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Ballou v. Walker

Supreme Court of Montana

August 15, 2017

BONNIE BALLOU, Individually as General Partner of L O Ranch Limited Partnership, and L O RANCH LIMITED PARTNERSHIP, a Montana Limited Partnership, Plaintiffs and Appellants,
v.
WILLIAM WALKER, Individually as Former General Partner of L O Ranch Limited Partnership, Defendant, Appellee and Cross-Appellant. WILLIAM WALKER, Counter claimant, Appellee and Cross-Appellant,
v.
BONNIE BALLOU, Counter claimant and Appellant, and DORAN PRIEWE, Third Party Defendant and Appellant.

          Submitted on Briefs: May 17, 2017

         Appeal From District Court of the Sixteenth Judicial District, In and For the County of Carter, Cause No. DV-6-2014-5 Honorable Michael B. Hayworth, Presiding Judge

          For Appellants: Michael E. Begley, Jessica T. Fehr, Afton E. Ball, Jordan W. FitzGerald, Moulton Bellingham PC, Billings, Montana (Attorneys for Bonnie Ballou and L O Ranch Limited Partnership) Erica D. Griffith, Krutzfeldt & Jones, PLLP, Miles City, Montana (Attorney for Doran Priewe)

          For Appellee: Michelle M. Sullivan, Michael A. Monson, Holland & Hart, LLP, Billings, Montana.

          OPINION

          LAURIE MCKINNON JUSTICE.

         ¶1 Bonnie Ballou (Ballou) appeals the judgment entered after a bench trial in the Sixteenth Judicial District Court, Carter County, that invalidated her attempt to expel her twin brother William Walker (Walker) from the family's limited liability partnership and which dissolved the partnership between them. Walker argues the court correctly preserved his partnership interest before ordering the partnership's dissolution. He counterclaims, however, on the issue of attorneys' fees, arguing that although the partnership agreement provided for an award of such fees to the party prevailing in litigation concerning partnership matters, Ballou's motion to recover those fees was deemed denied 60 days after the motion was filed. He claims the District Court was deprived of authority to consider the motion once it was deemed denied, but nevertheless awarded the fees to Ballou. This litigation thus presents the following issues on appeal:

1. Whether the District Court erred by concluding Walker was not subject to the buy-out provisions of the partnership agreement and dissolution was necessary.
2. Whether the District Court was divested of its authority to award attorneys' fees more than 60 days after the motion for fees was filed.

         ¶2 We affirm in part, reverse in part, and remand for further proceedings consistent with this Opinion.

         FACTUAL AND PROCEDURAL BACKGROUND

         ¶3 Twin siblings Bonnie Ballou and William Walker were the principals in L O Ranch Limited Partnership (L O), a family partnership meant at its inception to steward a family ranch and its real property located in eastern Montana for multiple generations. L O's substantial holdings consist primarily of approximately 14, 800 acres of real property near Alzada, Montana. The twins' interests in the partnership were uneven. When this litigation began, Walker held a 1.00% general partner interest and a 52.25% limited partner interest, for a total holding of 53.25%. Ballou's interests were a 0.50% general partner interest and a 46.20% limited partner interest, [1] for a total holding of 46.70%. They acquired their partnership interests from inheritance, capital contributions, intervivos gifts from their mother, and litigation against their brothers. When she died, the twins' mother, Eunice Walker, held her shares of the partnership in trust. Her will directed that the trust shares be distributed equally between her five children. After Eunice Walker died and her shares were distributed according to her testamentary wishes, Ballou and Walker wanted the partnership to continue holding the land and operating the ranch. The other siblings wanted to liquidate their holdings.

         ¶4 Following litigation, the siblings entered into an agreement whereby Ballou and Walker would buy out the remaining siblings' interests by securing a loan from Pinnacle Bank (Pinnacle) for $737, 986.06. Pinnacle approved the loan with a promissory note payable over 25 years, and with Ballou and Walker named individually as the borrowers, since they were receiving the partnership interests purchased. Pinnacle secured the note through a mortgage on lands L O owned in Carter County, Montana and through a continuing commercial guaranty that listed Ballou and Walker individually as borrowers, and L O as the guarantor. The guaranty gave Pinnacle the right of setoff against any accounts the Partnership maintained at Pinnacle. Accordingly, L O established a Pinnacle account for partnership operations. Ballou and Walker each had full access to this account, including account statements, online access, deposits, and withdrawals. The note was to be paid in 49 equal semi-annual installments of $24, 738.60 and a slightly higher final payment. Ballou and Walker agreed that each was to pay one-half of the note's semi-annual installment, resulting in a semi-annual payment per person of $12, 369.30.

         ¶5 The timing of the note intentionally coincided with payments L O was to receive under a lease agreement L O had recently negotiated with Ballou's alter-ego sheep-ranching business, Ballou Angus. Walker anticipated that income from the lease and from L O's other operations would provide him and Ballou both with sufficient partnership distributions to pay the note. L O deposited the annual Ballou Angus lease payment on February 27, 2013, for $42, 988.50. Walker wrote a check to himself for $22, 891.38 on July 3, 2013, from the L O account at Pinnacle, to pay, among other things, his part of the semi-annual installment due on the Pinnacle promissory note. Based on his L O 53.25% partnership interest, Walker considered this amount to be his rightful distributive draw since the draw reflected exactly 53.25% of Ballou Angus's total lease payment in February.

         ¶6 The partnership agreement (Agreement) that created L O governed partner draws. The Agreement distinguished between general partners and limited partners, giving general partners management powers and responsibilities that limited partners did not have. The Agreement noted in its Definitions section that references to a "Partner, " were meant to encompass both limited and general partners. Section 9.8 of the Agreement governed "Partner Draws, " and provided that "[a] Partner, with the consent of the General Partners, may take a draw upon the Partner's share of anticipated distributions from the Partnership. Such draws may be taken after a determination of distributions for Partners . . . if the General Partners agree." Section 9.5 governed distributions and established that "General Partners may . . . distribute to the Partners Partnership Net Profits and net proceeds . . . as the General Partners, in the exercise of their reasonable judgment find appropriate. . . . [A]ll distributions . . . shall be made in proportion to their respective Percentage interest." Ballou did not agree to Walker's $22, 891.38 draw and no evidence in the record shows Walker ever informed Ballou he was withdrawing these funds. Although Walker's withdrawal accorded with his percentage interest, Walker did not withdraw and distribute a payment to Ballou proportional to her partnership interest percentage. Neither did he offer to do so. Although Walker held a majority interest in the partnership and the District Court determined ...


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