McCormick v. Brevig
| Citation | 980 P.2d 603,1999 MT 86 |
| Decision Date | 27 April 1999 |
| Docket Number | No. 96-729,96-729 |
| Parties | Joan K. McCORMICK, f/k/a Joan K. Brevig, Plaintiff/Respondent/Cross-Appellant, v. Clark A. BREVIG, Defendant/Appellant, Brevig Land, Live And Lumber, a Montana General Partnership Consisting of Joan K. Brevig and Clark A. Brevig, Defendant/Respondent. Clark A. Brevig, Third-Party Plaintiff/Appellant/Cross-Respondent, v. Charles Bailly & Company, P.L.L.P., a Minnesota professional limited liability partnership, Mcgladrey & Pullen, L.L.P., a Minnesota limited liability partnership, (f/k/a Mcgladrey, Hendrickson & Co.), Monte R. Malnaa, an individual, Joan K. Mccormick, f/k/a Joan K. Brevig, as Personal Representative of the Estate of Charles A. Brevig, et al., Third-Party Defendants/Respondents. |
| Court | United States State Supreme Court of Montana |
David A. Veeder and Jolane D. Veeder; Veeder Law Firm, P.C.; Billings, Montana, for Appellant.
For Respondents: Steven J. Harman; Brown, Gerbase, Cebull, Fulton, Harman & Ross, P.C.; Billings, Montana, for Joan K. McCormick.
Calvin J. Stacey; Stacey & Walen; Billings, Montana, Thomas P. Johnson; Davis, Graham & Stubbs; Denver, Colorado, Robert R. Watson; Sidley & Austen; Chicago, Illinois, for McGladrey & Pullen, LLP.
Thomas J. Shroyer and Peter A. Koller; Moss & Barnett; Minneapolis, Minnesota; and Michael V. Anderson and V. Ann Liechty; Anderson & Liechty; Billings, Montana, for Charles Bailly & Co., P.L.L.P., and Malnaa.
¶1 In 1949, Charles and Helen Brevig were married, and they later had two children, Clark Brevig and Joan Brevig McCormick. In 1960, Charles purchased the Brevig Ranch outside of Lewistown from his parents. In 1971, Charles transferred his sole interest in the ranch by warranty deed to himself and Helen as joint tenants. Then, in 1972, Charles and Helen conveyed the ranch to Clark and Helen as joint tenants.
¶2 Charles and Helen divorced in 1977, at which time Helen conveyed her interest in the ranch to Charles in the property settlement agreement. Charles and Clark then owned the ranch property in equal shares. At this point, Charles and Clark began operating the ranch as Brevig Land, Live & Lumber, a partnership.
¶3 In 1977, Charles executed a new will. The main dispositive clause of the will devised all of his property, including his one-half interest in the ranch, to Clark and Joan in equal shares. Both Clark and Joan were aware of this clause.
¶4 In May 1979, Joan moved back to the ranch and purchased some land near it called the Downs Place. Thereafter, she began working on the family ranch which was owned by Charles and Clark.
¶5 Sometime in late 1979 or early 1980, Charles began dating Judy Knapp. Both Joan and Clark were concerned that Charles would marry Knapp and that she might someday inherit or claim an interest in the ranch. Charles, Joan, and Clark began discussing several different options, including the formation of a trust, to protect the ranch from Knapp.
¶6 On February 13, 1980, Joan and Monte R. Malnaa, an accountant, met with Billings attorney Gerald D. Christensen to discuss various options to keep the ranch in the family. One option was that Charles would create an irrevocable trust for certain property, naming Clark as the residual beneficiary and Joan as the trustee. The parties also discussed another option whereby Charles' interest in the land would be transferred to the ranching partnership and then Charles' interest in the partnership transferred to Joan.
¶7 On February 18, 1980, Malnaa forwarded to Christensen an outline of the proposed trust arrangement and a list of the partnership property as of January 1, 1980. Also included was the legal description of the ranch land which Clark and Charles owned in equal shares. Malnaa stated in the letter that his understanding was that the titles to all of the properties were to be put in the partnership name; Charles' partnership interest ¶8 Pursuant to Joan's request, Christensen drafted a proposed trust agreement. It is disputed whether the list of the partnership property prepared by Malnaa was received by Christensen before he drafted the document. The proposed trust agreement refers to an Exhibit A and further provides that the trust consists of both real and personal property as described in an attached Exhibit A.
thereafter being transferred into the trust. There is no evidence that the list had an "Exhibit A" stamped on it. Malnaa also asked Christensen at that time to draft a basic partnership agreement for Brevig Land, Live & Lumber.
¶9 On May 16, 1980, Christensen sent a letter to Joan including a copy of the proposed trust agreement. It is unknown whether an Exhibit A was attached to the trust when it was mailed by Christensen. Joan testified that she placed the letter and proposed trust agreement in a file cabinet at the ranch house.
¶10 Sometime in January or February 1982, Charles and Clark had a conversation about the future of the ranch. Clark was concerned about the ownership of the ranch and the possibility of Joan coming into an ownership position. Charles allegedly told Clark that he would not put Clark in business with Joan on the ranch and that he would take care of it.
¶11 Shortly thereafter, on April 16, 1982, the ranch was refinanced with the Federal Land Bank for $420,000. Joan co-signed for the debt and her income was necessary in order to obtain the loan.
¶12 On April 26, 1982, Charles and Joan executed a carbon copy of the draft "Irrevocable Trust Agreement" that Christensen had sent to Joan on May 16, 1980, in the presence of a notary public. Charles signed as the "Grantor" and Joan as the "Trustee." The trust provided that Charles would receive the income from the trust property during his lifetime and, upon his death, the trust property would pass to Clark. The trust also provided that it was Charles' intent to transfer the property described in an attached Exhibit A to Joan as trustee. Joan testified that she placed the signed trust agreement in a bank safe deposit box. She also testified that there was no Exhibit A attached to the trust agreement at the time of execution.
¶13 In June 1982, after receiving a copy of the trust document from Joan who was seeking his advice on it, Malnaa called Joan and told her that there were no assets in the trust without an attached Exhibit A. Therefore, the trust was a "phantom" or "dry" trust having no legal effect. Malnaa's notes stated that Joan would inform Charles but they would not tell Clark.
¶14 On July 30, 1982, a partnership agreement between Charles and Clark was signed. However, it was backdated to January 1, 1978, to reflect the dates on which they first began to operate as a partnership. The agreement was drafted by an attorney in Christensen's firm. The partnership agreement set forth that the capital contribution of the partnership includes both real and personal property described more fully in an attached Exhibit A. The Exhibit A attached to the partnership agreement in Malnaa's files with the original stamp was miscollated. The first page describing the real property was repeated as the third page, and there was no page describing the personal property. The partnership agreement did not refer to the irrevocable trust agreement or require that the trustee of the irrevocable trust, Joan, execute the partnership agreement.
¶15 The partnership agreement provided:
On the withdrawal or death of either partner, the remaining partner shall have the option of either purchasing the withdrawing or decedent partner's interest at a value to be determined by independent appraisal, or to dissolve the business, liquidating the partnership assets and distributing the proceeds proportionally to the remaining partner and the withdrawing partner or the deceased partner's estate.
¶16 After Joan filed suit in this case, the original and both copies of the partnership agreement were located. The original found in Malnaa's records had the miscollated Exhibit A attached. Charles' copy of the agreement also had the miscollated Exhibit A attached.
Clark's copy of the agreement was found without an attached Exhibit A.
¶17 Also on July 30, 1982, Joan removed the executed trust agreement from the safety deposit box and placed it in a file cabinet in the office at the Brevig Ranch. Clark resided at the Brevig Ranch and had access to the file cabinet.
¶18 Sometime in the summer of 1982, Charles received a loan from Central Montana Production Credit Association. As part of the loan transaction, Charles purchased a credit life insurance policy for the amount of $75,000 from Old Republic Life Insurance Company. Charles named Central Montana Production Credit Association as the creditor and Clark as the second beneficiary.
¶19 On October 28, 1982, Charles died. Malnaa provided certain services with respect to Charles' estate. He supervised the preparation of various federal and state tax forms. Clark and Joan were appointed co-personal representatives and probated Charles' estate. Clark and Joan each received one-half of the estate. Because Charles' estate principally consisted of his 50% interest in the ranch and 50% interest in the Brevig partnership, Clark ended up owning 75f the ranch assets and Joan owning 25%.
¶20 After the death of Charles, Clark was notified that Old Republic Life Insurance would pay policy benefits in two checks, one to Central Montana Production Credit Association for the outstanding loan balance, and a second payable to him for the residual amount of $73,631.87. Clark's proceeds were used to pay partnership expenses, and Charles' last medical and funeral expenses. Clark deposited the remaining proceeds with the partnership and received credit in his capital account.
¶21 A written partnership agreement was executed by Clark and Joan with Clark holding a 75%...
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