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O'DONNELL v. MCLOUGHLIN. (09/24/56)

September 24, 1956

O'DONNELL, APPELLANT,
v.
MCLOUGHLIN.



Appeal, No. 212, Jan. T., 1956, from decree of Court of Common Pleas No. 7 of Philadelphia County, Dec. T., 1954, No. 1738, in case of Hugh O'Donnell, Jr. v. George E. McLoughlin. Decree reversed. Equity. Before CRUMLISH, J. Adjudication filed directing receiver to sell partnership business to high bidder between partners and, failing such sale, to proceed to dissolution of partnership; exceptions to adjudication dismissed and final decree entered. Plaintiff appealed.

COUNSEL

Joseph D. Burke, for appellant.

Daniel Mungall, Jr., for appellee.

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

Author: Jones

[ 386 Pa. Page 188]

OPINION BY MR. JUSTICE JONES

This litigation eventuated from a partnership between the plaintiff and the defendant. The facts essential to an understanding of the question presented by this appeal are as follows.

On November 14, 1950, O'Donnell, the plaintiff, and McLoughlin, the defendant, entered into formal written articles of partnership for the conduct of a cooperage business in Philadelphia under the firm name of McLoughlin Bros. As provided by the articles, the partnership was to continue until December 31, 1951, and, thereafter, from year to year "subject to dissolution at the end of any calendar year by three months' written notice." The articles elsewhere provided that, "in the event either partner [desired] to withdraw from the partnership", he would "sell his interest in the partnership to the other partner" at a price to be determined by a prescribed formula. This particular article also contained a restrictive convenent against a withdrawing partner's engaging in a business similar to that of the partnership within a defined local area and a specified period of time.

Although the partnership business proved to be very profitable, mutual distrust arose to mar the relationship of the partners with the ultimate result that, on September 29, 1954, O'Donnell notified McLoughlin by letter that he intended to terminate the partnership and offered to sell his interest to McLoughlin at a certain stated price. McLoughlin responded in writing, accepting O'Donnell's offer of sale but stipulating that the price should be paid in installments as provided in the article which covered the withdrawal of a partner.

[ 386 Pa. Page 189]

O'Donnell answered that he was not a withdrawing, but a terminating, partner entitled, in keeping with his timely notice, to have the partnership dissolved, and that the provision for installment payments of the sale price for a partner's interest was not germane. Having thus arrived at an impasse, O'Donnell, on December 20, 1954, filed his complaint in equity for a dissolution and liquidation of the partnership. On the succeeding day, McLoughlin filed his complaint seeking specific performance of O'Donnell's offer of sale to be paid for, however, as McLoughlin insisted, in installments as in the case of a withdrawing partner. The two suits were consolidated for trial and terminated in the decree from which O'Donnell brought this appeal.

At a hearing on both causes on December 31, 1954, the learned chancellor, pursuant to a stipulation of respective counsel for the parties, appointed a receiver for the partnership pending final decree, and defined his duties. After further hearings, the chancellor on July 20, 1955, filed, under the caption of both suits, and adjudication wherein he held that, due to an ambiguity in paragraph 17 of the partnership articles, there was no contract of sale created by the exchange of letters between the partners. Paragraph 17 contained the provision relating to the dissolution of the partnership at the end of a calendar year upon three months' prior notice by one partner to the other. The chancellor found, inter alia, that "The partners in their personal relations in the business are irreconcilably estranged" and that "Section 16 of the articles of partnership ...


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