Opinion
No. 11–P–1421.
2013-09-27
Timothy BURKE v. Jeffrey COHEN.
By the Court (KANTROWITZ, SIKORA & RUBIN, JJ.).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
This appeal presents a further phase of a financial dispute between two former law partners. Their five-year venture came to an end in 1998.
Background. We affirmed a judgment entered by a judge of the Superior Court in favor of the plaintiff, Timothy Burke,
after a jury trial on the parties' competing claims for an accounting and a declaration of their respective rights and interests in the financial assets of their dissolved partnership
Burke commenced suit in Superior Court against Cohen on claims for (1) an accounting, (2) a declaratory judgment of his entitlement to funds under the appropriate allocation formula, (3) conversion by Cohen, (4) breach of fiduciary duty by Cohen, (5) breach of contract by Cohen, and (6) fraud and/or deceit by Cohen.
held in escrow by agreement. Burke v. Cohen, 77 Mass.App.Ct. 1110 (2010) ( Burke I ). As affirmed, the judgment defined the parties' entitlements to the partnership assets in dispute: Burke was entitled to $246,659.24 and Cohen entitled to $54,383.37 of the $301,042.61 total in escrowed funds.
Burke and Cohen had drafted two partnership agreements, one in 1994 and the other in 1996, but never executed either one.
a. Escrow account. The parties had agreed to put the disputed partnership monies into an escrow account apparently at the beginning of the litigation (late 1999). Burke was the original escrow agent. He placed the account first with Morgan Stanley Dean Witter, and then with Merrill Lynch. The escrowed funds yielded a consistently low rate of interest. In 2007, Burke's attorney took over as escrow agent and placed the account with Fidelity Investments; the account continued to yield a low rate of interest.
b. Jury verdict and judgment. At the close of all the evidence, Burke waived claims in contract and tort (conversion, breach of fiduciary duty, breach of contract, and fraud or deceit) and requested a verdict on his remaining counts for an accounting and a declaratory judgment of entitlement to the result of the accounting. The jury returned a verdict to the effect that the parties' drafted but unsigned agreement and formula for allocation of the assets governed, and favored Burke.
After delay and complications never fully explained by the record, a judgment dated July 25, 2005, quantified the disputed partnership funds as $301,042.61, and awarded the disputants the specified shares. The judgment directed Cohen to account for a separate sum of $131,385, and recited, “Interest shall be assessed by the clerk.” A later judgment dated November 6, 2006, however, contained no award (or any provision whatsoever) for interest.
c. Postappeal proceedings. A panel of this court affirmed the November 6, 2006, judgment in Burke I. Postappeal, Burke returned to Superior Court and requested that the final judgment after rescript include an award of statutory interest. Cohen opposed. Both parties filed supplemental, or reply, submissions on the question of interest.
Another Superior Court judge fielded all the postrescript papers addressing an award of interest, and denied Burke's request. After some initial fumbling (by session clerks), the court issued a third amended judgment after rescript on July 1, 2011. This genuinely final amended judgment provided clearly that “Burke is not entitled to either prejudgment or postjudgment interest.” From that third amended final judgment after rescript, Burke has appealed.
Analysis. Multiple lines of reasoning converge to defeat Burke's claim to interest.
The first is a settled point of Massachusetts law. “As a rule, interest is not chargeable among partners in the absence of some agreement” to the contrary, unless, by reason of the given circumstances, equity so requires an award. Shulkin v. Shulkin, 301 Mass. 184, 187 (1938). See BPR Group Ltd. Partnership v. Bendetson, 453 Mass. 853, 870 (2009). No such executed agreement exists here between the parties to require an award of interest in winding up the partnership affairs. Nor is this a case where the equities require such an award. See id. at 870 n. 26 (citing G.L. c. 108A, § 5); Marchand v. Murray, 27 Mass.App.Ct. 611, 616 (1989). The facts of record support no exception to the settled rule.
The unsigned, or de facto, partnership agreement (either version in fact) reflected an intention to waive interest and accept the written formula for division of the partnership assets on dissolution. We see no reason why the parties' own provisional arrangements (even if imperfectly concluded) should not furnish a fair and equitable result. A second contractual consideration leads toward the same conclusion. By mutual consent, the parties deposited the partnership monies in an interest-bearing account, while the civil action proceeded to a final conclusion. We respect their pragmatic bargain and do not “undertake to be wiser than” they. Guerin v. Stacy, 175 Mass. 595, 597 (1900) (Holmes, C.J.).
Considerations of equity reinforce those of contract. The accounting process, in distinction from a damages award, has the character of an equitable remedy. G.L. c. 214, § 3(5). Berwin v. Cable, 313 Mass. 431, 435–437 (1943). If we were to award interest on the strength of the accounting at this point, we would multiply the statutory rate of twelve percent by the twelve and one-half years since the commencement of litigation in 1999, so as to provide approximately 150% interest to Burke on his accounting entitlement of approximately $250,000. Those proportions appear to be grossly unfair or inequitable in the total circumstances of the dispute, especially the agreed placement of the disputed amount in escrow during the pendency of litigation. An equitable remedy should function fairly and practically. Here, we would turn the accounting mechanism into an instrument of oppression.
A final point of law brings us to the same result. The purpose of statutory interest “is to compensate a damaged party for the loss of use or the unlawful detention of money” and to provide “a return on the money that the party would have had but for the other party's wrongdoing.” McEvoy Travel Bureau, Inc. v. Norton Co., 408 Mass. 704, 717 (1990). In this instance we do not have the “unlawful detention of money,” but rather the agreed placement of a disputed sum in a neutral depository accruing regular interest. Also, the judgment appealed from contained no properly defined common law “damages,” but only a declaration of an entitlement to a fixed amount of money maintained in an escrow account bearing its own interest.
As a matter of law and as an exercise of equitable discretion, the denial of an award of interest in these circumstances was correct. We therefore affirm the third amended final judgment after rescript entered in the Superior Court.
So ordered.