No. 90-074 IN THE SUPREME COURT OF THE STATE OF MONTANA 1990

MICHAEL WESTFALL, Plaintiff and Respondent,

RODNEY E. ANDERSON and JERRY SOUTH, Defendants and Appellants.

APPEAL FROM: District Court of the Eighteenth JudicialDistrict, In and for the County of Gallatin, The Honorable Larry W. Moran, Judge presiding.

COUNSEL OF RECORD: For Appellant: Larry Jent,Attorney at Law, Bozeman, Montana McKinleyAnderson, AttorneyatLaw,Bozeman,Montana For Respondent: Michael J. Lilly, Berg, Lilly, Stokes, Andriolo, Tollesfsen & Schraudner, Bozeman, Montana

Filed: Submitted on Briefs: June 7, 1990 Decided: July 30, 1990 

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'Clerk . .Chief Justice J. A. Turnage delivered the Opinion of the Court. The District Court for the Eighteenth Judicial District, Gallatin County, entered judgment for plaintiff Westfall in this suit for repayment of capital contributions to a dissolved partnership. Defendants South and Anderson appeal. We affirm. The issue is whether the District Court erred in ordering SouthandAndersontorepayWestfall's capital contribution without first deducting partnership liabilities. InApril 1984, Westfall,Anderson, and South formed apartnership, by oral agreement, for the purpose of developing a subdivision on certain realproperty inGallatinCounty,Montana. The partnership entered a contract to purchase the property for $125,000. Westfall and South each contributed $5,100toward a down payment onthe land. Anderson's contributionwas tobehis efforts at selling lots for the partnership. The partners made improvements to the property including foundations on several lots and a well and a septic system on one lot. Westfall and South eachpaid half the costsof improvements. In the fall of 1984, an understanding was reached that Westfall would withdraw from the partnership. Beginning on September 28, 1984, all checks for the partnership were drawn on

a bank account entitled "South and Anderson Builders." The signatures of both South and Anderson appeared on each check; Westfall signed none. On December 18, 1984, Westfall deeded his interest in the partnership's land to South and Anderson. Almost fouryears later,Westfall filed thisaction torecoverhis capital investment in the partnership. At trial, Westfall testified that when he deeded his interest in the partnership property to South and Anderson, they agreed to reimburse him for his down payment on the land and for the costs he paid for improvements to the property. South and Anderson, on the other hand, testified that no such agreement had been made and that Westfall should share responsibility for debts incurred for improvements on the land up until December 18, 1984. They contended that Westfall owed them money. The court, sitting without a jury, found for Westfall and entered judgment in the amount of $9,576.80 plus costs.

Did the District Court err in ordering South and Anderson to repay Westfallts capital contribution without first deducting partnership liabilities? SouthandAnderson initiallyargue that the standard of review in an equitable proceeding such as this one is de novo review, under 3 3-2-204(5), MCA. That statute provides that in an equitable proceeding, this Courtmust reviewall questions of fact arising upon the evidencepresented in the record. This Court has recognized that review of findings of fact in an equitable case must comply with not only 3 3-2-204(5), MCA, but also with Rule 52(a), M.R.Civ.P., which requires that findings of fact be upheld unless they are clearly erroneous. Rasev. Castle Mountain Ranch, Inc. (Mont. 1981), 631 P.2d 680, 684, 38 St.Rep. 992, 996. In equity cases, where the issues are close, a degree of deferencewill be accorded the findings of the trial court, which is in a better position tomake decisions of fact. Rase, 631P.2d at 684. South and Anderson assert that the District Court erred in finding that the partnership was dissolved on or before September 28, 1984, when Westfall ceased partnership activities. They contend that the partnership was not dissolved until December 18, 1984,when Westfall deeded his interest in the property to them. The District Court quoted 5 35-10-601, MCA, which defines the dissolution of a partnership as the change caused by "anypartner ceasing to be associated in the carrying on as distinguished from thewinding up of the business." The record supports the court's finding that Westfall completely ceased participation in the partnership as of September 1984. We conclude that the courtwas correct in concluding that the dissolution of the partnership occurred in September 1984. South and Anderson further argue that regardless of the date of dissolution of the partnership, each partner must contribute toward thepartnership losses fromhis share of theprofits. They rely upon § 35-10-401(1), MCA. That section states that [elachpartner shallbe repaidhis contributions whether byway of capitaloradvancestothepartnership property and-shareequally in the profits and surplus remaining after all liabilities, including those to partners, are satisfied and must contributetoward the losses, whether of capital or otherwise, sustained by the partnership according to his share in the profits. However, as Westfall points out, the introduction to the above subsection states that "[tlhe rights and duties of thepartners in relation to the partnership shall be determined, subiect to anvasreement between them,by the following rules: 

# .. ." (Emphasis supplied.) Westfall testified that the partners had an agreement between them that South and Anderson would repay him for his capital investments to the partnership as of September 1984. Additionally, the record supports the finding that in September 1984 there were no creditors of the partnership other than the originalmortgagor. We conclude that the courtdid not err in concluding thatWestfall was entitled to $9,576.80,the amount of his contribution to the partnership. Affirmed.

We concur: 4 " ~h~ef Justice

Justices

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