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HERRICK v. CALDWELL. (05/23/55)

May 23, 1955


Appeals, Nos. 61 and 60, March T., 1955, from order of Court of Common Pleas of Butler County, Sept. T., 1949, in Equity, No. 12, in case of Aven B. Caldwell, Jr., and William L. Schultz v. Dr. R. B. Herrick, and June T., 1952, in Equity, No. 4, in case of Dr. R. B. Herrick v. Aven B. Caldwell, Jr. and William L. Schultz. Decree reversed.


Kenneth W. Rice, with him Carmen V. Marinaro, for appellant.

Lee C. McCandless, for appellees.

Before Stern, C.j., Stearne, Jones, Bell, Chidsey, Musmanno and Arnold, JJ.

Author: Chidsey

[ 382 Pa. Page 130]


The appellant, Dr. R. B. Herrick, a partner in a drive-in theater business located in Butler Township, Pennsylvania, brought an action in equity against the appellees, Aven B. Caldwell, Jr. and William L. Schultz, his co-partners, praying for a decree of dissolution, an accounting and distribution of the assets, and the appointment of a receiver. After the appellees by answer joined in the prayer, the court by an order dated May 7, 1952 appointed a receiver and directed him to wind up the business of the partnership and subject to the court's order to distribute the partnership assets after payment of the firm's debts. On June 6, 1952 the court confirmed a sale of the partnership property for the sum of $45,500 and on July 22, 1952 the receiver filed a report of all receipts and disbursements of the partnership showing a balance on hand of $42,254.25 together with a proposed schedule of distribution. Exceptions filed to this report by appellant, and to a subsequent order of court by both parties to the controversy were ultimately resolved in appellees' favor and a final decree was entered by the court on November 24, 1954*fn1 approving the schedule of distribution filed by the receiver. The present appeal at No. 60 March Term, 1955 is taken therefrom. Another appeal by the same appellant at No. 61 March Term, 1955 was abandoned at oral argument since it was taken from a decree entered April 14, 1952, well beyond the three month statutory limitation.

Although extremely complicated by the protracted proceedings below, the material facts are not in dispute and the principal legal question presented is a narrow one: Whether the partnership agreement provided a

[ 382 Pa. Page 131]

    method for distributing the assets upon dissolution contrary to that prescribed in the Uniform Partnership Act (Act of March 26, 1915, P.L. 18, 59 PS ยง 102).

In April of 1947 the parties entered into written articles of partnership for the purpose of operating a drive-in theater registered under the fictitious name Butler Drive-In Theater. The agreement provided, inter alia, that each of the appellees would contribute $5,000 to the joint venture and appellant all the remaining funds that should prove necessary to operate the business in excess of the $10,000 to be contributed by the appellees. The appellees were each to receive a salary of $50.00 per week for handling the managerial details of the theater. The agreement further stated in paragraph 4 that "The parties shall be deemed to own in said joint venture in or the accounting of the proceeds or profits as follows: R. B. Herrick 51% A. B. Caldwell 1/2 of 49% William [Schultz] 1/2 of 49%" (Emphasis supplied).

The theater opened on August 27, 1947. It was agreed that the total capital investment to July 31, 1951 was $50,364.57. To this amount the appellant admittedly contributed $11,682.30 and the appellees gave nothing. The balance required to finance the enterprise consisted of loans advanced to the partnership by outside interests which were repaid out of the profits of the business. On August 20, 1949 the appellees filed a bill in equity praying that the parties be adjudicated a partnership, each owning an undivided one-third interest and that the appellant account for the receipts and disbursements of the partnership. After hearing, the chancellor, Judge PURVIS, entered a decree directing the appellees and appellant to account to each other within 30 days on the basis set forth in paragraph 4 of their agreement; otherwise a master would be appointed to state an account between them.

[ 382 Pa. Page 132]

Exceptions filed by the appellees to the findings of fact and conclusions of law were subsequently dismissed by agreement and two stipulations of record signed by the parties and their attorneys were filed on July 20th and November 19, 1951. In the earlier stipulation they agreed to account to each other on the following basis after establishing the capital investment and operating expenses to July 31, 1951:

(a) That the capital investment be divided between the parties in accordance with the original agreement, $5,000 together with interest being charged to each of the appellees and the balance with interest being charged to appellant.

(b) That all money over and above the current operating expenses be determined to be profit which was to be applied to the individual obligations above set forth plus any contributions made by the individuals.

(c) That the profit remaining after the payment of the partners' capital contributions should be distributed in accordance with paragraph 4 of the agreement.

(d) That the amount owed by each to the other be determined and charged against the debtor's interest in the land, equipment and future earnings of the partnership.

The second stipulation provided as follows:

"In accordance with Stipulations heretofore filed, the parties further stipulate as to the accounting as follows:


That they have established the capital investment to July 31, 1951, to be $50,364.57.


That the parties establish the current operating expenses down to July 31, 1951, ...

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