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LAW v. MACKIE (03/23/53)

March 23, 1953


Appeal, No. 174, Jan. T., 1952, from decree of Court of Common Pleas of Lackawanna County, Nov. T., 1949, in Equity, No. 14, in case of Raymond T. Law v. Matthew D. Mackie. Decree reversed.


Earl G. Harrison, with him C.P. O'Malley, John W. Bour, James W. Scanlon, Wm. A. Schnader and Schnader, Harrison, Segal & Lewis, for appellant.

Will Leach, with him John R. Lenahan and Leach & Lenahan, for appellee.

Before Stern, C.j., Stearne, Jones, Bell, Chidsey and Arnold, JJ.

Author: Chidsey

[ 373 Pa. Page 214]


This case unfortunately has its origin in a dispute between members of the bar over a fee. The fee, in the amount of $125,000, was received by the defendant, Matthew D. Mackie, during the existence of a partnership between Mackie, who was the senior partner, and the plaintiff, Raymond T. Law, the junior partner. Defendant claimed that the fee was not a partnership asset but was earned solely by and belonged exclusively to him individually and that the plaintiff so understood. Plaintiff denied this and claimed it was a partnership asset in which he was entitled to participate. A brother lawyer, acting as an intermediary, obtained from both plaintiff and defendant assent to a settlement of the dispute, the terms of which and the circumstances surrounding its making being hereinafter set forth. Plaintiff filed a bill in equity praying that the settlement of the dispute be set aside as fraudulent on the part of the defendant, illegal and void, and that the defendant be required to make an accounting of partnership matters to the plaintiff. In his answer to the bill the defendant denied liability to account, relying apon the settlement, the terms of which it was averred were carried into effect, constituting a complete accord and satisfaction. Hearings were had before the chancellor who entered a decree nisi directing the defendant to render an accounting as prayed for. Defendant's exceptions thereto were overruled by the court en banc and a final decree entered in favor of the plaintiff. Defendant appealed therefrom under the provisions of the Act of June 24, 1895, P.L. 243, as amended, 12 PS ยง 1104, which permits an appeal to this Court upon the preliminary question of defendant's liability to account.

[ 373 Pa. Page 215]

On or about January 1, 1943 the plaintiff, the defendant and a third lawyer, John W. Murphy, formed a partnership under the firm name of Mackie, Murphy & Law, with offices in Scranton, Pennsylvania. Each partner made a capital contribution of $1,500. In 1946 Mr. Murphy was appointed Judge of the United States District Court and in September of that year the partnership consisted only of Mackie & Law. Both partnerships were formed under oral agreements and were partnerships at will. In the earlier partnership, profits were basically divided 37 1/2% to Mackie, 37 1/2% to Murphy and 25% to Law. When the partnership became Mackie & Law, the basic division of profits was 60% to Mackie and 40% to Law. While Murphy was with the firm, he became a member of Congress and relinquished some of his share of the profits which resulted in adjustments in the distribution on profits of the partnership between Mackie and Law.

In 1939, prior to the formation of the first partnership, one Amedeo Obici became a client of Mackie who drew his will. The will was redrafted seven times. Nineteen trusts were drafted and redrafted by Mackie, but finally the number was reduced to four. Mackie did not receive any compensation during Obici's lifetime for drafting these wills and trusts.

In May, 1947 Obici died and his executors retained Mackie individually to represent the estate which amounted to more than $2,000,000. A few months later they requested that Mackie write them a letter stating that he alone represented them and subsequently asked Mackie to have separate stationery printed for use in Obici matters showing only his name and not that of a firm. This was done. About October 15, 1948 Mackie received a fee of $125,000 from the Obici Estate. The item in the executors' account read: "10-4-48 Matthew D. Mackie -- Professional services covering

[ 373 Pa. Page 216]

    estate planning, drawing trusts and wills and administration of estate 125,000". Mackie opened, and deposited the fee in, a special account from which he made various payments to persons who had assisted him both in the planning and in the settlement of the Obici Estate. This was done with Law's knowledge, although the parties do not agree as to the circumstances under which the special account was opened.

On October 31, 1948 Law became ill and from November 20th to December 4th was in the Jefferson Hospital in Philadelphia. He was absent from the office from November 1st to December 15th. On the latter date, according to Law, or on December 23, 1948, according to Mackie, the two had a heated quarrel in disagreement as to whether Mr. Law was entitled to any part of the Obici fee, and this resulted in the dissolution of the firm. Mackie ordered the partnership books closed as of December 23, 1948 and removed them from the outer office to his own private office. On the same day he closed the partnership bank account and deposited the balance of $14,532.29 in a new account under the name "Matthew D. Mackie, Trustee". All of this balance but $2,638.14 belonged to Mackie or his clients. On December 31, 1948 Mackie also withdrew the balance of $103,836 in his special account in which the Obici fee had been deposited and had a cashier's check issued to himself in that amount which he put in his safe-deposit box. On the day of the quarrel or shortly thereafter, Law turned over to Mackie all of the files of Mackie's clients on which he had been working, and left the office.

In April of 1947 the plaintiff and defendant as partners became office associates with other counsel under the firm name of Welles, Mackie Mumford & Law. Mumford resigned in the early part of 1948 and thereafter the association was known as Welles, Mackie &

[ 373 Pa. Page 217]

Law. This association did not, however, affect in any way the partnership between plaintiff and defendant. About the first of January, 1949 Charles H. Welles, III of the association mentioned, volunteered to attempt to resolve the dispute between the two partners. With Law's assent, Welles called on Mackie and worked out with the latter a proposal which Welles reduced to writing in duplicate. Law was not present during this conference. Welles submitted this proposal to Law who first refused it but later notified Welles that it was acceptable. The terms of the settlement as set forth in the written proposal thus accepted by Law were as follows: "(1) Beginning Jan. 1, 1949. (a) Ray [Law] to keep all fees on business he brings in. (b) Also all fees on compensation cases.(c) On cases Matt [Mackie] turns over to Ray for handling, Ray to keep 2/3 of fees. (d) Ray to pay 1/4 of expenses. (2) As to past fees, books were closed December 23, 1948, Ray to receive 40% of net as shown thereon. (3) Matt to pay Ray capital of $1500. (4) Matt to pay Ray additional $6000. (5) All fees received after Dec. 23, 1948, on work already performed shall be retained in full by one who did the work (for example, Ray will keep all of Tudor fee).". The $6,000 referred to in item 4 pertained to the Obici fee. Mackie had first suggested $5,000 as to this item but Welles persuaded him to make it $6,000. Following this settlement, on January 17, 1949 Law returned to the partnership offices and resumed ...

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