Filed 5/16/14 Marquart v. Smith CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication

or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

JEFFREY R. MARQUART,

 Plaintiff, Cross-defendant and 

 Respondent,

v.

STUART A. SMITH,

 Defendant, Cross-complainant and 

 Appellant.

 G048099

 (Super. Ct. No. 30-2008-00115418)

 O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, Nancy 

Wieben Stock, Judge. Affirmed.

Gary E. Shoffner for Defendant, Cross-complainant and Appellant.

Waldron & Bragg, Weintraub Tobin, Gary A. Waldron and John S. Olson 

for Plaintiff, Cross-defendant and Respondent.

* * *
2

Defendant and cross-complainant Stuart A. Smith appeals from a judgment 

awarding plaintiff and cross-defendant Jeffrey R. Marquart over $874,000 in damages, 

plus prejudgment interest for breach of fiduciary duty. This action arose from the 

dissolution of the parties’ law partnership and a limited liability company through which 

they operated commercial office buildings. Defendant contends the trial court erred in 

concluding he was not entitled to any compensation for his efforts in winding up the law 

partnership’s affairs. Finding no error, we affirm the judgment. 

FACTS AND PROCEDURAL BACKGROUND

Plaintiff and defendant formed a law partnership in 1998, agreeing they 

would share equally in the business’ profits and losses. In 2003, the parties acquired an 

office building and created Centennial Professionals LLC to operate it. At the same time, 

they entered into a written agreement confirming the terms of their oral law partnership

agreement, including each member’s 50 percent interest in the firm’s profits and losses. 

During the law firm’s existence, each partner handled his own 

caseload. But they did not take equal draws from the firm’s income. The trial court 

found each party withdrew funds “in an atmosphere of no real control.” “[T]here were 

no . . . specific amounts indicated relative to partnership compensation and/or agreements 

whatsoever in this area and that it was somewhat of an idiosyncratic activity, with each 

partner taking funds as needed for personal reasons . . . year to year.” 

From time to time, plaintiff and defendant discussed the disparity in their

draws. Plaintiff testified that after defendant took several draws in January 2006 without 

his knowledge or consent, he decided to withdraw from the partnership. On February 1, 

plaintiff sent defendant a letter summarizing the firm’s financial status and stating he was 

terminating his practice with defendant. The court concluded this letter effectively 

dissolved the partnership. (Corp. Code, § 16801, subd. (1) [an at-will partnership is 
3

dissolved “by the express will to dissolve and wind up the partnership business of at least 

half of the partners”]; all further undesignated statutory references are to this code.) At 

trial, plaintiff presented evidence that as of February 1, defendant’s draws exceeded his

own draws by over $163,000. 

Plaintiff testified that upon leaving the partnership he took steps to ensure 

its trust account had sufficient funds to cover current obligations. He also assumed 

control over 36 pending partnership cases, consisting of 12 contingency fee cases and 24 

matters subject to hourly fee agreements. Defendant took responsibility for 73 

contingency fee cases belonging to the former partnership. 

The parties jointly established a new dual-signature trust account. Plaintiff 

testified he asked defendant to deposit the fees and costs received from his cases into the 

new trust account. Between February and August 2006, plaintiff deposited over 

$207,000 in fees and over $7,400 in costs into this account. He stopped making deposits 

after realizing defendant had refused to deposit any of the “hundreds of thousands of 

dollars” he had received from partnership cases. 

Between February 1, 2006 and November 30, 2009, plaintiff received over 

$677,000 in fees, plus more than $34,500 in costs on the law partnership cases he 

handled. Defendant received over $2.2 million in fees along with nearly $42,000 in costs

on the cases under his control. Defendant acknowledged he did not keep time records 

for his work on the former partnership cases after dissolution, claiming he “was entitled 

to . . . maintain [monies received]” from those cases. 

At the completion of the evidentiary phase of trial, the court issued an oral 

tentative ruling on the issues. It found neither party was more blameworthy than the 

other in causing the partnership’s demise. It also concluded the partnership revenues 

would be divided on a 50/50 basis, but defendant’s request for reasonable compensation 

in winding up the partnership’s business required a comparative analysis of the parties’ 

efforts. Two months later, the court issued a final ruling that determined defendant had 
4

the burden of proof on the reasonable compensation issue and, to satisfy this burden he 

would have to show he worked a disproportionately greater number of hours on pending 

partnership cases than plaintiff. It found the evidence presented and the parties’ offers of 

proof insufficient to justify awarding compensation to defendant. Finally, the court found 

defendant breached his fiduciary duties by “refusing to account for and secure for the 

benefit of the partnership” the firm’s revenues and costs. 

In addition, the court ordered a reference to address some accounting 

issues. After an extended delay in completing that proceeding, the court issued a written 

statement of decision which adhered to the views it had previously expressed and entered 

judgment for plaintiff. 

DISCUSSION

Defendant contends the trial court erred in refusing to award him “any 

compensation for completing [the] 73 contingency [fee] cases” he handled after 

dissolution of the parties’ partnership. He argues section 16401, subdivision (h), part of 

the Uniform Partnership Act of 1994 (§ 16100 et seq.; the Act), entitled him to recover 

“‘reasonable compensation’ for completing the partnership’s contingency cases.” He 

also claims this statute legislatively overruled the no extra compensation rule announced 

in Jewel v. Boxer (1984) 156 Cal.App.3d 171, a case decided under the former Uniform 

Partnership Act (former § 15001 et seq., repealed by Stats. 1996, ch. 1003, § 1.2, p. 

4734). Thus, he requests we reverse the judgment and remand the matter for a new trial. 

The trial court did not err in declining to award defendant any portion of the 

fees he recovered on the former partnership’s cases under his control. In Jewel, the trial 

court created a formula that awarded each member of a dissolved law partnership a 

quantum meruit recovery on the fees from the firm’s pending cases. The Court of Appeal 

reversed, ruling that under the former Uniform Partnership Act, unless the partnership 
5

agreement provided an alternative means of dividing postdissolution revenues, “after 

dissolution of a law partnership, income received by the former partners from cases 

unfinished at the time of dissolution is to be allocated on the basis of the partners’

respective interests in the dissolved partnership.” (Jewel v. Boxer, supra, 156 

Cal.App.3d at p. 177.) 

When Jewel was decided, former section 15018, subdivision (f) provided 

“[n]o partner is entitled to remuneration for acting in the partnership business, except that 

a surviving partner is entitled to reasonable compensation for his or her services in 

winding up the partnership affairs.” (Amended Stats. 1995, ch. 679, § 5, p. 5202; 

Repealed Stats. 1996, ch. 1003, § 1.2, p. 4734.) The Act eliminated this provision. Now 

section 16401, subdivision (h) declares “[a] partner is not entitled to remuneration for 

services performed for the partnership, except for reasonable compensation for services 

rendered in winding up the business of the partnership.” 

Even assuming defendant is correct in asserting the statutory change 

legislatively overruled Jewel, the trial court did not decline to award him reasonable 

compensation in winding up the partnership’s business based on that decision. Defendant

cites comments by the trial court at the end of the evidentiary phase of trial to support this 

argument. But the court’s statement of decision accepted the premise that, in an 

appropriate case, “[t]he revised [Act] allows for reasonable compensation for services 

rendered in winding up partnership business.” 

Rather, the court declined to award any portion of the fees to defendant for 

two other reasons. The first ground was that defendant failed to establish his right to 

reasonable compensation. The court noted “the burden [of proof] is on the partner [here 

defendant] seeking compensation to prove that the compensation sought is reasonable in 

light of the disproportionate share of partnership business performed in winding up” the 

law partnership, and “the . . . relevant measure for the analysis of compensation in this 

context is comparative hours worked . . . .” After reviewing the limited evidence 
6

presented at trial and the subsequent offers of proof, the court concluded “[t]here is no 

proper basis to say [defendant] worked more than [plaintiff].” 

The second reason for refusing to award defendant reasonable 

compensation was that it found he breached his fiduciary duties “by, among other 

things, . . . refusing to account for and secure for the benefit of the partnership revenues,” 

plus “failing to account [for] and reimburse the partnership for costs owed to the 

partnership.” Thus, the court concluded defendant “was not actually ever performing 

work for the winding up of the partnership which could allow a claim for reasonable 

compensation, but was just working for himself.” 

We find the record supports the trial court’s decision on the reasonable 

compensation issue. Defendant had the burden of proving the he was entitled to recover

additional compensation for his efforts in winding up the former partnership’s business. 

Section 16401, subdivision (h) generally bars a partner’s “remuneration for services 

performed” unless it is “reasonable compensation for services rendered in winding up the 

business of the partnership.” Thus, a partner seeking to recover reasonable compensation 

must shoulder the burden of proof on that issue. (Evid. Code, § 500 [generally “a party 

has the burden of proof as to each fact the existence or nonexistence of which is essential 

to the claim for relief or defense that he is asserting”].) 

The question of whether defendant satisfied his burden presented a question 

of fact. Under standard appellate principles “on appeal, the judgment or verdict is 

presumed correct. [Citation.] ‘[I]t follows . . . that the reviewing court must “consider 

the evidence in the light most favorable to the prevailing party, giving him the benefit of 

every reasonable inference, and resolving conflicts in support of the judgment.” 

[Citation.] “[T]he power of the appellate court begins and ends with a determination as 

to whether there is any substantial evidence, contradicted or uncontradicted, which will 

support the conclusion reached by the jury.”’” (Bardis v. Oates (2004) 119 
7

Cal.App.4th 1, 10.) “The weight of the evidence, and the credibility of the witnesses, are 

matters for the trier of fact.” (Smith v. Bull (1958) 50 Cal.2d 294, 305.) 

Defendant attacks the trial court’s conclusion he had to show the time he 

spent winding up pending partnership cases was disproportionately greater than the time 

plaintiff spent on the pending cases under his control. But section 16802, subdivision (a) 

states that generally, “a partnership continues after dissolution . . . for the purpose of 

winding up its business. The partnership is terminated when the winding up of its 

business is completed.” (See Rosenfeld, Meyer & Susman v. Cohen (1983) 146 

Cal.App.3d 200, 216, fn. omitted, disapproved of on another ground in Applied 

Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 521, fn. 10.) 

Unfinished business covers “‘any contract of employment between the partnership and 

the clients for the performance by the partnership of the services thereafter claimed.’” 

(Rosenfeld, Meyer & Susman v. Cohen, supra, 146 Cal.App.3d at p. 217.) 

The parties’ agreement provided they would equally share the partnership’s

profits and losses regardless of the size or nature of each member’s caseload. Both of 

them had a “duty to wind up and complete the business of the dissolved partnership” 

(Rosenfeld, Meyer & Susman v. Cohen, supra, 146 Cal.App.3d at p. 216), and each took

responsibility for part of the dissolved firm’s pending matters. Thus, both parties were 

entitled to receive reasonable compensation for completing unfinished partnership 

business. While plaintiff did not fully document the time he spent on partnership cases, 

the trial court noted his offer of proof was that he spent over 2,400 hours on the hourly 

fee cases alone. Defendant on the other hand admittedly failed to keep any records of the 

hours he spent on outstanding partnership cases for which he was responsible. The fact 

that he assumed control of twice as many cases as plaintiff does not alone justify a 

different result. Defendant acknowledged nearly one-third of the cases under his control 

resulted in either no fee recovery or a fee award of $5,000 or less. He also admitted over 

one-half of the fees he recovered came from just four cases. Given that the evidence 
8

showed defendant’s draws exceeded those of plaintiff by over $163,000 when the 

partnership dissolved, it was appropriate for the court to conclude defendant could 

recover reasonable compensation for his efforts in completing the unfinished partnership 

cases only if the time he spent on these matters was disproportionate to the time plaintiff 

spent winding up partnership business. 

Citing his own trial testimony that plaintiff once refused his request for 

assistance on a case, defendant complains the trial court erred in finding he never 

asked plaintiff to help him in handling his caseload. This argument misstates the 

evidence. The trial court’s finding referred to the lack of a request for help after the 

partnership was dissolved. In the statement of decision, it noted, “Nothing in the 

post[]dissolution effort . . . prevented a caseload adjustment; and, in fact, the law relating 

to partnership duties and responsibilities appears to require it when a partner asks for 

assistance. [Defendant] never asked for [plaintiff’s] assistance . . . .” By contrast, 

defendant’s testimony referred to a request he made before the partnership dissolved. He

acknowledged he “never took . . . th[e] matter up with [plaintiff]” after dissolution. 

Defendant also claims there is no authority supporting the trial court’s 

claim he needed to provide written time records of his work on partnership cases. He is 

wrong. Section 16404, subdivision (b)(1) imposes on a partner an obligation “[t]o 

account to the partnership and hold as trustee for it any property, profit, or benefit derived 

by the partner in the conduct and winding up of the partnership business . . . .” Also 

section 16807, subdivision (b) states “[e]ach partner is entitled to a settlement of all 

partnership accounts upon winding up the partnership business.” Thus, it has been 

held the Act “and the common law fiduciary obligations of partners, imposed a duty 

on . . . partners who receive[] unfinished fee income to accurately account for it.” 

(Rosenfeld, Meyer & Susman v. Cohen (1987) 191 Cal.App.3d 1035, 1051.) While

defendant presented vague statements to the effect he spent hundreds of hours on these 
9

matters, this evidence failed to satisfy his duty to accurately account for the fees and costs

reimbursements he received from the unfinished partnership matters. 

Defendant cites numerous cases for the proposition a court may award 

recovery of attorney fees even “in the absence of written time records.” What he forgets 

is that this case involves an action arising from the dissolution of a law partnership, not a 

successful litigant’s request for recovery of attorney fees qua attorney fees. The issue 

before the trial court was defendant’s right to reasonable compensation in winding up the 

partnership’s affairs. Under the parties’ agreement, the costs and fees he recovered 

belonged to the partnership. Thus, the cases on which defendant relies are inapposite. 

Finally, the court also refused to award defendant reasonable compensation 

for his efforts in winding up partnership affairs because it found him liable on plaintiff’s 

breach of fiduciary duty cause of action. This issue also presented a question of fact 

which we review under the substantial evidence rule. (David Welch Co. v. Erskine & 

Tulley (1988) 203 Cal.App.3d 884, 890.) 

As noted, defendant’s status as a partner of the law firm included a 

duty “[t]o account to the partnership and hold as trustee for it any property, profit, or 

benefit derived by the partner in the conduct and winding up of the partnership 

business . . . .” (§ 16404, subd. (b)(1); see also § 16807, subd. (b) [“[e]ach partner is 

entitled to a settlement of all partnership accounts upon winding up the partnership 

business”].) Defendant failed to present any accounting of the fees and costs he 

recovered on partnership cases or segregate the proceeds received from those cases. 

(§ 16401, subd. (g) [“[a] partner may use or possess partnership property only on behalf 

of the partnership”].) 

Defendant argues the trial court “fail[ed] to consider how [he] used the 

funds generated from the cases he was winding up.” He is mistaken. The trial court 

expressly found defendant’s failure to account for or reimburse the fees and costs from 

partnership cases resulted from his belief “he owned the[] clients [of the partnership cases 
10

under his control],” plus “each and every dollar of the revenues generated,” and thus he 

“knowingly retained funds belonging to the partnership, refused to account to the 

partnership for them or turn them over, and spent them on himself.” The appellate record 

supports the trial court’s finding. When asked by plaintiff’s counsel whether, after 

February 2, 2006, it was his “position that [he was] entitled to all moneys that [he] 

recovered” on pending partnership cases, defendant answered “[y]es.” 

The trial court found for plaintiff based on his breach of fiduciary duty 

cause of action, and the damages awarded to him consisted of an amount determined to 

comply with the partnership’s agreement’s 50/50 division of profits. Therefore, 

defendant has failed to establish any error, much less prejudicial error in this case. 

DISPOSITION

The judgment is affirmed. Respondent shall recover his costs on appeal. 

RYLAARSDAM, J.

WE CONCUR:

O’LEARY, P. J.

MOORE, J.