Kelly v. Smith

• Decision Date: 26 March 1992
• Docket Number: No. 37A04-9105-CV-137,37A04-9105-CV-137
• Citation: 588 N.E.2d 1306
• Parties: Timothy F. KELLY, Appellant, v. J.B. SMITH, Robert F. Parker, Randall J. Nye, Andrew J. Fetsch and Daniel W. Glavin, Appellees.
• Court: Indiana Appellate Court

Page 1306

588 N.E.2d 1306

Timothy F. KELLY, Appellant, v. J.B. SMITH, Robert F. Parker, Randall J. Nye, Andrew J Fetsch and Daniel W. Glavin, Appellees.

No. 37A04-9105-CV-137.

Court of Appeals of Indiana Fourth District.

March 26, 1992.

Rehearing Denied May 11, 1992.

Daniel A. Medrea, Karen L. Hughes, Lucas, Holcomb & Medrea, Merrillville, for appellant.

Fred M. Cuppy, Kathryn D. Schmidt, Burke, Murphy, Costanza & Cuppy, Merrillville, for appellees.

CONOVER, Judge.

Plaintiff/Counter-Defendant-Appellant Timothy Kelly appeals the grant of partial summary judgment in favor of Defendants/Counter-Claimants-Appellees J.B. Smith, Robert Parker, Randall J. Nye, Andrew J. Fetsch, and Daniel Glavin (Firm).

We affirm.

Kelly presents three restated issues for our review:

1. whether the trial court erred as a matter of law in its entry of partial summary judgment for the Firm, the counter-claimants;

2. whether summary judgment should be entered for Kelly, the counter-defendant; and

3. whether the trial court erroneously construed the Articles of Partnership.

Firm presents one issue in its cross-appeal:

1. whether the trial court erred in not granting summary judgment on the issue of Kelly's distribution percentage at the time of his withdrawal.

This action began when Elizabeth D. Kelly and Timothy F. Kelly filed a verified complaint for preliminary injunction with the Lake Superior Court asking the court to restrain the Firm from using the "Kelly" name in their law firm title. The Firm had continued to practice under the name of Beckman, Kelly and Smith after the termination of their partnership with Kelly on March 31, 1989.

The Firm filed a counterclaim. In count I, it asserted Kelly was liable to the Firm for all fees generated by legal matters which were part of the business of the Firm as of the date of his withdrawal, less the applicable proportion of the Firm income to which Kelly was entitled. Both sides filed motions for partial summary judgment on this count. The trial court rendered its partial summary judgment on count I in favor of the Firm on December 7, 1990.

Kelly filed a motion to correct errors, which the trial court denied. This appeal followed. More facts will be added as necessary.

Summary judgment is only proper where there is no genuine issue as to any material fact. City of Evansville v. Moore (1990), Ind., 563 N.E.2d 113, 114. In reviewing a trial court's entry of summary judgment, the reviewing court is bound by the same standards as the trial court; we must consider all the pleadings, affidavits, depositions, admissions, answers to interrogatories, and testimony in a light most favorable to the nonmoving party. Scott v. Bodor, Inc. (1991), Ind.App., 571 N.E.2d 313, 318; Reed v. Dillon (1991), Ind.App., 566 N.E.2d 585, 588. If any doubt as to the existence of a factual issue is present, the same should be resolved against the moving party. Ind.Trial Rule 56(C); City of Evansville, 563 N.E.2d at 114. Even if the facts are undisputed, summary judgment is inappropriate when evidence before the court reveals a good faith dispute as to the inferences to be drawn from such facts. Lawlis v. Kightlinger & Gray (1990), Ind.App., 562 N.E.2d 435, 439, reh. denied, trans. denied.

However, irrelevant or unnecessary factual disputes will not be considered. Id. A factual issue is "genuine" only when it cannot be foreclosed by reference to undisputed facts and requires a trier of fact to resolve the opposing parties' differing versions. Id.

Kelly contends the trial court should have considered only his affidavit denying a breach of fiduciary duty and not have interpreted the partnership agreement in considering the Firm's summary judgment motion. He points out J.B. Smith's affidavit, attached to the Firm's motion for summary judgment, does not address the issue of fiduciary duty but instead recites the Firm's calculation of the amount to which Kelly is entitled under the partnership agreement. This he contends forms an inadequate basis for resolving liability under count I.

Affidavits are to be liberally construed in favor of the non-movant. Woodward Ins., Inc. v. White (1982), Ind., 437 N.E.2d 59, 62. However, pursuant to T.R. 56(C), in effect at the time of the action, judgment sought shall be rendered if the pleadings, depositions, answers to interrogatories, admissions, and affidavits together with any testimony show no genuine issue exists as to any material fact and the moving party is entitled to judgment as a matter of law.

While Kelly's denial in his affidavit must be viewed as true since it is uncontradicted, the trial court properly examined the pleadings, deposition, interrogatory answers, and admissions as well. Frink v. State (1991), Ind., 568 N.E.2d 535, 536; T.R. 56(C) (1990). The partnership agreement was an exhibit in the Firm's counterclaim. Moreso, the resolution of how the partnership agreement is to be interpreted is implicit in count I of the counterclaim. The trial court need not limit itself to a review of the Smith and Kelly affidavits in ascertaining the Firm's right to recovery as Kelly suggests.

Furthermore, Kelly has cited no authority for the proposition the Firm is prevented from recovering on count I of the counterclaim because it contained an allegation of breach of fiduciary duty or for the proposition that proof of such a claim is an essential element of an action for an accounting under principles of partnership. In fact, other jurisdictions in addressing this precise question have held a fiduciary duty exists upon the termination of a partnership absent an agreement to the contrary.

In Resnick v. Kaplan (1981), 49 Md.App. 499, 434 A.2d 582, 587, the Maryland court explicitly rejected the proposition a firm needs to prove a breach of fiduciary duty before it can recover fees. The court held whether there was a violation of the partnership agreement "was not relevant or material to the rights of both sides to an accounting." 434 A.2d at 588. The Maryland court also held that whether there was a breach of a fiduciary duty is relevant to the issue of other damages but not the right of partners to an accounting and a division of assets on winding up. Berkson v. Berryman (1985), 62 Md.App. 79, 488 A.2d 504. We agree.

Therefore, the trial court did not err in construing the partnership agreement while considering the motion for partial summary judgment. The trial court correctly found no issue of material fact existed, and as a matter of law the Firm was entitled to partial summary judgment.

Kelly urges this court to enter judgment for him on count I of the counterclaim under his interpretation of Ind.Appellate Rule 15(N). He presents the same arguments discussed above to support his contention.

This court has the inherent power in the review of a summary judgment to reverse the grant of a summary judgment for one party and enter summary judgment for the appropriate party. Davidson v. Cincinnati Ins. Co. (1991), Ind.App., 572 N.E.2d 502, 508. For reasons set out below, we find no trial court error. Therefore, we will not grant summary judgment for Kelly. ¹

Kelly contends the trial court erred in construing the partnership agreement to include a duty of the withdrawing partner to wind-up unfinished business. He points to two provisions of the agreement which he suggests control all the Firm's and the withdrawing partner's duties in this regard.

Paragraph 6 of the partnership agreement, titled Termination and Buy-out, in pertinent part, states:

This agreement and this partnership may be terminated by any partner beginning One Hundred Twenty (120) days after notice in writing or intention so to do is given to the other partners. In the event of the death, retirement, or withdrawal of a partner, such partner shall be paid in accordance herewith, and as computed hereunder, his net capital account, his vested interest in receivables, and his vested interest in contingent fee cases.

....

Paragraph 15, titled Winding Up, reads:

Upon the termination of the partnership for any cause, a full account shall be taken and settled of all the moneys, debts and effects belonging to or due the firm and of all debts and liabilities of the firm.

The Indiana Uniform Partnership Act (UPA) encourages partnerships to enter into contracts to control the rights and duties of the various partners to each other. IND.CODE 23-4-1-18. If there is no contract, the UPA controls. IC 23-4-1-1 through 23-4-3-8. It is undisputed the parties entered into a partnership agreement which provides the UPA will govern in areas the agreement does not cover.

The trial court correctly found the partnership agreement has no specific provision which describes the remaining parties' interest in cases removed from the firm after partner withdrawal. Accordingly, the UPA provides

Every partner must account to the partnership for any benefit and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership.

IC 23-4-1-21.

Dissolution of a partnership is 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.

IC 23-4-1-29. Thus, the withdrawing partner remains as a trustee when the partnership is dissolved and terminated. Boushehry v. Ishak (1990), Ind.App., 550 N.E.2d 784, 788 (modified on rehearing on other grounds, 560 N.E.2d 116). ²

In Boushehry, Indiana joined the long line of jurisdictions which hold the fiduciary duties of the partners remain intact during the winding up process with respect to partnership business pending at the time of dissolution. Rosenfeld, Meyer & Susman v. Cohen (1983), 194 Cal.Rptr. 180, 146 Cal.App.3d 200; Resnick v. Kaplan (1981), 49 Md.App. 499, 434 A.2d 582; Woodruff v. Bryant (1977), Tex.App., 558 S.W.2d 535; Lavin v. Ehrlich (1974...