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HomeMy WebLinkAbout98-3420 equityAHM ASSOCIATES, a general partnership, SAMUEL L. ANDES and CARLTON E. HUGHES, Plaintiffs VS. ROBERT M MUMMA,II, Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA o 98-3420 EQUITY CIVIL ACTION- EQUITY IN RE: PETITION FOR DECLARATORY JUDGMENT BEFORE HESS, J. ORDER AND NOW, this day of September, 2000, the request of the plaintiffs for declaratory judgment is GRANTED and the court determines and declares that Samuel L. Andes and Carlton E. Hughes constitute a majority of the partners in AHM Associates and that they may, on behalf of the partnership, take all actions necessary to sell and convey the partnership' s property at 1011 Mumma Road and 1007 Mumma Road and take all other actions necessary to consummate the agreements between the partnership and Davis and tenant. BY THE COURT, Hubert X. Gilroy, Esquire For the Plaintiffs Kevin ~Hess, J. Mark D. Bradshaw, Esquire For the Defendant :rim AHM ASSOCIATES, a general partnership, SAMUEL L. ANDES and CARLTON E. HUGHES, Plaintiffs VS. ROBERT M MUMMA,II, Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA o 98-3420 EQUITY CIVIL ACTION- EQUITY IN RE: PETITION FOR DECLARATORY JUDGMENT BEFORE HESS, J. MEMORANDUM OPINION AND ORDER The plaintiffs seek a declaratory judgment as part of the relief sought in the captioned matter. Specifically, they seek a declaration that the affairs of AHM Associates, a partnership, may be conducted by a majority vote of the partners, there being no understanding to the contrary in the partnership agreement. Since this is rather clearly the law, we will grant the plaintiffs' petition. Because we believe they are supported by the record, we adopt the statement of facts as set forth in the plaintiffs' memorandum of law: 1. Prior to March of 2000, the minority shareholder, Robert M. Mumma, II, ("Mumma") demanded that AHM liquidate all of its assets, including two commercial office buildings in Wormleysburg, so that the partnership could be liquidated and the net proceeds be distributed among the partners. All partners agreed and the two properties were listed for sale. 2. In March of 2000, AHM entered into an agreement with Charles Davis and his wife to sell both of its commercial office buildings to Davis for a gross sale price of $2,775,000.00. All three partners, including Mumma, participated in the negotiation of that agreement and all three of them signed the agreement. 98-3420 EQUITY 3. In April of 2000, one of the tenants of the building at 1011 Mumma Road, Brown Schultz Sheridan & Fritz ("Brown Schultz") exercised a right of first refusal under its.lease with AHM. After several weeks of negotiations between AHM and Brown Schultz, Brown Schultz agreed to pay $1,950,000.00 for the property at 1011 Mumma Road. 4. Thereafter, during the months of June and July, Davis and Brown Schultz negotiated an arrangement whereby Davis would purchase both buildings and Brown Schultz would pay reduced rent due under its lease for the property at 1011 Mumma Road. 5. In July of 2000, Davis and Brown Schultz signed agreements to implement their arrangements and presented those agreements to AHM. 6. Following a series of conferences by telephone, in which all three partners of AHM participated, two of the partners (Andes & Hughes) executed a new agreement with Davis, on behalf of the partnership. 7. After all of the agreements were signed, Mumma refused to sign the agreements and instead proposed that AHM "sell" or otherwise transfer to him the property at 1007 Mumma Road. The law with regard to declaratory remedies provides that courts of record "shall have power to declare rights, status and other legal relations whether or not further relief is or could be claimed." 42 Pa.C.S.A. 7532. Though the defendant has raised the issue, we can find no authority for the proposition that a grant of declaratory relief requires the plaintiff to establish the prerequisites for a preliminary injunction; i.e., immediate and irreparable harm. In fact, it is not necessary for a petition brought under the Declaratory Judgments Act to allege injury or harm to the petitioner. Parker v. Com., Dept. of Public Welfare, 49 Pa. Cmmwlth. 619, 411 A.2d 897 98-3420 EQUITY (1980). On the other hand, in order to obtain declaratory relief, a plaintiff must establish an interest in the matter which is direct, substantial and present. South Whitehall Township v. Com., Dept. of Transp., 82 Pa. Cmmwlth. 217, 475 A.2d 166 (1984). Clearly, the plaintiffs have met those criteria in this case. Section 103 of the Uniform Partnership Act, 15 Pa.C.S.A. 8331, specifically provides that any differences arising as to the conduct of partnership business may be decided by a majority of the partners as long as the partnership agreement does not provide otherwise. This appears to be simply a codification of a long-standing common law principle. As noted in Markle v. Wilbur, 50 A. 204 at 207 (Pa. 1901)' But who determines whether the particular act complained of is necessary for the successful carrying on of the co-partnership? If, on a mere complaint and non-assent of the minority, there is no power in the majority, then the minority, in effect, carries on the partnership. If it is determined by the court on conflicting evidence, then the court carries it on. This is not the law. The role laid down in Story_, Partn. § 123, is stated thus' "But another question may arise, and that is whether, in case of partnership, the majority is to govern in case of a diversity of opinion between the partners as to the partnership business and the conduct thereof, or whether one partner can, by his dissent, arrest the partnership business, or suspend the ordinary powers and authority of the other partners in relation thereto against the will of the majority, where there is no stipulation in the partnership articles to control or vary the result (for, if there be any stipulation that ought to govern). The general rule would seem to be that each partner has an equal voice, however unequal the shares of the respective parties may be; and the majority, acting fairly and bona fide, have the right and authority to conduct the partnership within the tree scope thereof, and dispose of the partnership 98-3420 EQUITY property, notwithstanding the dissent of the minority." .... It would be unreasonable to expect that all members of a partnership should see alike upon all questions, and for that reason a mere difference of opinion about the best thing to do, or the best way of doing it, does not necessarily work a dissolution, or send the business and assets of the firm to a receiver. It was the rule of the common law that the contracts of partnership must be governed, like other agreements, by the principles of natural law and justice. It has accordingly been held that, where a firm consists of more than two persons, the majority, acting fairly and in good faith may direct the conduct of its affairs as long as they keep within the purpose and scope of the partnership. In this case, all of the partners of AHM are in agreement that the partnership should be dissolved and its assets sold. Two of the partners desire to follow through on an agreement to sell the partnership's office buildings to Davis. Mr. Mumma prefers an arrangement whereby the sale of the buildings would involve transfer of one of them to him. The disagreement appears to us to be clearly one which can be resolved by majority vote. There is nothing in the testimony thus far adduced in this case which suggests that the majority partners are acting in bad faith. We will, accordingly, enter a declaration allowing the sale of partnership assets to a third party by action of a majority of the partners. We leave, however, for another day the question of any potential liabilities of the partners, inter se. ORDER AND NOW, this day of September, 2000, the request of the plaintiffs for declaratory judgment is GRANTED and the court determines and declares that Samuel L. Andes and Carlton E. Hughes constitute a majority of the partners in AHM Associates and that they may, on behalf of the partnership, take all actions necessary to sell and convey the partnership's 98-3420 EQUITY property at 1011 Mumma Road and 1007 Mumma Road and take all other actions necessary to consummate the agreements between the partnership and Davis and tenant. BY THE COURT, Hubert X. Gilroy, Esquire For the Plaintiffs Mark D. Bradshaw, Esquire For the Defendant :rim .la~A. Hess, J.