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Young v. Delaney

September 22, 1994

MARYA C. YOUNG, APPELLANT
v.
LINDA DELANEY, THOMAS J. MACK, AND MONA LYONS, APPELLEES



Appeal from the Superior Court of the District of Columbia; (Hon. John H. Suda, Trial Judge)

Before Wagner, Chief Judge,* and Farrell and Sullivan, Associate Judges.

The opinion of the court was delivered by: Wagner

WAGNER, Chief Judge: This civil action was commenced by appellant, Marya C. Young, against her former law partners, appellees, Linda Delaney, Thomas J. Mack, and Mona Lyons, for the appointment of a receiver to wind-up the affairs of the former partnership, injunctive relief, and for damages for breach of fiduciary duty. Appellant filed a motion for summary judgment in which she claimed that the undisputed facts supported her claim for court supervision of the wind-up of the partnership's affairs pursuant to D.C. Code § 41-136 (1990) and a declaration of the distributive shares of each former partner. Appellees filed an opposition and cross-motion for summary judgment, contending that appellant's action for an accounting was premature, that she had no evidence supporting her claim of breach of fiduciary duty, and that the interests of the partners on dissolution was controlled by a subsisting agreement. The trial court denied appellant's motion for summary judgment and granted, without opinion, appellees' cross-motion for summary judgment. On appeal appellant argues that the trial court erred in its rulings because: (1) she is not required to defer a demand for an accounting for attorney's fees collected during the windup, particularly where the former partners breached their fiduciary duties; (2) there was no agreement governing dissolution which survived the break-up of the partnership; and (3) the terms of the purported agreement relied upon by appellees are so ambiguous as to be unenforceable. We find no error in the trial court's ruling denying appellant's motion for summary judgment seeking a declaration of the distributive shares of the partners and court supervision of the wind-up of the partnership's affairs. We also hold that an action for the appointment of a receiver to wind-up the affairs of a dissolved partnership is not premature and may be granted in the trial court's discretion when supported by evidence of the wind-up partner's breach of fiduciary duty or irreconcilable dissensions among the former partners which endanger the assets of the partnership. Here, material facts bearing upon the proper exercise of the trial court's discretion in this regard are in dispute which preclude summary judgment on the issue. We affirm the trial court's order denying summary judgment for appellant and reverse its order granting summary judgment to appellees.

I.

The dispute in this case involves the post-dissolution rights of former members of the law partnership of Lyons, Mack, Delaney & Young (LMDY). Many of the facts are undisputed, but others are not. LMDY was formed on April 17, 1989 by the appellees, Linda A. Delaney, Mona Lyons, and Thomas J. Mack, and Marya C. Young, appellant. The partners operated the partnership initially under an oral agreement under the terms of which they shared profits and losses as follows: 29.15 percent each for Young, Delaney, and Lyons; and 12.55 percent for Mack. The parties' oral agreement also provided that Young, Delaney and Lyons would be entitled to annual draws of $25,000 each against the firm's anticipated profits, and Mack, who worked part time, would be entitled to draws of $12,500.

After a series of meetings concerning the rather bleak income prospects for the firm, Young, Lyons and Delaney held a meeting on November 3, 1989 which resulted in some modification of the parties' earlier partnership agreement. Each side recalls its terms differently. Appellees contend that the parties agreed that henceforth any profit over and above the total of their respective authorized draws would be distributed by majority vote of the partners. According to appellant, the partners agreed only that there would be "no presumption as to distribution of profits after each partner received the minimum draw." None of the parties contend that any specific agreement was reached covering their respective rights and responsibilities in the event of dissolution.

On July 16, 1990, the partnership was dissolved at the behest of appellee Delaney. Three days later, appellee Lyons set forth in writing her recollection of the agreements purportedly reached at the meeting on November 3, 1989. Lyons' memorandum sets forth, in pertinent part, the following with respect to her understanding of the agreement:

4. In that regard, it seems essential to record the pre-existing terms of our now-defunct partnership. Although we never had a written partnership agreement, we originally contemplated equal equity shares in the practice. In the fall of 1989, however, after a series of particularly bleak partnership meetings, I expressed my unwillingness to continue operating under that assumption. At a meeting on November 3, 1989, attended by me, Lin and Marya , we thereupon agreed to be equal partners only to the extent that each of us was guaranteed equal draws up to $25,000 plus Tom[] [Mack's] lesser share. We further agreed that any profit of the practice above the total of those guaranteed sums would be distributed on an annual basis by majority vote of the partners.

On July 20, 1990, appellant expressed her understanding of this aspect of the November 3rd agreement in a reply memorandum. She stated:

4. I generally agree with the statements in paragraph 4 of the Memorandum. However, I wish to clarify that it was my understanding from those meetings only that there was no presumption of equal shares after the $25,000 draw level. I do not specifically recall agreeing that distributions on an annual basis would be by "majority" vote. However, as I have already discussed with Mona , I will accept Mona's recollection of events, but consider this point moot since there is no longer a partnership for purposes of taking a vote.

5. Given the dissolution, I do not believe we have a disagreement of any consequence concerning the meaning of the existing partnership agreement.

In an affidavit in support of her motion, appellant averred that at no time did she agree to distribution of the profits above the minimum draws by majority vote. She stated that appellees Young and Delaney requested the meeting to discuss financial incentives over and above minimum draws for cases for which one partner secured a large recovery or otherwise performed exceptional services. Young's version of this part of the Discussion was that she indicated to her partners that the idea for bonuses was a good one, and she accepted a proposal that there would be no presumption as to distribution of profits after receipt of the minimum draw by each of them. According to Young, excess profits did not become an issue prior to dissolution of the partnership because there were none.

On August 14, 1990, appellant Young sent another memorandum to her former partners expressing her view that there was no agreement governing dissolution and that she would "proceed with wind-down activities under the legal principles applicable in the absence of an agreement." Appellee Delaney wrote appellant a note asking for clarification. The following day, appellant sent another memorandum to her former partners explaining her position as follows:

Our dissolution is governed by the Uniform Partnership Act, because we have no express partnership agreement setting up procedures for dissolution. We are proceeding with a wind-down of the partnership business, not a continuation. But the partnership is not terminated until the wind up is completed; that is, the ...


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