Plaintiffs husband of thirty years died in February 1988. In February 1989, Plaintiff met Defendant in Mobile,

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Plaintiff’s husband of thirty years died in February 1988. In February 1989, Plaintiff met Defendant in Mobile, Alabama, while traveling. Their chance meeting quickly blossomed into a romantic relationship. When Plaintiff returned to her home in Maryland in late February 1989, Defendant accompanied her and they began living together.

   Initially, Defendant told Plaintiff he worked for a major oil company, had been outside the country for the past three years, was independently wealthy, and was not married. As Plaintiff later learned, none of these statements was true. In truth, Defendant had recently been released from prison. He had multiple criminal convictions, including convictions for counterfeiting and stealing. Further, Defendant’s assets at the time were no more than $2,000, and he was legally married to Patricia Lloyd.

   Evidence as to when Plaintiff learned of Defendant’s deceptions was contradictory. The trial court found that Plaintiff first learned of Defendant’s criminal history and lack of wealth soon after she returned to Maryland in February 1989. It found that Plaintiff discovered Defendant was not single ‘‘soon after her void marriage to Defendant.’’ The parties’ ‘‘void marriage’’ occurred July 10, 1989, in Canada.

   Except for occasional vacations, Plaintiff and Defendant resided in Plaintiff’s home in Maryland from late February 1989 through October 1990. During that period, Defendant made repairs and renovations to Plaintiff’s house. In October 1990, Plaintiff sold her Maryland home in an ‘‘owner-finance’’ arrangement.

   The parties then moved to Missouri. After looking at several farm properties, they bought a 600-acre farm in Crawford County, Missouri, for $150,000. The deed was dated March 8, 1991. The grantees named in the deed and the type of tenancy created were as follows: Plaintiff, a single person, and Defendant, a single person, as joint tenants with right of survivorship. The $150,000 purchase price was paid as follows: $100,000 cash downpayment and a $50,000 purchase money note that called for 120 monthly installments of $633.38.

   After buying the farm, Plaintiff and Defendant bought cattle and farm machinery, then began operating a cattle business on the property. The parties also made improvements to the farm, including remodeling an old farm house in which they lived. In June 1992, they began construction on a 4,200 square-foot house. Later, the house was expanded to 6,500 square feet. By the time of trial, Plaintiff’s expenditures for labor and materials on the home exceeded $201,000.

   A progressive deterioration in the parties’ relationship led to the filing of this multiple-count lawsuit in October 1995. [The trial court found that the subject real estate was not a partnership asset and ordered it be sold at public auction and the net sale proceeds to be distributed ninety-eight percent to Plaintiff and two percent to Defendant. The Defendant appealed the trial court’s refusal to classify farm real estate as a partnership asset. The Defendant claims he was prejudiced by this error because if the farm were properly classified as partnership property, any proceeds from its sale would be divided in accordance with the partners’ interests.]

   ‘‘The true method of determining whether, as between partners themselves, land standing in the names of individuals is to be treated as partnership property is to ascertain from the conduct of the parties and their course of dealing, the understanding and intention of the partners themselves, which, when ascertained, unquestionably should control.’’ [Citations.] Whether real estate titled in the names of individual partners is partnership property is a question of fact and the burden of proof is on the one alleging that the ownership does not accord with the legal title. [Citation.]

   In attempting to demonstrate that the parties intended for the real estate to be a partnership asset, Defendant points to the joint ownership of the farm and the fact that the parties operated the partnership cattle business on the farm as evidence that the two understood and intended for the farm to be a partnership asset. His reliance on those facts is misplaced, however. A joint purchase of real estate by two individuals does not, in and of itself, prove the land is a partnership asset. [Citation.] On the contrary, when land is conveyed to partnership members without any statement in the deed that the grantees hold the land as property of the firm, there is a presumption that title is in the individual grantees. [Citation.] Moreover, ‘‘[e]vidence that the land is used by the firm is of itself insufficient to rebut the presumption.’’ [Citation.] The mere use of land by a partnership does little to show the land is owned by the partnership. 614 Part 6 Unincorporated Business Associations [Citation.] Standing alone, evidence of partnership usage does not compel a finding that the land is a partnership asset. [Citations.]

   Defendant points to evidence that some real estate taxes and promissory note payments for the farm came from partnership funds. He argues such evidence indicates the parties intended the farm to be a partnership asset. We agree that such evidence is a factor to be considered, but it is not determinative of the issue, especially, when, as here, the partnership payment evidence is viewed in context. For instance, none of the $100,000 downpayment for the farm came from partnership funds. Instead, it all came from Plaintiff’s separate funds. Plaintiff was never reimbursed by either the partnership or Defendant for her downpayment. Of eighty-four monthly farm note payments, only three were paid from the parties’ joint account. Seventy-seven of the monthly farm note payments, a total of $48,770.26, were paid from Plaintiff’s separate funds. Plaintiff also spent $201,927.87 of her separate money to build a new house on the farm. None of the house construction costs came from partnership funds. Of the seven years’ worth of state and county real estate taxes that had been paid on the farm property, only one year was paid out of partnership funds. On the whole, the evidence is that Plaintiff invested over $350,000 of her own funds in this farm while less than $2,400 of partnership funds were used to pay the farm note and real estate taxes. Such minimal partnership expenditures is more indicative of the tendency of people—particularly in family or quasi-family businesses—to intermingle personal and partnership affairs, than it is an indication of the parties’ intent to include the farm as a partnership asset. [Citation.]

   Other evidence from which the parties’ intent can be gleaned includes the following: (A) Plaintiff and Defendant signed as individuals on the $50,000 purchase money note and deed of trust securing the same, without a recital of partnership status; (B) neither party filed a partnership income tax return; (C) Plaintiff filed income tax returns as an individual; (D) Defendant never filed an income tax return after the farm was purchased; (E) Plaintiff wrote checks on her individual account for materials and labor for farm improvements; and (F) Plaintiff repeatedly testified she never intended nor agreed to a partnership with Defendant. We find these circumstances sufficient to support the implicit finding and judgment of the trial court that a partnership agreement did not exist regarding the land and it was not a partnership asset. The trial court did not commit reversible error when it failed to include the farm as a partnership asset.

   The judgment of the trial court is affirmed. 

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Smith and Roberson Business Law

ISBN: 978-0538473637

15th Edition

Authors: Richard A. Mann, Barry S. Roberts

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