Opinion
January 30, 1933.
March 20, 1933.
Partnership — Actions — Actions at law — Claim of one partner against another — Absence of accounting.
The general rule is that, in the absence of an express agreement, an action in assumpsit, as distinguished from a suit in equity, cannot be maintained in respect to partnership transactions unless there has been an accounting or settlement of the partnership affairs.
Before FRAZER, C. J., KEPHART, SCHAFFER, MAXEY, DREW and LINN, JJ.
Appeal, No. 102, Jan. T., 1933, by plaintiffs, from judgment of C. P. Lehigh Co., Jan. T., 1926, No. 50, refusing to take off nonsuit, in case of Walter G. Stephens and Harry L. Stephens, copartners, trading as Penn Fountain, v. Charles L. Lehnert. Affirmed.
Assumpsit for stock sold to partnership.
The opinion of the lower court, by RENO, P. J., was as follows:
The general, if not universal, rule is that, in the absence of an express agreement, an action in assumpsit, as distinguished from a suit in equity, cannot be maintained in respect to partnership transactions unless there has been an accounting or settlement of the partnership affairs. For this proposition it is not necessary to cite the authorities, except to point to the imposing collection appended to Martin v. McBryde, 21 A.L.R. 21, 34 et seq.
It is just as well settled that an action at law may be maintained by a party to an executory agreement to form a partnership to recover damages for the breach by other parties of the agreement. Under this rule, recovery can be had upon express promises in respect to advances or contributions to be made to the partnership. In this category belongs Rush Centre Creamery Co. v. Hillis, 3 Pa. Super. 527, the only case cited by plaintiffs and on which they rely. There, the defendant breached the agreement; he failed to furnish milk to the company in accordance with his agreement; the agreement was rescinded by the act of the defendant in refusing to carry it out. As to him, there was no partnership and, as a consequence, there were no partnership accounts to be settled preliminarily to the action, and, in a suit by the partnership (not, as here, by a part of the membership of the partnership), he was required to pay, as damages for the breach, his proportion of the sum necessary to purchase the plant and equipment. This the Superior Court said quite plainly, although the syllabus does not accurately reflect the true ground of the decision.
This authority does not rule the case at bar. Here, the partnership was formed, it commenced business, and, for aught appearing in the pleadings or evidence, it is still in business. The purpose of the action is to recover for the cost of stock and equipment which, under the partnership articles, were sold by plaintiffs to the partnership, consisting of plaintiffs and defendant, or, to put it differently, to recover for a contribution which defendant agreed to make to the partnership. However stated, the action will not lie at law.
Under the general principle stated in the first and second paragraphs hereof, an express agreement by one or more partners to pay another partner for property brought into the partnership may be enforced in assumpsit. A case in point is Seanor v. Fitt, 263 Pa. 389. There is no such express agreement in the case at bar. There is, first, a promise by defendant to contribute "such sum or sums of money" to the partnership "as will be necessary to cover the cost of" the stock and equipment of the new partnership, "as capital," not to exceed $12,000. There is, second, a promise of plaintiffs "to sell to the said copartnership formed by these presents" a part of the stock and equipment. There is, third, a promise by defendant "to purchase for" the partnership the said stock and equipment. His promise is to the partnership of which he became a member, not to the old partnership of which plaintiffs were members. They cannot recover because there was no express agreement running to them. If defendant breached the agreement to purchase, the new partnership has been injured and it, for the reasons already stated, cannot maintain an action at law.
Now, July 25, 1932, the rule to show cause why the judgment of nonsuit should not be taken off is discharged.
Motion to set aside nonsuit dismissed. Plaintiffs appealed.
Error assigned, inter alia, was refusal to set aside nonsuit, quoting record.
Orrin E. Boyle, for appellants.
S. H. Rupp, of Butz Rupp, for appellee.
Argued January 30, 1933.
The judgment of the court below is affirmed on the opinion of the learned President Judge.