Court Opinion

ID: 3696964
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:37:11.884742+00
Date Added: 2024-06-11T13:47:45.581942
License: Public Domain

{¶ 32} I respectfully dissent.
 {¶ 33} The issue before this court is whether the probate court correctly concluded that the business entity known as Ivanchak, Ivanchak  Fowler was not a partnership. The business entity known as Ivanchak, Ivanchak  Fowler displayed every essential attribute of partnership. The "call" in this case is not close.
 {¶ 34} The undisputed testimony of every party in this case is that Theodore Ivanchak, Terry Ivanchak, and John Fowler intended to operate their law practice as a partnership. The probate court, in its judgment entry, acknowledged that "the parties stipulated that on January 1, 1998, a * * * law practice was formed known as Ivanchak, Ivanchak,  Fowler, and that the parties divided net profits as follows: 40% to Theodore T. Ivanchak, 40% to Terry F. Ivanchak, and 20% to John E. Fowler, II."14 The evidence is undisputed that Theodore, Terry, and Fowler shared profits and losses according to fixed formulas and proportionately reported these profits and losses on their personal income tax *Page 148 
returns. The fees in 26 of the cases pending at the death of Theodore were divided by the parties, by stipulation, according to these fixed formulas representing each attorney's ownership interest in the partnership. The fees in six cases remained unresolved because the cases were settled after changes in the partnership's membership had occurred. The evidence is undisputed that Theodore, Terry, and Fowler had equal access to the partnership's financial accounts; that they could enter into contracts that were binding on the partnership; and that they represented each other's clients in court as necessary.15
 {¶ 35} The only reasonable conclusion to be drawn from this evidence is that Theodore, Terry, and Fowler intended to and, in fact, did create and operate a partnership for the practice of law. Simandl v. Schimandle (1982),3 Ohio App.3d 357, 359-360, 3 OBR 414, 445 N.E.2d 734 (a partnership exists when "there has been a sharing of net profits from a continuing business operated by two or more persons, where each is capable of binding the business entity"); accordBrendamour v. Vamosi (July 12, 1995), 1st Dist. Nos. C-940004 and C-940027, 1995 WL 408651; Harvey v. Harvey
(1993), 91 Ohio App.3d 404, 411, 632 N.E.2d 956.
 {¶ 36} The majority remains unconvinced by the stipulation of the parties and unmoved by the undisputed evidence in the record. The majority professes to be exercising "deference" to the judgment of the court below. The majority protests that because "some evidence" exists to support the probate court's judgment, the judgment must be allowed to stand. I disagree. A cursory examination of this evidence relied upon demonstrates that it is neither competent nor credible.
 {¶ 37} The majority states that there was no written partnership agreement. This fact is irrelevant. It is a matter of black-letter law that "[a] partnership contract is not required to be in writing." Brewster v. Bigham, 11th Dist. No. 2004-L-113, 2005-Ohio-6071, 2005 WL 3047491, at ¶ 16. The existence of a partnership may "be proven by showing acts and conduct of the parties from which the fact may be inferred that the parties have agreed to become partners." Id. As noted, the acts and conduct of the parties, as well as their stipulations, demonstrate the existence of the partnership.
 {¶ 38} The majority states that Ivanchak, Ivanchak  Fowler did not maintain an IOLTA account. The relevance of this evidence is not apparent. There is no requirement in Ohio that law partnerships maintain IOLTA accounts. An attorney who is "affiliated with a law firm or legal professional association" has *Page 149 
the option of maintaining his own IOLTA account or of utilizing an IOLTA account "established and maintained by the firm or association." R.C. 4705.09(A)(2)(b). The law is indifferent whether a law partnership maintains its own IOLTA account or not.
 {¶ 39} The majority states that Theodore used firm funds to pay for certain personal expenses. The majority does not explain why the use of firm funds for personal expenses is probative of Ivanchak, Ivanchak  Fowler not being a partnership. The fact that Theodore had uninhibited access to firm funds is not irrelevant, however. This fact is evidence of co-ownership of firm's assets, an essential element of partnership. R.C. 1775.05(A).
 {¶ 40} Finally, the majority states that the failure to file partnership taxes is "some evidence" in support of the probate court's ruling. I disagree. Under federal law, partnerships are not subject to income tax. "Persons carrying on business as partners shall be liable for income tax only in their separate or individual capacities." Section 701, Title 26, U.S.Code.16 Under Ohio law, a partnership is defined as a "pass-through" entity for taxation purposes. R.C. 5733.04(O). As noted above, the undisputed evidence is that Theodore, Terry, and Fowler reported the profits and losses of Ivanchak, Ivanchak Fowler on their individual tax returns according to their ownership interest in the partnership. This is consistent with the tax treatment of a partner's share of partnership income. Since partnerships do not pay taxes directly, the failure to file partnership taxes is not "some evidence" that Ivanchak, Ivanchak  Fowler was not a partnership.
 {¶ 41} Thus, the evidence cited by the majority as supporting the conclusion that Ivanchak, Ivanchak 
Fowler is not a partnership does not support that conclusion.17
 {¶ 42} More than this, it is improper to even consider other evidence when the parties themselves have stipulated to the existence of a partnership and the sharing of profits. See Heinz v. Steffen (1996),112 Ohio App.3d 174, 184, 678 N.E.2d 264 (consideration of the factors listed in R.C. 1775.06(D) "would only be relevant if the existence of a partnership were disputed in the first place"). *Page 150 
Under the majority's analysis that the lack of writing constitutes "some evidence" of a lack of agreement, virtually every oral agreement in Ohio may be potentially nullified merely for being an oral agreement. The majority's decision is contrary, not only to the facts of this case, but to the law of this state.
 {¶ 43} For the foregoing reasons, I would reverse the decision of the lower court.
14 Neither party disputed the existence of the partnership before the probate court. Rather, the court, sua sponte, reached the conclusion that no partnership existed.
15 In another telling stipulation entered into by the parties, the estate of Theodore Ivanchak agreed to set aside a sum of money to satisfy the deductible in a legal-malpractice case pending against Fowler.
16 Partnerships are required under federal law to file Form 1065, but this form is for informational purposes only.
17 The majority concedes that the trial court erred in its finding that Smaltz and Wern concluded that Ivanchak, Ivanchak Fowler was not a partnership. The majority under-states the error. Although neither Smaltz nor Wern testified before the court, there was a memorandum from Smaltz to Theodore admitted at the hearing in which Smaltz requests an appointment "to discuss the books for the new partnership." Far from concluding that Ivanchak, Ivanchak  Fowler was not a partnership, Smaltz treated the entity as a partnership.