Berkson v. Berryman

KARWACKI, Judge. This appeal arises out of circumstances surrounding the demise of a short-lived partnership formed by two lawyers engaged in the practice of law. The matter originated with a Bill of Complaint for an Accounting and Other Related Relief filed on June 1, 1981 in the Circuit Court for Washington County (Moylan, J.) by the appellee, Susan Elgin Berryman, now Susan Carol Elgin. The appellee sought to establish the existence of a partnership between herself and the appellant, Jacob B. Berkson, and requested an accounting of partnership profits allegedly withheld from the appellee by the appellant.

The trial on the issues was bifurcated by the trial court upon the appellant’s motion. In his May 25, 1982 order granting that motion the trial judge stated that the case would proceed to trial solely on the issue of the existence of a partnership, and if one was found to exist between the ⁸² parties, additional proceedings would be had to determine the nature and extent of any accounting. On April 18, 1988, the date scheduled for the first phase of the trial, the appellant, without prior notice to the court or to the appellee, stipulated to the existence of a partnership between the parties. Counsel for the appellant then requested a continuance of the trial stating as grounds for his request that he was unprepared to go forward on the issue of the terms of the partnership.

This request was denied and trial proceeded on the issue of the terms of the partnership. At the close of this two day hearing, the court issued a memorandum opinion, including considerable findings of facts which are summarized below. On December 4, 1979, the day of her admission to the Maryland Bar, the appellee became an associate of the appellant in the practice of law. Before that time, the appellant was a sole practitioner, and the appellee was employed by him as a law clerk.

On June 1, 1980 the parties formed a partnership. Their oral agreement to do so provided that the, net profits from their practice were to be divided two-thirds to the appellant and one-third to the appellee. The parties were to contribute toward losses sustained by the partnership according to their respective shares in the profits and were to receive equal draws against anticipated profits of $100 per week. The formation of the partnership was announced in the newspaper that June, and in the telephone directory the following August.

The firm applied for malpractice insurance in the name of the partnership. The stationery was changed and the manner in which the telephone was answered was amended to reflect the new partnership name, Berkson and Berryman. In addition to payment of the normal operating expenses of the firm, the parties agreed to the payment of certain consultation and legal fees to other attorneys who had participated in the representation of clients. The parties also agreed to make payments of $100 per month on the ⁸³ principal and the quarterly interest payments due on a loan obligation incurred by the appellant before the partnership was formed.

In mid-June, the partners made a loan to the partnership in the amount of $1,000, of which the appellant contributed two-thirds and the appellee one-third. This loan was repaid to the partners shortly thereafter. It is undisputed that under their partnership agreement all open files and pending cases of both parties were to become partnership cases subject to the agreed upon division of profits and losses. The parties did not anticipate or discuss dissolution of the partnership, and there were no express provisions agreed upon pertaining to their respective rights and obligations upon dissolution.

Having determined that a partnership existed and the terms thereof the lower court scheduled the second phase of the trial dealing with the accounting for July 25, 1983. At that hearing the court determined that the partnership was dissolved on November 2, 1980 when the appellant denied the appellee access to their offices and files. This abrupt move by the appellant was an apparent response to events which occurred in late October. Several days before the dissolution the partners met with Dr. David Berryman, who was at that time married to the appellee.

Dr. Berry-man, a physician, demanded a contingent fee amounting to one-sixth of the legal fees recovered in one of the firm’s cases entitled Cool v. Stapleford (The Cool case). 1 Apparently Dr. Berryman had acted as a medical consultant to the partners in that case. Earlier, Dr. Berryman had made a similar written demand of the appellant in a letter dated October 25, 1980. The trial court specifically found that the ⁸⁴ appellee did not join in her husband’s demand, and no agreement was reached by the partners and Dr. Berryman as a result of their meeting. Dr. Berryman’s claim is the subject of a pending lawsuit.

About the same time, the appellee requested that her share in the partnership profits and losses be increased from a one-third interest to a one-half interest. The parties did not reach an agreement regarding this request. The lower court at the hearing of July 25, 1983 was persuaded by evidence offered by the appellee that following the dissolution she at all times was willing and able to participate in the winding up of the partnership’s cases, but that she was prevented by the appellant from doing so. Rather, after November 2, 1980, the appellant resumed his sole practice and in addition proceeded to conclude the cases which were those of his partnership with the appellee.

The evidence showed that the winding up of the partnership cases produced legal fees of $359,061.00. $302,327.00 of that amount was received in the Cool case mentioned above. In connection with the Cool case, the appellant subsequent to November 2, 1980, without any consultation with the appellee, employed Max R. Israelson, Esq., of the Baltimore Bar to assist him in its conclusion. The appellant paid Mr. Israelson $60,465.00 from the fee received in the Cool case without the consent of the appellee. Upon making the above outlined factual findings, the trial judge determined that the appellee was entitled to $115,-756.38 (her one-third share of the $359,061.00 fees earned in the winding up of the partnership cases, or $119,687.00, less certain credits in the amount of $3,930.62 due to the appellant).

He specifically rejected the appellant’s claim of credits for expenses incurred in winding up the partnership cases and for the fee he paid to Mr. Israelson for the latter’s assistance in concluding the Cool case. From the order implementing this determination, the appellant has appealed, raising the following contentions: I. The trial court abused its discretion in denying the appellant’s motion for a continuance; ⁸⁵ II. The appellee is estopped from claiming any share of the profits earned after dissolution of the partnership; III. The trial court erred in failing to deduct certain expenses and liabilities from the total amount of fees earned in winding up partnership cases; and, IV.

The court erred in failing to allow the appellant any credit for his services rendered in winding up the partnership affairs. I. Initially, the appellant contends that the trial judge abused his discretion in denying a motion for the continuance of the first phase of the bifurcated trial. The appellant recognizes that the grant or denial of a continuance lies within the discretion of the trial judge and that, unless arbitrary, his action will not be overturned on appeal. Greenstein v. Meister, 279 Md. 275 , 368 A.2d 451 (1977); Dart Drug Corp. v. Hechinger, 272 Md. 15 , 320 A.2d 266 (1974); Butkus v. McClendon, 259 Md. 170 , 269 A.2d 427 (1970); Cruis Along Boats v. Langley, 255 Md. 139 , 257 A.2d 184 (1969).

The appellant argues, however, that the court abused its discretion because it acted in contravention of the order granting the appellant’s motion to bifurcate the trial. The order reads in pertinent part, “it is this 25th day of May, 1982, by the Circuit Court for Washington County, ORDERED that the Motion for Bifurcation of Trial is granted and the case shall proceed to trial solely on the issue of the existence of a partnership.” The appellant argues that he had properly inferred from the language of the May 25, 1982 order that only the issue of the partnership’s existence and not the question of the terms of the partnership would be litigated at the April 18, 1983 trial. The appellant claims that the court’s decision not to grant his request for a continuance resulted in “surprise” to him, thereby preventing him from having the opportunity to prepare that issue for litigation adequately. We disagree, and for the several reasons discussed below conclude that ⁸⁶ the trial judge’s refusal to grant the continuance was a proper exercise of his discretion.

First, it is evident from a review of the pleadings filed in this case and the extent of discovery sought and received by both parties during the two years prior to the first trial that the parties had prepared before the first phase of the trial to litigate not only the partnership’s existence but the terms of it as well. In fact, it is difficult to conceive how the existence of a partnership could fairly be determined without some evidence adduced at trial as to its nature and terms. As the trial judge stated in his response to counsel’s argument in support of the motion to continue: The Court, whether it be skillful or unskillful, divided this into two basic issues, whether or not there was a partnership between the parties to this litigation; and, secondly, information from the files, books and records which would be relevant on the legal issue of an accounting for partnership assets and profits and losses; and the order went on to say that the Plaintiff must first make a prima facie showing of a partnership before any information relating to the accounting should be discoverable. We conclude that this interpretation reasonably effectuates the goals of the bifurcation; i.e., to postpone the time and expense of discovery on the accounting question until after the existence of the partnership had been first determined.

Secondly, we find no prejudice to the appellant resulting from the court’s refusal to grant the continuance. Any evidence that the appellant’s counsel was unable to elicit regarding the terms of the partnership at the first phase of the trial, he could certainly have put forth at the hearing on the issues of accounting held on July 25, 1983. Finally, and most importantly, nothing in the record before us indicates what evidence, if any, the appellant sought to produce at a later date to contradict the ultimate findings of fact by the lower court on what the terms of the partnership agreement between the parties were. Without ⁸⁷ such a proffer, the motion bordered on the frivolous.

Md. Rule 527 (New Md.Rule 2-508).

II

The appellant next asserts that the appellee is estopped from claiming any share of the profits earned after dissolution of the partnership. He specifically argues that the appellee breached her fiduciary duty of good faith and loyalty to the partnership. Cf. Herring v. Offutt, 266 Md. 593, 597 , 295 A.2d 876 (1972).

The appellate courts of Maryland have long applied the definition of equitable estoppel found in 3 Pomeroy’s Equity Jurisprudence § 804 (5th ed.): Equitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed, either of property, or contract, or of remedy, as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right, either of property, of contract, or of remedy. Bayshore Industries, Inc., v. Ziats, 232 Md. 167 , 192 A.2d 487 (1963); Crane Co. v. Onley, 194 Md. 43, 50 , 69 A.2d 903 (1949); Brenner v. Plitt, 182 Md. 348, 364 , 34 A.2d 853 (1943); Resnick v. Kaplan, 49 Md.App. 499, 511 , 434 A.2d 582 (1982). The appellant advances two incidents where the appellee allegedly breached her fiduciary duty. First, the appellant cites the claim by the appellee’s then husband, Dr. Berry-man, for a contingent fee in the Cool case.

The appellant asserts that because the appellee was present during the meeting between Dr. Berryman and the appellant, and stood silently by while the two discussed Dr. Berryman’s fee arrangements, the appellee placed herself in a direct conflict of interest with the partnership. We believe the appellant overlooks the fact that Dr. Berryman’s claim was made against a partnership asset of both the appellant and ⁸⁸ the appellee. For that reason the appellee certainly was an interested, if not necessary, party to any discussions with the claimant. The evidence fully supports the trial court’s finding that the appellee in no way placed herself in any conflict of interest with regard to the Berryman claim, and we are satisfied that the court’s finding to that effect was not clearly erroneous.

Maryland Rule 1086. Secondly, the appellant reasons that the appellee’s decision to act as attorney for Dr. Berryman and the