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McCormick v. Brevig

Montana Supreme Court
322 Mont. 112, 96 P.3d 697, 2004 MT 179 (2004)
ELI5:

Rule of Law:

Under Montana's Revised Uniform Partnership Act, when a partnership is dissolved by judicial decree because it is no longer reasonably practicable to carry on the business, the partnership's assets must be liquidated and any surplus distributed to the partners in cash; a court lacks the equitable authority to order one partner to purchase another partner's interest.


Facts:

  • After their father's death in 1982, siblings Joan McCormick and Clark Brevig became partners in a family ranch operation, initially with 25% and 75% interests, respectively.
  • From 1981 through 1986, Joan worked as an oil and gas 'landman' and contributed all of her income, less expenses, to support the financially struggling ranch, at times depositing her earnings directly into the partnership bank account.
  • In 1984, Joan purchased an additional 25% interest in the partnership from Clark, making them equal 50/50 partners.
  • In 1986, the partners executed an addendum to their agreement to account for Joan's excess capital contributions, agreeing her interest would not exceed 50%.
  • By the early 1990s, disagreements over ranch management, particularly regarding its debt, caused the siblings' relationship to deteriorate to the point where cooperation ceased.

Procedural Posture:

  • In 1995, Joan McCormick sued Clark Brevig and the Partnership in the District Court of the Tenth Judicial District, Fergus County, seeking dissolution and an accounting.
  • Clark Brevig filed counterclaims and a third-party complaint against the partnership's accountants.
  • The District Court granted partial summary judgment in favor of Joan McCormick and dismissed Clark's claims against her.
  • On a prior appeal (McCormick I), the Montana Supreme Court affirmed the judgment for Joan but reversed a summary judgment that had been granted to the accountants, remanding the case for further proceedings.
  • Following remand and a bench trial on Joan's claims, the District Court ordered the partnership dissolved pursuant to § 35-10-624(5), MCA.
  • Instead of ordering liquidation, the District Court, citing a desire to preserve the family farm, ordered Joan to sell her interest in the partnership to Clark for a court-determined price of $1,107,672.
  • Joan McCormick appealed the District Court's order compelling the sale of her interest to the Montana Supreme Court.

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Issue:

After ordering the dissolution of a partnership, does a district court err by failing to order the liquidation of partnership assets and instead granting one partner the right to purchase the other partner's interest at a court-determined price?


Opinions:

Majority - Justice Rice

Yes. When a court orders a partnership's dissolution under § 35-10-624(5), MCA, it must follow the statutory mandate of § 35-10-629, MCA, which requires the liquidation of partnership assets and the distribution of any surplus to partners in cash. The plain language of the statute, requiring payment 'in cash' after the 'liquidation of the partnership assets,' is unambiguous and controlling. The court distinguished between 'dissociation' under the Revised Uniform Partnership Act (RUPA), which may trigger a buyout, and a judicial 'dissolution,' which triggers a mandatory winding up and liquidation process. The District Court erred by consulting a dictionary to find an alternative meaning for 'liquidate' and creating a judicially-ordered buyout, a remedy not provided for by the statute in this context.



Analysis:

This decision solidifies the distinction between partner dissociation and judicial dissolution under Montana's Revised Uniform Partnership Act (RUPA). It establishes a bright-line rule that courts lack equitable discretion to fashion remedies, such as a forced buyout, when the statute explicitly mandates liquidation upon a court-ordered dissolution. The ruling emphasizes statutory formalism over judicial intervention aimed at preserving a business, even a family-run enterprise. This precedent will compel partners who wish to create buyout options upon dissolution to do so explicitly within their partnership agreements, as they cannot rely on a court to create such an outcome.

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