No. 12450 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1973 

BEN R. ARNOLD, 

Plaintiff and Respondent, 

-vs - 

LEO J . CREMER, JR. , 

Defendant and Appellant. 

Appeal from: District Court of the Sixth Judicial District, 

Honorable C. B. Sande, Judge presiding. 

Counsel of Record: 

For Appellant : 

William R. Morse argued, Absarokee, Montana 

C. E. Laws appeared, Absarokee, Montana 

For Respondent : 

John R. Kline argued, Helena, Montana 

Submitted: September 27, 1973 

Decided : 18 I973 
Mr. Justice Wesley Castles delivered the Opinion of the Court. 

This is an appeal from a judgment entered by the district 

court of the sixth judicial district, Park County, after that 

court adopted the report and findings of a Special Master in 

what developed as an accounting. Judgment in the amount of 

$10,749.82 was entered for plaintiff. 

The action was brought by plaintiff Ben R. Arnold to 

recover from defendant Leo J. Cremer, Jr. moneys owed arising 

out of various transactions between plaintiff and defendant, 

including an oral partnership. plaintiff's action in part 

was for a partnership accounting. Plaintiff as manager of the 

partnership submitted his accounting which showed a deficit 

in defendant's account which plaintiff was entitled to. The 

Special Master determined that to be $5,862.95. Plaintiff also 

claimed and was found to be owed: $4,674.40 for 46 heifers purchased by plaintiff for defendant; $212.47 interest on option 

money borrowed by plaintiff for defendant's benefit. 

Plaintiff and defendant were long-time friends and both had 

been in the cattle business for years. In 1959, they entered 

into an oral partnership agreement on a farming and ranching 

venture. Plaintiff had acquired a lease from one George Wepler. 

Defendant had cattle to put on the leased land. Both parties 

had ranch operations of their own. The partnership was operated 

under the name of Arnold Livestock Company. Capital and income 

was to be equal. Operation and management of the venture was 

to be by plaintiff. Other than the name of the partnership, 

place of operation, and agreement on division of capital and 

profit, no terms were agreed upon. Such was the informality of 

the agreement. 

A bank account was opened and plaintiff, defendant and defendant's son were authorized to write checks. Plaintiff, however, 
was the only one who wrote checks on the account. All of the 

bank statements, deposit slips and checks were kept. 

Plaintiff, at the direction of his accountant, kept other 

records of the partnership affairs in which he recorded receipts 

and disbursements for the years 1961, 1962, 1963 and 1964. 

In this regard, the Special Master found: 

"4. The managing partner maintained accounting 

records for the partnership until December 31, 

1963. These records were used in the preparation 

of the partnership income tax returns. The partnership books for the year 1964 were maintained by 

accountant M. L. Smith, who prepared the 1964 partnership income tax return. 

"5. The accounting records as maintained by Plaintiff are fairly common to the farm and ranch industry. 

Receipts are deposited in the bank and disbursements 

are made by check drawn on the bank. The receipts 

and disbursements are then classified and entered 

under appropriate columns in either the income or 

I the expense columns provided in National ~armers' 

Income Tax Record', a copyrighted booklet sold for 

the indicated purpose. The booklet does not provide 

for double entry bookkeeping and thus does not within 

itself contain controls against errors and omissions. I I 

Plaintiff testified that each year he went over the books 

with defendant. Defendant denied he had ever examined the books, 

but admitted Arnold offered to let him examine them. In addition, during the years from 1959 through 1963, the partnership 

tax return was prepared by Mr. Schreiner, plaintiff's accountant. 

Thereafter, defendant's accountant M. L. Smith prepared the 

partnership return. 

Plaintiff withdrew money from the partnership account for his 

personal use and recorded the withdrawals as loans to himself 

on the partnership books. plaintiff's withdrawals were with the 

knowledge and consent of defendant Cremer. Plaintiff's uncontradicted testimony was that none of the items listed in the books 

as expense items were used for his own personal livestock business. 

~efendant's accountant, M. L. Smith, kept the books for 

Arnold Livestock Company after 1963. Smith had worked for defendant's organization since 1935 and was still working for it 

on June 19, 1968, when his deposition was taken. 
The Wepler lease ran out after three years. A three year 

lease on the Hanson place was obtained by plaintiff when the 

Wepler lease still had a year to run. 

Plaintiff kept a personal ledger in which was recorded the 

barley that he and defendant, as individuals, supplied to the 

partnership. Plaintiff kept the weigh slips which were admitted 

at trial as plaintiff's Exhibit 8-1. Plaintiff and M, L. Smith 

used records that belonged to the elevator company to get some 

of the information as to the grain supplied. 

On April 1, 1963, Arnold Livestock Company purchased and 

paid for 400 head of yearling heifers from defendant for $50,000. 

Defendant Cremer actually moved 436 yearling heifers on to the 

Hanson lease. Although defendant got the 436 heifers back, he 

never paid to the partnership the $70,000 the contract called 

for. 

The Internal Revenue Service audited the partnership records 

in 1962. 

Plaintiff borrowed money on behalf of the partnership. 

Plaintiff's personal records for 1959 through 1963 were 

introduced in evidence as Exhibits 13 through 22. These were 

the same type of records kept for Arnold Livestock Company. 

They were kept in a like manner. Plaintiff kept his personal 

income and expenses separate from those of the partnership. 

Both plaintiff and defendant used men hired by the partnership 

to help out on their individual operations. 

Defendant Cremer used the Hanson lease for his own cattle 

without reimbursing the partnership. 

Upon dissolution of the partnership, M. L. Smith (who was 

defendant's and also the partnership's accountant after 1963) 

was hired to make an accounting. The prices entered on the books 

for cattle were established by defendant Cremer. Elevator figures 

were used to determine defendant's barley contribution at defendant's request. 
In making his findings in regard to the partnership the 

Special Master had bank records from the Yellowstone Bank; the 

testimony of Wallace E. Schreiner; the partnership U.S. tax 

returns; the Smith deposition and smith's accounting and the 

tax returns he prepared; the testimony of Charles McCartney, 

C.P.A. and his reconstruction of the records; the testimony of 

Dallas VanDelinder, C.P.A.; and "the entire file in the case, 

including depositions taken prior to trial but not put in evidence. I I 

On the above facts the Special Master found in addition to 

other facts the following, which is amply substantiated by the 

record and exhibits : 

"17. The following balance sheet reflects 

the assets and capital accounts of the partnership 

at the time of discontinuance of the partnership 

business and at the time of the hearing as determined 

from the testimony and exhibits and the foregoing 

findings of fact: 

ASSETS 

Cash in Yellowstone Bank 

Due from Leo J. Cremer, Jr. 

TOTAL ASSETS 

CAPITAL ACCOUNTS 

Leo J. Cremer, Jr. 

Ben R. Arnold 

-- TOTAL CAPITAL ACCOUNTS $70,226.39 

"18. Plaintiff claims $500 for the use of 

and $100.00 for damage to combines alleged to 

have been used by Defendant. The evidence does 

not establish that the use of the combines was 

by the Defendant or under circumstances rendering 

Defendant liable for same. 

"19. The partnership entered into a 

written agreement with Defendant (plaintiff ' s 

Exhibit 8-2) whereby the partnership agreed to 

purchase 400 heifers from Defendant, breed and 

feed them from April 1, 1963 to November 15, 1963, 

at whi.ch time Defendant agreed to buy them back 

for $70,000.00. The partnership paid for the 

heifers. Defendant took the cattle back prior 

to November 15, 1963, with the complaint that 

Plaintiff had caused Defendant and the partnership 

to be over-stocked with cattle. The evidence is conflicting on the question of the necessity to remove the animals and is insufficient to support any 

change in the written agreement. Defendant is indebted to the partnership for the sum of $70,000.00 

as provided in the agreement. I I 
As to his two findings for the plaintiff on matters outside the partnership accounting, the Special Master found: 

"20. Plaintiff purchased for the account 

of and delivered to Defendant 46 heifers on or 

about September 30, 1961, for the sum of 

$4,674.40. Plaintiff drew a draft on Defendant 

for $4,000.00 which was refused twice and then 

honored. Plaintiff thought the draft had been 

credited to him, but it was credited to the 

capital account of Defendant in the partnership 

on October 27, 1961. Defendant has not paid 

Plaintiff for said heifers and is indebted to 

him for the sum of $4,674.40 on account thereof. 

"21. Plaintiff leased certain lands 

from Robert P. Hanson and Dorothy M. Hanson, 

husband and wife, under the terms of a written 

agreement dated November 22, 1961 (Plaintiff's 

Exhibit 7). The rental for said lease was paid 

by the partnership and the lands were used by 

the partnership in its business. The lease 

contained an option to purchase the leased 

premises at any time prior to December 1, 1964. 

At the request of Defendant, the Plaintiff 

exercised the option for the benefit of the 

Defendant. In order to do so, Plaintiff 

borrowed $35,412.19 on his own account at the 

Yellowstone Bank, Columbus, Montana. Subsequently, 

a dispute arose between the Hansons and Plaintiff 

concerning performance of the lease agreement and 

status of the option to purchase. In settlement 

of the dispute, the option was cancelled. 

Defendant was a participant with Plaintiff 

in the negotiations leading up to settlement 

of the dispute by cancellation of the option, 

both having gone to the same attorney to 

represent them in the dispute with the Hansons. 

There is a conflict in the testimony as to the 

reason for cancellation of the option, but it 

does not appear that the cancellation was the 

fault of the Plaintiff. Plaintiff paid interest 

of $212.47 on his loan of $35,412.19 and is entitled to reimbursement from the Defendant 

therefor. " 

The Special Master concluded: 

"22. In summary of the foregoing findings, 

The Special Master finds that Plaintiff has rendered 

an accounting of the partnership affairs to Defendant, 

and as a result of such accounting and of other dealings 

between Plaintiff and Defendant as set forth above, 

Plaintiff is entitled to the balance of $226.39 in the 

partnership bank account in the Yellowstone Bank, 

Columbus, Montana, and is further entitled to have and 

recover from Defendant the sum of $10,749.82. * * *I1 

The issues set forth by appellant-defendant are four. The 

first issue, termed by appellant as the main issue, is: Whether a sole managing partner has sustained his fiduciary burden 

as a trustee with regard to accuracy of recordkeeping; and with 
regard to commingling of partnership assets with his personal 

assets in various ways. The other three issues include (1) the 

receipt in evidence by the Special Master of "unsupported bank 

statements", (2) the acceptance by the district court of the 

Special aster's findings, and (3) whether this Court should do 

an accounting of its own. These latter three issues are not 

issues as such, since they all bear on the single issue of whether 

the evidence submitted at the hearing was of a kind and of a 

sufficiency to sustain the findings. 

The entire thrust of appellant's position in the district 

court and here is that as a fiduciary the managing partner was 

under a strict duty of maintaining detailed records of each 

11 transaction and that the managing partner was held to an especially high" degree of duty. Then, appellant argues, where 

accounts are not kept with such detail and accurateness as to be 

capable of an "audit" in a strict sense, the presumptions are 

against the one causing it. Appellant states that to prove an 

item, plaintiff must have accounts and vouchers for each item 

and cites in support Hansen v. Hansen, 130 Mont. 175, 179, 297 P. 

2d 879. He then states that the Special Master considered the 

accounting on an ordinary partnership basis, rather than involving a sole managing partnership. 

We have considerable difficulty in grasping appellant's 

reasoning here. We do not disagree with the rules of law and 

accounting that appellant urges, but rather their application to 

the facts. Appellant seems to argue that plaintiff could not 

have an accounting because his bookkeeping was not perfect or 

that there was commingling of funds and other business. However, 

the Special Master found that plaintiff had rendered an accounting. 

On items that plaintiff did not prove, the Special Master did not 

allow. 

In summary appellant states that plaintiff has committed a 

host of acts of impropriety in breach of his trusteeship as a 
sole managing partner; he has taken cash; he has sold his own 

personal goods to the partnership at a personal profit; he has 

commingled his own business with that of the partnership; and, 

he cannot account for missing cattle. Then appellant states: 

"1n short he [plaintiff] is in serious trouble!" 

Appellant again urges that once a breach of trust has been 

established, the entire accounting is suspect and the managing 

partner must have all presumptions considered conclusively 

against him. 

We have examined the entire record. We find nothing as in 

Hansen, where the Court found the books were "utterly unreliable 

and furnish no basis whatever for a determination of the respective 

rights of the partners * * *.I' Rather we find, as the Special 

Master and the district court found, that an accounting was made; 

that plaintiff did not get credit where he did not have clear, 

satisfactory proof of the same; and that the informal partnership 

was conducted in a manner known to both parties. 

We find no error and affirm the judgment. 

Justice '--' 

a ChieS Justice 

/' ", 

f-\ Justices 

red B. Coate, 

Judge, sitting for 

Justice John Conway Harrison.