No. 91-096 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

ALAN FRANK, 

APPEAL FROM: District Court of the Eleventh Judicial District, 

In and for the County of Flathead, 

The Honorable C. B. McNeil, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Chris Christensen; Attorney at Law, ~alispell, 

Montana. 

For Respondent: 

William E. Hileman; Hedman, Hileman & Lacosta, 

Whitefish, Montana; Daniel W. Hileman; Murray & 

Kaufman, Kalispell, Montana. 

Submitted on brief: August 1, 1991 

Decided: September 17, 1991 

Filed: 

I 

Clerk 
Justice R. C. McDonough delivered the Opinion of the Court. 

Defendant Lawrence Birky appeals from the judgment of the 

District Court of the Eleventh Judicial District, Flathead County. 

The issue is whether the District Court was clearly erroneous in 

its findings relative to the accounting and distribution of the 

parties' partnership assets following dissolution of the 

partnership. We affirm. 

On July 1, 1978 Lawrence Birky (appellant/defendant) and Alan 

Frank (respondent/plaintiff) entered into a written partnership 

agreement to engage in the general business of logging and related 

industries. The agreement provided in part that the initial capital 

of the partnership would be contributed equally, that individual 

capital accounts would be kept for each partner, and that in the 

event of termination the assets would be divided equally. In 

October, 1983 Frank filed a complaint in the District Court 

alleging that Birky had breached the partnership agreement, 

requesting that the court dissolve the partnership and that the 

court award Frank his partnership share plus damages. 

On October 21, 1985, the parties stipulated to bifurcate the 

trial; first to determine the scope of the partnership and then to 

resolve the issue of accounting and distribution. Judgment on the 

scope of the partnership was entered September 26, 1986. The 

partnership was determined to be composed of the following assets: 

1976 Barko Loader mounted on a Kenworth truck complete 

with winch 

1978 Kenworth Truck and Trailer 
1978 450 Timberjack rubber-tire Skidder with chains 

Air compressor and fuel tank. 

The District Court found that the partnership was dissolved by 

mutual agreement in May, 1983 and ordered that the above property 

be divided equally between the parties. 

For the second phase, a Special Master was appointed by the 

court to provide an accounting of the partnership property. During 

presentation of evidence to the Special Master a dispute arose 

concerning the court's order that the property be divided equally 

and whether Birky would be precluded from offering evidence of 

capital contributions. Birky filed a motion for clarification with 

the District Court. The District Court ruled that: 

evidence shall be admissable of individual capital 

accounts as they stood on the books of the partnership 

as of the date of its dissolution in May of 1983 insofar 

as said accounts relate to the three items of property 

described. .. in the September 26, 1986 Judgment of this 

Court. Such capital accounts ... are relevant for... 

determining the amount in which the former partners will 

share equally after the payment of all liabilities 

including those to the partners' individual capital 

accounts. 

3. In the event that the books of the partnership 

did not contain any such capital accounts on the date of 

dissolution, then the court shall deem the contributions 

with respect to the three items of property to have been 

equal and no evidence shall be admissible by the Special 

Master for the purpose of now creating any such accounts. . . - 

Birky was unable to provide books containing a record of individual 

capital accounts and admitted that such a record did not exist. 

Thereafter the Special Master completed his findings and the 

District Court adopted the findings of the Special Master which 

included the following distribution of the partnership property. 
1) The Barko loader (sold by Birky for $42,000) 

$9000 allowed to Birky for repairs necessary 

to promulgate the sale. 

$15,500 to Frank. 

$15,500 retained by Birky. 

2) The Kenworth truck and trailer (sold for $42,000) 

$21,000 to Frank. 

$21,000 retained by Birky. (including 

responsibility for collecting $6,000 owed by 

purchaser. ) 

3) The Timberjack Skidder (Value of $40,000 at 

dissolution) 

$20,000 owed Frank by Birky who retained 

control and later sold. 

4) Profits, wages and other compensation generated 

during the partnership 

$22,325.00 owed Frank by Birky. 

Birky believes the equal distribution of the assets as 

delineated above is inequitable in light of the evidence presented. 

First, appellant Birky contends that the court committed 

prejudicial error by ordering (in the absence of individual capital 

accounts on the partnership books) the capital contributions of the 

partners to be deemed equal. Birky relies on § 35-10-401(1), MCA, 

which provides: 

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 by the partnership 

according to his share in the profits. 

Birky argues that by failing to remunerate him for his alleged 

capital contributions the District Court has circumvented the 
mandate of § 35-10-401(1), MCA. Birky further argues that to 

ignore the capital contributions creates an inequitable 

distribution of the property which results in the unjust enrichment 

of Frank. A substantial portion of his alleged capital 

contributions would have to be proved by parol or extrinsic 

evidence. 

A subissue necessary for review is, did the District Court err 

by instructing the Special Master to exclude parol or extrinsic 

evidence when determining the capital contributions. An 

evidentiary ruling by a trial court is a discretionary act. The 

standard of review for discretionary acts is: was the ruling a 

misuse or an abuse of the court's discretion. Steer, Inc. v. 

Department of Revenue of the State of Montana, (Mont. 19901, 803 

P.2d 601, 47 St.Rep. 2199. 

Birky contends that the court abused its discretion by not 

allowing him to present evidence pertaining to his capital 

contributions other than the business records. 

In the dissolution of a partnership and the sale and 

distribution of the partnership's assets, a partner against whom 

an action was brought and who failed to keep records was estopped 

from objecting to the court's finding of value of each party's 

contribution to the venture. Loney v. Pettapiece (19701, 156 Mont. 

1, 475 P.2d 999. In Loney, the trial court was faced with 

incomplete information regarding capital contributions to the 

venture. Based on the testimony received, the trial court 

attempted to accurately estimate the value of each partner's 
contribution to the partnership. 0~ appeal, the defendant argued 

that his capital contributions had not been fully considered. The 

court ruled that because he was in a position to keep records and 

did not he was precluded from objecting to the courtls valuation. 

Here Birky kept the records of the partnership, We conclude that 

the court did not abuse its discretion in refusing to allow par01 

or extrinsic evidence to be presented by Birky in determining 

capital contributions. 

The ultimate determination of capital contribution to the 

partnership is a question of fact to be determined by the District 

Court. Rule 52(a), M.R.Civ.P., requires that findings of facts be 

upheld unless they are found to be clearly erroneous. 1t [A] finding 

is 'clearly erroneous1 when, although there is evidence to support 

it, a review of the record leaves the court with the definite and 

Gypsum Co., (1948), 68 S.Ct. 525, 333 U.S. 364, 92 L.Ed. 746; 

Steer, Inc. v. Department of Revenue of the State of Montana (Mont. 

l99O), 803 P.2d 601, 47 St.Rep. 2199, citing Wage Appeal of Montana 

State Highway Patrol Officers v. Board of Personnel Appeals (19841, 

208 Mont. 33, 40, 676 P.2d 194, 198. (Citations omitted.) 

The District Court stated that in deciding to deem the 

contributions equal in the absence of partnership records, 

consideration was given 

. . . the fact that the Defendant was primarily responsible 

for maintaining the books of the partnership, the passage 

of time, the confusing and incomplete evidence relating 

to this issue at the initial hearing and other 

factors. 
There are ample facts in the record to support the ~istrict 

Court's finding that the capital contributions should be deemed 

equal. First, the partnership agreement itself clearly indicates 

that the contributions would be equal. Second, in the event that 

contributions were made they were to be documented in the capital 

accounts as part of the partnership records. As previously 

indicated, there were no such records, Third, the record of the 

proceeding before the District Court reflects evidence to support 

such a finding. The findings as supported above are not clearly 

erroneous and therefore cannot be set aside. 

The appellant raises the additional claim that the manner in 

which the court provided the accounting and distribution of the 

partnership was inconsistent with the evidence on record. We 

disagree. Specifically, the appellant finds error with the District 

Court's reliance on expert testimony, the court's lack of 

consideration of draws taken by Frank, the court's lack of 

consideration of partnership obligations, and the court's valuation 

of the skidder. Each of these four related issues is a question 

of fact to be determined by the trial court. 

The District Court relied on the findings of the Special 

Master and is obligated to follow the valuations as determined by 

the Special Master unless they are clearly erroneous. Rule 

53 (e) (2), M.R.Civ.P., Mehl v. Mehl (l99O), 241 Mont. 310, 786 P.2d 

1173. 

Both parties had opportunity to present expert testimony and 

thereby opportunity to provide a manner for the court to calculate 
the value of wages and profits generated by the partnership. The 

appellant takes exception with the court's acceptance of Frank's 

expert's method. Both experts testified that it was difficult to 

impossible to accurately verify the partnership's expenses. The 

finder of fact weighs the evidence and we conclude the findings 

are not clearly erroneous and are therefore affirmed. 

Lastly, appellant asks for review of the determination of the 

value of the skidder because he believes it was valued at an 

improper date. It is uncontested that the net value of assets is 

generally made at or near the time of dissolution. See In re the 

Marriage of Halverson (1988), 230 Mont. 226, 749 P.2d 518. The 

appellant argues that to follow the general rule achieves an 

inequitable result and that an exception should be made. Once 

again, decisions regarding valuation of partnership property will 

be overturned only if they are clearly erroneous. The decision of 

the court to adhere to the general rule is not clearly erroneous. 

Af f irmed . 
September 17, 1991 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the 

following named: 

Chris Christensen 

Attorney at Law 

1103 So. Main 

Kalispell, MT 59903 

William E. Hileman, Jr. 

Hedman, Hileman & Lacosta 

433 Second St. 

Whitefish, MT 59937 

Daniel W. Hilernan 

Murray & Kaufman 

P.O. Box 728 

Kalispell, MT 59903 

ED SMITH 

CLERK OF THE SUPREME COURT 

STAm MQNTANA