ZARELLA, J.
The present appeals arise from the protracted and acrimonious breakup of a partnership that was the subject of a prior appeal to this court. In Brennan v. Brennan Associates, 293 Conn. 60, 72, 977 A.2d 107 (2009) (Brennan I), we upheld the judicial dissociation of the plaintiff, Thomas Brennan, from the named defendant, Brennan Associates (partnership). The plaintiff subsequently instituted the present action to have his interest in the partnership valued and bought out by the partnership. The partnership and the remaining partners, the defendants Alexander Aiello, Serge Mihaly, and the coadministrators of the estate of former partner Richard Aiello,
The record reveals the following undisputed facts and procedural history, some of which are set forth in Brennan I. See id., at 64-70, 977 A.2d 107. In 1984, the plaintiff entered into a general partnership agreement with Alexander Aiello, Richard Aiello and Mihaly to operate and manage a shopping center they owned in the town of Trumbull. The partnership operated successfully for twenty years before Richard Aiello passed away. Upon his death, the coadministrators of Richard Aiello's estate succeeded to his interest in the partnership, at which time animosity began to grow among the remaining partners. The subsequent litigation between the partners, separate from the present case, resulted in a judgment of dissociation against
While the plaintiff's appeal was pending, he remained actively involved in managing the partnership's business and continued to profit from it. Specifically, the plaintiff continued to solicit tenants for the shopping mall and to attend partnership meetings. The plaintiff also continued to receive approximately $49,000 per month in partnership profits, as he had prior to the judgment of dissociation. In total, the plaintiff received a total of $1,702,400 in partnership profits while his appeal was pending. In an attempt to terminate the plaintiff's control over the partnership, the defendants moved to partially terminate the automatic stay that was in place pending appeal to enforce the judgment of dissociation, but the motion was denied. The plaintiff's appeal concluded on August 18, 2009, when, in Brennan I, this court affirmed the trial court's judgment of dissociation. Id., at 93, 977 A.2d 107. The court also held that, under the Revised Uniform Partnership Act (RUPA), as incorporated in Connecticut's Uniform Partnership Act (partnership act), General Statutes §§ 34-300 through 34-399, when a partner is dissociated, only the dissociated partner can initiate the buyout process, not the trial court or the remaining partners. Id., at 92-93, 977 A.2d 107.
Thus, shortly after the appeal in Brennan I concluded, the plaintiff instituted the present action under General Statutes § 34-362 to have the trial court value the partnership and his interest therein so that the partnership could buy him out. According to § 34-362(b), a dissociated partner's interest should be valued as of the "date of dissociation. . . ." At trial, the parties disagreed on when the plaintiff had been dissociated from the partnership. The parties presented evidence that the partnership's assets had declined significantly in value between 2006 and 2009 while the plaintiff's appeal in Brennan I was pending. The plaintiff argued that his interest should be valued as of September 27, 2006, the day the trial court rendered the judgment of dissociation against him, before the partnership's assets had declined in value. In contrast, the defendants argued that the plaintiff's interest should be valued as of August 18, 2009, the date on which Brennan I was officially decided, which was after the partnership's assets had declined in value. After weighing the parties' arguments, the trial court adopted the plaintiff's position and valued the plaintiff's interest in the partnership as of September 27, 2006, the date the trial court rendered the judgment of dissociation, rather than on August 18, 2009, the date that judgment was affirmed by this court.
Using the date of September 27, 2006, the trial court valued the plaintiff's interest in the partnership at $8,640,000. From that amount, the trial court subtracted $1,702,400 to account for the monthly payments that the plaintiff had received from the partnership while his appeal in Brennan I was pending. Accordingly, the trial court awarded the plaintiff a total of $6,937,600. The trial court also awarded the plaintiff interest on
The defendants first claim that the trial court incorrectly determined that the plaintiff had been dissociated in 2006, when the judgment of dissociation was rendered, rather than in 2009, when that judgment was affirmed in Brennan I and, thus, improperly valued the partnership and the plaintiff interest therein as of the earlier date. The defendants argue that the plaintiff could not have been dissociated from the partnership until the conclusion of his appeal in Brennan I because, until that point, the judgment of dissociation had been automatically stayed pursuant to Practice Book § 61-11(a) and the plaintiff had continued to profit from and to participate in managing the partnership. In opposition, the plaintiff claims that, regardless of the defendants' ability to enforce the judgment of dissociation, he was dissociated in 2006 because that was when the "judicial determination" was made that he should be dissociated. General Statutes § 34-355(5)(C). We agree with the defendants and conclude that the plaintiff was not dissociated from the partnership until the automatic stay was terminated upon the conclusion of his appeal in Brennan I.
To resolve this claim we must interpret the partnership act and, specifically, the term "date of dissociation" in § 34-362(b). "[A]s with any question of statutory construction, our review is plenary. . . ." (Citation omitted.) Brennan v. Brennan Associates, supra, 293 Conn. at 90, 977 A.2d 107. "When construing a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature. . . . In seeking to determine that meaning, General Statutes § 1-2z directs us first to consider the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered. . . . When a statute is not plain and unambiguous, we also look for interpretive guidance to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter. . . ." (Internal quotation marks omitted.) Gilmore v. Pawn King, Inc., 313 Conn. 535, 542-43, 98 A.3d 808 (2014). "The test to determine ambiguity is whether the statute, when read in context, is susceptible to more than one reasonable interpretation." (Internal quotation marks omitted.) Fairchild Heights, Inc. v. Amaro, 293 Conn. 1, 9, 976 A.2d 668 (2009). An additional principle of statutory construction
We begin our analysis by examining the relevant statutory provisions. The plaintiff brought this action under § 34-362, which provides that trial courts should value a dissociated partner's interest in the partnership as of the "date of dissociation. . . ." General Statutes § 34-362(b). Section 34-362, however, does not define the term "date of dissociation." Accordingly, we look to the broader statutory scheme to determine when a partner's dissociation occurs. Section 34-355 sheds light on this question, as it provides the various grounds on which a partner may be dissociated. In this case, the plaintiff was dissociated under § 34-355, which provides in relevant part that "[a] partner is dissociated from a partnership upon the occurrence of . . . (5) . . . the partner's expulsion by judicial determination because. . . (C) the partner engaged in conduct relating to the partnership business which makes it not reasonably practicable to carry on the business in partnership with the partner. . . ." (Emphasis added.)
We conclude that the language of § 34-355(5)(C) is plain and unambiguous and indicates that a partner is dissociated under that provision when the partner is expelled after a judicial determination is made that the partner's conduct has made it not reasonably practicable to carry on the business of the partnership. The plain language of § 34-355(5)(C) makes clear that a partner's dissociation under that provision occurs not merely upon a judicial determination that the partner has engaged in improper conduct, as the plaintiff suggests, but, rather, upon the partner's "expulsion by judicial determination" that such grounds exist. (Emphasis added.) General Statutes § 34-355(5). Thus, § 34-355(5) indicates that the "date of dissociation," for the purpose of valuing the partnership under § 34-362(b), is the date that the dissociated partner is actually expelled from the partnership, not the date that the judgment of dissociation is rendered.
Accordingly, we must determine when the plaintiff was expelled from the partnership in order to discern the proper date of dissociation for valuation purposes under § 34-362(b). To make that determination, however, we must consider the effect of the automatic stay that was in place after the judgment of dissociation was rendered against the plaintiff, and read the partnership act in conjunction with Practice Book § 61-11(a), which stays enforcement of all civil judgments pending an appeal. Specifically, Practice Book § 61-11(a) provides in relevant part that, "[e]xcept where otherwise provided by statute or other law, proceedings to enforce or carry out the judgment or order shall be automatically stayed until the time to take an appeal has expired. If an appeal is filed, such proceedings shall be stayed until the final determination of the cause. . . ."
This is precisely what occurred in the present case. It is undisputed that, after the judgment of dissociation was rendered against the plaintiff, the judgment was stayed pursuant to Practice Book § 61-11(a), and the plaintiff's participation in
We reject the plaintiff's argument to the contrary regarding the effect of the automatic stay on the judgment of dissociation. The plaintiff argues that he was dissociated on the date that the judgment of dissociation was rendered because the automatic stay does not affect the finality of an underlying judgment. Although it is undoubtedly true that an automatic stay does not affect the underlying judgment, the plaintiff's argument misses the point. The automatic stay, as the plaintiff acknowledges, "denies [a successful litigant] the immediate fruits of his or her victory . . . in order to protect the full and unhampered exercise of the right of appellate review." (Internal quotation marks omitted.) Preisner v. Aetna Casualty & Surety Co., 203 Conn. 407, 414, 525 A.2d 83 (1987). In the present case, the fruits of the defendants' victory at trial in Brennan I that they were denied pending the plaintiff's appeal were the plaintiff's expulsion from the partnership. Thus, it is both true that the judgment of dissociation rendered against the plaintiff was a final judgment and that the judgment did not become effective until the automatic stay was terminated. The plaintiff's argument therefore has no merit.
This policy, in our view, makes good sense. A partner's economic interests
In sum, the plaintiff in the present case was dissociated from the partnership on August 29, 2009, because that was the date on which the parties could no longer file a motion for reconsideration in Brennan I. See footnote 6 of this opinion. On that date, the automatic stay terminated, and the judgment of dissociation became effective, causing the plaintiff's expulsion. Accordingly, the trial court should have valued the plaintiff's interest in the partnership as of August 29, 2009, the date when Brennan I was finally resolved.
We next address the defendants' claim that the trial court improperly awarded the plaintiff interest on his $6,937,600 buyout award from the date of the judgment of dissociation in 2006. The following additional facts and procedural history are relevant to this claim.
At trial, there was no question that the partnership was obligated to buy the plaintiff out after his dissociation, but the parties disagreed over when the partnership was obligated to buy him out. Under normal circumstances, a dissociated partner is entitled to immediate payment of his interest in the partnership under § 34-362(b). If, however, a partner wrongfully dissociates from a partnership for a definite term, as the plaintiff did in the present case,
After concluding that the plaintiff was entitled to an early payment of his buyout award under § 34-362(h), the trial court determined that the plaintiff also was entitled to interest on that award under § 34-362(b), which provides that interest accrues on a dissociated partner's award from the date of dissociation. The trial court ordered the defendants to pay interest at an annual rate of 8 percent
On appeal, the defendants claim that, because the plaintiff wrongfully dissociated from the partnership, he was not entitled to interest on his buyout award under § 34-362(b). Instead, the defendants claim, the plaintiff was entitled to interest under § 34-362(h), which specifically applies to wrongful dissociation, only once each of the scheduled payments to the plaintiff became due and owing. In response, the plaintiff argues that the trial court properly applied the interest provision in § 34-362(b) because that subsection applies to all dissociated partners, regardless of whether they wrongfully dissociated. Alternatively, the plaintiff argues that, even if the trial court should have applied § 34-362(h), he nevertheless was entitled to interest dating back to the date of dissociation because he established that it would not be an undue hardship for the partnership to pay his buyout award before the expiration of the partnership's term. See General Statutes § 34-362(h). We agree with the defendants and conclude that § 34-362(h) controls and that the plaintiff was not entitled to interest on his buyout award until the four scheduled payments of that award became due and owing.
Whether the plaintiff was entitled to interest on his buyout award under § 34-362 "raises a question of statutory construction, which is a [question] of law, over which we exercise plenary review." (Internal quotation marks omitted.) Fairchild Heights, Inc. v. Amaro, supra, 293 Conn. at 8, 976 A.2d 668. We interpret § 34-362 according to the same principles of statutory construction set forth in part I of this opinion.
We begin our analysis with the applicable language of § 34-362, which sets forth two alternative procedures for valuing and buying out a dissociated partner's interest in a partnership. Subsection (b) of § 34-362 provides in relevant part that a dissociated partner's interest in a partnership
Subsection (h) of § 34-362, on the other hand, provides for a deferred payment to a partner whose dissociation was wrongful.
To determine which provision of § 34-362 controls in the present case, we rely on the "well-settled principle of construction that specific terms covering the given subject matter will prevail over general language of the same . . . statute which might otherwise prove controlling. . . . Where there are two provisions in a statute, one of which is general and designed to apply to cases generally, and the other is particular and relates to only one case or subject within the scope of a general provision, then the particular provision must prevail; and if both cannot apply, the particular provision will be treated as an exception to the general provision." (Internal quotation marks omitted.) Tomlinson v. Tomlinson, 305 Conn. 539, 552-53, 46 A.3d 112 (2012).
In light of this principle, we conclude that § 34-362(h), not § 34-362(b), controls whether the plaintiff is entitled to interest on his buyout award. It is clear that subsection (b) is designed to apply to cases generally, because it refers to "dissociated partner[s]" generally, without distinguishing between partners that have dissociated wrongfully and rightfully. General Statutes § 34-362(b). In contrast, subsection (h) is particular and relates only to cases in which a partner "wrongfully dissociates. . . ." General Statutes § 34-362(h). In the present case, it is undisputed that the plaintiff wrongfully dissociated from the partnership. See footnote 9 of this opinion. Accordingly, § 34-362(h) controls. The trial court properly applied subsection (h) initially, determining that its exception applied because making immediate payment would not cause undue hardship to the partnership, but then referred back to subsection (b) to determine whether the plaintiff was entitled to interest on his buyout award. Instead, the trial court should have applied the provision in subsection (h) pertaining to interest on a wrongfully dissociating partner's buyout award.
Having concluded that § 34-362(h) controls, we next must determine when interest begins to accrue on a wrongfully dissociating partner's buyout award under that provision. Section 34-362(h) provides that "[a] deferred payment must be adequately secured and bear interest" but is silent as to when interest begins to accrue on such a buyout award. Reading subsection (h) in the context of the other subsections of § 34-362 does not clarify
The legislative history surrounding the enactment of § 34-362, and the partnership act generally, is minimal, and there is no legislative history that clarifies the legislature's intent regarding the interest provision of § 34-362(h). We therefore turn to other extratextual sources to ascertain the meaning of the statute, specifically, the commentary to the RUPA and relevant scholarly articles. The drafters of the RUPA apparently created subsection (h) of § 34-362 in order "to protect the non-breaching partners [of a term partnership] from an unexpected loss of capital." D. Weidner & J. Larson, "The Revised Uniform Partnership Act: The Reporters' Overview," 49 Bus. Law. 1, 11 (1993). Although the commentary to the RUPA does not specifically address the interest provision of § 34-362(h), it does address why interest is awarded to rightfully dissociating partners. In general, interest accrues on a rightfully dissociating partner's award from the date of dissociation to the date of payment under § 34-362(b) "to compensate the dissociating partner for the use of his interest in the firm." Rev. Unif. Partnership Act of 1997, § 701, comment (3), supra, at 6 U.L.A. (Pt. 1) 177.
In light of this commentary, we conclude that the most reasonable interpretation of § 34-362(h) is that interest accrues on a payment to a wrongfully dissociating partner from the date the payment is due and owing, rather than from the date of dissociation. We believe that the rationale for awarding interest generally under subsection (b) of § 34-362, namely, compensating rightfully dissociating partners, simply does not apply in the context of payments to wrongfully dissociating partners under subsection (h). A partner who has wrongfully dissociated is not entitled to compensation for the use of his interest in the partnership because it was the partner's own wrongful conduct
Moreover, this interpretation of § 34-362(h) is consistent with common-law principles governing awards of interest generally. In contexts other than partnerships and the RUPA, we consistently have held that interest ordinarily begins to accrue only when the underlying obligation becomes due and owing. See, e.g., Cecio Bros., Inc. v. Feldmann, 161 Conn. 265, 274, 287 A.2d 374 (1971) ("[i]nterest ordinarily begins to run from the time when the money is due and payable"); see also Belisle v. Berkshire Ice Co., 98 Conn. 689, 696, 120 A. 599 (1923); Loomis v. Gillett, 75 Conn. 298, 300-301, 53 A. 581 (1902).
Applying this interpretation of § 34-362(h) to the present case, we conclude that the plaintiff is not entitled to interest on his buyout award under § 34-362(h) until the award becomes due and owing. Thus, the trial court improperly awarded the plaintiff interest on his buyout award from the date of dissociation. On remand, the trial court should apply § 34-362(h) and determine whether the plaintiff is entitled only to a deferred payment or an immediate payment if the partnership's term has expired, or whether there again will be no undue hardship to the business of the partnership. In either case, interest will begin to accrue only once the payment or payments become due and owing.
Finally, we turn to the defendants' claim regarding attorney's fees. The defendants claim that the trial court, in valuing the partnership, should have treated their attorney's fees as a liability of the partnership, which would have reduced the partnership's value and, in turn, reduced the plaintiff's buyout award. The defendants reason that their attorney's fees constituted a liability because the partnership agreement included a provision indemnifying each partner from "any and all liability, loss, expense, or damage . . . including attorney's fees . . . incurred by any of them" in the course of conducting the business of the partnership. Thus, under the terms of this indemnity provision, the defendants claim that the partnership was obligated to repay the defendant partners for their attorney's fees. We cannot review the defendants' claim because the record is inadequate for review.
The following additional facts regarding the defendants' attorney's fees are pertinent to this issue. Neither the defendant partners nor the partnership actually paid for the attorney's fees they incurred in the present case or in Brennan I. Instead, the fees were paid for by the estate of Richard Aiello. The defendants claimed that it was necessary to secure funding from the estate of Richard Aiello because the plaintiff would not consent to having the partnership indemnify the defendants for their attorney's fees. In 2005, the defendants agreed in writing to reimburse the estate of Richard Aiello for the attorney's fees.
From the outset of the present case, the defendants have claimed that the plaintiff is obligated to pay the attorney's fees they incurred in the present case and in Brennan I under two theories.
The defendants' second theory at trial was that they could recover attorney's fees from the plaintiff according to the terms of an indemnity provision contained in the partnership agreement. At trial, the defendants entered into evidence the partnership agreement, the agreement with the estate of Richard Aiello, which obligated the defendants to reimburse the estate for the attorney's fees, and the resolution reaffirming that obligation. The partnership agreement included an indemnity clause providing that "[t]he partnership shall . . . indemnify and save harmless each [p]artner from and against any and all liability, loss, expense, or damage incurred or sustained by reason of any act or omission in the conduct of the business of the partnership . . . including attorney's fees . . . incurred by any of them in connection with the defense of any action to which any of them may be made a party by reason of his activities on behalf of the partnership." The defendants argued that the partnership had incurred a debt defending the two actions brought by the plaintiff and that, under the indemnity provision in the partnership agreement, they were therefore "entitled to be indemnified" by the plaintiff for these expenses.
In pursuing these two theories at trial, the defendants presented evidence regarding how the partnership had treated their attorney's fees for accounting purposes. One of the coadministrators of the estate of Richard Aiello testified that the defendants believed that the plaintiff was liable to the partnership for the attorney's fees as damages under §§ 34-356 and 34-362. As such, the coadministrator explained, the partnership had treated the defendants' attorney's fees as "a receivable" from the plaintiff and an "offsetting liability" owed to the estate of Richard Aiello. The coadministrator explained that, if the trial court concluded that the plaintiff was not liable to the partnership for the attorney's fees, then the fees would become a liability of the partnership because the partnership would be obligated to reimburse the estate of Richard Aiello for the fees. Accordingly,
After an eleven day trial, the trial court concluded that the defendants were not entitled to attorney's fees from the plaintiff. With respect to the defendants' first theory, the trial court determined that, as a matter of law, attorney's fees are not recoverable under § 34-356(c) or § 34-362(c) and that, even if they were, the defendants had failed to establish that the plaintiff's wrongful dissociation had caused the damages that they sought. With respect to the second theory, the court never made any findings of fact regarding the indemnity provision of the partnership agreement or legal conclusions as to whether the defendants were entitled to attorney's fees under that provision. Instead, the trial court addressed only the effect of the defendants' agreement with the estate of Richard Aiello regarding the attorney's fees and the defendants' subsequent resolution to repay the estate. The trial court found that neither the defendants' agreement with the estate nor the resolution required the plaintiff to pay the defendants' attorney's fees because the plaintiff was not a party to either the agreement or the resolution.
After the trial court issued its memorandum of decision, the defendants filed a motion for articulation and/or clarification as to how it arrived at its ultimate valuation of the partnership. Specifically, the defendants claimed that "[i]t [was] unclear from the decision what values the court ascribed to the assets and liabilities [of the partnership]" and requested the court to "articulate findings as to the value of the real estate assets . . . and the partnership's liabilities" so that the defendants could determine whether the court properly applied the statutorily prescribed formula for valuing the partnership. The plaintiff opposed the defendants' motion, and the court ultimately denied the motion. The defendants subsequently filed a motion for review of the trial court's denial of their motion for articulation and/or clarification, and this court granted the motion for review but denied the relief requested therein.
On appeal, the defendants challenge only the trial court's ruling with respect to their second theory for recovering attorney's fees. Specifically, the defendants claim that the trial court, in valuing the partnership, should have treated the attorney's fees as a liability of the partnership because the indemnity provision in the partnership agreement required the partnership to indemnify the partners for the fees.
"It is well established that [i]t is the appellant's burden to provide an
We conclude that the record is inadequate to review the defendants' claim through no fault of the defendants. In its memorandum of decision, the trial court did not make any findings of fact with respect to the indemnity provision of the partnership agreement. Without findings of fact regarding whether the partnership is obligated to pay the defendants' attorney's fees under the indemnity provision, we cannot review the defendants' claim that the trial court should have treated their attorney's fees as a liability of the partnership. Nevertheless, the defendants made sufficient attempts to obtain an adequate record for review in their motion for articulation and/or clarification, which was denied, and their motion for review, which this court granted but ultimately denied the relief sought therein. Accordingly, under the unique circumstances of this case, we remand the case for further proceedings. At the hearing to value the partnership and the plaintiff's interest therein as of August 29, 2009; see part I of this opinion; the trial court should also determine whether the defendants are entitled to attorney's fees under the indemnification provision of the partnership agreement and, thus, whether the attorney's fees constitute a liability of the partnership.
The judgment in Docket No. SC 19116 is reversed as to the valuation of the partnership and the plaintiff's interest therein, and as to the award of interest under § 34-362, and the case is remanded for further proceedings to determine the value of the partnership and the mine whether the plaintiff is entitled to a deferred or immediate payment of the newly determined buyout award, and to determine whether the attorney's fees incurred by the defendants constitute a liability of the partnership; the judgment in Docket No. SC 19116 is affirmed in all other respects, and the appeal in Docket No. SC 19150 is dismissed.
In this opinion ROGERS, C.J., and PALMER, ESPINOSA, ROBINSON and VERTEFEUILLE, Js., concurred.
EVELEIGH, J., concurring in part and dissenting in part.
In construing General Statutes § 34-355, the statute setting forth the causes of dissociation,
In my view, use of the term "expulsion" in § 34-355 is not dispositive of this issue as the majority would suggest. In subdivisions (3), (4), and (5) of § 34-355, "expulsion" relates to the events that give rise to a cause of action for dissociation of a partner, clearly referring to some type of wrongful conduct on the part of the partner with use of terms such as "wrongful," "breach," and "unlawful." See General Statutes § 34-355(4) and (5). Contrary to the majority's interpretation, "expulsion" does not relate to the moment at which the already rendered judgment of dissociation becomes effective or enforceable after disposition of an appeal. My disagreement with the majority's analysis is that it construes the term "expulsion" in light of facts occurring after the judicial determination that dissociation was an appropriate remedy for a partner's wrongful conduct. Section 34-355 does not allow for the use of postjudgment events to justify the a priori judgment of dissociation.
Moreover, in my view, the majority's analogy to § 34-355(7) does not support its position. Subdivision (7) of § 34-355 applies to dissociate a partner when he has a physical or mental disability that affects his ability to serve as a partner. Certainly § 34-355(7) relates to a situation which is not the fault of the partner. Construing the term "expulsion" to prevent this innocent partner who has been dissociated pursuant to § 34-355(7) from valuing his interest in the partnership prior to the time that any appeals have been disposed of would be inappropriate.
Additionally, the defendants' desire to value the plaintiff's partnership interest as of 2009 belies the positions they took in Brennan I, in which they wished to value the plaintiff's partnership interest as early as possible and while the previous appeal was pending before this court. See Brennan v. Brennan Associates, 293 Conn. 60, 89, 977 A.2d 107 (2009) (Brennan I). After this court issued its opinion in Brennan, I, the defendants sent a letter to the plaintiff offering to purchase his interest in the partnership as of "the date of [the plaintiffs] dissociation. . . ." The defendants' letter indicated that the plaintiff was dissociated in September, 2006, the month in which the trial court rendered its original judgment of dissociation. Only after the passage of time, and subsequent decline in the real estate market, did the defendants begin to claim that the date of dissociation should be a date other than the date of the trial court's decision. As stated by the Pennsylvania Supreme Court in a similar partnership context, "a party whose contention is rejected [on appeal] should gain nothing by the lapse of time. . . ." Scheckter v. Rubin, 349 Pa. 102, 104, 36 A.2d 315 (1944).
This conclusion is further supported by an examination of partnership law under the Uniform Partnership Act (UPA), the Revised Uniform Partnership Act (RUPA), and Connecticut's Uniform Partnership Act (CUPA).
The majority lists several policy reasons why its decision is sound in that "the plaintiff was not dissociated until the conclusion of his appeal in Brennan I." First, "a partner should not be allowed to participate in a partnership when he does not share in the risk that the partnership will lose value." Second, "an outgoing partner would be deprived of sharing in any value he added to the partnership through his good faith efforts to run the business during the pendency of his appeal...." Third, "a disgruntled, outgoing partner could take a nonmeritorious appeal for the sole purpose of intentionally sabotaging the business of the partnership, knowing that he is not risking a diminution of his interest." In response to the first policy reason, in my view, a dissociated partner does share in the risk that the partnership will lose value even if his partnership interest is valued before he ceases participation. The dissociated partner has an economic incentive to prevent the loss of value and foster profitability of the partnership so that he ultimately will be paid his full share. Moreover, the dissociated partner may properly be compensated for his work during that time by the trial court. While the majority's second policy reason is a valid reason, the opposite is also true in that a dissociated partner does not share in any decline in value. Regarding the third policy reason, a dissociated partner has a fiduciary duty while working for the partnership, even if he works postdissociation, which prevents him from intentionally sabotaging the business of the partnership. Further, any damage to the partnership may defeat the partnership's ability to pay him. Such a course of action would be self-defeating if the court ultimately reversed the decision dissociating that partner from the partnership.
In my view, there are additional contrary policy considerations which should be entertained. The majority permits the parties to continue to prolong this dispute. The Brennan I trial court, Munro, J., ordered the plaintiff dissociated on September 27, 2006. The plaintiff appealed the ruling and this court affirmed the trial court's decision on August 18, 2009. See Brennan v. Brennan Associates, supra, 293 Conn. at 60, 977 A.2d 107. The plaintiff subsequently filed the present action seeking, inter alia, valuation of his partnership interest pursuant to § 34-362(b). On December 11, 2012, the trial court, Shaban, J., rendered judgment in favor of the plaintiff and, on March 15, 2013, entered orders regarding the date of valuation, interest and attorney's fees. The defendants appealed and the plaintiff cross appealed. It is now 2015 and the case is not over. As a result of the majority's decision, the case will be sent back for a new trial regarding valuation and attorney's fees. There is certainly the potential that any trial court decision will then be appealed again due to both issues. The end result of this litigation is that, although the partnership interest will be valued as of 2009, the partner who was dissociated in 2006 may be able to extend this matter until 2016, the original ending date contained in the partnership agreement.
I also take issue with the majority's consideration of the defendants' claim as to the date of dissociation. The defendants should have presented this issue in Brennan I and never did. See id., at 60, 977 A.2d 107. In my view, it is too late to discuss the matter at this time. Brennan I discussed the validity of the dissociation and certainly could have discussed the effective date of dissociation, but the issue
Unfortunately, the majority opinion does nothing to shorten the length of time taken in this matter or the delay occasioned by the parties. In my view, the procedure employed in these cases should be as follows: (1) the dissociation date should be the date the trial court rendered judgment of dissociation; (2) the dissociated party may then bring an appeal; cf. Hylton v. Gunter, 313 Conn. 472, 97 A.3d 970 (2014) (discussing final judgment rule); (3) the trial court retains jurisdiction for valuation purposes; (4) the parties wait for the statutory 120 day period; see General Statutes § 34-362(e); (5) the trial court then hears the valuation case; and (6) once a decision is received on the valuation, the judgment of valuation may then be joined with the original appeal. Either the Appellate Court or the Supreme Court would then hear a consolidated appeal. This process would save the parties at least three years involved in two separate appeals, thereby reducing the delay and the costs of attorney's fees incurred by the parties on two separate appeals.
Finally, as to part III of the majority opinion, I respectfully disagree with the majority's conclusion regarding attorney's fees because, in my view, the defendants did not offer any competent evidence during trial to sustain their claim that those fees should be treated as a liability of the partnership.
I would affirm the trial court's finding that the date of dissociation was September 27, 2006, and its conclusion that the attorney's fees were not a liability of the partnership. Accordingly, I respectfully dissent from parts I and III of the majority opinion.
The trial court's December 11, 2012 memorandum of decision appropriately sets forth the following relevant facts and procedural history. "On September 5, 1984, the plaintiff, along with Richard Aiello and [the] defendants Alexander Aiello and Serge Mihaly, entered into a written general partnership agreement ... for the operation and management of certain real property known as the Trumbull Shopping Center....
"After [the defendants] Salvatore [DiNardo], Peter [DiNardo], Leonard DiNardo and David Lehn became involved in [the partnership] as coadministrators of the estate of Richard Aiello,
"As a result of the situation, the plaintiff commenced a civil action against the defendants seeking a declaratory judgment as to the rights of the various parties under the partnership agreement. The defendants filed a counterclaim against the plaintiff seeking to have him statutorily dissociated from the partnership for his conduct. On September 27, 2006, a decision was rendered [by the trial court dissociating] the plaintiff from the partnership." (Footnote added.) "In [that] ruling, the [trial] court entered an order of dissociation pursuant to ... § 34-355(5)(C), which allows dissociation if it is
"The dissociation did not, however, result in the dissolution or winding up of the partnership and it continued on in its business as allowed by statute. The plaintiff filed an appeal [and] the trial court's decision [was affirmed] on August 18, 2009. [See Brennan v. Brennan Associates, supra, 293 Conn. at 60, 977 A.2d 107.] Because the parties were unclear as to the effect of the appellate stay on the plaintiff's involvement with the partnership, the plaintiff remained involved in its affairs during the pendency of the appeal.... He continued to, amongst other things, solicit tenants, attend partnership meetings, [and] write to the partners about the partnership's affairs.... He also continued to receive $48,640 per month constituting his percentage draw from the partnership consistent with the payments he had received prior to the dissociation. This participation and payment structure continued until the [plaintiff's appeal in Brennan I was resolved] at which time both his participation and the payments ceased.... The total payments received by the plaintiff from the ... partnership between September 27, 2006 and August 18, 2009 were $1,702,400.
"Thereafter, by letter dated September 3, 2009, the plaintiff made demand upon the partnership pursuant to . . . § 34-362
The trial court memorandum continued: "Prior to trial, the parties disagreed on what was the appropriate date of dissociation to be used by the court for the valuation of the plaintiff's interest in the partnership. The plaintiff contended that the appropriate date was the September 27, 2006 trial court decision. The defendants argued that the appropriate date was the August 18, 2009 ruling ... affirming the trial court's decision. Because the application of the statute under these circumstances appeared to be an issue of first impression in this state, the court reserved judgment on the issue and took evidence and argument from the parties relative to both dates."
"The parties presented a significant volume of evidence relative to the valuation of the plaintiff's interest in the partnership. This included, but was not limited to, expert testimony as to the valuation of the real estate, leasehold interests, cash and other holdings of the partnership. [The] [p]laintiff's experts valued the plaintiff's [32 percent] interest in the partnership to be $9,400,000 as of September 27, 2006. [The] [d]efendants presented expert testimony establishing the value of the plaintiff's interest in the partnership as of that date to be $6,800,000." Ultimately, the trial court found the date of dissociation to be September 27, 2006, and valued the plaintiff's partnership interest at $8,640,000.
The trial court found, as a matter of law, that the partnership was for a definite term and, thus, that "the plaintiff was a partner who wrongfully dissociated under
To account for the plaintiff's receipt of distributions and participation in partnership affairs during the pendency of the appeal, the trial court "allow[ed] a credit for the monthly payments made to the plaintiff from October 2006 through August 2009, totaling $1,702,400 ... [finding that] [s]uch credit may be allowed given the unique circumstances of this case under the principles of equity. The plaintiff's continued participation in the affairs of the partnership due to the parties' perceived ambiguity of the effect of the dissociation ruling in light of the appeal and the fact the partnership had no obligation to provide the plaintiff with a monthly salary draw following the dissociation, justifies an equitable allowance of such credit." The trial court further concluded that "interest shall accrue from the date of dissociation to the date of payment pursuant to § 34362(b). In that the rate of interest is not specifically set forth in that statute, pursuant to [General Statutes] § 34-304(b) the rate of interest shall be calculated at [8 percent] a year as set out in General Statutes § 37-1."
The defendants claimed offsets against the value of the plaintiff's partnership interest pursuant to §§ 34-356(c) and 34-362(c), (e), and (f) for costs associated with "all present and prior litigation between the parties [as] part of the damages caused by [the] plaintiff's wrongful dissociation... [which included] costs and attorney's fees relative to the partnership's involvement in the summary process actions it brought against its own tenants ... [and] attorney's fees for the posttrial briefing in this matter." In calculating the total amount due, the trial court declined to award offsets for attorney's fees against the value of the plaintiff's partnership interest,
After judgment, the plaintiff moved for offer of compromise interest and attorney's fees pursuant to General Statutes § 52-192a and Practice Book § 17-18, arguing that the 8 percent interest awarded from the date of dissociation until the future date of payment caused the plaintiff's recovery to exceed the offer of compromise he had tendered to the defendants for $9,215,000. In its memorandum of decision dated March 15, 2013, the trial court ruled that, although the plaintiff's recovery exceeded the offer of compromise because of the interest awarded pursuant to § 34-362(b), the cause of action giving rise to the plaintiff's recovery under § 34-362 was not an action for "money damages" or a "civil action based upon contract" under § 52-192a (a).
The defendants appealed from the judgment of the trial court, claiming that the trial court improperly: (1) valued the plaintiff's partnership interest as of September 27, 2006; (2) awarded interest to the plaintiff from the date of dissociation to the date of payment; and (3) failed to include attorney's fees as a liability when it calculated the partnership value. The plaintiff cross appealed from the judgment of the trial court, claiming that the trial court improperly declined to award offer of compromise interest pursuant to § 52-192a (a).
The majority holds that the trial court improperly found that the date of dissociation, the date on which the plaintiff's partnership interest is valued pursuant to § 34-362(b), was September 27, 2006, the date the Brennan I trial court rendered judgment of dissociation. Instead, the majority concludes that the date of dissociation is August 29, 2009, the date on which the parties could no longer file a motion seeking reconsideration of this court's opinion in Brennan I. Because the decline of the real estate market in 2008 negatively affected the profitability and value of the Trumbull Shopping Center, the defendants urge the 2009 date and, thus, the lower valuation of the plaintiff's partnership interest. The defendants claim that the trial court improperly construed § 34-362(b) by ignoring the effect the date had on other provisions of the CUPA, particularly § 34-357(b)(1).
As the trial court aptly noted, application of the statute under these circumstances is an issue of first impression in this state. This is due, in part, to the fact that the legislature substantially revised Connecticut's partnership laws in 1995. See footnote 3 of this concurring and dissenting opinion. Because of the paucity of case law interpreting the CUPA, I must first begin with case law in, and commentary about, the fundamental principles of partnership law inherent in the UPA. Jurisprudential understanding of the UPA caused and influenced the relevant revisions seen in the RUPA. In fact, in Brennan I, this court acknowledged the fact that the history of the UPA informed our interpretations of the RUPA, noting that "there is nothing in the history of, or policy underlying, these provisions to support the distinction [between the remedy of dissociation, a relatively new term in partnership law, versus that of dissolution] proposed by the plaintiff" especially in light of an official comment in the RUPA stating that "`dissociation,' is used in lieu of ... the term `dissolution'. . . ." Brennan v. Brennan Associates, supra, 293 Conn. at 84, 977 A.2d 107, quoting Rev. Unif. Partnership Act of 1997, § 601, comment (1), 6 U.L.A. (Pt. 1) 164 (2001). This court agreed with the trial court's use of "case law addressing the more established, and in [the trial court's] view analogous, standard for dissolution"; Brennan v. Brennan Associates, supra, at 77, 977 A.2d 107; and noted the conceptual similarities between dissociation and dissolution. Id., at 83-84, 977 A.2d 107.
The resolution of the defendants' claim in the present case requires me to interpret the phrase "date of dissociation" contained in § 34-362(b), as well as other references to dissociation in the CUPA. The proper interpretation of the CUPA is a "question of law, `over which [this court] exercise[s] plenary review.... The process of statutory interpretation involves the determination of the meaning of the statutory language as applied to the facts of the case....'" Brennan v. Brennan Associates, supra, 293 Conn. at 78-79, 977 A.2d 107. When construing a statute, "[o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature.... [W]e also look for interpretive guidance to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter...." (Internal quotation marks omitted.) Kasica v. Columbia, 309 Conn. 85, 93, 70 A.3d 1 (2013); see also General Statutes § 1-2z. "[T]he legislature is always presumed to have created a harmonious and consistent body of law.... [T]his tenet of statutory construction... requires [this court] to read statutes
No court has squarely addressed a challenge to the date of dissociation, under the RUPA, based on the effect of an appellate stay. Additionally, no court has squarely addressed a challenge to the date of dissolution, under the UPA, based on the effect of an appellate stay. Accordingly, in the present case, three lines of inquiry inform my conclusion that the date of dissociation is the date of the trial court's decision in Brennan I: (1) case law interpreting the analogous provisions on partnership dissolution in the UPA and, specifically, disputes over the date of dissolution by decree of court; (2) problems with the dissolution provisions of the UPA that the drafters of the RUPA attempted to remedy, particularly confusion over the causes and effects of dissolution; and (3) the relation of the RUPA to, and its adoption of, the UPA principles of partnership dissolution in determining the appropriate date of dissociation, which comport with our appellate stay jurisprudence and policy rationales.
Because dissociation is a relatively new concept under partnership law, I begin, first, with a discussion of the causes of partnership dissolution under the UPA, which are analogous to the causes of dissociation under the RUPA. Thereafter, because no court has squarely addressed a challenge to the date of dissolution, under the UPA, based on the effect of an appellate stay, I discuss and glean principles from case law about the date of dissolution that I will later apply in interpreting the date of dissociation; specifically, that it is the conduct giving rise to the grounds for dissolution—the cause of the dissolution—that controls the date of dissolution, and not conduct occurring postdissolution.
Under the UPA, the term "dissociation" did not exist; instead of dissociation, if certain enumerated events occurred, such as death, bankruptcy of a partner, or expulsion of a partner, the underlying partnership would be dissolved.
"To determine the date of dissolution, it is necessary first to consider the cause of dissolution." In re Crutcher, 209 B.R. 347, 352 (Bankr.E.D.Pa.1997). Determining this date often required a court to choose between nonjudicial and judicial causes of dissolution. See id. (choosing earliest of three possible dates of dissolution: [1] date partner had been expelled from business by being cut off from all management duties, judicial cause of dissolution under § 31[1][d] of UPA; [2] date partner filed for bankruptcy, nonjudicial cause of dissolution under § 31[5] of UPA; or [3] date partner filed adversary proceeding in Bankruptcy Court for accounting, expressing his will to withdraw from partnership, nonjudicial cause of dissolution under § 31[2] of UPA).
"[Nonjudicial] causes [of dissolution] appear to operate ipso facto, and dissolution dates from the occurrence of the event." J. Crane & A. Bromberg, supra, § 78, at p. 436. In Robins v. Roland, Docket No. B191659, 2008 WL 615865, *1 (Cal.App. April 7, 2008), for example, one partner of a three person real estate partnership died in 1994, leaving his wife as the executrix of his estate and the purported owner of his partnership interest. For years after her husband's death, the wife had received distributions from the partnership, attended company board meetings, signed minutes, and consented to partnership actions. Id., at *6. After relations between the partners soured, the wife attempted to dissociate from the partnership nine years later. Pursuant to § 31(d)(4) of the UPA, however, the death of the partner had already ipso facto caused dissolution because the partnership agreement did not provide for continuation of the partnership upon a partner's death. Despite the wife's receipt of partnership distributions and participation in partnership affairs for years after the dissolution caused by her husband's death, the California Court of Appeal held that the partnership had dissolved as a matter of law upon the partner's death in 1994, thus rendering moot the wife's attempt to dissociate. Id., at *3. The court reasoned that "[u]nder the UPA, a dissolved partnership does not automatically terminate but rather `continues until the winding up of partnership affairs is completed.' ... Thus, by default, the partnership would continue until being finally
In contrast to nonjudicial causes of dissolution, judicial causes of dissolution have less clearly defined dates; it is more difficult to determine the exact moment in time a partnership dissolves where a trial court's decree of court establishes that dissolution has occurred. According to Alan Bromberg, a leading scholar on partnership law, "a judicial dissolution dates from the court decree, unless there is equitable reason for the court to set an earlier date. These rules fix the time when partners' rights and powers are modified, and when their rights to an accounting accrue." (Emphasis added; footnotes omitted.) J. Crane & A. Bromberg, supra, § 78, at p. 436. In In re Woskob, 305 F.3d 177 (3d Cir.2002), the United States Court of Appeals for the Third Circuit chose between four possible dates of dissolution by decree of court: (1) the date the debtor's partner excluded the debtor from partnership proceeds in January 1997, a judicial cause of dissolution under the UPA; (2) the date the debtor excluded the debtor's partner from management and income from the partnership in April, 1997, a judicial cause of dissolution under the UPA; (3) the debtor's partner's bankruptcy in June 1997, a nonjudicial cause of dissolution under the UPA; or (4) the debtor's partner's death in 1999, a nonjudicial cause of dissolution under the UPA. With respect to whether the partners' expulsions in 1997 were "sufficient to dissolve [the] partnership through operation of law and without the need for a judicial decree," the Third Circuit distinguished between expulsions that "result in the instantaneous dissolution of the partnership"—such as when a partner expels another in accordance with power conferred by agreement under § 31(1)(d) of the UPA—and those that "merely serve as grounds by which a court can decree a dissolution"—such as when a partner expels another without power conferred by agreement. Id., at 183. The court held that because the partnership agreement did not confer the power to expel under § 31(1)(d) of the UPA, and because neither of the parties had brought suit for dissolution by decree of court after their purported exclusions by each other, the exclusions had not operated to ipso facto dissolve the partnership and were
As in In re Woskob, supra, 305 F.3d at 183, courts have looked to the conduct of the parties to determine when it would be equitable to set the date of dissolution at a time other than the date of the court's decree, finding this inquiry to be easier when conduct giving rise to grounds for dissolution is extreme, and harder where conduct giving rise to grounds for dissolution is not serious enough to "result in the instantaneous dissolution of the partnership." When conduct giving rise to grounds for dissolution by judicial decree is "serious and unequivocal ... the misconduct really dissolves the partnership, the court decree merely giv[es] legal effect thereto." Vangel v. Vangel, 116 Cal.App.2d 615, 626, 254 P.2d 919 (1953); see Fisher v. Fisher, 349 Mass. 675, 678, 212 N.E.2d 222 (1965) (fixing date of dissolution as date partner was notified in writing that he was "`permanently suspended'" from partnership, and effectively ousted, instead of date of judicial decree, and entering judgment nunc pro tunc, as of date he was notified, in interest of "[e]quity and... furtherance of justice"); see also Edwards v. Edwards, 122 Idaho 963, 968, 842 P.2d 299 (1992) ("[T]he effective date of a dissolution is the date of the first effective act of dissolution; subsequent acts or causes of dissolution are irrelevant .... Thus, although a dissolution by judicial decree generally dates from the date of the court decree, the date of dissolution may be deemed to have occurred earlier, where, as here, the partnership is dissolved on the basis of findings that relate back to a prior date." [Citations omitted; emphasis added.]); accord 68 C.J.S. 723, Partnership § 549 (2009).
But when grounds for dissolution by judicial decree are "so disputed or equivocal that automatic dissolution by operation of law, or self-help by partners [of excluding the offending partner] would be reckless"; J. Crane & A. Bromberg, supra, § 78, p. 437; the court may otherwise fix the date of dissolution as the date of the judicial decree. See Graham v. Dietze, Docket Nos. A-08-796 and A-09-088, 2010 WL 1600562, *5-6 (Neb.App.2010) (finding impropriety in trial court's setting date of dissolution as date before suit brought, when most reliable financial information had been available, and holding that date was improper because parties' conduct had not ipso facto amounted to dissolution and parties had not sought judicial dissolution as of that date); cf. Vangel v. Vangel, supra, at 116 Cal.App.2d at 626, 254 P.2d 919 (The trial court fixed the date of dissolution as the date of closing of evidence at trial instead of the date judgment was entered or the date of exclusion because "a court may, because of a breach of the partnership agreement, decree the dissolution of the partnership as of a date prior to the judgment. In some cases where the breach is serious and unequivocal the dissolution may be decreed as of the date of the breach.... But here the act of [the defendant] in excluding [the] plaintiffs did not ipso facto dissolve the partnership. His acts simply provided grounds for an application to a court of equity for such relief.... [The date of the close of evidence]
The conduct of the parties has always been relevant to determining the date of dissolution by decree of court because the conduct itself provides the factual basis that gives rise to a cause of action for dissolution as a matter of law. In Kruse v. Vollmar, 83 Ohio App.3d 378, 382, 614 N.E.2d 1136 (1992), the Court of Appeals of Ohio addressed whether a trial court had improperly failed to dissolve a partnership even though it had awarded punitive damages after finding that the defendants had excluded the plaintiff from management decisions. The Court of Appeals held that, on remand, the trial court must dissolve the partnership and that "the cause of the dissolution must be determined in the first instance by the trial court ... [and] the date on which the parties' interest in the partnership is to be finally ascertained is the date on which the trial court enters its judgment of dissolution consistent with this opinion...." Id., at 385, 614 N.E.2d 1136. Upon motion for reconsideration, however, the Court of Appeals of Ohio, in a per curiam opinion, noted that, in holding that the date of dissolution must be the date of the trial court's judgment, it had "fail[ed] to fully consider that there may be events that could cause the trial court, in the first instance, to establish the date of dissolution at a time previous to its final judgment entry." (Emphasis added.) Kruse v. Vollmar, 85 Ohio App.3d 198, 199, 619 N.E.2d 482 (1993). Accordingly, the court held that "the trial court should not be prevented from considering [events occurring prior to the date judgment is rendered] to ascertain what the proper date of dissolution should be...." Id.
Though trial courts have properly found earlier dates of dissolution than the date the trial court renders judgment of dissolution based on the conduct or circumstances of the parties, trial courts have neither found nor attempted to find later dates of dissolution than the date the trial court renders judgment of dissolution. A trial court cannot find future facts and, thus, no appellate court has directly addressed whether an appeal of the judgment of dissolution would alter the "date of dissolution" to be subsequent to the date the trial court renders judgment of dissolution. In Scheckter v. Rubin, supra, 349 Pa. at 104, 36 A.2d 315, however, the Supreme Court of Pennsylvania addressed whether the date of dissolution by decree of court should be the date specified in the decree nisi dissolving the partnership or the date when the trial court dismissed the exceptions to the decree nisi and entered the final decree. The appellant sought to gain the benefit of postdissolution appreciation in the value of his partnership interest from the date of the decree nisi to the date of the final decree. The court held unequivocally that the effective date of dissolution was the earlier date, "the date specified in the decree nisi which, in express words, dissolved the partnership as of that day.... There can be no serious objection, on the dismissal of the exceptions [to the decree nisi], to adopting, in the final decree, the date stated in the decree nisi as the dissolution date. In such circumstances, a party whose contention is rejected [on appeal] should gain nothing by the lapse of time between the dates of the nisi and final decrees." Id.; accord Kirby v. Kalbacher, 373 Pa. 103, 95 A.2d 535 (1953) (holding date of dissolution by decree of court to be date of decree nisi, notwithstanding affirmance of decree three months later, because affirmance merely restated fact of dissolution as of
These decisions all establish the principle that the conduct giving rise to the grounds for dissolution—the cause of the dissolution—controls the date of dissolution. No events relating to the grounds for dissolution occur during the pendency of an appeal; conduct or circumstances of the parties relevant to dissolution have already occurred, the trial court has already found facts, and no further factual developments during that interim period can influence an appellate court as to the propriety of upholding a dissolution because such developments are not in the appellate record. A mere lapse of time after a trial court renders judgment of dissolution has no bearing on a trial court's a priori factual finding of dissolution as of a particular date.
Like the courts refusing to set the date of dissolution after, at the latest, the date the trial court renders judgment of dissolution, other courts have similarly refused to allow valuation of partnership assets after the date of dissolution because, under the UPA, the "value [of the departing partner's interest] is computed as of the date of dissolution rather than the later time of settlement, which means the outgoing interest is protected, as against the other partners, from [postdissolution] losses and does not get the benefit of [postdissolution] appreciation." (Footnotes omitted.) 2 A. Bromberg & L. Ribstein, Bromberg and Ribstein on Partnership (2014) § 7.13(b)(1), pp. 7:186-7:187. For example, in Oliker v. Gershunoff, 195 Cal.App.3d 1288, 1304, 241 Cal.Rptr. 415 (1987), the California Court of Appeal addressed whether an expelled partner of a real estate syndication partnership was entitled to a pro rata share of postdissolution appreciation in value of the partnership-owned realty. The real estate market during the Oliker partnership was in the middle of a recession when the withdrawing partner withdrew. Id., at 1300, 241 Cal.Rptr. 415. After the partners mutually agreed to allow the withdrawing partner to withdraw, an inflationary cycle began and real property values boomed. Id. The California Court of Appeal held that, in receiving the value of his interest in the partnership, the withdrawing partner could not take advantage of postdissolution appreciation of the partnership property because "[t]o reach a contrary result would be manifestly inequitable. [The withdrawing partner] had no downside risk [after dissolution] because his interest, in large part, was fixed as of the date of dissolution. By a parity of reasoning, the withdrawing partner should not be entitled to share in the upside potential. Otherwise, a withdrawing partner would have no motivation to settle his partnership accounts but instead could delay such matter, gambling on the chance that the partnership's assets would rise in value in the interim, and knowing that, in any event, his value in the interest in the partnership determined as of the date of dissolution could not be reduced by any subsequent events." Id., at 1304, 241 Cal.Rptr. 415.
Similarly, in King v. Evans, 791 S.W.2d 531, 535 (Tex.App.1990), the Court of Appeals of Texas discussed how the UPA treated postdissolution fluctuations in value: "Section 42 [of the UPA] is intended to give the [noncontinuing] partner the benefit of asset appreciation at dissolution, and leave him unaffected by later [postdissolution] losses.... [T]he statute was obviously intended to put the risk of operating the business after dissolution on the continuing partner. This is the reason that the value of an outgoing partner's interest must be computed as of the date of dissolution rather than the later time of settlement. Conversely, neither would an outgoing partner receive the benefit
Courts refusing to alter either the date of dissolution or the value of a partnership interest despite postdissolution fluctuations in value are justified in this refusal, notwithstanding that a departing partner had only later felt the effects of dissolution (i.e., had received partnership distributions or participated in partnership affairs during an interim period). After all, courts valuing a departing partner's interest can equitably adjust the valuation to account for postdissolution distributions received while winding up or maintaining the status quo. See, e.g., Robins v. Roland, supra, 2008 WL 615865, *3 (finding date of dissolution to be date of death of partner, even though partner's wife continued to manage partnership affairs and receive distributions for years after dissolution); Vangel v. Vangel, supra, 116 Cal.App.2d at 630, 254 P.2d 919 (affirming date of dissolution as date of closing of evidence in trial court, even though "it appear[s] from the briefs and from the oral argument that the status quo with respect to the partnership operations has remained unaltered during the pendency of this appeal"); Scheckter v. Rubin, 355 Pa. 633, 635-36, 50 A.2d 668 (1947) (ordering reimbursement of funds expended by former partner in maintaining partnership business postdissolution and during pendency of appeals because even former partners may be "justly and properly entitled to reimbursement out of the [partnership] assets" in continuing dissolved business until settlement and because such expenditures can "be accounted for accordingly").
In accordance with the foregoing case law and principles of partnership law under the UPA, the date of dissolution and, thus, the date of valuation of a partnership interest is the date the trial court renders judgment of dissolution, or a date prior to that if the parties' conduct as found by the trial court—the cause of the dissolution itself—compels an earlier finding. Scholarship reinforces the principle that the date of dissolution is the date the trial court renders judgment of dissolution, or some date prior to when the trial court renders judgment of dissolution. See, e.g., J. Crane & A. Bromberg, supra, § 78, at p. 436 and n. 31; 2 A. Bromberg & L. Ribstein, Bromberg and Ribstein on Partnership, supra, at pp. 7:98-7:99; R. Hillman, "Misconduct as a Basis for Excluding or Expelling a Partner: Effecting Commercial Divorce and Securing Custody of the Business," 78 Nw. U.L.Rev. 527, 544 n. 63 (1983). Any date after the date the trial court renders judgment of dissolution has no factual relevance to the findings a trial court must make in determining a priori whether dissolution is warranted as a matter of law.
Having discussed case law interpreting the date of dissolution under the UPA, I now address other common problems courts and commentators have encountered in interpreting its dissolution provisions. In particular, I discuss problems with the definition of dissolution and how the statutory language set forth in the UPA created confusion about the causes and effects of dissolution. These problems informed the choices made by the drafters of the RUPA in overhauling the UPA and creating the analogue to dissolution—dissociation —that we must interpret in the present case.
Lawyers often misunderstood the term "dissolution" in the UPA. "Dissolution is probably the most confusing concept and area in all of partnership law." D. Weidner, "A Perspective to Reconsider Partnership Law," 16 Fla. St. U.L.Rev. 1, 13 (1988). "The dissolution of a partnership is but a preparatory step to its termination; a partnership continues after dissolution until the winding up of its affairs is completed." Bass v. Dalton, 218 Neb. 379, 381, 355 N.W.2d 225 (1984). Prior to the UPA, "the subject of the dissolution and winding up of a partnership [had been] involved in considerable confusion principally because of the various ways in which the word `dissolution' [was] employed. The term sometimes designate[d] the completion of the winding up of partnership affairs. This, the end of the association, [instead] should be called the termination of the partnership." W. Lewis, "The Uniform Partnership Act," 24 Yale L.J. 617, 626-27 (1915). Some confused dissolution as the effect of some prior triggering event that caused the partnership to eventually terminate. The correct interpretation, however, was that the triggering event itself was the dissolution, after which a partnership would wind up and terminate.
The UPA attempted to implement a precise definition of "dissolution"—accompanied by distinct references to winding up and termination—to clarify that dissolution did not mean termination. To remedy the
Even after the UPA attempted to clarify dissolution, case law in the seventy-five years since the drafting of the UPA did not evince this clarity. "Despite the relative precision of the statutory language [of the UPA], [`dissolution,' `winding up,' and `termination'] continue to be used indiscriminately by many courts and lawyers." J. Crane & A. Bromberg, supra, § 73, at p. 416.
The revision subcommittee specifically noted that the leading scholar on partnership law "has criticized the lack of coordination between the general definition of dissolution under [§] 29 [of the UPA] and the specific causes of dissolution under [§§] 31 and 32 [of the UPA]." UPA Revision Subcommittee of the Committee on Partnerships and Unincorporated Business Organizations, supra, 43 Bus. Law. at 161. The revision subcommittee agreed that the definition of dissolution "confuses the causes and effects in that [for example] a partner expressing his will to dissolve is dissociating himself and causing a dissolution,
Thus came the RUPA, which added the term "dissociation" to the statutory scheme in an attempt to clarify the moment in time when a partner begins the process of leaving a continuing partnership. See Rev. Unif. Partnership Act of 1997, § 601, supra, at 6 U.L.A. (Pt. 1) 163; see also General Statutes § 34-355. "Although the term dissociation is new to the statute, the concept is not."
A review of the RUPA's structure, language, and official comments confirms that the concepts of dissociation and dissolution are analogous. We agreed with this premise in Brennan I, noting that the drafters of the RUPA used the term dissociation "in lieu of the `UPA term "dissolution"....'" Brennan v. Brennan Associates, supra, 293 Conn. at 84, 977 A.2d 107. Just as § 31 of the UPA set forth "Causes of Dissolution" and § 32 of the UPA elaborated more fully on "Dissolution by Decree of Court," § 601 of the RUPA sets forth "Events Causing Partner's Dissociation," which include "expulsion by judicial determination" in § 601(5) of the RUPA, as is relevant to the present case. See Rev. Unif. Partnership Act of 1997, § 601, comment (6), supra, at 6 U.L.A. (Pt. 1) 166 ("[t]he enumerated grounds for judicial expulsion are based on ... grounds for judicial dissolution" set forth in § 32[1] of the UPA). "When the facts justify either the judicial expulsion of a partner or the issuance of a decree of dissolution of the partnership, the court at its discretion may pursue either option." (Emphasis added.) R. Hillman et al., Revised Uniform Partnership Act (West Ed.2014-2015) § 801, author's comment (4)(e); see also A. Wensinger, "The Revised Uniform Partnership Act Breakup Provisions: Stability or Head-ache?," 50 Wash. & Lee L.Rev. 905, 934 (1993) ("The meaning of the RUPA's `dissociation' is analogous to the ... definition of dissolution [under the UPA].... Although the RUPA has declined to define the term `dissociation,' the RUPA's dissociation now has virtually the same meaning as the UPA's dissolution: the occurrence of some event altering a partner's willingness or ability to continue in the business. The effect of the RUPA's `dissociation' is also similar to the effect of dissolution under the UPA. Like the UPA's `dissolution,' dissociation under the RUPA does not indicate the termination of the partnership business. Dissociation indicates either that the partners continuing the partnership will purchase the departing partner's interest or that the partnership will terminate and [have] its assets liquidated." [Footnotes omitted.]).
With this understanding of (1) how courts have interpreted the UPA in determining the date of dissolution, (2) how the definition of dissolution confused cause and effect and how the drafters of the RUPA acknowledged this confusion, and (3) that "dissociation" was meant to supplant dissolution, I now turn to case law interpreting the date of dissociation under the RUPA.
The determination that dissociation is analogous to dissolution also perseveres when I examine how the RUPA values an outgoing partner's partnership interest, whether the partnership continues despite dissociation or the partnership dissolves and liquidates. "The basic policy judgment is that the departing partner should get the same amount through the buyout that he or she would get if the business were wound up. Theoretically, the amount paid to the dissociating partner should be the same whether there is a buyout by the continuing partnership or a liquidation of the business." D. Weidner & J. Larson, supra, 49 Bus. Law. at 11-12. Just as the conduct or circumstances of the parties informed the relevant date of dissolution under the UPA, the "`moment of the event causing cessation'" informs the relevant date of dissociation in determining the price of a partner's interest during a buyout under the RUPA. D. Weidner, "The Revised Uniform Partnership Act Midstream: Major Policy Decisions," 21 U. Tol. L.Rev. 825, 840 (1990); see also In re Woskob, supra, 305 F.3d at 177; Vangel v. Vangel, supra, 116 Cal.App.2d at 626, 254 P.2d 919; Edwards v. Edwards, supra, 122 Idaho at 968, 842 P.2d 299; 68 C.J.S., supra, at p. 723.
Case law interpreting dissociation under the RUPA follows the same logic, policy rationales, and reasoning inherent in partnership law as does case law interpreting dissolution under the UPA. Just like the court in In re Woskob, the court in Fotouhi v. Mansdorf, 427 B.R. 798, 803 (N.D.Cal.2010) also found, years after the
Courts interpreting the RUPA must also be guided by findings of fact with respect to the parties' conduct or circumstances that give rise to dissociation, just as courts interpreting the UPA have done so with respect to dissolution. Compare Graham v. Dietze, supra, 2010 WL 1600562, at *5-6 (trial court improperly set date of dissolution as date before action brought because parties' conduct had not ipso facto amounted to dissolution and parties had not sought judicial dissolution as of that date), Kruse v. Vollmar, supra, 85 Ohio App.3d at 199, 619 N.E.2d 482 (trial court entitled to find earlier date of dissolution than date judgment is rendered if it makes factual findings that establish dissolution as matter of law at earlier date), with Robertson v. Jacobs Cattle Co., 285 Neb. 859, 874-75, 830 N.W.2d 191 (2013) (Valuation of dissociated partner's share under RUPA as of "date of dissociation" clearly "refers to the date of the event which resulted in the dissociation" and because "the dissociation occurred as a result of expulsion by judicial determination ... [the dissociated partners] were not dissociated from the partnership until the [D]istrict [C]ourt determined that they had engaged in conduct described in [§ 601 of the RUPA]").
Setting the "date of dissociation" as the date of the conduct or circumstances that cause dissociation remains correct notwithstanding postdissociation fluctuations in the value of the partnership. "During the period between dissociation and the purchase of the dissociated partner's interest, the dissociated partner is essentially a creditor of the partnership. The purchase price of the dissociated partner's interest is established as of the date of dissociation, it does not reflect post dissociation events in the life of the partnership." R. Hillman et al., supra, § 603, author's comment (6); see King v. Evans, supra, 791 S.W.2d at 536 (UPA places "risks of continuation of the farming business after dissolution, including the risks of land depreciation in a falling real estate market [on the] continuing partner"); accord Robertson v. Jacobs Cattle Co., supra, 285 Neb. at 874-75, 830 N.W.2d 191 (The court refused to find the date of dissociation to be earlier than the date the trial court rendered judgment
With these principles in mind, I now turn to the present case. The defendants claim, and the majority agrees, that the date of dissociation for purposes of valuing the plaintiff's partnership interest pursuant to § 34-362(b) should be informed by § 34-357 instead of § 34-355.
I acknowledge that the effect of the appellate stay pursuant to Practice Book § 61-11(a) and the subsequent participation of the plaintiff in partnership affairs "complicated matters," using the words of the court in Fotouhi v. Mansdorf, supra, 427 B.R. at 802. Just as the dissociated partner in Fotouhi continued working post-dissociation; id., at 803; the plaintiff in the present case also continued working postdissociation. The plaintiff in the present case was dissociated as a matter of law, but not as a matter of fact, even though he had no technical right to participate in partnership management pursuant to § 34-357(b)(1). Adopting the defendants' interpretation of "dissociation" as the date a partner in fact ceases to participate in the management and conduct of the partnership, instead of the date the trial court factually determines that the partner must be dissociated, either as of the date of the judgment of dissociation or at a prior date, however, would confuse cause and effect. See UPA Revision Subcommittee of the Committee on Partnerships and Unincorporated Business Organizations, supra, at 43 Bus. Law. 161 (noting that definition of dissolution, for which dissociation was later substituted, "confuses the causes and effects" of dissolution); see also J. Crane & A. Bromberg, supra, § 78, at p. 417 and n. 5. The true cause of the plaintiff's dissociation was the trial court's finding that an event causing the partner's
The drafters of the RUPA explicitly stated that "dissociation" was meant to supplant "dissolution" and that "dissolution" now had a new meaning. Id. ("An entirely new concept, `dissociation,' is used in lieu of the UPA term `dissolution'.... `Dissolution' is retained but with a different meaning.").
For dissolution's first role, defining the cause, the drafters of the RUPA decided to replace the word "dissolution" with the word "dissociation," "answer[ing] the policy question of whether enough has happened to trigger the contraction of a partner's association with the business." D. Weidner & J. Larson, supra, at 49 Bus. Law. 7. If enough had happened—if dissociation had been caused—the partnership would thereafter choose between one of two paths. On the first path, after dissociation of a partner for misconduct, the business could continue and the dissociating partner could be bought out. On the second path, after dissociation of a partner for misconduct, the business could treat such partner's dissociation as a dissolution of the partnership and thereafter wind up and terminate. On both paths, at least in the context of a change in the partnership due to a partner's misconduct, there must first have been a dissociation of the partner.
For dissolution's second role, defining the effect of a change in the partnership, i.e., winding up and termination, the drafters of the RUPA decided to retain the word "dissolution." Dissolution was, thus, repurposed to describe the second path, the result or effect of the dissociation that meant that the partnership would wind up and terminate. See Rev. Unif. Partnership Act of 1997, § 701, supra, at 6 U.L.A. (Pt. 1) 175 ("[i]f a partner is dissociated from a partnership without resulting in a dissolution and winding up of the partnership business under [§] 801" [emphasis added]). This interpretation is corroborated by the commentary's description of dissociation as a "`switching' provision" and its statement that "after a partner's dissociation, the partner's interest in the partnership must be purchased pursuant to the buyout rules in [§ 701] unless there is a dissolution and winding up of the partnership business under [§ 801]. Thus, a partner's dissociation for misconduct will always result in either a buyout of the dissociated partner's interest or a dissolution and winding up of the business." (Emphasis added.) Rev. Unif. Partnership Act of 1997, § 603, comment (1), supra, 6 U.L.A. (Pt. 1) 172. "Under [the] RUPA, not every partner dissociation causes a dissolution of the partnership. Only certain [dissociations] trigger a dissolution. The basic rule is that a partnership is dissolved, and its business must be wound up, only upon the occurrence of one the events listed in [§] 801. All other dissociations result in a buyout of the partner's interest under [§ 701] and a continuation of the partnership entity and business by the remaining partners." Rev. Unif. Partnership Act of 1997, § 801, comment (1), supra, 6 U.L.A. (Pt. 1) 190.
Automatic stays existed prior to the adoption of the RUPA and, despite their existence, the cases cited nevertheless yielded the same rule of law that the proper date of dissolution was the date of judgment of dissolution and not the date a subsequent appeal was resolved. See, e.g., In re Woskob, supra, 305 F.3d at 177; Fotouhi v. Mansdorf, supra, 427 B.R. at 802; In re Crutcher, supra, 209 B.R. at 352; Estate of Webster v. Thomas, supra, 2013 WL 164041; Anastos v. Sable, supra,
My own review of our jurisprudence interpreting appellate stays indicates that the date of dissociation does not change even if a judgment of dissociation is stayed pending appeal. I begin by noting that the appropriate time to challenge the effect of the automatic stay on the plaintiff's participation in partnership affairs would have been during the appeal in Brennan I. Practice Book § 61-14 provides in relevant part that "[t]he sole remedy of any party desiring the court to review an order concerning a stay of execution shall be by motion for review under Section 66-6. . . ." Practice Book § 66-6 provides in relevant part that "[t]he court may, on written motion for review stating the grounds for the relief sought, modify or vacate any order made by the trial court . . . concerning a stay of execution in a case on appeal. . . . Motions for review shall be filed within ten days from the issuance of notice of the order sought to be reviewed. . . ." Cf. In re Melody L., 290 Conn. 131, 172-73, 962 A.2d 81 (2009) ("If the motion [for relief from stay] is denied, a [party] may seek to have that denial reviewed by filing a motion for review pursuant to Practice Book § 66-6, as the [parties] did in this case. Indeed, it appears that the [parties'] appeal from their motion for [relief from a stay] pending appeal is merely an attempt for further review of the same issues decided in the motion for review." [Footnote omitted.]).
If the defendants had truly questioned the effect of the appellate stay on the judgment of dissociation as it related to the plaintiff's continued participation in the partnership, they should have included this claim in Brennan I. The fact of the matter is that the defendants did not question the propriety of the stay in the appellate system until it had an economic incentive to do so, when real estate prices fell years later and when it realized that the date of dissociation could impact the valuation of the partnership under the RUPA. In fact, in 2006, the defendants acknowledged that the plaintiff would have management rights during the pendency of the appeal, that the defendants might have to pay interest during that time period; see footnote 13 of this concurring and dissenting opinion; and, yet, that "the [trial] court [had] granted the defendants' remedy of dissociation" as of September 2006. Notwithstanding these acknowledgments, the defendants asked the trial court to set a valuation hearing date within thirty days of its posttrial brief of issues to be resolved. We normally would decline to review the defendants' challenge to the effect of the appellate stay years after the fact and merely because real estate values did not go in the direction the defendants had hoped. Cf. Sargent v. Smith, 272 Conn. 722, 733, 865 A.2d 1129 (2005) (denying plaintiff's claim in second appeal that he would have been entitled to money collected by receiver during pendency of first appeal, and noting that "no equitable considerations warrant a contrary result" because same parties were involved in both actions, that plaintiff could have alerted trial court in first action to his claim, and that plaintiff could have taken appeal challenging actions of receiver when actions actually occurred).
The parties' appeal in Brennan I did not challenge the notion that the parties should be prevented from working together; indeed, the plaintiff stated in his brief that he "has never disputed the fact that there was a great deal of dissension between [the] defendants and [the] plaintiff." Instead, Brennan I was merely about the appropriateness of the remedy: the plaintiff claimed that, instead of his being dissociated from the partnership, the partnership should have been dissolved, or that it should have been the defendants' being forced to withdraw from the partnership. Specifically, the plaintiff claimed in his brief that "[e]ven if [the] defendants' newly discovered attitude towards the plaintiff's twenty year old conduct were genuine, it is their change of attitude, not [the] plaintiff's conduct, that makes it reasonably impracticable to carry on the partnership. In that case, perhaps withdrawal of the objecting partners, or dissolution of the partnership might be appropriate; but dissociation of [the] plaintiff is not." [Emphasis in original.] Like in Sunbury, the parties merely appealed an aspect of the judgment of dissociation; they never desired to prevent their separation. Now, after eight years and the benefit of hindsight, the defendants challenge the date on which to value the plaintiff's partnership
I also note that, to the extent a judgment of dissociation can be characterized as a form of injunctive relief and disregarding the fact that the defendants could have raised this claim in Brennan I, the automatic stay of Practice Book § 61-11(a) would be inapplicable. For the dissociated partner, the judgment acts as a restraint on further conducting business as a partner. The question then becomes whether the injunctive relief inherent to a judgment of dissociation is subject to the automatic stay.
In Tomasso Bros., Inc. v. October Twenty-Four, Inc., 230 Conn. 641, 652-58, 646 A.2d 133 (1994), this court explored what types of injunctions are automatically stayed by Practice Book (1994) § 4046, the predecessor to and functional equivalent of Practice Book § 61-11. This court traced the history of the automatic stay provision, noting that, generally, prohibitory injunctions, which restrain a party from commission of an act, were not automatically stayed pending appeal, while mandatory injunctions, which command a party to perform an act, were. Id., at 652-54, 646 A.2d 133. "The primary purpose of these rules was to preserve the status quo during the pendency of the appeal. . . . Under this view, therefore, in the case of [not automatically staying] a prohibitory injunction, the enjoined party was prevented from doing irreparable harm to the party that successfully sought the injunction; in the case of [automatically staying] a mandatory injunction, the enjoined party was not required to assume a burden until the equities had been conclusively established." (Citation omitted.) Id., at 653, 646 A.2d 133.
Our case law interpreting prior versions of our rules of practice confirmed that stays of prohibitory injunctions, as well as those of mandatory injunctions, were not automatic on appeal. Id., at 654, 646 A.2d 133. We concluded that prohibitory injunctions were not automatically stayed and that "the enjoined party ought to be required to request the trial court to rule on a stay pending appeal, and that absent such a request, the injunction ought to be considered in effect. . . . [D]ifferent portions of the same injunction may be treated differently for some purposes . . . the fact that the same injunction may have both prohibitory and mandatory aspects counsels that both aspects be treated similarly for purposes of whether the injunction is automatically stayed pending appeal." (Citation omitted.) Id., at 657-58, 646 A.2d 133. The continuing vitality of this rule, that prohibitory injunctions are not automatically stayed on appeal, was reaffirmed in Sullivan v. McDonald, 281 Conn. 122, 126 n. 2, 913 A.2d 403 (2007); see also 43A C.J.S. 464, Injunctions § 397 (2004) ("[i]t is within the discretion of the court to stay the operation of the decree [granting an injunction] pending an appeal therefrom, until the hearing of the appeal on the merits, but taking an appeal does not of itself operate as a stay" [footnotes omitted]).
In the present case, however, the parties assumed the applicability of an automatic stay under Practice Book § 61-11, which, in effect, reinstated the plaintiff as a partner, and then requested relief from the automatic stay, which would have again enjoined the plaintiff from being a partner. The trial court in Brennan I denied the defendants' request for relief from the automatic stay under Practice Book § 61-11. Arguably, if the parties treated the plaintiff as a partner during the pendency of the appeal in Brennan I because they believed the injunctive aspects of the judgment of dissociation had been stayed, this court should accordingly treat the plaintiff as having been a partner during that time and set the date of dissociation as the date of resolution of the appeal in Brennan I. Whether the parties, or the trial court in Brennan I, considered the injunctive aspects of the judgment of dissociation to be stayed pending appeal is not controlling on this court, however, especially in light of their failure to seek review pursuant to Practice Book § 66-6 and their failure to even raise this argument. The trial court in the present case said it all when it aptly noted that "the parties were unclear as to the effect of the appellate stay on the plaintiff's involvement with the partnership [and so] the plaintiff remained involved in its affairs during the pendency of the appeal." We should not entertain the defendants' post hoc attempt to engineer the best financial scenario for its mandatory buyout of the plaintiff, years after the fact.
The majority's interpretation encourages appeals and detracts from this court's policy of conserving our scarce judicial resources. It allows for the possibility of either party's benefiting from postjudgment market conditions and, thus, creates incentives to lodge appeals and gamble on fluctuating market conditions where such incentives did not exist previously. See Scheckter v. Rubin, supra, 349 Pa. at 104, 36 A.2d 315 ("a party whose contention is rejected [on appeal] should gain nothing by the lapse of time between the dates of the nisi and final decrees"). Additionally, the majority's interpretation precludes settlement because, after an appeal has been filed, the date of dissociation would change to an unknown future date and, therefore, the parties could not possibly negotiate or settle because any appraisals they had would be meaningless. The majority's interpretation runs contrary to this court's declaration that "it becomes important to fix the parties' circumstances
To reach its interpretation of the date of dissociation, the majority places emphasis on the word "expulsion" in construing "expulsion by judicial determination. . . ." (Internal quotation marks omitted.) Specifically, the majority concludes that "[t]he language of § 34-355(5)(C) . . . indicates that . . . dissociation under that provision occurs not merely upon a judicial determination that the partner has engaged in improper conduct . . . but, rather, upon the partner's `expulsion by judicial determination' that such grounds exist." (Emphasis omitted.) The majority thus appears to require two judicial determinations: first, a judicial determination that cause exists to expel the partner from the partnership and, second, a judicial determination that the dissociating partner ceased his or her participation in the partnership after having found cause to expel the partner in the first instance. Thus, the majority would require expulsion in and of itself as a basis of dissociation. However, the majority's requirement that a partner be de facto expelled from a partnership before he or she can be dissociated ignores the plain language of § 34-357, which provides for cessation of management rights upon dissociation, not as forming the basis of dissociation. In essence, the majority conflates cause and effect, which the drafters of the RUPA attempted to prevent. See part I B of this concurring and dissenting opinion; R. Hillman et al., supra, § 601, author's comment (6)(e) ("judicial expulsion is a response to prior conduct or circumstances affecting a partner" [emphasis added]).
In support of its emphasis on the word "expulsion," the majority states that "[§] 34-355(7)(C) is particularly illuminating [in highlighting the importance of the term expulsion in § 34-355(5)], given that dissociation under that subparagraph, like under § 34-355(5), involves a judicial determination," and yet § 34-355(7)(C) does not use the term "expulsion." The majority's reference to § 34-355(7)(C) does not advance the case for "expulsion" being the operative term, however, because § 34-355(7) discusses events of physical or mental incapacity, such as "[t]he partner's death" and "the appointment of a guardian or general conservator. . . ." The term "expulsion" used in subdivisions (3), (4), and (5) of § 34-355 clearly refers to some wrongful conduct on the part of the partner, while subdivision (7) refers to incapacity through no fault of the partner.
The case law discussed previously in this opinion interprets the date of dissolution under the UPA with reference to the causation role dissolution had played, not the effect role dissolution had played. The courts cited have uniformly held that the causation type dissolution was the relevant moment to define the date of dissolution. Therefore, it has been noted that, "[n]othing in [the RUPA] reveals an intent to change prior case law [of determining the date of dissolution], which suggests flexibility to fix a date of separation to suit the circumstances of a given case. Accordingly, the effective date of dissociation by judicial expulsion may be the date of conduct or circumstances giving rise to the decree, the date of the petition for judicial relief, or the date of the decree itself. Normally, however, the date of the decree
I would conclude that the trial court appropriately valued the plaintiff's partnership interest as of 2006, the date of dissociation, rather than the date the plaintiff ceased to participate in partnership affairs, despite postdissociation fluctuations in value.
Additionally, the defendants' arguments to value the plaintiff's partnership interest as of 2009 belie the positions they took in Brennan I, in which they wished to value the plaintiff's partnership interest as early as possible and while the appeal was pending. See Brennan v. Brennan Associates, supra, 293 Conn. at 64, 977 A.2d 107. After this court issued its opinion in Brennan I, the defendants sent an offer to purchase the plaintiff's interest in the partnership as of "the date of [the plaintiff's] dissociation (September 2006)."
I would, accordingly, reject the majority's interpretation of the RUPA and, instead, reaffirm well established principles of partnership law, holding the date of dissociation to be the date the trial court rendered judgment of dissociation, or a date prior to when the trial court renders judgment of dissociation, if the parties' conduct as found by the trial court—the cause of the dissociation itself—compels an earlier finding.
As to part III of the majority's opinion, in my view, aside from some vague generalities, the defendants offered no proof that the partnership should have treated their attorney's fees as a liability of the partnership. Therefore, I respectfully dissent from the majority opinion regarding attorney's fees and would have affirmed the decision of the trial court.
The partnership never treated the attorney's fees as a liability of the partnership. All of the tax returns and evidence at trial support a contrary conclusion. Further, I disagree with the majority's characterization that the trial court decided the issue as a matter of law under § 34-356(c) or § 34-362(c). In my view, the trial court viewed the issue as one of causation in that the defendants had not proven attorney's fees should be treated as a liability.
The defendants claim that the trial court improperly failed to consider the defendants' attorney's fees as a liability of the partnership when computing the value of the plaintiff's partnership interest. They claim that the trial court improperly construed the partnership agreement
Section 34-362(b) provides a valuation formula for the purchase of a dissociated partner's partnership interest, as discussed
At trial in the present case, the defendants sought the entirety of their substantial attorney's fees as damages pursuant to §§ 34-356(c) and 34-362(c). The trial court noted that the defendants sought "costs and attorney's fees of all present and prior litigation between the parties [as] part of the damages caused by plaintiff's wrongful dissociation." The defendants' attorney's fees included fees incurred during Brennan I and the present case, as well as fees relating to the partnership's involvement in summary process actions it brought against some of its tenants. In support of their position on attorney's fees, the defendants cited exclusively to cases discussing the award of damages during partnership breakups.
Addressing the defendants' argument that it should award attorney's fees as damages, the trial court found that "the defendants have failed to prove by a preponderance of the evidence the allegations and applicability of their first and second special defenses. There is no evidence that the damages claimed by the defendants, whether for attorney's fees or otherwise, are causally related to the wrongful dissociation." In finding that "the conduct of the plaintiff did not lead to damage to the partnership but rather simply made management of the partnership unworkable" the court "decline[d] to award attorney's fees as an offset against the buyout price due the plaintiff."
On appeal, had the defendants challenged the trial court's determination that the attorney's fees did not causally relate to the plaintiff's wrongful dissociation, we would have reviewed the "trial court's determination of causation under the clearly erroneous standard." Beverly Hills Concepts, Inc. v. Schatz & Schatz, Ribicoff & Kotkin, 247 Conn. 48, 58, 717 A.2d 724 (1998).
In the present case, however, the defendants do not challenge the legal or factual bases of the trial court's decision on causation. The defendants instead claim entitlement to attorney's fees based on an entirely different theory: they now claim that the attorney's fees should have been treated as a liability of the partnership pursuant to the partnership agreement. The plaintiff notes that, at trial, the defendants couched their claim for attorney's fees as a claim for damages under the RUPA. I
At trial, the defendants did not properly raise the claim that the attorney's fees were a liability of the partnership; the overwhelming presentation of the claim was that the attorney's fees constituted damages. The defendants' counterclaim requested that the attorney's fees be awarded exclusively as damages for wrongful dissociation pursuant to §§ 34-356(c) and 34-362(c); they did not claim in the alternative that the attorney's fees were a liability of the partnership. Prior to sending their 2010 offer letter, the defendants engaged the partnership's accounting firm to provide balance sheets for the partnership over a period of years. These balance sheets did not list the attorney's fees as a liability.
The defendants did not offer the testimony of the partnership's accountant, who prepared the balance sheets or tax returns that both parties relied upon, to testify as to the accounting practices of the partnership. In lieu of the accountant's testimony, the parties instead stipulated to the amounts of the partnership's two liabilities for the two claimed dates of dissociation; those liabilities included only the amounts due on the mortgage and the tenants' security
The defendants did suggest that the attorney's fees were a liability once in pretrial
The defendants' theory at trial evinces a choice between two alternatives. On the one hand, the defendants could have chosen to book the attorney's fees as a contingent liability of the partnership—contingent because the partnership, for want of cash, had not yet reimbursed the estate— thereby reducing the value of the plaintiff's partnership interest by the plaintiff's proportional share of all attorney's fees. See footnote 36 of this concurring and dissenting opinion. On the other hand, the defendants could have chosen to forgo booking the attorney's fees as a contingent liability in the hopes of recovering, as damages pursuant to §§ 34-356(c) and 34-362(c), the cash to pay off the estate in full; the partnership would "receive" the cash to pay off the estate by offsetting the entirety of the attorney's fees, as damages, against the value of the plaintiff's partnership interest. Put another way, if the trial court calculated the attorney's fees as a liability, those fees, possibly including attorney's fees incurred by the plaintiff,
Scholars are familiar with the strategic choice involved in characterization of contingent liabilities during a valuation proceeding. See R. Hillman, "RUPA and Former Partners: Cutting the Gordian Knot with Continuing Partnership Entities," supra, 58 Law & Contemp. Probs. 22 ("[i]t is in the partnership's advantage to consider contingent liabilities in arriving at its estimate of the buyout price"); id., at 22 n. 93 ("[T]he partnership has an incentive to insist that all known liabilities be taken into account since they will reduce the buyout price. The dissociating partner
In the present case, by choosing the damages theory of entitlement to attorney's fees, the partnership chose to ignore its contingent liabilities in favor of a higher buyout price, taking the chance that the trial court would: (1) find the plaintiff liable for damages representing the full amount of their attorney's fees; (2) offset the damages in full against the purchase price; and (3) thus require the defendants to pay a much lower buyout price to the plaintiff. In doing so, the partnership also took the chance that the trial court would not find the plaintiff liable for the attorney's fees as damages, which occurred in the present case, causing the defendants to pay the higher buyout price and still owe the entirety of their own attorney's fees to the estate.
By choosing the damages claim of entitlement to attorney's fees, and presenting their arguments and evidence accordingly, the defendants failed to sufficiently raise their claim of entitlement to attorney's fees as a liability. See White v. Mazda Motor of America, Inc., 313 Conn. 610, 631, 99 A.3d 1079 (2014) ("Even if we assume that [the defendant's] passing suggestion actually referenced [the claim raised on appeal], it was too little, too late, for several reasons. . . . [A]n issue must be `distinctly raised' before the trial court, not just `briefly suggested. . . .'"). The defendants pursued the theory on attorney's fees—damages pursuant to §§ 34-356(c) and 34-362(c)—that would have yielded the most favorable valuation had they been successful; the defendants would have recovered all reasonable litigation related expenses as an offset against the value of the plaintiff's partnership interest. That the defendants did not prevail on this theory is not reason enough to permit the defendants to pursue, for the first time on appeal, an entirely distinct and unpreserved theory, which they could have presented at trial with competent evidence. See id., at 620-21, 99 A.3d 1079 ("`[t]he requirement that claims be raised timely and distinctly also recognizes that counsel should not have the opportunity to surprise an opponent by interjecting a claim when opposing counsel is no longer in a position to present evidence against such a claim'").
Therefore, I respectfully concur in part II of the majority opinion and dissent from parts I and III of the majority opinion.
The other grounds for dissociation enumerated in § 34-355 reveal the significance of the term "expulsion" in § 34-355(5). Of the ten events that can result in a partner's dissociation under § 34-355, only three include the term "expulsion" as the triggering event of a partner's dissociation. See General Statutes § 34-355(3) through (5). In contrast, the other subdivisions of the statute provide that a partner is dissociated as a matter of law upon the moment that a certain event occurs, regardless of the partner's participation in the partnership. See, e.g., General Statutes § 34-355(6)(A) (dissociation occurs upon partner "[b]ecoming a debtor in bankruptcy"); General Statutes § 34-355(7)(B) (dissociation occurs upon "the appointment of a guardian or general conservator for the partner"). This distinction indicates that a partner's "expulsion" is necessary for dissociation under some of the subdivisions of § 34-355 but not others. See, e.g., Marchesi v. Board of Selectmen, 309 Conn. 608, 618, 72 A.3d 394 (2013) ("[w]hen a statute, with reference to one subject contains a given provision, the omission of such provision from a similar statute concerning a related subject . . . is significant to show that a different intention existed" [internal quotation marks omitted]).
Section 34-355(7)(C) is particularly illuminating, given that dissociation under that subparagraph, like under § 34-355(5), involves a judicial determination. Section 34-355 provides in relevant part that "[a] partner is dissociated from a partnership upon . . . (7). . . (C) a judicial determination that the partner has . . . become incapable of performing the partner's duties under the partnership agreement. . . ." (Emphasis added.) The absence of the term "expulsion" from § 34-355(7) indicates that a partner is dissociated under that provision at the time of the judicial determination, regardless of whether he is expelled from the partnership. The difference in the language of § 34-355(5) and § 34-355(7)(C) supports the conclusion that the drafters of the RUPA included the word "expulsion" in § 34-355(5) for a reason, and that dissociation under § 34-355(5) does not occur until the partner is expelled from the partnership. See, e.g., Marchesi v. Board of Selectmen, supra, 309 Conn. at 618, 72 A.3d 394.
Because our review of the record reveals that the parties in Brennan I did not file a motion for reconsideration, and the time to file such a motion would have expired ten days after Brennan I was officially decided; see Practice Book § 71-5; the judgment of dissociation would have become effective on August 29, 2009.
The dissenting justice's claim rests on a deep misunderstanding of the procedural posture of this case. The date of dissociation, and the automatic stay's effect on that date, is relevant only insofar as § 34-362(b) requires a dissociated partner's interest in a partnership to be valued as of "the date of dissociation" so that it can be bought out by the partnership. In Brennan I, this court determined, inter alia, that the trial court correctly concluded that it did not have equitable authority to initiate the valuation and buyout process of the plaintiff and that "the legislature has intended for the dissociated partner to control the timing and procedure by which the valuation process occurs." Brennan v. Brennan Associates, supra, 293 Conn. at 92, 977 A.2d 107. Accordingly, the plaintiff brought the present action after Brennan I to have the partnership and his interest therein valued as of the date of dissociation and bought out by the partnership. Thus, the valuation process and, therefore, the date of dissociation were not relevant to the parties until the plaintiff brought the present action after Brennan I. Indeed, we expressly decided in Brennan I that it would have been inappropriate for the trial court to have valued the plaintiff's interest in the partnership as of the date of dissociation in the same action in which the plaintiff was dissociated. See id., at 92-93, 977 A.2d 107. Thus, contrary to the dissenting justice's claim, the defendants could not have raised in Brennan I the issue of the effect of the automatic stay on the date of dissociation.
The dissenting justice further claims that, even if the issue of the date of dissociation is properly before this court, the automatic stay did not apply to the judgment of dissociation rendered against the plaintiff insofar as dissociation is an injunctive remedy. Again, this is a novel claim that the plaintiff did not raise at trial or on appeal. The parties certainly could not have been confused as to whether the automatic stay was in effect after the defendants moved to partially terminate the stay while Brennan I was pending and the trial court denied their motion.
In any event, even if we assume that the dissenting justice's premise that injunctions are not subject to an automatic stay is true, the dissenting justice offers no authority to suggest that dissociation under § 34-355 is a form of injunctive relief. The case on which the dissenting justice primarily relies, namely, Tomasso Bros., Inc. v. October Twenty-Four, Inc., 230 Conn. 641, 646 A.2d 133 (1994), explains that a request for injunctive relief requires the trial court to exercise its discretion in balancing "the injury complained of with that which will result from interference by injunction." (Internal quotation marks omitted.) Id., at 648, 646 A.2d 133. In contrast, in a dissociation action, the trial court must determine, as a matter of fact, whether statutorily enumerated grounds exist for terminating an individual's status as a partner. Dissociation under the partnership act therefore is not analogous to an injunction that is ordered as an equitable remedy.
Thus, the dissenting justice's claim that the automatic stay did not apply to the plaintiff's dissociation is without merit. Given that the effect of the automatic stay is dispositive in the present case, we need not address the dissenting justice's other arguments as to why the date of dissociation, for valuation purposes, is the date the trial court rendered the judgment of dissociation against the plaintiff.
"(b) The buyout price of a dissociated partner's interest is the amount that would have been distributable to the dissociating partner under subsection (b) of section 34-378 if, on the date of dissociation, the assets of the partnership were sold at a price equal to the greater of the liquidation value or the value based on a sale of the entire business as a going concern without the dissociated partner and the partnership were wound up as of that date. Interest must be paid from the date of dissociation to the date of payment.
"(c) Damages for wrongful dissociation under subsection (b) of section 34-356, and all other amounts owing, whether or not presently due, from the dissociated partner to the partnership, must be offset against the buyout price. Interest must be paid from the date the amount owed becomes due to the date of payment....
"(e) If no agreement for the purchase of a dissociated partner's interest is reached within one hundred twenty days after a written demand for payment, the partnership shall pay, or cause to be paid, in cash to the dissociated partner the amount the partnership estimates to be the buyout price and accrued interest, reduced by any offsets and accrued interest under subsection (c) of this section.
"(f) If a deferred payment is authorized under subsection (h) of this section, the partnership may tender a written offer to pay the amount it estimates to be the buyout price and accrued interest, reduced by any offsets under subsection (c) of this section, stating the time of payment, the amount and type of security for payment and the other terms and conditions of the obligation....
"(h) A partner who wrongfully dissociates before the expiration of a definite term or the completion of a particular undertaking is not entitled to payment of any portion of the buyout price until expiration of the term or completion of the undertaking, unless the partner establishes to the satisfaction of the court that earlier payment will not cause undue hardship to the business of the partnership. A deferred payment must be adequately secured and bear interest.
"(i) A dissociated partner may maintain an action against the partnership ... to determine the buyout price of that partner's interest, any offsets under subsection (c) of this section or other terms of the obligation to purchase.... The court shall determine the buyout price of the dissociated partner's interest, any offset due under subsection (c) of this section and accrued interest, and enter judgment for any additional payment or refund. If deferred payment is authorized under subsection (h) of this section, the court shall also determine the security for payment and other terms of the obligation to purchase. The court may assess reasonable attorney's fees and the fees and expenses of appraisers or other experts for a party to the action, in amounts the court finds equitable, against a party that the court finds acted arbitrarily, vexatiously or not in good faith. The finding may be based on the partnership's failure to tender payment or an offer to pay or to comply with subsection (g) of this section."
"(2) In the case of a partnership for a definite term or particular undertaking, before the expiration of the term or completion of the undertaking ... (B) the partner is expelled by judicial determination under subdivision (5) of section 34-355....
"(c) A partner who wrongfully dissociates is liable to the partnership and to the other partners for damages caused by the dissociation. The liability is in addition to any other obligation of the partner to the partnership or to the other partners."
"(1) The partner's right to participate in the management and conduct of the partnership business terminates...."
Suppose the plaintiff had engaged in conduct that had ipso facto caused dissociation as a matter of law on the date of the conduct, such as giving the defendants notice of his express will to withdraw as a partner; General Statutes § 34-355(1); or filing for bankruptcy. General Statutes § 34-355(6)(A). Under that scenario, a trial court's finding of dissociation on a date prior to the date it rendered judgment of dissociation would be meaningless if, by any party's lodging an appeal and maintaining the status quo, the date of dissociation would automatically move to the date of disposition of the appeal. Such an interpretation runs contrary to well established principles of partnership law allowing a trial judge to establish dissociation of a partner or dissolution of a partnership, and thus the date of valuation of a partnership interest, at the "`moment of the event causing cessation.'" D. Weidner, "The Revised Uniform Partnership Act Midstream: Major Policy Decisions," supra, at 21 U. Tol. L.Rev. 840; see Robins v. Roland, supra, 2008 WL 615865, at *3; Vangel v. Vangel, supra, 116 Cal.App.2d at 630, 254 P.2d 919; Estate of Webster v. Thomas, supra, 2013 WL 164041, *4; Anastos v. Sable, supra, 443 Mass. at 151-52, 819 N.E.2d 587; Scheckter v. Rubin, supra, 355 Pa. at 634-35, 50 A.2d 668; see also Lassen v. Ogren, supra, Superior Court, Docket No. CV-07-5004349-S.
The defendants themselves recognized this in their 2006 posttrial brief, noting that the purpose of § 34-362(i) was to provide "a process by which the partners may exchange information about the valuation of the assets and liabilities and voluntarily resolve the valuation issue. This exchange of information has already occurred in this case. Not only have the parties examined the books and records of the company, they have each appraised the real estate and exchanged the appraisals with each other. Requiring additional time to pass before some other court takes up the issues will not add any information or result in a voluntary resolution. The parties simply disagree on the valuation issues and there is nothing left to do but have the [trial] court adjudicate these differences." Cf. Lange v. Bartlett, supra, 121 Wis.2d at 603 n. 1, 360 N.W.2d 702 ("A policy of judicial administration is that lawsuits should come to an end sometime. Once the final accounting has been determined and a judgment is entered, it would be expensive and time consuming for parties and witnesses to come back into court to determine the amount of profit from the date of judgment until payment.").
Moreover, the majority's interpretation of the date of dissociation as the date of disposition on appeal raises more questions than it answers. If the parties withdrew their appeals, would the date of dissociation be the date(s) of those withdrawals? If the parties maintained the status quo, but later were granted relief from the appellate stay, as the parties in the present case attempted to do, would the date of dissociation be the date of the relief from stay? The events described in the previous two questions have no relation to the conduct or circumstances that trigger dissociation pursuant to § 34-355 and, indeed, are not listed as causes of dissociation within § 34-355. The exact date of dissociation would depend on factors—e.g., whether the parties' schedules permitted oral argument at an earlier date, whether the parties requested extensions of time for appellate briefing, the expediency that an appellate court rendered its decision, etc.—wholly unrelated to the factual findings upon which the trial court found cause, as a matter of law, for dissociation.
The trial court found that the plaintiff had been dissociated despite his participation in partnership affairs during the appeal. Given the circumstances particular to the present case, the trial court might reasonably have been entitled to find that the plaintiff retained some fiduciary duties despite his technical dissociation. The trial court found that "the defendants have failed to establish by a preponderance of the evidence that for the period [during the appellate stay] the plaintiff was engaged in conduct that violated the duty of loyalty set forth in [General Statutes] § 34-338(b)(1) or (2). Nor did he violate, to the extent it may be applicable to [the] defendants' claim, any duty of care under § 34-338(c) to not engage in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law." The trial court also concluded that "[e]ven if one were to assume that there was a viable claim of breach of fiduciary duty [prior to lapse of the cause of action for breach of fiduciary duty in September 2008] based on the plaintiff's continued involvement with the partnership despite the dissociation ruling, the defendants have failed to meet their burden of proof under either the [CUPA] or the common law."
(Emphasis added.)
The plaintiff's valuation expert, Kenneth Pia, testified that "[the partnership] is a box. And it's an entity that is filled with various assets and two liabilities. The assets are in the form of real estate and there's a little bit of cash as well and the liabilities are, simply, the mortgage related to the real estate and the tenant security deposits, as it is a real estate intensive entity." (Emphasis added.)
When the parties acquiesce to use of wellkept partnership books and records as the bases of an accounting or an appraisal, courts may properly decline to disturb the parties' characterizations of partnership items in the absence of compelling evidence to the contrary. In Kerasotes v. Estate of Kerasotes, 238 Ill.App.3d 1020, 1027, 178 Ill.Dec. 849, 605 N.E.2d 643 (1992), for example, the Appellate Court of Illinois rejected the contention that the trial court should have characterized a parent partnership's asset as the asset, instead, of a subsidiary company. The court declined to do so, noting that, for many years, the parent partnership's financial statements had treated the asset as an asset of the parent partnership. Id. The court noted that "[t]he audit reflected this, and these amounts were included in determining the net assets of [the parent partnership]. It does not sit well for [one of the members of the subsidiary company], who was the president and chief executive officer of [the parent partnership], to now allege the accounting procedure employed for many years was incorrect and that he did not know that the [asset, composed of advertising revenue and soft drink rebates] would be included as revenue of [the parent partnership]." Id. The court noted that the parties had acquiesced, via a dissolution agreement, to the manner of the audit, relying on "audit of the books and records of the partnership. . . to certify the assets and liabilities of each partnership." Id. The court held that the members of the subsidiary company were "bound by this agreement and cannot now disregard the terms of [the dissolution agreement] simply because [the members of the subsidiary company] have discovered the terms are less profitable to them than they anticipated when they entered into it." Id.; see Cowan v. Maddin, 786 S.W.2d 647, 658 (Tenn.App.1989) ("It is not inequitable to plaintiff to continue treating prepaid expenses in the same manner as those expenses had been treated from [the beginning of the partnership in 1974 to the date of dissolution in 1986]. The plaintiff has had the benefit of that treatment over the years. . . ."); see also Dawson v. White & Case, 88 N.Y.2d 666, 673, 672 N.E.2d 589, 649 N.Y.S.2d 364 (1996) (affirming trial court's exclusion of unfunded pension plan payments from calculation of the partnership liabilities in part because partnership "never included the unfunded pension plan as a liability in the firm's financial statements").
Because the defendants chose the damages theory of entitlement to attorney's fees, the record is insufficient for this court—let alone the trial court—to decide whether the partnership's failure to characterize the attorney's fees as a liability throughout the many years of ongoing litigation now should be disregarded at the defendants' own request. See footnote 35 of this concurring and dissenting opinion. As to evidence of characterization, in Cowan, the court relied upon findings of a Special Master, who specifically took proof "regarding the manner in which the partnership had treated prepaid expenses," including testimony from the partnership's accountant. Cowan v. Maddin, supra, 786 S.W.2d at 657. Unlike in Cowan, the defendants in the present case have not offered proof as to the manner in which the partnership has treated attorney's fees, or liabilities in general, in the past. As to selectively-asserted accounting methods, in Dawson, the Court of Appeals of New York affirmed exclusion of a law firm's unfunded pension plan payments from the firm's liabilities, agreeing with the Appellate Division's reasoning that "[t]he purported multi-million dollar liability never appeared in any of [the] defendant's financial statements and was never assessed against either defendant or any of its partners for accounting purposes. It is only against plaintiff that defendant seeks to impose this burden. The unfunded plan was, and is, if anything, a future, not a current, liability. . . ." (Emphasis added.) Dawson v. White & Case, 212 A.D.2d 385, 386, 622 N.Y.S.2d 269 (N.Y.App.Div. 1995). Like the defendant in Dawson, the defendants in the present case only seek, after an unfavorable ruling by the trial court, to impose the burden of attorney's fees as a liability against the plaintiff.
