Monon Corp. v. Townsend, Yosha, Cline & Price
| Decision Date | 07 April 1997 |
| Docket Number | No. 49A02-9511-CV-675,49A02-9511-CV-675 |
| Citation | 678 N.E.2d 807 |
| Parties | MONON CORPORATION, Appellant-Plaintiff, v. TOWNSEND, YOSHA, CLINE & PRICE, an Indiana Partnership, Townsend, Yosha, Cline, Farrell & Ladendorf, an Indiana Partnership, Henry J. Price, Earl C. Townsend, Louis Buddy Yosha, Irwin J. Prince, Kevin P. Farrell, William Levy, Lance D. Cline, Mark C. Ladendorf, Appellees-Defendants. |
| Court | Indiana Appellate Court |
The Monon Corporation appeals the grant of summary judgment in favor of Townsend, Yosha, Cline & Price, an Indiana Partnership; Townsend, Yosha, Cline, Farrell & Ladendorf, an Indiana Partnership; Henry J. Price; Louis Buddy Yosha; Irwin J. Prince; Kevin P. Farrell; William Levy; Lance D. Cline; Mark C. Ladendorf; Teresa L. Todd (since dismissed by stipulation), and Lee C. Cristie (collectively, the Attorneys), in the Monon Corporation's lawsuit for damages for alleged legal malpractice. Monon presents the following issues:
I Whether Defendants can use incorporation as a professional corporation to shield them from liability in the face of Indiana Admission and Discipline Rule 27 which explicitly states that incorporation as a professional corporation does not modify the doctrine of liability of each for all.
II Whether the individual Defendants, who operated in the manner of a law partnership and held themselves out to Plaintiff and the public (including the courts) as a law partnership, and the partnerships they held out, are responsible for the alleged malpractice of Henry Price where the Defendants claim that they were actually part of a professional corporation which was kept hidden from Plaintiff and the public, and which did not comply with its corporate record-keeping obligations.
III Whether the trial court erroneously denied Plaintiff's motion to amend the complaint.
We reverse.
The purpose of summary judgment is to end litigation about which no factual dispute exists and which may be determined as a matter of law. Flosenzier v. John Glenn Education Association, 656 N.E.2d 864, 866 (Ind.Ct.App.1995), trans. denied. When we review a grant of summary judgment, we face the same issues as the trial court and carefully scrutinize the trial court's determination to ensure that the party which did not prevail was not improperly denied its day in court. Id. On appeal, the trial court's grant of summary judgment is clothed with a presumption of validity. Id. The appellants bear the burden to prove the trial court erroneously determined that no genuine issue of material fact exists and that the movants were entitled to judgment as a matter of law. Id. We liberally construe all inferences and resolve all doubts in the nonmovants' favor. Id.
The evidence most favorable to the Monon Corporation reveals that some of its employees left Monon to form a competitor, the Wabash National Corporation. In 1985, Monon retained Henry Price to represent the corporation in a lawsuit against Wabash and certain of its employees (Wabash I). The parties began to negotiate a release of claims, and Monon instructed Price that any formal agreement should not release Wabash from any future patent infringement claims related to a certain patent application Monon had filed in 1985. Despite the instruction, Price purportedly drafted a release which did so. The patent eventually issued to Monon in 1990, and Monon sued to enjoin Wabash for patent infringement and to recover damages (Wabash II). In Wabash II, the court determined that the prior release from Wabash I operated to bar Monon from the relief it sought.
When Monon retained Price, he was with the law firm of Barnes & Thornburg. Shortly thereafter, Price joined the firm of Townsend, Yosha, Cline & Price. He completed most of the work on Wabash I at the new firm and drafted the release there. Attorney Yosha practiced law at the firm but was the sole shareholder of the Louis Buddy Yosha, Professional Corporation. Regardless, the new firm used the name of Townsend, Yosha, Cline & Price on its letterhead, cards, listings, pleadings, and agreements. Price later left the firm, which subsequently became Townsend, Yosha, Cline, Farrell & Ladendorf. Since then, the firm and its members have changed several times.
Monon eventually sued Price for legal malpractice related to the allegedly faulty release. Monon attempted to include in the lawsuit all of the Attorneys related to the firm of Townsend, Yosha, Cline & Price during and after the time Price handled the Wabash I case. Monon claimed that Townsend, Yosha, Cline & Price was a partnership and that the partners and the partnership were vicariously liable for Price's malpractice. The Attorneys moved for summary judgment, which the trial court ultimately granted. Monon now claims that the trial court improperly granted summary judgment because the Attorneys were not entitled to judgment as a matter of law.
A partnership is an association of two or more persons to carry on as co-owners a business for profit. Ind.Code 23-4-1-6(1). We note that the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner of the business, but no such inference shall be drawn if such profits were received in payment as wages of an employee. I.C. 23-4-1-7(4)(b).
The doctrine of vicarious liability is an effect of the rule, applicable to all general partnerships, that each partner is the agent of the others. Birt v. St. Mary Mercy Hospital of Gary, Inc., 175 Ind.App. 32, 370 N.E.2d 379, 383 (1977).
That each partner is the agent of the firm while engaged in the prosecution of the partnership business, and that the firm is liable for the torts of each, if committed within the scope of his agency, appears to be well settled. It follows from the principles of agency, coupled with the doctrine that each partner is the agent of the firm, for the purpose of carrying on its business in the usual way, that an ordinary partnership is liable in damages for the negligence of any one of its members in conducting the business of the partnership.
Id. at 41, 370 N.E.2d at 384 (quoting Hess v. Lowery, 122 Ind. 225, 226-227, 23 N.E. 156). Monon first claims that the Attorneys may not use the Louis Buddy Yosha, Professional Corporation, to shield them from liability for Price's malpractice. Monon contends that the circumstances allow it to hold the Attorneys vicariously liable because lawyers cannot limit such liability due to Ind.Admission and Discipline Rule 27, which reads as follows:
One or more lawyers may form professional service corporations for the practice of law under the Professional Corporation Act of 1983.
* * *
(c) Incorporation by two (2) or more lawyers associated in the practice shall not modify any law applicable to the relationship between the person or persons furnishing professional services and the person receiving such services, including ... liability of each for all, arising out of the professional services offered by one (1) lawyer associated with others in the same corporation, as existed in a partnership for the practice of law.
The Attorneys claim that the provision does not apply here because the Louis Buddy Yosha, Professional Corporation, does not involve "incorporation by two (2) or more lawyers," in that Yosha was the sole incorporator and shareholder of the firm. The Attorneys claim that, as an individual lawyer, Yosha could implement a plan to limit liability for the malpractice of all lawyers with the corporation.
With regard to a professional corporation, I.C. 23-1.5-2-6 governs the extent to which a lawyer may enjoy limited liability:
(a) An individual who renders professional services as an employee of a professional corporation is liable for any negligent or wrongful act or omission in which he personally participates to the same extent as if he rendered such services as a sole practitioner.
(b) An individual who renders professional services as an employee of a professional corporation is liable for the conduct of other employees of the professional corporation under his direction or control to the same extent a sole practitioner would be so liable.
(c) A corporation whose employees perform professional services within the scope of their employment or of their apparent authority to act for the corporation is liable to the same extent as its employees.
(d) Except as otherwise provided by statute or by rule of the licensing authority, the personal liability of a shareholder of a professional corporation is no greater in any respect than that of a shareholder of a corporation organized under IC 23-1.
In the present case, the application of the statute depends upon the role of the Attorneys in the professional corporation.
If the Attorneys were shareholders of the professional corporation, then I.C. 23-1.5-2-6(d) controls the issue of liability of each for all. The statute provides that the personal liability of a shareholder of a professional corporation is no greater in any respect than that of a shareholder of a traditional corporation except as otherwise may be provided "by rule of the licensing authority." I.C. 23-1.5-2-6(d). Our Admis.Disc.R. 27 qualifies as a rule of the licensing authority under the statute. Thus, by operation of Admis.Disc.R. 27, through I.C. 23-1.5-2-6(d), attorneys who are shareholders of a professional corporation are liable for the acts of each other in the same manner as they would have been as partners. In the present case, if the Attorneys are all shareholders of the professional corporation, then they are each liable for the acts of all and were not entitled to summary judgment. Of...
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