Opinion ID: 875572
Heading Depth: 2
Heading Rank: 1

Heading: l.r. 587 (1929).

Text: An examina'tion o f t h e e n t i r e r e c o r d r e v e a l s c o n f l i c t i n g b u t s u b s t a n t i a l evidence t o support t h e j u r y ' s finding of a contract a s opposed t o a v o l u n t a r y bonus. Defendant makes a s t r o n g argument t h a t t h e t e s t i m o n y o f h i s two a c c o u n t a n t s , b o t h C.P.A. ' s , d e m o n s t r a t e s t h e y e a r l y payment was a bonus t h a t was p a i d by d e f e n d a n t t o t h e p l a i n t i f f s and u n d e r s t o o d t o be p a i d o n l y o u t o f  n e t o p e r a t i n g p r o f i t s f ' o f t h e ranching operations. A t t h e t r i a l one a c c o u n t a n t d e f i n e d t h e 1f n e t o p e r a t i n g p r o f i t f f a s  t h a t would i n c l u d e a l l r a n c h s a l e s , e x c e p t t h e s a l e s of l i v e s t o c k upon which t h e F e d e r a l income t a x p e o p l e w i l l g i v e us c a p i t a l g a i n s t r e a t m e n t  . The o t h e r d e s c r i b e d t h e operating p r o f i t a s t h e gross s a l e s of t h e c a t t l e l e s s e x p e n s e s , a n d . t h a t a s c h e d u l e of c a p i t a l g a i n s was k e p t w i t h such sums b e i n g t r e a t e d d i f f e r e n t l y f o r income t a x purposes. A r e t i r e d v i c e - p r e s i d e n t and t r u s t o f f i c e r o f t h e F i r s t N a t i o n a l Bank and T r u s t Company o f Helena, t e s t i f i e d a s t o h i s understanding i n these matters a s t h e r e s u l t of an e s t a t e planning meeting i n 1965 w i t h George Davis, Donald Davis and t h e a c c o u n t - A. Well, a s I r e c a l l i t , M r . George Davis e x p l a i n e d what h i s i d e a was of n e t o p e r a t i n g income f o r t h e purpose o f d e t e r m i n i n g s a l a r y and bonuses--for a s a l a r y and bonus arrangement, and t h a t was t h e g r o s s o p e r a t i n g income, e x c l u d i n g c a p i t a 1 g a i n s , l e s s o r d i n a r y o p e r a t i n g expenses, and n o t i n c l u d i n g d e p r e c i a t i o n , and t h a t would b e t h e n e t - - t h a t would l e a v e you t h e n e t p r o f i t from t h e o p e r a t i o n .  (Emphasis s u p p l i e d ) I n c o n t r a s t t o t h e above s t a t e m e n t s s u p p o r t i n g d e f e n d a n t ' s p o s i t i o n , t h e testimony o f t h e b r o t h e r s , Donald and Dan Davis, s t a n d s i n a d i f f e r e n t l i g h t from t h e o u t s e t . While t h e element o f d e p r e c i a t i o n i s n o t c o n t e s t e d by t h e p l a i n t i f f s i n d e t e r m i n i n g t h e n e t o p e r a t i n g p r o f i t s , c l e a r l y d i f f e r e n t t e s t i m o n y was g i v e n i n r e g a r d t o t h e i n c l u s i o n o f t h e element of c a p i t a l g a i n s i n t h e n e t o p e r a t i n g income. Dan Davis t e s t i f i e d : Q. Now, i f you know, when you made t h i s o r i g i n a l agreement o r arrangement i n 1965, was t h e r e any d i s c u s s i o n had a s t o whether t h e c a p i t a l g a i n s income would be t r e a t e d t h e same way t h a t t h e o t h e r income was, M r . Davis? [ O b j e c t i o n s u s t a i n e d a t t h i s p o i n t . ] MR LEAPHART: Was t h e r e any d i s c u s s i o n , l e t me p u t i t t h a t way? A . The d i s c u s s i o n t h a t took p l a c e , w e l l , t h a t was never discussed ---t h e y n e v e r t o l d m e t h a t i t was t o be deducted. It was j u s t supposed t o b e n e t p r o f i t . 11 Q . [Cross-examination] And when you s a y ' a l l o f t h e p r o f i t ' what do you mean by t h a t ? A. The d i f f e r e n c e between t o t a l s a l e s and t o t a l expenses, t h e p r o f i t . Q. Now, i n t h a t c l a i m t h a t you make, were you c o n t e n d i n g t h a t you were e n t i t l e d t o c a p i t a l p a i n ? A. When h e made t h e agreement w i t h u s , h e n e v e r s a i d a n y t h i n g a b o u t h o l d i n g o u t c a p i t a l g a i n s . 11 (Emphasis s u p p l i e d ) . Dan Davis went on t o s t a t e t h a t h i s s t a t e m e n t a p p l i e d t o b o t h of t h e a l l e g e d c o n t r a c t s . Donald Davis on c r o s s - e x a m i n a t i o n t e s t i f i e d : Q. Now, t h e s e y e a r s when h e went o v e r t h e income and t h e expense o r t h e r a n c h w i t h you, and showed h i s p r o f i t , you and h e f r e q u e n t l y d i d n ' t s e e t h e p r o f i t t h e same, o r what t h e p r o r i t was a s you con- t e n d was t o b e s h a r e d , i s t h a t r i g h t ? 'A. I d o n ' t e v e r remember o f h a v i n g any d i s c u s s i o n w i t h him. A t t i m e s when we were l o o k i n g o v e r t h e s e f i g u r e s , no, he never i n d i c a t e d t h a t c a p i t a l g a i n s ever entered i n t o t h i s d e a l a t a l l , b u t only t h a t t h e p r o f i t was t h e d i f f e r e n c e between t h e t o t a l s a l e s and t o t a l e x p e n s e s . He c l a i m e d t h a t t h e monies t h a t were t r e a t e d a s c a p i t a l g a i n s , a s f a r a s t a x p u r p o s e s were c o n c e r n e d , were i n c l u d e d i n t h e n e t p r o f i t s , i n h i s tax return. Q. Do you b e l i e v e h e [ d e f e n d a n t ] was confused a b o u t i t ? A. Well, a t f i r s t , t h e r e were t i m e s t h a t I t h o u g h t t h a t t h a t was a p o s s i b i l i t y . Q. That h e was c o n f u s e d , and d i d n ' t u n d e r s t a n d i t t h e way you d i d , i s t h a t r i g h t ? I . Well, t h e r e was no doubt i n m mind t h a t t h e r e was y a d i f f e r e n c e . Now. I d o n ' t know how h e u n d e r s t o o d i t . b u t h e had been i n t h e b u s i n e s s long enough t h a t i t was c e r - t a i n l y hard t o r m t o b e l i e v e t h a t he r e a l l y understood e i t t h e way he was t e l l i n g me h e u n d e r s t o o d i t - - - he had been i n t h e b u s i n e s s t o o l o n g t o make me b e l i e v e t h a t . 1 ' (Emphasis s u p p l i e d ) While t h e e v i d e n c e may s t a n d i n a p p a r e n t c o n f l i c t on t h e inclusion o r exclusion of the c a p i t a l gains i n the n e t operating p r o f i t o f t h e r a n c h e s , t h e j u r y was v e s t e d w i t h t h e s o l e c o n s i d e r a - t i o n of t h e f a c t u a l i s s u e s and t h e c r e d i b i l i t y of w i t n e s s e s and t e s t imony . T h i s Court f i n d s n o t h i n g i n c o m p a t i b l e t h a t might n o t be e x p l a i n e d by t h e p r o p o s i t i o n t h a t d e f e n d a n t was concerned w i t h t a x m a t t e r s w i t h h i s a c c o u n t a n t s , and t r e a t e d Donald Davis and Dan Davis d i f f e r e n t l y w i t h r e g a r d t o t h e c o n t r a c t o f p r o t i t sharing. I t would b e wholly c o r s i s t e n t w i t h t h e normal under- s t a n d i n g and r e p r e s e n t a t i o n s g i v e n t o t h e Davis b r o t h e r s t h a t t h e p r o f i t s meant revenues minus e x p e n s e s . The r e l a t i v e p o s i t i o n s t a k e n i n t h e l a w s u i t s and t h e i n t r o d u c t i o n o f t e s t i m o n y r e g a r d i n g t a x m a t t e r s i s c o l l a t e r a l t o t h e i s s u e o f t h e u n d e r s t a n d i n g between George Davis and t h e b r o t h e r s . T h i s Court w i l l n o t d i s t u r b t h e f a c t u a l d e t e r m i n a t i o n s of t h e j u r y and f i n d s n o t h i n g t h a t i s i n c r e d i b l e o r i n s u f f i c i e n t i n t h e e v i d e n c e produced a t t r i a l , upon which t h e j u r y r e l i e d . In regard t o defendant's t i n a l issue---the s t a t u t e of frauds a s a bar t o o r a l c o n t r a c t s - - - i t is sufficient t o note t h a t t h e o r a l c o n t r a c t s o f p r o f i t s h a r i n g r e l i e d upon a t t r i a l , were f u l l y e x e c u t e d on t h e p a r t o f t h e p l a i n t i f f s and a s s u c h represent a w e l l r e c o g n i z e d e x c e p t i o n t o t h e s t a t u t e of f r a u d s . Besse v . McHenry, 89 Mont. 520, 300 P . 199. The judgment o f t h e t r i a l / Associate J u s t i c e Ua------- Chief J u s t i c e Associae Q s t i c e s .