h e s t r u c t u r e ' . No r e n t d i s t r i b u t i o n s w e r e m a d e t o e i t h e r of the tenants i n common. On t h e b a s i s o f t h i s evidence the District Court concluded t h a t the appellants "are engaged i n a p a r t n e r s h i p i n v o l v i n g t h e purchase of r e a l e s t a t e on a p a r - c e l by p a r c e l b a s i s for l a t e r sale a t a profit'' and t h a t "Chet E l l i n g s o n a c t e d a s an agent of t h e p a r t n e r s h i p f o r t h e purpose of c a r r y i n g on t h e p a r t n e r s h i p b u s i n e s s . " With r e g a r d t o t h e s t a n d a r d of review, t h i s Court has repeatedly s t a t e d i t w i l l n o t o v e r t u r n f i n d i n g s of f a c t and c o n c l u s i o n s of law i f s u p p o r t e d by s u b s t a n t i a l e v i d e n c e and by t h e law. Evidence w i l l be viewed i n t h e l i g h t most favorable to the prevailing party. R u l e 5 2 , M.R.Civ.P.; Luppold v. Lewis (19771, 1 7 2 Mont. 280, 5 6 3 P.2d 5 3 8 ; M o r g e n & Oswood C o n s t r u c t i o n Co. v. Big Sky of Montana, Inc. (19761, 1 7 1 Mont. 268, 557 P.2d 1017. The judgment of t h e D i s t r i c t Court i s presumed t o be c o r r e c t and w i l l be u p h e l d u n l e s s c l e a r l y shown t o be e r r o n e o u s ; t h e burden of such showing i s upon t h e a p p e l l a n t . Kamp v . First N a t i o n a l B a n k a n d T r u s t Co. (19731, 1 6 1 Mont. 1 0 3 , 5 0 4 P.2d 987. I n viewing t h e e v i d e n c e i n t h e l i g h t most favorable to the respondent, we c a n n o t f i n d t h e j u d g m e n t of the D i s t r i c t Court t o be c l e a r l y erroneous. T h e r e was s u b s t a n t i a l e v i d e n c e t o s u p - p o r t a f i n d i n g of t h e e x i s t e n c e of a p a r t n e r s h i p by r e a s o n of the appellants' conduct with regard t o t h e p a s t and p r e s e n t real estate transactions. As a r e s u l t of t h e e x i s t e n c e of a part- n e r h i p and s e c t i o n 35-10-301(1), MCA, t h e a p p e l l a n t s a r e bound by the buy-sell agreement e x e c u t e d by t h e E l l i n g s o n Agency. The a p p e l l a n t s s t r o n g l y r e l y on t h i s C o u r t ' s f i n d i n g of n o p a r t n e r s h i p i n I v i n s v. Hardy (19471, 1 2 0 Mont. 35, 1 7 9 P.2d 745. I n I v i n s the D i s t r i c t Court found a p a r t n e r s h i p existed between tenant-in-common owners of real estate; however, this Court reversed, finding that t h e p a r t n e r s h i p was formed a f t e r t h e purchase of the interest i n land. W e r e we f a c e d w i t h t h e same f a c t s today, we w o u l d find sufficient evidence to support the District Court's finding in Ivins that t h e r e a l e s t a t e was h e l d a s partnership property. W distinguished Ivins e on t h e facts in R o b e r t s o n v. Robertson, s u p r a , however; t o d a y we a r e c o m p e l l e d t o e x p r e s s l y o v e r r u l e I v i n s t o t h e e x t e n t of the f i n d i n g of no p a r t - nership i n existence with respect t o t h e purchase and ownership of real estate. The judgment of the D i s t r i c t Court is affirmed. \ Chief J u s t i c e We concur: