BOBBY F. RAMSEY,                      )
                                      )    Davidson Chancery
      Plaintiff/Appellant,            )    No. 94-3452-III
                                      )
VS.                                   )

TED A BURKHALTER, FRANK
RYAN and RAMSEY BURKHALTER,
                                      )
                                      )
                                      )
                                           Appeal No.    FILED
                                           01A01-9707-CH-00318
P.C.,                                 )                        May 29, 1998
                                      )
      Defendants/Appellees.           )                  Cecil W. Crowson
                                                        Appellate Court Clerk
                  IN THE COURT OF APPEALS OF TENNESSEE
                             AT NASHVILLE

      APPEAL FROM THE CHANCERY COURT OF DAVIDSON COUNTY
                    AT NASHVILLE, TENNESSEE

              HONORABLE ELLEN HOBBS LYLE, CHANCELLOR



David T. Hooper, #5413
HOOPER & HOOPER, PLLC
109 Westpark Drive
Suite 410
Brentwood, Tennessee 37027
ATTORNEY FOR PLAINTIFF/APPELLANT


Jack W. Derryberry, Jr., #3870
WARD, DERRYBERRY & THOMPSON
1720 Parkway Towers
404 James Robertson Parkway
Nashville, Tennessee 37219
ATTORNEY FOR DEFENDANTS/APPELLEES


                             AFFIRMED AND REMANDED.


                                      HENRY F. TODD
                                      PRESIDING JUDGE, MIDDLE SECTION




CONCURS:
BEN H. CANTRELL, JUDGE
WILLIAM C. KOCH, JR., JUDGE
BOBBY F. RAMSEY,                              )
                                              )      Davidson Chancery
       Plaintiff/Appellant,                   )      No. 94-3452-III
                                              )
VS.                                           )
                                              )
TED A BURKHALTER, FRANK                       )      Appeal No.
RYAN and RAMSEY BURKHALTER,                   )      01A01-9707-CH-00318
P.C.,                                         )
                                              )
       Defendants/Appellees.                  )




                                    OPINION

       All of the captioned parties are certified public accountants who were participants as

shareholders and employees of a professional corporation. The plaintiff, Bobby F. Ramsey,

brought this action to recover salary due him and the value of his stock in the corporation. He

has appealed from a judgment in his favor which he insists is inadequate.



                                   BACKGROUND FACTS



       Plaintiff-appellant, Bobby F. Ramsey, has been a certified public accountant since 1967.

After five years of various accounting employments, he formed a partnership which was

dissolved by the death of his partner. For ten years thereafter, he practiced under the name of

Ramsey & Associates. Thereafter he practiced in a partnership for two years and, in 1989, he

resumed practice under the name, Ramsey & Associates. One year later, in November 1990, he

and Ted Burkhalter formed the firm of Ramsey-Burkhalter, P.C.. Burkhalter, who was also a

lawyer, drafted their agreement.



       In order to provide working capital for their enterprise, the parties agreed to contribute

their respective accounts receivable to the enterprise. They agreed that each would be entitled

to draw $1,000 per week, and that Burkhalter might draw more during tax season when his

accounting duties would curtail his legal work and income. During 1991, neither party drew any

salary. It was agreed that the salaries of the partners would be considered an operating expense

                                              -2-
of the enterprise which would continue to be liable for unpaid salaries and that profits would be

divided after deduction of operating expenses. Neither party withdrew any profit prior to the

beginning of the present action.



       On January 1, 1992, Frank Ryan was admitted to the enterprise. He was to be paid

$50,000 per year and was to be considered a “founding partner.” He was paid his salary

continuously until the inception of this suit. He made no contribution by waiver of salary or

assignment of receivables.



       In January 1992, Mr. Ramsey was diagnosed as suffering from congestive heart failure.



       In March 1994, he underwent surgery for removal of a malignancy and thereafter received

chemotherapy; all of which reduced his capacity to work. He received his full salary through

May 31, 1994, at which time Frank Ryan notified him that he and Burkhalter had decided to cut

his (Ramsey’s) salary to less than one-half.



       On August 28, 1994, Burkhalter and Ryan notified Ramsey that he should retire.

Discussions ensued as to which “accounts” Ramsey should take with him, which should remain

with Burkhalter and Ryan, and what compensation would be payable therefor.



                     THE PROCEEDINGS IN THE TRIAL COURT



       On November 14, 1994, Mr. Ramsey filed suit against Messrs. Burkhalter and Ryan.



       On April 10, 1995, Ramsey & Burkhalter, P.C., was added and the issues were referred

to the Master. In December 1995, January, February and March 1996, the Master conducted

hearings. On January 31, 1997, the Master filed a 10-page report containing 18 findings

including the following:



                                               -3-
        Master Finding: The parties stipulated at the hearing
that the 1990 Founding Stockholders Agreement applies
should a written agreement between the parties be relevant to
an issue. The parties also agree that Frank Ryan was to be
treated as a Founding Stockholder although he did not sign
the 1990 Agreement and although his salary was not formally
set by addendum.
                           ----
The Agreement provides that:

4.      Each partner should have at least 1000 realized hours
each year. If one does not reach this level, his salary may be
reduced in a ratio percentage in which his realized hours are
less than this minimum. ... This paragraph requirement for
realized time will not be unduly enforced, but will be weighed
by the partners or the Executive Committee to determine
whether a partner is complying with the requirement and if a
salary adjustment should be made.

        The Agreement also discusses possible bonuses to be
added to salary calculations. All references to hours and to
salary or bonuses use the term “realized” billings, which
means hours charged and paid, not just hours which were
chargeable.
                           ----
        Equity ownership on the other hand, was fixed. The
parties agreed that each partner is a one-third owner of all
equity in the business.
                           ----
        The stockholders of Ramsey and Burkhalter insured
against illness or disability through the professional
corporation. The Agreement states:

         ARTICLE 7 ILLNESS OR DISABILITY

       In the event of a partner’s illness or disability,
       he shall be entitled to his basic salary for the
       first six months of that period and then ½ his
       basic salary for the second six months. In the
       event that his medical records indicate
       continued disability, he may voluntarily
       withdraw or be terminated from the
       partnership (upon a vote of 85% of the
       remaining partners). In the event that he has
       neither withdrawn or terminated, he will not
       received [sic] further compensation until he
       returns to full time employment with the firm,
       but he will continue to be entitled to bonuses
       under Article 4 and equity share of profits.

       The Master finds that Mr. Ramsey was disabled or ill
during all of 1994. He is not entitled to additional salary
above that which he received during 1994.
                            ----
       In 1993, the partners orally agreed that Ramsey would
be paid approximately $4,000 per month. The other two

                     -4-
partners would be paid $4,800 per month. (There was no
modification of the 1000 realized hours requirement.)
Ramsey admits that this arrangement was fair given three
different work styles and levels of production at that time. As
a result, in 1993, Ramsey was paid $48,249. The other two
partners were paid $57,604.
                             ----
        The Master finds Mr. Ramsey is not entitled to
additional salary for 1994. The section of the Agreement
dealing with illness and disability would result in a salary of
$43,200 for the year even if the $4800 per month salary is
used as the basic salary. This $43,200 figure is calculated as
follows:

January 1-June 1, 1994: @ 4800 per month               $28,800
July 1994-December 1994 @ $2400 per month              $14,400
                                                       $43,200

Mr. Ramsey was paid $43,487.89 in 1994.
                             ----
Master Finding: As Mr. Ramsey was ill or disabled in 1994,
and was paid accordingly, no salary adjustments are due.
                             ----
Mr. Ryan testified that he agreed to work for no pay in 1991
and that he was not due a salary until January 1992. Mr. Ryan
should not receive compensation or credit for services he
rendered in 1991.
                             ----
Neither Mr. Ramsey nor Mr. Burkhalter should expect to
receive a salary for 1991.
                             ----
T.C.A. § 48-101-614(a) requires that fair value be assessed
“as of the date of death, disqualification, transfer, retirement
or termination.” The master finds the first formal notification
to Mr. Ramsey of the decision that he must withdraw, was
dated August 28, 1994. (Exhibit 5)
                             ----
        Master Finding: Bobby Ramsey’s equity is the fair
value of his shares. He is not entitled to additional salary
under any of the theories raised in this lawsuit.
                             ----
        The balance sheet of July 31, 1994, reflects gross
assets of $222,864.69. Most of this number consists of
receivables reflecting billed time ($165,368.17). Unbilled
receivables are $23,452.12. The realization rate for the firm
is 95. 1% ($165,368.17 + $23,452.12) x .951 = $179,568.00
(Exhibit 21). The Master finds therefore, that the true value
of the receivables is $179,568.00. Cash in the company at
that time totaled $22,308.00. Book value of equipment and
furniture owned by Ramsey Burkhalter on July 31, 1994 was
$11,152.31 (an appraisal of equipment and furniture was not
available to the Master). Security deposits are recorded at
$584.00. The sum of the gross tangible assets is therefore,
$213,612.00. Liabilities totaled $24,644.07. (Exhibit 10) Net
assets are $188,968 because



                      -5-
                        Gross assets:           $213,612
                        Liabilities:            - 24,644
                        Net assets:             $188,968

                33% of $188,968 = $62,989

                        The Master finds that by agreement, Mr. Ramsey was
                assigned $28,848 of the receivables of his clients at full value
                for each dollar.
                                            ----
                        The Master has reviewed the voluminous transcript
                carefully. As a result, the Master finds the value of Mr.
                Ramsey’s stock to be one-third of the value of the net assets
                on July 31, 1994 minus the accounts receivable which were
                assigned to him by agreement. Ramsey Burkhalter should
                purchase Mr. Ramsey’s stock at the fair value of $34,141.00.
                As further explanation:

                        $62,989.00      One third net assets
                        -28,848.00      Value of accounts receivable
                                        assigned to Mr. Ramsey
                        $34,141.00



         All parties filed exceptions to the report of the Master. The Trial Judge confirmed

the report and made it the judgment of the Court. A motion of the plaintiff for discretionary

costs was overruled.



         The plaintiff, Mr. Ramsey, appealed and has presented the following issues:

                       1.      Whether the trial court erred in failing to
                award Bobby Ramsey his unpaid 1991 salary that was
                designated as being a “normal operating expense” of Ramsey
                Burkhalter, P.C.

                        2.     In the alternative, whether the trial court erred
                in failing to award bobby Ramsey additional equity in
                Ramsey Burkhalter, P.C. based on the undistributed retained
                earnings in the corporation at the end of 1991.

                        3.      Whether, in addition to an award of his share
                of the equity in the professional corporation, Bobby Ramsey
                is also entitled to an award from Ted Burkhalter and Frank
                Ryan for clients they retained for which he was the source or
                procuring partner.


        The concurrent finding of a Master and Chancellor upon controverted questions of

fact is entitled to the weight of the verdict of a jury if there is any evidence to sustain it.



                                                 -6-
T.C.A. § 27-1-113, In Re: Estate of Tipps, Tenn. 1995, 907 S.W.2d 400; Coats v. Thompson,

Tenn. App. 1986, 713 S.W.2d 83.



        The dealings between the parties, described above, created a classic procedural

situation for a reference to the Master. No error is found in the order creating the reference,

which was agreed to by the parties.



        The first exception of the plaintiff to the report was that Master found that “a detailed

analysis of each client account was not relevant to the value of the stock of the corporation.” The

Master correctly held that the value of the stock of the corporation was total assets minus total

liabilities. In respect to physical assets, it was incumbent upon the parties to prove their version

of the value of each asset. Likewise, in respect to the value of the expectation of continued

patronage of individual “clients” (good will), it was incumbent upon the parties to prove their

version of the value of the expectation of continued patronage of each client. It is too much to

expect of a Master to listen to endless details of past dealings with patrons in order to make an

estimation of the probability of continuation of and profit from the patronage of each client. The

first exception of the plaintiff was not well taken.



        The plaintiff’s second exception to the Master’s report was that it failed to award plaintiff

the unpaid 1991 salary. It is uncontradicted that the two initial parties waived their 1991 salaries

as a part of their capital contribution to the corporation. Their only hope of recovering this salary

was a future distribution of profits or liquidation of stock. There was no distribution of profits,

and the liquidation value of the stock was dependant upon the profits and/or losses from year to

year preceding the dissolution.



        No merit is found in plaintiff’s second exception to the report.




                                                -7-
           Plaintiff’s third, and last, exception to the report was that he was not granted an

additional salary adjustment due to his disability during that year. The Master’s report, quoted

above, discussed at length the disability rights of plaintiff, and no error is found therein.



           No merit is found in any of the exceptions of plaintiff to the Master’s report. In the

absence of exceptions to the report of the Master, they cannot be reviewed for the first time on

appeal. Rogers v. Rogers, 101 Tenn. 428, 47 S.W. 701.



           The dealings of the parties with each other do not conform to the popular conception of

accountants as artists of exactitude. Their dealings with each other have created for the courts

a masterpiece of inexactitude. The result reached by the Master, the Trial Court and this Court

represents the best that the inexact science of law can do to resolve the problems created by the

parties.



           The judgment of the Trial Court is affirmed. Costs of this appeal are taxed against the

plaintiff-appellant and his surety. The cause is remanded to the Trial Court for necessary further

proceedings.

                                AFFIRMED AND REMANDED.



                                                        _________________________________
                                                        HENRY F. TODD
                                                        PRESIDING JUDGE, MIDDLE SECTION

CONCUR:


_____________________________
BEN H. CANTRELL, JUDGE


_____________________________
WILLIAM C. KOCH, JR., JUDGE




                                                 -8-
