Stone v. Stone

• Decision Date: 25 March 1974
• Docket Number: No. 53958,53958
• Citation: Stone v. Stone, 292 So.2d 686 (La. 1974)
• Parties: Lawrence A. STONE, II, Plaintiff-Appellant-Relator, v. Langdon STONE and the Lawrence A. Stone Agency, Defendants-Appellees-Respondents.
• Court: Louisiana Supreme Court

Page 686

292 So.2d 686

Lawrence A. STONE, II, Plaintiff-Appellant-Relator, v. Langdon STONE and the Lawrence A. Stone Agency Defendants-Appellees-Respondents.

No. 53958.

Supreme Court of Louisiana.

March 25, 1974.

Rehearing Denied April 26, 1974.

Geoffrey H. Longenecker, Porteous, Toledano, Hainkel & Johnson, New Orleans, for plaintiff-applicant.

C. Ellis Henican, Henican, James & Cleveland, New Orleans, for defendants-respondents.

TATE, Justice.

The Lawrence A. Stone Agency ('the Agency') is an insurance agency partnership composed of the late founder's sons, Lawrence A. Stone, II ('Lawrence'), and Langdon Stone ('Langdon'). By this acton, Lawrence brings suit against Langdon and the Agency to dissolve the partnership and to partition its effects.

The previous courts sustained an exception of prematurity. 281 So.2d 181 (La.App.4th Cir. 1973). The basis of the exception was a clause in the partnership memorandum requiring arbitration of any dispute arising over the firm's operation.

We granted certiorari, 283 So.2d 768 (La.1973), to consider Lawrence's contention that the arbitration clause could not preclude his suit to dissolve the partnership, because his right to dissolve it at will was not subject to any defense.

1.

Following the decedent Stone's death, his sons Lawrence and Langdon entered into a partnership memorandum along with their mother, Mrs. Sally Stone, the decedent's widow. The partnershp, composed of Lawrence and Langdon, agreed to compensate Mrs. Stone six hundred dollars per month for the use of the name, 'The Lawrence A. Stone Agency', as well as for her services. They agreed that the partnership 'shall terminate upon the death of either partner', with the right of the surviving partner to continue to use the partnership name, provided he continued to pay Mrs. Stone the monthly sum of six hundred dollars.

Additionally, the partnership memorandum included an agreement that '* * * if there should ever arise any dispute between Lawrence A. Stone, II and Langdon Stone over any matter pertaining to the operation of the partnership, the dispute shall be settled under and in accordance with the provisions of the Louisiana Arbitration Act * * *.' (See La.R.S. 9:4201--17.)

The suit alleges cause for dissolution, namely, certain alleged improper partnership acts and neglect of partnership business on the part of Langdon. However, in this court, the plaintiff Lawrence relies primarily upon his allegation praying for dissolution and upon the unqualified right of a partner to dissolve a partnership of unlimited duration (providing there is no bad faith and providing the dissolution is not requested unseasonably at a time unduly prejudicial to the partnership), Louisiana Civil Code, Articles 2884--86.

The defendants did not plead that the request for dissolution is made in bad faith or unseasonably. The only ground alleged by their exception urging prematurity is that under the arbitration clause the agreement provides 'that any and all disputes that might arise' shall be settled in accordsiana Civil Code Article 2884--86.

2.

A partnership may be entered into either for a specified duration or else without agreement as to duration. Civil Code Article 2853.

If for a specified duration, the partnership ends at the expiration of time specified. Articles 2876(1), 2877. However, it may also be dissolved by one of the partners for just cause, Articles 2887, 2888,¹ or by the death of a partner unless contrary agreement was made, Article 2880.

If the partnership was contracted without any limitation of time, it is presumed to have been entered into for the lifetime of the partners. Article 2854. However, as well as being dissolved by the death of a partner, Article 2880, one of the partners may dissolve the partnership by simple notice to his partner(s), in the absence of bad faith or undue prejudice to the partnership interests. Articles 2884--86.²

In the case of a partnership of unlimited duration, the right to dissolve is qualified only in that it must be exercised in good faith and done 'seasonably'. Article 2884. An unseasonable dissolution is one made at an inopportune time, when it is in the interest of the Partnership that its dissolution be postponed. Article 2886. The right of a partner to dissolve a partnership without duration is 'a matter of public order, because it is destined to protect individual liberty * * *.' Planiol, Civil Law Treatise, Volume 2, No. 1984 (LSLI Translation 1959).

See also Comment, Dissolution and Termination of Partnerships, 45 Tul.L.Rev. 389 (1971).

3.

As we understand it, the respondents Langdon and the Agency contend that the intention of the partnership memorandum was to constitute it for the life of the partners, i.e., for that definite duration. Therefore, since it needed Cause for its dissolution, such cause is subject to arbitration, being a dispute arising out of the operation of the partnership.

This contention is also founded upon the provision of the agreement that the partnership continue to pay Mrs. Stone a monthly sum during its existence. It is contended that this evidences a desire to pay the widow a monthly income during her lifetime.

We cannot so hold. According to the partnership memorandum, the interest of the widow was to receive six hundred dollars per month so long as the name of her husband's firm, 'The Lawrence A. Stone agency', was used by the partnership or its successor. Insofar as the partnership, Mrs. Stone had by the agreement no right to continue it if the partners wished to dissolve it;³ only the right to receive a monthly income so long as the firm name was used for the business done. She had no right, therefore, to force the partnership to continue in business just to pay her the monthly sum.

Once the partnership was dissolved and ceased to use the firm name, there was no further obligation to her. For this reason, insofar as the Partnership is concerned (which itself had no interest in Continuing indefinitely to pay six hundred dollars monthly to Mrs. Stone), it was not 'unseasonable' of a partner to request dissolution of the partnership, simply because the dissolution might terminate this obligation. It can hardly be contended that it is in the best interest of a partnership to continue in existence simply to perpetuate this or any obligation which it otherwise would not owe.

The agreement that the partnership 'shall terminate upon the death of either partner' did not, in our opinion, constitute an agreement to form a partnership of definite duration, i.e., for the lifetime of the partners; at least in the absence of further language instancing such an intent. The provision merely confirms the duration for the life of the partners, as is presumed in the absence of agreement to a specified time for the duration of the partnership. Article 2854.⁴

If this intention be deemed ambiguous, we construe the instrument in favor of indefinite duration and thus as terminable upon notice, rather than in favor of lifetime duration and thus terminable only for cause.

We do so in view of the public policy evidenced by the articles favoring freedom of individuals. See Planiol cited above. We do so also because of the general polcy consideration that the partnership relationship is essentially founded on mutual trust and confidence and terminable when such cease, Breaux v. LeBlanc, 50 La.Ann. 228, 23 So. 281, 284 (1898); so that a construction favoring freedom to dissolve should be given as against one limiting the right to do so, in the absence of specific intention to the contrary.

4.

Under the present facts, therefore, a partner with the right to terminate a partnership at will has requested its dissolution. The sole ground urged by the exception of prematurity is that the partnership agreement provides that if 'any Dispute . . . over any matter pertaining to the operation of the partnership' should arise between the parties, then it is subject to arbitration.

Under these circumstances, there is no dispute between the parties subject to arbitration. The requesting partner has the unqualified right to dissolve the partnership, under the facts at issue. There is nothing to arbitrate. It is, further, doubtful that the agreement to arbitrate 'any dispute . . . over any matter pertaining to Operation of the partnership' intended to include within the scope the right of either party to demand Dissolution of the partnership, in the absence of language more clearly specifying such intent. See Domke on Commercial Arbitration, section 13.03 ('Partnership') (1968).

Arbitration presupposes that an arbitrator may decide in favor of one party and against another. Here, the legal right of a partner to dissolve the partnership at his will is not a 'dispute' subject to arbitration, at least in the absence of further showing.

In our opinion, this is the sense of the provision in the Louisiana Arbitration Law, La.R.S. 9:4201--17, that: 'A provision . . . to settle by arbitration . . . shall be valid, irrevocable, and enforceable, Save upon such grounds as exist at law . . . for the revocation of any contract.' La.R.S. 9:4201.⁵

Thus, as where the contract is inherently invalid as in violation of a statutory provisions, Domke cited above at Section 8.06, or as where the agreement to arbitrate involves a matter not subject to non-judicial determination, such as custody of children (Domke, Section 13.08) or questions of law as to whether there has been a patent infringement (Domke, Section 13.05), the legal issue involved is non-arbitrable: For the legal right of a partner to dissolve a partnership of indefinite duration is an unqualified right, under the facts pleaded.

We are aware that Bodman, Murrell & Webb v Acacia Foundation of L.S.U., Inc., 246 So.2d 323 (La.App.1st Cir. 1971), certiorari denied, 258 La. 766, 247 So.2d 864 (1971), has interpreted La.R.S. 9:4201, the quoted statute, as meaning 'only that there must exist grounds for...