Opinion ID: 1197637
Heading Depth: 1
Heading Rank: 4

Heading: The Ione ranch was held in an estate by the entireties and became the property of Leo Gorger upon the death of his wife.

Text: It appears from the Findings of Fact by the trial judge, as previously set forth, that his decision on this subject was based upon his findings: (1) that prior to the death of Ruth Gorger title to both the Ione ranch and the Pendleton ranch had been contributed to the partnership, so as to change the title in those properties from an estate by the entireties to an estate in common; (2) that no withdrawal of the Ione ranch from the partnership was made during the lifetime of Ruth Gorger, but only during the probate period; and (3) that the letter by Mr. Raley with instructions to Mrs. Cosper, accountant for the partnership, dated February 20, 1959, cannot be reconciled with these holdings, but that this letter was not without question, based upon the apparent finding by him that if such a letter had been written and delivered to the accountant on or about that date it would have been found by plaintiffs' witness, Mr. Dickey, who had reviewed all the accountant's records for the period and did not find that letter among such records. In contending that the trial court did not err in these findings, plaintiffs point out that: (1) Leo Gorger admitted that the word entireties was inadvertently used in the deeds by which he and his wife took title to their property; (2) the 1956 partnership agreement defined assets of the partnership as those included in its balance sheet; (3) the Ione ranch was included in the partnership balance sheet at the end of 1960; (4) a contribution may be made to the capital of a partnership regardless of where the muniment of title may lie; (5) the 1959 lease did not withdraw the Ione ranch from the partnership; and (6) when Mrs. Gorger died, the partnership interest in the Ione ranch was not subject to subsequent unilateral withdrawal by Leo Gorger, as was done. We agree with these findings and contentions to the extent that we believe that in the absence of the letters by Mr. Raley in 1959 and the 1959 lease the preponderance of the evidence would require a finding that the Ione ranch had been contributed to the partnership and was not withdrawn from it prior to the death of Ruth Gorger. We also believe, however, as recognized by the trial court, that those letters and that lease are not only inconsistent with such findings, but that unless they were not only questionable, as found by the trial court, but fraudulent, they require a finding that in 1959, prior to Ruth Gorger's death in 1961, Leo and Ruth Gorger intended to and did withdraw the Ione ranch from the partnership and that they then intended that it be held in an estate by the entireties, in accordance with the provisions of the previous deeds. The Uniform Partnership Act provides (ORS 68.130) that: (1) All property originally brought into the partnership stock or subsequently acquired by purchase or otherwise, on account of the partnership is partnership property. (2) Unless the contrary intention appears, property acquired with partnership funds is partnership property   . The courts are in substantial agreement with the proposition that the intention of the parties governs in determining what constitutes partnership property. Annot., 45 A.L.R.2d 1012 (1956). Our previous decisions are in accord: Minter v. Minter, 80 Or. 369, 375, 157 P. 157 (1916), and Merchant v. Smith-Powers Logging Co., 91 Or. 442, 447, 178 P. 939 (1919). Conversely, this court has recognized that the fact that property is used for partnership purposes is not conclusive evidence that it is partnership property. Fenton v. State Ind. Acc. Com., 199 Or. 668, 672, 264 P.2d 1037 (1953). To the same effect, see Annot., 45 A.L.R.2d 1011 (1956). Even when property previously owned by the partners has been contributed to a partnership, the partners may subsequently transfer the ownership of such property back to the partners. ORS 68.420(2) (b) provides: A partner's right in specific partnership property is not assignable except in connection with the assignment of the rights of all the partners in the same property. The clear implication of this section is that partnership property may be assigned by a joint act of all the partners. Thus, as held in Johnson v. Jackson, 82 F. Supp. 915, 918 (E.D.Pa.), aff'd, 3 Cir., 173 F.2d 223 (1949): In the absence of the proved intention to delay or defraud creditors, there is no legal objection to a transfer of partnership property from the firm to one of the partners. Cf. Gertz v. Fontecchio, 331 Mich. 165, 49 N.W.2d 121, 124 (1951). In our judgment, the letters by Mr. Raley, as attorney for Leo and Ruth Gorger, as written to them and to their accountant in 1959, prior to the death of Ruth Gorger, if genuine, together with the 1959 lease by Leo and Ruth Gorger, as owners of the Ione ranch, to the partnership, so as to permit its use by the partnership, while retaining title in themselves, compel the conclusion that even if there may have been a previous contribution of that ranch to the partnership, the partners agreed and intended in 1959 that it be withdrawn from the partnership and held in an estate by the entireties, in accordance with the terms of the original deeds. The disregard of these letters by the trial court upon the ground that they were questionable can only be sustained by a finding that they were not prepared until after the death of Ruth Gorger and were then prepared as a part of a conspiracy between Leo Gorger and his attorney, Mr. Raley, to defraud his children. This is a most serious charge, not only against Leo Gorger, but also against his attorney, James H. Raley, now deceased. Upon examination of the record, we do not believe that the evidence sustains such a serious charge but that, on the contrary, it requires us to hold that these letters by Mr. Raley were in fact written in 1959, prior to the death of Ruth Gorger in 1961. The most compelling evidence in support of this conclusion is the lease, which not only was dated February 25, 1959, but was recorded on June 29, 1959, long prior to the death of Ruth Gorger in 1961. The obvious purpose of this lease was to carry into effect the proposals by Mr. Raley in his earlier letter to Leo and Ruth Gorger to the effect that the Ione ranch should be considered as being owned by them in an estate by the entireties, and leased for use by the partnership, rather than being held by it as a partnership asset. [4] We believe that the signing of this lease by Leo and Ruth Gorger in 1959 was the best and most persuasive evidence of the intent of Leo and Ruth Gorger to approve and make effective at that time the recommendations by their attorney. It is true, as pointed out by plaintiffs, that Mrs. Cosper, who kept the partnership accounts, did not follow the instructions of Mr. Raley, as set forth in his separate letter to her, but continued to prepare partnership records showing the Ione ranch to be a fixed asset of the partnership. As previously stated, however, the question whether the Ione ranch was contributed to or withdrawn from the partnership is a question to be determined by the intent of the partners. Although the practice of the accountant of the partnership may be evidence of that intent, such practice is not controlling on that issue, at least under the facts of this case. In our judgment, the evidence of the continuing accounting practices of Mrs. Cosper is not sufficient to overcome the effect of the execution of the lease in 1959. It is also of interest to note that Mrs. Cosper was then becoming elderly, as shown by the testimony that she retired from her occupation as an accountant in 1969 because she was old. In addition, there was testimony that she did not appear as a witness because she was in very poor health at the time of trial. There was also testimony that, contrary to the testimony of plaintiffs' expert witness, the 1959 letter to Mrs. Cosper from Mr. Raley was subsequently found in one of the boxes of partnership records which were delivered to Leo Gorger by Mrs. Cosper when she retired and were then stored in his home. Even in the absence of such testimony, however, the evidence of the execution and recording in 1959 of the lease by Leo and Ruth Gorger, as previously discussed, was persuasive and compelling evidence on this issue, in our judgment. For these reasons, we hold that the trial court erred in finding that when Ruth Gorger died in 1961 the Ione ranch was not held in an estate by the entireties, but was partnership property, and in holding that an undivided one-half of the interest of Leo and Ruth Gorger in that ranch went into the trust for her children as established by her will. It also follows that the trial court erred in surcharging Leo Gorger, as trustee, with the sum of $33,137.26 as income received by him from his interest in that ranch for the years 1962 through 1973. [5]