Saturday, November 20, 2021

Consent Revocation For Conversion Of Dead Partners Stock

A Roanoke  attorney who had departed from his firm learned years later of valuable stock that was due to the successor firm.

The remaining partners had all died and the heirs had no knowledge of the asset's value.

Nelson Mackey joined the law firm of Dodson, Pence, Viar, Young & Woodrum as a partner in 1987. In 1990, the firm filed a certificate of partnership under the name “Dodson, Pence, Viar, Woodrum, and Mackey” that listed Mackey as a partner. Mackey soon determined that his partners were not “on the same page with” him regarding compensation arrangements and so he left the firm in 1995. In response, the remaining partners—Griffith Dodson, Richard Pence, and Richard Viar—formed the partnership of “Dodson, Pence, & Viar” by filing another certificate of partnership that same year. No formal winding up of the partnership or accounting of partnership assets occurred upon Mackey’s departure, nor did he seek any distribution of assets

His license revocation by consent was ordered by the Virginia State Bar Disciplinary Board

The Virginia Supreme Court affirmed conversion findings and describes how he learned of the stock in 2002 from an assistant who was winding up the practice of the last deceased partner

Years later in 2009, Mackey wrote to Computershare—the contractor WellPoint, Inc., employed to administer its securities transactions—directing it to sell the stock. He drafted the letter on “Dodson, Pence, Viar, Woodrum & Mackey” letterhead he created that included his home address, phone number, and personal email address. He directed Computershare to “remit the merger consideration and net sales proceeds payable to Dodson Pence Viar Woodrum Mackey, G. Nelson Mackey, Jr.,” to his home address. Computershare complied and sent Mackey two checks—one for $20,513.49 for the merger consideration and another for $77,995.90 from the stock sale. Mackey deposited the checks into a business account he and his wife controlled. Mackey did not inform any of the estates of the sale even though he “understood [the stock] was a partnership asset” that he “assume[d]” his “deceased law partners would have an ownership interest in.”

The name he used was that of the defunct former firm.

The stock came from the firm health insurance

In 1997, Trigon demutualized and became a stock insurance company. As part of this restructuring process, Trigon issued 683 shares in the name of Dodson, Pence, Viar, Woodrum, & Mackey even though the partnership purchasing insurance coverage at that time was Dodson, Pence, & Viar. Over the ensuing years, various mergers and a stock split occurred. As a result, the 683 Trigon shares eventually became 1,450 shares in WellPoint, Inc., plus approximately $20,000 cash in merger consideration

A tax advisor for the last widow uncovered the sale

While reviewing old files in 2015, Quinn came across the July 2002 letter from National City Bank to Viar explaining the Trigon stock had been worth approximately $64,000 at the time. After reviewing the letter, Quinn notified Mrs. Viar and attempted to contact Mackey to no avail. Quinn eventually contacted Computershare, which said that it could not release information unless he proved he represented someone entitled to the stock. Nevertheless, Computershare advised him that there had been “some activity in the account” and suggested Quinn contact Mackey—something Quinn found “very suspicious.” After Quinn provided documentation, Computershare confirmed that Mackey had liquidated the stock in 2009. Quinn  reported his findings to Mrs. Viar and contacted the other estates. The Pence and Dodson estates thus learned of the stock’s existence and Mackey’s actions for the first time in November 2015.

Litigation ensued

Ample evidence in the record supports the trial court’s conclusion that Mackey’s misrepresentation about the stock’s value was the reason Quinn and Mrs. Viar did not look into the stock further or contact the other estates. The trial court found that Quinn was a disinterested party who exhibited a pattern of inquiring about the stock and asking Mackey for updates until Mackey told him “the stock was essentially worthless.” Once that happened, Quinn “suddenly stopped” asking about the stock. The trial court found that Mackey’s testimony, including his denial of the misrepresentation, was not credible, but found Quinn’s testimony that he trusted Mackey and relied on his statements “both compelling and persuasive."

The court rejected his claim of entitlement as the surviving partner

Mackey converted the stock because he lacked a right to possess the stock while Mrs. Viar had an immediate right to possession to carry out her administrative duties as executor of Viar’s estate. For these reasons, we affirm the trial court’s rulings as to Mrs. Viar, reverse as to the other executors, and remand for further proceedings consistent with this opinion.

(Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2021/11/an-attorney-who-had-departed-from-his-firm-in-1995-learned-years-later-of-valuable-stock-that-was-due-to-the-successor-firm.html

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