No. 12077 INTHE SUPREME COURT OF THE STATE OF MONTANA 1972

YENS HANSEN, Plaintiff and Respondent,

LEE KIERNAN, Administrator of the Estate of JOSEPH PATRICK KIERNAN, deceased, 

### et ale, Defendants and Appellants.

Appeal from: District Court of theThird Judicial District, Honorable Sid G. Stewart, Judge presiding. Counsel of Record: ForAppellants: Tipp, Haven and Brault, Missoula, Montana. Raymond

### WeBrault argued, Missoula, Montana. For Respondent: William Re Taylor argued, Deer Lodge, Montana. James J. Masar, Deer Lodge, Montana.

Submitted: April 21, 1972 Decided: 

### JUL f

## 11914 Filed: 

### JUL 

## 1.1lmMr. Justice John Conway Harrison delivered the Opinion of the Court.

This is an appeal from a judgment and decree of the district

courc of the third judicial district, Powell County, sittingwithout

a jury, ordering specific performance of an oral agreement entered intoby plaintiff Yens Hansen and decedent Joseph Patrick Kiernan. The court further ordered allmonies that have accrued and will become due to the benefit of decedent's estate as a result of the former partnership tobe paid toplaintiff. By his amended complaint, plaintiff asked (1) for a declaration and adjudication of the rights of plaintiff and the estate of Joseph Kiernan, deceased, tomonies due under a contract for deed agreement; (2) that the district court enterjudgment establishing an oral contract between plaintiff and decedent; and (3) a decree that as a result of the contract plaintiff isentitled to allmonies that have accrued and willbecome due under the contract for deed. Defendant inthe instant suit isthe administrator of the estate of Joseph Patrick Kiernan, Lee Kiernan. It isdefendant's position that a partnership existed between plaintiff and decedent but that the partnership terminated with Kiernan's death and there isnow due his estate an accounting of the partnership affairs. Further, alltestimony relating to an alleged oral agreement between plaintiff and decedent to execute mutual wills was inadmissible under the so-called "dead man's" statute, section 93-701-3, R.C.M. 1947. The uncontested facts indicate that in 1932 Joseph Kiernan,

a singleman 43 years of age, entered into an oralpartnership agreement with Yens Hansen, a singleman 28 ypars of age. The partnership agreement provided that Hansen and Kiernan would purchase a 331 acre ranch known as the "~acklin Place" near Elliston,Montana, for the purpose of engaging inthe ranching and cattle raisingbusiness. The partnership flourished and in 1940 they purchased additional property known as the 

### at Creek Place" consisting of approximately419 acres. Atvarious times during the period 1932

## - 1941, both Hansen and Kiernan s0ugh.t outside employment to earn cash and each contributed his earnings to the partnership. While it may seem unusual that such an undertaking was only supported by an oral agreement, it should be noted. that Hansen and Kiernan had known each other since 1914, and Kiernan had resided at

### ans sen's grandparents' ranch for a number of years previous to 1932. There is every indication that they were not only good friends, but were also amiable and diligentbusiness partners. On January 23, 1941, the partners executed formal written articles of copartnership. The articlesprovided, among other things, that theywould:

'I* 

# * become copartners inthe ranching and farming business under and by thename, firm and styleof 'Kiernan & Hansen.

## ' 9: 

# * % "That the term of said partnership 9: 9: 

# * shall end whenever the partiesmay terminate said partnershipby mutual consent with orwithout a written agreement of dissolution.

# * ;k "At the termination of this partnership, by expiration of the term orby reason of any other cause d. -1- -L the debts of the partnership shallbe discharged; and allmoney or other assets of the partnership then remaining, shallbe divided between the parties, share and share alike ik 9: 9:. I' In 1942 Hansen was drafted into the United States army at the age of 38. Before leaving for active duty Hansen, recognizing the uncertainties of wartime military service, executed

a willwhereby he bequeathed and devised his personal and real property toJoseph IGernan, leaving onlyhis "good will1'to his heirs-at-law. The willwas mailed to Kiernan and deposited by him inhis safetydepositbox. Atalltimes afterreceiving 

### an sen'swil.1, Kiernan had access and control over the will. At trial, over the objection of defendant's counsel,Yens Yanseii testified that in 1942 due to his impending military service he and Kiernan entered into an oral agreement to execute mutual

.~r reciprocal wills whereby each of themwould give, devise,and bequeath to the other all of his right, title and interest in all of their real and personal property except a certainhomestead belonging to Kiernan. He testified that pursuant to such agreement he executed the aforementionedwill, thus fully performing his part oZ the agreement. Plaintiff further testified that during the 33 months he spent on active duty Kiernan continued to operate the partnership; that he sent home to Kiernan the sum of $800 to be expended for the ranching partnership;and, that upon his dischargehe contributed

an additional $800 to the partnership. In 1945 the partners purchased additionalpropercy known

as the "~onovan Place" consisting of approximately 360 acres. In 1960, they purchased another ranch consisting of approximately 800

acres. In 1960 Kiernan became afflictedwith arthritiswhich required him to use a cane and eventually crutches in order to get around. This so restricted Kiernan's activities that the partners agreed to sell their partnership and, in effect, retire. 

### In 1966 the partners entered into an agreementwith two prospective purchasers for the sale and purchase of all of the real and personal property of the partnership. The partnership

was sold under a contract for deed agreement the terms ofwhich provided for a down payment and a balance due of $85,200to be paid in ten equal annual installments, the first due onNovember 

### 15, 1967. An escrow agreement,warranty deed, abstract of title and insurance policieswere held in escrow by the Deer Lodge Bank &Trust Company. An escrow receiptwas issued to the parties which recited the escrow agent would: "Credit payments to Sellers, by escrow check made payable to both sellersf1. Hansen testified that in the fall of 1966he and Kiernan made a "special trip downhere to the bank in Deer Lodge on account of that" escrow receipt. ftik 9c 9; it didn't leave any provision for the survivor of us +i 

# *

# *. " He testified he and Kiernan explained to the bank cashier (since deceased) that theywanted thewording of the escrow receipt changed:

"2

# * 9; so that if anything happened to either one or the other of us, that the money would automatically go to the other one

# * +;." As a result of this meeting, the escrow receiptwas modified by interlineation to read: "Credit payments to Sellers, checking account # 14-509f'. This changewas signed by Hansen and initialed by Kiernan. Checking account #14-509 had been used by the partners during the existence of their partnership. Each partner had the right to draw on this account. After the sale of the partnership assets, Hansen and Kiernan continued to use this account for their personal use. Following the sale of the partnership assets Hansen and Kiernan continued their associationand friendship. They took motor trips together to Alaska and California; they purchased a residence inMissoula in joint tenancywith the right of survivorship; they had two savings accounts,both in joint tenancy;and they purchased corporate stock also in joint tenancy. 

### OnApril 8, 1968,Joseph Kiernan passed away. No will was

ever located. Plaintiffbrought the instant action for specific performance of the oral agreement entered intobetween himself and Kiernan in 1942 to execute mutual or reciprocalwills. Here, the problem is to determinewho is entitled to the balance of thepayments due under the contract for deed agreement paid after ~iernan's death and those still to be paid---Hansenor ~iernan's heirs under the intestacy laws? The trial court held that there had existed an oral agreenent between Hansen and Kiernan to execute mutualwills; that Hansen had performed his part of the agreement;that Kiernan had failed and neglected to perform his part of the agreement; and, therefore, specific performance of the agreementby the administrator was ordered. Defendant raises eleven issues for review on appealwhich

we believe canbe more succinctly stated as: 1. Whether the trial court erred inrefusing to hear defendant's preliminarymotion to strike because of a local court rule requiring the filing of briefs with suchpreliminarymotions. 

### 2. Whether testimony relating to conversations and agreements between theplaintiff and decedentwere properly admitted

1 I' under the "dead man s statute, section 93-701-3,

### R.C.M. 

### 1947. 3. Whether defendant's post-trial motion to dismiss should have been granted, due to the running of the statute of limitations. 

### 4. Whether plaintiff was guilty of laches. 

### 5. Whether the attempt to enforce the oral agreement varied the terms of thewritten articles of copartnership. 

### 6. Whether the trial court ruled specifically on the objections raised at trial. Issue 

### 1. We find that prior to trial defendant had properly filed and noticed a motion to strike certain portions of plaintiff's amended complaint. 

### On the date set forhearing of the motion the trial judge summarily denied themotion, because of defendant's failure to file a brief in support of the motion in accordance with a local court rule.While defendant has raised this issue on appeal, it has not been argued either in defendant's brief or during oral argument before this Court. We can only surmise that this specification of error has been abandoned and wewill not consider it further, except to say that such rules of practice may be adopted and enforced by the district courts in accordancewith section 93-502, 

### R.C.M. 1947,and Rule 83,M.R.Civ.P. Issue 2. Section 93-701-3,R.C.M. 1947,provides that the following persons cannot be witnesses: "(3). Parties or assignors of parties to an action or proceeding, or persons inwhose behalf an action or proceeding isprosecuted against an executor or administrator upon a claim or demand against the estate of a deceased person, as to the facts of direct transactions or oral communications between the proposed witness and the deceased, exceptingwhen the executor or administrator first

The purpose of this statute is twofold: (1) it prevents the livingparty,by reason of the death of his adversary, from gaining an undue advantage over the administrator, and 

### (2) it removes the temptation for the commission of perjury. Leffek



### v. Luedeman, 95Mont. 457, 463, 27 P.2d 511;Johnsonv. Mommoth Lode, 136Mont. 420, 422,423, 348 P.2d 267;Novak v. Novak, 141 Mont. 312, 316, 377 P.2d 368. The statute, section 93-701-3(3), allows two exceptions to the prohibition of a surviving party acting as a witness in an action for a claim or demand against an estate. The first is when the executor or administrator first introduces evidence of such

a claim or demand. We are not conceredhere with this exception. However, the second exception provides that the surviving party

II may be a witness when it appears to the court that, without the

I I testimony of thewitness, injusticewill be done. 

### We must now determine if the trial court abused its discretion under this second exception.

### In Johnsonv. Mommoth Lode, 136Mont. 420,423, 348 P.2d 267, this Court said:

'If: 9: 

### before a witness, who is declared to be incompetentby this statute,will be allowed to testify to prevent an injustice,a foundation must be laid by the introduction of other evidence, which shows that in allprobability the proponenthas a meritorious cause of action.It



### (Emphasis supplied) What then is the "other evidence" that tends to show that plaintiff's claimhere ismeritorious? (1) There is thewill executedby Yens Hansen in 1942,whichbequeaths and devises all of his real and personal property to Kiernan. (2) There is the testimony of Katie Hansen, plaintiff's sister, who stated that she had known Joseph Kiernan all ofher life and that in the fall of 1966, I(iernan and plaintiff had had dinnerwith her after their trip to the Deer Lodge Bank & 

### Trust Company to change the escrow receipt. She testified:

III -1-



# - 4b 

### well, 

### Iremember that Joe [Kiernan] made the remark that everythingwas taken care of--- that they had been to thebank, and that the papers were all in order, so that if anything happened to either of them,why itwas a right of survivorship, and that if one of them would pass away, the other one would get it 7k ik

# *.11 

### (3) There are the two savings accounts inHansen's and Kiernan's names as joint tenantswith right of survivorship. 

### (4) There

are the shares of corporate stock also held in joint tenancywith right of survivorship.. 

### (5) Therewas a purchase of a residence inMissoula, againwith joint tenancywith right of survivorship. (6) There is the escrow receipt which shows that a change to the documentwas made. 

### (7) Therewas anundisputed lifelong association between Hansen and Kiernan without any indicationwhatsoever that therewas ever any discord or mistrust between them. 

### (8) There is evidence that

### an sen's willwas mailed to Kiernan in 1942,and held by Kiernan in his safety depositbox, (9) There is ample evidence of a successful partnership that existed between these twomen under both an oral agreement and written articles of copartnership. Finally, after the sale of the partnership, Hansen and Kiernan continued their association by traveling together, living together and looking after each other until ~iernan's death. Considering all of the "other evidence" as a whole,we cannot say that plaintiff failed to lay a sufficient foundation for the admission of his testimony relative to an oral agreement,. entered into between himself and Kiernan to execute mutualwills. Nor willwe reverse without a positive showing that the district court abused its discretion. This Court said inNovak v. Novak, 141Mont. 312, 316, 377 P.2d 368:

I -1, 4b ;k it [the court] had the advantage of observing thewitnesses during their testimony and was in a better position than this court to determinewhether or not injustice would result if the plaintiffwere not permitted to testify. " Issue 3. Defendant alleges his post-trial motion to dismiss should have been granted due to the running of the statute of limitations. He argues that if there everwas an agreement to execute mutual wills, that such an agreementwas an oral agreement entered into in 1942,and is now barred by sections 93-2601and 93-2604, R.C.M. 1947. In support defendant cites Pincus v. Davis, 95Mont. 375, 26 P.2d 986. Rule 8(c), M.R.Civ.P., provides that a defense of the running of the statute of limitations is an affirmative defense and can only be raisedby answer. Grogan v. Valley Trading Co., 30Mont. 229, 76 P. 211; State ex rel. IColbowv. District Court, 38Mont. 415, 

### 100 

### P. 207. Here, defendant failed to plead the statute of limitations inhis answer and thereforewaived such defense.However, defendant argues that Pincus holds that this Court may raise the statute of limitations on its ownmotion as a bar to a claim against an administrator under section 91-2710,R.C.M. 1947. Cocanougher v. Cocanougher, 141Wont. 28, 375 P.2d 1014, Defendant iscorrect inthis contentionhowever both Pincus and Cocanougher apply to cases where the claim against the decedent arose many years prior to an actionbeing filed. They involve obvious cause of actionwhich the plaintiffs failed to do anything about. Such isnot the case here. ldhile we may dispose of this argument by saying that defendant has waived hisright toraise this defense under Rule 8(c), M.R.Civ.P., we go further and say that the statuteof limitations isnot a valid defense. The cause of action did not arise until therewas a breach of the agreement toexecute mutual wills. Plaintiff had no knowledge of thisbreach until after the death of Joseph Kiernan. We find issue 3 tobe without merit. Issue 4. Whether plaintiff isguilty of laches even though not plead by defendant? Rule 8(c), M.R.Civ,P., requires that such a defense must be plead tobe reliedupon. Failing to so plead, we willnot further consider defendant's issue 4. United Statesv. Eytcheson, 237 F. Supp. 371; Weir v. Silver Bow County, 113Mont. 237, 124P.2d 1003; Stateex rel. Boorman v, StateBoard of Land Commrs., 109Mont, 127, 94 P.2d 201, Issue 5. Whether the attempt toenforce the oral agreement varied the terms of thewritten articles of copartnership? In asserting this issue, defendant contends the partnership remained ineffectuntil the death of Kiernan and therefore controls the division of partnership assets asbetween the partners. The trial court found that the sale of allpartnership property in 1966 terminated the partnership. The particularundertaking of the partnershipwas a "ranching and farming businessi'. The termination of that undertaking by the sale of the ranch "lock, stock and barrel" as testified by plaintiff, brought the partnership evidenced by the written agreement toan end. Section 63-503, R.C.M. 1947.Under the particular facts of this case, the trial court correctly concluded that the written partnership agreementwas not a bar either to plaintiff's testimony or his claim. Issue 

### 6. Whether the trial court properly ruled on evidentiarymatters? We have carefully examined the record and find no merit to this issue. The judgment of the district court is affirmed.

1

Associate Justice



### / Chief justice



## 11 Fon. Charles Luedke. District Judge, sitting forMr. Justice Castles.

Mr. Justice Haswell and Mr. Justice Daly dissenting: We dissent. plaintiff's claim for relief in the instant case is bottomed on establishing a valid and enforceable oral agreement between plaintiff and decedent in July 1942,whereby each agreed to make a will leaving his interest in the partnership property to the other. The existence of such an oral agreement rests entirely on the uncorroborated testimony of plaintiff, the survivor, concerning a conversationhe had with decedent almost thirtyyears previously. In our view, plaintiff is an incompetentwitness toso testify, such testimony is inadmissible in evidence under Montana's deadman statute [section 93-701-3(3), R.C.M. 19471, and plaintiff's claim fails. This statute provides inpertinent part:

IIPersonswho cannotbe witnesses. The following persons cannotbe witnesses:

"3. Parties or assignors of parties to an action or proceeding, or persons inwhose behalf an action or proceedings is prosecuted against an executor or administrator upon a claim or demand against the estate of a deceased person, as to the facts of direct transactions or oral communications between the proposed witness and the deceased, excepting when the executor or administrator first introduces evidence thereof, or when it appears to the court that, without the testimony of the witness, injustice will be done. >k f: 2" Previousdecisions of this Court indicate that the purpose of the deadman's statute is twofold: (1) to prevent the survivor from gaining anundue advantage over the deceased's estate, and (2) to remove the temptation for the commission of perjury by the survivor giving testimony that in all probability cannotbe denied by any living person. Novak v. Novak, 

### 141 Mont. 312, 316, 377 P.2d 368; Johnsonv. Mommoth Lode, 136Mont. 420, 

### 348 P.2d 267; Cox v. Williamson, 124Bfont. 512, 227 P,2d 614; Leffek v. Luedeman, 95Mont. 457, 27 P.2d 511. 

### In conformitywith suchpurpose, this Court has required that before a witness,who is declared to be incompetentby this statute,will be allowed to testify to prevent an injustice,a foundation must be laid by the introduction of other evidencewhich indicates that inall probability the proponent has a meritorious

cause of action. Johnsonv. Mommoth Lode, supra, and cases cited therein; Potlatch Oil & Refining Co. v. Ohio Oil Co., CCA 9,199 F.2d 766, cert. den. 345 U.S. 926, 73 S.Ct. 786, 97L ed 1357; Phelps

### v. Union Central Life Ins. Co., 105 Flont. 195, 71 Y.2d 887.Inour view, this foundation evidence must indicate the probability of the existence of such oral agreement, and not simply establish facts equally consistent with its existence or explainable on unrelated grounds. This requirement isparticularly important where, ashere, the terms of the alleged oral agreement are directly contrary to the terms of the three pertinent written agreements admitted inevidence ---the partnership agreement, the original escrow agreement, and the modified escrow agreement. It has been so held by this Court inprevious cases involving alleged oral agreements tomake a will Langston v. Currie, 95 Mont. 57, 26 P, 

### 3 2d 160; Cox v. Williamson, supra, and particularly incases where the oral agreement modifies or conflictswith a written contract. Bauer v. Flonroe, 117Mont. 306, 158 P.2d 485; Davison v. Casebolt, 154Mont. 125, 461 P.2d 2, In the instant case there issimply no evidence of the existence of an oral contract todevise and bequeath except for the testimony of plaintiff, the surviving partner. The making of

a willby plaintiff no more proves the existence of an oral contractby decedent toexecute a willinplaintiff's favor, than the execution of any contract or document by one person creates a recipricol obligation on the part of the obligee. Nor does any of the other evidence listed inthe majority opinion prove an oral contract by decedent todevise and bequeath hisproperty toplaintiff. The lapse of some 24 years between 1942 and decedent's death in 1968, without enforcement or mention of the alleged oral contract by plaintiff adds nothing to the required foundation. Absent any foundation therefor, we would hold that the district court abused itsdiscretion inadmitting the testimony of plaintiff under the deadman's statute, and accordingly that 

## la in tiff's claim must fail.