Westfall v. Anderson

No. 90-074

IN THE SUPREME COURT OF THE STATE OF MONTANA
1990

MICHAEL WESTFALL,
Plaintiff and Respondent,

RODNEY E. ANDERSON and
JERRY SOUTH,
Defendants and Appellants.

APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Larry W. Moran, Judge presiding.

COUNSEL OF RECORD:
For Appellant:
Larry Jent, Attorney at Law, Bozeman, Montana
McKinley Anderson, Attorney at Law, Bozeman, Montana
For Respondent:
Michael J. Lilly, Berg, Lilly, Stokes, Andriolo,
Tollesfsen & Schraudner, Bozeman, Montana

Submitted on Briefs: June 7, 1990

Filed: . Decided: July 30, 1990

'Clerk ..
Chief Justice J. A. Turnage delivered the Opinion of the Court.
The District Court for the Eighteenth Judicial District,
Gallatin County, entered judgment for plaintiff Westfall in this
suit for repayment of capital contributions to a dissolved
partnership. Defendants South and Anderson appeal. We affirm.
The issue is whether the District Court erred in ordering
South and Anderson to repay Westfall's capital contribution without
first deducting partnership liabilities.
In April 1984, Westfall, Anderson, and South formed a partner-
ship, by oral agreement, for the purpose of developing a sub-
division on certain real property in Gallatin County, Montana. The
partnership entered a contract to purchase the property for
$125,000. Westfall and South each contributed $5,100 toward a down
payment on the land. Anderson's contribution was to be his efforts
at selling lots for the partnership.
The partners made improvements to the property including
foundations on several lots and a well and a septic system on one
lot. Westfall and South each paid half the costs of improvements.
In the fall of 1984, an understanding was reached that
Westfall would withdraw from the partnership. Beginning on
September 28, 1984, all checks for the partnership were drawn on
a bank account entitled "South and Anderson Builders." The
signatures of both South and Anderson appeared on each check;
Westfall signed none. On December 18, 1984, Westfall deeded his
interest in the partnership's land to South and Anderson.
Almost four years later, Westfall filed this action to recover
his capital investment in the partnership. At trial, Westfall
testified that when he deeded his interest in the partnership
property to South and Anderson, they agreed to reimburse him for
his down payment on the land and for the costs he paid for
improvements to the property. South and Anderson, on the other
hand, testified that no such agreement had been made and that
Westfall should share responsibility for debts incurred for
improvements on the land up until December 18, 1984. They
contended that Westfall owed them money. The court, sitting
without a jury, found for Westfall and entered judgment in the
amount of $9,576.80 plus costs.

Did the District Court err in ordering South and Anderson to
repay Westfallts capital contribution without first deducting
partnership liabilities?
South and Anderson initially argue that the standard of review
in an equitable proceeding such as this one is de novo review,
under 3 3-2-204(5), MCA. That statute provides that in an
equitable proceeding, this Court must review all questions of fact
arising upon the evidence presented in the record. This Court has
recognized that review of findings of fact in an equitable case
must comply with not only 3 3-2-204 (5), MCA, but also with Rule
52(a), M.R.Civ.P., which requires that findings of fact be upheld
unless they are clearly erroneous. Rase v. Castle Mountain Ranch,
Inc. (Mont. 1981), 631 P.2d 680, 684, 38 St.Rep. 992, 996. In
equity cases, where the issues are close, a degree of deference
will be accorded the findings of the trial court, which is in a
better position to make decisions of fact. Rase, 631 P.2d at 684.
South and Anderson assert that the District Court erred in
finding that the partnership was dissolved on or before September
28, 1984, when Westfall ceased partnership activities. They con-
tend that the partnership was not dissolved until December 18,
1984, when Westfall deeded his interest in the property to them.
The District Court quoted 5 35-10-601, MCA, which defines the
dissolution of a partnership as the change caused by "any partner
ceasing to be associated in the carrying on as distinguished from
the winding up of the business." The record supports the court's
finding that Westfall completely ceased participation in the
partnership as of September 1984. We conclude that the court was
correct in concluding that the dissolution of the partnership
occurred in September 1984.
South and Anderson further argue that regardless of the date
of dissolution of the partnership, each partner must contribute
toward the partnership losses from his share of the profits. They
rely upon § 35-10-401(1), MCA. That section states that
[elach 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 and must contribute toward the losses, whether
of capital or otherwise, sustained by the partnership
according to his share in the profits.
However, as Westfall points out, the introduction to the above
subsection states that "[tlhe rights and duties of the partners in
relation to the partnership shall be determined, subiect to anv
asreement between them, by the following rules: . . ." (Emphasis
supplied.) Westfall testified that the partners had an agreement
between them that South and Anderson would repay him for his
capital investments to the partnership as of September 1984.
Additionally, the record supports the finding that in September
1984 there were no creditors of the partnership other than the

original mortgagor. We conclude that the court did not err in con-
cluding that Westfall was entitled to $9,576.80, the amount of his
contribution to the partnership.
Affirmed.

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Justice

We concur:

Justices -\3