Gangl v. Gangl, 9605

• Decision Date: 11 July 1979
• Docket Number: No. 9605,9605
• Citation: 281 N.W.2d 574
• Parties: Anton GANGL, Plaintiff and Appellant, v. John GANGL, Margaret Gangl, Robert Gangl, Alice Gangl, and Gangl Farms, a partnership, Defendants and Appellees. Civ.
• Court: North Dakota Supreme Court

Page 574

281 N.W.2d 574

Anton GANGL, Plaintiff and Appellant, v. John GANGL, Margaret Gangl, Robert Gangl, Alice Gangl, and Gangl Farms, a partnership, Defendants and Appellees.

Civ. No. 9605.

Supreme Court of North Dakota.

July 11, 1979.

Rehearing Denied Aug. 2, 1979.

Kelsch, Kelsch & Tudor, Mandan, for plaintiff and appellant; argued by William C. Kelsch, Mandan.

Lester J. Schirado, Mandan, for defendants and appellees John Gangl and Margaret Gangl.

Bair, Brown & Kautzmann, Mandan, for defendants and appellees Robert Gangl and Alice Gangl; argued by Malcolm H. Brown, Mandan.

SAND, Justice.

A common family farming effort which began in the early part of this century was ended by the parties to this action following a dispute in 1976. This action was initiated by Anton Gangl when the parties failed to reach an agreement on a division of the real and personal property used in the farming operation. Anton asserted the parties' working arrangement was a partnership and thus the assets of the arrangement should be divided accordingly. The district court determined that Anton failed to establish the existence of a partnership and consequently was not entitled to a division of the property in the manner he requested. A judgment was entered accordingly, from which Anton appealed. We affirm.

After the death of their father in 1928, the Gangl family continued operation of their approximately 570-acre family farm with the oldest son, John, eventually assuming management. At that time the Gangl family consisted of the surviving spouse, Juliana, two daughters, Julia and Mary, and five sons, John, Joseph, Andrew, Anton and Henry. In 1942 John directed the filing of a federal partnership income tax return showing as "partners" Juliana and all of her children except Julia. Subsequent returns indicated Andrew withdrew from the arrangement in 1945, Mary in 1948, Joe in 1957, and Juliana upon her death in 1960. These returns also indicate John's only son, Robert, was brought into the arrangement in 1960. Thus from 1960 to 1976 the returns included as "partners" John, Anton, Henry, and Robert.

Until 1976 John continued to direct the filing of federal and state partnership tax returns showing an equal division of profits and losses among the partners. Most of these returns, however, contained the written notation, "working agreement," which John contended was an indication the parties did not establish a partnership relationship. It is undisputed the parties at no time entered into a formal written or verbal agreement creating a partnership or other business arrangement.

From 1942 through 1976, John made the major decisions concerning the operation of the farm. Proceeds from all the wheat raised on the farm, as well as ASCS payments, mineral lease payments, and crop insurance proceeds, were placed in John's personal checking account. From this same account John paid all farm operating expenses, made land and machinery payments, paid the rent on leased lands, and paid all real estate taxes. In addition, he paid the personal income taxes of each of the participants.

During the latter years of the farming arrangement, each of the remaining four participants owned their own beef cows. These cattle were raised together, the calves sold collectively, and the proceeds placed in John's personal account. John would then divide the proceeds based upon an average price per calf times the number of calves sold by each individual. Testimony indicated that although John allowed Anton, Henry, and Robert to own approximately 30 cows, he himself owned between 60 to 80 cows, stating he needed the additional income to meet expenses.

Individual participants of the farming arrangement raised their own dairy cattle, hogs, and poultry. Income from these endeavors was collected and retained by the individual participants.

Real property in issue in this case was acquired at various times during the course of the arrangement and put in various participant's names. In the interest of simplicity, we will refer to numerical titles when discussing various tracts of land acquired by the parties. The tracts, and the record title owners are:

                                              RECORD OWNER
                                 ---------------------------------------
                TRACT   ACREAGE  John & Margaret  Robert & Alice  Anton
                --------------------------------------------------------
                I        571.29           285.65                  285.65
                II       148.09            74.05                   74.05
                III      591.21           295.60                  295.60
                IV       330.30                       330.30
                V        320.00           213.40      106.60
                VI       240.71                       240.71
                VII      160.00           160.00
                       -------------------------------------------------
                TOTAL   2,361.6          1,028.7      677.61      655.3
                

In addition to the above property, Henry has over 700 acres of land in his name, most of which was acquired at least in part with funds from John's checking account. Anton chose not to include Henry as a participant in this action and has not sought an interest in the land held in Henry's name.

Except for tract I, which Juliana gave to Anton and John in 1948, all of the above tracts were purchased primarily with funds from John's personal checking account. John transacted all borrowing arrangements in later years and the proceeds from loans were deposited in his personal account. These loans were later retired with funds from John's account. Also, in the 1950's, the Gangls sold one-half of the oil and gas interests in all their lands. Although the checks from the sale were made out in the names of the record title owners, they were endorsed over to John and deposited in his personal checking account.

In maintaining his checking account, John did not distinguish between his personal income and expenditures and those of the joint farming arrangement. Consequently, although loans were repaid from John's account and most of the land was purchased with funds therefrom, there were no records indicating if the funds were John's personal funds or those derived from the common farming effort. Anton testified that on occasions when he requested to examine the records of the farming operation John either refused to supply him with records or supplied him with unintelligible records. Anton stated he was told if he did not like the way things were being managed he could withdraw from the arrangement.

Robert and John testified that when Robert was brought into the arrangement John promised him equal status with the other participants and that he would eventually receive some land if he continued with the arrangement. Even though it is not clear if Anton and Henry were aware of this promise, they did not object to Robert's participation and the eventual transfer of lands made to him, although the transfers were initially made without their knowledge.

In 1941, John arranged a contract for the purchase of tract III which was placed in Anton's name. In 1948, Juliana Gangl gave John and Anton one-half interest in the home place (tract I). John testified his mother gave the one-half interest to Anton at John's request so if anything happened to John, Anton would be able to take care of his mother and sisters. John also stated a few years later he wanted the one-half interest turned over to him and Anton refused. John then presented Anton with the alternative of transferring either one-half of tract III, or one-half of tract I to John, or else John would have his mother change the deed to tract I and give it all to him. Anton subsequently delivered a deed for a one-half interest in tract III to John. Anton, on the other hand, testified he delivered the deed of one-half interest in tract III just before he got married to provide John a means of caring for his mother in case something happened to Anton. The deed was placed in the family safe and was never recorded until 1977 after this dispute arose.

In this action Anton sought to set aside the 1950 deed conveying the one-half interest in tract III to John and also sought a one-third partnership share of tracts IV, V, and VI. The district court denied both claims and Anton challenged both denials on appeal.

Anton also sought a division of certain personal property used in the farming effort. According to Anton, after the dispute in 1976 the parties met to attempt a division of the major items of machinery. A list of this machinery was prepared and the four participants took turns choosing from the list. A list of the machinery Anton was to receive was prepared and signed by Anton, John, Henry, and Robert. The district court concluded this division was an accord and satisfaction of Anton's interest in all the personal property acquired by the common farming effort. Anton contended this division was only as to those major machinery items contained on the list and that he has an interest in any remaining personal property acquired with funds from the joint farming effort.

The heart of this action concerns the status of land now held in the names of John, Anton, and Robert and the respective interests of each of the three men in that property. It appears the participants in the joint farming effort shared the labor of that endeavor and hoped to share in any profits therefrom. Although no one testified to an exact agreement of how much each participant would receive for his efforts, all stated they participated under the expectation of receiving some land for participation.

Anton contended, in effect, that because the parties could not reach an agreement as to their respective interests in the property, their arrangement should be considered a partnership and the property derived from that arrangement divided accordingly. Section 45-05-05 of the North Dakota Century Code defines a partnership as "an association of two or more persons to carry on as coowners a business for profit."

The existence of a partnership is not...