Court Opinion

ID: 7818437
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:44:59.850553+00
Date Added: 2024-06-11T16:30:40.098835
License: Public Domain

John A. Fogleman, Justice, dissenting. I am as yet unable to understand how the majority can find evidence to overcome appellant’s contention that the real estate involved was partnership property or how the trial court could find that J. B. Wilson and George Wilson constituted a farming partnership which stopped short of ownership of the real estate. The evidence that Wilson Bros, owned the land seems stronger to me than that relied upon to show a farming partnership. I think that a partial explanation lies in failure to apply law relating to partnerships rather than to constructive or resulting trusts. Appellant has never sought to impress either upon the conveyances. He has simply sought to establish a trust under partnership law. The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business. Ark. Stat. Ann. § 65-107 (4) (Repl. 1966); Brandenburg v. Brandenburg, 234 Ark. 1117, 356 S. W. 2d 625; Zajac v. Harris, 241 Ark. 737, 410 S. W. 2d 593. Clear and convincing evidence is not required to prove a partnership. Its existence need be proved only by a preponderance of the evidence. Brandenburg v. Brandenburg, supra. We have held that provisions of the Uniform Partnership Act [Ark. Stat. Ann. § 65-101, et seq. (Repl. 1966)] are applicable to partnerships entered into prior to its passage and which had acquired real estate prior to its adoption. Zach v. Schulman, 213 Ark. 122, 210 S. W. 2d 124, 2 A. L. R. 2d 1078. Pertinent provisions other than the one cited hereinabove include the following: 1. Unless the contrary intention appears, property acquired with partnership funds is partnership property. Ark. Stat. Ann. § 65-108 (2) (Repl. 1966). 2. Every partner is an agent of the partnership for the purpose of its business and his acts for apparently carrying on the business of the partnership bind it. Ark. Stat. Ann. § 65-109 (1) Repl. 1966). 3. A partner’s interest in partnership property is as a tenant in partnership. Ark. Stat. Ann. § 65-125 (1) (Repl. 1966). Until adoption of the Uniform Partnership Act in 1941, the title to real property could not be held in the name of the partnership. Percifull v. Platt, 36 Ark. 456; Spaulding Mfg. Co. v. Godbold, 92 Ark. 63, 121 S. W 1063, 29 L. R. A. (n.s.) 282, 135 Am. St. Rep. 168, 19 Ann. Cas. 947. The act recognizes, however, that title to partnership real property may be held in the name of one of the partners, but that this partner may not effectively convey title to the property unless the grantee in the conveyance is a holder for value without knowledge or the conveyance is one for apparently carrying on the business of the partnership. Ark. Stat. Ann. § 65-110 (3) and (4) (Repl. 1966). When the legal title is vested in the name of one of the partners, he becomes, in equity, a trustee for the other partners to the extent of their interest. Spaulding Mfg. Co. v. Godbold, supra. Real estate purchased for partnership purposes, paid for with partnership funds and held and used for partnership purposes, is treated as partnership property regardless of how or by what agency it is bought or in whose name the title is held, and the holder of the legal title is a trustee for the partnership. Cain v. Mitchell, 179 Ark. 556, 17 S. W. 2d 282. When land is purchased for use in carrying on the partnership business with partnership funds and there is no agreement or design that it be held for the partners’ separate use, it will be treated in equity as vested in them in their firm capacity, whether the title is in all, or less than all the partners. Lewis v. Buford, 93 Ark. 57, 124 S. W. 244. Proceeding upon these well established principles, we should turn aside from attempts to measure the evidence by the clear and convincing yardstick and abandon efforts to decide whether there was a constructive or resulting trust to answer the following pertinent inquiries: 1. Did J. B. Wilson receive a share of the profits of the business of Wilson Bros., consisting of him and George Wilson? 2. Is there any evidence that he received these profits as compensation for services as distinguished from his share as a partner? 3. Does the evidence that a partnership existed preponderate? 4. Were the lands in question purchased with partnership funds? 5. If so, is there a preponderance of the evidence to show an intention that the lands not be held as partnership property? 6. Does the evidence show that the property was used for partnership purposes? I humbly submit that questions 1, 3, 4, and 6 must be answered in the affirmative and questions 2 and 5 in the negative. This being so, the decree should be reversed for a decree declaring that George Wilson held the lands as trustee for the partnership of Wilson Bros. Time and space limitations do not permit adequate elaboration upon the great volume of evidence in the record. The testimony of J. B. Wilson, even as limited by the trial judge, clearly established a case for relief. But a decree in his favor does not hinge upon J. B.’s credibility. His testimony is corroborated in most instances where documentary evidence is available and by disinterested witnesses who would have no motive for misrepresen ta tion. The chancellor found, and the majority proceeds upon the assumption, that there was a partnership consisting of J. B. and George Wilson engaged in livestock and farming operations upon the lands involved. In any view of the case we must start upon the well substantiated premise stated in the majority opinion that these two brothers had held themselves out all their adult lives, and were universally regarded, as partners d/b/a “Wilson Bros.” J. B. was 21 months older than his brother. They first operated a petroleum business left them by their father. J. B. told of their acquisition of the various tracts making up the farm near 3-Way Store known as Wilson Bros, ranch. The acquisitions commenced about 1940 and extended into the early 1950’s. One of the tracts purchased was the Lane tract, on which a Federal Land Bank mortgage was assumed. Payments were made through a National Farm Loan Association. Wilson’s testimony about payments by him to this association was corroborated by the secretary of that association, who said that the loan was assumed by George and J. B., but carried in the name of George. He recalled that a payment was made by J. B. in cash, and a receipt issued to him on May 29, 1947. This witness also identified a 1945 receipt for a payment by Wilson Bros. J. B.. said he borrowed money from Prislovsky to pay off this debt and later borrowed from Prudential Life Ins. Co. to pay. He produced a check to Prislovsky from Wilson Bros, which he said was for interest on this loan. J. B. also said that he borrowed money from Dr. J. B. Strait to pay for the Keaton land. He produced two Wilson Bros, checks signed by him for payments on this loan. He said that Wilson Bros, then obtained a loan from Prudential Ins. Co. to pay off the debts to Prislovsky and Strait. While these mortgages were signed by George and his wife only, J. B.’s testimony that this insurance company required that J. B. sign the note is corroborated by a letter from the company and does not seem to be questioned. J. B. says that a loan made by John Hancock Life Insurance Company was obtained to pay the Prudential indebtedness, to pay Wortman for land clearing and to pay other debts. He was not asked to sign either the mortgage or the note. He admitted that money was borrowed by George on more than one occasion from Mrs. Kennedy, but stated that he went and got the money on one occasion and that all the proceeds of these loans were placed in a bank account in the name of Nancy Tullos, one of George’s daughters, and that he and George wrote the checks on this account for partnership purposes. After PCA loans were obtained in George’s name rather than in the name of Wilson Bros., the proceeds, according to J. B., were deposited in the bank, either in the name of Nancy Tullos or George Wilson. He said that he then signed checks “George Wilson, by J. B. Wilson.” He also said that George would give him a book of signed checks, and exhibited eight that he had when George died. He exhibited some deposit slips for deposits made by him to this bank account. J. B. also exhibited checks for payment of taxes on the farm, which he said came from partnership funds. Two of them were signed J. B. and George Wilson, and two were signed Wilson Bros, by J: B. Wilson. Tax assessment records clearly show that the lands were assessed in the name of Wilson Bros, for many years prior to George’s death. Not one of these tracts was assessed in the name of George Wilson, although a lot owned by him was so assessed. The tax assessor testified that the assessments for the years 1963 through 1967 were made by George Wilson. After his death the assessment was changed to show the name of the owner as Kathryn Wilson at the suggestion of her attorney. In 1960 only is there any indication that George Wilson paid these taxes. J. B. exhibited other checks written on Wilson Bros, for lands purchased. One of them was for the Cox land in 1952, later sold. He also exhibited a check to Harry Harper signed Wilson Bros, by J. B. Wilson, which he testified was to retire a loan which enabled them to construct a building at the 3-Way Store. He exhibited a deposit slip to the account of Wilson Bros, identifying a check of H. W. Harper, which he said represented the loan proceeds. Many other such Wilson Bros, checks were exhibited. J. B. testified that neither he nor George ever performed any work in any capacity for anyone other than Wilson Bros. This testimony is not substantially contradicted. He stated that they never had an accounting but used money from the business as they needed it. Although there is abundant evidence of use of parts of the lands by J. B. Wilson, there is never any indication that he paid any rent or that he was expected to pay any. The only business telephone listing was in the name of Wilson Bros. Ranch. J. B. testified that the first land purchase made by either was in 1937. The land was deeded by Kentucky Home Life Insurance Company to J. B. Wilson. J. B. said that it belonged to him and George and that they sold it for $6,000 and put the money in the Wilson Bros, bank account. J. B. is corroborated about many of the land purchases. Floyd McPherson said that negotiations for purchase of 192 acres from him in 1946 were opened and the deal made by J. B. Wilson. $1,000 of the $5,000 purchase price was paid in cash by J. B., $500 was credited for a bull traded by J. B. and $3,500 was paid by Roy McCollum. McPherson said that the contract to sell was to Wilson Bros., and his recollection was that the deed was made to Wilson Bros. Esker McPherson said that J. B. approached him and wanted him to buy some land and hold it for J. B. Later J. B. and George returned and said that Roy McCollum would finance them to buy a one-third interest in the Montgomery estate. After the purchase, they brought a deed to McCollum for McPherson to sign. The Lane property was bought from Mrs. Paul Gourley. Her letter offering the land to George and J. B. in April 1944 was exhibited. The offer was accepted by a letter, over George’s signature. It recited that the terms were acceptable to “J. B. and myself” and that “we” are accepting them. It also recited that “we” will pay for it. Strong corroboration of J. B. Wilson came from Warren Bass, a certified public accountant, called as a witness by appellees. He prepared income tax returns for George Wilson for several years. He did not consider that a partnership existed, and did not prepare a partnership return. At George’s request, he prepared returns showing all income shared with J. B., “because he needed to help his brother anyway.” All the income and expenses from the farming operations and cattle operations were consolidated, then divided in halves with one-half allocated to each brother. Bass said George told him that he was giving his brother one-half. George Wilson did tell him that the cattle and personal property belonged to the two and that all the income was paid to them as Wilson Bros. When Bass prepared the portion of the return for George relating to social security self-employment tax, he listed George Wilson’s farm income as coming from “farm partnerships.” A breakdown of the income and expenses on the worksheets for these returns revealed that in 1966 George Wilson received $132.32 in interest from a bank as his only income from any source other than the partnership. Expenses for acquiring cotton acreage bought are included. Taxes in the amount of $793.23 were included as was interest amounting to $5,007.78. George Wilson claimed no separate income from the land, and no rental charge was made to Wilson Bros, or to J. B. Wilson. Arthur Thomas bought the Madden place from them. He dealt with George, but said that George told him that the land was owned by Wilson Bros. Judge Fred Wilcox bought land from them, which was part of the Cox place. At closing, Judge Wilcox asked if J. B. and his wife shouldn’t sign the deed. He was assured by George and an abstractor that the title was in George. Wilcox said that Wilson Bros, had paid him by check for work done on the farm. Various witnesses testified about land clearing for Wilson Bros, on their farm near 3-Way Store. They testified about having dealt with both George and J. B. with reference to the clearing, and some of them recite payments made by Wilson Bros, checks or checks signed by J. B. and George Wilson. Some of the payments were made by cash, and some by farm machinery apparently owned by Wilson Bros. One of these witnesses, William Wortman, admitted receiving four checks for clearing land signed by George Wilson only and payable to him as administrator of his father’s estate. This was in 1965 when J. B. Wilson says that the bank account was carried in George’s name, well after the change in the PCA loans. Mrs. Lillian Young said that she had closed loans for Wilson Bros, and prepared deeds for them. Although she first stated that she always dealt with George, her statement for abstract work in 1953 was rendered to Wilson Bros, and addressed to them in care of J. B. She received at least three checks for work done for Wilson Bros, on the account of Wilson Bros, signed by J. B. W. She explained that it was hard for her to contact George, but she could always find J. B. The abstract work was done on land, and she was told to send her statements to Wilson Bros. Marion McDonald leased the Montgomery and Keaton lands from Wilson Bros, in 1947 and 1948. He dealt with J. B. principally, although he did talk to George. The contract required him to put down a new well which would become the property of Wilson Bros, at the end of three years. He grew rice crops on the land. The landowner’s share of the crop proceeds was paid to Wilson Bros. McDonald sold the pump and power unit on the well to Wilson Bros, at the end of the three-year term for 16 head of cattle and $800. Later McDonald installed a new pump when J. B. told him something was wrong. He billed J. B., who paid him. George Wilson always referred to the lands as belonging to Wilson Bros, in discussions with McDonald. Albert Higgins and William J. Brown told about negotiations with George Wilson for renting lands and for proposed fish farming operations. Both said George Wilson stated that the land belonged to him and J. B. Wilson Bros, paid one-half of the bills for fertilizing and putting chemicals on crops of tenants on the land. There is evidence that payments for the landlord’s share from cotton and cottonseed sold at the gin were made to Wilson Bros. It was Howard Ives’ recollection that both J. B. and George signed the lease when he rented the farm for two years. If was shown that the PCA in Stuttgart financed the operations of Wilson Bros, beginning in 1954. The first loan application was signed by both J. B. and George. It was for acreage in rice, beans, oats and lespedeza. The ownership of one of the tracts of land on which the crops were to be produced was shown to be in J. B. and George Wilson. The 1955 application was for crop production on lands farmed in cotton, milo, oats, rye grass pasture and pasture crops. One of the tracts was again shown under the ownership of J. B. and George Wilson. The change in the name to whom the loan was granted was made in 1962 because of judgments against J. B., but George kept on mortgaging the same property as security. The PCA held an insurance policy issued by American Livestock and Insurance Company, dated July 22, 1967, insuring J. B. and George Wilson, d/b/a Wilson Bros. The indebtedness existing at the time of George Wilson’s death was paid by credit life insurance, apparently from this policy. The policy was offered by PCA but not required. Premiums were charged to the borrower. The brothers had carried credit life as early as 1955. The policy could not have been issued on J. B. when the loan was made to George only, according to the PCA officials. George Wilson’s son-in-law said that a check he gave in payment for cattle bought from George was made to Wilson Bros., and delivered to George, who endorsed it and used it to pay off a PCA loan. He said that he got free rent on his bean crop by working on the farm for George and J. B. He testified that he helped them put in the cotton crop, and they let him put in another bean crop the next year. He later professed that his reference to J. B. in this testimony was an oversight on his part. One of the appellees, Joan Rodgers, a daughter of George, testified that she would say offhand that her father engaged in no business other than the farm and 3-Way Grocery and the cattle business. George’s widow testified about income from sale of Christmas cards and a flower shop and from her own employment. She definitely stated that her earnings were applied to the needs of her children, herself, her home and the payment of bills such as doctor’s bills, all of which were beneficial to her husband. The only suggestion that George Wilson had separate assets to apply to the purchase of lands is in her testimony that a lot given her by her mother was mortgaged to Mrs. Kennedy for a payment on the farm. She said that “we” later paid the mortgage and sold the lot. The proceeds of the sale of the lot were used for the George Wilson family. She testified that her husband became a veterinarian and worked for others with cattle before he and his brother acquired their herd. This is the only way in which she fixes the time, and is the only indication that George Wilson ever engaged in any business activity or employment separately from J. B. Wilson. There is other testimony and other corroboration of J. B. Wilson. That recited is illustrative. I submit that the evidence is more than sufficient to establish J. B. Wilson’s interest in the lands known as the Wilson Bros. Ranch held in the name of George Wilson. This is without the testimony of J. B. Wilson excluded by the court under the dead man’s statute. This may have been error. The personal representative of George Wilson’s estate was a party to J. B.’s counterclaim or cross-complaint only as a volunteer. It is not seriously contended that the land is needed for any purpose in connection with the administration of the estate. Wilson concedes that he is estopped to assert any claim against creditors of the George Wilson estate because of the long number of years that he permitted the title to be held in George’s name. He admits that the partnership is liable for the payment of mortgage indebtedness on the land. Even if the administrator is properly a nominal party, the dead man’s statute has no application to litigation which is basically between J. B. Wilson and the heirs of the estate. June 21, 1971 This is also without regard to appellant’s serious contention that the answer to J. B. Wilson’s counterclaim or cross-complaint should have been stricken, because it was filed more than 20 days after service of the counterclaim. See Utley v. Heckinger, 235 Ark. 780, 362 S. W. 2d 13. I respectfully dissent. I am authorized to state that Mr. Justice Brown joins in this opinion.