Gast v. Peters, S-02-974.

• Decision Date: 21 November 2003
• Docket Number: No. S-02-974.,S-02-974.
• Citation: 671 N.W.2d 758,267 Neb. 18
• Parties: William E. GAST, Appellant, v. Paul F. PETERS and Gast & Peters, a Nebraska partnership, Appellees.
• Court: Nebraska Supreme Court

671 N.W.2d 758

267 Neb. 18

William E. GAST, Appellant, v. Paul F. PETERS and Gast & Peters, a Nebraska partnership, Appellees.

No. S-02-974.

Supreme Court of Nebraska.

November 21, 2003.

David E. Pavel, of David E. Pavel Law Offices, P.C., Omaha, for appellant.

Monte Taylor and Paul F. Peters, of Taylor, Peters & Drews, Omaha, for appellees.

HENDRY, C.J., and WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

STEPHAN, J.

This appeal arises from a dispute between two lawyers involving fees earned before the dissolution of their partnership but collected thereafter. Following a bench trial, the district court for Douglas County found that Paul F. Peters was justified in setting off $17,620.62 from fees due his former partner, William E. Gast, from a case which Peters had concluded because Gast had underpaid Peters by that same amount in distributing fees collected on another case which Gast had concluded. Upon consideration of Gast's appeal, we find no error and affirm.

BACKGROUND

The parties entered into a written partnership agreement effective January 1, 1990, in which they agreed to practice law under the firm name "Gast & Peters" (G&P). Under the terms of the agreement, the net profits and losses of the partnership were to be divided and borne equally between the partners.

In a November 10, 1992, agreement (merger agreement), Gast and Peters each indicated their acceptance of the outlined terms and conditions of a merger between G&P and the law firm of Schmid, Mooney & Frederick, P.C. (SM&F), effective January 1, 1993. Paragraph 4 of the merger agreement provided in relevant part:

As of January 1, 1993, all contingent fee cases will be valued by G&P and SM&F, i.e., each pending case would be individually reviewed. Work completed and work to be performed would be apportioned on a percentage basis on each case. At the time of eventual payment of fees, the fees from each case would then be apportioned accordingly between G&P and SM&F, i.e., fees from a case 10% completed as of time of merger would be apportioned 10% to G&P and 90% to SM&F.

The merger agreement made specific reference to an attached letter dated October 23, 1992, signed by Peters on behalf of G&P and Keith I. Frederick on behalf of SM&F. This letter listed G&P's 14 largest pending contingency cases and assigned fee apportionment percentages to G&P and SM&F based on work which G&P had completed on each case as of the date of the letter. The letter provided that the proportions of the fees would become "vested" in G&P and SM&F, respectively, as of the January 1, 1993, merger date, subject to any adjustments required because of significant additional work accomplished prior to the merger.

From January 1, 1993, until February 28, 1996, both Gast and Peters were shareholders, directors, and employees of SM&F. Both parties left SM&F on approximately March 1, 1996, and thereafter have practiced law separately from each other. When Gast and Peters left SM&F, all but 2 of the 14 contingent fee cases referred to in the merger documents had been concluded. The two unresolved cases are referred to by the parties as the "Yager" and "Stenson" cases.

Gast originated the Yager case for G&P in 1990. When G&P merged with SM&F, G&P withdrew its representation of the client. Gast and attorney Terry Gutierrez continued working on the case as employees of SM&F. When Gast left SM&F, he took the Yager files with him, and he and his new firm, Gast, Ratz & Gutierrez, P.C. (SR&G), assumed responsibility for the case until its settlement in 1997. There is no record of the client's ever dismissing G&P or entering into a contingency fee agreement with SM&F or SR&G. As a result of the settlement, a total of $97,892.32 in attorney fees was received and deposited in the SR&G trust account. Pursuant to the merger agreement, the fees from the Yager case were to be apportioned 60 percent to G&P and 40 percent to SM&F. Under this formula, G&P would have received $58,735.39. On February 7, 1998, after receipt of the Yager fee, Gast and other members of SR&G met with Peters and Frederick to discuss apportionment of the fee. Both prior to and during this meeting, Peters stated his position that G&P was entitled to 60 percent of the fee pursuant to the merger agreement. Gast and his SR&G colleagues took the position that the remaining 40 percent would be insufficient to compensate both SM&F and SR&G. No agreement was reached on this point, and Peters left the meeting. Subsequently, Gast and the members of SR&G decided to disburse 24 percent of the Yager fee in the amount of $23,494.16 to G&P, with a portion of the balance distributed to SM&F and the remainder retained by SR&G.

Peters originated the Stenson case for G&P. Peters retained the Stenson case files when he left SM&F, and both he and Gast were involved with the case until its conclusion by settlement in 1997. Pursuant to the merger agreement, fees from the Stenson case were to be apportioned 85 percent to G&P and 15 percent to SM&F. In January 1997, however, Peters entered into an agreement on behalf of G&P to modify the Stenson fee apportionment agreement due to the amount of work which he and Gast performed subsequent to their departure from SM&F. Under the modified agreement, G&P's percentage was increased from 85 percent to 88.75 percent and SM&F's share was reduced from 15 percent to 11.25 percent. Accordingly, G&P received 88.75 percent of the total attorney fees in the Stenson case, or $74,032.29. SM&F issued a check payable to G&P for this amount from its trust account and delivered it to Peters. Peters deposited the check into a newly created G&P account. In a letter dated September 11, 1998, Peters informed Gast of the deposit. In the same letter, Peters provided a detailed account of the manner in which he was disbursing the deposited funds. He informed Gast that he was disbursing 50 percent of the total proceeds, or $37,016.15, to himself in accordance with the G&P partnership agreement. Peters further disclosed that out of Gast's equal share, he was withholding the $17,620.62 in fees which he claimed to have been underpaid on the Yager settlement, thereby resulting in a net payment to Gast in the amount of $19,395.53.

Gast filed this action in which he sought a declaratory judgment that he was entitled to an additional $17,620.62 from the fee generated by the Stenson settlement. In his answer, Peters affirmatively alleged that the amount paid to Gast in the Stenson case constituted Gast's full 50-percent share minus a legal and proper setoff for Peters for the unpaid portion of Peters' claimed share of the Yager fees. Both Gast and Peters filed motions for summary judgment. Following two interlocutory orders which resulted in an entry of partial summary judgment for each party, the district court conducted a bench trial and thereafter concluded that Peters had properly set off the disputed $17,620.62, to which he was entitled. Gast filed this timely appeal, which we moved to our docket on our own motion pursuant to our authority to regulate the caseloads of the appellate courts of this state. See Neb.Rev.Stat. § 24-1106(3) (Reissue 1995).

ASSIGNMENT OF ERROR

Gast assigns, restated and consolidated, that the trial court erred in finding that Peters properly set off $17,620.62 from the Stenson settlement.

STANDARD OF REVIEW

An action for declaratory judgment is sui generis; whether such action is to be treated as one at law or one in equity is to be determined by the nature of the dispute. Mason v. City of Lincoln, 266 Neb. 399, 665 N.W.2d 600 (2003); Spanish Oaks v. Hy-Vee, 265 Neb. 133, 655 N.W.2d 390 (2003); Lake Arrowhead, Inc. v. Jolliffe, 263 Neb. 354, 639 N.W.2d 905 (2002).

An action for the dissolution of a partnership and an accounting between partners is one in equity and is reviewed in this court de novo on the record. Bass v. Dalton, 213 Neb. 360, 329 N.W.2d 115 (1983).

In reviewing an equity action for a declaratory judgment, an appellate court tries factual issues de novo on the record and reaches a conclusion independent of the findings of the trial court, subject to the rule that where credible evidence is in conflict on material issues of fact, the reviewing court may consider and give weight to the fact that the trial court observed the witnesses and accepted one version of the facts over another. Lake Arrowhead, Inc. v. Jolliffe, supra.

ANALYSIS

As this is essentially an action for an accounting between partners of a partnership formed prior to January 1, 1998, the Uniform Partnership Act (UPA), Neb.Rev.Stat. §§ 67-301 to 67-346 (Reissue 1996), is applicable and determines the rights and duties of the parties. See § 67-318. It is undisputed that Gast and Peters were equal partners in G&P and that pursuant to their partnership agreement, each was entitled to one half of the partnership's profits. The merger between G&P and SM&F resulted in the dissolution of G&P. See § 67-329 (defining dissolution of partnership as "the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business"). Dissolution of a partnership, however, is not synonymous with its termination. "On dissolution...