In Re Estate of Schaefer
72 Wis. 2d 600, 241 N.W.2d 607, 1976 Wisc. LEXIS 1436 (1976)
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Rule of Law:
Real estate purchased with partnership funds and used for partnership purposes is presumed to be partnership property, regardless of the name in which the title is held. An oral partnership agreement to deal in real estate is enforceable, despite the statute of frauds, if the parties' long-standing conduct constitutes full performance of the agreement.
Facts:
- In 1933, brothers Ben G. Schaefer and Arthur E. Schaefer started a business, each contributing equal capital, without a written partnership agreement.
- From 1944 to 1967, the brothers acquired 13 parcels of real estate for the business.
- The deeds to the properties varied: nine named the brothers individually, three named them 'as tenants in common,' and one referenced a 'real estate partnership.'
- The brothers maintained a separate bank account titled 'Ben G. Schaefer and Arthur E. Schaefer, Real Estate Trust Account, Partnership.'
- All funds for purchasing, improving, and managing the properties came from this partnership account, and all income from sales and leases was deposited into it.
- For over 20 years, the business filed partnership tax returns, and the profits were divided equally between Ben and Arthur.
- Various business documents, including leases and mortgages, referred to the brothers as 'co-partners' or to the business as a partnership.
- Following Ben G. Schaefer's death, his widow, Marilynn H. Schaefer, claimed the real estate was held as tenants in common, not as partnership property.
Procedural Posture:
- Marilynn H. Schaefer, widow of the decedent Ben G. Schaefer, filed a petition in the probate court.
- The petition claimed that real estate inventoried as property of a partnership between Ben and Arthur Schaefer was actually owned by them as tenants in common.
- The trial court found that a partnership existed and the real estate was partnership property.
- The trial court entered an order denying Marilynn Schaefer's petition regarding the real estate.
- Marilynn Schaefer (appellant) appealed the trial court's order to the Wisconsin Supreme Court.
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Issue:
Does real estate purchased with partnership funds and used for partnership purposes constitute partnership property, even when the deeds name the individuals as grantees (sometimes as tenants in common) and there is no written partnership agreement?
Opinions:
Majority - Day, J.
Yes. Real estate purchased with partnership funds and appropriated for partnership purposes is partnership property, and an oral partnership agreement is taken out of the statute of frauds by full performance. The evidence overwhelmingly establishes the existence of a partnership based on the brothers' intent, community of interest, shared management, and profit sharing. Under the Uniform Partnership Act, property acquired with partnership funds is presumed to be partnership property unless a contrary intention appears. Here, the consistent use of a partnership bank account for all real estate transactions, the filing of partnership tax returns, and references to a partnership in business documents strongly support this presumption, outweighing the inconsistent language in a few deeds. While Wisconsin's minority rule requires real estate partnerships to be in writing under the statute of frauds, an exception applies for full performance. The brothers' conduct over more than two decades in jointly managing the properties and sharing profits constitutes full performance, thus making their oral agreement enforceable. The form of the deeds and the inclusion of words of inheritance are not controlling, as courts look to the parties' intent and the substance of their dealings to determine the character of the property.
Analysis:
This case solidifies the principle that the substance of a business arrangement and the conduct of the parties will prevail over formalities like the form of title or the absence of a written agreement. It reinforces the strength of the statutory presumption that property bought with partnership funds is partnership property. The decision provides a significant clarification on the 'full performance' exception to the statute of frauds in the context of oral real estate partnerships, demonstrating that long-term, consistent actions by partners are sufficient to validate their agreement. This protects the integrity and continuity of a partnership's assets against claims by heirs seeking to disrupt the business based on technical defects in documentation.
