Opinion ID: 2608934
Heading Depth: 1
Heading Rank: 1

Heading: grant of the holly street property

Text: T.V.B. argues that the grant of the Holly Street property, which Dykstra alone executed in his personal capacity, was improper because the partnership agreement requires that all partners execute grants of partnership property, and, because I.C. § 53-308(3) requires that all grants of partnership property be made in the name of the partnership.
The introductory clause to I.C. § 53-318 provides: 53-318. 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... . (Emphasis added.) We read this provision to mean that any agreements made between the partners, pertaining to the rights and duties of the partners in relation to the partnership, are controlling as to the partners and the partnership. The evidence is undisputed that as of January 15, 1976, the partnership agreement involved in these proceedings provided that only the male partners were required to execute documents conveying interest of the partnership. In 1980, the Butlers withdrew as partners. This left David Dykstra and his spouse and the Beckleys as partners in the partnership which owned the partnership property. On February 2, 1981, Dykstra acquired the only other partnership interest remaining, that of the Beckleys. Concurrent with the purchase, at the closing of the conveyance of the Beckley partnership interest to Dykstra and in consideration of that purchase, Dykstra executed and delivered the promissory note and deed of trust, the subject of this action. As of that moment, the only partner required to execute and authorized to execute on behalf of the partnership was David L. Dykstra. The Dykstras were the sole partners in the partnership; and the only evidence concerning the authorization of David Dykstra to execute the documents in question is the affidavit of David Dykstra wherein he affirmatively states that, I was acting as an agent for DB2 ENTERPRISES with the authorization of Jackie K. Dykstra, the remaining partner, and Merle W. Beckley, the withdrawing partner, to execute and encumber the partnership property. There can be no question that this act was authorized by the partnership agreement. There can be no question that the execution and delivery of the note and deed of trust, by the subject of these proceedings, was authorized by the partnership agreement and by the partners therein at the time of the execution and delivery of those instruments.
The note and deed of trust executed by Dykstra in connection with the purchase of the Beckley partnership interest, was executed by Dykstra in his own name, without identifying the property described in the deed of trust as being owned by the partnership. T.V.B. asserts, as it did to the trial court, that the failure of the deed of trust to comply with the requirements of I.C. § 53-308(3) invalidates the instrument. Idaho Code § 53-308(3) states: 53-308. Partnership property.        3. Any estate in real property may be acquired in the partnership name. Title so acquired can be conveyed only in the partnership name. The Johnsons argue that I.C. § 53-310(2) authorized the conveyance of the real property. That section provides that: [W]here title to real property is in the name of the partnership, a conveyance executed by a partner, in his own name, passes the equitable interest of the partnership, provided the act is one within the authority of the partner under the provisions of paragraph 1 of section 53-309. The issue is whether or not the note and deed of trust executed by Dykstra to Beckley created a valid lien on the real property described in that deed of trust. T.V.B. urges that the only possible interpretation of I.C. § 53-310(2) is that the deed would only be effective where the initial conveyance had been made in the partnership name but executed only by an individual; in other words, that the instrument conveying the lien or interest in real estate must evidence on its face that it is property the record title to which is in a partnership name. It is, of course, elemental that sections of a common statute must be construed together so as to give them meaning whenever possible. Sampson v. Layton, 86 Idaho 453, 387 P.2d 883 (1963); Norton v. Department of Employment, 94 Idaho 924, 928, 500 P.2d 825, 829 (1972). The rationale behind and the reason for the adoption of the particular Uniform Partnership Act provision in I.C. § 53-308(3) was in direct response to the common law view which required that title to real estate be held by recognized legal persons, necessitating a holding by the courts that a partnership could not take title to realty in the firm name. [1] As noted in Crane and Bromberg On Partnership, by Allen R. Bromberg (1968), at page 223: The obvious solution to the common law non-entity view was to authorize partnerships to take legal title (or any other estate) in the firm name, and this is what the U.P.A. has done. There can be little doubt that the Act means what it says, or that this is one of the more profound theoretical changes it has made. (Footnotes omitted.) The rationale of the Uniform Partnership Act was to clearly depart from that which had been held by the common law. The Uniform Partnership Act authors, however, did recognize that a partnership interest could be conveyed other than in the partnership name, as reflected in I.C. § 53-310(2), as long as the partner conveying the interest had the authority to do so. In this case we have held that Dykstra did have the authority pursuant to the partnership agreement. The two sections, I.C. § 53-308(3) and I.C. § 53-310(2), permit the conveyance of the legal title under the terms of I.C. § 53-308(3), and the equitable interest of the partnership under I.C. § 53-310(2). In either instance, a valid lien is created, provided that the title to the property is in the partnership and the conveyance is for partnership purposes. In other words, a conveyance executed by a partner in his own name, without mentioning the partnership, passes the equitable title of the partnership, making it an effective conveyance, provided the title is in the partnership and the conveyance is for partnership purposes. 59A Am.Jur.2d § 304. The rationale for this result is further set forth by Professor Bromberg in Crane and Bromberg On Partnership at page 224: If a partnership has taken title to land in its name, the U.P.A. provides that title can be conveyed only in that name. However, a conveyance by one or more of the partners, if a firm act, would convey at least an equitable title of the partnership. Such title would probably be bad against a later B.F.P. [ bona fide purchaser] taking a conveyance in the firm name, unless the local recording acts caused the prior deed to be indexed in the firm name. It would similarly be bad against an execution creditor if, by the recording acts, he is in the position of a B.F.P. as regards unrecorded equitable interests. We do hold that Dykstra's execution and delivery of the note and deed of trust, an act authorized by the written partnership agreement and authorized by the partners as provided for in I.C. § 53-309, conveyed an effective lien upon the Holly Street property of the partnership, even though executed solely in Dykstra's name. The conveyance was executed in a manner consistent with I.C. § 53-310(2).
The uncontroverted evidence in the record before us is that at the time Dykstra, on behalf of the partnership, entered the financing agreement with T.V.B., he personally informed an officer at T.V.B. about the prior Beckley deed of trust on the Holly Street property. He told the bank that there was a prior deed of trust in favor of Merle W. Beckley on that property, and that the bank should contact Beckley to obtain a subordination agreement from him. The bank ignored this advice and proceeded with its loan. In this case, the deed of trust from Dykstra to Beckley had been placed of record. That recordation, however, conveyed no constructive notice to the world, or T.V.B., that the property was held in the name of the partnership. On the face of this record, without actual knowledge, the bank's lien would have been superior to that of Beckley, and the bank's statutory foreclosure would have vested title in the Holly Street property in T.V.B. The actual notice given to the bank by Dykstra of the Beckley deed of trust on the same parcel in which the bank was taking a security interest, deprived the bank of its right to rely solely on the record title concerning the Holly Street property. At a minimum, T.V.B. was put on notice to inquire further. The actual notice received by T.V.B. in this case renders its security instrument inferior to that granted to Beckley. Fajen v. Powlus, 96 Idaho 625, 533 P.2d 746 (1975); Farm Bureau Fin. Co. v. Carney, 100 Idaho 745, 747, 605 P.2d 509, 511 (1980). T.V.B. urges that although it had actual notice of the Beckley deed of trust, the Johnsons cannot introduce evidence to show that the deed of trust is anything other than what it purports to be on its face. That is, namely, an instrument signed only by Dykstra bearing no indicia of an interest in the real property which is the subject of that deed of trust in anyone other than Dykstra. The thrust of the argument of T.V.B. is that an attempt to show that the partnership owned the Holly Street property and that the Beckley deed of trust was a lien on partnership property executed on behalf of the partnership, is an attempt to vary the terms of the deed of trust to Beckley and is precluded, absent a finding that that instrument is ambiguous, based on the authority of the Idaho Rules of Evidence and by the holding of this Court in Hall v. Hall, 116 Idaho 483, 777 P.2d 255 (1989). The parol evidence rule is not applicable here, as title to property in question could be, and was, encumbered by Dykstra acting with the authority of the partnership. There is no attempt to vary the terms of the instrument in question. The sole issue is if the acts of Dykstra complied with I.C. § 53-310(2). We hold that they did. We need not address the impact of Hall v. Hall in connection with the resolution of this case.