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 Judicial District, 

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 

McKinley Anderson, Attorney at Law, 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 . 

'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 

South and Anderson to repay Westfall's capital contribution without 

first deducting partnership liabilities. 

In April 1984, Westfall, Anderson, and South formed a partnership, by oral agreement, for the purpose of developing a subdivision on certain real property in Gallatin County, Montana. The 

partnership entered a contract to purchase the property for 

$125,000. Westfall and South each contributed $5,100 toward a down 

payment on the land. Anderson's contribution was to be his 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 each paid half the costs of 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 four years later, Westfall filed this action to recover 
his 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? 

South and Anderson initially argue 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 Court must review all questions of fact 

arising upon the evidence presented 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. Rase v. 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 deference 
will be accorded the findings of the trial court, which is in a 

better position to make decisions of fact. Rase, 631 P.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 "any partner 

ceasing to be associated in the carrying on as distinguished from 

the winding 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 court was 

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 the partnership losses from his share of the profits. They 

rely upon § 35-10-401(1), MCA. That section states that 

[elach partner shall be repaid his contributions whether 

by way of capital or advances to the partnership property 

and -share equally in the profits and surplus remaining 

after all liabilities, including those to partners, are 

satisfied and must contribute toward 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 the partners in 

relation to the partnership shall be determined, subiect to anv 
asreement 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 

original mortgagor. We conclude that the court did not err in concluding that Westfall was entitled to $9,576.80, the amount of his 

contribution to the partnership. 

Affirmed. 

We concur: 

4 " ~h~ef Justice 

Justices -\3