Nishman v. DeMarco

• Decision Date: 14 July 1980
• Citation: 430 N.Y.S.2d 339,76 A.D.2d 360
• Parties: Robert W. NISHMAN, Respondent, v. Anthony J. DeMARCO, Jr., Appellant. *
• Court: New York Supreme Court — Appellate Division

Page 339

430 N.Y.S.2d 339

76 A.D.2d 360

Robert W. NISHMAN, Respondent, v. Anthony J. DeMARCO, Jr., Appellant. ^*

Supreme Court, Appellate Division, Second Department.

July 14, 1980.

Fabian G. Palomino, Brooklyn, for appellant.

Sharfman, Shanman & Poret, P. C., New York City (James A. Shanman, New York City, of counsel), for respondent.

Before LAZER, J. P., and RABIN, MARGETT and O'CONNOR, JJ.

LAZER, Justice Presiding.

This appeal is the denouement of a fierce dispute between two lawyers who dissolved their 12-year-old partnership and now disagree as to what, if anything, was agreed upon with reference to the disposition of post-dissolution partnership fees and expenses. In an action for an accounting of these fees, the plaintiff, Robert W. Nishman, has been successful in obtaining an interlocutory judgment directing an accounting. The defendant, Anthony J. DeMarco, has challenged the interlocutory judgment contending that Special Term was in error when, in a written decision after trial, it (1) found that what had been agreed upon by the parties was an equal division of post-dissolution fees, and (2) refused to dismiss the complaint on "clean hands" considerations. Since the parties had agreed at the outset of the accounting trial to limit the issue to whether a fee sharing agreement existed, there are before us factual issues relative to the agreement and the legal question of whether equity litigants can stipulate the clean hands doctrine out of a case. We conclude that an affirmance is required.

I

Created with a handshake in June, 1962, Nishman & DeMarco existed for 12 years without the benefit of a written partnership agreement with DeMarco furnishing services as a trial attorney and Nishman acting as the "office man". Until the dissolution of the firm on July 1, 1974, the partners' draw was equal.

After July 1, 1974, the ex-partners continued in joint occupation of their office suite until their lease expired on September 30, 1975. For partnership fees received during that interim period, it is not disputed that the parties agreed to divide fees equally. New business was to belong to the attorney who obtained it or whomever the clients sought out.

Following termination of the lease and the parties' physical separation, DeMarco did not remit to Nishman 50% of fees received on partnership matters closed out after September 30. In some cases, the sum he forwarded was less than 50% of the fee, while in others he sent nothing. DeMarco's original response to the instant accounting action was a denial of the allegations of the complaint and the interposition of a counterclaim for an accounting of fees collected by Nishman after July 1, 1974. On this appeal, DeMarco asserts that the counterclaim was withdrawn by him during an in-chambers discussion with the Trial Justice's clerk prior to trial. Although the claim of formal withdrawal is unsupported in the record, the counterclaim clearly was abandoned at trial.

As the trial commenced, counsel for both parties stipulated that its first phase would "be concerned only with the issues of what the parties' agreement was" and if, at the close of the liability portion of the trial, a question concerning any sum due to plaintiff still existed the litigants would attempt to stipulate to the amount. Thus, if plaintiff was successful in establishing his right to an accounting, the need for an accounting trial would be dispensed with.

The focus of the trial was upon the parties' conflicting contentions concerning the existence of a fee and expense sharing agreement. Nishman, who was his only witness, testified that the post-September 30 separation worked no change in the parties' agreement to apportion fees equally. Upon their separation, the two former partners divided the case files on the basis of readiness for trial; the ready cases went to DeMarco, otherwise the partner responsible for the original referral took it. To support his claim that fees were to be shared equally, Nishman introduced a letter from DeMarco dated March 4, 1976 six months after the separation in which the latter wrote:

"In addition, you have certain files which have been closed but fees were undisturbed as yet. Please provide me with a breakdown of the amount of settlement, expenses, net fee and share which you expect to distribute to me.

"You are hereby authorized to retain any expected fee to be paid to me as a set-off against any fee to be paid to you out of the proceeds of any file retained by me. I am prepared to distribute your share of the Soriano fee upon receipt of your statement of fees due me." (Emphasis supplied.)

The letter evoked no response from Nishman. At the close of his case, both parties stipulated that partnership fees received between July 1, 1974 and September 30, 1975 had been divided equally.

In contradiction of Nishman's assertions, DeMarco testified that the apportionment of files depended upon which of the partners had brought the matter in originally and that the understanding was that after September 30, 1975, neither lawyer retained any interest in the files of the other. According to DeMarco, this division and the disposal of the firm's physical assets had accomplished an informal accounting between the parties. None other was necessary.

To establish that no agreement for equal sharing of fees existed, DeMarco introduced checks and bank records relating to the Nishman & DeMarco accounts over which plaintiff had control. These indicated that after September of 1975 Nishman drew for his own use 95% of the funds he deposited while defendant drew no checks on the account after the dissolution. DeMarco declared that Nishman made only a single remittance to him a 50% share of the fee in four cases and this occurred after the suit had begun. Letters in which DeMarco had requested a 50% payment for expenses on partnership cases were explained by noting that the particular expenses involved were incurred between July 1, 1974 and September 30, 1975, while the parties were still bearing them equally.

Questioned concerning the circumstances of the March 4 "set-off" letter, DeMarco explained that it was written after plaintiff had requested a similar breakdown of cases from him. Thus,

"(w)hen I said to him, you are authorized to retain any collected fee to be paid to me as a set-off against any fee to be paid to you, out of the proceeds of any file retained by me, I expected that he would give me a breakdown. And to the extent that he did work on the file, which warranted him retaining part of the fee, and giving it part of it to me because of the work that was done on the file which was completed before he took it, that I would give him a part of my fee for cases where he performed any work on the part of the file that I retained." (Emphasis supplied.)

During cross-examination, DeMarco varied his account of the parties' intentions concerning post-September 30 fees. In response to pre-trial interrogatory number "1", which required that he set forth "the substance of each agreement, whether written or oral, between you and plaintiff" regarding division of fees received after June 30, 1974 on account of "partnership matters", DeMarco had responded:

"Plaintiff and defendant divided the partnership files as of July 1, 1974 * * * Defendant and plaintiff agreed that distribution of any proceeds representing counsel fees would be made on an equitable basis, based upon the work necessary for the successful conclusion of the matter by settlement or trial."

Although this answer clearly posited an agreement for equitable division of fees after July 1, DeMarco declared that the answer was incorrect because the firm's files had been divided in September, 1975, and that thereafter each party could pay to the other a share of the fee he had collected if, in his own discretion, he believed his ex-partner deserved it. Nishman's lawyer then attempted to sift out this account of the agreement:

"Q * * * First of all, did you have any agreement with Mr. Nishman?

"A There was no agreement as such, there was an understanding that I would give him an equitable share as he gave an equitable share to me out of the files he kept for the work that I completed.

"Q Now, was the agreement that you would give him that you would each take an equitable share, or was the agreement that each of you could give the other something if you felt like it?

"A That was it.

"Q That was it? It wasn't really an agreement then for an equitable share, it was an agreement that if you felt like giving him something, you would give him something?

"A Exactly. And I did not expect anything from this case, and the effort you put in shows that.

"Q I don't want to put words in your mouth, Mr. DeMarco, but what you are telling me and tell me if this is right it wasn't really in any agreement at all I mean, you just parted and if you felt like giving him something, you would give him something, and if he felt like giving you something, that he would give you something?

"A That was the agreement.

"Q That wasn't really an agreement at all, was it, Mr. DeMarco?

"A You're absolutely right."

To reconcile the inconsistency between an agreement for an equitable division and no agreement at all, defendant explained that his answer to interrogatory "1" in which he postulated the existence of an agreement applied only to the period from July 1, 1974 to September, 1975. Later, DeMarco asserted consistent with counsel's stipulation at the close of plaintiff's case that if a matter had been concluded between those two dates, the fee division was 50-50. DeMarco also asserted that his answer to interrogatory number "1" was the result of his understanding of the meaning of the term "partnership matters" as set forth in the interrogatories and that no such matters existed after June 30, 1974 when the partnership ended. Nevertheless, no such problem of comprehension concerning "partnership matters" which had been clearly defined...