Title: Narans v. Paulsen

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Narans v. Paulsen1990 WY 151803 P.2d 358Case Number: 90-6Decided: 12/17/1990Supreme Court of Wyoming
Stephen R. NARANS, SDKD, 
Ltd., a Colorado limited partnership; North Basin Investments, a Wyoming 
corporation; and Energy Inn Partnership,

 Appellants 
(Defendants),

v.

Al PAULSEN, 

Appellee 
(Plaintiff).

Appeal from the District 
Court, Campbell County, Timothy J. Judson, J.

George E. 
Powers, Jr., of Godfrey & Sundahl, Cheyenne, for 
appellants.

W.W. Reeves of 
Reeves & Murdock, Casper, for appellee.

Before 
URBIGKIT, C.J., and THOMAS, CARDINE, MACY and GOLDEN, JJ.

GOLDEN, Justice.

[¶1]      The central 
question presented in this appeal is whether one of several co-makers on an 
original promissory note can become, on a subsequent renewal of that note, an 
accommodation party who, after he pays off the note, is entitled to recover on 
the note from the other original co-makers. After a bench trial, the district 
court judge found that Al Paulsen, O.D., who along with his business associates 
had signed the original note, was an accommodation party on the last of several 
subsequent renewals of that note and was, therefore, entitled to recover from 
his business associates on the note which he had paid off after the note was in 
default. Dr. Paulsen's business associates appeal from that 
judgment.

[¶2]      We 
affirm.

[¶3]      Appellants Narans 
and North Basin Investment (formerly High Country Corporation) state the issues 
as:

I. When a party, who is 
primarily liable on an obligation and who executes a promissory note as a maker, 
later pays off the obligation and reacquires the note, thereby discharging the 
note, can the party maintain any cause of action against any co-makers upon the 
note itself?

II. Did the agreement of 
December 30, 1986, constitute a release by plaintiff-appellee of 
defendant-appellants Narans, Energy Inn Partnership and SDKD, Ltd., for claims 
arising out of the existing partnership debt, reserving only a right to enforce 
the covenent [sic] of High Country Corporation to assume responsibility for that 
debt?

III. Did the district 
court abuse its discretion when it denied defendant's motion to amend answers 
and later proceeded to enter judgment upon a finding of fact which was 
contradicted by the evidence submitted at trial?

Appellee Paulsen 
rephrases these issues as:

1. May a partner 
[Appellee Paulsen], who signs a renewal note for a partnership debt after his 
withdrawal from the partnership because his signature is required by the lender 
as a condition of continuing the credit, be an accommodation maker on the note 
so that he acquires the rights of the holder of the note when he has paid 
it?

2. Did the release by 
Appellee Paulsen of all claims, "which may now exist," also release claims 
arising after the date of the release?

3. Did the District Court 
abuse its discretion when it denied Defendants' Motion to Amend Answers, which 
was made one day before the trial, and argued at the opening of the 
trial?

FACTS

[¶4]      The Energy Inn 
Partnership was originally formed to develop and operate a Holiday Inn in 
Gillette, Wyoming. On March 1, 1984, partners High Country Corporation (now 
North Basin Investments) (50% partnership interest), SDKD, Ltd. (25% interest), 
and Dr. Paulsen (25% interest) executed a "master note" to the Security Bank of 
Gillette (now First Interstate Bank of Gillette) for $150,000. The loan proceeds 
were used to cover Energy Inn Partnership's operating expenses, in particular 
preexisting supply creditor debts, not Dr. Paulsen's partnership contribution. 
At maturity this note was marked "Paid by Renewal" and a new note was signed by 
co-makers Energy Inn Partnership (by Dr. Paulsen), High Country Corporation (by 
John Rijo), and SDKD, Ltd. (by Steve Narans). Two renewal notes followed, on 
January 7, 1986 and July 31, 1986, both signed by co-makers Energy Inn 
Partnership, High Country Corporation, and SDKD, Ltd. On December 20, 1986, 
another renewal note was signed by co-makers Energy Inn Partnership (by Steve 
Narans), High Country Corporation (by William Gingrich), SDKD, Ltd. (by Steve 
Narans), and Dr. Paulsen. This renewal note bore a maturity date of June 30, 
1987.

[¶5]      Ten days after 
the December 20, 1986 renewal note was signed, Dr. Paulsen, High Country 
Corporation, and Gillette Lodging, Inc. executed a buy-sell agreement covering 
all of Dr. Paulsen's various partnership interests.1 Of the $100,000 purchase price, the 
parties allocated $20,000 for Dr. Paulsen's interest in Energy Inn Partnership. 
With respect to this interest, Dr. Paulsen delivered all of his interest (25%) 
in partnership profits and losses and 24/25ths of his capital interest. As to 
Dr. Paulsen's remaining 1% capital interest, Gillette Lodging, Inc. was given an 
option to purchase that small percentage interest. All of the $100,000 purchase 
price payments were to be applied to Energy Inn Partnership's loan balance at 
the bank, which balance was $81,250 as of December 20, 1986, the most recent 
renewal.

[¶6]      After executing 
the December 30, 1986 buy-sell agreement, the partnership stopped sending 
monthly profit and loss reports to Dr. Paulsen. Dr. Paulsen did not take part in 
affairs of the partnership after that date. He gave the bank a copy of the 
buy-sell agreement. He asked the bank to release him from the obligation 
represented by the renewal note, but the bank refused. On two subsequent 
renewals of the note, July 15, 1987, and November 1, 1987, he signed as a 
co-maker along with Energy Inn Partnership, High Country Corporation, and SDKD, 
Ltd. With respect to this last renewal note of November 1, 1987, Dr. Paulsen 
signed twice, as a partner of Energy Inn Partnership and as an individual. There 
was evidence at trial that when Dr. Paulsen signed the December 1986 buy-sell 
agreement his intention was that he was relieving himself of the obligation to 
the bank and his co-makers on that note were assuming that obligation in full. 
There was evidence that Energy Inn Partnership intended to keep the credit at 
the bank, have the note renewed from time to time, and pay it according to its 
terms. According to Steve Narans' trial testimony, "We wanted to keep [the 
credit at the bank] in place so that Dr. Paulsen would not have to pay it off." 
Narans also testified that it was represented on Form K-1 to the 1987 Energy Inn 
Partnership income tax return that Dr. Paulsen had no liability for any 
partnership debts. There was evidence that Dr. Paulsen continued to sign the 
note renewals as a help to the business associates who had bought him 
out.

[¶7]      The Energy Inn 
Partnership defaulted on the November 1, 1987 renewal note which had a balance 
of $76,250. There was evidence that the partnership defaulted because the 
business had failed and it simply did not have the money to continue and not 
because the partnership claimed the note represented Dr. Paulsen's partnership 
debt. The bank looked to Dr. Paulsen as a co-maker. He paid off the note, and 
the bank endorsed it and assigned it to him on July 8, 1988. Dr. Paulsen then 
initiated this action. The district court awarded Dr. Paulsen $86,805 for 
payment of the note, interest and attorney's fees. This appeal 
followed.

STANDARD OF 
REVIEW

[¶8]      This court 
presumes the district court's findings of fact are correct and will not disturb 
such findings on appeal unless they are inconsistent with the evidence, clearly 
erroneous, or contrary to the great weight of the evidence. Chapman v. Mutual 
Life Insurance Company of New York, 800 P.2d 1147 (Wyo. 1990). The question is 
not whether we would have reached the same result, but whether the evidence is 
sufficient to support the trial court's result. Id. To determine whether 
evidence presented at trial was sufficient to support the judgment this court 
first of all gives deference to the trial court's determination because it was 
able to judge the demeanor of the witnesses. In Interest of N.M. and A.C., 794 P.2d 564 (Wyo. 1990). We then accept the evidence of the prevailing party as 
true and give that party the benefit of all favorable inferences that can fairly 
be drawn from its evidence, while disregarding conflicting evidence. Id. We are 
not directed to any clear error, and the weight of the evidence sustains the 
district court's holding.

ACCOMMODATION MAKER 
STATUS

[¶9]      Appellants claim 
that Dr. Paulsen was simply a co-maker on the original note and all subsequent 
renewals, including the last one on November 1, 1987, and not an accommodation 
party as found by the district court. If Dr. Paulsen was a co-maker and not an 
accommodation party, then his paying off the defaulted note discharged the debt, 
not only as to him but as to his co-makers as well, thus barring his action 
against them for recovery of the full amount of the note. On the other hand, if 
Dr. Paulsen was an accommodation party, then he enjoyed the statutory right to 
recourse for the amount paid to the holder of the note against his co-makers as 
the party accommodated. W.S. 34-21-352(e) (1977) (renumbered W.S. 34.1-3-415(e) 
(July 1990 Repl.)); 6 R. Anderson, Uniform Commercial Code, § 3-415:42 (3d Ed. 
1984).

[¶10]   This court has not previously 
discussed what factors must be considered in the determination of whether a 
party enjoys accommodation maker status. Appellants and Dr. Paulsen have 
referred us to a number of cases on the subject, and we have found additional 
legal authority to supplement their offering. From this combination of legal 
authority, we understand that a variety of principles are generally applicable. 
A party claiming accommodation maker status has the burden of proof on the 
point. 6 R. Anderson, supra, § 3-415:12, at 349. That a party signs as a 
co-maker does not establish that he is not an accommodation maker. Id. § 
3-415:26, at 357. A party cannot be an accommodation maker with respect to his 
own debt. Id. § 3-415:19, at 353. In determining the status of a signer of a 
renewal note, it is necessary to examine the entire series of transactions and 
also see the manner in which he signed the original note. Id. § 3-415:7, at 
345-46. Whether one is an accommodation maker is a question of the intentions of 
the party claiming that status, the party alleged to be the accommodated party, 
and the party holding the note when the alleged accommodation maker signed the 
note. Id. § 3-415:16, at 351. If the accommodation maker status is not readily 
apparent from the face of the note itself, parol evidence is admissible to 
establish the intentions of those concerned. Id. § 3-415:32, at 360. A party who 
does not directly benefit from the note is likely to be held to be an 
accommodation maker. Id. § 3-415:18, at 352. With respect to these foregoing 
factors, see generally, Holcomb State Bank v. Adamson, 107 Ill. App.3d 908, 63 
Ill.Dec. 704, 438 N.E.2d 635 (1982); South Side Bank & Trust Co. v. Yorke, 
15 Ill. App.3d 948, 305 N.E.2d 367 (1973); El-Ce Storms Trust v. Svetahor, 223 
Mont. 113, 724 P.2d 704 (1986); Mooney v. GR and Associates, 746 P.2d 1174 (Utah 
App. 1987); Utah Farm Production Credit Association v. Watts, 737 P.2d 154 (Utah 
1987).

[¶11]   No one of the above factors 
conclusively establishes the maker's status. Generally speaking, the courts have 
applied a two-stage analysis with these factors in mind. In the first stage, the 
court simply examines the note or renewals in question for evidence of any 
expression of limitation of liability accompanying the maker's signature. If no 
such expression is evident, as there was not on either the original note or any 
of the renewals in this case, the fact finder moves to the second stage and 
considers parol evidence as previously described.

[¶12]   From the record there is evidence 
that the original note's proceeds were not for Dr. Paulsen's direct benefit, but 
rather for the purpose of covering Energy Inn Partnership's pre-existing debts. 
Although Dr. Paulsen's signature as a co-maker appears on the original note, it 
is absent from several subsequent renewals on which the names of Energy Inn 
Partnership, High Country Corporation, and SDKD, Ltd. consistently appear as 
principal co-makers. From the evidence the district court could have reasonably 
concluded that the bank, as the holder of the note, intended Dr. Paulsen to have 
been an accommodation maker. This conclusion was buttressed by Dr. Paulsen's 
signature reappearing on the last renewal dated November 1, 1987, not once but 
twice. Although he signed as a partner, he also signed as an individual. The 
district court found some ambiguity regarding Dr. Paulsen's partnership status 
in light of the December 30, 1986 buy-sell agreement. It appears the district 
court resolved that ambiguity in Dr. Paulsen's favor based on all the evidence, 
including the testimony about the absence of interaction between Dr. Paulsen and 
the business affairs of the partnership after the buy-sell agreement was signed. 
In particular, Dr. Paulsen did not receive financial reports and was not 
involved in partnership business. The district court also had evidence that Dr. 
Paulsen signed the renewals after the sale of his interests only to help the 
partnership to continue to obtain the credit; he received no direct personal 
benefit from any renewal. There was evidence that Dr. Paulsen did not share in 
any of the partnership's profits or losses after signing the buy-sell agreement 
and that the parties' intentions were that the obligation evidenced by the 
renewals was the sole responsibility of the partnership. Applying the 
accommodation maker analysis to the facts found by the district court, we hold 
they form an adequate basis for that court's decision in Dr. Paulsen's 
favor.

[¶13]   We conclude that the district 
court's judgment that Dr. Paulsen was an accommodation maker is adequately 
supported by record evidence and not contrary to the great weight of the 
evidence. The district court had sufficient facts before it to find that Dr. 
Paulsen was no longer a partner, but signed the notes issued after the buy-sell 
agreement only as an accommodation to the remaining Energy Inn 
partners.

THE RELEASE 
PROVISIONS

[¶14]   Appellants next contend that Dr. 
Paulsen's suit on the note is barred by the pertinent release provision in the 
December 30, 1986 buy-sell agreement. The provision reads:

Paulsen, for himself, his 
heirs and assigns, hereby releases High Country and Stephen R. Narans, the 
Energy Inn Partnership, the Gillette II Partnership, and the Gillette Econo 
Lodge Limited Partnership, the Gillette Holiday Inn Liquors, Inc., their 
officers, directors, shareholders, employees, agents, attorneys, partners, 
trustees, beneficiaries, heirs, successors and assigns from any and all claims 
demands and causes of action which may now exist, whether presently known 
or unknown. (emphasis added).

The district 
court found that the provisions were inapplicable because Paulsen's claim arose 
after the agreement.

[¶15]   The trial court was correct. If the 
language of the agreement is clear and unambiguous, it expresses and controls 
the intent of the parties. State v. Pennzoil Company, 752 P.2d 975, 978 (Wyo. 
1988). The release provision is not ambiguous, and by its plain meaning applies 
only to claims existing at the time the buy-sell agreement was signed. Dr. 
Paulsen's claim did not arise until he paid off the note in July of 1988, and so 
is not barred by the release language in the buysell agreement.

DENIAL OF THE MOTION TO 
AMEND

[¶16]   Finally, appellants claim that the 
district court abused its discretion when it denied their motion to amend their 
answer. The motion to amend was made on October 5, 1989, on the eve of trial. 
Appellants' motion was based on an application for extension of time to file the 
1987 partnership tax return prepared by the partnership's accounting firm. This 
request suggests that SDKD and Narans were not involved in the partnership in 
1987, but instead that High Country and Dr. Paulsen were the only two partners, 
High Country having a 99% interest and Dr. Paulsen the remaining 1%. 

[¶17]   Appellants answered Dr. Paulsen's 
complaint on January 26, 1989, and had several months to prepare for trial. The 
district court's pre-trial order filed May 11, 1989, shows that the parties 
neither offered nor anticipated any amendments to the pleadings. Dr. Paulsen 
countered the motion with assertions that his 1987 income tax return did not 
contain the schedule, that he understood changes in participation in the 
partnership had taken place since he had left it but did not know what those 
changes were or when they occurred, and that appellants were represented by the 
same counsel who had written the buy-sell agreement and attempted to negotiate a 
settlement. He also argued that the delay which would have been required to 
conduct further discovery would be expensive and thus would prejudice 
him.

[¶18]   W.R.C.P. 15(a) does provide that 
leave of the court to amend will be "freely given when justice so requires." 
However, liberal application does not mean unlimited license to amend. This 
court has said before that "allowance or disallowance of an amendment to the 
pleadings is within the sound discretion of the district court." Robertson v. 
TWP, Inc., 656 P.2d 547, 551 (Wyo. 1983). "[J]udicial discretion [is] `a 
composite of many things, among which are conclusions drawn from objective 
criteria; it means a sound judgment exercised with regard to what is right under 
the circumstances and without doing so arbitrarily or capriciously.'" Kennedy v. 
Kennedy, 761 P.2d 995, 998 (Wyo. 1988) (quoting Martin v. State, 720 P.2d 894, 
897 (Wyo. 1986)). Although it is always easy for those on the secure heights of 
hindsight to suggest another course might have been taken, that is not to say 
the district court abused its discretion.

[¶19]   Rule 15(a) does not require that 
trial be delayed on such tenuous grounds less than twenty four hours before it 
is to begin. Appellants' evidence did not establish that justice would be 
furthered by permitting the amendment, or that the court acted arbitrarily or 
capriciously. Consequently, we cannot say that the district court abused its 
discretion in denying the motion to amend.

[¶20]   Appellants have not carried their 
burden on any of their arguments of error. The judgment of the trial court is 
affirmed in all respects.

URBIGKIT, 
C.J., 
files a dissenting opinion.

URBIGKIT, Chief Justice, 
dissenting.

[¶21]   Analysis of the facts of this case 
reveals that, by denial of a motion for leave to amend to delete inappropriately 
admitted and clearly erroneous allegations, the trial court tried a case that 
factually did not exist. This majority then, in misinterpreting the documents 
and details, misconstrues the issues presented. Since the citations of 
authorities are inappropriately applied by a misunderstanding of the basic 
transaction, the result achieved is just plain wrong. Consequently, whether or 
not the local resident doctor should be repaid what he lost in his inopportune 
partnership venture, the basis for decision here is legally erroneous. I 
consequently dissent.

[¶22]   Dr. Alfred William Paulsen, a 
Gillette optometrist, became the owner of a twenty acre tract of Gillette, 
Wyoming real estate upon which he wanted to build a motel. For that purpose, 
Energy Inn Partnership was formed in 1976, a Holiday Inn franchise was obtained 
and a motel built, in which partnership he acquired a twenty-five percent 
interest.1 The great Gillette oil and coal 
boom came to subside and was followed in this enterprise by partnership calls 
for capital infusion. The record reflects that the initiating promissory note 
for this litigation was signed by the partnership and the partners on September 
1, 1984, in the amount of $150,000 in order to cover Dr. Paulsen's partnership 
deficiency call required to provide additional capital for the 
venture.

[¶23]   By 1986, Dr. Paulsen wanted to get 
out and release the tiger, with the partnership then obviously in financial 
distress with the local recession economy. He entered into a sales agreement 
where, in direct effect, he sold 24/25ths percent of his partnership interest 
and twenty-five percent of its loss write-off constituent in consideration of 
the buyer's assumption of the balance remaining due on the September 1, 1984 
note which, by 1987, still totalled about $81,250. As life is wont to be, this 
transaction did not achieve for him either a partnership or a personal release 
of the liability which he originally incurred by becoming a partner in 1976 and 
more directly documented by his execution of the note in 1984 with subsequent 
renewals.2

[¶24]   Obviously, the lender bank was 
disinclined to release the local "solvent" obligor and, consequently, in 
November of 1987, Dr. Paulsen signed the extension note for the balance then 
remaining of $76,250. The partnership, which by then consisted in fact of High 
Country Corporation, ninety-nine percent, and Dr. Paulsen, one percent, had made 
interest payments and a modest principal reduction. Unfortunately, further 
payments were not made. In 1988, the lender called upon Dr. Paulsen, who had 
signed the 1987 note as an individual and then served as "an advisory director" 
of the lender bank, to pay off the note. He did, took an assignment of the note 
from the bank and, by this lawsuit, sued the partnership - High Country 
Corporation, which had purchased 24/25ths percent of his partnership interest, a 
former partner in the enterprise, SDKD, Ltd., and appellant Stephen R. Narans, 
who was a principal in both High Country Corporation and SDKD, Ltd.

[¶25]   The complexity of this litigation 
was engendered by appellants' inappropriate admission in their answers to the 
complaint. In the complaint, Dr. Paulsen alleged, as relevant to this 
issue:

     2. SDKD and High 
Country Corporation are partners of Energy Inn Partnership.

* * * * * *

     5. Energy Inn 
Partnership and its partners High Country Corporation and SDKD have defaulted on 
the note, Exhibit "A" hereto.

The answers 
stated:

     2. Defendant admits 
the allegations contained in paragraph 2 of Plaintiff's Complaint.

* * * * * *

     5. Defendant admits 
that Energy Inn Partnership, a Partnership consisting of High Country 
Corporation, SDKD, Ltd., and the Plaintiff, have defaulted on the note, a copy 
of which has been attached as Exhibit A to Plaintiff's Complaint.

[¶26]   There is no question within the 
record and the documentation provided that earlier than the 1986 buy-out 
transaction, SDKD, Ltd. had ceased to be a partner in the venture. As of 
December 30, 1986, the only partners were High Country Corporation, seventy-five 
percent, and Dr. Paulsen, twenty-five percent, which, after the buy-out, 
resulted in a partnership interest of High Country Corporation, ninety-nine 
percent, and Dr. Paulsen, one percent, general although limited by the 
profit/loss attribution clause.

[¶27]   The complaint was filed December 
29, 1988 and the answers were filed January 26, 1989. On October 5, 1989, 
appellants moved to amend to withdraw an incorrect factual admission. That 
motion was denied and the trial court proceeded to try the case as if SDKD, Ltd. 
was a partner and Dr. Paulsen was not a partner, neither of which is or was 
factually true.

[¶28]   Although I recognize that the 
"discovery" of the error in pleading came late in the proceeding, I find 
singular error and abuse of discretion in denial of a motion which essentially 
would have been no different than one presented during the trial to conform to 
the evidence which would relate the case to its actual facts. Holding a litigant 
to an erroneous and incorrect admission which is seasonably discovered and an 
effort at correction made does not comply with the justice proviso of W.R.C.P. 1 
and the freely given concept for amendment provided in W.R.C.P. 15. See Beaudoin 
v. Taylor, 492 P.2d 966 (Wyo. 1972). I agree, as Justice Guthrie so 
appropriately said in Beaudoin in direct application to this case, "[w]e merely 
observe it does not serve the spirit, philosophy, and purpose of the civil rules 
to adhere to the cause of action concept." Id. at 970.

[¶29]   Since the facts of this case were 
really not in conflict and the only conflict was engendered by the erroneous 
admission, neither delay in proceeding nor due prejudice is observed. Bush v. 
Duff, 754 P.2d 159 (Wyo. 1988); Johnson v. Aetna Cas. & Sur. Co. of 
Hartford, Conn., 608 P.2d 1299 (Wyo. 1980). Abuse of discretion exists with 
amendment denial when it should have been allowed in the furtherance of justice. 
Bush is directly applicable here. The trial court should have heard the real 
case and then, within the question of the constituency of the partnership, any 
assertion or conclusion that Dr. Paulsen had not continued as a partner is just 
factually wrong.

[¶30]   If Dr. Paulsen had not been a 
partner in 1987, if SDKD, Ltd. had been a partner in 1987, and if the 1984 
transaction had not involved funds acquired to serve the benefit, both direct 
and indirect, of Dr. Paulsen relative to the partnership financial problems and 
his delinquency in partnership calls, then I would concur with this majority's 
decision. I do not differ with the analysis as clearly defined in written 
agreements that the partnership and its partner, defendant High Country 
Corporation, intended to save Dr. Paulsen harmless from the bank indebtedness by 
providing him money as a characterized buy-out sum from which he could make the 
bank payments on the note. When the venture and its general partner, High 
Country Corporation, did not provide those payments, the agreement was breached 
and Dr. Paulsen was entitled to sue on its indemnity provisions but not on the 
assigned note to secure repayment. The error in result in the initial decision 
and instant opinion results in an improper judgment against SDKD, Ltd., a prior 
co-partner with Dr. Paulsen and the principal in SDKD, Ltd., Stephen R. 
Narans.

[¶31]   Further synthesized, the error in 
the majority opinion is the assumption that the 1984 loan, when accommodating a 
partnership deficiency call against a partner, is "not for [the partner's] 
direct benefit." The rule generally stated is no benefit3 but, in any event, the factual 
circumstances clearly meet any of the stated tests. This majority's conclusion 
that follows that the partner in this circumstance was only an "accommodation 
maker" is factually inaccurate and erroneous as a matter of law.

[¶32]   If Dr. Paulsen had not been a 
partner in 1984 when he executed the note and had not at least arguably executed 
it for his direct or indirect benefit to assist a floundering business, I could 
also accept the authorities presented by this majority in support of the present 
decision. However, reading those decisions, Mooney v. GR and Associates, 746 P.2d 1174 (Utah App. 1987); Utah Farm Production Credit Ass'n v. Watts, 737 P.2d 154 (Utah 1987); El-Ce Storms Trust v. Svetahor, 223 Mont. 113, 724 P.2d 704 
(1986); Holcomb State Bank v. Adamson, 107 Ill. App.3d 908, 63 Ill.Dec. 704, 438 N.E.2d 635 (1982); and South Side Bank & Trust Co. v. Yorke, 15 Ill. App.3d 
948, 305 N.E.2d 367 (1973), are unconvincing that this partner's execution of 
that note at that time provides justification for the present assertion that in 
1984, Dr. Paulsen was only an "accommodation maker." I further conclude that if 
he was a co-maker with the partners in 1984, he then continued to be a co-maker 
with last renewal in 1987 by virtue of his endorsed responsibility on the 
obligation by continued execution of the renewal note which debt had been 
originally incurred for his specific benefit, both direct and 
indirect.

[¶33]   Consequently, I 
dissent.

FOOTNOTES

1 In addition 
to his interest in Energy Inn Partnership, Dr. Paulsen had interests in the 
Gillette II Partnership, the Gillette Econo Lodge Limited Partnership, and the 
Gillette Holiday Inn Liquors, Inc., a Wyoming 
corporation.

FOOTNOTES for the 
Dissent

1 Undoubtedly, the motel 
interest depreciation as a real estate investment afforded a significant tax 
offset to Dr. Paulsen's medical practice income.

2 The retention by Dr. 
Paulsen of a one percent interest by his request within the 1986 buy-out 
transaction causes unnecessary confusion in trial court consideration and 
present court decision.

The 
subject addressed in the record is clearly understandable as the pervasive tax 
issue of partnership participation when depreciation recapture "possibilities" 
exist if a partner has achieved a negative partnership equity through 
depreciation tax benefit and then terminates his interest in the partnership and 
receives a third-party assumption of the outstanding indebtedness.

To 
get out of a real estate partnership which has been losing money can, when done 
in the wrong way such as by foreclosure or sale, become very expensive in 
additional income from recaptured depreciation. What Dr. Paulsen did reflects 
not only reasonable but apparent sophisticated tax advice or 
information.

3 Utah Farm Production 
Credit Ass'n v. Watts, 737 P.2d 154 (Utah 1987) states the rule as direct or 
indirect benefit, but generally the test standard provided by the cases is 
unfettered "benefit." Farmers State Bank of Oakley v. Cooper, 227 Kan. 547, 608 P.2d 929 (1980); Riegler v. Riegler, 244 Ark. 483, 426 S.W.2d 789 (1968); 
Commerce Union Bank v. Davis, 581 S.W.2d 142 (Tenn. App. 1978).