Appeals from decree of Court of Common Pleas of Allegheny County, Oct. T., 1964, No. 1182, and Jan. T., 1965, No. 2194, in cases of Charles H. Clement v. L. W. Clement et al., and Same v. L. W. Clement et al.
Charles D. Coll, for appellant.
Marvin J. Apple, for appellees.
Harold A. Gold, with him Baskin, Boreman, Sachs, Gondelman & Craig, for appellee.
Jones, Cohen, Eagen, O'Brien, Roberts and Pomeroy, JJ. Opinion by Mr. Justice Roberts. Mr. Chief Justice Bell took no part in the consideration or decision of this case. Dissenting Opinion by Mr. Justice Eagen.
Charles and L. W. Clement are brothers whose forty year partnership has ended in acrimonious litigation. The essence of the conflict lies in Charles' contention that L.W. has over the years wrongfully taken for himself more than his share of the partnership's profits. Charles discovered these misdeeds during negotiations with L.W. over the sale of Charles' interest in the partnership in 1964. He then filed an action in equity, asking for dissolution of the partnership, appointment of a receiver, and an accounting. Dissolution was ordered and a receiver appointed. After lengthy hearings on the issue of the accounting the chancellor decided that L.W., who was the brighter of the two and who kept the partnership books, had diverted partnership funds. The chancellor awarded Charles a one-half interest in several pieces of property owned by L.W. and in several insurance policies on L.W.'s life on the
ground that these had been purchased with partnership assets.
The court en banc then heard the case and reversed the chancellor's decree in several material respects. The reversal was grounded on two propositions: that Charles' recovery could only be premised on a showing of fraud and that this burden was not met, and that the doctrine of laches foreclosed Charles' right to complain about the bulk of the alleged misdeeds.
We disagree with the court en banc's statement of the applicable law and therefore reverse. Our theory is simple. There is a fiduciary relationship between partners. Where such a relationship exists actual fraud need not be shown. There was ample evidence of self-dealing and diversion of partnership assets on the part of L.W. -- more than enough to sustain the chancellor's conclusion that several substantial investments made by L.W. over the years were bankrolled with funds improperly withdrawn from the partnership. Further, we are of the opinion that the doctrine of laches is inapplicable because Charles' delay in asserting his rights was as much a product of L.W.'s concealment and misbehavior as of any negligence on his part. In all this we are strongly motivated by the fact that the chancellor saw and heard the various witnesses for exhausting periods of time and was in a much better position than we could ever hope to be to taste the flavor of the testimony.
The Act of 1915, March 26, P. L. 18, part IV, § 21, 59 P.S. § 54, very simply and unambiguously provides that partners owe a fiduciary duty one to another. See also P.L.E. Partnerships, §§ 71, 91, 93. One should not have to deal with his partner as though he were the opposite party in an arms-length transaction. One should be allowed to trust his partner, to expect that he is ...