NO. 88-260

IN THE SUPREME COURT OF THE STATEOF MONTANA 1989

ROBERT 11.ANTONICK, Plaintiffand Appellant,-vsGORDON R. JONES, Defendantand Respondent.

APP

### EAL FROM: District Court of the First Judicial District, 

### In and 

### for the County ofLewis & Clark, The Honorable ThomasHonzel,Judgepresidinff.

COUNSELOF RECORD:

ForAppellant: Patrick F. Hooks; Hooks & Rudewitz,Townsend, Montana

For Respondent: CordellJohnson; Gough, Shanahan, Johnson & Waterman, Helena,Montana

Submitted: Jan. 19, 1989

l-- Decided. February 28, 1989 cc 0 L-3 ~ileG 

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### Mr. JusticeFred J.Weber delivered theOpinion of the Court.

This is an appealby plaintiff and appellant, Robert 

### L. Antonick from a judgment in favor of defendant and respondent, Gordon R. 

### Jones. The District Court for the First Judicial District, Lewis and Clark County, found that no partnership existed between Mr. Antonick and Mr. Jones. The court ruled in favor ofMr. Jones on his counterclaim alleging that Mr. Antonick must repay certain amounts of money which he had drawn from the checking account,and alsomoney which he accepted from patients after the relationship was terminated. The District Court also found thatMr. Antonick did not fraudulently issue four "paid in full" receipts to certain patients. From this judgmentMr. Antonick appeals, and Mr. Jones cross-appeals on the issue of fraud. We affirm. The issuesare: 1. Did the District Court err in concluding that no partnership existed? 2. 

### Did the District Court err in concluding that Mr. Jones is entitled to reimbursementbyMr. Antonick? 3. 

### Did the District Court err in concluding that Mr. Antonick did not fraudulently issue paid in full receipts? Mr. Antonick and Mr. Jones are physical therapists who have known each other since high school. In 1959 Mr. Antonick began thephysical therapydepartment at St. Peter's Hospital in Helena,Montana. Mr. Jonesbegan his practice in Butte, Montana, at ButteCommunity Hospital. In the early 1960's Mr. Jones moved to Helena and the two men formed a partnership for a short time. Mr. Antonick operated the physical therapy department at St. Peter's Hospital and Mr. Jones operated the physical therapy department at St. John's Hospital. Theypaid.expenses, then splitthe profits. This partnership was amicably terminated after less than ayear. Beginning in 1973 Mr. Jones operated the Shodair Hospital PhysicalTherapyDepartment (Shodair) in Helena, Montana,

on a contractbasis. He received 65% of the total business billed out of that department. Shodair furnished the space, most of the equipment,and officepersonnel. Mr. Antonick had been operating St. Peter's physical therapy department. In 1973he bought a ranchnear Townsend, Montana, and moved to Townsend. He commuted to Helena and worked at St. Peter's until 1980, when he quit, intending to retire. However, in less than a year he began doing parttimephysical therapywork in Townsend. In the spring of 1982, Mr. Antonick began working for Plr. Jones at Shodair on a contract basis. Initially, he worked for Mr. Jones three afternoons a week, but increased this to five afternoons a week while maintaining a morning physical therapy practice inTownsend. Mr. Antonick waspaid

a base amountcalculated at sixpatients times the charge for

apatient visit. The amounthe receivedvaried from $2860 to $3660per month. In the fall of 1983, Shodair decided to change the operationof its physical therapy department so that it would

no longer be 

### a department of Shodair. Mr. Jones separated from Shodair and began merely leasing space and equipment from Shodair. Mr. Jones signed a lease with Shodair, and became responsible forbilling his ownpatients. OnNovember 

### 1, 1983, the arrangement essentially became a private practice. Mr. Antonick continued to work at this office under the new arrangement. Following the change on November 

### 1, 1983, Mr. Jones opened a new checking account for the business. None of the funds from his former checking account were transferred tothe new account. While opening the account,a bank employee, Linda Opie, filled out a signature card. The card was for "Physical Therapy and Rehabilitative Services," and the square for partnership was marked with an "X". Linda Opie testified that she normally fills out a card based on information given by the customer, but she did not remember what occurred in this case. Mr. Jones testified that he did not tell Linda Opie to mark the partnership square. Ms. Opie testified that in opening an account for a partnership, a partnership formwould be filled out;however, nonewas found in the bank files. Four people were authorized to sign checks on this new account: Mr. Jones and hiswife, and 

### Mr. Antonick and hiswife. Mr. Jones also established a line of credit with the bank up to $25,000, upon which $17,000 was actually drawn. Mr. Jones was personally liable on this loan. Mr. Jones dealt with the bank president, Dan Johnson, who testified that he dealt with Mr. ,Tones as an individual and that the bank regarded the transactionas one with a soleproprietorship. Mr. Johnson testified that a partnership financial statementand financial statements from each partnerwould 

### be required to transact business with apartnership. The physical therapy practice was renamed "Physical Therapy and Rehabilitative Services" (PTRS) and all of the paperwork, including checks, forms, office stamps, and stationary bore the title "Physical Therapy and Rehahilitati~re Services, Gordon B. Jones, L.P.T. 

### - Robert J. Antonick, L.P.T." During the entire time that the two menworked together, from 1982 through February 1986, partnership income tax returns were neverprepared nor filed. No partnership income

was ever reported on a K-1 form. Mr. Antonick filed an indi~rfdualincome tax return for these years, including aSchedule

### C,which is for a soleproprietor. Mr. Jones issued toMr. Antonick a form 1099 for each of theyears 1982, 1983, 1984, and 1985. Form 1099 is issued to an independent contractor, showing the amounts paid in compensation on a contractbasis. Workers' compensation insurance carried on PTRS employees listed both Mr. Jones and Mr. Antonick as insureds. In 1985Mr. Antonick filled out a professional liability insurancepolicy. He listedhimselfas self-employed,and did not mark the space forpartnership. When Mr. Jones filled out a similar application he described himself as a self-employed individual. He listed four physiotherapists asemployeesand

onephysiotherapistas an independent contractor. Mr. Jones testified that he orally agreed to pay Mr. Antonick $3000 per month under the new arrangement. Mr. Antonick drew a total of $40,000 from PTRS in 1984. For the year of 1985,Mr. Antonick's compensationwas $59,350. 

### Mr. Jones testified that at the beginning of 1985, when Mr. Antonick requested a raise to $60,000 per year, he simply agreed. Mr. Antonick denies this conversation. In each of the years 1984 and 1985, the amounts drawn from month to month varied. In August, 1985, Mr. Jones incorporated, becoming a professional corporation. At that point he offered Mr. Antonick an employment agreement. Later, he had a similar agreementprepared by an attorney. Inregard to these offers Mr. Jones testified that he wanted Mr. Antonick to join the practice full-time. However, Mr. Antonick did not sign either of these agreements. In January 1986, Mr. Antonick wrote four checks to himself for a total amount of $21,259. He filled out the check stubs calling the payments "contractpayment," "bonus," and "honus." One check stubwas left blank. When Mr. Joneslearned of these checks in early February, the parties terminated their relationship. I Did the District Court err in concluding that no partnership existed? The standard of review onappeal is whether the district court findings are clearly erroneous. Rule 52(a), M.R.Civ.P. "If there is substantial credible evidence to support the findings, those findings are not clearly erroneous." Parker

v. Elder (1988), 758 P.2d 292, 293, 45 St.Rep. 1305, 1307. We have examined the record and conclude that the determinations of the District Court are supported by substantial credible evidence. We therefore affirm each District Court ruling. 

### A partnership is defined in S 35-10-201(1), MCA, as "an associationof two ormore persons to carry onas co-owners a business for profit." This Court previously stated the elements necessary to establish a partnership in Render T?. Render (1965),144Mont. 470, 480, 397P.2d 957, 962:

To establish joint venture or a partnership, 

### it is necessary to determine the intent of the parties; such business relationships arise only when the parties intend to associate themselves as such. There must be some contribution by each co-adventurer or partner of something promotive of the enterprise. There must be a jointproprietary interest and a right of mutual control over the subject matter of the enterprise or over the property engaged therein, and there must be an agreement to share the profits. The intention of the parties has to be clearly manifested, and must be ascertained from all the facts and circumstances and the actionsand conduct of theparties. (Citations omitted.)These elementswere recently reiterated in In theMatter of the Estate of Wilbur Edward Smith (1988), 749 P.2d 512, 515, 45 St.Rep. 93, 98. In that casewe also stated:

The burden of establishing a partnership is upon the person claiming a partnership exists. FirstNational Bank ofTwin Bridgesv. Sant (1973), 161 Mont. 376, 386, 506 P.2d 835, 841. No person can become a partner without the consent of all partners. Section 35-10-401(7), MCA; Pulliam v. Pulliam (Mont. 1987), 733 P.2d 1299, 1300, 44 St.Rep. 483, 485. The existence of a partnership depends upon the intention of the parties. Intent must be ascertained from all the facts, circumstances, actions and conduct of the parties. Gaspar v. Buckingham (1944), 116 Mont. 236, 246, 153P.2d 892, 896.

The initial test ofwhether a partnership exists is the intentof theparties. Bender, 397P.2d at 962. This inherently impliesamutual agreementormeeting of the minds. In this case there was never a written partnership agreement, and therewas conflictingtestimony onwhether therewas ever
an oral agreementto form apartnership. Mr. Antonick testified that on or about November 1, 1983,they agreed to form a partnership whereinMr. Antonick would be paid $36,000ayear and Mr. Jones would be paid $72,000per year, and that after all expenses were paid, whatever profit remained would he split 50/50. The difference in salaries reflected the fact that Mr. Antonick worked half days. Mr. Jones acknowledges that Mr. Antonick made this proposal hut denies that he agreed to it. It is the task of the trial court to resolve any conflicts Fn testimony. Render, 397 P.2d at 962. 

### In this case there is substantial credibleevidence to support a finding that there was no mutual agreement to form a partnership.However, this does not end the inquiry since a courtmay find that a partnership was formed, although both parties deny that they intended such a relationship. In Truck Ins. Exchange v. Industrial Indemnity Co. (19841, 212 Mont. 297, 300, 688P.2d 1243, 1244-45, this Court found that a partnership existed, stating:
"[ilf the facts bring the arrangement within the definition of a partnership, the parties cannot escape liability incident to that relationship merely by saying thatno such thing exists." Simons v. Northern Pac,Ry. Co. (1933),94Mont. 355, 369, 22 P.2d 609, 614. 

### If the intended action of the parties creates a partnership in fact, what the parties call their arrangement or intend their arrangement to be is irrelevant.
Thus we must examine the intended action of the parties to determine if the elements of the Bender test are fulfilled. Mr. Antonick contends that a partnership came into existence on November 

### 1, 1983. He bases this contention on several changes which occurred at that time. A new bank account was opened on which Mr. Antonick was authorized to sign. Thebank card designated the accountas a partnership. Thename of thebusinesswas changed to "PhysicalTherapy and Rehabilitative Services, Gordon R. Jones,L.P.T. 

## - Robert L. Antonick, L.P.T.

### " All paperwork generated by the business bore thisdesignation. Mr. Antonick contends that the elementofmutual control

wasmet, citingvarious instances inwhich he participated in hiring discussions and other business decisions. Mr. Antonick specifically callsattention to hisparticipation in discussions involving a business records system, and his unilateral decision to purchase an office computer. He refers to his involvement in having a therapy pool modifjed..

### He points out that he helped Mr. Jones search for new office space when expansionwasbeing considered. There is,however, conflicting evidence on the issue of jointproprietary interest and right ofmutual control. The evidencedemonstrated that Shodairdealt exclusivelywithMr. Jones. Mr. Jones alone negotiated and signed the lease for the facility. Mr. Jones was purchasing equipment from Shodair. Additionally, First Bank dealt exclusivelywithMr. Jones. The bank president, Dan Johnson, testified that he dealt with and loaned money to Mr. Jones as a sole proprietor. He testified that if he had considered the business a partnershiphewould have required a financial statement from each partner and from the partnership. Testimony from PTRS employeesrevealed that without exceptionthey consideredMr. Jones to be the owner of the business. There was evidence presented indicating that Mr. Antonick did not have mutual control overhiring and firing decisions. While Mr. Antonick did participate in some discussions and decisions regarding the physical therapy practice, the District Court found that the evidence as a whole did not establish a mutual proprietary interest or a right ofmutual. control. We conclude that. there is substantial. credible evidence to support this finding. Mr. Antonick also contends that while he did not make a monetary contribution to the partnership, he did contribute something "promotive of the enterprise" in that he contributed his reputation and experience to the enterprise. While

we note that a contribution to the enterprise need not he monetary, the District Court properly considered this factor and found that this element of 

### the Render test was not satisfied.

### Mr. Antonick contends that the compensationhe received isprima facie evidence that a partnership existed. He

### bases this contentionon § 

### 35-10-202(4), MCA:

The receipt by a person of a share of the profits of a business isprima facie evidence that such person is a partner in the business, but no such inference shallbe drawn if such profits were received inpayment:

(b) as wages of an employee or rent to a landlord;

Mr. Antonick contends first, that therewas a sharing of profits, and second, that unless these monies were paid as "wages of an employee," that it isprima facie evidence of a partnership. Mr. Antonick contends thatpaymentsmade to an independent contractor cannot fall under this exception. Because of our following discussion on the significance of sharing of profits, we do not find it necessary to rule on this contention. The evidence is conflicting and close as to whether there actuallywas a sharingofprofits. Mr. Jones testified that Mr. Antonick was entitled to a certain sum each month and that he had never agreed to split the profits with Mr. Antonick. However, Julie Curd, a Helena CPA, testified that in her opinion Mr. Antonick and Mr. Jones were sharing the profits of the business. Ms. Curd based this opinion on her study of the financial records of PTRS in which she summarized and compared Mr. Antonick's monthly draws and the monthly bank balances. She found thatMr. Antonick's draws were made in relation to the balance in the bank account. There was also testimony by Mr. Jones that the normal practice at 

### month's end was to pay all employees and part-timetherapistsbefore eitherMr. Jones orMr. Antonick took their draws. At the end of 1984, Mr. Antonick showed Mr. Jones the amounts each had drawn for the year and proposed settling their accounts according to the proposed salaries of $36,000 and $72,000,and a splitting of the remainingprofits. Mr. Jones did not agree with Mr. Antonick's proposal or figures, but said he would get back to him. Mr. Jones testified that he did not getback tohim. The amounts of each party's draws cannot be reconciled with either party's theory. In 1984 Mr. Antonick drew a total of $40,000 from the business account, and Mr. Jones took $98,648. In 1985 their total amounts drawn for theyear were $59,350 and $156,643, respectively. The record indicates no attempt to pay Mr. Jones twice the amount paid to Mr. Antonick. There were irregular monthly payments to Mr. Antonick, not identical in amount, and a year-end total not consistent with the claimed agreement. However, Mr. Antonick's total annual draws for each year are not exactly the $36,000 or $60,000 which he should have received as an independent contractor. The monthly payments and year-end totals do not clearly reveal any definite compensation arrangement. The record also indicates that the way in which Mr. Antonick was compensated did not change after November 

### 1, 1983. it is undisputed thatMr. Antonick was compensated as
an independent contractor prior to November 

### 1, 1983. That history is relevant to a determination of whether he was an independentcontractor. The evidence on whether the parties were actually sharingprofits is therefore conflicting,and the trial court did not make a specific finding on this issue. However,even if the parties were sharing profits, this js not. conclusiveevidenceofapartnershiprelationship. Prima facieevidence only means that a party has met an initial burd.en; that evidence would not be dispositive of the partnership issue. Resolution of the present case required a review of all the facts and circumstances surrounding the disputed relationship. The District Court considered detailed and comprehensive evidence on all aspects of the business arrangement. The ultimate finding was that Mr. Antonick failed to establish by a preponderance of the evidence that a partnership existed. We hold that there was substantial credible evidence to support the District Court's finding that no partnership was created. Mr. Antonick concedes that if this Court affirms the finding that no partnership existed, then he is not entitled to keep the money which he received from patients after the relationship was terminated. We affirm the District Court on these two judgments. I1 Did the District Court err in concluding thatMr. Jones is entitled to reimbursementby Mr. Antonick? Mr. Antonick contends that the District Court erred in finding that

### Mr. Jones is entitled to reimbursement fromMr. Antonick in the sum of $16,259. Mr. Antonick wrote four checks to himself in January 1985, totaling $21,259. The court found that as an independent contractor,Mr. Antonick

was entitled to keep $5000 of that sum for services rendered in January. Because we agreewith the lower court's finding thatnopartnership existed,and because there is substantial credible evidence to support the finding that Mr. Antonick

was to be paid $5000 per month, we affirm the District Court's judgmenton this issue.111 Did the District Court err in concluding that Mr. Antonick did not fraudulently issue paid in full receipts? In May, 1986,

### Mr. Antonick wrote "paid in full" on the billing statementsof four patientswhom he had treatedwhile he was associated with Mr. Jones. Mr. Jones contends that Mr. Antonick did this fraudulently and d.eceitfully, citing VanEttingerv. Pappin (1978), 180 Mont. 1, 588P.2d 988and S 27-1-712,MCA. Both Mr. Jones and Mr. Antonick testified that at times each had done "pro bono" work for certain patients. Mr. Antonick testified that when he wrote "paid in full" on the statements,he received nomoney. He testified that he had a prior arrangement with one patient to accept insurance only inpayment. He testified that the otherpatientswere unable to pay their accounts and that it had always been his practice to "absorb" bills which patients were unable to pay. The District Court found that the giving of these receipts failed to fulfill the elementsof fraud. Substantial evidence supports that finding. FJe hold that the District Courtdid not 

### err in thisdetermination. Affirmed.

Chief Justice

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