Preview:

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 Montana. at Law, ~alispell,

For Respondent:
William E. Hileman; Hedman, Hileman & Lacosta, Whitefish, Montana; Daniel W. Hileman; Murray & Kaufman, Kalispell, Montana.

Submitted on brief: Decided: Filed:

August 1, 1991
September 17, 1991

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 control and later sold.
4)

Birky who retained

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 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

Download ecf74c39-73c7-4869-a453-6c10f0366e07.pdf

Montana Law