Court Opinion

ID: 882527
Source: CourtListenerOpinion
Date Created: 2013-06-05 01:36:37.289513+00
Date Added: 2024-06-11T09:07:45.073607
License: Public Domain

NO.    91-317

             IN THE SUPREME COURT OF THE STATE         OF MONTANA

                                       1992

MARIE DOTING,

                  Plaintiff and Cross-Appellant,
      -vs-
FRANK J . TRUNK, J R . ,   a n d PATRICIA A . TRUNK,
                  Defendants, Respondents and Appellants.

FIRST CITIZENS BANK OF BOZEMAN,
                  Plaintiff and Respondent,

m R I E DOTING, FRANK J. TRUNK, JR., PATRICIA A. TRUNK,
                  D e f e n d a n t s , Appellants and Cross Appellants.

APPEAL FROM:      District Court of the Eighteenth Judicial District,
                  In and for the County of Gallatin,
                  The Honorable Kenneth E. Wilson, Judge presiding.

COUNSEL OF RECORD:

             For Appellant:
                  John C. Brown; Cok      &    Wheat, Bozeman, Montana
             For Respondent:
                   J. David Penwell, Attorney at Law, Bozeman, Montana
                   Gregory 0 . Morgan, Attorney at Law, Bozeman,

          @A?= 2 1 7992             Submitted on Briefs:       April 15, 1992
                                                    Decided:   May 21,     1992

                                       Clerk
Justice Fred J. Weber delivered the Opinion of the Court.

     This case concerns the dissolution of the Frank J. Trunk   &   Son
Partnership.   Plaintiff, Marie Doting (Ms. Doting), initiated the
underlying action by filing her complaint and petition to dissolve
the partnership.     Defendants   (Trunks) moved   to dismiss the
complaint on the grounds that Ms. Doting's request for judicial
dissolution of the partnership agreement violated the parties'
partnership agreement.   The Trunks further filed a motion for a
protective order to stay their responses to Ms. Doting's discovery
requests until the motion to dismiss had been decided.              The
District Court for the Eighteenth Judicial District, Gallatin
County, denied the Trunks' motion to dismiss and motion for
protective order.    After a non-jury trial, the District Court
ordered the dissolution of the partnership. Trunks appeal and Ms.
Doting cross-appeals. We affirm.
     We restate the issues as follows:
     1.   Did the District Court properly order the dissolution of
the partnership prior to the winding up of certain contract
receivables and the liquidation of certain assets and liabilities?
     2.   Did the District Court properly conclude that Ms. Doting
was not liable for damages or attorney fees incurred by the Trunks
as a result of the dissolution of the partnership?
     3.   Did the District Court properly find the Trunks liable
for certain partnership expenses?
     4.   Did the District Court properly conclude that the Trunks
should pay one-half of Mr. Frost's attorney fees related to his
representation   of   the   partnership    in   the   Rae   subdivision
litigation?
     5.   Did the District Court err in ruling that Ms. Doting was
not entitled to punitive damages?
     On May 15, 1975, Frank and Patricia Truck, Marie Doting and
Maurice Klabunde (Ms. Doting's ex-husband), executed a partnership
agreement which created the Frank J. Trunk        &   Son Partnership.
Frank and Patricia Trunk each owned a 25% interest in the
partnership. Ms. ~otingand her husband at the time, Mr. Klabunde,
owned the other 50% interest.        Ms.   Doting and Mr. Klabunde
subsequently divorced, at which time Mr. Klabundels interest was
assigned to Ms. Doting by Mr. Klabunde pursuant to their decree of
dissolution of marriage.
     The partnership operated King Arthur's Mobile Home Park.
Pursuant to the partnership agreement, Frank Trunk was named
general manager for the purposes of operating the King Arthurls
Mobile Home Park. The District Court found that from May of 1975,
through June 21, 1982, the date of the Klabunde's divorce, Mr.
Klabunde spoke for the Klabunde interest in the partnership.        The
court further found that Ms. Doting's conduct was "totally passive
with the exception of signing essential partnership document^.^^
The court found the Trunks were the active managers of the
partnership through 1987 and that Ms. Doting was aware of and
consented to such management.    The District Court found that the
business being conducted by the partnership at the date of and
after its formation included the development and operation of King
Arthur's Mobile Home Park and the platting and subdevelopment of
Rae subdivision, which ultimately resulted in the creation of 50
lots for single and multi-family residential units.
     In September of 1981, the partnership sold its chief asset,
the King Arthur's Mobile Home Park, to Mr. Clark Bronson (the
Bronson contract), with the final payment due in August, 2001. The
mobile home park was resold in 1984 to Gary and Loretta Oakland
(the Oakland contract).   After the sale of the mobile home park,
the partnership's primary function was to collect and distribute
the proceeds from the sale of the partnership properties.   Some of
the partnership lots were sold to the Kapinos         (the Kapinos
contract) with the final payment due in November, 1993. The escrow
agent for the Kapinos contract is the First Citizen's Bank of
Bozeman, Montana.
     Shortly after the Klabundes divorced in June of 1982, the
partners had   a    formal meeting to discuss the wind      up   and
liquidation of the partnership business.   The court found that it
was the intention of the partners at that time to continue the
partnership while it liquidated its assets.
     On June 16, 1988, Ms. Doting filed a complaint and petition to
dissolve the partnership.     Ms. Doting alleged that after her
divorce, the Trunks failed to respond to her requests to keep her
advised of the status of the partnership and the manner in which
the partnership conducted its affairs.        She alleged that her
efforts to remain informed of the partnership's business became
further frustrated by the fact that the Trunks moved out of Montana
and conducted all the partnership business from outside the state.
Ms. Doting made several specific allegations regarding the Trunks'

                                4
  violation of the Uniform Partnership Act and the partnership
  agreement, including:     (1) breach of the partnership agreement by
  paying a salary to Mrs. Trunk; (2) Mr. Trunk's amendment of an
  escrow instruction without resolution and authorization of the
                .<
                 i""L
7 partner~hip~without Doting's knowledge; (3) refusal to provide
                    Ms.
  Ms. Doting with information concerning the partnership business;
  (4) refusal to distribute Ms. Doting's share of the partnership
  funds from the partnership bank account when Ms. Doting demanded
  such:     (5) willful   and persistent breach   of the partnership
  agreement and attempt to exclude Ms. Doting from her rights of
  management; and, (6) that the sale of the King Arthur's Mobile Home
  Park eliminated the basic purpose for existence and operation of
  the partnership; and the irreconcilable difference between the
  partners concerning the partnership made a dissolution of the
  partnership necessary and equitable. She further alleged that the
  Trunks violated the implied covenant of good faith and fair dealing
  and as a consequence she was entitled to recover exemplary and
  punitive damages.
          The Trunks moved to dismiss the complaint on the grounds that
  Mr. Doting's request for judicial dissolution of the partnership
  violated the partnership agreement. The District Court denied the
  motion.      Subsequently, the Trunks filed their answer to the
  complaint, again requesting that the District Court deny the
  request for judicial dissolution because it would violate the
  partnership agreement.
          After a three-day trial, the District Court issued its
  findings of fact and conclusions of law, and ordered Ms. Doting to

                                     5
prepare an appropriate judgment reflecting the findings and
conclusions.   On January 17, 1991, the ~istrictCourt signed the
judgment dissolving the partnership.
     The Trunks subseguently moved to amend the judgment and the
findings of fact.   While this motion was pending, the ~istrict
Court consolidated this case with the interpleader action entitled
First Citizens Bank of Bozeman v . Marie Dotinq, Frank J. Trunk,
Jr., and Patricia A . Trunk. The issues raised in the interpleader
action are not relevant to this case.
     On February 27, 1991, a hearing was held on the Trunks' motion
   amend findings of fact and motion to amend the judgment.      The
District Court issued its order amending the findings of fact and
judgment on March 8, 1991.    The March 8th order was amended on
April 5, 1991, to address accumulated funds held in escrow.      The
Trunks appeal and Ms. ~otingcross-appeals.

     Did the District Court properly order the dissolution of the
partnership prior to the winding up of certain contract receivables
and the liquidation of certain assets and liabilities?
     The District Court referred to this case as "The War of
RosesI1,noting that there was such animosity and antagonism between
the parties, that dissolution of the partnership was in everyone's
best interest.   The court stated:
     The conflict manifests itself in the antagonism between
     the parties, between the attorneys, between the plaintiff
     and the attorney for the defendants. This in itself
     reinforces the Court's resolve that the partnership
     should be dissolved with the words of this Court echoed
     by the Montana Supreme Court in Heitz -vs [sic] Heitz, 47
     St.Rep. 1393 (1990):
            We agree and repeat the statements of the
            District Court that this type of case should
            be settled between the two parties and that
            neither party may be satisfied with what the
            Courts say.
     The District Court agreed with the Trunks that the bookkeeping
should be done by a qualified third party and appointed Mr. Bailey
of the accounting firm of Bailey and Brinkman as the agent to wind
up the affairs of the partnership.    Mr. Bailey was appointed with
the consent of the parties.    The court ordered Mr. Bailey to wind
up the partnership affairs within 60 days of the date of the
court's order.
     The District Court concluded that the legal sale of the
principal asset of the partnership, King Arthur's Mobile Home Park,
was accomplished prior to the institution of this action, and the
sale contract, and the Kapinos contract, were easily divisible.
The court concluded that the remaining assets of the partnership
were also easily divisible. The court ordered that the assets of
the partnership be distributed 50% percent to Ms. Doting and 50% to
the Trunks.      It ordered cash in the partnership checking and
savings account be immediately distributed equally to the parties.
It further ordered that the Bronson contract and Kapinos contract
be distributed equally.
     With regard to the Bronson and Kapinos contracts, the court
ordered :
          The payments on the Kapinos contract to the escrow
     agent shall be deposited in the new account to be
     established for the winding up of the Partnership affairs
     with the accounting firm of Bailey and Brinkman, Bozeman,
     Montana, as provided below.
            The payments on the Bronson contract, to the escrow
    agent the First Citizens Bank, will henceforth be divided
    by the escrow agent when they are received; one-half
    (1/2) to [Ms. Doting] and one-half (1/2) to the [Trunks]
    to be disbursed to the parties by the said Bank as the
    parties shall instruct the Bank.

         In addition, counsel for [Ms. Doting] shall prepare
    an assignment from the partnership to the parties of the
    partnership's interest in the Bronson contract and the
    Kapinos contract conveying an undivided tenancy in common
    fifty percent (50%) interest in and to said contracts to
    each of the parties respectively.   ...
         5)   The partnership checking and savings account
    shall be closed and a new account opened by the
    accounting firm of Bailey and Brinkman, who functioned as
    the accountants for the partnership previously,    . . .
    The Kapinos payment shall be distributed by the escrow
    agent for said contract, the Montana Bank of Bozeman, to
    said accountants to be deposited in the new partnership
    account. Said funds shall be used by the accountants to
    pay partnership bills and to wind up the affairs of the
    partnership with any surplus to be distributed one half
                                                            .
     ...
    (1/2) to [Ms. Doting] and one half (1/2) to the [Trunks]
          The subsequent Kapinos payments shall be used to
    cover the partnership debts until the winding up of the
    partnership affairs is completed.
    The Trunks maintain that the partnership must be allowed to
continue in existence for the limited purpose of administering and
enforcing the Bronson and Kapinos contract receivables.         They
further maintain that the District Court's order is unclear as to
whether Mr. Bailey is to continue to administer the Kapinos and
Bronson contract receivables after the end of the 60-day wind up
period. They contend that Mr. Bailey should continue to administer
the two contract receivables because the ramifications of the
alternative, that the two contract receivables be distributed to
the parties as tenants in common prior to their payoffs, would
seriously jeopardize the value of the two receivables. Hence, the
Trunks maintain that the wind up of the partnership's affairs
should be continued until such time as the Bronson and Kapinos
contracts are paid in full.
    Ms.     Doting   contends that    there   is no       reason   for the
partnership to remain in existence because almost all of the lots
have been sold by mutual consent of the parties and the                Rae
Subdivision suit involving the partnership has been                finally
adjudicated.     See Rae Subdivision County Water     &   Sewer Dist. No.
313 v. Frank J. Trunk   &   Son (Mont. 1991), 823 P.2d 845, 48 St.Rep.
1065.    She maintains that the grounds or reasons for the original
creation of the partnership no longer exist following the sale of
the principal asset, the King Arthur's Mobile Home Park.               She
further points out that the Trunks moved to the State of Washington
shortly after selling the mobile home park and the partnership has
not been engaged in any business other than collecting receivables
since that time.
     As Ms. Doting points out, the partnership agreement does not
provide for termination or dissolution, but rather only provides
for a buy-out agreement between partners.        However, the Uniform
Partnership Act (UPA) specifically provides for the procedure for
dissolution of a partnership.         In fact, the UPA explains the
relationship of winding up, dissolution, and termination of a
partnership.
        Section 35-10-604(1) (f), MCA, provides that a court may order
dissolution if circumstances render a dissolution equitable. Such
is the case here.     The District Court stated that
        since the partners are unable to agree as to the
        continued management of the partnership affairs and the
        partnership agreement does not provide an acceptable
      means to settle the problems, and the fact that the main
      assets of the partnership have been sold, the Court
      finds, as a matter of law, that the partnership should be
      dissolved   ...
Section 35-10-601, MCA, provides:
      The dissolution of a partnership is the change in the
      relation of the partners caused by any partner ceasing to
      be associated in the carrying on as distinguished from
      the winding up of the business.
The     omm mission Comments to the Montana Code Annotated offer the
following explanation for the term ndissolution".
           As used by the legal profession the term
      lldissolutionndesignates, not only the single act of the
      termination of the actual conduct of the ordinary
      business, but also often the series of acts thereafter
      until the final settlement of all partnership affairs.
      It is also freguently said that dissolution, although the
      word is used to designate only the termination of
      ordinary business relations, terminates the partnership,
      it being at the same time explained that the partnership
      thereafter continues to exist for the purpose of suing
      and being sued in the process of winding up partnership
      affairs. Certainty demands that the confusion should be
      removed if possible. In this act dissolution designates
      the point in time when the partners cease to carry on the
      business together; termination is the point in time when
      all the partnership affairs are wound up; winding up, the
      process    of   settling   partnership   affairs    after
      dissolution. (Emphasis added).
Section 35-10-602, MCA, provides:
        On dissolution the partnership is not terminated but
        continues until the windins up of partnership affairs is
        completed. (Emphasis added).
        We conclude that the Trunksf argument that the partnership
should remain in existence until the winding up is completed is
moot.    As explained by the UPA, dissolution does not terminate the
partnership for purposes of winding up and suing and being sued
while winding up.     While the District Court ordered Mr. Bailey to
wind up the partnership affairs within 60 days, it is obvious that
the Kapinos and Bronson contract receivables will not be paid in
full by that time.   However, the court further ordered that the
subsequent Kapinos payments shall be used to cover the partnership
debts until the winding up of the partnership affairs is completed.
Under the UPA, the partnership will continue in existence solely
for the purpose of winding up until all receivables have been
received and payables have been paid.
     The Trunks argue that Mr. Bailey should be ordered to continue
the administration of the partnership affairs until everything is
paid off.   We disagree.     The partnership will by law remain in
existence for purposes of winding up.     If the partners have any
legal problems with the winding up, they have adequate legal
remedies under the UPA.      As the court ordered, the payments on
receivables collected after Mr. Bailey's 60 days are up will be
used to pay any remaining partnership debts and otherwise divided
between the parties 50-50.
     We agree with the District Court that it is unfortunate that
there is such extreme animosity between these parties, and we
further agree that due to such animosity, this type of case should
be settled between the two parties and not by the courts. We hold
that the District Court properly ordered the dissolution of the
partnership prior to the winding up of certain contract receivables
and the liquidation of certain assets and liabilities.
                                  II

     Did the District Court properly conclude that Ms. Doting was
not liable for damages or attorney fees incurred by the Trunks as
a result of the dissolution of the partnership?

                                  11
    The Trunks maintain that Ms. Doting should be liable for
damages and attorney fees incurred by them "as a result of [Ms.
Dotingls] dissolution of the partnership in contravention of the
partnership agreementn.
    As noted in Issue I, the reason for the partnership's
existence ceased to exist when the King Arthur's Mobile Home Park
was sold and the Trunks moved out of state.   Furthermore, as held
in Issue I, the partnership agreement did        not provide    for
dissolution, only buy-out.
     We conclude that the Trunks1 argument on this issue is without
merit and affirm the District Court's decision on this issue.

     Did the District Court properly find the Trunks liable for
certain partnership expenses?
     The District Court made the following finding of fact:
          28. The Court finds that the Trunks1 expenses in
     connection with partnership business fortravel, lodging,
     phone, meals, the plumbing license, the newspaper
     subscription and other related expenses were necessary
     and reasonable in furtherance of the partnership
     business. However, one half of all expenses related to
     this action that may be included in [Ms. Doting's]
     proposed finding No. 40 should be remitted to [Ms.
     Doting].
The District Court ordered Ms. Doting to prepare an appropriate
judgment reflecting the Findings of Fact and Conclusions of Law.
Ms. Doting complied and the court signed the judgment.   Paragraph
11 of the judgment prepared by Ms. Doting and signed by the court
provided that Ms. Doting was entitled to
     The further and additional sum of $3,295.65 representing
     one-half (1/2) of the expenses paid by the Trunks out of
     partnership assets related to this action. (Emphasis
     added)
     The Trunks maintain that the sum of $3,295.65                 actually
represents one-half of the legitimate expenses of the partnership
paid by the Trunks, justified by them at trial and approved by the
District Court in the above-quoted Finding of Fact No.                   28.

Therefore, the Trunks ask this Court to delete this item of damages
from the judgment and order Ms. Doting to reimburse this amount to
them.
        Ms.   Doting maintains that her proposed           findings of the
expenses incurred were the amount of $6,591.30, and that one half
of that amount is $3,296.65       -   the exact amount found by the court
in its judgment.         The court had ordered that one half of all
expenses related to this action should be remitted to her.               Ms.
Doting contends that if she does not receive the $3,296.65, she
would end up paying a portion of the Trunks' defense costs.
        We affirm the determination of the District Court that the
Trunks properly should pay for their own defense in this case. We
affirm the holding of the District Court that the Trunks are
therefore liable to Ms. Doting for $3,296.65 in payment of certain
partnership expenses.
                                       IV
        Did the District Court properly conclude that the Trunks
should pay one-half of Mr. Frost's attorney fees related to his
representation      of    the   partnership     in   the   Rae   Subdivision
litigation?
        The partnership's       attorney, Mr.    Frost,    represented   the
partnership in the Rae Subdivision litigation until Ms. Doting
hired her own attorney, Mr. Penwell.         Mr. Penwell then filed an
answer in the Rae Subdivision case in Ms. Doting's behalf.              Mr.
Frost continued on as counsel for the Trunks in the Rae Subdivision
case.
     The District Court ordered that the Trunks pay Ms. Doting one
half of the sums paid by the partnership to Mr.                   Frost for
representation of the partnership in the Rae Subdivision suit after
Mr. Penwell filed an answer for Ms. Doting in that suit.               That
amount was found to be $1,309.83.
        The Trunks contend that the District Court erred in ordering
them to pay that sum because it represents one-half of the sums
paid by the partnership to Mr. Frost for his representation of the
partnership in the Rae Subdivision litigation before Ms. Doting
filed her own answer.      They maintain that the partnership should
pay all of Mr. Frost's attorney fees and costs arising from his
representation of the partnership in the Rae Subdivision litigation
because Mr. Doting's attorney merely adopted and ratified Mr.
Frost's work in the case.
        As we stated in the previous issue, the Trunks cannot expect
Ms. Doting to bear the burden of paying for the expenses of both
parties. Although on appeal the Trunks contend that Ms. Doting had
no authority to fire the partnership attorney and hire her own
attorney to defend her in the Rae Subdivision case, they do not
argue, nor have they provided evidence for purposes of this case
before     us,   that   they   previously   objected   to   her    separate
representation in the Rae Subdivision case or previously argued
that she lacked authority to hire separate counsel.          They cannot

                                     14
raise an issue of lack of authority for the first time on appeal.
    We hold that the District Court properly concluded that the
Trunks should pay one-half of Mr. Frost's attorney fees related to
his representation of the partnership in the Rae Subdivision
litigation.
                                v
     Did the District Court err in ruling that Ms. Doting was not
entitled to punitive damages?
     Ms. Doting has now conceded that her cross-appeal on this
issue was not filed on time.    We will not address the punitive
damages issue.
     Aff inned.

                                      ,
We Concur: