Foti v. Cook, 780207

Citation263 S.E.2d 430,220 Va. 800
Decision Date29 February 1980
Docket NumberNo. 780207,780207
CourtSupreme Court of Virginia
PartiesVictor F. FOTI v. William A. COOK, Jr., James M. Dillon, Lacy W. Hanson, Isaac O. Perkins, R. David Rotty, Joseph B. Wright and Glenn D. McMillion, t/a Andrews, Burket & Co. Record

Charles D. Fox, III, Roanoke (John Davis Feldmann, Hunter, Fox & Wooten, Roanoke, on briefs), for appellant.

William R. Rakes, John S. Edwards, Roanoke (Gentry, Locke, Rakes & Moore, Roanoke, on brief), for appellees.

Before I'ANSON, C. J., and CARRICO, HARRISON, COCHRAN, POFF and COMPTON, JJ.

HARRISON, Justice.

Victor F. Foti, William A. Cook, Jr., James M. Dillon, Lacy W. Hanson, Isaac O. Perkins, R. David Rotty, Joseph B. Wright, and Glenn D. McMillion, Certified Public Accountants, were partners in the Roanoke accounting firm of Andrews, Burket and Company (the Andrews firm). On August 1, 1976, Foti submitted his voluntary resignation from the firm, and it was accepted the following day. A dispute thereafter arose between the parties, Foti claiming that his status as a partner had been terminated involuntarily as the result of certain action taken by the remaining partners in the firm subsequent to his resignation, and that he was no longer bound by the terms of their partnership agreement. This action precipitated a motion for a declaratory judgment by the remaining partners to establish whether the agreement was valid and applicable and whether Foti was in violation thereof. Foti noted this appeal from an adverse judgment by the court below.

The controversy arises from a provision in the Articles of Partnership of Andrews, Burket & Co., which provides, in substance, that in the event a partner voluntarily withdraws from the firm and during the twenty-four months following such withdrawal performs accounting services for clients of the partnership, such partner shall pay to the partnership an amount equal to one-third of each year's fee collected from such clients for a period of three years. 1

Foti was an associate of the Andrews firm from 1959 to 1969. In 1969 he became a senior partner, and at that time first entered into the partnership employment agreement which contained a postemployment restrictive covenant similar to the one in issue. From time to time as additional partners were admitted to the firm, or as the partnership shares were modified, the contract was revised and the agreement redated and reexecuted. The agreement in dispute was executed in May 1975, and was in effect at the time Foti resigned. In his letter of resignation Foti indicated his intention to comply with the partnership agreement and wrote, "I have not solicited any of our present clients and don't intend to do so."

After his resignation was accepted by the partners, Foti declined invitations to attend a meeting of the firm's management partners on August 6, 1976, and the partners' monthly meeting on August 17, 1976. The partners testified that following the receipt of Foti's resignation they took steps to transfer Foti's responsibility for certain of the firm's clients to the remaining partners; that it was decided that Foti should direct his efforts during his remaining time as a partner to transferring to the other partners responsibilities that he had for the firm's clients; and that in order to carry out this program Foti should take a partner or an employee of the firm with him whenever he had any occasion to visit clients. They also decided that all the firm's working papers should remain in the office files because of the firm's continuing liability for such work. They agreed, however, that Foti would have access to the files and have the privilege of examining their contents in the offices of the firm.

Foti testified that subsequent to his resignation the remaining partners of the firm held several meetings, of which Foti had no notice, and at these meetings decisions were made which adversely affected his interests in the partnership. He complained specifically of the decisions made in the August 17, 1976 meeting that he was not to accumulate any chargeable time for work done for clients, that he was not to remove any working papers from the office of the firm, and that he was not to meet with any clients unless accompanied by another member of the firm. Foti alleges that these acts on the part of the remaining partners constituted an involuntary termination of his status as a partner. 2 He notified the firm of this position by letter dated August 30, 1976. In September 1976, Foti became a member of the accounting firm, R. L. Persinger and Company, whose name was later changed to Persinger, Foti and Company.

The partners of the Andrews firm never voted to expel Foti pursuant to Article V, Section V.2 of the partnership agreement, and Foti continued to receive his partnership "draws" until the end of September 1976, when his association with Persinger commenced. During the month of September 1976, Foti performed accounting services for clients of Andrews, Burket & Co., but billed these clients through his new firm.

Upon a trial of the case a jury was impaneled to try the sole factual issue of the voluntariness of Foti's withdrawal from his former accounting firm. After the evidence had been submitted, the trial court granted summary judgment for the Andrews firm, finding no issue of material fact as to the voluntariness of Foti's withdrawal. The court further held that the partnership covenant in question was reasonable and valid and that Foti was liable thereunder. The parties stipulated the identity of the clients of the Andrews firm for whom Foti, or his new accounting firm, had performed accounting services during the first year after Foti's withdrawal. Upon this stipulation and the evidence the court entered judgment against Foti in favor of the appellees in the amount of $40,264.31. This sum represents payment required under the partnership covenant for the year ending September 30, 1977.

Odell Hamden, a partner in the firm of Persinger, Foti and Company, testified that his firm was then performing accounting work for a number of clients who were formerly clients of the Andrews firm. He said that Foti had contact with some of these clients during the month of September 1976, and prior to the time Persinger and Foti officially went into partnership. Hamden was aware of the provisions of the Andrews partnership contract and said that any payments that Foti would have to make under this agreement would be made by the Persinger firm. Specifically the witness said: "Mr. Foti . . . made the observation that he wanted to live up to his commitments, and we said that if he had any obligations as a result of this action that we expected to honor them."

The trial judge found as a matter of law that Foti's withdrawal from the Andrews firm was voluntary. There is ample evidence to support this finding. It is conceded that Foti was a respected and valued partner of the Andrews firm and that his resignation was neither solicited nor welcomed by the firm. While the actions taken by the remaining partners at the August 17, 1976 meeting may have been prompted by self-interest, and amounted to an effort to retain its clients whom Foti may have attracted to the firm, or its clients who had been served by Foti through the years, such actions were not unreasonable. The restrictions placed on Foti did not constitute a dismissal of Foti as a partner. For obvious reasons the firm desired to retain its clients and therefore took action to assure that Foti would not use his remaining days with the firm to solicit clients or incur good will for his new firm.

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