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Clarke v. Mitchell

Court of Appeals of Kansas.
Aug 9, 2013
305 P.3d 48 (Kan. Ct. App. 2013)

Opinion

No. 108,811.

2013-08-9

Bryan J. CLARKE and Amy Clarke, Appellees, v. Patrick MITCHELL, Appellant.

Appeal from Sedgwick District Court; Mark A. Vining, Judge. Lee H. Woodard, of Woodard, Hernandez, Roth & Day, L.L.C., of Wichita, for appellant. No appearance by appellees.


Appeal from Sedgwick District Court; Mark A. Vining, Judge.
Lee H. Woodard, of Woodard, Hernandez, Roth & Day, L.L.C., of Wichita, for appellant. No appearance by appellees.
Before BRUNS, P.J., HILL, J., and ERNEST L. JOHNSON, District Judge Retired, assigned.

MEMORANDUM OPINION


PER CURIAM.

In this appeal, we reverse the finding of the district court that an individual lawyer was personally responsible for the return of a retainer fee paid to the law firm, a limited liability company. A letter was sent to the client advising the retainer would be returned. The district court held the lawyer had to pay the fee because he did not sign the letter written on the law firm's stationery in a way indicating he was signing in some representative capacity for the firm. By omitting terms such as “managing partner,” “for,” or “by,” the lawyer made himself responsible for the fee, not the firm, according to the district court. We hold the substance of the letter reveals the law firm was responsible for refunding this fee, and the failure of the attorney to denote himself as managing partner in the signature block does not make the signing lawyer personally liable for the fee. Accordingly, we reverse. The facts provide a context for the correct interpretation of the letter in question.

In September 2011, Amy Clarke met with Terry Beall, a lawyer and firm member of Beall, Mitchell & Sullivan, L.L.C., to discuss filing a divorce action against her husband Bryan Clarke. During this meeting, Amy paid the law firm a retainer fee of $1,400. Amy received a receipt from the law firm for $1,400. The next month, Amy returned to see Beall and brought her mother Mona Ewing along. Ewing privately told Beall that she was paying for the divorce. Amy subsequently chose not to fill out the necessary papers to file the divorce action and dropped the matter.

In November 2011, the Kansas Department of Social and Rehabilitation Services removed the Clarke children from the home and initiated child in need of care proceedings. Amy and her husband, Bryan, went to Beall, Mitchell & Sullivan, L.L.C., seeking representation in the CINC case. The Clarkes met with Patrick Mitchell, a lawyer and managing partner of the law firm. The Clarkes paid a retainer fee of $1,600 and received a corresponding receipt from the law firm. By the end of November, Amy had contacted Mitchell and terminated his representation in the CINC case.

On December 14, 2011, Mitchell sent the Clarkes a letter with a billing statement for the CINC case showing a balance of $807.50 owed by the law firm to the Clarkes on the $1,600 CINC retainer fee. The letter stated that the $1,400 retainer fee Amy paid in the divorce case would be refunded to Ewing. The law firm sent Amy a trust account check for $807.50 and Ewing a trust account check for $1,331.

The Clarkes filed a small claims action against Mitchell seeking recovery of the $1,400 retainer fee sent to Ewing. In January 2012, the small claims court returned a personal judgment against Mitchell in the amount of $1,400 plus costs.

Mitchell appealed the small claims ruling, arguing that as a member of the law firm that had received the $1,400 divorce retainer fee, he could not be held personally liable for the debts of the limited liability company. At a bench trial in September 2012, the Clarkes appeared pro se. The district court affirmed the small claims judgment against Mitchell for $1,400 plus costs. The district court erred by concentrating solely on the signature block.

Mitchell argues that the district court erred in holding him, as a member of the LLC, personally liable for his law firm's obligations to refund any retainer fee. Mitchell maintains that the proper remedy for Amy was to obtain judgment against the law firm, because Amy had retained the aw firm when considering initiating the divorce action. The Clarkes did not submit a brief.

This is an argument contending an error under the Kansas Revised Limited Liability Company Act, K.S.A. 17–7662 et seq. Clearly, this is a question of law over which this court has unlimited review. Unruh v. Purina Mills, 289 Kan. 1185, 1193, 221 P.3d 1130 (2009).

Generally, a member or manager of a limited liability company, such as the LLC here, cannot be held personally liable for the LLC's obligations:

“Except as otherwise provided by this act, the debts, obligations and liabilities of a limited liability company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the limited liability company, and no member or manager of a limited liability company shall be obligated personally for any such debt, obligation or liability of the limited liability company solely by reason of being a member or acting as a manager of the limited liability company.” (Emphasis added.) K.S.A. 17–7688(a).

There is no question here of any alter ego theory or a finding that Mitchell had participated in, approved or sanctioned a wrongful action, had knowledge amounting to acquiescence to the wrongful action, made a false representation as to material matters in connection with the wrongful action, or willfully participated in acts of fraud or deceit. See Patrons State Bank & Trust Co. v. Shapiro, 215 Kan. 856, 862, 528 P.2d 1198 (1974); State ex rel. Stephan v. Commemorative Services Corp., 16 Kan.App.2d 389, 400, 823 P.2d 831 (1991), rev. denied 250 Kan. 806 (1992). Instead, the district court affirmed the small claims judgment against Mitchell on the theory that Mitchell had accepted personal responsibility for returning the $1,400 retainer fee and had not acted in any representative capacity with the law firm.

During the trial, neither party disputed that the firm of Beall, Mitchell & Sullivan, L.L.C., had received the $1,400 retainer fee through Beall, a member of the law firm. The district court clearly acknowledged that the $1,400 retainer fee and corresponding receipt Amy received created a contractual relationship between the law firm and Amy. Further, “[i]t is elementary law that in the absence of a special arrangement a client who employs a member of a law firm employs the firm.” Cox v. Trousdale, 138 Kan. 633, 643, 27 P.2d 298(1933).

The district court held Mitchell personally liable for returning the $1,400 retainer fee to Amy. In doing so, the district court was persuaded by the signature block on the letter:

“Exhibit K [December 14, 2011, letter] shows that the monies were handled by Pat Mitchell—Patrick Mitchell, excuse me. It's on the LLC letterhead, but Mr. Mitchell does not sign as a managing partner or in any capacity with the firm, but rather as an individual And in that letter, in Exhibit K, he says: With regard to the retainer fee Amy put down, those monies will be refunded to Amy's mother.” (Emphasis added.)

We believe this to be form over substance. In Zukel v. Great W. Managers, LLC, 31 Kan.App.2d 1098, 1102–03, 78 P.3d 480 (2003), rev. denied 277 Kan. 928 (2004), this court stated that the proper approach to bind a corporation “is to state the name of the corporation, followed by the names of the officers with capacity, preceded by the word ‘per’ or ‘by,’ and followed by the title of the officers.” However, in the absence of an equivocal corporate caption indicating the officer's position, the corporation can still be held liable where the substance of the agreement rather than the form of the signature block governs the interpretation of an agreement. 31 Kan.App.2d at 1103–04.

The clear language of the December 14, 2011, letter and corresponding form of execution by Mitchell is not consistent with any intent on his part to sign as an individual but rather has the characteristics of a representative execution. Granted, the signature block in the letter fails the format clarified in Zukel on one point—the name “Patrick J. Mitchell” is typewritten under the space for a signature, without reference to Mitchell's representative capacity. But the signature block did include the closing: “Sincerely, BEALL, MITCHELL & SULLIVAN, LLC” Mitchell's signature is directly below the closing and above his typewritten name. Further, the letter also contained the firm letterhead with the names of the three member attorneys of the LLC, including Mitchell.

Nothing in the language of the letter suggests that liability for the obligation it imposes will be personal in nature. Cf. Consolidated Beef Industries, Inc. v. Schuyler, 239 Kan. 38, 43–44, 716 P.2d 544 (1986). In that case, the court held that the inclusion of the signer's corporate position in the signature block of a contract did not preclude a finding that the signer personally intended to be liable for the contract when the language of the agreement indicated that the signer “intended that he be personally bound to pay any debt owed by” the debtor. 239 Kan. at 44.

Moreover, the evidence presented at trial supports a finding that Mitchell sent the letter on behalf of the law firm as the authorized officer of the LLC. Amy did not dispute that Mitchell did not have authority to bind the LLC and never claimed to have personally employed Mitchell. Amy testified Mitchell did not perform any services in connection with her contemplated divorce action and that she did not know Mitchell prior to the CINC case. When Amy was asked whether the law firm should have paid her back, Amy responded, “Yes, someone from the law firm should have, but every time I contacted the law firm, they wouldn't speak to us. They told us that it was his responsibility, Patrick Mitchell's responsibility; we had to deal directly with him.” After Amy asked Mitchell why it was his decision whom to refund the money to instead of Beall's, Mitchell testified:

“Ultimately it's we are a law firm. There's three attorneys, and we are an LLC. I am the managing partner. That falls on me.

“When I had consulted with Mr. Beall when I consulted with your mother and received the information I did from her, I then went to the Disciplinary Administrator and sought their advisory as what to what I should do with the refund. Putting that together as the managing partner, I am then the one responsible for writing the check. That's it.”

Given these facts, substantial competent evidence does not support the district court's hypertechnical finding that Mitchell was not acting as managing partner of the LLC in sending the December 14, 2011, letter to the Clarkes. “Substantial competent evidence refers to legal and relevant evidence that a reasonable person could accept as being adequate to support a conclusion.” State v. Schultz, 289 Kan. 334, 340, 212 P.3d 150 (2009). Accordingly, any obligation to return the $1,400 retainer fee to Amy rested solely with Beall, Mitchell & Sullivan, L.L.C. See K.S.A. 17–7688(a).

Reversed.


Summaries of

Clarke v. Mitchell

Court of Appeals of Kansas.
Aug 9, 2013
305 P.3d 48 (Kan. Ct. App. 2013)
Case details for

Clarke v. Mitchell

Case Details

Full title:Bryan J. CLARKE and Amy Clarke, Appellees, v. Patrick MITCHELL, Appellant.

Court:Court of Appeals of Kansas.

Date published: Aug 9, 2013

Citations

305 P.3d 48 (Kan. Ct. App. 2013)