EVERSOLE (VIRGIL), ET AL. VS. MCCURLEY (CAROLE E.), ET AL.
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RENDERED: JANUARY 21, 2011; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2009-CA-001923-MR
VIRGIL EVERSOLE, III, AND
COURTENAY EVERSOLE
v.
APPELLANTS
APPEAL FROM HARLAN CIRCUIT COURT
HONORABLE RODERICK MESSER, SPECIAL JUDGE
ACTION NO. 05-CI-00718
CAROLE E. MCCURLEY;
CAROLE E. MCCURLEY, TRUSTEE OF
THE CAROLE E. MCCURLEY TRUST;
CAROLE E. MCCURLEY TRUST; JAMES
MCCURLEY; MARGARET EDWARDS;
AND BANK OF HARLAN
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: LAMBERT, MOORE, AND NICKELL, JUDGES.
LAMBERT, JUDGE: Courtenay Eversole and Virgil Eversole, III, appeal a partial
summary judgment entered by the Harlan Circuit Court on September 18, 2009.
After careful review, we affirm the ultimate holding by the trial court that any
partnership that existed among the parties is dissolved.
This case arises from a family dispute over properties amassed over
several decades by Virgil Eversole, Sr., a Harlan County businessman who died in
1985. Besides numerous rental properties, Mr. Eversole owned about 6000 acres
of real estate bearing coal, oil, gas, and timber in Harlan and Leslie Counties. Mr.
Eversole was survived by three daughters: Courtenay Eversole, Margaret Edwards,
and Carole Eversole McCurley, and one grandson, Virgil Eversole, III, (hereinafter
“Virgil”), all parties to this action and the sole beneficiaries under Mr. Eversole’s
will.
From Mr. Eversole’s death in 1985 to 1997, the executor of his estate
managed the rental properties, collected rents and royalties, and made distributions
to the four beneficiaries of the estate. From 1997 to the present, the beneficiaries
continued the same practice, but under the name of “Eversole Heirs,” with Brenda
Eversole, Virgil’s mother, taking on the administrative duties formerly handled by
the executor. Brenda Eversole collects rent from commercial properties and
royalties from those properties leased to mineral producers, places those monies in
the “Eversole Heirs” common accounts at the Bank of Harlan, pays bills from
those accounts for matters affecting the properties, and mails monthly distribution
checks to the four Eversoles in this suit. Each year, partnership tax returns are
prepared, sent to each beneficiary, and are filed with the Internal Revenue Service.
The “Eversole Heirs” business office is maintained on Main Street in Harlan,
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Kentucky, where the books and records are kept, and the “Eversole Heirs” post
office address is P.O. Box 747, Harlan, Kentucky.
Prior to filing the complaint in this action, Margaret decided she could
get a higher rate of return on her money in Lexington than what she was earning on
the common accounts in Harlan. Thus, she came to Harlan and unilaterally
withdrew approximately $40,000.00 from one of the accounts, forcing an
immediate distribution of $160,000.00 to the other beneficiaries. At that point, the
other beneficiaries agreed that two signatures would thereafter be required for
withdrawals from the accounts.
On October 7, 2005, Margaret filed this suit against her two sisters,
Carole and Courtenay, and her nephew, Virgil, for an accounting, a declaration of
rights, and damages for conversion. Margaret sought 25% of the accounts, and
other unspecified damages. At that time, the defendants were Carole, Courtenay,
and Virgil. They answered, asserting that the monies belonged to the family
partnership, which was doing business under the name “Eversole Heirs.” They
argued that the accounts Margaret sought to apportion are the property of the
partnership and are not subject to apportionment until such time as the partnership
assets are dissolved and/or all liabilities of the partnership are paid in full at the
conclusion of the partnership.
Sometime thereafter, parties began approaching the family members,
offering to buy out their “interests.” In particular, Kentucky River Property, LLC,
offered to buy out Carole and Virgil. Carole wanted to sell her portion, but Virgil
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declined. However, the central issue to this lawsuit—whether the devisees of Mr.
Eversole now hold his properties as tenants in common or tenants in partnership—
apparently clouded title sufficiently for the putative purchaser to withdraw.
Following the purchase offer, Carole got a different attorney and
essentially switched sides. Notwithstanding her initial insistence that the family
members were partners and doing business for profit under the name “Eversole
Heirs,” Carole now argues that no partnership exists or has ever existed and that
the properties are instead the sole, undivided property interests of the beneficiaries.
On December 4, 2008, Carole filed a motion to intervene, asking that the Carole E.
McCurley Trust and James McCurley (her husband) be joined as parties. Carole
now argues that the beneficiaries of the Eversole properties own the properties as
tenants in common.
Margaret and Carole (along with the trust and James McCurley)
subsequently filed motions for partial summary judgment, asking that the Eversole
beneficiaries be declared tenants in common, not partners. In the alternative, they
asked that if a partnership was found to exist, that it be dissolved. Courtenay and
Virgil filed pleadings in opposition.
The Harlan Circuit Court entered partial summary judgment in favor
of Margaret and Carole, holding that as a matter of law, “no partnership exists or
has ever existed” with respect to the Eversole’s property because of the absence of
formal partnership documents. Further, the court held that the Eversole realty
cannot belong to a partnership in the absence of a written deed. Finally, the court
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determined that to the extent there was a partnership, it was dissolved. Courtenay
and Virgil now appeal.
In reviewing a grant of summary judgment, our inquiry focuses on
“whether the trial court correctly found that there were no genuine issues as to any
material fact and that the moving party was entitled to judgment as a matter of
law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996); Kentucky Rules of
Civil Procedure (CR) 56.03. “[T]he proper function of summary judgment is to
terminate litigation when, as a matter of law, it appears that it would be impossible
for the respondent to produce evidence at the trial warranting a judgment in his
favor.” Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky.
1991).
On appeal, Courtenay and Virgil argue that summary judgment was
inappropriate because genuine issues of material fact exist. While we agree with
the appellants that issues of fact existed, no genuine issues of material fact
existed, and thus summary judgment was appropriately granted by the trial court.
It is undisputed that in the instant case the Eversole Heirs neither had
a formal partnership agreement, nor had they filed the appropriate partnership
documents with the Commonwealth of Kentucky per KRS 365.015. However,
Courtenay and Virgil argue that in the absence of formal written partnership
documents or a partnership agreement, the intent of the “partners” controls. To a
certain extent, we agree; however in the instant case it is not clear that the Heirs
intended to form or maintain a partnership.
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Kentucky Revised Statutes (KRS) 362.175 defines a partnership as
“an association of two (2) or more persons to carry on as co-owners a business for
profit and includes, for all purposes of the laws of this Commonwealth, a registered
limited liability partnership.” KRS 362.180 sets forth the rules for determining
whether a partnership exists:
In determining whether a partnership exists, these rules
shall apply:
(1) Except as provided by KRS 362.225 persons who are
not partners as to each other are not partners as to third
persons.
(2) Joint tenancy, tenancy in common, tenancy by the
entireties, joint property, common property, or part
ownership does not of itself establish a partnership,
whether such co-owners do or do not share any profits
made by the use of the property.
(3) The sharing of gross returns does not of itself
establish a partnership, whether or not the persons
sharing them have a joint or common right or interest in
any property from which the returns are derived.
(4) The receipt by a person of a share of the profits of a
business is prima facie evidence that he is a partner in the
business, but no such inference shall be drawn if such
profits were received in payment:
(a) As a debt by installments or otherwise,
(b) As wages of an employee or rent to a landlord,
(c) As an annuity to a widow, or widower or
representative of a deceased partner,
(d) As interest on a loan, though the amount of payment
vary with the profits of the business,
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(e) As the consideration for the sale of a goodwill of a
business or other property by installments or otherwise.
The trial court determined that the Eversole Heirs made individual decisions with
respect to the property and signed all leases in their names as individuals, thus
evidencing that no partnership existed. While we agree with the Heirs that signing
the leases and documents in their individual names evidences nothing more than
that no one partner was authorized to sign for the partnership, we ultimately agree
with the trial court that whether or not a partnership existed is moot at this point.
KRS 362.300(1)(b) states that dissolution of a partnership is caused
without violation of the agreement between partners by the express will of any
partner when no definite term or particular undertaking is specified. A definite
term or particular undertaking is something capable of accomplishment at some
time. See Fischer v. Fischer, 197 S.W.3d 98, 102 (Ky. 2006). In the instant case,
no definite term or particular undertaking was specified in any formal agreement,
and the partners/heirs cannot even agree whether they were operating as a
partnership or as tenants in common. Thus, the trial court properly determined that
the partnership, if it existed at all, was dissolved at the will of one or more partners.
The trial court further determined that dissolution was appropriate
under KRS 362.305(1)(f), which states that on application by or for a partner, the
court shall decree a dissolution whenever other circumstances render a dissolution
equitable. (Emphasis added). The trial court determined that several “other
circumstances” made dissolution equitable:
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(a) The parties course of conduct has been more like that of owners
of undivided interests in property than a partnership, especially
as it relates to the Mineral Properties;
(b) The McCurley’s deeded their interest in the property to a trust.
This was done without objection by any other member of the
Eversole family;
(c) Each of the Eversole Heirs has been permitted to make his or
her own decisions with respect to the Mineral Property at issue
in this dispute;
(d) Depositing the monies into a joint account was once
administratively convenient. However, that convenience has
now been lost because only two members of the Eversole
family deposit their revenue from leasing in the account.
(e) The status quo changed when first Plaintiff Mrs. Edwards and
subsequently Mr. and Mrs. McCurley requested that they
receive their mineral royalty monies separately and none of the
other Eversole Heirs have ever objected to this change;
(f) Without dissolution, what was once administratively convenient
is now an administrative and accounting nightmare;
(g) The parties are geographically diverse;
(h) The parties no longer get along very well and are engaged in
litigation;
(i) Many of the rental properties are in a state of dilapidation and
need to be sold to new owners who will raze or renovate them;
(j) The McCurley’s wish to sell their interest in the property to a
third party; and
(k) The parties are deadlocked as to whether the partnership should
continue.
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Thus, under KRS 362.305, numerous equitable circumstances existed to justify
dissolving the alleged partnership, even if dissolution under KRS 362.300(1)(b)
were not mandated.
In conclusion, even were Courtenay and Virgil able to produce
evidence at trial that a partnership existed, it appears that it would be impossible
for them to produce evidence at trial warranting a judgment in their favor, given
the clearly applicable rules for dissolving a partnership under the above
circumstances. Accordingly, we affirm the partial summary judgment entered by
the Harlan Circuit Court.
ALL CONCUR.
BRIEF FOR APPELLANTS:
H. Kent Hendrickson
Harlan, Kentucky
BRIEF FOR APPELLEES CAROLE
E. MCCURLEY TRUST; CAROLE
E. MCCURLEY, TRUSTEE; JAMES
MCCURLEY; AND MARGARET
EDWARDS:
Gary W. Napier
Drayer B. Spurlock
London, Kentucky
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