Estate of Palmer, Matter of

• Decision Date: 19 November 1985
• Docket Number: No. 84-167,84-167
• Citation: 218 Mont. 285,708 P.2d 242
• Parties: In the Matter of the ESTATE OF Robert R. PALMER, Deceased.
• Court: Montana Supreme Court

Page 242

708 P.2d 242

218 Mont. 285

In the Matter of the ESTATE OF Robert R. PALMER, Deceased.

No. 84-167.

Supreme Court of Montana.

Submitted May 23, 1985.

Decided Oct. 21, 1985.

Rehearing Denied Nov. 19, 1985.

Hooks & Budewitz, Patrick F. Hooks argued, Townsend, Moore, Rice, O'Connell & Refling, Perry J. Moore, Bozeman, for appellant.

Drysdale, McLean, Screnar & DiRe, Roger Scouten and James McLean argued, Bozeman, for respondent.

WEBER, Justice.

A motion to determine the existence of a joint tenancy was filed in the probate proceedings in the District Court of Park County. An appeal was taken from the order determining that the checking account, cattle, cattle brands and brokerage account did not pass to the surviving partner in his capacity as surviving joint tenant. We affirm the District Court.

The issues are:

1. Did the District Court err in holding that the bank checking account in the names of William Palmer and Robert Palmer as joint tenants was partnership property?

2. Did the District Court err in holding that the cattle branded with a brand registered in the names of "William Palmer or Robert Palmer" were partnership property?

3. Did the District Court err in holding that a brokerage account, registered in the name of William Palmer for which Robert Palmer signed a document as a joint tenant, was partnership property?

Following are pertinent facts contained in the uncontested findings of fact of the District Court.

Robert Palmer (Robert) died on November 8, 1981. For many years prior to Robert's death, he and his brother, William, operated and conducted a partnership called "Palmer Brothers." The partnership was engaged in the business of raising livestock and feed, conducting a feedlot operation, and buying and selling cattle on ranchlands about 10 miles northeast of Livingston in Park County, Montana. William and Mildred, his wife, resided on the ranch for many years prior to Robert's death, while Robert resided in Livingston. Robert married Constance on September 21, 1979, and Constance is Robert's sole heir at law. For many years prior to Robert's death, Robert and William owned a checking account in First Bank Livingston, in which they deposited all receipts and the proceeds from cattle sales and other income, and from which they paid all partnership debts and obligations. Additional facts will be set forth in our discussion of the checking account issue. William and Brad Palmer, son of William, claimed the proceeds in the checking account at the time of Robert's death as surviving joint tenants. Constance contends that the balance is a part of the partnership assets and should be accounted for in the partnership. Because of the or brand certificate, William claims that the brands and any cattle carrying them passed to him as surviving joint tenant, and to Mildred as his successor in interest. Constance claims the property is part of the partnership's assets and should be accounted for in the partnership. In 1979, William opened a commodity or brokerage account with Merrill Lynch. William claims the Merrill Lynch account as his sole property, or as surviving joint tenant if the account is found to be joint, while Constance claims the account is part of the partnership assets.

The District Court pointed out that William testified that his relationship with Robert was very close and they got along well both as friends and as business partners until the last few years of Robert's life, when his personality changed and he did erratic things. Constance testified that Robert and William were not friendly for several years before Robert's death, although she acknowledged that Robert named William as personal representative in his 1977 will. Another brother, Maro Palmer, testified that Robert had told him William was trying to take the business away from him and that Robert's behavior had not changed until a few weeks before death. Brad Palmer testified that William and Robert got along well with only normal disagreements until the last year or so when Robert became unable to make decisions and lost his judgment. A neighboring rancher testified that the brothers got along well and he never saw any disagreement.

The District Court found that the partnership income tax returns for 1972 through 1981, with 1974 missing, showed that the partnership paid all of the expenses of operating the ranch, including huge sums for purchasing and feeding livestock, interest on loans, taxes, vet care and trucking, from the Palmer Brothers' checking account; that all partnership income, including profits from cattle sales, was deposited in that account; and that the partners split equally any net profits or losses. The District Court further found that neither brother had any individual source of income.

The evidence established that the bank account was opened in joint tenancy form in 1947, and the Palmer Brothers' partnership commenced business in 1949.

Following Robert's death on November 8, 1981, Brad Palmer was appointed as personal representative of his estate under Robert's will of February 7, 1977. Constance as sole heir of Robert, petitioned the court to terminate the appointment of Brad as personal representative. She was appointed as personal representative of the estate of Robert on February 24, 1982, and continued in that capacity. William filed a petition to determine joint tenancies in the probate proceeding. A hearing was held, testimony was submitted and evidence was introduced by both sides. By Order Ruling on Motion dated March 7, 1984, the District Court denied the motion of William to determine the checking account, cattle, cattle brands and brokerage accounts passed to him as surviving joint tenant. The court further determined that all of such items of personal property were the partnership property of Palmer Brothers and were to be accounted for by William as surviving partner, or his successors, to Constance, the personal representative of Robert's estate. William and Mildred, his wife and successor, appealed from the Order.

I

The issues presented require us to consider the provisions of the Uniform Partnership Act as adopted in 1947. Because there are few Montana cases which constitute authority on the legal issues before us, we have found it necessary to review the historical background of partnerships and partnership property.

John Collyer's A Practical Treatise on the Law of Partnership, originally published in England in 1832, contains an illuminating discussion of the history of the law of partnership which was well developed by cases in both England and the United States by 1830. Based upon a number of English and American cases cited in the footnotes, the treatise discusses the treatment of partnership property upon the death of one partner. The analysis is a clear forecast of the Uniform Partnership Act approach as developed almost 100 years later:

From what has been already observed as to the want of survivorship among partners, it follows, that, upon the decease of one of several partners, his share of the movable stock and effects of the partnership, subject to the partnership debts, devolves to his personal representatives, who thereupon become, both at law and in equity, tenants in common with the surviving partners. Although, for the purpose of encouraging trade, it is held that the harsh doctrine of the jus accrescendi, which is an incident of joint tenancy at the common law, does not apply to the partnership property, yet on the decease of one of the partners, as the surviving partner stands chargeable with the whole of the partnership debts, the interest of the partners in the partnership property shall be deemed so far a joint tenancy as to enable the surviving partner to take the property by survivorship, for all purposes of holding and administering the estate, until the effects are reduced to money and the debts are paid. When the debts are all paid, the effects of the partnership reduced to money, and the purposes of the partnership accomplished, the surviving partner shall be held to account with the representatives of the deceased for his just share of the partnership funds.

J. Collyer, A Practical Treatise on the Law of Partnership Sec. 129, at 117-18 (4th Amer. ed. 1853) (hereinafter cited as Collyer ). In substance, this provides that upon death of a partner, his share of partnership property, subject to partnership debts, passes to his personal representative who becomes a tenant in common with the surviving partner. Further, because the surviving partner is chargeable with the whole of the partnership debts, the surviving partner is deemed to take the property by survivorship in order to administer the partnership. Finally, when the debts are paid and the partnership purpose is accomplished, the surviving partner must account to the personal representative of the deceased partner for his just share of that which remains.

The cases referred to in Collyer emphasize the contradiction between the cases decided in equity courts, where forms of ownership did not control, and courts of law, where the form of ownership of property as tenants in common or as joint tenants with right of survivorship controlled. In a partnership, even though the property was held as joint tenants, in equity survivorship would not be allowed notwithstanding the form of the deed. The treatise states as follows:

Where lands are conveyed to certain persons, as joint tenants, for the purposes of a trade or an adventure, in equity there will be no survivorship in such property, notwithstanding the form of the conveyance.

Collyer, Sec. 134 at 122 (emphasis supplied). The text develops this theory further, stating at Sec. 135:

The rules and principles by which partners hold real estate, purchased by them with partnership funds and for partnership purposes, have been considerably discussed in America, ... Several late decisions in Massachusetts have established the...