No. 84-159
IN THE SUPREME COURT OF THE STATE OF MONTANA
1384
TRUCK INSURANCE EXCHANGE,
a Recriprocal and Inter-Insurance
Exchange,
Plaintiff and Appellant,
-vs-
INDUSTRIAL INDEMNITY CO. ,
Defendant and Respondent.
APPEAL FROM: The District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Thomas Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Morrow, Sedivy & Bennett, Bozeman, Montana
For Respondent :
Corette, Smith, Pohlman & Allen, Butte, Montana
Submitted on Briefs: June 28, 1984
Decided: October 1 , 1934
gt - .
Filed: ',. '
Clerk
Nr. Justice Frank B. Morrison, Jr. delivered the Opinion of
the Court.
This action was brought before the Eighteenth Judicial
District Court on cross-motions for summary judgment. The
motions were supported by depositions, briefs and memoranda.
Defendant and respondent, Industrial Indemnity's motion was
granted February 14, 1984. Judgment for Industrial Indemnity
was entered March 13, 1984. Truck Insurance appeals. We
vacate the March 13, 1984, judgment and remand, with
instructions to enter summary judgment for Truck Insurance.
Wilbur Kimm has been a grain and potato farmer in the
Gallatin Valley for a number of years. He owns his own land
and farming equipment and has developed his own storage
warehouses. Industrial I~demnity is the provider of the
insurance on his farm equipment, vehicles and liability for
farm operations.
Wilbur's son, William Kimm became an employee of Wilbur
in 1973. William ceased working for his father in 1976 and
started his own potato operation. By 1981 William owned one
acre of land on which he built a potato storage warehouse.
His potatoes are grown on land leased from other individuals.
William uses Wilbur's potato planter and grader when they are
needed, but owns several other pieces of farm equipment.
Truck Insurance is William's insurance provider.
William and Wilbur each grow approximately the same
amount of seed potatoes. The potatoes are stored together
and are advertised in three magazines under the name Wilbur
Kimm and Son.
William arranged to sell their seed potatoes to several
area farmers in the spring of 1981. Against Wilbur's advice,
William treated the potatoes with a formaldehyde/clorox
mixture prior to the sale. The treatment was to protect
against pathogens bacteria and the spread of airborne
diseases during transport and storage. Instead, the
treatment destroyed the seed potatoes and the various buyers
suffered crop damage.
The buyers filed claims against William. Truck
Insurance settled the claims for $174,985.83. In exchange,
the buyers each signed a covenant not to sue containing the
following language:
"IT IS FURTHER SPECIFICALLY AGREED by and between
the parties hereto that this agreement does not
preclude or prohibit WILLIAM KIMM or TRUCK
INSURANCE EXCHANGE from asserting a claim as
against WILBUR KIMM, or his insurer, seeking
contribution from said WILBUR KIMM, and in this
regard, this agreement shall be considered an
assignment by the undersigned to said WILLIAM KIMM
and TRUCK INSURANCE EXCHANGE of the undersigned's
right and interest in and to said claim as against
WILBUR KIMM. "
Truck Insurance then filed this complaint, seeking
contribution from Industrial Indemnity in the amount of
one-half the claims, $87,492.92. The action is based on
Truck Insurance's assertion that Wilbur Kimm and Son is
actually a partnership.
If Wilbur Kimm and Son is a partnership in the business
of raising potatoes, the Uniform Partnership Act, sections
35-10-101, MCA, et seq. applies. Section 35-10-401(1), MCA
states:
"Rules determining rights and duties of partners.
The rights and duties of the partners in relation
to the partnership shall be determined, subject to
any agreement between them, by the following rules:
" (1) Each partner shall be repaid his
contributions whether by way of capital or advances
to the partnership property and share equally in
the profits and surplus remaining after all
liabilities, including those to partners, are
satisfied - - contribute towards the losses,
and must
whether of capital or otherwise, sustained & the
partnershTp accordingto - share - - p r o f i t 3
- his in the
(emphasis added)
Therefore, if the business is a partnership, Wilbur, and thus
Industrial Indemnity as his insurer, is liable under a
contribution theory for a portion of the claims paid by
Wil1ia.m to the buyers. J. Crane and A. Gromberg, - -
Law of
Partnership, Section 65 (a) at 366-368 (1968) .
In his order finding no partnership and granting
Industrial Indemnity's motion for summary judgment, the trial
judge relied primarily on the Kimms' testimony that they did
not intend for a partnership to exist. Altl~ough the intent
of the parties is a major factor, Bender v. Bender (1965),
144 Mont. 470, 480, 397 P.2d 957, 962, " [i]f the facts bring
the arrangement within the definition of a partnership, the
parties cannot escape liability incident to that relationship
merely by saying that no such thing exists." Simons v.
Northern Pac. Ry. Co. (1933), 94 Mont. 355, 369, 22 ~ . 2 d609,
614. If the intended action of the parties creates a
partnership in fact, what the parties call their arrangement
or intend their arrangement to be is irrelevant.
A partnership is defined in section 35-10-201(1), MCA,
as "an association of two or more persons to carry on as
co-owners a business for profit." Section 35-10-202, MCA,
provides rules for determining whether a partnership exists.
Part 4 is particularly relevant here:
"Rules for determining the existence of a
partnership. In determining whether a partnership
exists, these rules shall apply:
" (4) The receipt by a person of a share of the
profits of a business is prima facie evidence that
such person is a partner in the business, but no
such inference shall be drawn if such profits were
received in payment:
(a) as a debt by installments or otherwise;
(b) as wages of an employee or rent to a landlord;
(c) as an annuity to a surviving spouse or
representative of a deceased partner;
(d) as interest on a loan, though the amount of
payment varies with the profits of the business;
(e) as the consideration for the sale of a
goodwill of a business or other property by
installments or otherwise."
Wilbur and William K i m have a joint bank account in the
name of K i m Seed. Buyers of potatoes pay one check to Kimm
Seed rather than two separate checks of equal value to
William and Wilbur. Expenses of the potato business,
including the wages of a shared hired man, diesel fuel for
the tractors, advertising, fertilizer and potato treatments,
are paid out of the account rather than each party writing an
expense check. The Kimms each raise approximately the same
number of potatoes so incur the same amount of expenses and
receive the same proceeds from the sale of their potatoes.
At the close of the season, Wilbur and William split the
money remaining in the account.
When questioned regarding the Kimms' practice of
splitting the proceeds of the account at the close of each
season, the Kimmsl accountant, Gary Spitzer stated:
"I wouldn't describe it as a share of the profits
because they would have other operating expenses
connected with it that they paid personally. I
would describe it as the excess of the receipts
over the disbursements in that account." Gary
Spitzer deposition, pp. 27-28.
No evidence of any separate, individual operating expense was
ever presented. By sha.ring the proceeds of the Kimm Seed
account equally, Wilbur and William Kimm are sharing "the
excess of receipts over disbursements." They are, in effect,
sharing profits equally.
It is undisputed that the testimony of Spitzer
established that none of the exceptions to section
35-10-202(4), MCA, apply in this case. Therefore, the
splitting of the profits in the K i m Seed account is prima
facie evidence of a partnership between Wilbur and William
Krr.
inn This prima facie evidence, coupled with the
advertising of the seed potatoes under the name Wilbur Kim1
and Son and the merging by the Kimms of resources and talents
for the growing of the potatoes, clearly preponderates
against the District Court's finding of no partnership.
Montana Farm Service Co. v. Marquart (1978), 176 Mont. 357,
360, 578 P.2d 315, 316-317. Further, since Wilbur and
William share in the profits of their partnership equally,
they must also share in the losses equally. Section
35-10-401 (1), MCA.
Thus, we vacate the order and judgment granting
Industrial Indemnity's motion for summary judgment and remand
the cause to the District Court for entry of an order and
judgment granting Truck Insurance's motion for summary
judgment and ordering Industrial Indemnity to pay $87,492.92
to Truck Insurance.
We concur:
%s^--R$,~h/~*
Chief Justlce
Justices
Mr. Justice L. C. Gulbrandson, dissenting.
I respectfully dissent.
The following facts are uncontroverted.
1. No federal, or state, partnership return was ever
filed for income tax purposes.
2. The joint bank account was credited for convenience
only, and was established at the suggestion of the
accountant, who knew the parties did not intend to operate
as partners.
3. Each party had his own identification number for
W-2 form purposes.
4. Each party had other farm operating expenses that
each paid personally.
5. Each party owned all necessary potato farming
equipment, except a p1ant.er and a cutter, to operate
independantly, but worked the seed potato properties jointly
so they would not have to duplicate that equipment.
5. Each party farmed approximately the same acreage,
and land lease payments were paid individually.
7. Each party carried separate liability insurance
coverage, and paid the premiums individually.
8. Registration costs, and advertising expenses were
halved by selling under a joint name.
9. Lab fees, involving the testing of approximately
46,000 plants, in a common plot, were reduced by using a
joint name.
10. Individually owned trucks were fueled out of
individually owned gas tanks, and each party paid personal
property tax, and maintenance expenses, on his own
equipment.
11. Each party paid his own utility and power costs
for his potato storage sheds.
12. The word "partnership" was never used by the
parties in the magazine advertising, or on shipping tags.
13. Neither party could borrow or loan money for the
other, and each borrowed individually to deposit funds in
the joint account.
14. Each party described the working arrangement as a
"trade of services."
15. William Kimm and Wilbur Kimm never considered the
working arrangement as a partnership.
16. Wilbur Kimm had previously been in an
unsatisfactory partnership, refused to be in a partnership,
and did not want his sons to be in partnership with him or
with each other.
In my view, the foregoing constitutes sufficient
evidence to find that no partnership existed, and I would
therefore affirm the trial judge.
.
~ustice/