Paulick v. Denny, No. 2005AP2867 (Wis. App. 3/28/2007)
| Decision Date | 28 March 2007 |
| Docket Number | No. 2005AP2867.,2005AP2867. |
| Court | Wisconsin Court of Appeals |
| Parties | Judith M. Paulick, Plaintiff-Respondent, Michael P. Jakus, Intervening Plaintiff-Respondent, v. William A. Denny, Defendant-Appellant, Denny & Yanisch, LLP, Defendant. |
APPEAL from a judgment of the circuit court for Waukesha County: JACQUELINE R. ERWIN, Judge. Affirmed.
Before Brown, Nettesheim and Anderson, JJ.
William A. Denny appeals from a judgment in favor of Judith M. Paulick and Michael P. Jakus for their share of attorney fees earned during the parties' partnership. Denny argues that summary judgment determining that a partnership existed was improper because conditions precedent to the formation of a partnership did not occur and that there are disputed material facts concerning equal responsibilities and sharing of income. He also contends that the partnership terminated when Paulick and Jakus unilaterally withdrew their capital contributions, that the parties had an implied agreement on how to treat attorney fees received after the termination, that expenses incurred in generating a contingency fee should have been offset, that the contingency fee should have been distributed based on the hours expended by partners, and that Paulick was not entitled to equity relief because she failed to deposit attorney fees she earned into the partnership. Denny also challenges the allowance of prejudgment interest. We affirm the judgment of the circuit court.
¶ 2 In February 2001, Paulick commenced this action alleging that she, Jakus, and Denny agreed to form a law partnership, Denny and Yanisch, LLP, and practice law from the offices then occupied by Denny, that Denny failed to account to the partnership for fees billed to clients and income received, and that on December 30, 2000, Denny provided written notice that the partnership was terminated. She sought an accounting as part of the winding up of the partnership. In his answer, Denny admitted that Paulick entered into a partnership with himself and Jakus effective January 1, 2000, and that it was impliedly understood that all expenses of the partnership would be satisfied by all three partners equally and net income shared equally. He alleged that Paulick had withdrawn her $10,000 capital contribution from the partnership and failed to account to the partnership for fees billed to some clients. His counterclaim demanded an accounting by Paulick of partnership assets. Judge Willis Zick was appointed as a special master to conduct a full accounting of Denny & Yanisch, LLP. An accountant was also appointed to prepare a report. Jakus was allowed to intervene as a plaintiff in the action.
¶ 3 While the action was pending, Denny received a large contingent fee as a result of the representation of Sherriane Weborg, regarding the death of her husband with the sinking of his fishing vessel, the Linda E, on Lake Michigan. Weborg had signed a contingent fee retainer agreement with Denny & Yanisch, LLP in July 2000. At an October 14, 2002 hearing, Denny's motion to amend his answer was granted. The amended answer denied the existence of a partnership and stated that "[t]he entity known as Denny & Yanisch, LLP was a partnership only in so far as third parties were concerned."
¶ 4 Paulick moved for partial summary judgment declaring that a limited liability partnership was in existence for the year 2000. The circuit court granted judgment that the partnership was in existence for the entirety of 2000. A trial to the court was conducted on issues related to winding up the partnership. Judgment was entered requiring Denny to pay Paulick $194,870.16 and Jakus $238,819.77, plus five percent interest on those amounts from April 12, 2002 until July 28, 2005.
¶ 5 We review the circuit court's grant of summary judgment using the same methodology as the circuit court. City of Beaver Dam v. Cromheecke, 222 Wis. 2d 608, 613, 587 N.W.2d 923 (Ct. App. 1998). There is no need to repeat the well-known methodology; the controlling principle is that when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law, summary judgment is appropriate. Id.; WIS. Stat. § 802.08(2) (2005-06).1
¶ 6 A partnership agreement may be proven by circumstantial evidence demonstrating that the conduct of the parties was of such a nature as to clearly express the mutual intent of the parties to enter into a contractual relationship. Heck & Paetow Claim Service, Inc. v. Heck, 93 Wis. 2d 349, 359, 286 N.W.2d 831 (1980). To establish a partnership the parties must: "(1) intend to form a bona fide partnership and accept the accompanying legal requirements and duties, (2) have a community of interest in the capital employed, (3) have an equal voice in the partnership's management, and (4) share and distribute profits and losses." Tralmer Sales & Serv., Inc. v. Erickson, 186 Wis. 2d 549, 563, 521 N.W.2d 182 (Ct. App. 1994). Here Paulick and Jakus have the burden of proof of establishing a partnership relationship. See id.
¶ 7 Paulick presented the deposition testimony of Denny that he reached a consensus with Paulick and Jakus to form a new entity that would encompass all his "hard assets," such as desks, file cabinets, furniture, and office equipment and that each would put in $10,000 cash.2 He admitted they were to share management and the profits and losses. Jakus confirmed that the parties agreed to form a partnership. To that end the three partners submitted a Limited Liability Legal Practice Registration form to the Wisconsin State Bar and filed a Registration Statement with the Wisconsin Department of Financial Institutions. A new tax payer identification number was obtained. A new checking account was opened and each partner deposited $10,000 to the account. These undisputed facts demonstrate that the parties intended to form a partnership and accept the accompanying legal requirements and duties, had a community of interest in the capital employed for the purpose of starting the partnership, and agreed to share equally management and profits.
¶ 8 Denny claims that a condition precedent to the formation of the partnership was the purchase of his office furniture and equipment and when that failed to occur, the partnership never happened. However, nothing establishes that the purchase was a condition precedent. At best Denny established that within four months of forming the partnership, the purchase was to be completed for no less than $30,000. Something that is to occur within four months cannot be a condition precedent, particularly when the parties engaged in other conduct that demonstrated the partnership had commenced.
¶ 9 Denny contends that because Paulick and Jakus unilaterally withdrew their capital contributions, there was in fact no equal voice in partnership activities. He also claims that there was in fact no sharing of the profits of the partnership because the accounting reflected that Paulick and Jakus took draws but Denny did not. There is no evidence that the partners were restricted in the use of the capital contributions or draws. Denny admitted that there was no discussion about the circumstances under which capital could be withdrawn or about partner draws. Moreover, the withdrawal of capital and unequal draws do not bear on partnership formation. Rather, as Denny later argues, those acts might constitute breach of the partnership agreement, an occurrence after the partnership is in existence.
¶ 10 Having concluded that a partnership was formed, we turn to Denny's claim that it terminated in June 2000, before the retainer agreement with Weborg for the Linda E case was signed. He claims that the failure to purchase the office furniture and equipment and withdrawal of the capital contributions signaled the end of the partnership. A material breach of a contract may relieve the other party to the contract of the obligation of performance. See People's Trust & Sav. Bank v. Wassersteen, 226 Wis. 249, 254, 276 N.W. 330 (1937). However, notice that the contract is terminated is required. See Guentner v. Gnagi, 258 Wis. 383, 391, 46 N.W.2d 194 (1951) (). See also Stolper Steel Prod. Corp. v. Behrens Mfg. Co., 10 Wis. 2d 478, 490, 103 N.W.2d 683 (1960) (the party must treat the conduct of the breaching party as a breach; quoting Woodman v. Blue Grass Land Co., 125 Wis. 489, 495, 103 N.W. 236, 104 N.W. 920 (1905) (). Unreasonable delay in asserting the right to rescission or conduct affirming the continuing existence of a contract may constitute waiver. See Grube v. Daun, 213 Wis. 2d 533, 551, 570 N.W.2d 851 (1997). The question of waiver is one of law that this court can review independently. Id.
¶ 11 Denny testified that when he discovered the capital withdrawals, he never told Paulick or Jakus that he would no longer do business with them or that he considered the partnership terminated.3 In fact, Denny never questioned the existence of the partnership until he filed his amended answer in 2002. Denny continue to use the LLC letterhead. Well into December 2000, Denny continue to demand at least $30,000 as payment by the partnership for the office furniture and equipment. Denny's handwritten note demonstrates the continuing existence of a partnership until he terminated it on December 30, 2000. In early 2001 he wrote letters to service providers explaining that the LLP had terminated in December 2000 and a new general partnership existed. Denny did not give notice that...
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