Opinion ID: 6260849
Heading Depth: 1
Heading Rank: 3

Heading: Applying the Law to the Chancellor’s Pacts

Text: Appellant Murphy joined the firm of Haws & Burke in July, 1966. By Ms own admission he was from that date until January, 1971 merely an employee of the firm. Similarly, appellant Slota, who became associated with the firm in June, 1967, was also by his own admission an employee until January, 1971. There is therefore no point in reviewing the evidence pertaining to any earlier period to determine whether Murphy and Slota were then general partners; they agree they were not. In December, 1970, appellee Thomas J. Burke, who until that month had operated Haws & Burke as a sole proprietorship, incorporated the firm as a professional business corporation, listing himself on the papers of incorporation as the sole promoter and causing all stock to be issued in his name. 11 In November of 1970, the month previous to incorporation, Burke had individually and privately broached with his attorney-employees the subject of future employment as employees of the contemplated professional corporation. Although both Murphy and Slota testified that at this time Burke offered to accept them as “partners”, but to operate under corporate form, the other two lawyer-appellees testified that no such offer had been made to them. The chancellor found in favor of the appellees. 12 In January, 1971 a meeting was held at which the professional corporation’s accountant reviewed the deferred compensation possibilities open to the employees of the corporation. Although appellant Slota testified that the subject of the meeting was “partnership”, appellant Murphy testified that he did not recall that the word was ever used, and all other participants testified that the meeting never touched on the subject of proprietary interest of the employees. The accountant was quite certain that nothing was said on the subject of “partners” because the tax consequences would be altogether different. Suffice it to say that the chancellor disbelieved appellant’s version and credited that of the appellees. In May, 1971 appellee Burke delivered to the appellants drafts of agreements under which they might acquire interests in the professional corporation of Haws & Burke, provided they first execute a written employment agreement, a stock repurchase agreement, and an application for life insurance to be used to finance stock repurchase. The interests offered would have been about 15% each. Dissatisfied by what they viewed as onerous terms of the stock repurchase and a covenant not to compete contained in the employment agreement, 13 appellants terminated their relationship with Haws & Burke without ever having “alleg[ed], aver [red], suggested], or otherwise claim[ed] that they were partners of the individual defendants or shareholders in the Professional Corporation of Haws & Burke.” 14 It is clear that the evidence supports the conclusions that (a) prior to January, 1971 there was no partnership, and that (b) after January, 1971 there was neither an agreement under which appellants acquired a proprietary interest, conduct from which such an agreement could be implied, or a representation by Burke upon which appellants relied to their detriment. We therefore affirm the decrees of the court below. It is so ordered. Costs on appellants.