McCormick v. Brevig

• Decision Date: 13 July 2004
• Docket Number: No. 03-256.,03-256.
• Citation: 96 P.3d 697,2004 MT 179,322 Mont. 112
• Court: Montana Supreme Court
• Parties: Joan K. McCORMICK, f/k/a Joan K. Brevig, Plaintiff and Appellant, v. Clark A. BREVIG, Brevig Land Live and Lumber, a Montana General Partnership Consisting of Joan K. Brevig and Clark A. Brevig, Defendants, Respondents and Cross-Appellants.

96 P.3d 697

2004 MT 179

322 Mont. 112

Joan K. McCORMICK, f/k/a Joan K. Brevig, Plaintiff and Appellant, v. Clark A. BREVIG, Brevig Land Live and Lumber, a Montana General Partnership Consisting of Joan K. Brevig and Clark A. Brevig, Defendants, Respondents and Cross-Appellants.

No. 03-256.

Supreme Court of Montana.

Submitted on Briefs December 11, 2003.

Decided July 13, 2004.

Rehearing Denied August 24, 2004.

For Appellant: Kenneth R. Dyrud, Glenn E. Tremper, and Cindy L. Cate, Church, Harris, Johnson & Williams, P.C., Great Falls, Montana.

For Respondents: David A. Veeder, Jolane D. Veeder, Veeder Law Firm, P.C., Billings, Montana.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 This case involves a protracted dispute between a brother and sister concerning their respective interests in a ranching partnership that is before the Court a second time. The litigation began in 1995 when Joan McCormick ("Joan") brought this action against her brother, Clark Brevig ("Clark"), and their Partnership, Brevig Land Live and Lumber (hereinafter, "the Partnership"), seeking a Partnership accounting and dissolution. Clark counterclaimed for fraud, deceit, negligent misrepresentation, and to quiet title. He also filed a third-party complaint against several accounting defendants for professional negligence and against his sister for breach of fiduciary duty. Thereafter, Joan moved for partial summary judgment in relation to Clark's counterclaim and third-party complaint, and Clark moved for partial summary judgment on the issue of liability raised in his counterclaim and third-party complaint against Joan. Clark also moved for partial summary judgment on the issue of liability against the third-party accounting defendants. The District Court of the Tenth Judicial District, Fergus County, granted Joan's motion for partial summary judgment on her claims and denied Clark's motion for partial summary judgment against Joan. The court additionally dismissed Clark's claims for fraud, deceit, negligent misrepresentation, and breach of fiduciary duty against Joan.

¶ 2 The accounting defendants also moved for summary judgment on all claims asserted against them by Clark, which the court granted. Following certification of the summary judgment orders as final pursuant to Rule 54(b), M.R.Civ.P., the parties appealed to this Court. We affirmed the District Court's entry of summary judgment in favor of Joan, but concluded that the court had erred in granting summary judgment to the accounting defendants, and therefore reversed and remanded for further proceedings. McCormick v. Brevig, 1999 MT 86, 294 Mont. 144, 980 P.2d 603 (hereinafter referred to as, "McCormick I").

¶ 3 Following remittitur and substitution of the original trial judge, the District Court resumed proceedings concerning the Partnership accounting and dissolution, and Clark settled his claims with the accounting defendants. A bench trial was held January 18 through 21, 2000. On April 3, 2000, the District Court entered findings of fact and conclusions of law, dissolving the Partnership, and ordering its business wound up, pending a hearing before a special master and a determination of the proper method for dissolution.

¶ 4 A limited accounting by a special master was thereafter performed. On December 27, 2001, the District Court concluded that the parties' Partnership agreement did not apply, and that a judicial dissolution of the Partnership was warranted pursuant to § 35-10-624(5), MCA. The court further recognized that § 35-10-629, MCA, explicitly required any surplus assets after paying creditors to be paid to the partners in cash in accordance with their right to distribution. Nonetheless, the court found that it would be inequitable to order the liquidation of the Partnership assets in order to satisfy Joan's interest in the Partnership. Therefore, in keeping with its desire to preserve the family farm, the court ordered Joan to sell her interest in the Partnership to her brother following an appraisal and determination of the value of her share. With the assistance of a special master, and following an accounting of Partnership assets, the District Court eventually fixed a price of $1,107,672 on Joan's 50 percent interest in the Partnership. Joan appeals from the District Court's accounting and order requiring her to sell her interest in the Partnership to her brother, and Clark cross-appeals from the court's determination regarding certain Partnership assets, as well as from an evidentiary ruling made at trial. We affirm in part, reverse in part, and remand for further proceedings.

¶ 5 The following issues are presented on appeal:

¶ 6 1. After ordering dissolution of the Partnership, did the District Court err by failing to order liquidation of the Partnership assets, and instead granting Clark the right to purchase Joan's Partnership interest at a price determined by the court?

¶ 7 2. Did the District Court err by failing to grant Joan's petition for an accounting of the Partnership's business affairs?

¶ 8 3. Did the District Court err by adopting the findings of the special master?

¶ 9 4. Did the District Court err in ruling that Clark did not dissociate by withdrawing from the Partnership?

¶ 10 5. Did the District Court err in concluding that the Charolais cattle constituted partnership assets?

¶ 11 6. Did the District Court err by excluding evidence of a teleconference and concluding that Clark was not entitled to compensation?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 12 Joan and Clark are the children of Charles and Helen Brevig (hereinafter, "Charles" and "Helen"). 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. The following year, Charles and Helen conveyed the ranch to Clark and Helen as joint tenants.

¶ 13 When Charles and Helen divorced in 1977, Helen conveyed her interest in the ranch to Charles in the property settlement agreement. Thereafter, Clark and his father owned the ranch in equal shares, and began operating the ranch as Brevig Land, Live & Lumber, a partnership, pursuant to a written agreement.

¶ 14 Although she was not a partner in the ranch operation, Joan lived on the ranch and assisted in ranch operations from 1975 until 1981. In 1981, with the ranch facing severe financial hardship, Joan left the ranch to work as an oil and gas "landman," in order to generate outside income to enable the ranch to meet its financial obligations. In her capacity as a landman, Joan served as a liaison between the oil industry and the mineral owners. This work required her to travel throughout the United States performing title searches on a per diem basis.

¶ 15 In 1982, Charles and Clark sought to refinance the farm debt in the amount of $422,000 with the Federal Land Bank. Because the ranch operation did not generate sufficient cash flow to meet the projected debt payment, the bank required Joan to sign the mortgage which was secured by the ranch real estate. Joan's income as a landman became committed to assist in repayment of the ranch debt.

¶ 16 During the time of Joan's employment as a landman from 1981 through 1986, it was Joan's practice to contribute all of her income, less expenses, to the support of the ranch operation. In 1983, Joan closed her personal bank account and began to deposit all of her income into the partnership bank account. From this account, Joan would pay her personal expenses and the balance would be applied to the obligations of Charles and Clark's partnership. After she married in 1986, Joan made payments directly to the banks for the ranch obligations rather than to deposit the money in the ranch operating account. Joan also made direct payments for taxes and insurance.

¶ 17 On October 28, 1982, Charles died unexpectedly after a short illness. Thereafter, pursuant to Charles' Last Will and Testament, Clark and Joan were appointed co-personal representatives and probated Charles' estate. Clark and Joan each received one-half of Charles' estate, which principally consisted of his 50 percent interest in the ranch and Partnership. As a result of the distributions, Clark then owned 75 percent of the ranch assets, and Joan 25 percent. A written partnership agreement was thereafter executed by Clark and Joan reflecting their respective 75/25 percent interests in the Partnership. Except for these ownership percentages, the written agreement was identical to the one executed between Charles and Clark in 1978.

¶ 18 After Charles' death, Joan continued her work as a landman, and made financial contributions to the new Partnership. She also maintained the Partnership's books and records. Meanwhile, Clark assumed responsibility for the day-to-day affairs of the ranch. Clark and Joan made management decisions together.

¶ 19 In 1984, Joan obtained an additional 25 percent in the Partnership, fully paying for this interest by the following year. For his share of the sale, Clark received a capital credit of approximately $60,000. From 1984 to 1993, Joan was listed as a 50/50 partner on all the tax returns for the Partnership.

¶ 20 Around November 1986, at the recommendation of the Partnership's principle accountant, Clark and Joan executed an addendum to the Partnership agreement, reflecting their agreement to make adjustments in the Partnership interests based on varying capital contributions. The addendum was needed to account for the excess capital contributions made by Joan, and to conform that part of the agreement to the tax returns which showed Clark and Joan as equal partners. The parties had agreed, however, that Joan's interest in the Partnership would not exceed 50 percent, regardless of the amount of her excess capital contributions.

¶ 21 Disagreements concerning management of the ranch, and particularly, management of the debt load on the ranch,...