SIEVERS, Judge.
In this probate proceeding, the county court for Douglas County conducted a trial on two issues: first, a claim that Paul C. Tully, the decedent, made unauthorized withdrawals of money and payment for personal debts and purchases from "the LLC" for which he owes the claimants; and second, the successor personal representative's request that Tully's Kennels, a portion of which Paul owned, cease making payments of "consulting" fees to Paul's father. The county court granted the first claim in its entirety and denied the request for an order ceasing the payments. We find substantial errors in the county court's decision.
The successor personal representative, Security National Bank (hereafter the personal representative), assigns, restated, that the Douglas County Court erred (1) in failing to order the cessation of the payments to Allen Tully and his wife by Tully's Kennels and (2) in granting the claims of Tully's Kennels, Tully Properties, and Julie Tully Westman (Julie) in full by finding that Paul had made unauthorized withdrawals from Tully's Kennels and had paid for personal items and received benefits from the checking or credit card accounts of Tully's Kennels.
Our standard of review is set forth in In re Estate of Hedke, 278 Neb. 727, 775 N.W.2d 13 (2009): Absent an equity question, an appellate court reviews probate matters for error appearing on the record. When reviewing a judgment for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. Id. We do not reweigh evidence, but consider the evidence in the light most favorable to the successful party. Id. And we resolve evidentiary conflicts in favor of the successful party, who is entitled to every reasonable inference deducible from the evidence. Id. The probate court's factual findings have the effect of a verdict, and we will not set those findings aside unless they are clearly erroneous. Id.
After our review of the record, we depart from our typical opinion format and include the pertinent factual background in our discussion of the assignments of error, because in this case this seems the more efficient approach.
Allen established a business called Tully's Kennels, located in Omaha, Nebraska, which business engaged in the kenneling of dogs, the buying and selling of puppies, and cremation services for pets. The business was operated by Allen for 50 years, until October 2006 when it was gifted to Paul and Julie, the children of Allen and his wife. However, the record fails to reveal exactly how that gift was accomplished and formalized. Julie testified that Allen operated Tully's Kennels as a sole proprietorship. Additionally, there is a single reference in Julie's testimony that the parent's gift included Tully Properties, although there is no evidence about what Tully Properties, as gifted from the parents, consisted of or involved. Nor is there evidence to explain what Julie and Paul did with respect to Tully Properties after the gift or (what took place) after Paul's death. Although Tully Properties is one of the three named claimants in the claim made against Paul's estate, there is no evidence whatsoever that any of the so-called "unauthorized withdrawals" were made by Paul from an entity entitled "Tully Properties LLC." Thus, at the outset, we reverse and vacate the award of the Douglas County Court to Tully Properties, as there is simply no evidence to support it—putting aside other problems which we shortly discuss. We now turn to the other two claimants, Tully's Kennels and Julie.
While the personal representative does not raise the issue of standing, a court can raise the question on its own. "Because the requirement of standing is fundamental to a court's exercising jurisdiction, a litigant or court before which a case is pending can raise the question of standing at any time during the proceeding." Mutual Group U.S. v. Higgins, 259 Neb. 616, 619, 611 N.W.2d 404, 408 (2000). Standing is a jurisdictional component of a party's case because only a party with standing may invoke the jurisdiction of a court. Miller v. City of Omaha, 260 Neb. 507, 618 N.W.2d 628 (2000). "As an aspect of jurisdiction and justiciability, `standing' requires that a litigant have such a personal stake in the outcome of a controversy as to warrant invocation of a court's jurisdiction and justify the exercise of the court's remedial powers on the litigant's behalf." Mutual Group U.S. v. Higgins, 259 Neb. at 619, 611 N.W.2d at 408. Therefore, we first examine whether Tully's Kennels had standing to claim reimbursement from Paul's estate.
Nebraska law has stringent requirements for the formation and operation of a limited liability company that are contained in the Limited Liability Company Act. See Neb. Rev. Stat. §§ 21-2601 to 21-2654 (Reissue 2007 & Cum. Supp. 2010). Section 21-2605 provides, "One or more persons may form a limited liability company by executing and delivering articles of organization in duplicate to the Secretary of State." And § 21-2606 contains an extensive list of the elements to be included in the statutorily required articles of organization. There is no documentary evidence whatsoever that anyone ever complied with these requirements so as to form a valid entity named "Tully's Kennels LLC."
Moreover, Douglas Oldaker, senior vice president and trust officer of the personal representative, testified that he has been unable to "locate any sort of operating agreement, LLC document of any kind at this point." As mentioned above, articles of organization for a limited liability company must be filed with the Nebraska Secretary of State—making them readily accessible if they existed. Oldaker further testified that Tully's Kennels is "titled individually between [Paul] and his sister [Julie]." Julie's own testimony actually seems to square with the foregoing testimony from Oldaker when she testified:
Seemingly, contrary to the above admission, Julie also testified that after acquiring the business from her parents, she and Paul decided to form limited liability companies, and that they transferred the interest that had been gifted to the limited liability companies. But, as said above, there simply is no evidence that any limited liability company was formed or that the claimant Tully's Kennels is a properly formed and operating limited liability company. Additionally, we note Julie said that she and Paul each got 50 percent of Tully's Kennels and Tully Properties, that they "were equal partners [who] got paid the same" with equal benefits, and that they each understood that.
There is more evidence in the record showing that under Nebraska law there is no such legal entity named "Tully's Kennels LLC." Under Nebraska law, § 21-2604(1) and (4) provides:
(Emphasis supplied.)
Thus, the name of the limited liability company, including particularly its designation as such, is to be used for virtually all significant matters. By this statute, such name and designation as a limited liability company is to be included on all checks—an important requirement as relates to this case. None of the checks or checking account statements in evidence comply with this statute as they simply say "Tully's Kennels," with an address. Likewise, we note that the Capital One "Visa Business Card Account," with which Paul allegedly made numerous personal purchases, is titled simply "Paul C. Tully" on the first address line followed on the next line simply by "Tully's Kennels" and then the business' address. On this business credit card, through which a great number of business purchases were routinely made, there simply is no mention of, nor designation of a limited liability company.
Accordingly, the evidence the claimants offered to prove their claims is actually further proof that whatever funds Paul was allegedly wrongfully using did not come from "the LLC," as alleged in the claim. Said evidence also proves that there was no legal entity named "Tully's Kennels LLC" or "Tully Properties LLC" that has standing to make these claims. See Mutual Group U.S. v. Higgins, 259 Neb. 616, 611 N.W.2d 404 (2000) (standing requires that litigant have such personal stake in outcome of controversy as to warrant invocation of court's jurisdiction). The credit card statements, checks, and other evidence that were intended to prove Paul's "unauthorized withdrawals from the LLC" totaling $34,588.73 (as awarded by the county court), prove nothing of the sort. The overwhelming weight of the evidence shows that the alleged claimant named "Tully's Kennels LLC" did not exist, and as such, it could not possibly have any stake in the outcome of this litigation. Therefore, the Douglas County Court's award of $34,588.73 to the claimant named "Tully's Kennels LLC" cannot stand and such is also hereby reversed and vacated.
Next, we discuss Julie's personal claim against Paul's estate. The operative and amended claim filed on May 4, 2009, in the Douglas County Court against Paul's estate also includes the claim of Julie for "Unauthorized withdrawals from the LLC for [Paul's] personal use" totaling $34,588.73. The emphasis we have supplied in the quote is important because no claim is advanced, nor evidence produced, that Paul took money that belonged to Julie personally, and in fact, there is no allegation that he did, as indicated by the above quote.
On the record we have, it appears that after the gift of Tully's Kennels from their father Allen, who ran it as a sole proprietorship, Julie and Paul operated the kennel as a de facto partnership. The failure to prove the existence of the limited liability company asserting the claims seems to have escaped the trial court's consideration. Likewise, the legal impact of the fact that Julie and Paul were apparently operating the kennel as a de facto partnership also appears to have gone unnoticed. We must emphasize that because of an incomplete and inadequate record, we avoid making an express and binding finding that Julie and Paul had a legal partnership. We leave that determination for the trial court upon the remand we hereafter order, but at least for analytical purposes, we assume what appears likely, which is that Julie and Paul operated the kennel as a de facto partnership. Given the rather startling omissions in the evidentiary record, this assumption is the best we can do.
Neb. Rev. Stat. § 67-402 (Reissue 2009) provides that for purposes of the Uniform Partnership Act of 1998:
Thus, a partnership can be based on an oral agreement. There is no evidence of a written partnership agreement in the record.
Paul's death brings into play Neb. Rev. Stat. § 67-431 (Reissue 2009), which defines the events causing a partner's dissociation from the partnership. Under § 67-431(7) dissociation occurs in the event of an individual partner's death. Then, we look to Neb. Rev. Stat. § 67-439 (Reissue 2009): "A partnership is dissolved, and its business must be wound up . . . [w]ithin ninety days after a partner's dissociation by death . . . under subdivisions (6) through (10) of section 67-431." Neb. Rev. Stat. § 67-445 (Reissue 2009) provides for winding up the partnership business, including discharge of obligations to creditors, as well as the settlement of partnership accounts, which through § 67-445(2) involves the following:
Relations among the partners, as well as between the partners and the partnership, are governed by the partnership agreement, but to the extent the partnership agreement does not otherwise provide, the Uniform Partnership Act of 1998 governs. See Neb. Rev. Stat. § 67-404(1) (Reissue 2009) and Shoemaker v. Shoemaker, 275 Neb. 112, 745 N.W.2d 299 (2008). Assuming that there was no written partnership agreement, the act governs the dissolution and winding up of any partnership Julie and Paul had in the kennel, which must occur because of the dissociation of Paul from any such partnership between him and Julie by virtue of his death, as is provided for in the statutes we have referenced above. However, there is no evidence that the dissolution and winding up of any partnership between Julie and Paul has occurred.
There is no evidence concerning profits, losses, debts, or assets of the kennel, nor is there a shred of evidence of the status of Julie and Paul's partner accounts. All of these matters would need to be included in the calculus of determining whether Paul's estate is in a negative or positive position vis-a-vis Julie's partnership account. And part of that process of "balancing the books" between partners would encompass whether Paul used partnership funds for nonpartnership personal purposes outside of what the partners had agreed could properly be done by one or the other of them. An action for the dissolution of a partnership and an accounting between partners is one in equity and is reviewed by the appellate court de novo on the record. Gast v. Peters, 267 Neb. 18, 671 N.W.2d 758 (2003). But in this case, the approach was to attempt to surcharge Paul's estate for allegedly improper spending of partnership funds, without any consideration of the overall picture and status of the partnership's finances, as must be done in the case of the dissociation of a partner because of a death. In short, on the record before us, this proceeding is not the proper one to account and "balance the books" between Julie and Paul's estate, given their apparent status as de facto equal partners, and we emphasize the "apparent" aspect given that this record conspicuously fails to clearly inform us the legal status of Tully's Kennels at the time of Paul's death—an omission that is frankly puzzling.
We should comment that our analysis of this appeal is not argued or suggested by the personal representative, which simply broadly asserts that the award to the claimants was wrong, but not for the reasons we have articulated. Nonetheless, Paul's will leaves his property to his sole heir, a minor daughter, and the result reached by the county court, with one partial exception delineated later, is arbitrary, capricious, and unreasonable to the point that there is plain error which compels us to reverse and remand this cause to the county court with directions for further proceedings in order to protect the interest of Paul's heir and accomplish a just and correct result as between Julie and Paul's estate. See State v. Veiman, 249 Neb. 875, 546 N.W.2d 785 (1996) (plain error is error plainly evident from record and of such nature that to leave it uncorrected would result in damage to integrity, reputation, or fairness of judicial process).
For the variety of reasons discussed above, the county court's decision awarding Julie judgment in the sum of $34,588.73 is hereby reversed and vacated, as we did above with reference to the court's award of such sum to the claimants named "Tully's Kennels LLC" and "Tully Properties LLC."
The county court made a second and separate award of $2,088.74 to Julie and the claimants named "Tully's Kennels LLC" and "Tully Properties LLC," which was stipulated by the parties as a valid claim chargeable to Paul's estate. The record shows that of this amount, a portion relates to funeral expenses for Paul, the cost for the facility rental of $830.30, as well as $766.40 for food. However, the trial court added an additional $492.04 to the funeral expenses to make up its second award of $2,088.74. The extra $492.04 is traceable to Julie's testimony that after Paul's death, Paul's truck would not start, and thus she put the cost of repairs to get it running on her "Julie Tully Westman Tully's Kennels" American Express card—which perhaps was her equivalent to the Capital One Visa that Paul used. While Julie testified that the truck was titled in Paul's name and went to his estate, the evidence is also clear that this was a truck used in the kennel business. Thus, whether such expenses were properly reimbursable to Julie again involves the process of winding up the partnership and balancing the partners' accounts—if there was a partnership. Therefore, we modify the county court's second award to the three claimants of $2,088.74 so that it is an award of funeral expenses stipulated as a valid claim in the amount of $1,596.70, but only to Julie, as the other two alleged claimants have no standing.
We now turn to the second assignment of error of the personal representative, which alleges that the county court erred in denying its motion that Julie should be prohibited from making any further payments from Tully's Kennels to her parents. The issue was raised by the personal representative's pleading entitled "Petition for Ceasing Payments." After the court completed the hearing on the claim for unauthorized payments, the court took up this motion concerning the payments to Julie's parents.
The evidence is that payments were made by Tully's Kennels to Allen after he made his gift to Julie and Paul in October 2006. In the years 2007 and 2008, Internal Revenue Service Forms 1099 were provided by Tully's Kennels to Allen for the payments he received in the sum of $33,230.56 in 2007 and $47,750 in 2008. No Form 1099 is in evidence for 2009, but Julie testified that such payments were continuing, and the personal representative's trust officer, Oldaker, testified that for 2009, the payments were approaching $60,000. According to Julie, the payments prior to 2009 were for Allen's "consulting and advice services" to her and Paul. And, in 2009, she claimed such services were provided to her, given Paul's death in late January of that same year. The personal representative took the position that the payments were depleting the value of the business, 50 percent of which was owned by Paul's estate and was to pass to Paul's sole heir, his minor daughter. And moreover, that such payments were not proper during the administration of the estate.
The evidence is that there was no written agreement for consulting services, nor could Julie provide any specifics of an oral agreement, such as an hourly rate, an upper limit on payments, exactly what sort of advice or consultation Allen was providing, or the time actually spent by Allen. Oldaker's concern about the payments, in addition to their clear impact on the estate's assets, appears to derive from a conversation he had with Julie's attorney in which he was told that these payments represented an unlimited obligation to provide for support of Allen and his wife. We take "unlimited" to connote both amount and duration. While there was a gift tax return for the gift from the parents to Julie and Paul which Oldaker examined (but is not in evidence), he testified that he would expect that such return would incorporate something about these payments, as such would affect the valuation of the gift, but it did not. Finally, according to Oldaker's testimony, in his inquiries of Julie's counsel, he was informed as follows:
It is noteworthy that neither Julie nor Allen (who was apparently present given the statement of Allen's counsel that he had previously planned to call him as a witness but would rest instead) denied that Oldaker was correctly describing the "tradition" leading to the payments. Moreover, no bills or statements supporting any of the payments to Allen were introduced; rather, Julie simply testified, "He would hand us the bill and we would pay the bill."
The personal representative's fundamental concern with stopping these payments was that the payments were depleting the estate, without appropriate justification, thereby reducing the assets available to fund the trust that Paul's will established for his minor daughter. We agree that the subject of these payments is obviously an appropriate matter for concern and investigation by the personal representative, and on the record before us, there are multiple "red flags" about the payments. Indeed, a personal representative has a fiduciary duty to the decedent's beneficiary, and must act in accordance with the prudent investor rule set forth in Neb. Rev. Stat. §§ 30-3883 to 30-3889 (Reissue 2008) by investing and managing trust assets with reasonable care, skill, and caution. See Neb. Rev. Stat. § 30-2464 (Reissue 2008). Section 30-2464 further directs that the personal representative shall use the authority conferred upon him or her by the Nebraska Probate Code and the will "for the best interests of successors to the estate." Moreover, Neb. Rev. Stat. § 30-2472 (Reissue 2008) gives a personal representative the same power over the title to property of the estate that an absolute owner would have for the benefit of those interested in the estate. Thus, quite clearly, it is entirely appropriate for the personal representative to object to the substantial payments being made to Allen, because following Paul's death, half of every dollar going to Allen is effectively coming from Paul's minor daughter and the justification for the payments is plainly inadequate.
The single page of argument in Julie's brief on the personal representaive's motion can be summarized as follows: Julie testified that there was an oral agreement for Allen to provide advice and consulting services, the probate court's factual findings have the effect of a jury verdict which will not be set aside unless clearly erroneous, and "[b]ecause an agreement for consulting fees existed," the probate court properly dismissed the personal representative's petition to cease such payments. See brief for appellees at 12, citing In re Estate of Muncillo, 280 Neb. 669, 789 N.W.2d 37 (2010). First of all, the county court made no factual finding of the existence of an agreement. In fact, the county court denied the personal representative's motion in an order of September 8, 2010, without any rationale or reasoning whatsoever.
We agree with the standard of review asserted by Julie. We have set forth above Julie's testimony from which the existence of an oral agreement supposedly derives—including the fact that there are no terms, rates, or limitations for such fees. Putting aside those shortcomings for a moment, we suggest that the county court's order and Julie's argument ignore the most fundamental question. We would frame that question as follows: "Given that Paul is now deceased and 50 percent interest in the kennel business now concededly passes in trust to his minor daughter, should Julie, during the administration of Paul's estate, continue to make large payments of the kennel's money to her father, Allen, under this completely amorphous `agreement' when doing so obviously reduces the assets available for Paul's daughter?" We have little hesitancy in answering this question in the negative. We cannot help but point out that this "consulting and advice" is being given to Julie—who has been involved in the business for years.
Moreover, while Julie testified to nearly daily consultation with Allen, the subject of the need for such was never articulated or otherwise proved beyond the fact that Allen had years of experience with the business. Undoubtedly, there is some degree of specialized experience needed to operate this business, but Julie is hardly a novice. And, fundamentally, we find that there is no evidentiary showing whatsoever that the complexity of the business is such that a $50,000 per year consultant is required or that the value of the advice and consultation is commensurate with the cost. And, these payments hardly fall in the category of being required in the ordinary course of business to keep the kennel operating—such as paying the monthly bills for dog food.
And finally, this record provides us with no information that would give the amount of the payments any relevant context, e.g., is this a $2-million-a-year operation or a business netting $50,000 a year. Obviously, such fact would bear on the reasonableness of the large payments being made to Allen. All of these factors would be matters that under the "prudent investor" standard a personal representative would justifiably be concerned about, as should the probate court. And Julie's statement that "[Allen] would hand us the bill and we would pay the bill," would hardly satisfy a prudent investor that the payments were necessary, reasonable, and sensible, remembering that no bills were produced at trial.
The probate court gave no reason for denying the request to halt Julie's payments to Allen for consultation during the pendency of the estate proceedings. We find multiple reasons why the request should have been granted. In fact, we would go so far as to say on this record, it obviously should have been granted. Therefore, we reverse the county court's decision denying the request for an order that all payments to Allen and his wife cease, and we remand the cause with directions that the county court enter such an order.
As is evident from our opinion, we have found substantial and material problems with the county court's order. We can envision, however, that such court has substantially more information about this estate via its ongoing administration than we have in the record on appeal. Nonetheless, we can decide only the issues before us on the record that the parties present. With respect to the claim for reimbursement from Paul's estate, while there are several oblique and confusing allusions in the record to limited liability companies, there simply is no proof that claimants Tully's Kennels and Tully Properties are properly formed and legal limited liability companies. Rather, the evidence strongly suggests that Julie and Paul were operating the business under an oral equal partnership arrangement. If that is true, there is a statutory procedure to be followed in order to wind up the partnership and "balance the books" and partner's accounts. But there is no evidence that such procedures have been employed. Thus, in the end, we affirm the award of $1,596.70 for funeral expenses to Julie, as such were stipulated to as proper. Otherwise, we reverse the monetary awards of the county court to the claimants named "Tully's Kennels LLC" and "Tully Properties LLC" and to Julie in their entirety.
Finally, the personal representative's request for an order that Julie cease all payments to her parents clearly should have been granted, and we direct the county court to immediately enter such an order. If there have been such payments made during the pendency of this appeal, the court shall hold proceedings to surcharge Julie for such in order to restore the status quo to that existing at the time of the filing of the personal representative's motion which should have been granted.
AFFIRMED IN PART, AND IN PART REVERSED AND VACATED, AND CAUSE REMANDED WITH DIRECTIONS.
MOORE, Judge, participating on briefs.
