Opinion ID: 1197637
Heading Depth: 1
Heading Rank: 9

Heading: Surcharge of Leo Gorger for expenses and taxes paid from partnership funds.

Text: The trial court decree would surcharge the capital account of Leo Gorger the sum of $30,717.12 on account of personal expenses paid from the income of the operation of such partnership business. This is also assigned as error by defendant Leo Gorger. In the operation of the ranching partnership Leo Gorger continued to pay from partnership funds, as in previous years, the expenses incident to the house on the Pendleton ranch, as well as some other expenses. These expenses included utilities, gas and oil, auto maintenance, travel expense, fire insurance and taxes on the house. By the will of Ruth Gorger, her interest in the Pendleton ranch house was left to Leo Gorger. The Pendleton ranch, except for the house, however, continued to be considered and treated as an asset of the partnership. Leo Gorger actively operated that ranch until 1970, after which it was leased to a tenant for operation, although Leo Gorger contined to live in the house. The trial court surcharged Leo Gorger with $6,193.12 for utility expenses, representing one-half of the utilities for the years 1962 through 1970 (during which he actively operated the Pendleton ranch), and the entire expense for utilities for subsequent years. The trial court also surcharged Leo Gorger with $6,198.52 for gas and oil, representing one-fourth of the expense for gas and oil purchased at the Pendleton ranch for the years 1962 through 1971 and the entire expense for gas and oil for subsequent years. Similarly, the trial court surcharged Leo Gorger with $1,824.87 for auto maintenance on his automobile, representing one-half of that expense through 1970 and the entire amount thereafter, and the sum of $1,835.71 for travel expenses, again representing one-half of that expense through 1970 and the entire amount after that year, when he discontinued operating the wheat ranch and started concentrating on his motel investments. In addition, the trial court surcharged Leo Gorger with $3,264.36 for repairs which were found to constitute improvements to the house, some of such where incurred after 1970. In support of the position that the trial court erred in surcharging Leo Gorger for these items, it is contended that he worked on the ranch without compensation; that the trust was utilizing almost $200,000 of partnership money without paying interest thereon and that from 1970 to 1973 he was counseled by his accountant in regard to the allocation of expenses; that his accountant took into consideration the fact that he owned the house and automobiles, but that they were being used by the partnership in the production of income, and that his accountant told him that this allocation was entirely proper. Defendants also say that for plaintiff Donald Gorger, who had already received over $70,000 in distributions from the trust, to surcharge his father for such items was unjust treatment of the man who built the whole thing and that such a decision is incredible. We may sympathize with these views. These considerations cannot, however, excuse at least substantial compliance by the trustee of a family trust with the duties and responsibilities imposed by law upon all trustees. A trustee is entitled to reimbursement from the trust for reasonable and necessary expenses incurred by him in the discharge of his duties as trustee. State Farm Mut. Auto. Ins. Co. v. Clinton, 267 Or. 653, 656, 518 P.2d 645 (1974). Nevertheless, we have held that before he is entitled to be credited for such expenditures, he has the duty as trustee to identify them specifically and prove that they were made for trust purposes. Jimenez v. Lee, 274 Or. 457, 462, 547 P.2d 126, 130 (1976), citing Bogert, Trusts and Trustees 10-13, § 962 (2d ed. 1962). See also Wood et al. v. Honeyman et al., 178 Or. 484, 556, 169 P.2d 131 (1946). It may be true, as stated in Wood et al. v. Honeyman et al., supra, at 570, that when, as in this case, a trust is a family affair, a trustee may be justified in the belief that he will not be required for this purpose to maintain records as complete as if he were acting for strangers. Nevertheless, the burden of proof is still upon the trustee. After an examination of the records produced by Leo Gorger and his accountant, together with their testimony, we are compelled to agree with the conclusion reached by the trial court to the effect that such records were not sufficient to support an allocation of these various items in the manner contended for by the trustee. On the contrary, we believe that the evidence, when taken as a whole, supports the allocation of these items as made by the supplemental findings of the trial court. We approve and affirm these findings. Whether or not Leo Gorger is also entitled to charge the trust estate for other items, such as interest on moneys advanced to the trust, is another matter, to be discussed subsequently.