No. 84-159 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1384 

TRUCK INSURANCE EXCHANGE, 

a Recriprocal and Inter-Insurance 

Exchange, 

Plaintiff and Appellant, 

-vsINDUSTRIAL INDEMNITY CO. , 

Defendant and Respondent. 

APPEAL FROM: The District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin, 

The Honorable Thomas Olson, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Morrow, Sedivy & Bennett, Bozeman, Montana 

For Respondent : 

Corette, Smith, Pohlman & Allen, Butte, Montana 

gt - . Filed: ',. ' 

Submitted on Briefs: June 28, 1984 

Decided: October 1, 1934 

Clerk 
Nr. Justice Frank B. Morrison, Jr. delivered the Opinion of 

the Court. 

This action was brought before the Eighteenth Judicial 

District Court on cross-motions for summary judgment. The 

motions were supported by depositions, briefs and memoranda. 

Defendant and respondent, Industrial Indemnity's motion was 

granted February 14, 1984. Judgment for Industrial Indemnity 

was entered March 13, 1984. Truck Insurance appeals. We 

vacate the March 13, 1984, judgment and remand, with 

instructions to enter summary judgment for Truck Insurance. 

Wilbur Kimm has been a grain and potato farmer in the 

Gallatin Valley for a number of years. He owns his own land 

and farming equipment and has developed his own storage 

warehouses. Industrial I~demnity is the provider of the 

insurance on his farm equipment, vehicles and liability for 

farm operations. 

Wilbur's son, William Kimm became an employee of Wilbur 

in 1973. William ceased working for his father in 1976 and 

started his own potato operation. By 1981 William owned one 

acre of land on which he built a potato storage warehouse. 

His potatoes are grown on land leased from other individuals. 

William uses Wilbur's potato planter and grader when they are 

needed, but owns several other pieces of farm equipment. 

Truck Insurance is William's insurance provider. 

William and Wilbur each grow approximately the same 

amount of seed potatoes. The potatoes are stored together 

and are advertised in three magazines under the name Wilbur 

Kimm and Son. 

William arranged to sell their seed potatoes to several 

area farmers in the spring of 1981. Against Wilbur's advice, 

William treated the potatoes with a formaldehyde/clorox 

mixture prior to the sale. The treatment was to protect 
against pathogens bacteria and the spread of airborne 

diseases during transport and storage. Instead, the 

treatment destroyed the seed potatoes and the various buyers 

suffered crop damage. 

The buyers filed claims against William. Truck 

Insurance settled the claims for $174,985.83. In exchange, 

the buyers each signed a covenant not to sue containing the 

following language: 

"IT IS FURTHER SPECIFICALLY AGREED by and between 

the parties hereto that this agreement does not 

preclude or prohibit WILLIAM KIMM or TRUCK 

INSURANCE EXCHANGE from asserting a claim as 

against WILBUR KIMM, or his insurer, seeking 

contribution from said WILBUR KIMM, and in this 

regard, this agreement shall be considered an 

assignment by the undersigned to said WILLIAM KIMM 

and TRUCK INSURANCE EXCHANGE of the undersigned's 

right and interest in and to said claim as against 

WILBUR KIMM. " 

Truck Insurance then filed this complaint, seeking 

contribution from Industrial Indemnity in the amount of 

one-half the claims, $87,492.92. The action is based on 

Truck Insurance's assertion that Wilbur Kimm and Son is 

actually a partnership. 

If Wilbur Kimm and Son is a partnership in the business 

of raising potatoes, the Uniform Partnership Act, sections 

35-10-101, MCA, et seq. applies. Section 35-10-401(1), MCA 

states: 

"Rules determining rights and duties of partners. 

The rights and duties of the partners in relation 

to the partnership shall be determined, subject to 

any agreement between them, by the following rules: 

" (1) Each 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 towards the losses, 

whether of capital or otherwise, sustained & the 

partnershTp accordingto -- his share -- in the profit3 

(emphasis added) 
Therefore, if the business is a partnership, Wilbur, and thus 

Industrial Indemnity as his insurer, is liable under a 

contribution theory for a portion of the claims paid by 

Wil1ia.m to the buyers. J. Crane and A. Gromberg, -- Law of 

Partnership, Section 65 (a) at 366-368 (1968) . 

In his order finding no partnership and granting 

Industrial Indemnity's motion for summary judgment, the trial 

judge relied primarily on the Kimms' testimony that they did 

not intend for a partnership to exist. Altl~ough the intent 

of the parties is a major factor, Bender v. Bender (1965), 

144 Mont. 470, 480, 397 P.2d 957, 962, " [i] f the facts bring 

the arrangement within the definition of a partnership, the 

parties cannot escape liability incident to that relationship 

merely by saying that no such thing exists." Simons v. 

Northern Pac. Ry. Co. (1933), 94 Mont. 355, 369, 22 ~.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. 

A partnership is defined in section 35-10-201(1), MCA, 

as "an association of two or more persons to carry on as 

co-owners a business for profit." Section 35-10-202, MCA, 

provides rules for determining whether a partnership exists. 

Part 4 is particularly relevant here: 

"Rules for determining the existence of a 

partnership. In determining whether a partnership 

exists, these rules shall apply: 

" (4) The receipt by a person of a share of the 

profits of a business is prima facie evidence that 

such person is a partner in the business, but no 

such inference shall be drawn if such profits were 

received in payment: 

(a) as a debt by installments or otherwise; 

(b) as wages of an employee or rent to a landlord; 
(c) as an annuity to a surviving spouse or 

representative of a deceased partner; 

(d) as interest on a loan, though the amount of 

payment varies with the profits of the business; 

(e) as the consideration for the sale of a 

goodwill of a business or other property by 

installments or otherwise." 

Wilbur and William Kim have a joint bank account in the 

name of Kim Seed. Buyers of potatoes pay one check to Kimm 

Seed rather than two separate checks of equal value to 

William and Wilbur. Expenses of the potato business, 

including the wages of a shared hired man, diesel fuel for 

the tractors, advertising, fertilizer and potato treatments, 

are paid out of the account rather than each party writing an 

expense check. The Kimms each raise approximately the same 

number of potatoes so incur the same amount of expenses and 

receive the same proceeds from the sale of their potatoes. 

At the close of the season, Wilbur and William split the 

money remaining in the account. 

When questioned regarding the Kimms' practice of 

splitting the proceeds of the account at the close of each 

season, the Kimmsl accountant, Gary Spitzer stated: 

"I wouldn't describe it as a share of the profits 

because they would have other operating expenses 

connected with it that they paid personally. I 

would describe it as the excess of the receipts 

over the disbursements in that account." Gary 

Spitzer deposition, pp. 27-28. 

No evidence of any separate, individual operating expense was 

ever presented. By sha.ring the proceeds of the Kimm Seed 

account equally, Wilbur and William Kimm are sharing "the 

excess of receipts over disbursements." They are, in effect, 

sharing profits equally. 

It is undisputed that the testimony of Spitzer 

established that none of the exceptions to section 

35-10-202(4), MCA, apply in this case. Therefore, the 
splitting of the profits in the Kim Seed account is prima 

facie evidence of a partnership between Wilbur and William 

Kirnrn. This prima facie evidence, coupled with the 

advertising of the seed potatoes under the name Wilbur Kim1 

and Son and the merging by the Kimms of resources and talents 

for the growing of the potatoes, clearly preponderates 

against the District Court's finding of no partnership. 

Montana Farm Service Co. v. Marquart (1978), 176 Mont. 357, 

360, 578 P.2d 315, 316-317. Further, since Wilbur and 

William share in the profits of their partnership equally, 

they must also share in the losses equally. Section 

35-10-401 (1) , MCA. 

Thus, we vacate the order and judgment granting 

Industrial Indemnity's motion for summary judgment and remand 

the cause to the District Court for entry of an order and 

judgment granting Truck Insurance's motion for summary 

judgment and ordering Industrial Indemnity to pay $87,492.92 

to Truck Insurance. 

We concur: 

%s^--R$,~h/~* 

Chief Justlce 

Justices 
Mr. Justice L. C. Gulbrandson, dissenting. 

I respectfully dissent. 

The following facts are uncontroverted. 

1. No federal, or state, partnership return was ever 

filed for income tax purposes. 

2. The joint bank account was credited for convenience 

only, and was established at the suggestion of the 

accountant, who knew the parties did not intend to operate 

as partners. 

3. Each party had his own identification number for 

W-2 form purposes. 

4. Each party had other farm operating expenses that 

each paid personally. 

5. Each party owned all necessary potato farming 

equipment, except a p1ant.er and a cutter, to operate 

independantly, but worked the seed potato properties jointly 

so they would not have to duplicate that equipment. 

5. Each party farmed approximately the same acreage, 

and land lease payments were paid individually. 

7. Each party carried separate liability insurance 

coverage, and paid the premiums individually. 

8. Registration costs, and advertising expenses were 

halved by selling under a joint name. 

9. Lab fees, involving the testing of approximately 

46,000 plants, in a common plot, were reduced by using a 

joint name. 

10. Individually owned trucks were fueled out of 

individually owned gas tanks, and each party paid personal 

property tax, and maintenance expenses, on his own 
equipment. 

11. Each party paid his own utility and power costs 

for his potato storage sheds. 

12. The word "partnership" was never used by the 

parties in the magazine advertising, or on shipping tags. 

13. Neither party could borrow or loan money for the 

other, and each borrowed individually to deposit funds in 

the joint account. 

14. Each party described the working arrangement as a 

"trade of services." 

15. William Kimm and Wilbur Kimm never considered the 

working arrangement as a partnership. 

16. Wilbur Kimm had previously been in an 

unsatisfactory partnership, refused to be in a partnership, 

and did not want his sons to be in partnership with him or 

with each other. 

In my view, the foregoing constitutes sufficient 

evidence to find that no partnership existed, and I would 

therefore affirm the trial judge. 

. ~ustice/