No. 91-360
IN THE SUPREME COURT OF THE STATE OF MONTANA
STEPHEN M. BARRETT,
Plaintiff and Respondent,
-vs-
HOWARD M. LARSEN,
Defendant and Appellant. LA 3 m i d
CLEW. OF SUPREME COURT
STATE OF MONTANA
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:
Gary L Beiswanger, Attorney at Law, Billings,
.
Montana
For Respondent:
Steven B. Ungar, Attorney at Law, Bozeman, Montana
Submitted on Briefs: February 20, 1992
Decided: February 4, 1993
Filed:
Clerk
Justice Karla M. Gray delivered the Opinion of the Court.
The Eighteenth Judicial District Court, Gallatin County,
entered judgment on a jury verdict awarding Stephen Barrett damages
for Howard Larsenls breach of a partnership agreement. Howard
Larsen appeals from the judgment and from the court's order denying
his motion for judgment notwithstanding the verdict or for new
trial. We affirm.
We restate the issues on appeal as:
1. Did the District Court err in instructing the jury?
2. Did the District Court err in denying Larsen's motions
for directed verdict and for judgment notwithstanding the verdict?
3. Did the District Court err in admitting Barrett s Exhibit
No. 21 into evidence?
4. Did the District Court err in denying Larsen's 5 25-11-
102, MCA, motion for a new trial?
In September of 1979, Stephen Barrett (Barrett), Howard Larsen
(Larsen), and Michael Bartlett (Bartlett) purchased a 37 acre tract
of undeveloped real estate near Bozeman, Montana. The three men
were longtime friends; Barrett practiced law in Bozeman, Montana,
and Larsen and Bartlett were attorneys in southern California.
Barrett, Larsen and Bartlett each contributed $8,500 to the
purchase of the property. Barrett signedthe purchase agreement on
his own behalf, and for Larsen and Bartlett pursuant to power of
attorney agreements. According to the purchase agreement, the men
owned the property as tenants in common, each holding an undivided
one-third interest. They intended to subdivide, and later resell,
2
the property for profit. No written partnership agreement was
executed.
The men agreed that Barrett would perform the tasks associated
with subdividing the undeveloped real estate. Barrett divided the
property into three tracts. Each of two tracts encompassed
approximately 4.73 acres; Barrett conveyed one such tract to his
wife, Janis Barrett, and the other tract to Larsenvs wife, Lana
Larsen. The third tract encompassed the remaining 28 acres.
In September of 1980, Barrett, Larsen and Bartlett each
contributed $2,491.66 toward the first annual payment required by
the purchase agreement. Barrett and Larsen made additional
contributions the following September when the second annual
payment was due. Bartlett was unable to contribute and, as a
result, the respective interests in the property were no longer
equal. Larsen sent Barrett a letter, dated September 28, 1981,
acknowledging this change:
Enclosed please find my check in the amount of
$4,984. This letter confirmsthe agreement reached among
you, Mike and myself whereby in consideration of
additional contributions by you and me, the partnersv
capital accounts are to be adjusted as follows:
Steven M. Barrett 36.6%
Michael J. Bartlett 25.7%
Howard M. Larsen 37.7%
In October, 1981, the three undeveloped tracts of real estate
were exchanged for a fully-rented commercial building in Belgrade,
Montana (Belgrade Property). The Agreement for Sale, Purchase and
Exchange of Real Property was signed by the Barretts, and by
Barrett for Larsen, Lana Larsen and Bartlett pursuant to power of
attorney agreements. The Belgrade Property was conveyed by
warranty deed to the Barretts.
At the time of the exchange, the Belgrade Property was subject
to an existing loan, which the Barretts assumed. The Barretts
refinanced the loan before a balloon payment was due in 1983. The
Barretts were the only signatories on the refinanced loan.
Including Larsen and Bartlett as co-signors would have required
obtaining updated financial information from Larsen and Bartlett,
an inconvenience that Barrett sought to avoid. Barrett informed
Larsen and Bartlett that the loan had been refinanced in this
manner.
In October, 1985, the major tenant of the Belgrade Property
moved out at the expiration of its lease. Barrett's subsequent
attempts to sell, lease or exchange the property were unsuccessful.
In a letter dated February 24, 1986, Barrett informed Larsen and
Bartlett of his plans to refinance the mortgage a second time in
order to attract potential purchasers. Barrett sent a copy of the
loan application to Larsen and Bartlett and indicated that they
would be co-signing the loan. Barrett stated that he was reluctant
to refinance the mortgage in the partnership's name because he did
not have the required partnership documentation. Additionally, he
requested, and Larsen and Bartlett sent, additional contributions
based on their respective interests in the Belgrade Property to
cover the ongoing expenses of the building. The Barretts
ultimately refinanced the loan in their names only.
Early in 1988, Bartlett informed Barrett and Larsen that he
was withdrawing from the investment. Larsen discussed the
withdrawal with Barrett and indicated that he would not increase
4
his interest in the Belgrade Property. Accordingly, Barrett
assumed Bartlettls interest, increasing his interest to 62.3%.
Larsen continued to have a 37.7% interest in the property.
Barrettlsongoing attempts to sell or otherwise dispose of the
Belgrade Property were unsuccessful. In December, 1987, Barrett
found a tenant to lease a major portion of the building. However,
the loan payments and the utility, insurance, and tax expenses
associated with the property continued to exceed the rental income.
Barrett and Larsen made additional contributions to supplement the
rental income in March, May and November of 1988, and February of
1989, according to their percentage interests in the property. In
March of 1989, Larsen informed Barrett that he would not make
additional contributions.
On April 20, 1990, Barrett sued Larsen for breach of a
partnership agreement. A jury trial began on February 12, 1991.
Larsen moved unsuccessfully for a directed verdict after Barrettvs
case-in-chief. The jury ultimately determined that a partnership
existed between Barrett and Larsen with respect to the Belgrade
Property and that Larsen breached the partnership agreement by
failing to make contributions; it awarded Barrett $45,255 in
damages, plus interest. The District Court denied Larsenvsmotion
for judgment notwithstanding the verdict or for new trial. Larsen
appeals.
Did the District Court err in instructing the jury?
Larsen contends that the District Court improperly instructed
the jury by refusing the following proposed instruction:
5
Instruction 20. Where purported partners did not hold
property jointly, had unequal control over assets, held
no joint bank accounts, and did not file partnership tax
returns, no partnership existed.
Larsen relied on Wiberg v 17 Bar, Inc. (1990), 241 Mont. 490, 498,
.
788 P.2d 292, 297, citing Matter of Estate of Smith (1988), 230
Mont. 140, 147-48, 749 P.2d 512, 516-17, as his sole authority for
the instruction.
Barrett contends Larsenls reliance on Wiberq is misplaced.
According to Barrett, the Wiberq language upon which Larsen relies
is a partial recitation of some, but not all, of the facts upon
which we determined that there was insufficient evidence to support
the jury's finding of a partnership in smith. Barrett asserts that
Larsenls instruction is neither our holding in Wiberq nor an
accurate statement of our holding in Smith. We agree.
In Smith, we focused on 5 35-10-201(1), MCA, and the elements
of a partnership set forth in Bender v. Bender (1965), 144 Mont.
470, 397 P.2d 957, to determine whether evidence supported the
existence of a partnership. Section 35-10-201(1), MCA, defines a
partnership as "an association of two or more persons to carry on
as co-owners a business for profit.It Bender set forth the
following elements of a partnership:
"To establish . . . a partnership, it is necessary to
determine the intent of the parties: such business
relationships arise only when the parties intend to
associate themselves as such. There must be some
contribution by each co-adventurer or partner or
something promotive of the enterprise. There must be
joint proprietary interest and a right of mutual control
over the subject matter of the enterprise or over the
property engaged therein, and there must be an agreement
to share the profits. [Citation omitted.] The intention
of the parties has to be clearly manifested, [citing
cases] and must be ascertained from all the facts and
circumstances and actions and conduct of the parties.
[Citation omitted.]"
Smith, 230 Mont. at 145, 749 P.2d at 515, quoting Bender, 144 Mont.
at 480, 397 P.2d at 962. On the basis of 5 35-10-201(1), MCA, and
the Bender elements, we determined in smith that the evidence did
not support a finding that a partnership existed.
Both Smith and Wiberq rely primarily on 5 35-10-201(1), MCA,
and the criteria for a partnership set forth in Bender. Nothing in
either Smith or Wiberq suggests that the four elements asserted by
Larsen are the sole and exclusive elements of a partnership, as a
matter of law. We hold that the District Court did not err in
refusing Larsen's proposed jury instruction.
Did the District Court err in denying Larsen's motions for
directed verdict and for judgment notwithstanding the verdict?
Our standard for reviewing a trial court's denial of a motion
for judgment notwithstanding the verdict is the same as our
standard for reviewing a motion for a directed verdict: a directed
verdict may be granted only when it appears the non-moving party
could not recover upon any view of the evidence, including the
legitimate inferences to be drawn from it. Hash V. State (1991),
247 Mont. 497, 500, 807 P.2d 1363, 1365. On appeal, we review the
evidence in a light most favorable to the prevailing party to
determine whether substantial evidence supports the jury's verdict.
-
Id.
In support of his motion for directed verdict, Larsen
contended that Barrett failed to present a prima facie case
establishing the existence of a partnership. After the District
Court entered judgment on the jury verdict in Barrett's favor,
Larsen moved for judgment notwithstanding the verdict on
essentially the same basis. The District Court denied both
motions. As our discussion in the previous issue indicates, the
elements required to establish a partnership are set forth in § 35-
10-201(1), MCA, and Bender.
Larsen asserts two arguments in support of his claim that the
requirements for the existence of a partnership under 5 35-10-
201(1), MCA, are not met. First, he argues that he and Barrett are
not co-owners of the Belgrade Property. While it is true that the
Barretts are the record title holders of the property and
refinanced the loan in their names, substantial evidence indicates
that Larsen is a co-owner. Larsen contributed to the purchase of,
and was a record title holder for, the undeveloped real estate. He
acknowledged that his "partners capital account" reflected a 37.7%
interest in the property in a letter he sent Barrett.
The undeveloped real estate was later exchanged for the
Belgrade Property. Via an undisputed power of attorney agreement,
Larsen was a party to the Agreement for Sale, Purchase and Exchange
of Real Property. Barrett informed Larsen that while the Barretts
were the record title holders, the actual interest was held by
himself, Larsen and Bartlett. Larsen continued to contribute to
the operating expenses of the building on that property for several
years after the purchase in amounts reflecting his percentage
interest. Larsen's co-ownership of the Belgrade Property is
supported by substantial evidence.
8
Larsen next contends, without citing authority, that the
purchase and sale of real estate does not constitute a business for
profit. It is well established in Montana, however, that a
partnership may be created for the purchase and sale of real
estate. Walsh v. Ellingson Agency (1980), 188 Mont. 367, 372, 613
P.2d 1381, 1384. In Walsh, two defendants had purchased properties
as tenants in common with equal contributions, and had shared the
profits upon resale. One defendant collected rent generated by the
property from which the suit arose, using the rental proceeds to
pay property taxes and maintain the property. We upheld the
district court's conclusion that the defendants were engaged in a
partnership.
The case before us is analogous to Walsh. Here, Barrett,
Bartlett and Larsen purchased the undeveloped real estate as
tenants in common with equal contributions, intending to resell the
property for a profit. Barrett testified that Larsen consented to
the exchange of the real estate for the commercial building.
Larsen contributed to the investment according to his percentage
interest. Barrett collected and applied the rent to the ongoing
expenses of the building. Larsen testified that had the building
sold, he would be entitled to 37.7% of any profit realized.
Substantial evidence indicates that Barrettand Larsen were engaged
together in a business for profit.
The same evidence establishing co-ownership of a business for
profit establishes certain partnership criteria under Bender:
Larsen's contribution, joint proprietary interest, and the right to
share the profits. Additionally, the record reflects that Larsen
9
had a right to mutually control the property. Larsen admitted that
he delegated the management of the undeveloped real estate to
Barrett, and that the delegation continued after the exchange for
the Belgrade Property. Furthermore, Barrett testified that he
exchanged the undeveloped property for the Belgrade Property with
Larsen's consent and that he discussed the refinancing with Larsen.
Reviewing the record in a light most favorable to Barrett, we
conclude that the jury's determinations that a partnership existed
between Barrett and Larsen with respect to the Belgrade Property
and that Larsen breached the partnership agreement is supported by
substantial evidence. We hold that the District Court did not err
in denying Larsen's motion for directed verdict and for judgment
notwithstanding the verdict.
Did the District Court err in admitting Barrett's Exhibit No.
21 into evidence?
Larsen claims that the District Court erred in admitting
Barrett's Exhibit No. 21, entitled Plaintiff's Damage Summary. The
mortgage, insurance, tax, and utility payments made by Barrett
after Larsen withdrew from the partnership; the outstanding taxes
on the property; and the outstanding balance on the mortgage loan
were summarized on the exhibit. The amounts were multiplied by
37.7%, Larsen's interest in the property, to establish the amount
of damages claimed by Barrett.
The court admitted the exhibit into evidence under Rule 1006,
M.R.Evid., which provides:
The contents of voluminous writings, recordings or
10
photographs which cannot conveniently be examined in
court may be presented in the form of a chart, summary,
or calculation. The originals, or duplicates, shall be
made available for examination or copying, or both, by
other parties at a reasonable time and place. The court
may order that they be produced in court.
The admissibility of evidence is within the discretion of the
district court; we will not reverse its ruling absent an abuse of
discretion. Massman v. City of Helena (1989), 237 Mont 234, 240,
773 P.2d 1206, 1210.
Larsen contends that the documents which formed the basis for
the summary exhibit were not sufficiently voluminous to allow the
admission of the exhibit under the Rule. However, Rule 1006,
M.R.Evid., does not require the underlying documents to be so
voluminous that an in-court examination would be physically
impossible, only that such examination would not be convenient.
Here, the exhibit summarized mortgage, insurance, tax and utility
payments Barrett made between the time Larsen withdrew from the
partnership and the date of trial as well as outstanding taxes and
the balance on the loan. The exhibit also reflected Barrett's
calculation of his damages, made by multiplying the expenditures
and outstanding balances by Larsen's percentage interest. Rule
1006, M.R.Evid., expressly provides that the contents of the
voluminous documents may be presented in the form of a calculation.
Additionally, Larsen contends that the documents were not made
available to him prior to trial with the knowledge that a summary
would be prepared, a condition he asserts must be met before the
exhibit can be admitted under the Rule. Larsen cites no authority
to support his contention, nor does the plain language of the Rule
impose such a requirement. Larsen admitted that he reviewed a box
of documents pursuant to his request for production. He does not
assert that the summarized documents were not among them.
The record reveals that Barrett laid a proper foundation for
the admission of the exhibit. Furthermore, Larsen was free to test
the veracity of the summary exhibit through cross-examination or
request the court to order Barrett to produce the underlying
documents; he did neither. We hold that the District Court did not
abuse its discretion in admitting Barrett's Exhibit No. 21 into
evidence.
Did the District Court err in denying Larsen's 5 25-11-102,
MCA, motion for a new trial?
Larsen contends that he is entitled to a new trial under 5 25-
11-102(6), MCA, on the grounds that, as a matter of law, there is
insufficient evidence of record to support the existence of a
partnership. The decision to grant or deny a new trial is within
the discretion of the district court; we will not overturn its
decision absent an abuse of discretion. Tope v. Taylor (1988), 235
Mont. 124, 131-32, 768 P.2d 845, 849-50. As our previous
discussion indicates, Barrett presented sufficient evidence to
establish the existence of a partnership. We hold that the
District Court did not err in denying Larsen's motion for new trial
based on insufficient evidence.
Larsen also contends that he is entitled to a new trial under
5 25-11-102(5), MCA, on the basis that the jury awarded excessive
damages. He asserts that the jury awarded damages based on
12
Barrett's damage summary exhibit and, therefore, that $37,700 of
the $45,255 award represents 37.7% of the outstanding balance on
the loan. Larsen contends that including his share of the
outstanding balance as damages is excessive because the value of
the property is not taken into consideration. According to Larsen,
damages relating to the loan balance cannot be ascertained until
foreclosure occurs and a deficiency determined.
A district court may not grant a motion for new trial pursuant
to 5 25-11-102(5), MCA, unless it appears that excessive damages
were awarded under the influence of passion or prejudice. Gibson
v. Western Fire Ins. Co. (1984), 210 Mont. 267, 290, 682 P.2d 725,
738. Upon review, we will not disturb a district court's order
denying a new trial when the damage award is supported by the
record:
"It is not a question of the amount this Court would have
awarded under the circumstances. It is not the amount
which in our opinion would compensate the injured party;
rather, it is a question of what amount of damages will
the record in the case support when viewed, as it must
be, in the light most favorable to the plaintiff. ... II
French v. Ralph B. Moore, Inc. (1983), 203 Mont. 327, 336, 661 P.2d
844, 849, quoting Ashley v. Safeway Stores, Inc. (1935), 100 Mont.
Larsen has not asserted and, given the case before us, could
not establish that the jury awarded excessive damages under the
influence of passion or prejudice. The damage award mirrors
Barrett's testimony and summary exhibit and, therefore, is
supported by the record. Barrett and Larsen agreed to submit the
issue of damages to the jury on the basis of breach of contract
rather than the statutory provisions governing the dissolution of
a partnership. Barrett testified that the $37,700 was a reasonable
estimate of his future damages caused by Larsen's breach of the
partnership agreement. Larsen did not object to the estimate of
future damages during Barrettls direct testimony, challenge the
estimate of future damages on cross-examination, or undermine it
during his own case. We hold that the District Court did not abuse
its discretion in denying Larsen's motion for new trial based on
excessive damages.
Af finned. I
We concur:
Chief Justice
Justices
February 4, 1993
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
Gary L. Beiswanger
Attorney at Law
P.O. Box 20562
Billings, MT 59104
Steven B. Ungar
Attorney at Law
P.O. Box 1348
Bozeman, MT 59771
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA