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[U] Martz & Gailey, LLP v. Martz

Superior Court of Pennsylvania

August 14, 2013

MARTZ & GAILEY, LLP, Appellant
v.
HOLLY MARTZ, EXECUTRIX OF THE ESTATE OF GARY D. MARTZ MARTZ & GAILEY, LLP
v.
HOLLY MARTZ, EXECUTRIX OF THE ESTATE OF GARY D. MARTZ, Appellant

NON-PRECEDENTIAL DECISION

Appeal from the Order Entered July 24, 2012, in the Court of Common Pleas of York County Civil Division at No. 2011-SU-001051-44

Appeal from the Order Entered July 24, 2012, in the Court of Common Pleas of York County Civil Division at No. 2011-SU-001051-44

BEFORE: FORD ELLIOTT, P.J.E., WECHT AND COLVILLE, [*] JJ.

MEMORANDUM

FORD ELLIOTT, P.J.E.

This is a cross-appeal from the order of July 24, 2012, granting Martz & Gailey, LLP's motion for judgment on the remaining pleadings. We affirm.

On March 8, 1999, Gary D. Martz and Herman A. Gailey, III, entered into a partnership agreement ("the Agreement") for the purpose of practicing law. A limited liability partnership was created, Martz & Gailey, LLP. Each partner owned a 50% interest in the partnership. Gary Martz's wife, Holly Martz, was the bookkeeper and office administrator of the firm.

Gary Martz died on May 19, 2008, and Holly Martz is the executrix of his estate. Holly Martz remained employed by the firm until March 2011. At issue is whether Gary Martz's death constitutes a "retirement event" or a "liquidating event" under the terms of the Agreement. According to Martz & Gailey, Gary Martz's death was a retirement event under Section 12.1 of the Agreement; and therefore, his estate is owed the "redemption price" as set forth in Section 12.2.

By contrast, Holly Martz contends that Gary Martz's death was a liquidating event under Section 13 of the Agreement because Martz & Gailey only had two partners. Holly Martz argues that the estate's interest in the partnership should not be valued under the redemption price calculation provided in Section 12.2. Rather, pursuant to Section 13 of the Agreement, the firm must dissolve and wind-up its affairs if only one partner remains. Any balance that remains after the firm liquidates its assets and satisfies the claims of creditors is to be distributed to the partners. According to Holly Martz, this would include all pending contingency fee cases.

Martz & Gailey filed a complaint in the nature of a declaratory judgment action on March 15, 2011, to determine the rights of the parties under the Agreement. Holly Martz filed an answer and new matter contending that Section 13 of the Agreement controlled, and demanding that the firm be liquidated. Holly Martz also set forth allegations of breach of contract and breach of a fiduciary duty against Attorney Gailey. On January 5, 2012, the trial court granted Holly Martz's motion for partial judgment on the pleadings, finding that the death of Gary Martz constituted a "liquidating event" under Section 13 of the Agreement. The trial court determined that Section 12 would only apply in situations where there are three or more partners and the partnership could continue after there is a "retirement event, " such as the death or normal retirement of one of the partners. The trial court denied Martz & Gailey's cross-motion for partial judgment on the pleadings.

Subsequently, on July 24, 2012, the trial court granted Martz & Gailey's motion for judgment on the remaining pleadings, and entered judgment in favor of Martz & Gailey with regard to Holly Martz's remaining allegations and claims for relief. The trial court stated that,

We agree with [the firm] in that, although [Holly Martz] may not have styled her allegations and claims for relief as "counterclaims, " such allegations remained unresolved as evidenced by [Holly Martz]'s continuing demand for answers to interrogatories after entry of our previous Order granting [Holly Martz]'s Motion for Partial Judgment on the Pleadings.

Order, 7/24/12 at 1.

Martz & Gailey filed a notice of appeal on August 9, 2012. Holly Martz filed a cross-appeal on August 22, 2012. Both parties complied with Pa.R.A.P., Rule 1925(b), 42 Pa.C.S.A., and the trial court has filed an opinion.

Martz & Gailey has raised the following issue for this court's review on appeal:

1. Did the trial court err when it denied Martz & Gailey's Motion for Partial Judgment on the Pleadings, granted Mrs. Martz's Motion for Partial Judgment on the Pleadings, and concluded that Section 13 of the Partnership Agreement concerning dissolution governed over the specific provisions of Section 12, where Section 12 establishes a comprehensive and detailed means for arriving at a final binding determination of the value of a partner's interest in the partnership in the event a partner dies?

Martz & Gailey's brief at 4.

On cross-appeal, Holly Martz has framed the issues as follows:

1. Should Martz & Gailey's appeal be quashed and/or dismissed where the trial court declared the respective rights and obligations of the parties in a final Order on January 5, 2012, and no timely appeal from that Order was filed?
2. In the event the Court considers the merits issue, does Section 13 of the Partnership Agreement govern the firm's obligations to Gary D. Martz's Estate, given that his death caused there to be only one partner remaining in Martz & Gailey, LLP, which constitutes a "liquidating event" under the express terms and plain language of the Partnership Agreement and as a matter of Pennsylvania law?

Holly Martz's brief at 5.

Before we may reach the merits, we must first address Holly Martz's argument that this appeal is not properly before us because "the question of appealability implicates the jurisdiction of our court." Jacksonian v. Temple University Health System Foundation, 862 A.2d 1275, 1279 (Pa.Super. 2004), quoting In re Estate of Israel, 645 A.2d 1333, 1336 (Pa.Super. 1994). "Generally, only appeals from final orders are eligible for appellate review." Id. (citation omitted).[1]

"Few legal principles are as well settled as that an appeal properly lies only from a final order unless otherwise permitted by rule or statute." G.B. v. M.M.B., 670 A.2d 714, 717 (Pa.Super. 1996) (en banc) (citations omitted). Whether an appellant has filed a timely appeal from a final order implicates the jurisdiction of this court. Flowers v. Flowers, 612 A.2d 1064, 1065 (Pa.Super. 1992) (citations omitted). Pennsylvania Rule of Appellate Procedure 341 defines a final order as, inter alia, any order that disposes of all claims and all parties. Pa.R.A.P., Rule 341(b)(1), 42 Pa.C.S.A.

Holly Martz argues that the January 5, 2012 order was a final order, and therefore, Martz & Gailey's appeal filed August 9, 2012 was untimely. Pa.R.A.P., Rule 903(a), 42 Pa.C.S.A. (providing that, generally, notice of appeal shall be filed within 30 days after the entry of the order from which the appeal is taken). Martz & Gailey responds that the January 5 order was interlocutory and the matter was not final until July 24, 2012, when the trial court granted its motion for judgment on the remaining pleadings. According to Holly Martz, the matter was finally resolved by the January 5 order declaring that Gary Martz's death was a "liquidating event" and not a "retirement event" under the Agreement. After the trial court's ruling on this narrow legal issue, all that remained was to calculate the estate's interest. Holly Martz argues that Martz & Gailey's complaint was in the nature of a request for declaratory judgment, and the Declaratory Judgments Act provides that orders adjudicating the rights of all parties are final and immediately appealable. Holly Martz characterizes Martz & Gailey's motion for judgment on the remaining pleadings as a cynical attempt to re-start the 30-day appeal period once they realized it was too late to appeal the January 5 order.

As a general rule, an order dismissing some but not all counts of a multi-count complaint is interlocutory and not appealable. In adhering to this policy, the courts have sought to avoid piecemeal litigation.
This court has held that an appeal will not lie from an order granting partial summary judgment.

Bolmgren v. State Farm, 758 A.2d 689, 690-691 (Pa.Super. 2000) (citations omitted). Similarly, an order dismissing a complaint but leaving pending a counterclaim is no longer interpreted as an appealable final order. Pa.R.A.P. 341, comment.

Instantly, as stated in the July 24, 2012 order, there were several counterclaims left unresolved by the January 5, 2012 order. Specifically, Holly Martz made counterclaims for breach of contract and breach of a fiduciary duty, and made claims for monetary and punitive damages. In fact, Holly Martz continued to make discovery requests after the January 5 order. Holly Martz characterizes these outstanding claims for breach of contract and breach of a fiduciary duty as mere "assertions" or "observations" rather than counterclaims. This is splitting hairs. Clearly, the January 5 order did not dispose of all claims and all parties and was not a final order pursuant to Rule 341.[2]

Holly Martz cites Consolidation Coal Co. v. White, 875 A.2d 318 (Pa.Super. 2005), which is readily distinguished. In that case, although the trial court's order indicated it was a "partial" grant of judgment on the pleadings, it was clear that the order fully adjudicated the claims between and among the named parties to the litigation. Id. at 325. Although the trial court rejected certain of Consol's requests, it ruled that there was no conceivable legal theory under which the appellants could prevail in their claim against Consol. Id. at 324-325. By contrast, in the instant case, Holly Martz could still proceed with her counterclaims against Martz & Gailey which were unaffected by the trial court's January 5 order.

Holly Martz argues that the January 5 order was a declaratory order and was immediately appealable under Section 7532 of the Declaratory Judgments Act, which provides that all such declarations of rights shall have the force and effect of a final judgment or decree. 42 Pa.C.S.A. § 7532. See White, 875 A.2d at 324, citing Nationwide v. Wickett, 563 Pa. 595, 602, 763 A.2d 813, 817 (2000) ("If the trial court's order does, in fact, adjudicate the rights of all parties, then it is immediately appealable pursuant to [Pa.R.A.P.] 341(b)(2)."). However, even though this is a declaratory judgment action, that does not mean the trial court's January 5 order was not interlocutory. See Bolmgren, 758 A.2d at 691 ("Although the Act provides that the declaration shall have the 'force and effect of a final judgment or decree, ' this partial adjudication does not become appealable merely because it is cast in the form of a declaratory judgment."). We determine that the January 5 order was interlocutory as it did not dispose of all claims and all parties, and Martz & Gailey's appeal from the subsequent order filed July 24, 2012 was proper.

We now turn to the merits of the appeal. As stated above, this appeal turns on whether Gary Martz's death constitutes a "liquidating event" or a "retirement event" under the terms of the Agreement.

Our scope of review on an appeal from the grant of judgment on the pleadings is plenary. Meehan v. Archdiocese of Philadelphia, 870 A.2d 912, 918 (2005). Entry of judgment on the pleadings is permitted under Pennsylvania Rule of Civil Procedure 1034, which provides that "after the pleadings are closed, but within such time as not to unreasonably delay trial, any party may move for judgment on the pleadings." Pa.R.C.P. 1034(a). A motion for judgment on the pleadings is similar to a demurrer. Citicorp North America, Inc. v. Thornton, 707 A.2d 536, 538 (Pa.Super.1998). It may be entered when there are no disputed issues of fact and the moving party is entitled to judgment as a matter of law. Id. In determining if there is a dispute as to facts, the court must confine its consideration to the pleadings and relevant documents. Id. On appeal, we accept as true all well-pleaded allegations in the complaint. Meehan, supra.
On appeal, our task is to determine whether the trial court's ruling was based on a clear error of law or whether there were facts disclosed by the pleadings which should properly be tried before a jury or by a judge sitting without a jury. Citicorp, supra.
Neither party can be deemed to have admitted either conclusions of law or unjustified inferences. Moreover, in conducting its inquiry, the court should confine itself to the pleadings themselves and any documents or exhibits properly attached to them. It may not consider inadmissible evidence in determining a motion for judgment on the pleadings. Only when the moving party's case is clear and free from doubt such that a trial would prove fruitless will an appellate court affirm a motion for judgment on the pleadings.
Kelly v. Nationwide Insurance Company, 414 Pa.Super. 6, 606 A.2d 470, 471-72 (1992) (quotations and citations omitted).

White, 875 A.2d at 325-326.

In interpreting contracts, we are guided by the following principles:

The interpretation of any contract is a question of law and this Court's scope of review is plenary. Moreover, "[w]e need not defer to the conclusions of the trial court and are free to draw our own inferences. In interpreting a contract, the ultimate goal is to ascertain and give effect to the intent of the parties as reasonably manifested by the language of their written agreement." When construing agreements involving clear and unambiguous terms, this Court need only examine the writing itself to give effect to the parties' understanding. This Court must construe the contract only as written and may not modify the plain meaning under the guise of interpretation.

Szymanowski v. Brace, 987 A.2d 717, 722 (Pa.Super. 2009), appeal denied, 606 Pa. 688, 997 A.2d 1179 (2010), quoting Abbott v. Schnader, Harrison, Segal & Lewis, LLP, 805 A.2d 547, 553 (Pa.Super. 2002) (internal citations omitted). "In construing the contract the writings must be interpreted as a whole and words must be given their ordinary meaning. And we must assume that the parties intended a reasonable result." Paull v. Pivar, 53 A.2d 826, 828 (Pa.Super. 1947) (citations omitted).

Section 12.1 of the Agreement defines a "retiring event":
For purposes of this Agreement, "Retiring Event" means, with respect to any Partner, the first to occur of (a) the death of such Partner, (b) the Disability of such Partner, (c) the Bankruptcy of such Partner, (d) the Normal Retirement of such Partner, or (e) the expulsion, with or without cause, of such Partner pursuant to Section 12.6 hereof. The Partner with respect to whom a Retiring Event occurs is sometimes referred to herein as a "Retiring Partner." Upon the occurrence of a Retiring Event, the Partnership shall continue without dissolution, and the Retiring Partner shall cease to be a Partner and shall have no further right to participate in the Partnership's business, Profits, Losses, ordistributions, but shall have only the rights provided in this Section 12.

Section 12.2 of the Agreement, "Redemption Price, " provides:

The Redemption Price of a Retiring Partner's Partnership interest shall be an amount equal to the Net Equity of the Retiring Partner's interest as of the last day of the month preceding the month during which the Retiring Event occurs, less any Partnership distributions to the Retiring Partner after such day. The accounting firm regularly employed by the Partnership shall give notice of the Redemption Price to the Partnership and the Retiring Partner as soon as reasonably possible. The Redemption Price as so determined shall be final and binding on the Partnership and the Retiring Partner.[3]

Section 13.1 of the Agreement, "Liquidating Events, " provides:

The Partnership shall dissolve and commence winding up and liquidating upon the first to occur of any of the following ("Liquidating Events"): (a) The decision of the Partners to dissolve, wind up, and liquidate the Partnership; (b) The happening of any other event that makes it unlawful or impossible to carry on the business of the Partnership; or (c) Any event which causes there to be only one (1) Partner.

The trial court concluded that the death of Gary Martz was a liquidating event under subparagraph (c), "Any event which causes there to be only one (1) Partner." The trial court found that Section 12, which specifically mentions death as a retirement event, only applies where there are three or more partners and the partnership could continue.[4] We agree.

The Agreement stated that the partnership was formed pursuant to the provisions of the Pennsylvania Uniform Partnership Act, 15 Pa.C.S.A. § 8301 et seq. (Agreement, 3/8/1999 at ¶1.1.) The Act defines a "partnership" as "an association of two or more persons to carry on as co-owners a business for profit." 15 Pa.C.S.A. § 8311(a). When the partnership is reduced to one partner, it is dissolved. This is because a "partnership" is an aggregate of individuals and not a separate entity.

We deem it to be the law in Pennsylvania and the approved opinion in most other jurisdictions that a partnership is not recognized as an entity like a corporation, that it is not a legal entity having as such a domicile or residence separate and distinct from that of the individuals who compose it. It is rather a relation or status between two or more persons who unite their labor or property to carry on a business for profit.

In re Morrison's Estate, 343 Pa. 157, 162, 22 A.2d 729, 732 (1941). When Gary Martz died, the partnership died with him.

Although not binding on this court, we find the Ohio case of Kelley v. Ferraro, 188 Ohio App.3d 734, 936 N.E.2d 986 (8th Dist. 2010), appeal denied, 127 Ohio St.3d 1504, 939 N.E.2d 1267 (2011), to be instructive. In Kelley, as in this case, the partnership agreement provided that "liquidating events" included "Any event which causes there to be only one (1) Partner." Id. at 741-742, 936 N.E.2d at 992. The Court of Appeals of Ohio held that Michael Kelley's death was a liquidating event requiring dissolution and winding up of the firm.

Under Section 11.1(d), "any event" that caused there to be only one partner of K & F required dissolution and winding up of the firm. An "event" is "something that happens." Webster's Third New International Dictionary (1986) 788. As the death of Michael Kelley was "something that happen[ed]" that caused there to be only one partner of K & F, [James] Ferraro, as the remaining partner, was obligated under the agreement to dissolve and wind up K & F.

Id. at 742, 936 N.E.2d at 992 (footnote omitted). The Kelley court determined that the contract language was unambiguous, precluding the admission of parol evidence:

The language is clear: "any event" that caused there to be only one partner of K & F required dissolution and winding up of the firm. Michael Kelley's death was obviously an event that caused there to be only one partner at K & F, thereby triggering Ferraro's duty to dissolve and wind up the firm.

Id. at 743, 936 N.E.2d at 994. Therefore, Ferraro was statutorily and contractually required to dissolve the firm, wind-up its affairs, and provide Michael Kelley's widow/executrix with an accounting and settlement of the estate's interest. Id. at 740, 936 N.E.2d at 991.

As in Kelley, here, clearly Gary Martz's death was an event causing there to be only one partner remaining. Therefore, Section 13.1 governs and the partnership must be dissolved. Martz & Gailey complains that Section 12.1, which specifically references death of a partner, controls the more general provisions of Section 13.1. It is true, of course, that "the specific controls the general when interpreting a contract." Trombetta v. Raymond James Financial Services, Inc., 907 A.2d 550, 560 (Pa.Super. 2006) (citations omitted). However, it is also true that the contract must be examined as a whole and "clauses in a contract should not be read as independent agreements thrown together without consideration of their combined effects." Id. (citations omitted).

Putting aside for a moment the not insignificant matter that a partnership is statutorily defined as an association of two or more persons, we agree with the trial court that Section 12 of the Agreement only applies where there are three or more partners. Section 12.1 provides that upon the occurrence of a "retiring event, " such as death, bankruptcy, or disability, "the Partnership shall continue without dissolution, and the Retiring Partner shall cease to be a Partner." However, as recognized by Section 13.1(c), the partnership cannot continue with only one partner. Clearly, Section 12, dealing with retiring partners, does not apply where there are only two partners of the firm and one of them dies. In that circumstance, Section 13, relating to dissolution and winding up, applies.

For these reasons, we determine that Gary Martz's death was a "liquidating event" under Section 13.1 of the Agreement. Therefore, the partnership was required to wind-up its affairs and liquidate its assets as described in Section 13. The trial court did not err in granting partial judgment on the pleadings in favor of Holly Martz on this issue.

Order affirmed.

Judgment Entered.


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