April 22, 2019

Frederick Skillern: Real Estate Case Law — Titles and Title Insurance (1)

Editor’s note: This is Part 16 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.

frederick-b-skillernBy Frederick B. Skillern

Grosboll v. Grosboll (In re Estate of Grossboll)
Colorado Court of Appeals, October 24, 2013
2013 COA 141

Partnership property; statute of frauds.

Jo Ann Grosboll, decedents’ daughter, appeals the district court’s order finding that the sales proceeds of an apartment building are an asset of the parents’ estates rather than an asset of Grosboll Manor, L.L.L.P., a limited partnership formed by Jo Ann and her parents. Jo Ann’s brother, understandably, argues that the apartments are property of the estate. The key issue revolves around the fact that there is no deed of conveyance to the partnership.

As a matter of first impression, the court considers whether real property owned individually by one who enters into a partnership with others may become a partnership asset without a written conveyance sufficient to satisfy the statute of frauds. The court holds that a written conveyance (such as a deed) from a partner to the partnership is not necessarily required.

The court reviews the historical development of the entity theory of partnerships and the Uniform Partnership Act. The current version of the partnership act allows real property titled in an individual partner’s name to be deemed an asset of the partnership. The trust relationship between partners provides adequate protection against fraud in oral agreements making a partner’s real property a partnership asset. As a result, by statute, the intention of the partners determines whether such real property is a partnership asset. The existence of a written conveyance is a factor for a court to consider in evaluating that intent.

Jo Ann contended that, according to the terms of the written partnership agreement and the intention of the partners, Loma Vista was a partnership asset. The partnership agreement provided that (1) title to all assets of the partnership shall be deemed to be owned by the partnership”; (2) record title to any or all assets of the partnership may be held in the name of . . . one or more nominees”; and (3) all assets of the partnership shall be recorded as the property of the partnership in the books and records of the partnership, irrespective of the name in which record title to such assets is held.” Jo Ann testified that when the partnership was established, she and her parents had agreed to make Loma Vista a partnership asset. Additionally, the accountant for the partnership testified that he treated Loma Vista as a partnership asset on the partnership books. Therefore, Jo Ann asserted she was entitled to the sale proceeds because decedents’ wills devised their interests in the partnership to her.

The partnership act provides a rebuttable presumption that a partner’s property is separate if it is not acquired with partnership assets:

Property acquired in the name of one or more of the partners, without an indication in the instrument transferring title to the property of the person’s capacity as a partner or of the existence of a partnership and without use of partnership assets is presumed to be separate property, even if used for partnership purposes.

C.R.S. § 7-64-204(4).

Because the UPL and UPA specifically contemplate that real property titled in an individual partner’s name may be deemed an asset of the partnership, the appeals court holds here that a written conveyance from a partner who originally brings real estate into the partnership, although a factor to consider, is not required to convert real property into partnership property.

Frederick B. Skillern, Esq., is a director and shareholder with Montgomery Little & Soran, P.C., practicing in real estate and related litigation and appeals. He serves as an expert witness in cases dealing with real estate, professional responsibility and attorney fees, and acts as a mediator and arbitrator in real estate cases. Before joining Montgomery Little in 2003, Fred was in private practice in Denver for 6 years with Carpenter & Klatskin and for 10 years with Isaacson Rosenbaum. He served as a district judge for Colorado’s Eighteenth Judicial District from 2000 through 2002. Fred is a graduate of Dartmouth College, and received his law degree at the University of Colorado in 1976, in another day and time in which the legal job market was simply awful.

Colorado Court of Appeals: Erroneous Legal Standard Applied in Determining that Apartment Building was Estate Asset and Not Partnership Asset

The Colorado Court of Appeals issued its opinion in In re Estate of Grosboll on Thursday, October 24, 2013.

Probate—Estate—Partnership—Real Property—Statute of Frauds.

In this probate matter concerning the consolidated estates of Jeanette Elizabeth Grosboll and Ashley Nelson Grosboll (collectively, decedents), Jo Ann C. Grosboll, decedents’ daughter, appealed the district court’s order finding that the sales proceeds of Loma Vista Apartments (Loma Vista) were an estate asset rather than an asset of Grosboll Manor, L.L.L.P. (partnership), a limited partnership formed between decedents and Jo Ann. The orders were reversed and the case was remanded.

In 2004, decedents and Jo Ann entered into a limited liability limited partnership by executing a written partnership agreement. When decedents died, Loma Vista was titled in their individual names. Robert Grosboll’s surviving sons contended that Loma Vista was an estate asset because it was titled in decedents’ names, and they were entitled to the sale proceeds of Loma Vista as the residuary beneficiaries of decedents’ estate. Jo Ann contended that, according to the terms of the written partnership agreement and the intention of the partners, Loma Vista was a partnership asset and she was entitled to it as the remaining partner.

As a matter of first impression, the Court of Appeals considered whether real property owned individually by one who enters into a partnership may become a partnership asset without a written conveyance sufficient to satisfy the statute of frauds. A written conveyance from a partner to the partnership is not required because the General Assembly has enacted legislation specifically allowing real property titled in an individual partner’s name to be deemed an asset of the partnership, and because the trust relationship between partners provides adequate protection against fraud in oral agreements making a partner’s real property a partnership asset. Thus, the intention of the partners determines whether such real property is a partnership asset, but a written conveyance is a factor for a court to consider in evaluating that intent. Here, the district court, relying on the statute of frauds, found that because decedents did not execute a deed transferring their individual interest in Loma Vista to the partnership, it was not a partnership asset. Because the trial court applied an erroneous legal standard, the trial court’s order was reversed and the case was remanded for further findings of fact and conclusions of law consistent with this opinion.

Summary and full case available here.