Court Opinion

ID: 9641022
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:21:04.743027+00
Date Added: 2024-06-11T09:05:05.246839
License: Public Domain

*382FLAHERTY, Justice,
dissenting.
I believe the distinction drawn by the majority between this case and McCabe v. McCabe, 525 Pa. 25, 575 A.2d 87 (1990), is invalid. McCabe should control this case, for there is nothing here which was not present in McCabe.
McCabe stated that:
where an agreement imposes strict limits on the value that can be realized by a partner, the agreement places the continuing welfare of the partnership as a whole above the interests of any particular member of the firm. This results in a true diminution in the distinguishable value of any given partner’s interest, and it would be a fiction to appraise such an interest as though the limitations were not in effect.
Id. at 30-31, 575 A.2d at 89-90 (footnote omitted). The failure to follow McCabe may be due to the concept that the nonprofessional spouse is entitled to an equitable share of the value of his spouse’s firm. If that were true, I would be with the majority, but it is a serious misstatement of the law. The firm is not in privity with the nonmember spouse; he has no call upon the firm or its assets. Rather he has a right to an equitable portion of the value of his spouse’s interest in the firm.
If the partnership agreement is legally binding, there is no reason whatever to disregard its consequences. Unless we have a public policy which prohibits professional adults from establishing an association on whatever terms they find fitting, or in the absence of fraud or some other legal defect in the partnership agreement, the agreement is legally binding on its signatories, as it is on Mr. Butler in this case. That being so, we cannot ignore the consequences of the contract.
In this case, precisely as in McCabe, the value of the professional spouse’s interest in his firm is severely limited by his partnership agreement. That limitation should determine the value of his interest for purposes of equitable distribution, as it did in McCabe.
The majority’s distinction of McCabe I believe to be misplaced. The majority opinion states that “the McCabe agree*383ment provides a formula of sorts for ascertaining a current monetary value, as opposed to a predetermined fixed value,” whereas this one “provides only a fixed amount” which “was not periodically reviewed in an effort to determine whether it reflected the company’s current financial picture.” This, to me, is irrelevant.† The fundament of McCabe was that when the professional member’s interest was limited by contract the nonmember spouse’s interest could be no greater than that of the member. McCabe gave no consideration to how often the valuation was updated nor to how accurately it reflected a relationship to the current value of the firm. It merely recognized the validity of the contractual limitation on the value of the partner’s interest and the principle that the limitation necessarily also limited the nonpartner spouse’s interest, which could be no greater than the partner’s interest. That is equally true here. It is unjust in this case to base a professional spouse’s obligations on a theoretical value which is completely beyond his legal ability to realize, as it would have been in McCabe. What was true five years ago is equally true today.
I therefore respectfully dissent.
ZAPPALA, J., joins this dissenting opinion.

The majority seems to be operating on the unspoken assumption that there is something fraudulent about the partnership agreement, though fraud is not an issue in this case. The mere possibility of fraud does not justify the law in treating with suspicion every decision made in the ordinary course of business and rejecting a commonplace agreement simply because it is not updated with sufficient frequency to satisfy the majority. The principle that fraud is never presumed is an ancient one, expressed in Cooke’s English King’s Bench Reports, 550, “Fraus est odiosa et non praesumenda.”