Martinson v. Holso

• Decision Date: 18 May 1988
• Docket Number: No. 15829,15829
• Citation: Martinson v. Holso, 424 N.W.2d 664 (S.D. 1988)
• Parties: Peter MARTINSON, Mayme Nelson, Irene Fenno, Earl Bogstad, James Bogstad, Ronald Bogstad, Duane Bogstad, Elva Blogg, Darlene Larsen, Darlene Larsen as Trustee for Earl Bogstad, Marjean Evans, Junella Dinwiddie, Melva Anderson and A.G. Dick, Plaintiffs and Appellants, v. Mayme HOLSO, individually and as Executrix of the Estate of Orville M. Sparby, Deceased, Albin Overby, the unknown heirs of Jenny Martinson, Deceased, Bennie M. Sparby, Deceased, Clifford B. Sparby, Deceased, Milton S. Sparby, Deceased, and the South Dakota Department of Revenue, Defendants and Appellees.
• Court: South Dakota Supreme Court

Page 664

424 N.W.2d 664

Peter MARTINSON, Mayme Nelson, Irene Fenno, Earl Bogstad James Bogstad, Ronald Bogstad, Duane Bogstad, Elva Blogg Darlene Larsen, Darlene Larsen as Trustee for Earl Bogstad Marjean Evans, Junella Dinwiddie, Melva Anderson and A.G Dick, Plaintiffs and Appellants, v. Mayme HOLSO, individually and as Executrix of the Estate of Orville M. Sparby, Deceased, Albin Overby, the unknown heirs of Jenny Martinson, Deceased, Bennie M. Sparby, Deceased, Clifford B. Sparby, Deceased, Milton S. Sparby, Deceased, and the South Dakota Department of Revenue, Defendants and Appellees.

No. 15829.

Supreme Court of South Dakota.

Argued Jan. 13, 1988.

Decided May 18, 1988.

Donn Bennett of Bennett & Main, Belle Fourche, for plaintiffs and appellants; Edward J. Nelson of Bennett & Main, Belle Fourche, on brief.

Allen G. Nelson and Mark F. Marshall of Bangs, McCullen, Butler, Foye & Simmons, Rapid City, and Leroy Hill of Leroy Hill Law Office, Belle Fourche, for Mayme Holso defendant and appellee.

Martin G. Farrell, Asst. Atty. Gen., Pierre, for State of South Dakota, Dept. of Revenue, defendant and appellee.

MORGAN, Justice.

Plaintiffs and appellants, Martinson, et al. (appellants), appeal from a declaratory judgment entered in favor of defendants and appellees, Holso, et al. (Holso). We affirm.

This action was brought to determine questions arising in the administration of the estate of Orville Sparby, last surviving partner of the Sparby Brothers partnership, and to determine heirs to partnership and personal assets. The trial court determined that all assets, formerly partnership property, were to pass under the last will and testament of Orville Sparby. The court further found that all financial assets were to pass by joint tenancy.

It is not contested that there was a partnership between the Sparby Brothers; Bennie, Clifford, Milton and Orville. What is contested is that there existed a valid oral agreement that the surviving brother or brothers would take all partnership assets. It is further claimed that upon the death of each brother, it was the surviving brothers' duty or the last surviving partner's representative's duty to wind up, terminate the partnership, and distribute the deceased partner's assets.

Benny Sparby died on October 14, 1975, Benny died a single man, without issue, and never made a will. His estate was never probated. Clifford died on August 13, 1977. He never married, had no issue, and no will. His estate was not probated. Milton died on September 16, 1982. He never married, left no issue, and never made a will. His estate was not probated. Orville Sparby died on August 23, 1985. Orville never married and died without issue. As the last surviving brother of the partnership, Orville left a will which was admitted to probate. Orville left all of his property to his niece, Mayme Holso, whom he also designated to be the executrix of his last will and testament.

The Sparby brothers began their ranching partnership in 1940, with land acquired from their father and using land in both Harding County, South Dakota, and nearby Carter County, Montana. Over the years, the partnership acquired other land. Title to the land was held either individually, as a partnership, under joint tenancy, or as tenancy in common. This property was utilized in the partnership to raise cattle, sheep and hogs. Aside from the funds earned by Bennie Sparby while he served in the United States armed forces during World War II, the only source of funds for the acquisition of the real estate in question was from the ranch partnership. Throughout the partnership, all real estate taxes, without regard for the record title, were paid from Sparby Brother funds. Income tax returns reveal that all income and expense derived from the partnership was allocated equally among the partners, except for a two-year period preceding Bennie Sparby's death. During that period, the income tax returns showed that Bennie Sparby's income was reduced, apparently because he was drawing social security.

A joint checking account was established at the Bank of Belle Fourche as early as 1942. Even though the signators varied from time to time, it was a partnership account. After Milton's death, the account was changed to Orville Sparby or Eleanor Dick, as joint tenants, omitting any reference to "Sparby Brothers." Upon Eleanor's death in 1984, the account was changed to show the joint tenants to be Orville Sparby and Mayme Holso. At the time of Orville Sparby's death, there was a balance of $78,132.58 in the account.

The partnership also established a joint checking account at the First National Bank of the Black Hills in 1955. Following the death of Milton Sparby, the account was changed to Orville Sparby or Mayme Holso, as joint tenants. The balance of the account at the time of Orville's death was $39,726.50.

In 1962, the Sparby brothers jointly rented a safety deposit box from the Bank of Belle Fourche. Following Milton's death, the safety deposit box was rented jointly by Orville Sparby and Mayme Holso. At the time of Orville's death, there was $33,425 in cash in the safety deposit box.

In 1984, Orville Sparby, using what had previously been partnership funds, purchased a $10,000 certificate of deposit at the Bank of Belle Fourche in the names of Mayme Holso and her husband Elvin. This was allegedly intended as a gift.

The evidence demonstrates that all sources of income to any of the brothers were deposited into the partnership accounts, including such items as reimbursement from Medicaid for medical bills. Likewise, all partnership expenses and personal expenses of each of the brothers were paid from the partnership checking accounts. Personal items paid from the checking accounts included payments for medical bills, insurance premiums, groceries, motel bills, federal income taxes, and funeral expenses of deceased partners.

Appellants include nieces and nephews of the Sparby brothers as issue of sisters of the half blood issue of a brother, a sister of the half blood, and the surviving husband of Eleanor Dick, a sister.

Appellants have raised a number of issues which we will consider in several categories. The first area of dispute centers on the effect of the Uniform Partnership Act, SDCL Chapters 48-1 to 48-5, inclusive, on the validity of an oral partnership agreement, particularly a provision for the surviving partner or partners to take all upon the death of a partner. Procedurally related to that issue is the admissibility of decedent's statements as to conversations with the brothers. (SDCL 19-16-34, decedents' statements admissible.) Does the affirmative defense of laches give greater weight to that testimony? Was there clear and convincing evidence to establish a "survivor takes all" agreement? Finally, what effect would such an agreement have upon the duty of the surviving partner or partners to wind up the partnership upon the death of a partner per SDCL 30-17-9?

The next area of contention centers on specific assets and appellants argue that the trial court erred when it held that

the joint tenancy bank accounts among the brothers from time to time were valid;

the bank account, certificate of deposit and safety deposit box, all denominated in joint tenancy between Orville and Holso were valid;

a provision in a lease/option agreement did not create a vested interest in the subject property in Eleanor; and

a provision in a contract for deed did not create a vested interest in Eleanor.

The last issue that we will consider is whether Orville's will controls the passage of legal title of the partnership real property?

We must first determine whether the Uniform Partnership Act (UPA) prohibits such an oral agreement. ¹ In Bailes v. Bailes, 261 Ark. 389, 549 S.W.2d 69 (1977), the court found that the UPA does not require either the initial partnership agreement, or an agreement which disposes of assets upon the death of a partner, to be in writing. Citing to 68 C.J.S. Partnership Sec. 294a. See also Balafas v. Balafas, 263 Minn. 267, 117 N.W.2d 20 (1962); Jones v. Jones, 310 N.W.2d 753 (N.D.1981). The Bailes court said that an agreement which disposes of assets upon the death of a partner is valid and binding even though it be parol. The actual intent of the parties is important in determining the business relationship between them. Gammill v. Gammill, 256 Ark. 671, 510 S.W.2d 66 (1974). In the absence of other partners or creditors, partners can agree that certain matters be handled in a manner different than that provided under the UPA. Hogan v. Hogan, 234 Ark. 383, 352 S.W.2d 184 (1961). We find these cases to be persuasive and likewise find no prohibition under the UPA of an oral partnership agreement or an oral survivorship agreement.

Appellants' next argument against the oral "survivor takes all" agreement is that the court erred in admitting testimony under SDCL 19-16-34, the Deadman's Statute. ² The Deadman's Statute operates as an exception to the hearsay rule upon a finding by the trial judge that the statement was made by the decedent and that it was made in good faith and on decedent's personal knowledge. Admission of statements under SDCL 19-16-34 are within the sound discretion of the trial court and such decisions will be upheld in the absence of an abuse of discretion. In re Congdon's Estate, 74 S.D. 306, 51 N.W.2d 877 (1952); Cox v. Bowman, 71 S.D. 72, 21 N.W.2d 277 (1945). See also In re Estate of Gosmire, 331 N.W.2d 562 (S.D.1983). The testimony objected to at trial was adduced from Holso and three disinterested parties based on statements made to them by Clifford, Milton and Orville. Martinson complains that the statements were not made by all of the brothers and that as to the statements attributed to Orville, they were hearsay on hearsay and self-serving.

The trial court made the requisite finding that the testimony offered pursuant to SDCL 19-16-34 was based on the personal...