Allen's Estate, Matter of

• Decision Date: 18 February 1976
• Docket Number: No. 2--57169,2--57169
• Parties: In the Matter of the ESTATE of Edward J. ALLEN, a/k/a E. J. Allen, Deceased. Appeal of Ruby ALLEN.
• Court: Iowa Supreme Court

Page 163

239 N.W.2d 163

In the Matter of the ESTATE of Edward J. ALLEN, a/k/a E. J. Allen, Deceased Appeal of Ruby ALLEN.

No. 2--57169.

Supreme Court of Iowa.

Feb. 18, 1976.

Baird, Bowers & Oliver, Des Moines, for appellant, Ruby Glover Allen.

Michael F. Travis, Bedford, and Richard L. Wilson, Lenox, for appellee, Edward J. Allen Estate.

Heard before MOORE, C.J., and MASON, LeGRAND, HARRIS, and McCORMICK, JJ.

HARRIS, Justice.

This appeal challenges the trial court's ruling on objections to the final report in an ancillary estate. Decedent's widow and her attorney are co-administrators. Their final report was attacked on various grounds by decedent's mother and sister. Decedent's mother appeals from rulings favorable to the widow. We affirm in part, reverse in part and remand with instructions.

The decedent Edward Allen died intestate May 12, 1972, a resident of Hopkins, Missouri. He was survived by his widow Phyllis Allen (Phyllis) of Hopkins, Missouri, his mother--the appellant--Ruby Allen (Ruby), of Gravity, Iowa, and his sister Lucille Miller (Lucille) of Red Oak, Iowa. Resident estate proceedings took place in Missouri. The final report was approved there April 6, 1973.

The Iowa ancillary estate was opened May 25, 1972. The final report of the co-administrators was filed April 11, 1973. In response to written objections by Ruby and Lucille it was amended. Ruby and Lucille also objected to the final report in its final form. Ruby's appeal from the trial court's order overruling the objections presents five propositions. The first three have to do with disposition of property in which decedent had once held partnership interests. A fourth proposition challenges disposition of funds deposited by Phyllis in an Iowa bank and which were derived from the sale of personal property located in Missouri. Ruby's final challenge is to the granting in Iowa of a surviving spouse's allowance.

We explained the scope of our review of objections to a final report in In re Estate of Roehlke, 231 N.W.2d 26, 27 (Iowa 1975). The hearing on objections is an equitable proceeding under § 633.33, The Code. Our review is de novo. We give deference to but are not bound by the trial court's findings.

I. Beginning January 2, 1966 decedent and H. A. McCoy operated a cattle business in partnership. Because the parties considered the question to be of controlling importance they dispute whether the partnership was terminated prior to decedent's death. Ruby believes decedent and McCoy had merely moved toward termination. Phyllis argues the partnership had been actually terminated.

Between December 7, 1965 and December 3, 1968 decedent and McCoy acquired 1123 acres of land situated in Worth County, Missouri and Ringgold County, Iowa. The land was purchased in five different parcels for use in the cattle operation. Title to the Iowa land was conveyed as 'an undivided one-half interest to Edward J. Allen and Phyllis Allen, Husband and Wife as Joint Tenants with Full Rights of Survivorship, and not as Tenants in common; an undivided one-half interest to H. A. McCoy and Wylma McCoy, Husband and Wife.'

The title to four Missouri parcels all indicated each couple was to receive an undivided one-half interest in the land. Two mentioned the Allen's undivided one-half interest was to be held in tenancy by the entirety; the other two merely indicated 'Edward J. Allen and Phyllis Allen, husband and wife.'

The 1123 acres of land were sold on contract April 15, 1972. The contract, prepared an Official Form 21.2 of the Iowa State Bar Association, contained a provision continuing any joint tenancy of the vendors in their contractual interest notwithstanding execution of the contract.

Ruby contends the land was a partnership asset and that the principal and interest payments received upon sales remained partnership property. She asserts decedent's one-half interest should be included in the estate to pass by intestate succession. In support of her contention Ruby sets out ten indicia in an attempt to establish the land had been, and continued to be, held in partnership until sold on contract. She lists such factors as source of purchase price, use of the property by McCoy and decedent, and the fact the land transaction appeared on their partnership tax returns. From this basis Ruby argues a familiar partnership principle in the mistaken belief it will inure to her benefit. The principle was stated at 12 Drake L.Rev. 131, 135--136 (1963). We quoted it with approval in Lamp v. Lempfert, 259 Iowa 902, 908, 146 N.W.2d 241, 245 (1966):

'* * * In determining what is partnership property, consideration is most strongly given to the source of the funds from which the property is acquired. It has been held in numerous cases that where property is purchased through partnership funds, even though title is taken in the name of one partner alone, the property is that of the partnership. Other consideration has been given to the general surrounding circumstances regarding the situation of the parties, the manner of keeping the accounts, how the repairs, improvements and taxes have been paid, and what has been done with the income, the use made thereof, and the like. (Authorities).'

Phyllis argues the partnership was in fact terminated prior to the sale of the land. The issue of partnership termination was hotly disputed at trial and on appeal. We need not and will not pass on this issue because we consider the issue inappropriate.

In the first place termination of the partnership would not necessarily work an automatic division of assets. Even though a partnership is terminated its assets, though held in other than the partnership name, are generally subject to a resulting trust. Gregory v. Gregory, 248 Iowa 672, 674--675, 82 N.W.2d 144, 146 (1957); Lutz v. Billick, 172 Iowa 543, 547, 154 N.W. 884, 885 (1915) and authorities.

We believe the answer to Ruby's contention lies in the purpose of the rule upon which she relies. We perceive that purpose to be to protect and preserve the true nature and extent of ownership in partnership assets. In this regard the intent of the parties is paramount. 60 Am.Jur.2d, Partnership, § 92, pp. 21--22. Because the purpose of the rule is to protect the actualities of ownership the rule presuming partnership ownership does not apply to situations where the parties intend otherwise. 60 Am.Jur.2d, Partnership, § 94, pp. 23--24; 68 C.J.S. Partnership § 72d, pp. 508--511. The rule was well stated in Gertz v. Fontecchio, 331 Mich. 165, 170--171, 49 N.W.2d 121, 124 (1951):

'* * * Property acquired with partnership funds or by the partners individually for the use of the partnership does not necessarily constitute a partnership asset. In the absence of supervening rights of creditors, such property may, as between the partners, at least, be owned by them individually as tenants in common or otherwise, as distinguished from the partnership, if such was their intention in the acquisition and holding thereof. (Authorities) * * *.'

The rule, under the Uniform Partnership Act, is now codified in Iowa by § 544.8(2), The Code, which provides: 'Unless the contrary intention appears, property acquired with partnership funds is partnership property.' (Emphasis added.)

We think evidence in this case compels a conclusion the parties intended otherwise. It appears in the titles to the various parcels. In each parcel title included the wife of each partner. Each couple held an undivided one-half interest as teants in common with the other couple. Decedent and Phyllis held their interest in joint tenancy with right of survivorship. It is manifest the parties carefully thought out and provided for the nature of their ownership in the parcels. The trial court was correct in determining the land was not a partnership asset. Ruby's first contention in antithetical to the clear intention of the parties and is without merit.

II. Decedent was also involved in another partnership. Together with Ralph Tamerius he conducted a general farming and cattle raising operation on a farm in Taylor County, Iowa. Three hundred of the 380 acres which comprised the farm had been purchased by decedent and Phyllis on March 6, 1967. A Missouri bank was designated as escrow agent in the contract and was directed as follows:

'Sellers have this date executed warranty deed conveying this farm to buyers. This deed is deposited with escrow agent. When total purchase price is paid in full escrow agent is directed to deliver deed to buyers. In event of breach or forfeiture by buyers and sellers exercise of option to forfeit by reason thereof as hereinafter set out, escrow agent to return deed to sellers, in which even all amounts paid on contract by buyers shall be considered as rent and liquidated damages and contract shall be terminated.'

In the contract the purchasers were merely indentified as 'Edward J. Allen and Phyllis Allen, husband and wife.' In the warranty deed, which the contract recites was excecuted at the same time, the grantees were designated as 'Edward J. Allen and Phyllis Allen, husband and wife, as joint tenants, and not as tenants in common.' At the time of decedent's death $13,750 of the $37,500 original purchase price remained unpaid.

Ruby relies on the presumption we explained in In re Estate of Miller, 248 Iowa 19, 79 N.W.2d 315 (1956). Under our holding in Miller a presumption arises whenever realty is conveyed to two or more persons as grantees that they take as tenants in common and not as joint tenants. Ruby argues we should look to the real estate contract and ignore the undelivered deed, citing Randolph v. West, 158 N.W.2d 722 (Iowa 1968). She also urges the deed which was in escrow was executed only by the vendors and does not show what the grantees intended their interest to be.

We however agree with trial court that the presumption in favor of tenancy in common was overcome in this case. The controlling question again is the...