Bendalin v. Youngblood & Assocs.

• Decision Date: 24 October 2012
• Docket Number: No. 06–11–00110–CV.,06–11–00110–CV.
• Citation: 381 S.W.3d 719
• Court: Texas Court of Appeals
• Parties: Ronald M. BENDALIN, Appellant, v. YOUNGBLOOD & ASSOCIATES, a Texas General Partnership, Eldon L. Youngblood, Hilary Youngblood, and David Pederson, Appellees.

381 S.W.3d 719

Ronald M. BENDALIN, Appellant,

v.YOUNGBLOOD & ASSOCIATES, a Texas General Partnership, Eldon L. Youngblood, Hilary Youngblood, and David Pederson, Appellees.

No. 06–11–00110–CV.

Court of Appeals of Texas,

Texarkana.

Submitted Aug. 9, 2012.

Decided Oct. 2, 2012.

Rehearing Overruled Oct. 24, 2012.

Andrew M. Gould, Jeffrey W. Hellberg, Jr., Wick Phillips Gould Martin, LLP, Dallas, for appellant.

Stuart M. Reynolds, Jr., Jennifer L. Watkins, Schneider & Miller, PC, Richardson, Alan R. Bromberg, Dallas, for appellees.

Before MORRISS, C.J., CARTER and MOSELEY, JJ.

OPINION

Opinion by Chief Justice MORRISS.

In its simplest terms, the withdrawal of Ronald M. Bendalin from his law partnership with Eldon L. Youngblood gave rise to this dispute involving the two men and their entities, most notably the Youngblood and Bendalin Partnership (YB Partnership). The relationships involved and the fallout from the withdrawal, however, are far from simple.

A bench trial in Dallas County ¹ yielded a judgment against Bendalin for wrongful withdrawal as a partner. He was ordered to pay, inter alia, $43,831.00 as his exiting partnership contribution, $5,259.72 and $1,413.16 as prejudgment interest, $295,817.50 in attorney's fees, and $69,563.85 in expert fees.² We reverse the trial court's judgment and remand for further proceedings consistent with this opinion, because we reach the following conclusions:

1. Bendalin's withdrawal was effective without written notice;

2. Bendalin's attempts to rescind his withdrawal were ineffective; 3. Quasi-estoppel does not negate Bendalin's withdrawal;

4. Bendalin's withdrawal was effective December 31, 2008;

5. Bendalin's withdrawal was not wrongful; and

6. Remand is needed to determine the amounts to be recovered.

Because of the complexity of this matter, we have structured this opinion in multiple parts, including our analysis leading to the above six holdings.

I. BACKGROUND

A. The Relationships

Youngblood was an attorney associated with Akin, Gump, Strauss, Hauer & Feld, LLP (Akin) in the 1990s. He developed a practice “by which large volumes of residential mortgage loan-document packages could be prepared quickly and accurately, using sophisticated computer software and significant paralegal help.” A fixed fee was charged by Akin “to the lender-client's borrower and paid upon the closing of the loan.” The practice grew, and Youngblood caused Akin to hire Bendalin in 1999 as his associate.

In 2003, Youngblood and Bendalin “negotiated a buy-out from Akin of the practice” and together formed YB Partnership for the following purpose:

The Partnership is formed to develop and perform legal services work in the nature of high-volume, fixed-fee preparation of residential loan and deed packages for institutions within the mortgage banking industry and to execute and deliver any documents or instruments necessary or appropriate in connection with the business of the Partnership, and for all other purposes appropriate or permitted

for a legal services firm.

They also negotiated an arrangement with another law firm, McGlinchey Stafford PLLC (McGlinchey),³ in which they would personally “become non-equity partners of McGlinchey and, McGlinchey would become a minority partner in a new entity as of July 1, 2003.” McGlinchey was to receive a twenty percent carried continuing interest in the new entity in exchange for “something over a million dollars.” This new entity, formed by YB Partnership as the general partner and McGlinchey, was called McGlinchey Stafford and Youngblood & Bendalin, LLP (Firm), and carried out the day-to-day business of a legal services firm. YB Partnership owned eighty percent interest in the Firm ⁴ and McGlinchey owned “20% through a wholly owned subsidiary called MB Member.” Youngblood testified that subsequently, the Firm created a company called McGlinchey Stafford and Youngblood & Bendalin Mortgage Banking Group, LLC (MBG) so that MBG could “be the employer of ... employees and lease them back to [the Firm] ... and, of course, we continued [YB Partnership] to supervise those employees.” ⁵

Bendalin wore four hats as a result of the business structure outlined above. He was a nonequity partner and lawyer for McGlinchey, a partner of YB Partnership, the Firm's manager, and an MBG employee.

B. The Withdrawal

According to the Firm's Chief Compliance and Document Preparation Director, Marshall Clayton Mahurin, III, the Firm was “continually growing” until 2007, when there was a “drastic reduction in the entire industry that impacted us directly and our loan volume dropped off precipitously, and I would estimate that we laid off approximately 50 percent of our workforce, possibly more.” The financial impact of this decline in business was felt throughout 2008, and there was even a time when MBG employees were being asked to take unpaid time off in order to prevent layoffs.

In the summer of 2008, Bendalin began representing Vantium Capital (Vantium) as one of McGlinchey's corporate clients, and was being paid for his legal services on an hourly basis. Appreciating his work, Vantium extended an offer of employment to Bendalin. On November 20, 2008, Bendalin signed a three-year general counsel employment contract with Vantium. He “owed it to his family to take the offer that was extended to him” for financial reasons, as it was “too good to refuse.” Bendalin's start date was December 2, 2008, a fact not known by Youngblood “until discovery in the lawsuit.”

On the morning of November 21, 2008, Bendalin held a private meeting with Youngblood to announce his departure, informing Youngblood “that he had accepted a full-time general counsel position with Vantium Capital, ... that he was leaving the firm and intended to sell his interest either to [him] or to someone else.” Youngblood testified that Bendalin's departure was unconditional and that he understood he would have “the first shot” to purchase the YB Partnership interest because “[t]hat's the only interest he had to sell and that was the interest—that was the entity he was withdrawing from.” He testified that there was a discussion that McGlinchey might have been interested in purchasing Bendalin's interest in YB Partnership, in addition to individual potential purchasers Tom Turet and David John Pederson.

MBG Accounting Director and Director of Client Services (and YB Partnership's sole employee), Sandra Martin, also heard from Bendalin on November 21, 2008, who “said that he was leaving and taking a job with Vantium Capital.” Martin “asked if there was any way he would reconsider. He said no.” She “even asked if he—if we could work out him staying ‘Of Counsel.’ He said no.”

Also in evidence is a “statement regarding withdrawal” signed by Youngblood and Murphy which said that they were in the meeting with Bendalin November 21, 2008, and that, during that meeting, “Bendalin expressed his will and intention to withdraw from the business and law partnership ... and specified the effective date for his withdrawal to be December 31, 2008.” No evidence directly contradicts this statement.

Also on November 21, Pederson, who had joined the Firm as an attorney, was asked by Bendalin to join him for “a quick beer right after work.” Pederson testified that Bendalin “told me that he wanted to let me know that he was leaving the firm and taking a position as general counsel with Vantium Capital.” Pederson “asked him if there was any way he would stay and he—he indicated there—it was a done deal, he couldn't—he had to move on.” Pederson and Murphy clarified that Bendalin did not specify whether he was withdrawing from the YB Partnership at these meetings. Murphy's attempts during the following week to convince Bendalin to stay were fruitless.

On December 1, 2008, the Firm “had a regular staff managers meeting ... where the midlevel managers,” of MBG, including Martin, Pederson, HR Director Cindy Wall, Dacia Owen, IT Director John Mezger, Customer Service/Help Line Director Ken Mezger, Marketing Director Vicki Murphy, Mahurin, Youngblood, and Bendalin all “came together.” Pederson testified that Bendalin “simply announced to everyone that he would be leaving and taking the position of general counsel at Vantium Capital” “[a]t the end of the meeting” and that he would be gone by December 31, 2008.⁶ Bendalin did not respond to a question posed by Martin as to whether a partnership could only have one partner.

After the meeting, Martin was asked to “come up with a list of issues that would need to be handled for [Bendalin] to be able to transition out of the business” by December 31, such as revising the company name, removing Bendalin from payroll, and potentially adding a new partner. This list also included “Remove Bendalin from Bank Accounts: ... YB Northern Trust,” “Determine FMV ⁷ Model.”

Murphy testified that Bendalin had “[v]ery little involvement with YB” or the Firm after December 1 and that he turned in his company Blackberry December 3. In a December 5, 2008, e-mail, Youngblood sent the following note to Bendalin:

Just a reminder: Sandra M[artin] and I need a signed notice from you of your withdrawal from YB partnership to be effective December 31. I also need your written consent to transfer a small portion (1%) of my interest to another unnamed person (probably David; my daughter, Hilary; or another) prior to the end of the month.

Bendalin's response on December 8 said:

While it is my intention to withdraw as of December 31st, I can obviously not do so until we have agreed on terms. As such, I will be happy to provide formal notice of my withdrawal, and my consent for you to transfer a portion of your interest when we have agreed to all terms of the withdrawal.

Youngblood retorted by claiming that “[y]ou have already given notice of your withdrawal date of December 31, 2008,” and asking Bendalin to review Texas law and talk to Martin regarding the task of “evaluating the applicable FMV before the date of your...