Opinion
J-S02023-14 No. 1302 EDA 2013
03-14-2014
CHESTER CRANE v. WILLIAM CRANE, JR., ET AL APPEAL OF: CHESTER CRANE
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
Appeal from the Judgment Entered July 10, 2013
In the Court of Common Pleas of Northampton County
Civil Division at No(s): 1985-C-626 and 1992-C-2604
BEFORE: GANTMAN, P.J., OLSON AND PLATT, JJ. MEMORANDUM BY OLSON, J.:
Retired Senior Judge assigned to the Superior Court.
Appellant, Chester Crane, appeals from the judgment entered on July 10, 2013, challenging the April 2, 2013 order that denied his post-trial motions. We affirm.
The trial court summarized the facts of this case as follows:
[Appellant], Elmer, William Jr., and Walter [Crane] are brothers. They are four of nine children born to William Crane Sr. ("William Sr."). William Sr. operated a farming business in Lower Mount Bethel Township on two farms that he owned, referred to as the Gravel Hill Farm and the Lower Farm. In the mid-to-late 1950s, [Appellant], Elmer, WilliamTrial Court Opinion, 1/2/2013, at 5-8 (footnote omitted). On December 31, 2012, the trial court entered an order denying Appellant's exceptions to the Master's report. On January 2, 2013, the trial court filed an opinion regarding its decision. This timely appeal followed.
Jr., and Walter formed a partnership in order to conduct a farming business on two farms that they had purchased as partners in Lower Mount Bethel Township - the Schipp Farm and the Stonehouse Farm. The four brothers referred to the partnership as Crane Brothers Partnership ("CBP"). There is no exact date establishing the partnership, as it apparently was never formally organized. At first, the brothers' farming business was independent of their father's business. At some point during William Sr.'s life, however, William Sr.'s farming business and the CBP farming business merged and began operating as one business on the four farms.
William Sr. died in December of 1963. As part of his [w]ill, William Sr. left the Gravel Hill Farm to Elmer and Walter. [Appellant] purchased the Lower Farm from William Sr.'s Estate. Interestingly, the [w]ill of William Sr. also directed that CBP continue the farming business, with Elmer as the business's manager, for a period of at least five years after his death. CBP complied with the dictates of the [w]ill of William Sr. and continued the farming business long after the five year period expired.
At the time of the death of William Sr., the farming business consisted of a cow herd/dairy farm and corn and wheat fields. During 1979, the cow herd was sold and CBP ceased its dairy farm business. From 1979 until William Jr.'s death in 1985, CBP grew primarily corn and some wheat.
A fifth field was eventually rented by William Jr. in order to expand the farming business. This field was known as the Jacobsburg Farm. Whether this field was rented on behalf of CBP or with William Jr.'s personal funds remains at issue in this matter.
CBP sold its crops (both corn and wheat) exclusively to George V. Seiple and Sons, Co., Inc. ("Seiple"). Initially, there was one Seiple account under the name "Crane Estate" through which the merged businesses transacted all of their crop sales. This account's name was later re-named the "Crane Brothers Partnership" long after the death of William Sr. In 1978, a second Seiple account was created under the name "William Crane, Jr." According to the Seiple
records, the "Crane Brothers Partnership" account was closed in 1982, and those funds were transferred to the "William Crane Jr." account.
Apparently, William Jr. received and controlled all of the proceeds from the farming business during the critical time period at issue - 1979 until his death in 1985. There are no records or other evidence that the other partners of CBP received disbursements related to the farming business. On January 25, 1985, [Appellant] and Elmer filed a request for accounting of the income that William Jr. received from 1979 to 1985. That action was docketed at C-48-CV-1985-626. On October 29, 1985, the Honorable Robert A. Freedberg entered an order directing William Jr. to harvest the crop on the partnership property and pay the proceeds into the Office of the Prothonotary. William Jr. died later that year on December 16, 1985. It is the 1985 filing that appears to be the subject of the [r]eport of the [m]aster now at issue.
Preliminary [a]ccountings were filed by Elmer (related to [a] counterclaim filed by William Jr. against Elmer and Chester for compensation for his services on their behalf), the Estate of Walter (related to a claim that Walter allegedly and improperly received partnership monies), and the Estate of William Jr.
Chester subsequently filed [e]xceptions and [o]bjections to these [p]reliminary [a]ccountings.
After a settlement conference was held before the Honorable Jack A. Panella in 1996, most of the issues regarding the first [p]reliminary [a]ccountings were resolved. As a result, the parties filed a second round of [p]reliminary [a]ccountings. Chester filed [e]xceptions and [o]bjections to the second [p]reliminary [a]ccounting of William Jr., on August 31, 1998. Elmer joined in those [e]xceptions.
Attorney [Harry] Newman was appointed on August 31, 1998, as the hearing Master to resolve the [e]xceptions.
Ultimately, the three main issues raised before and addressed by Master Newman ("Master") were: 1) whether
Chester and Elmer were entitled to a share of the money generated by William Jr.'s farming activities from mid-to-late 1979 to his death in 1985; 2) whether Elmer was entitled to compensation for his management services; and 3) whether Chester was entitled to compensation from William Jr. for equipment Chester owned that was used by William Jr. in his farming operation.
A number of hearings took place in front of the Master between May 2001 and September 2004. The witnesses who testified before the Master were William Crane IV, Chester, Elmer, David Wegner, Thomas Campbell, and Richard Crane. The Master eventually filed a [r]eport on April 5, 2011, containing detailed [f]indings of [f]act and [c]onclusions. [The trial court] was not aware of the reason for the delay in the filing of the Master's report.
For clarity and ease of discussion, we will refer to the brothers by their first names except for Chester, who we refer to as Appellant. We also note that Elmer was originally a named plaintiff with Appellant. Elmer has since died and his estate was substituted as a plaintiff, but the estate is not a party to this appeal.
Appellant filed post-trial motions. In an opinion and order filed on April 2, 2013, the trial court initially noted that Appellant was requesting reconsideration and then denied Appellant relief. On April 16, 2013, Appellant filed a notice of appeal. On May 7, 2013, Appellant filed a concise statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b). The trial court filed an opinion pursuant to Pa.R.A.P. 1925(a), relying upon its earlier decisions filed on January 2, 2013 and April 2, 2012, respectively. On July 8, 2013, this Court entered an order directing Appellant to praecipe the trial court to enter judgment and file a final judgment with this Court in order to perfect his appeal. On July 10, 2013, the trial court entered a final order pursuant to Pa.R.A.P. 301 and transmitted it in a supplemental record to this Court. Thus, the appeal is properly before us.
On appeal, Appellant presents the following issues for our review:
1. Did the [trial c]ourt err in failing to find and conclude that the evidence presented establishes that WilliamAppellant's Brief at 4.
Crane, Jr. received profits from the operation of the partnership business, during the period from 1979 through 1985, totaling $545,535.86.
2. Did the [trial c]ourt err in failing to find and conclude that, by reason of the receipt by William Crane, Jr. of the profits of the partnership farming operation, and his failure to distribute same to the partners, Chester Crane and Elmer Crane are each entitled to receive from the partnership the sum of $136,383.96, together with interest and costs, representing each partner's share of the proven distributable profits of the partnership. The [trial c]ourt furthered erred in failing to order that said payments be made to [Chester Crane and Elmer Crane].
3. Did the [trial c]ourt err in finding that William Crane, Jr. paid for necessary supplies, including but not limited to seed and fertilizer, where the accounting records from George V. Seiple, submitted as exhibits by [Appellant], proved that said expenses were deducted from the corn sales profits before distribution of net profit to William Crane, Jr.
4. Did the [trial c]ourt err in failing to find that George V. Seiple's running account, showing the sum of $237,032.88 which was titled Crane Brothers account and was distributed to William Crane, Jr., was Crane Brothers property and was never shared with partners Chester Crane and Elmer Crane.
While Appellant lists the foregoing issues on appeal, in the argument section of his appellate brief he only argues that the trial court applied the wrong burden of proof in this case. Id. at 10. Appellant claims that "William Crane Junior and his heirs, not Chester Crane and Elmer Crane, [] have failed to produce evidence to satisfy the burden applicable to them." Id. Appellant asserts:
Appellant raised the burden of proof issue in his Rule 1925(b) concise statement of errors complained of on appeal. Thus, Appellant preserved the issue on appeal.
There is no question, based upon the evidence and the court's conclusions, that William Crane Junior received all of the proceeds from the farming of four partnership farms, from 1979 through 1985. There is no question, based on the evidence and the court's conclusions, that those proceeds totaled $545,535.86 over that time period. Despite all of this, and despite the absence of any explanation for what happened to those proceeds by the person who received them, the court categorically places the burden on the wrong parties, and concludes that [Appellant has] not met [his] burden.
Id.
A challenge to the burden of proof "presents a question of law, for which our standard of review is de novo and our scope of review is plenary." Reott v. Asia Trend, Inc., 7 A.3d 830, 835 (Pa. Super. 2010). Both parties and the trial court cite our Supreme Court's 1933 decision in Bracht v. Connell, 170 A. 207 (Pa. 1933) for the burden of proof with respect to an accounting in a partnership. Bracht states, in pertinent part, as follows:
Generally speaking, where a partner fails to keep a record of partnership transactions, and is unable to account for them, every presumption will be made against him. While it is his duty to keep proper accounts, in determining whether he has met this obligation it is necessary to consider the nature of the business engaged in, the usual practices, the necessities of the time and place of carrying on the work, and, in this case, the customary practice of these partners. Road building necessarily involves the temporary employment of large numbers of persons. The personnel is likely to change repeatedly and with each job. These contracts are of but a few months' duration, occurring inBracht v. Connell, 170 A. 297, 301 (Pa. 1933).
places widely separated. Books, time cards, batch sheets, and other original entry records must be kept in shanties alongside the road, in constantly moving offices, under the most impermanent of circumstances. This was the experience of the old partnership. To require the accuracy and permanence of proof which one would require of a bank or of a business conducted in a well-equipped and stable office is to deny appellants a just appreciation of their situation and permits appellee to have an unfair advantage in a matter of which he had full knowledge. Contractors are not accountants, nor are they required to be. The exigencies of road construction deny the accuracy and completeness of banking practice to their records. The canceled checks, corroborated by the testimony of the bookkeeper who received the bills and made out the checks, by that of the partner who signed the checks, pay-roll books, showing the amounts paid to labor employed and the trucks used, and all the other customarily retained records of such a job, are prima facie proof of the facts therein contained, and cast the burden of proving such evidence false on the person who challenges it.
Appellee, during the trial, constantly demanded that records in connection with appellants' account be disregarded as insufficient, while his testimony shows that no audit of the Connell, Laub & Bracht partnership books had ever been made, no inventory or adjustment of materials had, no accounting of individual advances, no permanent set of partnership books kept, but, rather, only a cashbook system used for each job; no batch sheets, invoices, time books or other original entry data preserved. Surely to conclude that his former partners were attempting to defraud him by failing properly to keep records, when they were proceeding in accord with the practice of their former partnership as well as the practice of appellee himself after the termination of the partnership, is most unfair. Such assertions have no appeal to the court.
Thus, the Supreme Court has clearly stated that a partner has a "duty to keep proper accounts" but in determining whether there was prima facie proof that the partner met this obligation, "it is necessary to consider the nature of the business engaged in, the usual practices, the necessities of the time and place of the carrying on the work, and ... the customary practices of [the] partners." Id. Thereafter, "the burden of proving such evidence false [then falls] on the person who challenges it." Id.
Here, the trial court determined:
CBP did not have any formal documentation setting forth the partnership structure or individual partner responsibility or any mechanism for remunerating those partners who performed labor and other duties for the partnership. There is no evidence as to how the partnership operated, transacted business or distributed profits prior to this dispute. We have only the testimony of Chester and Elmer. [...] Neither provided any credible testimony as to the business (financial) operations of CBP.Trial Court Opinion, 1/2/2013, at 28-29.
Moreover,
the record established that William Jr., transacted all of the CBP business with Seiple, individually managed the CBP farming operations, paid CBP expenses and controlled the proceeds from the sale of corn to Seiple. The business ledger maintained by Seiple for CBP, indicates that deductions were made from CBP for seed and fertilizer. However, a series of checks written from William Jr.'s personal account over the time period at issue (1979-1985) indicates that William Jr. paid significant monies for farm equipment maintenance, farming supplies, farming related services, and salaries related to the farming operation. The documentary record established that the only partner who individually paid CBP expenses was William Crane, Jr.Trial Court Opinion, 4/2/2013, at 4.
With regard to Appellant's claim regarding a partnership share of the $545,535.86 paid by Seiple into the CBP account over the time period at issue, the trial court stated:
[R]evenue generated from selling crops is not the same as profit. It is impossible for us to conclude that any revenue collected from Seiple during the lifetime of William Jr. is profit available for distribution. Although the record establishes that some farming expenses were incurred through Seiple, such as seed and some fertilizer, other evidence presented to the Master establishes that William Jr. incurred and paid for significant farming expenses. Further, as William Jr. worked full time farming and managing, he was entitled to significant wages.Trial Court Opinion, 1/2/2013, at 31.
Additionally, the trial court noted that William Jr. operated a fifth farm outside of the CBP and "that Seiple commingled the revenue generated from the CBP corn, with the corn and wheat grown by William Jr. on the Jacobson Farm" making it "impossible for [the trial court] to account for the separate operations." Id. at 30. The trial court further stated, "[t]here is no mechanism for delineating the funds" and "[i]t would be improper for [Appellant] and Elmer to recover revenue belonging solely to William Jr." Id. Accordingly, the trial court concluded that "without any proof from [Appellant] and Elmer that CBP ever successfully generated a profit in the past, [the trial court found] little credibility in their claim to treat any, let alone all, of the Seiple payments as profit for the partnership." Id. at 32.
Here, CBP had no formal written business model. William Jr.'s estate provided evidence of his accounting methods in handling the business affairs of the CBP. It provided evidence of the revenue generated by the CBP through Seiple. It also provided evidence of the necessary expenses for farm equipment maintenance, farming supplies, farming related services, and salaries related to the farming operation. As such, there was evidence regarding the nature of the business and the customary business practices of the farming partnership. As Bracht makes clear, the burden then shifts to the partner alleging a failure to keep proper accounting to prove fraudulent activity. The Master rejected Appellant's testimony as not credible and the trial court agreed. We give great deference to that finding. See In re W.M., 41 A.3d 618, 622-623 (Pa. Super. 2012) ("[T]he master's report and recommendation, although only advisory, are to be given the fullest consideration, particularly on the question of credibility of witnesses, because the master has the opportunity to observe and assess the behavior and demeanor of the parties.").
Based on all of the foregoing, the trial court applied the proper shifting burden of proof in this case. The trial court determined that William Jr. engaged in customary farming business practices. Appellant did not provide evidence of the falsity of those practices. Hence, the trial court did not err in denying Appellant's exceptions to the Master's report. Accordingly, Appellant's appellate claims are without merit.
Judgment affirmed. Judgment Entered. __________
Joseph D. Seletyn, Esq.
Prothonotary