Rosenfeld v. Rosenfeld

• Decision Date: 28 June 1957
• Citation: 133 A.2d 829,390 Pa. 39
• Parties: , 66 A.L.R.2d 1013 Samuel ROSENFELD and Samuel Rosenfeld, Executor of the Estate of Isadore Rosenfeld, deceased, v. David ROSENFELD, Harry Rosenfeld, David Rosenfeld II, and Jack Rosenfeld, Appellants, and Sidney Singer, Fisk Realty Co., Inc., a Pennsylvania corporation, and Quaker Cleaners, Inc., a Pennsylvania corporation. Appeals of David ROSENFELD and others.
• Court: Pennsylvania Supreme Court

Page 829

133 A.2d 829

390 Pa. 39, 66 A.L.R.2d 1013

Samuel ROSENFELD and Samuel Rosenfeld, Executor of the Estate of Isadore Rosenfeld, deceased, v. David ROSENFELD, Harry Rosenfeld, David Rosenfeld II, and Jack Rosenfeld, Appellants and Sidney Singer, Fisk Realty Co., Inc., a Pennsylvania corporation, and Quaker Cleaners, Inc., a Pennsylvania corporation Appeals of David ROSENFELD and others.

Supreme Court of Pennsylvania.

June 28, 1957.

Elder W. Marshall, Carl E. Glock, Jr., Leonard L. Scheinholtz, Reed, Smith, Shaw & McClay, John A. Metz, Jr., Metz, McClure & MacAlister, Pittsburgh, for appellants.

William H. Eckert, Smith, Buchanan, Ingersoll, Rodewald & Eckert, Samuel Kaufman, Benjamin Jacobson, Milton W. Lamproplos, Pittsburgh, for appellees.

Before CHARLES ALVIN JONES, C. J., and BELL, CHIDSEY, MUSMANNO, ARNOLD, BENJAMIN R. JONES and COHEN, JJ.

CHIDSEY, Justice.

These are appeals by four of the defendant partners from that portion of a final decree in equity, affirming the adjudication of the chancellor, which ordered the defendant partners to account to the partnership and the plaintiff partner for certain salaries previously paid to them under a written salary agreement.

Plaintiff brought this suit primarily to enforce a stock proxy held by him in a dry cleaning business conducted by a partnership and two corporations as a unitary enterprise. The individual defendants are the other partners, and are also the other stockholders in the two corporations named as defendants. Defendants denied the validity of the proxy and sought to restrain plaintiff from exercising it on the ground that he was interested in a competing dry cleaning business. The chancellor held in favor of the plaintiff and decreed that the proxy was valid and that plaintiff's vote thereof should be recognized. No exceptions were taken to the findings, conclusions of law, or decree nisi on this principal issue, and appellants make no objection to that part of the final decree.

The facts found and supported by the evidence may be summarized as follows: Plaintiff's father, Isadore Rosenfeld, was one of the founders of a partnership known as Liberty Cleaners & Dyers (hereinafter called Liberty) engaged in the wholesale dry cleaning business, and when defendant David Rosenfeld, plaintiff's uncle, joined him shortly thereafter, each owned a 50% interest in the firm. In 1933, defendant Fisk Realty Co., Inc. was incorporated in Pennsylvania to hold title to the real estate on which the cleaning plant was operated. Two years later the partnership entered into the retail dry cleaning business and defendant Quaker Cleaners, Inc. was formed to operate retail stores which were opened, the receipts therefrom belonging to Liberty. In 1938, Isadore Rosenfeld gave his son, Samuel Rosenfeld, plaintiff, one-half of his 50% interest. Three years later defendants Harry Rosenfeld and Jack Rosenfeld were admitted to the partnership; they having acquired a 15% and 10% interest respectively from David Rosenfeld. In 1946 defendant David Rosenfeld II purchased a 7-1/2% interest from Isadore, and defendant Sidney Singer bought a similar interest from plaintiff. Isadore died on April 27, 1951, and his interest passed to, and now belongs to, plaintiff, Samuel Rosenfeld, either individually or as executor of his father's estate. At the time this suit was instituted, and until the adjudication and thereafter, the interests of the partners in the partnership and the corporations have been as follows: plaintiff, 35%; David Rosenfeld, 25%; Harry Rosenfeld, 15%; Jack Rosenfeld, 10%; David Rosenfeld II, 7-1/2%; and Sidney Singer, 7-1/2%.

When David Rosenfeld II and Sidney Singer became partners in 1946, they each signed a proxy giving to Isadore and Samuel Rosenfeld and the survivor of them the right to vote their stock in the two corporations, thus enabling the survivor to retain 50% control of the business. At the same time, all the individual partners entered into written articles of partnership. Paragraph Thirteenth of these partnership articles, which were in effect on April 27, 1951 when Isadore Rosenfeld died, provided that the partnership should terminate on the sixtieth day after the death of Isadore Rosenfeld.

Before 1937 Liberty's profits were modest, but as more Quaker retail stores were opened, Liberty's profits increased to large and substantial amounts. Up until 1948, plaintiff did considerable work for the partnership, including the fitting out and opening of various Quaker retail stores. Plaintiff has not been active in the business since 1958, but this is due to appellants' having excluded him from participation. ¹ Appellants admit that they do not want plaintiff to resume active participation in the business.

Prior to Isadore's death on April 27, 1951, the defendant partners had been receiving weekly salaries as follows: David Rosenfeld, $100; Harry Rosenfeld, $250; Jack Rosenfeld, David Rosenfeld II and Sidney Singer, each $125. On or about June 29, 1951, all the remaining partners entered into a written salary agreement (under seal and under the provisions of the Uniform Written Obligations Act), which provided that the salaries for the defendant partners who were actively engaged in the operation of the partnership business, should be increased to the following amounts per week: David Rosenfeld, $600; Harry Rosenfeld, $550; Jack Rosenfeld, $325; David Rosenfeld II and Sidney Singer, each $275. This written salary agreement states that the increased salaries were to be effective on July 1, 1951, but is silent as to its term of duration. The agreement increased the salaries of the defendant partners by an aggregate of $67,600 annually, and reduced plaintiff's 35% share of the profits by $23,600 per year. The chancellor found that at the time this agreement for increased salaries was entered into, the individual defendants agreed that they would continue to recognize plaintiff's 50% control of the business and that plaintiff's share of the profits would be protected. Appellants repudiated their promise; they continued to exclude plaintiff from active participation in the business, attempted to repudiate the voting proxy involved in the principal issue in the court below, tried to remove plaintiff as an officer of the defendant corporations, and otherwise sought to reduce his rights to a 50% voice in the management and a 35% share of the profits of the business. On March 31, 1952, plaintiff notified the defendant partners by letter that he no longer agreed to the salaries specified in the agreement of June 29, 1951 and demanded that the salaries be reduced to the scale in effect prior to the agreement. Defendants refused to lower their salaries, but on the contrary, on May 25, 1953, appellants, over plaintiff's protest, signed another instrument again raising the salaries of Jack Rosenfeld, David Rosenfeld II, and Sidney Singer. The chancellor found that the salaries which the defendants are receiving are consuming an unconscionable proportion of the profits of the business, and this disproportion is growing, due to the substantial decline in the profits of the business; though plaintiff owns 35% of the business, he is receiving a much smaller and unfair percentage of its earnings, and no salary whatsoever. The chancellor and the unanimous court en banc held that the individual defendants must account for the salaries which they drew from the partnership after April 1, 1952, the date when plaintiff informed them that he no longer agreed to the salary increase, to the extent that they exceeded the amounts of their respective salaries prior to July 1, 1951.

Section 18 of the Uniform Partnership Act, March 26, 1915, P.L. 18, part IV, § 18, 59 P.S. § 51, provides:

'The rights and duties of the partners in relation to the partnership shall be determined, subject to any agreement between them, by the following rules:

* * *

* * *

'(f) No partner is entitled to remuneration for acting in the partnership business, * * *.' (Emphasis supplied).

The law is clear that in the absence of an agreement to the contrary, a partner is not entitled to compensation beyond his share of the profits, for services rendered by him in performing partnership matters. Kirby v. Kalbacher, 373 Pa. 103, 95 A.2d 535; Lacey v. Rutter, 366 Pa. 17, 76 A.2d 389; Rolshouse v. Wally, 272 Pa. 506, 116 A. 474; Delp v. Edlis, 190 Pa. 25, 42 A. 462; Lindsey v. Stranahan, 129 Pa. 635, 18 A. 524; Marsh's Appeal, 69 Pa. 30; 40 Am. Jur. § 120. In the absence of a contract, a right to compensation arises only where the services rendered extend beyond normal partnership functions: Bracht v. Connell, 313 Pa. 397, 170 A. 297; Herman v. Pepper, 317 Pa. 349, 176 A. 201. This is basic and fundamental under partnership law.

Appellants do not contend that the work they performed for the partnership was beyond normal partnership matters. They do contend that by virtue of the agreement of June 29, 1951, increasing the salaries of the defendant partners, they thereby came within in the exception of Section 18 of the Uniform Partnership Act quoted supra, that this contract was binding on the plaintiff, and therefore he could not lawfully terminate it by his notice of March 31, 1952.

As previously noted, the agreement in question is silent with respect to its intended duration. Appellants contend that the salary agreement was intended to have a duration co-extensive with the life of the partnership itself. In Cummings v. Kelling Nut Company, 368 Pa. 448, 451, 452, 84 A.2d 323, 325, this Court said: 'The general rule is that when a contract provides that one party shall render services to another, or shall act as an agent, or shall have exclusive sales rights within certain territory, but does not specify a definite time or prescribe conditions which shall determine the duration of the relation, the contract may be terminated by either party at will: Coffin v. Landis, 46 Pa. 426; ...