No. 91-096
IN THE SUPREME COURT OF THE STATE OF MONTANA
ALAN FRANK,
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable C. B. McNeil, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Chris Christensen; Attorney at Law, ~alispell,
Montana.
For Respondent:
William E. Hileman; Hedman, Hileman & Lacosta,
Whitefish, Montana; Daniel W. Hileman; Murray &
Kaufman, Kalispell, Montana.
Submitted on brief: August 1, 1991
Decided: September 17, 1991
Filed:
I
Clerk
Justice R. C. McDonough delivered the Opinion of the Court.
Defendant Lawrence Birky appeals from the judgment of the
District Court of the Eleventh Judicial District, Flathead County.
The issue is whether the District Court was clearly erroneous in
its findings relative to the accounting and distribution of the
parties' partnership assets following dissolution of the
partnership. We affirm.
On July 1, 1978 Lawrence Birky (appellant/defendant) and Alan
Frank (respondent/plaintiff) entered into a written partnership
agreement to engage in the general business of logging and related
industries. The agreement provided in part that the initial capital
of the partnership would be contributed equally, that individual
capital accounts would be kept for each partner, and that in the
event of termination the assets would be divided equally. In
October, 1983 Frank filed a complaint in the District Court
alleging that Birky had breached the partnership agreement,
requesting that the court dissolve the partnership and that the
court award Frank his partnership share plus damages.
On October 21, 1985, the parties stipulated to bifurcate the
trial; first to determine the scope of the partnership and then to
resolve the issue of accounting and distribution. Judgment on the
scope of the partnership was entered September 26, 1986. The
partnership was determined to be composed of the following assets:
1976 Barko Loader mounted on a Kenworth truck complete
with winch
1978 Kenworth Truck and Trailer
1978 450 Timberjack rubber-tire Skidder with chains
Air compressor and fuel tank.
The District Court found that the partnership was dissolved by
mutual agreement in May, 1983 and ordered that the above property
be divided equally between the parties.
For the second phase, a Special Master was appointed by the
court to provide an accounting of the partnership property. During
presentation of evidence to the Special Master a dispute arose
concerning the court's order that the property be divided equally
and whether Birky would be precluded from offering evidence of
capital contributions. Birky filed a motion for clarification with
the District Court. The District Court ruled that:
evidence shall be admissable of individual capital
accounts as they stood on the books of the partnership
as of the date of its dissolution in May of 1983 insofar
as said accounts relate to the three items of property
described. .. in the September 26, 1986 Judgment of this
Court. Such capital accounts ... are relevant for...
determining the amount in which the former partners will
share equally after the payment of all liabilities
including those to the partners' individual capital
accounts.
3. In the event that the books of the partnership
did not contain any such capital accounts on the date of
dissolution, then the court shall deem the contributions
with respect to the three items of property to have been
equal and no evidence shall be admissible by the Special
Master for the purpose of now creating any such accounts.
..-
Birky was unable to provide books containing a record of individual
capital accounts and admitted that such a record did not exist.
Thereafter the Special Master completed his findings and the
District Court adopted the findings of the Special Master which
included the following distribution of the partnership property.
1) The Barko loader (sold by Birky for $42,000)
$9000 allowed to Birky for repairs necessary
to promulgate the sale.
$15,500 to Frank.
$15,500 retained by Birky.
2) The Kenworth truck and trailer (sold for $42,000)
$21,000 to Frank.
$21,000 retained by Birky. (including
responsibility for collecting $6,000 owed by
purchaser. )
3) The Timberjack Skidder (Value of $40,000 at
dissolution)
$20,000 owed Frank by Birky who retained
control and later sold.
4) Profits, wages and other compensation generated
during the partnership
$22,325.00 owed Frank by Birky.
Birky believes the equal distribution of the assets as
delineated above is inequitable in light of the evidence presented.
First, appellant Birky contends that the court committed
prejudicial error by ordering (in the absence of individual capital
accounts on the partnership books) the capital contributions of the
partners to be deemed equal. Birky relies on § 35-10-401(1), MCA,
which provides:
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 and must contribute
towards the losses, whether of capital or
otherwise, sustained by the partnership
according to his share in the profits.
Birky argues that by failing to remunerate him for his alleged
capital contributions the District Court has circumvented the
mandate of § 35-10-401(1), MCA. Birky further argues that to
ignore the capital contributions creates an inequitable
distribution of the property which results in the unjust enrichment
of Frank. A substantial portion of his alleged capital
contributions would have to be proved by parol or extrinsic
evidence.
A subissue necessary for review is, did the District Court err
by instructing the Special Master to exclude parol or extrinsic
evidence when determining the capital contributions. An
evidentiary ruling by a trial court is a discretionary act. The
standard of review for discretionary acts is: was the ruling a
misuse or an abuse of the court's discretion. Steer, Inc. v.
Department of Revenue of the State of Montana, (Mont. 19901, 803
P.2d 601, 47 St.Rep. 2199.
Birky contends that the court abused its discretion by not
allowing him to present evidence pertaining to his capital
contributions other than the business records.
In the dissolution of a partnership and the sale and
distribution of the partnership's assets, a partner against whom
an action was brought and who failed to keep records was estopped
from objecting to the court's finding of value of each party's
contribution to the venture. Loney v. Pettapiece (19701, 156 Mont.
1, 475 P.2d 999. In Loney, the trial court was faced with
incomplete information regarding capital contributions to the
venture. Based on the testimony received, the trial court
attempted to accurately estimate the value of each partner's
contribution to the partnership. 0~ appeal, the defendant argued
that his capital contributions had not been fully considered. T h e
court ruled that because he was in a position to keep records and
did not he was precluded from objecting to the courtlsvaluation.
Here Birky kept the records of the partnership, We conclude that
the court did not abuse its discretion in refusing to allow par01
or extrinsic evidence to be presented by Birky in determining
capital contributions.
The ultimate determination of capital contribution to the
partnership is a question of fact to be determined by the District
Court. Rule 52(a), M.R.Civ.P., requires that findings of facts be
upheld unless they are found to be clearly erroneous. 1t [A] finding
is 'clearly erroneous1 when, although there is evidence to support
it, a review of the record leaves the court with the definite and
Gypsum Co., (1948), 68 S.Ct. 525, 333 U.S. 364, 92 L . E d . 746;
Steer, Inc. v. Department of Revenue of the State of Montana (Mont.
l99O), 803 P.2d 601, 47 St.Rep. 2199, citing Wage Appeal of Montana
State Highway Patrol Officers v. Board of Personnel Appeals (19841,
208 Mont. 33, 40, 676 P.2d 194, 198. (Citations omitted.)
The District Court stated that in deciding to deem the
contributions equal in the absence of partnership records,
consideration was given
.. . the fact that the Defendant was primarily responsible
for maintaining the books of the partnership, the passage
of time, the confusing and incomplete evidence relating
to this issue at the initial hearing and other
factors.
There are ample facts in the record to support the ~istrict
Court's finding that the capital contributions should be deemed
equal. First, the partnership agreement itself clearly indicates
that the contributions would be equal. Second, in the event that
contributions were made they were to be documented in the capital
accounts as part of the partnership records. As previously
indicated, there were no such records, Third, the record of the
proceeding before the District Court reflects evidence to support
such a finding. The findings as supported above are not clearly
erroneous and therefore cannot be set aside.
The appellant raises the additional claim that the manner in
which the court provided the accounting and distribution of the
partnership was inconsistent with the evidence on record. We
disagree. Specifically, the appellant finds error with the District
Court's reliance on expert testimony, the court's lack of
consideration of draws taken by Frank, the court's lack of
consideration of partnership obligations, and the court's valuation
of the skidder. Each of these four related issues is a question
of fact to be determined by the trial court.
The District Court relied on the findings of the Special
Master and is obligated to follow the valuations as determined by
the Special Master unless they are clearly erroneous. Rule
53 (e)( 2 ) , M.R.Civ.P., Mehl v. Mehl (l99O), 241 Mont. 310, 786 P.2d
1173.
Both parties had opportunity to present expert testimony and
thereby opportunity to provide a manner for the court to calculate
the value of wages and profits generated by the partnership. The
appellant takes exception with the court's acceptance of Frank's
expert's method. Both experts testified that it was difficult to
impossible to accurately verify the partnership's expenses. The
finder of fact weighs the evidence and we conclude the findings
are not clearly erroneous and are therefore affirmed.
Lastly, appellant asks for review of the determination of the
value of the skidder because he believes it was valued at an
improper date. It is uncontested that the net value of assets is
generally made at or near the time of dissolution. See In re the
Marriage of Halverson (1988), 230 Mont. 226, 749 P.2d 518. The
appellant argues that to follow the general rule achieves an
inequitable result and that an exception should be made. Once
again, decisions regarding valuation of partnership property will
be overturned only if they are clearly erroneous. The decision of
the court to adhere to the general rule is not clearly erroneous.
Af firmed .
September 17, 1991
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
Chris Christensen
Attorney at Law
1103 So. Main
Kalispell, M T 59903
William E. Hileman, Jr.
Hedman, Hileman & Lacosta
433 Second St.
Whitefish, MT 59937
Daniel W. Hilernan
Murray & Kaufman
P.O. Box 728
Kalispell, MT 59903
ED SMITH
CLERK OF THE SUPREME COURT
STAm MQNTANA