Murgoitio v. Murgoitio
| Decision Date | 24 April 1986 |
| Docket Number | 15241,Nos. 14636,s. 14636 |
| Citation | 111 Idaho 573,726 P.2d 685 |
| Parties | L.L. MURGOITIO, Plaintiff-Counter Defendant, Appellant-Cross-Respondent, v. J.C. MURGOITIO, Defendant-Counterclaimant, Respondent-Cross-Appellant, and J.C. Murgoitio and L.L. Murgoitio, Personal Representatives for the Estate of R.G. Murgoitio, Defendants-Respondents, and Anna Potts, one of the Personal Representatives of the Estate of R.G. Murgoitio, deceased, Defendant-Respondent, Cross-Appellant. L.L. MURGOITIO, Plaintiff-Appellant, v. J.C. MURGOITIO, and J.C. Murgoitio, L.L. Murgoitio and Anna Potts, Personal Representative of the Estate of R.G. Murgoitio, deceased, Defendants-Respondents. |
| Court | Idaho Supreme Court |
Glenn A. Coughlan, of Coughlan, Coughlan & Korn, and Frank Stoppello, of Stoppello & Hampton, Boise, for plaintiff-counter defendant, appellant-cross-respondent.
Merlyn W. clark, Esq., of Hawley, Troxell, Ennis & Hawley, Robert M. Tyler, Jr., Melville W. Fisher II, and Bobbi K. Dominick, of Elam, Burke & Boyd, and Stanley A. Welsh, of Clemons, Cosho & Humphrey, Boise, for defendants-respondents.
This case involves the dissolution, winding-up and termination of a family partnership. In the early 1900's, J.H. Murgoitio (James) immigrated to the United States from Spain and began a small dairy operation on a 40-acre tract of land (the Home 40). James had three sons: R.G. (Ray), L.L. (Lou), and J.C. (Joe). At a relatively early age, Ray was seriously injured in a fire. His injuries hampered his activity in future years. As the sons grew up, they gradually accepted more responsibility for the dairy operation, and ultimately a partnership arrangement was formed in which each of the four men had a 25% interest.
It was the practice of the partnership to raise feed for the dairy cattle on property it either owned or leased. Over the years, the size of the partnership operation increased. In 1942, James purchased two parcels of land: the Kellogg 80 and Kellogg 40. On November 27, 1944, James executed a deed for the Kellogg 80 naming Lou as grantee and a deed for the Kellogg 40 naming Ray as grantee. On that same date, Lou executed a mortgage to Joe encumbering the Kellogg 80. In 1947, James purchased another parcel of land, the Boyce 40. On November 6, 1947, he executed a deed conveying the Boyce 40 to his three sons.
In 1952, the three sons purchased their father's interest in the partnership. On April 1, 1952, in connection with that purchase, James conveyed the Home 40 to his sons. On that same date, all three sons executed a mortgage back to James encumbering the Boyce 40, Home 40, Kellogg 80 and Kellogg 40 to secure their obligation to James for his interest in the partnership. The sons then formed a new partnership with Lou and Joe each holding a 40% interest, and Ray a 20% interest. No written partnership agreement was ever drafted.
Throughout the 1950's and 1960's the partnership continued to grow and acquire additional parcels of land. Although this newly acquired property was deeded to the individual partners, rather than to the partnership, the partnership was the only source of income for any of the partners and the new property was all acquired with partnership funds. The income from the property went into the partnership, and all expenses and improvements were paid for with partnership funds.
During this same period of time, the partnership began a small feed lot operation on the McBirney 160 where Joe's home was located. Over the years the size of the feed lot grew and Joe assumed primary responsibility for its operation, while Lou supervised the original dairy operation. Both Joe and Lou participated in farming the partnership property and the crops raised were used to feed both dairy and feed lot cattle.
The partnership continued to grow during the 1970's. Joe's and Lou's sons began to assist in the partnership operation with Joe's family running the feed lot and Lou's the dairy. Ray's health deteriorated and he was unable to be actively involved in the management of the partnership. Lou and Joe each obtained individual sources of financing for their respective operations, but continued to share the proceeds of the financing, transferring funds between accounts as different operations required capital.
In 1978, Lou declared to his brothers that he was dissolving the partnership effective December 31, 1978, and on August 14, 1979, he initiated this action seeking the court's assistance in winding-up and terminating the partnership. Ray died intestate on December 11, 1979, survived by his two brothers and two sisters, Anna and Margaret. Joe and Lou were initially appointed personal representatives for Ray's estate. On August 7, 1981, Anna was added as an additional personal representative, and one week later was made a defendant in this action in her capacity as co-personal representative.
During the course of the hearings on winding-up the partnership, a dispute arose as to the ownership of the real property. Lou asserted that the property belonged to the individual partners according to the record title, while Joe and the estate took the position that the partnership owned all the real property. The parties agreed to a separate trial on the issue of ownership of the real property and a trial on that issue commenced on August 28, 1981. In a Memorandum Decision dated October 5, 1981, the trial court concluded that all the real property (approximately 875 acres) was owned by the partnership, rather than by the partners individually.
On October 22, 1981, trial commenced to determine the value of partnership assets and the best method for winding-up and terminating the partnership. During the course of the second trial, the parties stipulated to ownership of some of the personal property. On May 14, 1982, the trial court entered a Memorandum Opinion regarding the winding-up and liquidation of the partnership.
The court concluded that the evidence before it did not establish the precise value of any of the partnership real property which value could be used as a basis for distribution in kind. Accordingly, the court determined that the most equitable method of liquidating the partnership would be to first distribute the assets of the dairy and feed lot businesses to Lou and Joe, respectively, and then to sell all the realty at public sale, allowing the surviving partners a preference to acquire the real estate associated with their businesses. Based on the court's determination that the value of the partnership exceeded $6 million, each of the surviving partners was given a $2.5 million credit to use in bidding on the property. In addition, Lou and Joe were given a "first opportunity to buy" the property on which their operations were located at the highest value supported by the evidence within 30 days of the entry of judgment. The partners were required to account to the partnership for their use of partnership property until the date of sale.
On June 8, 1982, Lou filed a Notice of Appeal with this Court (Case No. 14636). Both Joe and Anna filed cross-appeals. On October 15, 1982, we remanded the case to the district court for certification pursuant to I.A.R. 12, or for entry of findings, conclusions and judgment, and suspended further proceedings in this Court.
The trial court entered two Memorandum Opinions on December 14, 1982 and May 27, 1983. The May 27 opinion concluded that the entry of findings, conclusions and judgment, rather than an I.A.R. 12 certification, was appropriate, and directed Joe to submit the proposed findings and conclusions and a final judgment consistent with that opinion.
On August 30, 1983, the findings of fact, conclusions of law and judgment were entered. The court declared that all partnership operations had ceased as of October 22, 1981, the date of the second trial. Because the parties were unable to agree on any distribution of partnership assets, other than machinery and equipment, and because the court felt it would be inequitable to terminate the partnership until all of the assets were completely liquidated or distributed, it proposed a plan for winding-up and terminating the partnership designed to allow the surviving partners to preserve the value of their respective homes and businesses. In essence, the surviving partners were to continue to operate their individual businesses, and to remain in possession of the real property they controlled until sale or distribution. In return, the partners were to pay a reasonable rent to the partnership for the use of the partnership land and the improvements thereon from the date of cessation of partnership operations (October 22, 1981) until the date of sale. Title to the personal property was distributed to the partner using the property, and he was in turn required to pay interest to the partnership for its use from the date of distribution until the date of termination. A receiver was appointed to conserve and manage the partnership. His duties included collecting the rent and interest and conducting the sales of the real property. The partnership was to be terminated as of the date of the final sale of the real property.
On September 28, 1983, Lou filed appeal No. 15241 from the August 30, 1983 judgment. Lou also moved the trial court to stay the execution of the judgment pending a resolution of this appeal. The court ultimately granted the stay of execution as to those provisions of the judgment requiring Lou to pay rent for the use of partnership land prior to September 15, 1983, and interest for the use of the partnership personal property prior to June 15, 1983. The court held, however, that if Lou did not pay rent for the real property he retained after September 15, 1983, the receiver would be allowed to rent it to others.
On appeal, Lou argues that the trial court erred in two major respects: first, in finding that the real property was owned by...
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