McCormick v. Brevig

No. 03-256

IN THE SUPREME COURT OF THE STATE OF MONTANA

2004 MT 179

JOAN K. McCORMICK, f/k/a JOAN K. BREVIG,

Plaintiff and Appellant,

v.

CLARK A. BREVIG, BREVIG LAND LIVE
AND LUMBER, a Montana General Partnership
Consisting of Joan K. Brevig and Clark A. Brevig,

Defendants, Respondents and Cross-Appellants.

APPEAL FROM: District Court of the Tenth Judicial District,
In and For the County of Fergus, Cause No. DV 95-86,
Honorable Wm. Nels Swandal, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Kenneth R. Dyrud, Glenn E. Tremper, and Cindy L. Cate, Church,
Harris, Johnson & Williams, P.C., Great Falls, Montana

For Respondents:

David A. Veeder, Jolane D. Veeder, Veeder Law Firm, P.C.,
Billings, Montana

Submitted on Briefs: December 11, 2003

Decided: July 13, 2004

Filed:

__________________________________________
Clerk
Justice Jim Rice delivered the Opinion of the Court.

¶1 This case involves a protracted dispute between a brother and sister concerning their

respective interests in a ranching partnership that is before the Court a second time. The

litigation began in 1995 when Joan McCormick (“Joan”) brought this action against her

brother, Clark Brevig (“Clark”), and their Partnership, Brevig Land Live and Lumber

(hereinafter, “the Partnership”), seeking a Partnership accounting and dissolution. Clark

counterclaimed for fraud, deceit, negligent misrepresentation, and to quiet title. He also filed

a third-party complaint against several accounting defendants for professional negligence

and against his sister for breach of fiduciary duty. Thereafter, Joan moved for partial

summary judgment in relation to Clark’s counterclaim and third-party complaint, and Clark

moved for partial summary judgment on the issue of liability raised in his counterclaim and

third-party complaint against Joan. Clark also moved for partial summary judgment on the

issue of liability against the third-party accounting defendants. The District Court of the

Tenth Judicial District, Fergus County, granted Joan’s motion for partial summary judgment

on her claims and denied Clark’s motion for partial summary judgment against Joan. The

court additionally dismissed Clark’s claims for fraud, deceit, negligent misrepresentation,

and breach of fiduciary duty against Joan.

¶2 The accounting defendants also moved for summary judgment on all claims asserted

against them by Clark, which the court granted. Following certification of the summary

judgment orders as final pursuant to Rule 54(b), M.R.Civ.P., the parties appealed to this

Court. We affirmed the District Court’s entry of summary judgment in favor of Joan, but

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concluded that the court had erred in granting summary judgment to the accounting

defendants, and therefore reversed and remanded for further proceedings. McCormick v.

Brevig, 1999 MT 86, 294 Mont. 144, 980 P.2d 603 (hereinafter referred to as, “McCormick

I”).

¶3 Following remittitur and substitution of the original trial judge, the District Court

resumed proceedings concerning the Partnership accounting and dissolution, and Clark

settled his claims with the accounting defendants. A bench trial was held January 18 through

21, 2000. On April 3, 2000, the District Court entered findings of fact and conclusions of

law, dissolving the Partnership, and ordering its business wound up, pending a hearing

before a special master and a determination of the proper method for dissolution.

¶4 A limited accounting by a special master was thereafter performed. On December

27, 2001, the District Court concluded that the parties’ Partnership agreement did not apply,

and that a judicial dissolution of the Partnership was warranted pursuant to § 35-10-624(5),

MCA. The court further recognized that § 35-10-629, MCA, explicitly required any surplus

assets after paying creditors to be paid to the partners in cash in accordance with their right

to distribution. Nonetheless, the court found that it would be inequitable to order the

liquidation of the Partnership assets in order to satisfy Joan’s interest in the Partnership.

Therefore, in keeping with its desire to preserve the family farm, the court ordered Joan to

sell her interest in the Partnership to her brother following an appraisal and determination

of the value of her share. With the assistance of a special master, and following an

accounting of Partnership assets, the District Court eventually fixed a price of $1,107,672

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on Joan’s 50 percent interest in the Partnership. Joan appeals from the District Court’s

accounting and order requiring her to sell her interest in the Partnership to her brother, and

Clark cross-appeals from the court’s determination regarding certain Partnership assets, as

well as from an evidentiary ruling made at trial. We affirm in part, reverse in part, and

remand for further proceedings.

¶5 The following issues are presented on appeal:

¶6 1. After ordering dissolution of the Partnership, did the District Court err by failing

to order liquidation of the Partnership assets, and instead granting Clark the right to purchase

Joan’s Partnership interest at a price determined by the court?

¶7 2. Did the District Court err by failing to grant Joan’s petition for an accounting of

the Partnership’s business affairs?

¶8 3. Did the District Court err by adopting the findings of the special master?

¶9 4. Did the District Court err in ruling that Clark did not dissociate by withdrawing

from the Partnership?

¶10 5. Did the District Court err in concluding that the Charolais cattle constituted

partnership assets?

¶11 6. Did the District Court err by excluding evidence of a teleconference and concluding

that Clark was not entitled to compensation?

FACTUAL AND PROCEDURAL BACKGROUND

¶12 Joan and Clark are the children of Charles and Helen Brevig (hereinafter, “Charles”

and “Helen”). In 1960 Charles purchased the Brevig Ranch outside of Lewistown from his

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parents. In 1971, Charles transferred his sole interest in the ranch by warranty deed to

himself and Helen as joint tenants. The following year, Charles and Helen conveyed the

ranch to Clark and Helen as joint tenants.

¶13 When Charles and Helen divorced in 1977, Helen conveyed her interest in the ranch

to Charles in the property settlement agreement. Thereafter, Clark and his father owned the

ranch in equal shares, and began operating the ranch as Brevig Land, Live & Lumber, a

partnership, pursuant to a written agreement.

¶14 Although she was not a partner in the ranch operation, Joan lived on the ranch and

assisted in ranch operations from 1975 until 1981. In 1981, with the ranch facing severe

financial hardship, Joan left the ranch to work as an oil and gas “landman,” in order to

generate outside income to enable the ranch to meet its financial obligations. In her capacity

as a landman, Joan served as a liaison between the oil industry and the mineral owners. This

work required her to travel throughout the United States performing title searches on a per

diem basis.

¶15 In 1982, Charles and Clark sought to refinance the farm debt in the amount of

$422,000 with the Federal Land Bank. Because the ranch operation did not generate

sufficient cash flow to meet the projected debt payment, the bank required Joan to sign the

mortgage which was secured by the ranch real estate. Joan’s income as a landman became

committed to assist in repayment of the ranch debt.

¶16 During the time of Joan’s employment as a landman from 1981 through 1986, it was

Joan’s practice to contribute all of her income, less expenses, to the support of the ranch

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operation. In 1983, Joan closed her personal bank account and began to deposit all of her

income into the partnership bank account. From this account, Joan would pay her personal

expenses and the balance would be applied to the obligations of Charles and Clark’s

partnership. After she married in 1986, Joan made payments directly to the banks for the

ranch obligations rather than to deposit the money in the ranch operating account. Joan also

made direct payments for taxes and insurance.

¶17 On October 28, 1982, Charles died unexpectedly after a short illness. Thereafter,

pursuant to Charles’ Last Will and Testament, Clark and Joan were appointed co-personal

representatives and probated Charles’ estate. Clark and Joan each received one-half of

Charles’ estate, which principally consisted of his 50 percent interest in the ranch and

Partnership. As a result of the distributions, Clark then owned 75 percent of the ranch assets,

and Joan 25 percent. A written partnership agreement was thereafter executed by Clark and

Joan reflecting their respective 75/25 percent interests in the Partnership. Except for these

ownership percentages, the written agreement was identical to the one executed between

Charles and Clark in 1978.

¶18 After Charles’ death, Joan continued her work as a landman, and made financial

contributions to the new Partnership. She also maintained the Partnership’s books and

records. Meanwhile, Clark assumed responsibility for the day-to-day affairs of the ranch.

Clark and Joan made management decisions together.

¶19 In 1984, Joan obtained an additional 25 percent in the Partnership, fully paying for

this interest by the following year. For his share of the sale, Clark received a capital credit

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of approximately $60,000. From 1984 to 1993, Joan was listed as a 50/50 partner on all the

tax returns for the Partnership.

¶20 Around November 1986, at the recommendation of the Partnership’s principle

accountant, Clark and Joan executed an addendum to the Partnership agreement, reflecting

their agreement to make adjustments in the Partnership interests based on varying capital

contributions. The addendum was needed to account for the excess capital contributions

made by Joan, and to conform that part of the agreement to the tax returns which showed

Clark and Joan as equal partners. The parties had agreed, however, that Joan’s interest in the

Partnership would not exceed 50 percent, regardless of the amount of her excess capital

contributions.

¶21 Disagreements concerning management of the ranch, and particularly, management

of the debt load on the ranch, caused Clark and Joan’s relationship to deteriorate. By the

early 1990s, cooperation between Clark and Joan regarding the operation of the ranch and

securing of loans necessary to fund the ranch had essentially ceased, and they began looking

for ways to dissolve the Partnership.

¶22 In 1995, Joan brought suit against Clark and the Partnership, alleging that Clark had

converted Partnership assets to his own personal use, and sought an accounting of the

Partnership’s affairs. She also requested a determination that Clark had engaged in conduct

warranting a decree of expulsion. Alternatively, Joan sought an order dissolving and

winding up the Partnership.

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¶23 Clark answered by denying that the ranch property was held by the Partnership, and

asserted counterclaims for fraud, deceit, negligent misrepresentation and to quiet title. Clark

maintained that he owned the ranch, either by virtue of a trust allegedly created by his father,

or through two incomplete deeds to the property that Clark had completed and recorded

without Joan’s knowledge. Clark also brought third-party claims against the Partnership’s

accountants.

¶24 On appeal, this Court affirmed the District Court’s determination that neither the

alleged trust nor the incomplete deeds transferred the ranch property to Clark. We remanded

the case for resolution of Joan’s claims for an accounting and other relief, and for a

determination as to Clark’s claims against the accountants. McCormick I, ¶ 119.

¶25 Clark thereafter settled his claims against the Partnership accountants, and the matter

proceeded to a bench trial as to Joan’s claims for dissolution and an accounting. On April

3, 2000, the District Court issued findings of fact and conclusions of law, finding that neither

Clark nor Joan had dissociated from the Partnership, that Joan was a 50 percent partner and

should be credited for any excess capital contributions she made to the Partnership, and that

Clark was not entitled to receive compensation as a partner. The court further concluded that

the Partnership should be dissolved and its business wound up, and reasoned that

appointment of a special master was appropriate in order to determine the amount of the

parties’ respective capital contributions and Partnership assets.

¶26 On February 7, 2001, following the appointment and discharge of the two previous

masters, Larry Blakely, CPA, (“Blakely”) was appointed special master. Blakely was vested

8
with the authority to inquire into all pertinent matters of record and charged with determining

the amount, if any, of Joan’s excess capital contributions to the Partnership as well as to

resolve disputes concerning Partnership assets.

¶27 After meeting with the parties on an informal basis and reviewing Partnership tax

returns for the period of 1985 through 1998, Blakely filed his initial report with the court.

In his report, Blakely concluded that there were no excess capital contributions made by Joan

to the Partnership, and that Clark had not utilized any Partnership assets for his own benefit.

¶28 Joan objected to Blakely’s report, arguing that he had improperly limited himself to

draft and unfiled tax returns previously prepared by Russ Spika, CPA (“Spika”), and had

failed to consider evidence which Joan had presented showing significant contributions to

the Partnership. Joan further argued that Blakely had failed to follow the historical methods

of accounting that had been used by the Partnership up through 1993, which Clark was

estopped from challenging pursuant to the court’s April 3, 2000 order.

¶29 A hearing on the parties’ objections to the special master’s findings was held on

November 26, 2001. On December 27, 2001, the District Court ordered the value of Joan’s

interest in the Partnership to be determined following an appraisal conducted and paid for

by the Partnership. Following such determination, Clark would have sixty days in which to

purchase Joan’s interest, or the Partnership assets would be liquidated and the net assets

distributed to the partners.

¶30 A real estate appraiser was subsequently appointed by the court, and a new series of

disputes concerning the appraisal process began. On August 7, 2002, the court entered an

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order appointing additional real estate appraisers to assist in the appraisal process, and

reenlisted the services of special master Blakely to review the revised Partnership income

tax returns prepared by Spika for the 1994 through 2001 tax years. In making his report, the

court directed Blakely to meet separately with the respective parties, their counsel and

accountants, and to determine whether the partnership income tax returns prepared by Spika

should be filed with the Internal Revenue Service. The court further ordered Blakely to

determine the net value of Joan’s share of the appraised Partnership assets.

¶31 On December 12, 2002, Blakely filed his final report with the court, accepting Spika’s

tax returns, and valuing Joan’s interest in the Partnership at $795,629. Joan objected to

Blakely’s findings and a hearing followed. On January 29, 2003, the District Court entered

findings of fact and conclusions of law, accepting Blakely’s findings and valuing Joan’s

interest in the Partnership at $1,107,672. Clark thereafter tendered this amount to Joan for

the purchase of her interest, which Joan rejected. This appeal followed.

STANDARD OF REVIEW

¶32 We review a district court’s findings of fact to determine whether the findings are

clearly erroneous. Baltrusch v. Baltrusch, 2003 MT 357, ¶ 23, 319 Mont. 23, ¶ 23, 83 P.3d

256, ¶ 23. A district court’s findings are clearly erroneous if substantial credible evidence

does not support them, if the trial court has misapprehended the effect of the evidence or if

a review of the record leaves this Court with the definite and firm conviction that a mistake

has been committed. Ray v. Nansel, 2002 MT 191, ¶ 19, 311 Mont. 135, ¶ 19, 53 P.3d 870,

¶ 19. We review a district court’s conclusions of law for correctness. Baltrusch, ¶ 23.

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 DISCUSSION

¶33 After ordering dissolution of the Partnership, did the District Court err by failing
to order liquidation of the Partnership assets, and instead granting Clark the right to
purchase Joan’s Partnership interest at a price determined by the court?

¶34 Joan contends that when a partnership is dissolved by judicial decree, Montana’s

Revised Uniform Partnership Act, § 35-10-101 et. seq., MCA (2001), requires liquidation

by sale of partnership assets and distribution in cash of any surplus to the partners. In

response, Clark asserts that there are other judicially acceptable methods of distributing

partnership assets upon dissolution besides liquidating assets through a forced sale. For the

reasons set forth below, we conclude that the Revised Uniform Partnership Act requires

liquidation of partnership assets and distribution of the net surplus in cash to the partners

upon dissolution entered by judicial decree when it is no longer reasonably practicable to

carry on the business of the partnership.

¶35 We begin our analysis by reviewing the law of partnerships as it pertains to the issues

in this case. A partnership is an association of two or more persons to carry on as co-owners

a business for profit. See § 35-10-102(5)(a), MCA; see also § 35-10-201(1), MCA (1991).

An informal or oral agreement will usually suffice to create a partnership, and where a

partnership agreement exists, it will generally govern relations among partners. Thus,

statutory rules are merely default rules, which apply only in the absence of a partnership

agreement to the contrary. See § 35-10-106, MCA. In the present case, the parties do not

dispute that the partnership agreement did not apply to situations involving a court ordered

dissolution of a partnership.

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¶36 Partnership law in Montana and throughout the United States has been primarily

derived from the Uniform Partnership Act (“UPA”), which was originally promulgated by

the Uniform Law Commissioners in 1914. Under the UPA, the law of partnership breakups

was couched in terms of dissolution. A partnership was dissolved and its assets liquidated

upon the happening of specific events, the most significant of which was the death of a

partner or any partner expressing a will to leave the partnership. Montana adopted the UPA

in 1947.

¶37 In 1993, our legislature significantly amended the UPA by adopting the Revised

Uniform Partnership Act, or RUPA.1 Unlike the UPA, RUPA now provides two separate

tracks for the exiting partner. The first track applies to the dissociating partner, and does not

result in a dissolution, but in a buy-out of the dissociating partner’s interest in the

partnership. See § 35-10-616, MCA. The term “dissociation” is new to the act, and occurs

upon the happening of any one of ten events specified in § 35-10-616, MCA. Examples of

events leading to dissociation include bankruptcy of a partner and death, see § 35-10-

616(6)(a) and (7)(a), MCA, but does not include a judicially ordered dissolution of the

partnership.

¶38 The second track for the exiting partner does involve dissolution and winding up of

the partnership’s affairs. Section 35-10-624, MCA, sets forth the events causing dissolution

and winding up of a partnership, and includes the following:

1
Although the 1993 Legislature did not amend the title of the UPA, it adopted the
changes embodied within the Revised Uniform Partnership Act (“RUPA”) and, therefore,
we shall refer to the act throughout this opinion as “RUPA.”

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 Events causing dissolution and winding up of partnership business.
...
(5) a judicial decree, issued upon application by a partner, that:
(a) the economic purpose of the partnership is likely to be unreasonably
frustrated;
(b) another partner has engaged in conduct relating to the partnership
business that makes it not reasonably practicable to carry on the business in
partnership with that partner; or
(c) it is not otherwise reasonably practicable to carry on the partnership
business in conformity with the partnership agreement[.]

¶39 In this case, the District Court dissolved the Partnership pursuant to § 35-10-624(5),

MCA. In so doing, it recognized that, in the absence of a partnership agreement to the

contrary, the only possible result under RUPA was for the partnership assets to be liquidated

and the proceeds distributed between the partners proportionately. The court reasoned,

however, that the term “liquidate” had a variety of possible meanings, one of which was “to

assemble and mobilize the assets, settle with the creditors and debtors and apportion the

remaining assets, if any, among the stockholders or owners.” Applying this definition, which

the court had obtained from Black’s Law Dictionary, the court concluded that a judicially

ordered buy-out of Joan’s interest in the Partnership by Clark was an acceptable alternative

to liquidation of the partnership assets through a compelled sale.

¶40 It is well established that “the role of courts in applying a statute has always been to

‘ascertain and declare what is in terms or in substance contained therein, not to insert what

has been omitted or to omit what has been inserted.’” State v. Goebel, 2001 MT 73, ¶ 16,

305 Mont. 53, ¶ 16, 31 P.3d 335, ¶ 16 (citation omitted). “[T]he intent of the Legislature is

controlling when construing a statute. The intention of the Legislature must first be

13
determined from the plain meaning of the words used, and if interpretation of the statute can

be so determined, the courts may not go further and apply any other means of interpretation.”

Goebel, ¶ 17.

¶41 It is true that this Court has previously utilized dictionaries when seeking to define the

common use and meaning of terms. See Ravalli County v. Erickson, 2004 MT 35, ¶ 13, 320

Mont. 31, ¶ 13, 85 P.3d 772, ¶ 13. However, in this case, we conclude that it was not

necessary for the District Court to resort to such devices. Section 35-10-629(1), MCA,

clearly provides that “[i]n winding up a partnership’s business, the assets of the partnership

must be applied to discharge its obligations to creditors, including partners who are creditors.

Any surplus must be applied to pay in cash the net amount distributable to partners in

accordance with their right to distributions pursuant to subsection (2).” (Emphasis added.)

Furthermore, subsection (2) of the statute provides:

Each partner is entitled to a settlement of all partnership accounts upon
winding up the partnership business. In settling accounts among the partners,
the profits and losses that result from the liquidation of the partnership assets
must be credited and charged to the partners’ accounts. The partnership shall
make a distribution to a partner in an amount equal to that partner’s positive
account balance.

(Emphasis added.) Thus, the common purpose and plain meaning of the term “liquidation,”

as it is used in § 35-10-629(2), MCA, is to reduce the partnership assets to cash, pay

creditors, and distribute to partners the value of their respective interest. See also 59A Am.

Jur. 2d Partnership § 1100 (2003). This is all part of the process of “winding up” the

business of a partnership and terminating its affairs.

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¶42 Clark invites this Court to take a liberal reading of § 35-10-629, MCA, and cites Creel

v. Lilly (Md. 1999), 729 A.2d 385, in support of the proposition that judicially acceptable

alternatives exist to compelled liquidation in a dissolution situation. At issue in Creel was

whether the surviving partners of a partnership had a duty to liquidate all partnership assets

because there was no provision in the partnership agreement providing for the continuation

of the partnership upon a partner’s death, and the estate had not consented to the

continuation of business. Creel, 729 A.2d at 387. After examining cases in which other

courts had elected to order an in-kind distribution rather than a compelled liquidation, or had

allowed the remaining partners to purchase the withdrawing partner’s interest in the

partnership, the court concluded that the UPA did not mandate a forced sale of all

partnership assets in order to ascertain the true value of the business, and that “winding up”

was not always synonymous with liquidation. Creel, 729 A.2d at 403. The court further

noted that it would have reached the same conclusion regardless of whether the UPA or

RUPA governed since, under RUPA, the remaining partners could have elected to continue

business following the death of one of the partners. Creel, 729 A.2d at 397.

¶43 However, of critical distinction between the facts in Creel and the case subjudice is

the manner in which the partners exited the entity. In Creel one of the partners had died.

Here, Joan sought a court ordered dissolution of the Partnership. Under RUPA, the death

of a partner triggers the provisions of § 35-10-619, MCA, which allows for the purchase of

the dissociated partner’s interest in the partnership, much like what was ordered in Creel.

Conversely, a court ordered dissolution pursuant to § 35-10-624(5), MCA, as in this case,

15
results in the dissolution and winding up of the partnership. Thus, Creel is both legally and

factually distinguishable.

¶44 Furthermore, the cases relied upon by the court in Creel in reaching its conclusion that

liquidation of assets was not always mandated upon dissolution, Nicholes v. Hunt (Or. 1975),

541 P.2d 820, Logoluso v. Logoluso (Cal. 1965), 43 Cal.Rptr. 678, Gregg v. Bernards (Or.

1968), 443 P.2d 166, Goergen v. Nebrich (N.Y. 1958), 174 N.Y.S.2d 366, and Fortugno v.

Hudson Manure Co. (N.J. 1958), 144 A.2d 207, are likewise pre-RUPA holdings, which are

inapposite to the facts at issue in this case.

¶45 Accordingly, we conclude that when a partnership’s dissolution is court ordered

pursuant to § 35-10-624(5), MCA, the partnership assets necessarily must be reduced to cash

in order to satisfy the obligations of the partnership and distribute any net surplus in cash to

the remaining partners in accordance with their respective interests. By adopting a judicially

created alternative to this statutorily mandated requirement, the District Court erred.

¶46 Did the District Court err by failing to grant Joan’s petition for an accounting of
the Partnership’s business affairs?

¶47 Joan maintains that the accounting performed by special master Blakely was

inadequate as it was limited to a review of tax returns, some of which were unfiled drafts,

for the years 1985 to 2001. She argues that the partnership tax returns failed to account for

the nearly $400,000 Clark allegedly removed from the Partnership for his own personal use.

Clark responds that the District Court found no competent evidence supporting Joan’s claim

16
that he wrongfully took funds from the Partnership, and argues that Joan agreed to the special

master’s limited accounting. However, the record reveals no such stipulation by Joan.

¶48 Every partner is generally entitled to have an accounting of the partnership’s affairs,

even in the absence of an express contract so providing. 59A Am. Jur. 2d Partnership § 617.

Moreover, RUPA provides that a partner may maintain an action against the partnership or

another partner for legal or equitable relief, including an accounting as to partnership

business, or to enforce a right to compel a dissolution and winding up of the partnership

business under § 35-10-624, MCA. See § 35-10-409(2)(b)(iii), MCA.

¶49 The purpose of an accounting is to determine the rights and liabilities of the partners,

and to ascertain the value of the partners’ interests in the partnership as of a particular date,

such as the date of dissolution. 59A Am. Jur. 2d Partnership at § 667. “When an action for

an accounting is being used to wind up the partnership’s affairs, the court is obligated to

provide ‘for a full accounting of the partnership assets and obligations and distribution of any

remaining assets or liabilities to the partners in accordance with their interests in the

partnership.’” Guntle v. Barnett (Wash. 1994), 871 P.2d 627, 630. This is often

accomplished through the appointment of a special master subject to court review, who

conducts a comprehensive investigation of the transactions of the partnership and the

partners. Guntle , 871 P.2d at 630. In rendering the accounting, mere summaries or lump

listings of types of items, or schedules of cash to be distributed without detailing the firm’s

transactions, are generally insufficient, as are mere tax returns. 59A Am. Jur. 2d Partnership

at § 621; Juliano v. Rea (1982), 452 N.Y.S.2d 668, 669.

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¶50 In this case, special master Blakely was charged with determining the amount of

Joan’s excess capital contributions and resolving disputes concerning ownership of

Partnership assets. In this regard, Blakely performed a detailed accounting of the assets,

liabilities, and capital contributions of each of the partners. While he accomplished much

of this by reviewing the partnership tax returns from 1985 to 2001, some of which were

apparently in draft form, Blakely also held several extensive meetings with the parties in

which he heard oral arguments and received evidence. From these meetings, and information

obtained from the partnership tax returns, Blakely prepared and submitted two reports to the

District Court, detailing the partners’ respective capital contributions and withdrawals, as

well as partnership assets and liabilities. These reports further itemized transactions

occurring within the Partnership from 1995 through 2001, and included a break-down for

Blakely’s determination of the suggested purchase price for Joan’s interest in the Partnership.

This was sufficient given the issues which were presented for Blakely’s review, and given

the fact that he testified before the District Court and was subject to cross-examination

concerning his findings.

¶51 Because we conclude, however, that the Partnership’s assets must be liquidated in

order to satisfy the Partnership’s obligations to its creditors and distribute the net surplus of

any assets in cash to the partners, on remand it will become necessary for the District Court

to perform a full accounting of the Partnership’s affairs. Once again, this requires a detailed

accounting of all the Partnership’s assets and liabilities, as well as distributions of assets and

18
liabilities to the partners in accordance with their respective interests in the Partnership.

Blakely’s reports may very well be of assistance in this process.

¶52 Did the District Court err by adopting the findings of the special master?

¶53 Joan challenges the District Court’s adoption of the special master’s findings by

arguing that the procedures before the special master failed to comply with Rule 53,

M.R.Civ.P., and takes particular issue with the master’s failure to hold proceedings on the

record, as well as what she perceives as his failure to prepare findings of fact and

conclusions of law.

¶54 Rule 53, M.R.Civ.P., allows a district court to appoint a master in complicated cases

to examine a matter and make a report thereon. Maloney v. Home and Investment Center,

Inc., 2000 MT 34, ¶ 28, 298 Mont. 213, ¶ 28, 994 P.2d 1124, ¶ 28. Rule 53(c), M.R.Civ.P.,

pertains to the power of masters and provides in relevant part:

The order of reference to the master may specify or limit the master’s powers,
and may direct the master to report only upon particular issues . . . . Subject
to the specifications and limitations stated in the order, the master has and
shall exercise the power to regulate all proceedings in every hearing before the
master and to do all acts and take all measures necessary or proper for the
efficient performance of the master’s duties under the order. . . . When a
party so requests, the master shall make a record of the evidence offered and
excluded in the same manner and subject to the same limitations as provided
in the Montana Rules of Evidence for a court sitting without a jury.

(Emphasis added.) Furthermore, pursuant to Rule 53(e)(1), M.R.Civ.P., “the master shall

prepare a report upon the matters submitted to the master by the order of reference and, if

required to make findings of fact and conclusions of law, the master shall set them forth in

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the report.” (Emphasis added.) In non-jury actions, the District Court is required to accept

the master’s findings of fact unless clearly erroneous. Rule 53(e)(2), M.R.Civ.P.

¶55 In the present case, the order referring the matter to special master Blakely charged

Blakely with rendering a decision on (1) the amount, if any, of Joan’s excess capital

contributions to the Partnership, and (2) what personal property was or was not obtained and

maintained by Partnership assets, and what should be considered individual property. The

order further directed Blakely to “conduct necessary hearings with all necessary parties and

their attorneys as may be practicable,” and to “review the necessary law and thereafter render

a report including Findings of Fact and Conclusions of Law concerning the merits of this

matter . . . .”

¶56 Blakely complied with the court’s directive by holding hearings with the parties, their

attorneys and accountants, receiving evidence, and issuing a report to the court. Blakely’s

determinations were not in a typical findings of fact and conclusions of law format, but,

nonetheless, recognizing that Blakely is an accountant, not a lawyer, we conclude that

Blakely’s reports to the District Court satisfied the requirements of Rule 53(e), M.R.Civ.P.

Furthermore, in the absence of a request by the parties, special master Blakely was not

obligated to make a record of the evidence offered and excluded in the same manner and

subject to the same limitations as provided in the Montana Rules of Evidence for a court

sitting without a jury. See Rule 53(c), M.R.Civ.P. Because the burden of challenging a

master’s findings is on the party objecting, Maloney, ¶ 28, and Joan has not established that

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the master’s findings are clearly erroneous, we conclude the District Court did not err in

accepting the special master’s report.

¶57 Did the District Court err in ruling that Clark did not dissociate by withdrawing
from the Partnership?

¶58 In her amended complaint, Joan petitioned the District Court for an order expelling

Clark from the Partnership pursuant to § 35-10-616, MCA, as a result of his allegedly

wrongful conduct of converting Partnership assets to his own personal use. Following a non-

jury trial, the District Court concluded that neither party had dissociated from the

Partnership, and denied Joan’s request for an order of expulsion.

¶59 On appeal, Joan contends that the District Court failed to consider evidence showing

that Clark had dissociated from the Partnership pursuant to § 35-10-616(5), MCA. She

argues that the court failed to consider evidence that Clark had denied the existence of the

Partnership and had taken steps to transfer legal title of the Partnership’s primary asset–the

ranch–to his name, and had converted over $400,000 of Partnership funds to his own

personal use. She further maintains that the court erred in denying her request for expulsion

in light of the fact that Clark had instigated criminal theft charges against her in 1994, which

later proved frivolous. In response, Clark asserts that the District Court adequately

considered each of the events leading to dissociation under § 35-10-616, MCA, and properly

denied Joan’s request for expulsion.

¶60 Section 35-10-616, MCA, delineates ten events causing a partner’s dissociation from

a partnership. Pursuant to § 35-10-616(5), MCA, one of the ways a partner may be

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dissociated is expulsion by judicial decree, made upon the application by the partnership or

another partner, because:

(a) the partner engaged in wrongful conduct that adversely and
materially affected the partnership business;
(b) the partner willfully or persistently committed a material breach of
the partnership agreement or of a duty owed to the partnership or other
partners under 35-10-405, MCA;
(c) the partner engaged in conduct relating to the partnership business
that made it not reasonably practical to carry on business in partnership with
that partner[.]

Dissociation under § 35-10-616(5), MCA, is considered wrongful. Section 35-10-

617(1)(b)(ii), MCA.

¶61 In this case, Joan’s amended complaint did not specifically request relief pursuant to

§ 35-10-616(5), MCA, and it is evident from the record that the District Court considered

her claim generally under § 35-10-616, MCA. In so doing, the District Court found that

Clark had not given notice of his express will to withdraw as a partner, that the partnership

agreement did not apply, and that Clark had continued to work the ranch since his alleged

dissociation in 1994, which Joan and the Partnership had benefitted from. The court further

noted that, although Clark had obtained loans in his individual name from 1994 forward, this

did not constitute dissociation since it was a necessary action in light of the parties’ inability

to communicate about ranch finances. Furthermore, the court concluded that Clark had not

dissociated from the Partnership by virtue of reporting Partnership gains and losses on his

individual tax returns. The court reasoned that Clark had filed the appropriate Partnership

tax returns following this Court’s decision in McCormick I, ¶¶ 67, 84, holding that the deeds

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transferring the ranch from Joan to Clark were void and the irrevocable trust allegedly

established by the parties’ father was invalid, and that Clark’s prior reliance upon the deeds

was reasonable.

¶62 Based upon these findings, which Joan does not dispute, we cannot disagree with the

District Court’s conclusion that Clark did not dissociate from the Partnership. While Joan

contends that the District Court failed to consider evidence that Clark wrongfully converted

over $400,000 of Partnership funds to his personal use, it does not appear from the record

that Joan raised this argument before the District Court in a timely fashion. Rather, the

record shows that these allegations first surfaced following trial and the appointment of a

special master.

¶63 Additionally, Joan’s contention that Clark dissociated from the Partnership by

instigating criminal theft charges against her fails. The District Court weighed this evidence

at trial and rejected it, finding that both parties were at least partially at fault for the

deterioration of the Partnership. The court also noted that the act of taking alternate legal

positions during the course of the dispute did not amount to dissociation. Because Joan has

not established that the District Court’s findings were clearly erroneous, we conclude the

court did not err in concluding that Clark did not dissociate from the Partnership pursuant

to § 35-10-616, MCA.

¶64 Did the District Court err in concluding that the Charolais cattle constituted
partnership assets?

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¶65 In 1990 Helen Brevig purchased approximately ten head of Charolais cattle to live on

the ranch. The following year, Helen transferred ownership of the cattle and the brand to

Clark and his two sons. Thereafter, these cattle were listed and treated as Partnership

property for all tax purposes, and proceeds from the sale of the cattle’s offspring was placed

into a Partnership account. Today, all the Charolais cattle residing on the ranch are offspring

of those cattle originally purchased by Helen in 1990.

¶66 The issue concerning ownership of the Charolais cattle arose as a result of the special

master’s treatment of the cattle as Partnership assets in his accounting. At trial, Clark

argued that the Charolais cattle should be regarded as separate property due to the fact that

his mother, who was not a partner, had gifted the cattle to Clark and his two sons, neither of

whom are partners. The District Court concluded, however, that since Clark had signed tax

returns indicating that the cattle were Partnership property, and had placed proceeds from

the sale of calves into Partnership accounts, the cattle should be treated as Partnership assets.

¶67 On cross-appeal, Clark challenges the District Court’s characterization of the

Charolais cattle as Partnership assets, and argues that the mere inclusion of the cattle in the

Partnership tax returns is legally insufficient to transfer title of the cattle to the Partnership.

We agree.

¶68 Section 35-10-203, MCA, pertains to partnership property and provides as follows:

(1) Property transferred to or otherwise acquired by a partnership is
property of the partnership and not of the partners individually.
(2) Property is partnership property if acquired in the name of:

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 (a) the partnership; or
(b) one or more partners with an indication in the instrument
transferring title to the property of the person’s capacity as a partner or of the
existence of a partnership but without an indication of the name of the
partnership.
(3) Property is acquired in the name of the partnership by a transfer to:
(a) the partnership in its name; or
(b) one or more partners in their capacity as partners in the partnership
if the name of the partnership is indicated in the instrument transferring title
to the property.
(4) Property is presumed to be partnership property if purchased with
partnership assets even if not acquired in the name of the partnership or of one
or more partners with an indication in the instrument transferring title to the
property of the person’s capacity as a partner or of the existence of a
partnership.
(5) Property acquired in the name of one or more of the partners
without an indication in the instrument transferring title to the property of the
person’s capacity as a partner or of the existence of a partnership and without
use of partnership assets is presumed to be separate property even if used for
partnership purposes.

(Emphasis added.) As reflected in the statute, property purchased with partnership assets,

or transferred in the partnership’s name, or to one or more of the partners in their capacity

as partners of the partnership, is presumed to be partnership property. On the other hand,

property acquired in the name of a partner without an indication that the property is being

transferred to that person in his or her capacity as a partner of the partnership is presumed

to be separate property, even if used for partnership purposes. See § 35-10-203, MCA.

¶69 In the present case, special master Blakely included the cattle as partnership assets in

his accounting because they were listed on the partnership tax returns. However, nothing in

the record suggests that the Charolais cattle were purchased with Partnership assets or

transferred to Clark and his two sons in their capacity as partners of the Partnership. Nor has

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their been any assignment of the cattle to the Partnership. Therefore, despite the fact that the

cattle were included in the Partnership tax returns, and proceeds from the sale of the cattle’s

offspring placed in Partnership accounts, the cattle are to be presumed separate property

pursuant to § 35-10-203(5), MCA.

¶70 As Joan correctly points out, this presumption is a rebuttable one. Nonetheless, Joan

did not introduce any evidence to overcome the presumption but, rather, has relied on appeal

upon the District Court’s findings that money from the sale of calves had been placed into

Partnership accounts, and that the cattle had been listed on Partnership tax returns. However,

we have previously considered and rejected arguments that a third party acquires an interest

in cattle simply by feeding, watering, and pasturing them. In In re Marriage of Schultz

(1982), 199 Mont. 332, 649 P.2d 1268, the respondent in a divorce proceeding claimed he

had an interest in a cattle brand which had been transferred to the parties’ daughter because

he had fed and watered the cattle and had taken care of them on his land. The respondent

cited no authority in support of his contentions and, on appeal, we held that his claim was

meritless. We further noted that proceeds from the sale of the daughter’s calves had been

used by the ranch in its operation, and thus concluded that the respondent had been equitably

compensated for his contributions. Schultz, 199 Mont. at 338, 649 P.2d at 1271.

¶71 As in Schultz, here proceeds from the sale of calves had been deposited in Partnership

accounts and used for Partnership purposes. Joan has not demonstrated any equitable

interest in the cattle by virtue of the Partnership’s care and feeding of the cattle, nor has she

provided any authority which would compel the conclusion that ownership of the cattle

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passed to the Partnership. Because the presumption established by § 35-10-203(5), MCA,

has not been overcome by evidence to the contrary, we conclude the District Court erred in

categorizing the Charolais cattle as Partnership assets, and reverse the court’s determination

in that regard.

¶72 Did the District Court err by excluding evidence of a teleconference and
concluding that Clark was not entitled to compensation?

¶73 Clark asserts that the District Court erred in excluding evidence of a taped telephone

conference between himself, Helen, Joan, and two accountants, which allegedly contained

Joan’s admission that Clark should receive a salary as ranch manager in the amount of

$24,000 per year. The District Court excluded the taped testimony on the ground that it was

not clear that all persons involved in the conversation were aware that it was being tape-

recorded, in violation of § 45-8-213, MCA, which pertains to privacy in communication.

The court further found that the tape recording offered by Clark as evidence in support of his

claim that Joan had agreed to pay him a salary had been intentionally altered, and therefore

lacked the necessary foundation to be authenticated under Rule 901, M.R.Evid. Because

we conclude the District Court correctly denied admission of the proffered evidence on the

grounds that it was incapable of being authenticated, we decline to address whether it was

also proper for the court to exclude the tape recording pursuant to § 45-8-213, MCA.

¶74 The requirement of authentication or identification is a condition precedent to

admissibility. Rule 901, M.R.Evid. In State v. Warwick (1972), 158 Mont. 531, 542, 494

P.2d 627, 633, this Court set forth the standards for admissibility of sound recordings. They

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are (1) a showing that the recording device was capable of taking testimony, (2) a showing

that the operator of the device was competent, (3) establishment of authenticity and

correctness of the recording, (4) a showing that changes, additions or deletions have not been

made, (5) a showing of the manner of the preservation of the recording, and (6) identification

of the speakers.

¶75 In this case, the District Court found that the tape recording had been intentionally

altered so as to capture only certain phrases or sentences from the original recording and the

original version of the recording was no longer available. Consequently, it was impossible

to authenticate the recording pursuant to the standards set forth in Warwick. As we have

often noted, a district court has broad discretion in determining whether evidence is relevant

and admissible and we will not overturn that determination absent an abuse of discretion.

Glacier Tennis Club at Summit, LLC v. Treweek Const. Co., Inc., 2004 MT 70, ¶ 47, 320

Mont. 351, ¶ 47, 87 P.3d 431, ¶ 47. Here, Clark has not even attempted to discredit the

District Court’s findings that he intentionally altered the tape. Accordingly, we conclude the

District Court was correct to deny admission of the tape recorded conversation.

¶76 Affirmed in part, reversed in part, and remanded for further proceedings consistent

with this opinion.

/S/ JIM RICE

We concur:

/S/ KARLA M. GRAY

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/S/ W. WILLIAM LEAPHART
/S/ PATRICIA O. COTTER
/S/ JIM REGNIER

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