No. 89-327
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
MARLOWE MEHL,
Plaintiff and Respondent,
-VS-
EUGENE MEHL,
Defendant and Appellant.
APPEAL FROM: District Court of the Fifteenth Judicial District,
In and for the County of Sheridan,
The Honorable M. James Sorte, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
David L. Irving; Glasgow, Montana
For Respondent:
Kevin T. Sweeney, Billings, Montana
Submitted on Briefs: Jan. 11, 1990
Decided: February 13, 1990
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Justice R. C. McDonough delivered the Opinion of the Court.
This is an appeal from an action to dissolve a partnership.
Defendant, Eugene Mehl appeals from an order of the ~istrictCourt
of the Fifteenth Judicial District, Sheridan County, which
distributed property owned by a partnership operated by Eugene Mehl
and the plaintiff, Marlowe Mehl. We affirm.
The issues on appeal are:
1. Whether the District Court erred by allowing Marlowe Mehl
to claim his children's wages as a partnership expense.
2. Whether the District Court erred by denying Eugene Mehlls
claim for wages in compensation for winding up the partnership
affairs.
3. Whether the ~istrictCourt erred by finding the Dagmar Bar
as a partnership asset, and whether an error was committed in
valuing the bar at $50,000.
4. Whether the District Court's order distributing the
partnership assets is incorrect, inconsistent and not supported by
the evidence.
Eugene and Marlowe Mehl are brothers. Since 1950, they have
operated the family farm as a partnership known as "Mehl Brotherst1
or I1Mehl Farms.'' The partnership operated without a written
partnership agreement and it had no definite term. Property held
by the partnership consisted primarily of farming equipment and
machinery. The partnership did not own any real property, but it
leased land from the family and from other people.
All proceeds were deposited in a checking account at a local
bank and expenses were paid from that account. The brothers had
agreed to split all profits on a fifty-fifty basis. Whenever money
was needed by either partner, the practice was that he would tell
the other and withdraw such money.
Initially, each partner was active in the farming business.
Eugene took care of most of the day to day chores and Marlowe and
his wife, in addition to helping Eugene, took care of the
partnership books. However, in 1972 Marlowe Mehl suffered a
stroke, and as a result was unable to fully contribute to the day
to day activities on the farm. Some of his children were hired
from time to time, in order to perform necessary chores.
In 1973, Eugene Mehl withdrew $7,200 from the partnership
account and bought the Dagmar Bar located in Dagmar, Montana. The
warranty deed and the liquor license to the bar were held in the
names of Eugene Mehl and his wife, Bonnie. In 1980, Eugene and
Bonnie were divorced and Bonnie received the bar and liquor license
as part of the property settlement.
The partnership dissolved on November 21, 1983 by written
notice from Marlowe Mehl to Eugene Mehl. The following month,
Marlowe filed a complaint in District Court. A special master was
appointed to assist the court in a partnership distribution. The
lower court, relying upon the report prepared by the master, issued
its order distributing the partnership property on January 20,
1989. Eugene Mehl submitted a motion to amend the court's order
on January 25, 1989. The lower court denied this motion and this
appeal followed.
I
Prior to addressing the four separate specifications of error
asserted by Eugene Mehl, we first discuss the standard of review
to be applied by this Court to the District Court order winding up
the Mehl Brothers partnership.
The District Court conducted this proceeding without a jury.
The function of this Court, acting as an appellate tribunal in
reviewing the determination of the District Court, is not to
substitute its judgment for the District Court but to determine
whether there is substantial credible evidence to support its
determination. Although there may be conflicting evidence, if the
record contains substantial evidence for which the District Court
determination can be grounded, the District Court must be affirmed.
Eliason v. Wallace (1984), 209 Mont. 358, 680 P.2d 573.
As his first specification of error, Eugene Mehl argues that
the lower court erred in its finding that the wages paid to Marlowe
Mehlts children were partnership expenditures. According to
Eugene, Marlowets children were hired after Marlowe1s stroke and
only because he was unable to do his share of the work. Therefore,
Eugene argues, their wages should be deducted from Marlowe1s
capital account and should not be considered a partnership expense.
The District Court disagreed with this argument. It took
judicial notice of the fact that farm children are often hired to
do work on the family farm. This arrangement normally benefits the
farmer in two ways--his children earn a wage and the wages are
deducted as a business expense on the farmtstax returns.
This arrangement took place on the Mehl Brothers farm.
Marlowets children were hired to do certain chores and the
partnership deducted the wages as a business expense. Moreover,
as Eugene himself testified, there was an agreement between he and
Marlowe to pay the children a wage. Therefore, in light of the
fact that Eugene acquiesced to this arrangement and the fact that
he enjoyed the resultant tax advantage, we hold that the District
Court did not err in its determination that the wages were a proper
partnership expense.
The second issue on appeal concerns the claim by Eugene Mehl
for wages which he claims are due him for winding up the
partnership. In support of his argument that he is entitled to
such wages, he relies upon 5 35-10-401(6), MCA.
His reliance upon this statute is ill founded. Section 35-
10-401(6), MCA, states in pertinent part:
No partner is entitled to remuneration for acting in the
partnership business, except that a surviving partner is
entitled to reasonable compensation for his services in
winding up the partnership affairs. (Emphasis added.)
This statute is clear. In the absence of any agreement to the
contrary, partners are not entitled to any wages unless one of the
partners dies and the surviving partner winds up the partnership.
In the present case, Marlowe Mehl did not die. Furthermore, there
is no partnership agreement entitling Eugene Mehl to any wages for
his work winding up the partnership. The District Court, following
the mandate of this statute, held that Eugene was not entitled to
his claimed wages. Its determination of this issue is correct.
Eugene Mehl contends it was reversible error for the District
Court to treat the Dagmar Bar as a partnership asset, and it was
reversible error to assign a $50,000 value to the bar. We
disagree.
Section 35-10-203(2), MCA, states:
Unless a contrary intention appears, property acquired
with partnership funds is partnership property.
The record shows that Eugene purchased the Dagmar Bar with two
checks written on the partnership account. Therefore, the burden
is on him to show that the bar did not belong to the partnership.
Documentation of ownership of the bar was submitted by both
parties. Eugene Mehl submitted the warranty deed and liquor
license to the bar which were in his and his wife's name. He also
entered into evidence bank statements, employment registrations and
other financial records which tended to indicate that he was the
owner of the bar.
Marlowe Mehl submitted tax records and the property settlement
between Eugene and his ex-wife Bonnie, which stated that the bar
was partnership property. The lower court reviewed the evidence
submitted by both parties and determined that the evidence
submitted by Eugene did not overcome the presumption contained in
5 35-10-203 ( 2 ) , MCA.
We acknowledge, however, that the evidence on this issue is
conflicting. In light of the presumption created by 5 35-10-
203(2), MCA, and in light of the evidence of ownership contained
within the tax records and property settlement, we find there is
substantial evidence for the court Is findings and there is no abuse
of discretion. Accordingly, the District Court's findings must be
affirmed.
Eugene Mehl also takes exception to the valuation of the bar
as determined by the lower court. The District Court valued the
bar at $50,000, and charged Eugene's capital account accordingly.
Eugene maintains that the bar is worth substantially less and
places a value on it of only $10,000-$15,000.
In coming to its conclusion, the District Court relied upon
the special report prepared by the master. On issues decided by
a special master, the District Court must accept the master's
determination unless it is clearly erroneous. Rule 53(e)(2),
M.R.Civ.P.
The master utilized three approaches in arriving at his
valuation of the bar. In particular he evaluated the bar by
examining the income it generates, the value placed upon it in
Eugene's divorce action and by examining other similar bars in
close proximity to Dagmar. The master's report is well reasoned
and the value placed on the bar is clearly not erroneous.
Therefore, the District Court was obligated to accept his
valuation. On this issue the lower court is affirmed.
As a final issue, Eugene Mehl argues that the trial court's
distribution of partnership assets is not supported by the
evidence. Once again, we note that the lower court relied upon the
report prepared by the special master in valuing and distributing
the partnership assets which was based on substantial evidence.
It came to the conclusion that both parties drew approximately
equal amounts of money from the partnership and therefore neither
party was owed any money. It then ordered sale of the remaining
assets and a fifty-fifty split of the proceeds. We find that the
District Court's determination in this matter is well reasoned and
is supported by substantial evidence.
Af finned.
We Concur: d
Chief Justice
.-
Justices