A recent decision by the Colorado Court of Appeals allows the retention of partnership assets following the death of one or more partners, even in the presence of a will.
On October 23, 2013 the Colorado Court of Appeals handed down a decision that clarifies the claims of parties to the willed estate of a deceased person and surviving members of a limited business partnership with that person or persons. The ruling, 2013 COA 141. No. 11CA2626. In re the Estate of Grosboll: Grosboll v. Grosboll, Jr., involves a claim by members of the Grosboll family to the Loma Vista Apartments, the sole asset of Grosboll Manor L.L.L.P., a partnership between the now deceased Jeanette Grossboll and Ashley Grossboll, and the surviving daughter Jo Ann Grossboll, the appellant in the case. The case appellees were the sons of Robert Grossboll, Jo Ann's brother, who died in 2010.
In 2004, Jeanette, Ashley, and Jo Ann Grossboll formed a limited liability limited partnership, with each of the principal partners providing initial capital contributions of $750,000. The daughter, Jo Ann, contributed $100, making her a limited partner. Jeanette and Ashley Grossboll also drafted joint wills in 2004, which named Jo Ann as the beneficiary of the partnership, while the sons of the deceased, Edward and Robert, would divide the remaining estate. Following the death of Robert, his surviving sons Eric, Christopher, and Robert, Jr. argued at the probate hearing that they were entitled to a share of the Loma Vista Apartments, which they claimed as an estate asset. Jo Ann, in contrast, explained that the proceeds from Loma Vista, which had been sold in the interim, were a partnership asset according to her written and verbal agreements with the other partners, and thus solely hers.
The initial district court ruling in favor of Robert’s sons was based upon the language of Colorado’s Statute of Frauds, § 38-10-106, C.R.S. 2013, which concerns real estate deeds and titles. The statute requires the presence of a ‘written conveyance,’ i.e. a deed, in order to insure the legal transfer of land and/or property.
During the appeal, the court scrutinized similar cases from various states that involved the necessity for a written conveyance in order to establish individually held property as a partnership asset. After considering several cases and the language of Colorado’s Uniform Partnership Law (UPL), §§ 7-60-101 to -154, C.R.S. 2013, and Colorado’s Uniform Partnership Act (UPA), §§ 7-64-101 to -1206, C.R.S. 2013, the Court of Appeals determined that a deed was, in fact, not required in this case, and that the UPL and UPA effectively supercede the Statute of Frauds. Thus, the appellate court overturned the prior district court decision on the matter, and awarded Jo Ann Grossboll full proceeds from the sale of her partnership asset, the Loma Vista Apartments.
The principal lesson to be drawn from this case involves explicitness in drawing up wills and partnership agreements. If Jeanette and Ashley Grossboll had wanted the Loma Vista Apartments to go solely to the daughter, Jo Ann, the Court of Appeals will have interpreted this case correctly. If they had wanted it to become part of their broader estate, and hence to be divided between Jo Ann and the sons Robert and Edward or their surviving heirs, they would have had to explicitly state this in their joint wills. Otherwise, it would be superseded by the partnership agreement, as it was in this case.