West v. West, 9870
| Decision Date | 27 December 1963 |
| Docket Number | No. 9870,9870 |
| Parties | d 87 Rulon R. WEST, Plaintiff and Appellant, v. Terry R. WEST and Flora E. West, Defendants and Respondents. |
| Court | Utah Supreme Court |
Fabian & Clendenin, Bryce E. Roe, Salt Lake City, for appellant.
Mark, Johnson, Schoenhals & Roberts, Salt Lake City, for respondents.
Rulon R. West sued his wife, Flora E. West, and their son, Terry R. West, for dissolution and accounting of a partnership by which they operated El Rancho Motel at 5203 South State Street in Murray, Utah, and for distribution of remaining assets. From a summary judgment against him, plaintiff appeals.
The parties embarked on this family enterprise in 1957. The plaintiff, Rulon R. West, advanced $47,500 to make a down payment on the motel, and $1,000 to be used as working capital. A somewhat comprehensive partnership agreement was executed. Some of its provisions have proved to be controversial, as will be seen below.
The son, Terry West, was to keep the books and manage the business. It did not prosper and it was necessary for the father Rulon to make further advances of money between 1957 and 1960, which totalled another $100,000. Finally he brought this action.
The partnership agreement contained provisions purposed to take care of distribution of assets in the eventuality of termination. Paragraph 12 provided in part that,
'* * * If the partnership shall be determined or expire during the joint lives of the partners, then the partnership shall be wound up, and the assets distributed in the proportions set forth in paragraph 6 above hereof.'
Paragraph 6 is as follows:
'The net profits of the business shall be divided between the partners in the following proportions: Rulon R. West, forty per cent (40%); Terry R. West, forty per cent (40%); and Flora E. West twenty per cent (20%); and the partners shall in like proportion bear all losses, including loss of capital.'
The question underlying this controversy is what constitutes the 'assets' to be distributed to the partners.
The trial court ruled in accordance with the defendants' contention that the father Rulon West had committed all of the monies he advanced as contributions to capital of the partnership, and that it was intended that they should become part of the business; and that they are therefore subject to distribution in the proportions stated. It is the father's position that the monies the partnership obtained from him were simply advances or loans to the partnership which were to be repaid; and particularly that this was true as to the advances made after the initial investment.
The defendants place reliance on paragraph 3 of the partnership agreement, which states:
'(a) * * * A real estate contract, etc.
'(b) Any further sums which any partner shall with the consent of the other from time to time contribute for capital purposes which shall be credited to the capital account.'
Defendants insist that the 'further sums' advanced by the father Rulon West were intended for 'capital purposes' and that they thus became part of the assets of the partnership and hence are distributable as such under the provision of paragraph 12 quoted above.
In opposition to the foregoing argument, plaintiff Rulon West points to a dissolution agreement executed by the parties March 30, 1960, paragraph 1 of which states:
'1. Elements and completion of winding up. The winding up of the partnership affairs shall consist of selling all real and personal property of the partnership, paying all partnership liabilities (including liabilities to partners), and distributing the net assets of the partnership in cash to the parties hereto in the following proportions:
Rulon R. West 40%
Terry R. West 40%
Flora E. West 20%
The emphasized language shows plainly that some character of 'liabilities to partners' was contemplated and that these should be paid before distribution of the net assets. Liabilities to partners could only mean obligations owed to the partners individually, and this, of course, would apply to money advanced if it was done as a loan as plaintiff contends. In that connection it is noteworthy to mention that Flora E. West had also made some advances to the partnership, and that these had been repaid with interest.
The defendants rejoin by pointing to a supplement to the dissolution agreement, executed by the parties three days later, on April 2, 1960, which they insist shows that their proportion of the total assets of the partnership, including all monies advanced by plaintiff Rulon West, was intended to be given to them as a gift. It recites that:
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