Opinion
Decided May 24, 1926.
Partnership — Dissolution by death of partner — Notwithstanding option for children to succeed to interest — Receiver cannot be appointed to continue business, when — Agreement to enter into partnership not enforcible in equity.
1. Dissolution is worked by death of partner, though partnership agreement provides if one of the partners dies his children shall have privilege of taking over his partnership interest, and that the other agrees to enter into partnership with them.
2. Other than for purpose of winding up partnership's affairs, equity cannot appoint receiver to carry on partnership business.
3. Remedy for breach of agreement to enter into partnership is by action at law, and not in equity.
APPEAL: Court of Appeals for Butler county.
Mr. M.O. Burns, for plaintiffs.
Messrs. Waite, Schindel Bayless and Mr. Herbert Shaffer, for defendant.
Prior to 1920, Joseph Schumaker and Joseph J. Pater were partners doing business under the firm name of Joseph Schumaker Co. After the death of Joseph Schumaker, Philomena Schumaker, his wife, the defendant here, and Joseph J. Pater, her brother, on December 1, 1920, by written agreement, entered into a partnership, and carried on the business of the old firm in its name. Pater was indebted to Joseph Schumaker in the sum of $14,095.34. The articles of partnership provided that the parties were to share equally in the profits of the business, and that an agreed percentage of the profits due to Pater were to be applied to the payment of his indebtedness to the estate of Schumaker.
The partnership continued until Joseph J. Pater's death, August 11, 1924. The death of Pater dissolved the partnership, unless it was extended beyond that time by the following provision in the partnership agreement:
"This agreement will remain in full force and effect unless terminated by consent of both parties, or dissolved by death, bankruptcy, or insolvency.
"It is further agreed that if either party is dissatisfied with the management of the other, they shall then agree that some other person familiar with the business take charge of and operate the same and account to them from month to month until the obligation of Joseph J. Pater is satisfied.
"If said Joseph J. Pater should die and his children desire to take over his partnership interest under the terms and conditions herein set forth, they shall have the privilege of so doing, and said Philomena Schumaker agrees to enter into a partnership with them, or any of them as is agreed upon by them, but said partnership shall provide for the payment of any balance due upon the said claim of Philomena Schumaker against Joseph J. Pater herein set out but without demand that said partner is to become personally liable for the payment of the said Joseph J. Pater obligation herein set out, and remaining unpaid."
It is the law of Ohio that a dissolution of a partnership takes place immediately on the death of one of its members. McGrath v. Cowen, 57 Ohio St. 385, 49 N.E. 338.
Plaintiffs contend that there is an exception to this rule, and that it would arise if there was an express stipulation in the articles of partnership that Pater's interest in the profits of the concern was to extend beyond his death. They do not cite any Ohio authorities to this effect, but cite a case from Maryland, Scholefield v. Eichelberger, 32 U.S., (7 Pet.), 586, 8 L. Ed., 793. We do not see how this question is presented by the record. In fact, the articles of partnership themselves contemplate a dissolution of the partnership prior to any other action to be taken. They recite: "This agreement will remain in full force and effect unless terminated by consent of both parties, or dissolved by death, bankruptcy or insolvency."
That part of the partnership agreement giving the children of Joseph J. Pater the option to take over his interest in the business not only contemplates its being taken over after a dissolution of the partnership, but expressly provides: "Said Philomena Schumaker agrees to enter into a partnership with them," etc.
Both the law of Ohio and the facts in this record settle the question that the partnership was dissolved by the death of Joseph J. Pater, and, while the children were given the option to take over the interest of their father in the business, the record fails to disclose any act on their part looking to that end. True, they wrote letters to Philomena Schumaker, expressing a desire to enter into a partnership, which she answered on April 8, 1925. She replied separately to each of said children. On April 21, 1925, she communicated with them again, and inclosed a draft of a partnership agreement. She recognized her obligation to enter into a partnership with said children, if they so desired. The record is silent as to any answer they made to her communication, or whether or not they accepted or rejected her offer of partnership with them.
The plaintiffs charge that Mrs. Schumaker has refused to enter into a partnership with them, and are asking a court of equity to grant them specific performance of a contract. It cannot be specific performance of a contract between Philomena Schumaker and Joseph J. Pater; nor can there be specific performance of a contract that is not before the court. A court of equity has no power to compel a person to enter into or to continue in a partnership. It is not authorized to appoint a receiver to carry on a partnership business, other than for the purpose of winding up the affairs of the partnership. A court of equity will not undertake to make a contract for the parties, nor to carry on a business for a partnership.
It follows that the relief is not equitable. If there has been a breach of contract, there would be an action at law, granting relief for such breach.
In this view, the prayer of the petition will be denied, and the petition dismissed.
Petition dismissed.
BUCHWALTER, P.J., and HAMILTON, J., concur.