Arnold v. Burgess

• Decision Date: 03 December 1987
• Docket Number: No. 16094,16094
• Citation: 747 P.2d 1315,113 Idaho 786
• Parties: Donna L. ARNOLD, Plaintiff-Respondent, v. Melrose L. BURGESS and Berniece Burgess, husband and wife; S. Wayne Burgess and Carol J. Burgess, husband and wife, Defendants-Appellants, and M. Edmond Burgess, formerly doing business as Burgess Farms, Defendants.
• Court: Idaho Court of Appeals

Page 1315

747 P.2d 1315

113 Idaho 786

Donna L. ARNOLD, Plaintiff-Respondent, v. Melrose L. BURGESS and Berniece Burgess, husband and wife; S. Wayne Burgess and Carol J. Burgess, husband and wife, Defendants-Appellants and M. Edmond Burgess, formerly doing business as Burgess Farms, Defendants.

No. 16094.

Court of Appeals of Idaho.

Dec. 3, 1987.

Thomas H. Church of Church, Church, Snow & Tuft, Burley, for defendants-appellants.

Richard D. Greenwood of Stephan, Slavin, Kvanvig & Greenwood, Twin Falls, for plaintiff-respondent.

WALTERS, Chief Judge.

Donna Arnold brought this action to obtain a judgment based upon allegedly inequitable in-kind distributions of partnership property during the attempted winding up of Burgess Farms, a family partnership. The trial court entered judgment for the principal sum of $69,927.50, plus $36,232.02 in prejudgment interest, against four of her former partners. The appeal by her partners presents three primary issues: (1) Did the court erroneously find that an account stated or settlement agreement existed among the parties? (2) Did the evidence support the court's finding that Arnold was entitled to the principal sum of the judgment? and (3) Did the court err by granting prejudgment interest from the date of dissolution of the partnership? Because we conclude that the trial court grounded its decision upon a restitution theory, rather than an express contract theory, we do not reach the first issue. We affirm the principal award, but on grounds other than the theory of "unjust enrichment" applied by the trial court. We also affirm the award of prejudgment interest, but direct the trial court to correct a clerical error in the judgment.

The parties to this action are Melrose and Berniece Burgess, husband and wife, S. Wayne and Carol Burgess, husband and wife, and M. Edmond Burgess and his former wife, Donna Arnold. Wayne and Edmond are the sons of Melrose and Berniece. Although Edmond Burgess elected not to be a party to this appeal, for simplicity we will refer to the collective appellants as either the "Burgesses" or the "defendants," and to the former Mrs. Edmond Burgess as "Arnold."

The following facts are drawn from the trial court's findings. In 1969 these three couples orally formed a partnership known as Burgess Farms. A certificate of partnership was later recorded, but a written partnership agreement was never drafted. From 1969 until 1980 they farmed a number of parcels in the area of Paul, Idaho. During the later years they also operated a fresh-pack potato marketing business. Profits and losses were shared equally. The businesses were jointly managed. Title to the various parcels of real property was held either separately or jointly by the individuals, but not in the name of the partnership. The farmland was jointly mortgaged to secure obligations of both the partnership and of the individuals.

Unfortunately, an eye injury suffered during the 1976 season prevented Edmond Burgess from continuing full participation in the operation of the farm. In addition, cooperation declined as Arnold became increasingly dissatisfied with the management of the businesses. Therefore, on December 31, 1980, the partnership was dissolved. Soon thereafter, Edmond Burgess and Donna Arnold began divorce proceedings.

During the ensuing three years, the partners undertook to wind up the affairs of the partnership. Because Melrose and Wayne Burgess desired to continue farming, the partners attempted to liquidate the assets by a series of in-kind distributions. First, the 1980 potato crop was distributed. By agreement of the parties, an imbalance in this distribution was to be corrected at final settlement of the partnership. Later, the farm machinery was also disproportionately distributed. Other assets were similarly divided. Certain real property was exchanged, apparently to produce more efficient farming units for each couple, to separate title, and to remove some financial disparity. Partnership losses for the 1980 agricultural season were borne by the defendants. As each distribution was made, preliminary statements of account were prepared or adjusted.

Ultimately, all assets and obligations were distributed except for partnership debts owed to the Farmers Home Administration (FmHA) and the Federal Land Bank of Spokane (FLB). Apparently the delay in winding up resulted in a failure to make payments to FmHA and FLB. All of the parties remained jointly and severally liable to these creditors. Unfortunately, no final accounting or settlement satisfactory to all partners was ever achieved.

When Arnold concluded that a satisfactory termination of the partnership would not be forthcoming, she filed this action. She claimed that approximately $153,000 was due her and Edmond from the other partners because of the disproportionate distribution of assets. Her complaint asserted two counts. Count I was grounded upon an alleged settlement agreement among the partners. Count II recited:

That on or about July 1, 1981, the partnership known as Burgess Farms was dissolved and the plaintiff and defendant, M. Edmond Burgess, were entitled to the sum of One Hundred Fifty-three Thousand One Hundred Ninety Dollars ($153,190.00) from the other partners for their equity in the partnership assets conveyed to the other partners as part of the partnership dissolution.

Both the defendants' answer and the trial court's decision treated this assertion as a claim of unjust enrichment. The defendants denied the claim and asserted that Arnold had failed to negotiate in good faith.

The trial court found that on the date of dissolution the capital accounts were "equal." The court also found that at least one statement of account--although never approved by all parties--reflected the true state of partnership affairs. This exhibit indicated that as a result of prior distributions $139,859 was due Edmond from Melrose and Wayne, and that they had offered to assume a share of Edmond and Arnold's debt to FmHA as compensation. The court concluded that the disproportionate distribution of assets constituted "unjust enrichment" of the defendants at the expense of Arnold and entered judgment in her behalf for one-half of the amount owed to her and Edmond. In addition, the court awarded prejudgment interest running from the date of dissolution.

The court found no bad faith in Arnold's acts during the attempted winding up. After acknowledging that the termination of a family farm partnership can be a particularly painful and difficult process, the court concluded that Arnold's rejection of the Burgesses' offer to assume her debt was reasonable in light of their inability to obtain a release for her from FmHA.

I

The Burgesses appeal with respect to both express contract and unjust enrichment theories of recovery. However, as described below, our review of the record indicates the trial court's judgment rested only upon the latter concept.

The court found that there had been no meeting of the minds regarding a final accounting. Although the court relied upon various "statements of account," these are distinct from "accounts stated." A statement of account is a mere rendition of an account. See BLACK'S LAW DICTIONARY 1263 (5th ed. 1979). Some form of assent or agreement is required to convert it to an account stated. Kugler v. Northwest Aviation, Inc., 108 Idaho 884, 887, 702 P.2d 922, 925 (Ct.App.1985). That is, the former is an oral or written statement, a form of evidence; the latter is a contract, a concept of law. The trial court's findings refer to statements of account, not to accounts stated.

We have reviewed the court's written decision and the transcript of the judge's oral pronouncements at the completion of trial and are satisfied that the decision was based upon a restitution theory. Because the court did not find an express contract, we need not address the Burgesses' claim that the court erred in such a finding.

II

We turn next to the Burgesses' argument that the trial court erred in reaching the conclusion that they had been unjustly enriched. They contend that no benefit was conferred by asset and liability distributions because an FmHA foreclosure subsequent to entry of judgment deprived them of any benefit they might have enjoyed. The Burgesses argue that the inevitability of this foreclosure was established by unrefuted evidence that the foreclosure proceeding had begun and that the value of the security was substantially less than the amount of the debt to FmHA. In contrast, Arnold argues that she was entitled to an accounting and, therefore, the court's finding of unjust enrichment was "nonprejudicial surplusage."

We begin our analysis by briefly reviewing the law of partnerships. "A partnership is an association of two (2) or more persons to carry on as coowners a business for profit." I.C. § 53-306(1). "The dissolution of a partnership is the change in relation of the partners caused by any partner ceasing to be associated in the carrying on, as distinguished from the winding up, of the business." I.C. § 53-329. Dissolution does not terminate a partnership, it simply alters the authority of the partners with respect to partnership business. The partnership continues until the winding up of partnership affairs is completed. I.C. § 53-330; Heileson v. Cook, 108 Idaho 236, 697 P.2d 1250 (Ct.App.1985). Winding up is the process of settling partnership affairs after dissolution. Uniform Partnership Act § 29, 6 U.L.A. 365, Official Comment (1969). Where partners mutually agree to a dissolution, any partner has the right to wind up partnership affairs in accordance with the agreement. I.C. § 53-337; Burnham v. Bray, 104 Idaho 550, 557, 661 P.2d 335, 342 (Ct.App.1983). Upon cause shown, any partner may obtain winding up by the court. I.C. § 53-337. In such an action a court may enter a money judgment as the state of the partnership accounts may require. See Johnston v. Ellis, 49 Idaho...