Brown v. Brown

• Decision Date: 14 September 1971
• Docket Number: CA-CIV,No. 1,1
• Citation: 15 Ariz.App. 333,488 P.2d 689
• Parties: Walter C. BROWN and W. D. Plaster, Appellants, v. G. Harold BROWN, Individually and as general partner of the Ponderosa Land and Investment Co., dba Ponderosa Land Co., Ponderosa Title Co., et al., Appellees. 1055.
• Court: Arizona Court of Appeals

Page 689

488 P.2d 689

15 Ariz.App. 333

Walter C. BROWN and W. D. Plaster, Appellants, v. G. Harold BROWN, Individually and as general partner of the Ponderosa Land and Investment Co., dba Ponderosa Land Co., Ponderosa Title Co., et al., Appellees.

No. 1 CA-CIV 1055.

Court of Appeals of Arizona, Division 1, Department A.

Sept. 14, 1971.

Rehearing Denied Oct. 14, 1971.

Review Denied Nov. 9, 1971.

Hughes, Hughes & Conlan, by John C. Hughes, Phoenix, for appellants.

Herbert Mallamo, Phoenix, for appellees.

DONOFRIO, Judge.

William D. Plaster and Walter C. Brown commenced this litigation to dissolve a partnership in which they claimed to be limited partners and to obtain a distribution of the partnership assets. Following a series of master's reports and hearings thereon, the trial court entered a decree of dissolution and distributed the partnership assets. Plaster and Brown (herein referred to as plaintiffs) now appeal therefrom, contending there were a number of errors concerning the propriety of the court's rejection of the master's first report, the directions given to the master relative to his next report, the scope of the hearings on the master's report, and the fees assessed in connection therewith.

The pertinent facts are as follows. The parties to this action executed a certificate of limited partnership under the name of Ponderosa Land and Investment Company on or about May 1, 1960, for the purpose of subdividing 320 acres of land near Flagstaff, Arizona, to be sold as lots for summer homes. The plaintiffs were designated therein as two of the limited partners, and G. Harold Brown, defendant-appellee, (herein referred to as defendant) as the general partner. (It should be noted that plaintiff Walter C. Brown and defendant G. Harold Brown are not related.) After the instant action was commenced, the parties stipulated on February 3, 1966, that the matter be referred to a master for a certified audit. Accordingly, a report was made by the master and filed on May 1, 1967. The report thus filed contained an uncertified audit. On September 21, 1967, at a pretrial conference, the defendant submitted an accounting he had prepared. This accounting was denied. The matter came on for trial on October 4, 1967, at which time the master testified that the records were not adequate to give a certified audit of the partnership due to the limitations imposed by the accounting method he was directed to follow under the terms of the stipulation. On October 11, 1967, after approximately four days of trial the court found that the master's report presented no findings which could be used as a basis for judgment, and resubmitted the matter to the master with instructions.

Plaintiffs first contend that the trial court erred in failing to adopt this master's report. We do not agree. Rule 53(h), Rules of Civil Procedure, 16 A.R.S., states:

'The court shall accept the master's findings of fact unless clearly erroneous. Within ten days after being served with notice of the filing of the report any party may serve written objections thereto upon the other parties. Application to the court for action upon the report and upon objections thereto shall be by motion and upon notice as prescribed in Rule 6(c). The court after hearing may adopt the report or may modify it or may reject it in whole or in part or may receive further evidence or may recommit it with instructions.' (Emphasis supplied.)

We hold under the circumstances of this case that it was within the trial court's discretion not to accept the master's report but to resubmit the matter to the master for further accounting.

We would agree that if the parties had stipulated that the master's report be final, then only questions of law would thereafter be considered. However, in this case the parties stipulated only to a certified audit, not that regardless of the certification the master's report be final. The master was unable to render a certified audit. Under these circumstances, it was within the court's discretion to resubmit the matter to the master with special instructions, there having been no exceptions filed thereto for the court to pass upon.

Secondly, plaintiffs contend that the trial court erred in its directions to the master regarding the preparation of the second report. Plaintiffs claim that the proper instruction should have been that defendant be allowed credit only where defendant's disbursements were supported by all vouchers, memoranda and receipts, rather than the instruction given, that the master adopt the distribution of the partnership assets as set forth in defendant's accounting when supported by evidence, and further directed that partnership disbursements claimed by defendant not be allowed unless first supported by adequate evidence. We believe that the trial court's directions conform to the holding that the managing partner has the burden to support with competent evidence the disbursements made. Fernandez v. Garza, 88 Ariz. 214, 354 P.2d 260 (1960); Mollohan v. Christy, 80 Ariz. 141, 294 P.2d 375 (1956). After thoroughly reviewing the record, we have found no instances where the defendant was allowed credit without there being competent supporting evidence.

Plaintiffs also contend that it was error not to let plaintiffs examine and cross-examine the master on fraud or breach of fiduciary duty at the hearings conducted by the master pursuant to the master's second report. We do not agree.

First, there is no right to examine or cross-examine the master at the master's hearing. Secondly, the trial court confined the master's hearing solely to matters relating to distribution and instructed the master not to hear evidence on the issues of fraud or breach of fiduciary duty. This instruction is in conformity with Rule 53(c), Rules of Civil Procedure, 16 A.R.S., which states:

'The order of reference to the master may specify or limit his powers and may direct him to report only upon particular issues or to do or perform particular acts or to receive and report evidence only * * *.'

Further, after the master's second report was filed, the court then held hearings on the issues of fraud and breach of fiduciary duty, and at that time plaintiffs were afforded an opportunity to examine and cross-examine the master on the issues of fraud and breach of fiduciary duty.

Next, plaintiffs contend that the trial court erred in instructing the master that defendant and plaintiff Plaster purchased the equipment used in the partnership operation and rented it to the Ponderosa group; that the correct instruction should have been that the partnership purchased the equipment because the accounting showed portions of the equipment purchased out of partnership funds. The law in Arizona, A.R.S. § 29--208, subsec. B is that:

'Unless the contrary intention appears, property acquired with partnership funds is partnership property.' (Emphasis supplied.)

The trial court concluded, however, that a contrary intention did appear, and there is ample evidence to support the trial court's conclusion. Much of this equipment was purchased long prior to the inception of the partnership and that portion of the equipment purchased during the partnership operation was to a great extent paid for by personal funds. The trial court found that the portion of equipment paid for by partnership funds was necessitated because the partnership operation was undercapitalized and underfinanced, requiring unusual financing methods; that defendant had contributed a great sum of money to the partnership at will and at times it was necessary for him to use partnership funds to pay for the equipment.

The master prepared and filed his second report, and objections as to this report were heard by the trial court on May 1 and 3, 1968. On the morning of May 3, 1968, the court informed both counsel that there would be rulings on all objections by 4:30 that afternoon, May 3, 1968. The matter came on for further trial on July 15, 1968, on the issues of fraud and breach of fiduciary duty. On the morning of July 19, 1968, the court announced that plaintiffs' counsel would have until 4:30 that afternoon to complete the case on the issues of fraud and breach of fiduciary duty.

Plaintiffs contend that they were denied due process if law and an opportunity to be heard when the trial court limited plaintiffs' evidence in support of their objections to the master's second report, and again when the court limited the presentation of the evidence on the issues of fraud and breach of fiduciary duty. We disagree.

We have thoroughly reviewed the record before us and find that plaintiffs had an adequate opportunity to be heard concerning both matters. Plaintiffs did not have the right to argue their case Ad infinitum. The judge placed a time limit which we find was reasonable. Further, the trial court ordered that plaintiffs could make objections to the master's report or present an offer of proof and make a record as to what would have been offered at the hearing, or make...