Slemmer's Appeal

| Pa. | May 7, 1868

The opinion of the court was delivered, May 7th 1868, by

Sharswood, J.

The main question which arises on this record and which has been fully discussed, both in the oral and printed arguments, is, whether the articles of copartnership, dated January 5th 1861, were abrogated by the lease of June 5th 1862.

That there is any express agreement to supersede or annul them has not been and cannot be pretended. It is alleged, that before the lease or the verbal agreement for it, the business of the partnership had been that of miners, not refiners. But the original articles expressly contradict this allegation. They show clearly that refining was from the first within the contemplation of the parties.

They recite “ an agreement verbally entered into in the summer of 1860, for the mining for and disposition of, by sale or refining, rock oil or petroleum.” A small experimental refinery was erected with the funds of the firm on Strawberry alley, in the borough of Norristown, in the summer of 1860. The lease says not a word of any new business being about to be commenced, hut it is a lease from the plaintiff, Henry T. Slemmer, to the firm “ Slemmer Brothers, oil refiners.” Nor is there anything in the provisions of the lease, which is not perfectly consistent with the articles. There is no implied rescission. It was declared in the articles that “a final settlement of company affairs may be demanded by the concurrent action of any three members.” With an evident reference to the event contemplated in this clause, the lease provides as follows:—

“ It is hereby mutually agreed that this lease may end at any period within fifteen years, if the parties of the second part (Slemmer Brothers), desire it, in consequence of closing their business as oil refiners.”

A technical dissolution of the firm by the withdrawal of one or more partners would not in law, if no provision had been made for the case, put an end to the lease. The term would still have been assets, to be disposed of and accounted for on a winding up or to pass to and become the property of the continuing firm on the retirement or death of a member. It was expressly agreed, therefore, that in case of a final settlement and closing the business of the firm as oil refiners, the term should end. But it is not to expire before its efflux by time in any other event. It would be unreasonable to put' a different construction upon it. The plaintiff, Henry T. Slemmer, one of the firm, is the party of the first part, — the firm, of which he is a member, “ Slemmer Brothers,” the party of the second part. By the express words of the instrument, it can only be ended before the close of the fifteen years, “ if the parties of the second part desire it.” Yet it is in the power of the plaintiff at any time to withdraw and thus cause a technical dissolution of the firm. He could do this independently of any agreement, subject to his liability to his copartners if the act was wrongful: Mason v. Connell, 1 Whart. 381" court="Pa." date_filed="1836-04-05" href="https://app.midpage.ai/document/mason-v-connell-6313861?utm_source=webapp" opinion_id="6313861">1 Whart. 381. But here the free privilege of withdrawing at any time was secured to each partner by the terms of the original articles. It makes the argument so much the stronger on the construction of the lease. It could never have been the intention of the parties that the plaintiff, the lessor, should himself have the power of determining the lease at any time by retiring from and thus technically dissolving the firm. Nor can there even be any inference drawn from the provisions of the lease, that the time when the partnership was to continue was fixed at fifteen years. At the end of that period, the firm might wish to build a new and enlarged factory in a different place. The plaintiff, the lessor, would have been obliged then to accept a surrender, and to pay or to be accountable to the firm for the appraised value of the buildings and improvements, and the partnership still continue to operate under its original articles. There was nothing improbable in such an event, if the friendly and fraternal relations between these brothers had continued as they ought to have done. The agreement then of January 5th 1861 is still the law of this partnership, made by the parties, its terms reasonable and just in themselves, and which a court of equity ought to regard as the rule in all questions arising between them.

But it is assumed in the plaintiff’s bill, and has been earnestly contended, that the letter signed by the defendants and addressed to the plaintiff, dated January 25th 1866, was a virtual dissolution of the partnership — that it closed their business as oil refiners, consequently ended the term under the lease of June 5th 1862 ; and that the provisions of that instrument formed thereupon the rule for winding up the concern. Such seem to have been the opinions of the master and the court below. We cannot yield our assent to this as a conclusion of fact or of law. The most and the worst that can be said of the letter of January 25th 1866, is that it was a hasty and ill-advised threat. It was notice merely of the policy they proposed to adopt with a view to a dissolution at some future time. By the terms of the original articles, any three members of the firm had clearly a right to adopt such a resolution, and it was right to give notice of it to the plaintiff a reasonable time before proceeding to carry it into effect. The plaintiff himself appears to have so regarded it. He attended a meeting of the company four days afterwards, when a resolution was adopted'against his voice, declaring “that the energies' of-the company be henceforth wholly directed to placing the company effects in a merchantable condition with a view to an early and equitable division thereof, and a final settlement of company affairs as provided in our articles setting forth an agreement, &c., dated January 5th 1861.” There is nothing, therefore, in this transaction which ought to vary the relative position of the parties.

There is one other matter, which requires perhaps to be noticed. It relates to what no doubt has been the source from which the unhappy differences between these brothers first sprung, the purchase by him in his own name, of the land on which the Ford street refinery was erected and the adjoining lot. The defendants allege that this was a fraud upon them, and pray that their answer may stand as a cross-bill — not for discovery, hut relief — to wit, that the plaintiff may he decreed to convey to the firm. Without stopping to inquire whether this course of pleading is allowable under Rules XXXIX. and XLI. in Equity, as the point of practice has not been made, we think the defendants have failed to show any title to the relief for which they pray. The purchase by and in the name of the plaintiff was communicated by him to the other members of the firm at the time, and although the reason he assigned for it was probably false and undoubtedly flimsy, yet they appear to have acquiesced. Besides| which, even if the real estate purchased by the plaintiff ought to have been in the name and for the use of the firm, it is entirely too late now for the defendants to set up this claim. The acceptance of the lease and the improvements made under it; the time which has elapsed; and the altered position of the parties, all preclude the idea of going back and unravelling these old transactions. Though, had the defendants shown themselves prompt, a court of equity might have decreed a conveyance, it would be clearly inequitable to do so now. It is a maxim as good in equity as at law : Vigilcmtibus non dormientibus jura subveniunt.

It only remains to consider whether there should be a decree. of dissolution and on what terms. On this subject a wide discretion is necessarily vested in a court of equity. In this state the Act of Assembly of June 16th 1836, § 13, Pamph. L. 789, has specially conferred upon the Supreme Court and the Courts of Common Pleas “the supervision and control of partnerships.” A partnership will not be dissolved on slight grounds. The plaintiff complains that the defendants “ have failed with him to conduct the business of the firm in a proper and harmonious manner.” The defendants, at a meeting of the company in January 29th 1866, voted for and adopted a declaration that “ irreconcilable differences exist, which preclude harmonious and successful operations by our company, as oil refiners.” It is lamentably plain therefore, and we might perhaps 'be justified in saying, admitted on both sides, that such have been the dissensions which have sprung up between these brothers, that the partnership heretofore existing between them can no longer be carried on with comfort and advantage to all concerned. In such a case a court of equity will decree a dissolution: Bishop v. Breckles, 1 Hoff. C. R. 534; Collyer on Partn. § 297. In making such a decree the court will consider not merely the terms of the express contract between the partners, but also the duties and obligations implied in every partnership contract: Smith v. Jeyes, 4 Beavan 503. Where a valuable business has grown up by the joint labors and contributions of all, the court should be careful to preserve it if possible, and to put all the parties upon a fair and equal footing in competing for it. To appoint a receiver, to direct a sale of the whole and a winding up of the business would destroy its value without benefiting either party. The plaintiff in this bill prayed for an appraisement of all the partnership assets, and that the defendants should be directed, on the plaintiff’s paying to them or securing to them the payment of the value of their respective shares in the partnership, to yield up to him the possession of the oil factory, and all the partnership estate, and that the defendants be restrained from the further management of the business of the said factory, or of interfering or intermeddling with the same in any way or manner whatever. In other words he asked a decree, which should transfer the entiré business to him. The defendants might, with much greater show of reason, demand that the court should enforce the provision of the original articles against the plaintiff as a retiring partner, and require him upon an appraisement to assign all his interest to them. The court below did not make such a decree as the plaintiff asked, but on the ground that the letter of January 25th 1866, was a dissolution of the partnership •and terminated the lease, they directed an appraisement of the building and improvements on the lot held under it, and the ■delivery of them to the plaintiff, and appointed a receiver to wind ■•up the affairs of the concern.. Practically there would not' be much difference between the decree prayed for and that granted. The possession of the oil factory and its fixtures and appurtenances would be possession of the business. The duty of the receiver would only be to sell the stock of oil, material and tools on hand, and collect the outstanding debts. We deem it our right and our duty to hold the scales of justice more equally between these brothers, to give to each party the right to bid for the business and estate of the partnership, and then to award it to the highest bidder. We have made a decree accordingly.

The decree of the Court of Common Pleas of Montgomery county is reversed, and now it is ordered and decreed that on the dissolution of the said firm of Slemmer Brothers as hereinafter declared, all the estate and assets of the partnership, including the unexpired term of the lease of the premises on which the factory is erected, and the buildings and improvements thereon, shall be assigned and transferred to that one or more of the said partners, who shall offer to pay or secure to be paid within a reasonable time the highest price for the same : and that the record of this case be remitted to the Court of Common Pleas of Montgomery county, with direction to carry this decree into effect, and for that purpose to make all necessary orders and references for the purpose of settling and adjusting the accounts between the parties, and making a final decree therein; and upon such assignment and transfer being made, in pursuance of the order of the court, then that the said partnership shall be thenceforth dissolved. Both parties to pay their own costs in the court below and in' this court: and the costs of the subsequent proceedings to be paid from the assets of the partnership.