Anderson v. Anderson, Kaufman, Ringert and Clark, Chartered
| Decision Date | 07 June 1989 |
| Docket Number | No. 17303,17303 |
| Citation | 116 Idaho 359,775 P.2d 1201 |
| Parties | Richard J.T. ANDERSON, an individual, Plaintiff-appellant, v. ANDERSON, KAUFMAN, RINGERT AND CLARK, CHARTERED, an Idaho professional service corporation, now known as Ringert, Clark, Harrington, Reid, Christenson and Kaufman, Chartered, an Idaho professional service corporation; Akar, Inc., an Idaho corporation; William F. Ringert; D. Blair Clark; James G. Reid; Jeffrey R. Christenson; Andrew M. Harrington; and James P. Kaufman, individuals, Defendants-respondents. ANDERSON, KAUFMAN, RINGERT, AND CLARK, CHARTERED, an Idaho professional service corporation, now known as Ringert, Clark, Harrington, Reid, Christenson and Kaufman, Chartered, an Idaho professional corporation, Counterclaimants-respondents, v. Richard J.T. ANDERSON, an individual, Counterdefendant-appellant. |
| Court | Idaho Supreme Court |
Elam, Burke & Boyd, Boise, for plaintiff-appellant. Robert M. Tyler, Jr., argued.
Holland & Hart, Langroise, Sullivan, Boise, for defendants-respondents. Steven B. Anderson argued.
Richard J.T. Anderson (Anderson) sued the members of his former law firm, now called Ringert, Clark, Harrington, Reid, Christenson & Kaufman (the firm), and the firm itself over the value of his interest in the shares and assets of the law firm professional corporation. 1 The firm counterclaimed alleging that Anderson, as president and office manager, had paid himself $27,138.00 in excessive salaries and breached his fiduciary duty to the firm by receiving undisclosed payments from firm clients. After an extended trial, the district court ruled in favor of both parties on their respective claims, which resulted in a substantial judgment for the firm because its counterclaim was significantly greater than Anderson's claim. Anderson appeals the trial court's holding that he was equitably estopped from asserting a statute of limitations defense to the firm's counterclaim. Anderson also appeals the trial court's award to the firm of punitive damages, attorney fees and costs. We affirm the trial court's judgment on all matters except the award of attorney fees, which we reverse.
Anderson is an attorney who practiced law in his father's firm until his father, Eugene Anderson, died in 1972. At that time Anderson, Sam Kaufman and William Ringert, two other associates in his father's firm, formed two corporations (AKAR, Inc., which held the law firm assets, and AKAR, Chartered, a professional corporation through which the firm engaged in the practice of law). As manager and president of the firm from 1972 until May, 1984, Anderson maintained all corporate books and records, performed accounting work for the firm, prepared its income tax returns, computed and paid the salaries and bonus compensation for all lawyers in the firm, and had final review over client billings. He was compensated by the firm for management work from 1979 on.
To keep track of the hours worked each day, the firm's attorneys used the DayTimer System. With this system, the attorney made a daily record of the time worked for each client. These time records were the main basis for client billings after 1979. Before 1979, the hours logged into an attorney's DayTimer were optional and essentially irrelevant in determining attorneys' salaries because each attorney received 50% of the fees he generated. The balance was retained by the firm. Beginning in 1979, the hours were computed into the salary compensation formula, and so each attorney reported his hours to Anderson, who then prepared monthly accounts from which to bill clients and to compute compensation for that attorney. These accounting ledgers were firm documents prepared and maintained under Anderson's supervision and control. As corporate documents, the ledgers were available for review by all corporate shareholders in the firm. The DayTimers, however, were kept personally by each attorney, if they were kept at all. On January 2, 1985, the firm terminated Anderson both as an employee and as an officer and a director of the corporation (allegedly because Anderson had been manipulating salaries and corporate records). After termination Anderson sued the firm asserting several claims for relief, including the value of his shares in the corporations which The firm amended its counterclaim on August 4, 1986, after discovering on November 5, 1985, some of Anderson's personal records which disclosed that he had been personally receiving fees for work performed, fees which had not been reported as law firm earnings and deposited to the firm's account. The discovery allegedly occurred while cleaning out an old storage area of the law firm building occasioned by a leak in the roof. In the process a box of Anderson's personal records was found. Included in the box were checks from clients to Anderson, deposit slips to Anderson's personal account, and ledgers showing his banking records. The information in these records allegedly reflected that Anderson had received fees which had not been turned over to the firm, and provided the basis for the amended counterclaim which alleged breach of fiduciary duty in failing to report and pay over the fees, and added a claim for punitive damages. The omitted fees involved work done by Anderson for (1) Gem State Securities Corp. (Gem State Securities) and its subsidiary, American Reserve Life Insurance Co. (American Reserve Life), in which Anderson participated as an officer and director; (2) CDJ Associates (CDJ), a partnership formed by Anderson and his sisters for managing the estate of their father, Eugene Anderson; and (3) the Estate of Frank McCleary (the McCleary Estate) which was being probated by his father at the time of his death, and which was continued by Anderson.
[116 Idaho 361] he claimed was $177,171.67 plus interest. The firm counterclaimed alleging that Anderson wrongfully and fraudulently paid himself a management fee which was $27,138.00 more than the amount agreed by the board of directors.
At trial Anderson defended against the counterclaim, alleging that he alone, and not the firm, was entitled to the alleged non-legal fees and that he had no duty to report them or the time spent on this work. Alternatively, Anderson argued that the statute of limitations had run. The firm argued that Anderson was obliged to include these fees as corporate earnings and record them accordingly. The firm alleged that Anderson was equitably estopped from asserting the statute of limitations and (1) that firm members had no knowledge of these fees, actual or constructive, and (2) that they had no duty to investigate in light of Anderson's fiduciary duties owed toward them.
After a 7-day trial, the trial court ruled for Anderson on his claim against the firm for his corporate shares which were found to have a value of only $35,000 plus interest, and on his claim regarding his interest in the firm's extensive law library. 2 However, the trial court also ruled against Anderson on the counterclaim, finding that he had breached his fiduciary duty to the professional corporation and to its officers, directors and shareholders and had wrongfully deprived the firm of legal fees amounting to $210,591.00, which with accrued interest, totaled $260,588.00. 3 While the counterclaim was facially barred by the statute of limitations, the trial court held that Anderson was equitably estopped from asserting a statute of limitations defense to the counterclaim because of his fiduciary duty to the firm and its members. The trial court found that Anderson breached this duty by concealing material facts surrounding the receipt of direct payments from firm clients. Therefore, the firm and its members were not charged with knowledge of the concealments or obliged to investigate. The trial court also indicated that Anderson concealed the payments in such a manner that the firm members could not discover them by investigating corporate records. Additionally, the trial court found Anderson's conduct in claiming fees personally and in failing to
[116 Idaho 362] disclose those payments was an extreme deviation from the standards of professional conduct expected of Anderson as an attorney and as managing shareholder of the professional corporation. Consequently, the trial court awarded punitive damages of $25,000.00. The trial court also awarded $50,000 attorney fees to the law firm, together with costs as a matter of right ($4,804.75) and discretionary costs ($16,247.99). Anderson has appealed. We affirm the trial court's judgment, except as to attorney fees.
Our standard of review is to analyze the record and determine (1) whether there is substantial competent evidence to support the trial court's findings of fact, and (2) whether the trial court, in its conclusions of law, properly applied the law to the facts as found. Pope v. Intermountain Gas Co., 103 Idaho 217, 646 P.2d 988 (1982); Perry Plumbing Co. v. Schuler, 96 Idaho 494, 531 P.2d 584 (1975); Bischoff v. Quong-Watkins Properties, 113 Idaho 826, 748 P.2d 410 (Ct.App.1987).
The primary issue on appeal is whether Anderson was equitably estopped from asserting a statute of limitations defense to the counterclaim. Based on its findings that Anderson had a fiduciary duty to disclose client payments to the firm, and based on the fact that he had effectively concealed knowledge of those payments from the firm, the trial court concluded that Anderson was equitably estopped.
The trial court found that Anderson, as president of the professional corporation and office manager of the firm, and as an attorney, stood in a fiduciary relationship both to the professional corporation and to the other officers, directors and shareholders of the professional corporation. The trial court further found that Anderson breached his fiduciary duties to the professional...
To continue reading
Request your trial
-
Smith v. Angell, 18674
...to negotiate a settlement when deciding whether to award attorney fees is prohibited under Idaho law. In Anderson v. Anderson, Kaufman, et. al., 116 Idaho 359, 775 P.2d 1201 (1989), this court unanimously held that "the failure to enter into or conduct settlement negotiations is not a basis......
-
Tingley v. Harrison
...prejudice. Hamill, 103 Idaho at 22, 644 P.2d at 344. See also Theriault, 108 Idaho at 307, 698 P.2d at 369; Anderson v. Anderson, 116 Idaho 359, 364, 775 P.2d 1201, 1206 (1989); Williams v. Blakely, 114 Idaho 323, 325, 757 P.2d 186, 188 (1988). There can be no estoppel absent any of the ele......
-
DesFosses v. DesFosses
...were unreasonable. This result seems to be a departure from the analysis the Court required in Anderson v. Anderson, Kaufman, Ringert, and Clark, Chartered, 116 Idaho 359, 775 P.2d 1201 (1989), where the Court discussed whether the nonprevailing plaintiff--against whom fees were awarded by ......
-
Turner v. Willis
...negotiations in determining whether to impose costs and attorney fees under I.R.C.P. 54. See also Anderson v. Anderson, Kaufman, Ringert & Clark, 116 Idaho 359, 775 P.2d 1201 (1989). I further concur in the majority's conclusion that the raising of a contributory negligence defense, when th......