Langhoff v. Michael E. Marr, P.C.

• Decision Date: 31 January 1990
• Citation: 568 A.2d 844,81 Md.App. 438
• Parties: Stephen D. LANGHOFF v. MICHAEL E. MARR, P.C. 113 Sept. Term 1989
• Court: Court of Special Appeals of Maryland

Page 438

81 Md.App. 438

568 A.2d 844

Stephen D. LANGHOFF v. MICHAEL E. MARR, P.C.

113 Sept. Term 1989

Court of Special Appeals of Maryland.

Jan. 31, 1990.

Melvin J. Sykes, Baltimore, for appellant.

Henry R. Lord (Kenneth L. Thompson, John J. Kuchno, and Piper & Marbury, on the brief), Baltimore, for appellee.

Argued before MOYLAN, BISHOP and KARWACKI, JJ.

BISHOP, Judge.

In this case we will decide whether a professional association of lawyers, at the time of termination, should be treated as a corporation or as a partnership. It will be upon our disposition of this issue that the distribution of the assets of the professional association will depend.

Stephen D. Langhoff (Langhoff), appellant, terminated a successful law partnership, Smith and Langhoff (S. & L.) with Parker Smith, and entered what was to be a short-lived, unsuccessful relationship with Michael E. Marr, P.C. (Marr), appellee, and Richard Bennett (Bennett) in a professional service corporation ¹ known as Marr, Langhoff and In the summer of 1981, because Parker Smith, his partner, interrupted his law practice to sail around the world, Langhoff approached Bennett about merging the S. & L. law practice with the then-existing Marr and Bennett, P.A. (M. & B.). After some discussion, (relatively little, considering the important nature of the undertaking) on October 19, 1981, Langhoff moved into offices with M. & B. and thus began the operation of a joint practice under the banner of M.L. & B. Articles of Amendment and Restatement of M. & B. were approved by the State Department of Assessment and Taxation on November 4, 1981, by which M.L. & B. formally came into existence. The three owners of the newly formed corporation were Marr with 375 shares, Langhoff, 375 shares and Bennett, 250 shares; 37.5%, 37.5% and 25%, respectively. The association of the three principals lasted for a little over 10 weeks, from October 19, 1981 until December 31, 1981. M.L. & B., however, formally existed as a corporation from November 4, 1981 until June 29, 1982 when, on that date, Articles of Amendment and Restatement were approved by the State Department of Assessments and Taxation. Practically, the faltering relationship ceased on December 14, 1981 when Marr delivered to Langhoff an "Agreement to Continue" which required Langhoff to pay to Marr & Bennett $64,840.00 in order for M.L. & B., P.A. to continue. This was later made more explicit in a letter dated December 29, 1981, in which Marr demanded that $50,000.00 be paid no later than January 4, 1982, to "restructure" M.L. & B. Although the record indicates that the shares of stock were issued, there is nothing in the record to indicate the retirement or ultimate disposition of the stock.

Bennett, P.A. (M.L. & B.), a successor to the pre-existing professional service association of Marr and Bennett, P.A.

In 1978, just after graduation from the University of Maryland Law School, but before he passed the bar, Joseph L. Evans (Evans) entered the employ of the law firm of Sutley and Marr as a law clerk. He became an associate in November of 1978 when he passed the bar. Early in 1979 In November, 1979, James Fanseen, an attorney, called Evans and requested that he represent a client, Marguerite Cook, in an unemployment compensation case. Evans agreed to do so and Marguerite Cook then became a client of Michael E. Marr, P.A. Evans, apparently an exceptional lawyer, did an outstanding job on the Cook unemployment case and, as a result, developed a professional relationship with Cook which led to his representing not only her but three of her friends, Iris Torres, Dorothy Ebner and Diane Ruggiero (Leicht), (the Cook plaintiffs), in a wrongful discharge case against their former employer, Rite-Aid of Maryland, Inc., and certain of its officers (the Rite-Aid case). Four and one half years after Langhoff departed from the corporation the Rite-Aid case was ultimately handled to an extremely successful conclusion by Langhoff and Pray who received fees in the total amount of $1,624,054.44; one-half going to each of them. It is clear from the record that the work contribution of Marr to the success of the Rite Aid case was infinitesimal when compared with that of Langhoff and Pray.

                when Sutley and Marr terminated their association, Evans continued his employment as an associate with Michael E. Marr, P.A.   Evans' employment relationship with Marr continued in the various associations in which Marr became involved, until December 10, 1981, when Evans terminated that relationship by accepting employment with the Attorney General of Maryland.   In 1980 Evans and Nedda Pray (Pray) were married.   Evans and Pray, both now lawyers, had been law students together.   Pray, until she became involved in the events of this case, worked for three years as an assistant state's attorney in Harford County, during which she became an experienced criminal trial attorney
                

Michael E. Marr, P.C., a successor corporation (the Corporate Plaintiff) and Michael E. Marr individually filed a four-count complaint against Langhoff, Pray and Evans. The complaint charged (I) that the three defendants maliciously interfered with the Corporation's contracts with the Rite-Aid clients; (II) that they conspired to induce the The issues presented to the jury and the jury's responses were:

                clients to breach their contract with the plaintiffs;  (III) that defendants Langhoff and Evans breached their fiduciary duty to the Corporation when, after the termination of the Corporation, they solicited Rite-Aid clients, and Langhoff removed the Rite-Aid file from the Corporation's office;  and (IV) (in debita assumpsit or implied contract) that Langhoff and Pray "received money which is rightfully that of the plaintiffs and should not be allowed to retain it."   By way of the settlement of a counter-claim by Evans against Marr, the case against Evans was dismissed with prejudice.   Pray had previously been dropped as a defendant.   The case proceeded to trial on a second amended complaint which contained an amended version of Count III 2 with Marr, P.C. as the sole plaintiff against Langhoff only
                

1. Did the plaintiff know, or by the exercise of reasonable care should plaintiff have known by February 28, 1982 ³ that the defendant had the intent to take the Cook/Rite Aid cases away from the plaintiff?

Yes X No

2. Did the parties agree that if the defendant did not press his claim for repayment of loans the plaintiff would drop any claim to fees in the Cook/Rite Aid cases?

Yes No X

3. Is the plaintiff estopped from claiming fees in the Cook/Rite Aid cases?

Yes No X

Based on limitations, the jury's response to Issue 1 would have been a bar to Marr's cause of action. Marr filed a motion for judgment n.o.v. The trial court found as a matter of law that the violation of the alleged fiduciary duty did not occur until Langhoff received the fee and failed to turn it over to the corporation. This date was well within limitations. The court granted and entered judgment in favor of Marr, P.C. against Langhoff in the amount of $812,027.22, the 50% share of the total fee that Langhoff received plus pre-judgment interest.

ISSUES

Langhoff raises the following questions:

I. Did the court below err in holding as a matter of law that Langhoff's fee was received subject to a fiduciary obligation to turn it over to the corporation and in denying Langhoff's motion for judgment on the issue of liability for breach of fiduciary duty?

II. Should the court have directed entry of judgment for Langhoff on the ground that plaintiff's own evidence established that the clients would not in any event have stayed with the corporation after the split-up, or at the very least, should the court have submitted the liability issue of causation to the jury?

III. Did the court err in rejecting Langhoff's contention that judgment for Marr was precluded by the dismissal, with prejudice, of the assumpsit count?

IV. Did the court err in its instructions to the jury with regard to the issues of accord and satisfaction and Bennett's authority to act for the corporation?

Because our disposition of Issue III, the assumpsit issue, could render the other three issues moot, we will address that issue first; however, since our holding under Issue III will be adverse to appellant, we will address Issue I which will be dispositive of the case. We will not, therefore, address Issues II and IV.

Assumpsit Dismissal with Prejudice

Appellant argues that the trial court erred in entering judgment n.o.v. for the appellee because that judgment was precluded by appellee's voluntary dismissal, with prejudice, of the assumpsit count. Appellant contends that "the gravamen of the dismissed assumpsit count was Langhoff's receipt and retention of the Rite-Aid fee." Such dismissal finally adjudicated that the receipt and retention of the fee did not constitute an undue advantage taken of appellee's situation, and therefore could not be the grounds for a subsequent claim alleging breach of fiduciary duty.

Appellee responds that it is permitted to join in a single action "as many claims as he may have against a defendant whether they be in tort or in assumpsit." The evidence supporting the tort claim of breach of fiduciary duty sub judice is fundamentally different from that necessary to prove the assumpsit claim; therefore, "it cannot be said that judgment on assumpsit bars a cause of action for breach of fiduciary duty." The dismissal of one cause of action does not serve to bar all alternative causes of action simply because they arise from a common set of circumstances.

In Parks v. State, 41 Md.App. 381, 385, 397 A.2d 212 (1979) we held:

The words "with prejudice" ... have, of course, a well-established meaning in the law. They signify that the dismissal is final, that the controversy is concluded and cannot be reopened by a new or subsequent action. A dismissal "with prejudice" has been held to be as...