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HomeMy WebLinkAbout92-2044 CivilGEORGE SULLENBERGER, JR., Plaintiff VS. RICHARD C. JEHU and KURTA. WAGNER, t/a VILLAGE FAMILY RESTAURANT, and the INTERNAL REVENUE SERVICE Defendants IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA 2044 CIVIL 1992 CIVIL ACTION - LAW IN RE: DECLARATORY JUDGMENT FINDINGS AND VERDICT BEFORE HESS, J. AND NOW, this ORDER day of March, 1998, alter hearing and careful consideration of the testimony adduced, the court finds and declares that the plaintiff, George F. Sullenberger, Jr., is not and has never been a partner in the business known as the Village Family Restaurant. Brooks R. Foland, Esquire For the Plaintiff Paige MacDonald-Matthes, Esquire For Defendant Jehu BY THE COURT, Douglas P. France, Esquire For Defendant Wagner :rlm GEORGE SULLENBERGER, JR., Plaintiff VS. RICHARD C. JEHU and KURTA. WAGNER, t/a VILLAGE FAMILY RESTAURANT, and the INTERNAL REVENUE SERVICE Defendants IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA 2044 CIVIL 1992 CIVIL ACTION - LAW IN RE: DECLARATORY JUDGMENT FINDINGS AND VERDICT BEFORE HESS, J. The plaintiff in this case seeks a declaration from the court to the effect that he is and was not a partner in a business known as the Village Family Restaurant and, therefore, is not responsible for its debts. The facts as we find them to be are as follows. The plaintiff, George Sullenberger, and the defendant, Richard L. Jehu, met in the mid 1980s. They had a number of business relations and were also good friends and often traveled together. The plaintiff owned and ran a successful repossession business. Because the plaintiff had more work than he could personally handle, he agreed to sell defendant Jehu fifty percent of his repossession business. The unwritten agreement between the parties provided that Jehu would pay $25,000 down and $60,000 in monthly installments thereafter. Later, Jehu approached the plaintiff and indicated that he had been unable to secure the $25,000 down payment. Instead, he indicated that the down payment would be paid from one-half of his profits from the Village Family Restaurant. Eventually, it was agreed that the plaintiff would receive 2044 CIVIL 1992 one-third of all of the profits of the restaurant. This was with the agreement of Mr. Jehu's partner, Kurt Wagner. Wagner had agreed to this arrangement because of representations made by Jehu that plaintiff had good credit and would contribute capital to the restaurant. Wagner admitted that he did not verify this information with the plaintiff or otherwise corroborate any of this information. The plaintiff, in fact, had no intention of making capital contributions. While the plaintiff spent time at the Village Family Restaurant and occasionally took meals there, he did not engage in the day-to-day management or supervision of it. He executed no leases of real or personal property or any other documents or contracts with vendors or with anyone else on behalf of the restaurant. He was not named on any checking or saving account and never had access to any of the restaurant's books, records, or payroll. He had no involvement or dealings with the vendors or suppliers of Village Family Restaurant and did not receive any salary or wages from it. When the business fell on hard financial times in the summer of 1991, the plaintiff was asked to pledge his personal credit so that the business could obtain a loan. This he refused to do. Plaintiff concedes that he attached a Schedule K-1 to his federal income tax return showing a loss in the restaurant business for the 1990 tax year. Nothing in the testimony of the trial indicated that the plaintiff attached this schedule with the knowledge that his return was materially incorrect or in violation of existing tax laws. As the fortunes of the restaurant business waned, Jehu and Wagner attempted to sell the Village Family Restaurant. Plaintiff was not involved in the attempted sale in any fashion. He 2 2044 CIVIL 1992 had no dealings with realtors or brokers nor was he named as a partner or party in any of the sales documents or in any letters concerning the prospective sale. In March of 1992, defendant, Kurt Wagner, signed a document which set forth a number of contingencies that had to be complied with before final settlement on the restaurant. The letter requested that certain documents be amended to reflect that the seller was a partnership "consisting of Wagner and Jehu." DISCUSSION The absence of a written partnership agreement with respect to the Village Family Restaurant is not in dispute. Thus, no written agreement was ever executed making the plaintiff a partner. The question in this case then becomes whether George Sullenger, Jr. is a partner by estoppel. As the plaintiff correctly observes, under the Uniform Partnership Act, the elements of partnership by estoppel are: 1. A representation to a third party that one is a partner; 2. Reliance upon that representation by the third party to whom it was made; and 3. The extension of credit by such party in reliance upon the representation. O'Brien and Geere Engineers, Inc. v. Taleghani, 525 F.Supp. 750 (E.D. Pa. 1981); See also 15 Pa.C.S.A. Section 8328. Moreover, the burden of proving partnership by estoppel is on the party asserting it. Rosenberger v, Herbst, 210 Pa. Super. 127, 232 A.2d 634 (1967). We are satisfied that partnership by estoppel is not applicable in this case. No 2044 CIVIL 1992 representation was made by the plaintiff or anyone else that Mr. Sullenberger was a partner in the Village Family Restaurant. Admittedly, one wimess heard the plaintiff use the term "partner" when discussing the restaurant. It is clear, however, that no third party relied upon any such representation in extending credit to or otherwise entering into contracts with the Village Family Restaurant. In addition to the theory of partnership by estoppel, the Uniform Partnership Act sets out other roles for determining the existence of a partnership. Section 8312 of the Act provides, in pertinent part, that: (4) The receipt by a person of a share of the profits of a business is prima facia evidence that he is a partner in the business, but no such inference shall be drawn if the profits were received in payment: (i) As a debt by installments or otherwise. · · · (v) As the consideration for the sale of the goodwill of a business or other property by installments or otherwise. 15 Pa.C.S.A. Section 8312(4). Thus, it is clear that the plaintiff's sharing in the profits of the Village Family Restaurant for the purpose of satisfying a debt owed to him by Jehu does not make him a partner. As we have noted, the plaintiff attached a Schedule K-1 to his income tax return reflecting a loss for the Village Family Restaurant. The plaintiff testified credibly that he did not understand the import of this attachment and did not intend, thereby, to hold himself out as a partner. We do not believe that this incident, standing alone, warrants a conclusion that the 4 2044 CIVIL 1992 plaimiff was a partner in the restaurant business. ORDER AND NOW, this l! '* day of March, 1998, after hearing and careful consideration of the testimony adduced, the court finds and declares that the plaintiff, George F. Sullenberger, Jr., is not and has never been a partner in the business known as the Village Family Restaurant. BY THE COURT, Brooks R. Foland, Esquire For the Plaintiff K~. Hess, J. Paige MacDonald-Matthes, Esquire For Defendant Jehu Douglas P. France, Esquire For Defendant Wagner :rim