Case Name: Jennings, Beale & Co.'s Appeal
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1888-04-23
Citations: 2 Monag. 188
Docket Number: Appeal, No. 42
Parties: Jennings, Beale & Co.’s Appeal.
Judges: 
Reporter: Cases in the Supreme Court of Pennsylvania; being those cases not designated to be reported
Volume: 2
Pages: 188–193

Head Matter:
Jennings, Beale & Co.’s Appeal.
An injunction to restrain one from acting as superintendent of a limited partnership, against the will of the majority of the managers, will be issued, where the bill alleges irreparable injury. That the defendant is the holder of a large amount of stock, will not prevent equitable interference. Nor will the fact that the parties entered into articles of agreement, in addition to the certificate under the Act of June 2, 1874, providing that the majority in number and value should decide all questions in relation to the business, but subject to such control, the defendant sliould have special charge of the mills, etc., at a specified salary, the defendant having been elected superintendent for one year, resigned and withdrew his resignation, but the office was abolished by a majority of the stockholders at the end of the year.
March 8, 1888.
Appeal, No. 42, Oct. T., 1888, from C. P. Armstrong Co., refusing a preliminary injunction, on a bill in equity by Jennings, Beale & Co., Limited, against Jos. G. Beale, at March T., 1888, No. 69. Trunkey and Clark, JJ., absent.
The facts appear by the opinion of the court, by Neale, P. J.:
“This bill was filed Dec. 22, 1887. It is purely a bill for an injunction, and sets out that Benj. F. Jennings, John Davis, Robert Flenniken and Jos. G. Beale, are members of a copartnership organized and doing business in Leechburg, under the Act of June 2, 1874.
“ The bill recites that the interest of the partners are divided as follows: B. F. Jennings, 85 shares of $1,000 each; John Davis, 10 shares of $1000 each; Robert Flenniken, 10 shares of $1000 each; Jos. G. Beale, 45 shares of $rooo each; in all making 150 shares of $150,000.
“ The certificate of partnership was duly acknowledged on Oct. 27, 1886, and recorded in Armstrong county, on Nov. 2,1886. Under those articles, the shares were as follows: Jos. G. Beale, 70 shares; Benj. F. Jennings, 70 shares; and John Davis, 10 shares; Robert Flenniken not appearing as a partner or shareholder.
“ On Oct. 27, 1886, contemporaneous with the acknowledgment of the certificate of partnership, an independent article of partnership was also executed by Jos. G. Beale, Benj. F. Jennings and John Davis, reciting the various terms and conditions of the partnership association, the first provision being as follows: ‘ 1st. The majority in number and value shall decide all questions in relation to the business of said association, but subject to such control, the said Jos. G. Beale shall have special charge of the mills and manufacture of such material as they propose to sell; the said B. F. Jennings shall have special charge of the finances and the purchase of material; and the said John Davis shall perform the duties usually appertaining to a secretary and treasurer in limited associations. Each of said partners, however, shall give his whole time, skill and attention to the business of the association; and, as compensation for the services rendered as above provided, the said Beale and Jennings shall each be entitled to draw out of the funds of the association the sum of $3,000 per annum, and the said Davis the sum of $1,500 per annum, to be charged to expense account.
“ A subsequent article was signed by the said parties and by Robert Flenniken, by which he, Robert Flenniken, was constituted a member of the firm and designated the treasurer, with an annual salary of $1,200. This addition to the original article was executed Feb. 27, 1887.
“ It appears by the bill that, ‘on Oct. 17, 1886, Jos. G. Beale was duly elected superintendent of manufacturing, to hold office for one year.....On Oct. 14, 1887, said Beale tendered his resignation, to take effect on Oct. 25, 1887, or not later than that date, which, at the request of B. F. Jennings, who was the chairman, the time was extended until the association should be able to secure a successor.’ But it does not appear that any action was taken by the firm until Nov. 22, 1887, when there was a meeting of the shareholders of the association. At this meeting, and before action was taken upon the letter of resignation, another letter was presented to the meeting by Jos. G. Beale, revoking his resignation. This the members refused to recognize, but proceeded to act upon the letter of resignation, and thereupon declared the office of superintendent vacant and abolished, and conferring its duties upon B. F. Jennings, the chairman. And it was also provided that the salary of said Beale should cease forthwith. In this proceeding, said Beale, although present, refused to vote.
“ ‘ Subsequently,’ as the bill recites, ‘ the chairman assumed control and discharged the men and employed one Geo. Goodsel as manager under himself. That said Beale, on Dec. 8, 1887, took pos session of the mills, assumed to be superintendent, and has continued to act as such.’
“ The bill further states ‘ that such conduct on the part of the defendant is utterly subversive of all discipline, is seriously interfering with the business of the firm, is wholly illegal, and, if continued in, will work irreparable injury to the business of the partnership association;’ and, finally, the bill prays for an injunction to issue, restraining said Beale ‘ from interfering in any manner whatever with the business and works of the said partnership association or of any of its legally constituted officers, or from acting or claiming to act in any way as superintendent of manufacturing for said association; ’ and for other relief, etc.
“.This bill is supported by separate affidavits of Jennings, Flennikcn, Davis and others. Counter affidavits have also been furnished by Jos. G. Beale and others.
“The minutes of the meeting of Nov. 22, 1887, are also submitted. By the minutes, it appears that the withdrawal of the resignation of Mr. Beale was before the meeting as the time of considering the acceptance of his letter of resignation.
“The.members of the firm, in the face of this letter of withdrawal, and against the objection of Mr. Beale, accepted the resignation, and thereupon declared the office of superintendent abolished.
“ This action clearly gives rise to a grave question of validity of such action. In the usual course of business, an offer to do or not to do a thing is ever regarded as subject to revocation until acted upon by the other party. Thus,'a bid at a sale may be recalled before it has been accepted. The right of stoppage in transitu is a well recognized principle, and also a letter transmitted by mail is subject to the same'right of revocation.
“ Hence a very grave question is at the very threshold of this application for an injunction. Could the abolition of Mr. Beale’s position or office, based upon his letter of resignation, with its actual withdrawal or revocation before the board at the time, and the first acted upon by a resolution not to accept the withdrawal, be regarded as valid ?
“The application for an injunction does not allege incompetency on the part of Mr. Beale. Some acts of negligence, on his part, are asserted; and his interference with the employment of the working men, and a clashing of authority that produces injury to the business, are alleged.
“ The counter affidavit of Mr. Beale is explanatory of the facts subsequent to the action of the board, and alleges that B. F. Jennings did not, at any time, take the superintendency of manufacturing upon himself; that he, Beale, has never ceased to exercise the duties of such superintendency; and, in general, the answer of affidavits of Mr. Beale is, throughout, a positive denial of all the facts relied upon by the applicant for this summary interference by the court-with the affairs of the partnership,
“ And, whilst it cannot be overlooked that a most unfortunate condition of want of harmony exists, yet, in the face of all'the facts presented, we fail to see our way clear of difficulty in extending the chancery powers of the court so far as are now prayed for.
“ Mr. Beale still remains a partner, with an interest large in value in every item of assets of the firm; the full rights of a partner in all its affairs; no purpose shown on his part to dispose of firm property; a full willingness, on his part, averred, to carry out the terms of his original contract; a denial of any acts of carelessness; and the inequality of submitting the defendant to the undiminished payment of salary to his other co-partners, and the entire withdrawal of his own salary, are all questions for consideration which suggest themselves to the conscience of a chancellor with such force that must cause him to hesitate in the application of a power that, upon final hearing, might be shown to have been improvident and violative of the contractual rights of the defendant.
“ It would be unwise to now predetermine the merits of the controversy; therefore, to say, at this time, that the facts presented by the plaintiffs, if established, would or would not sustain a bill for dissolution of the partnership, or for the appointment of a receiver, would be going a step further than the matter before us demands.
“Under the ruling of Sloan v. Moore, 37 Pa. 217, a case that more nearly approaches the present controversy than any which has been cited, and very fully expresses the law and defines the limits of summary power, the exigency shown to have existed in that case has not arisen in the present. There the partner was openly violating the contractual relation, whilst here the defendant is only insisting on maintaining his contract relation by the performance of the duty conferred by his contract with his co-partners. In the case cited, the defendant was seeking to consummate a sale and disposition of the partnership property, without the consent of his co-partners. In this case, the defendant is in the same position- in which his original contract placed him, from which it is sought to oust him, by the action of his co-partners, without his consent, and against his protest.
“ It is alleged, on the part of the complainants, that the conduct of the defendant will work irreparable injury to the business of the firm. This is wholly denied by the defendant, who avers that ‘B. F. Jennings was unable, to start and run the works without the aid, counsel and assistance of the defendant.’ An issue of fact is thus raised, that, in this preliminary proceeding, it would be impossible to determine, and certainly involves the case in a greater degree of uncertainty and indefiniteness than should exist to justify the granting of an injunction that, in its effects, might be greatly injurious to the defendant in placing his interests entirely under the control of his partners, who were united in this action to displace him and deprive him of any control whatever.
“ For the foregoing reasons, among others, the preliminary injunction is refused.”
The assignment of error specified the action of the court in refusing the preliminary injunction.
D. T. Watson and W. K. Jennings, for appellants.
Defendant, by leading the firm to employ another manager, forfeited his right to withdraw his resignation. As to what is a reasonable time, see 1 Parsons, Cont. 48.
Besides, the term of office to which defendant was elected expired at the end of the year and he. was not re-elected.
The’articles of partnership did not vest him with the right to control the manufacturing during the whole time of the partnership, because, 1, the Act provides that the officers shall be elected for one year, and this is of more force than any private agreement; 2, the right was expressly subject to the control of the majority, being only declaratory of the law; and, 3, if there was a vested right, part of it passed with the transfer of the stock by the defendant.
Conceding him to be legally superintendent, as such he had a right simply to tender his services and demand his salary. He had no right to take possession of his employers’ works and hold them vi et armis. Pie is in no better position as stockholder. See, on the rights of a stockholder to interfere, Lindley, Part., 542, 571; Burns v. Pennell, 2 H. L. 520; Com. v. Phcenix Iron Co., 105 Pa. in ; Phcenix Iron Co. v. Com., 113 Pa. 563; Peacocks. Cummings, 46 Pa. 434.
Injunction, and not quo warranto, is the .proper remedy. Philips v. Com., 98 Pa. 394; Tidewater Co., Limited, v. Satterfield, 12 W. N. C. 457; Kerr v. Trego, 47 Pa. 292; Pond v. R. R., 12 Blatch. 280; Shaw v. Hill, 9 Jur. 820; High, Ext. L. Rem., 6,76.
There is scarcely any dispute as to the facts, and the injunction should be granted on the authority of Manderson v. Bank, 28 Pa. 379, for in that case it was done although the truth of the charges was left in doubt, on the principle that it could do no harm to restrain from the commission of acts contrary to law.
It is not denied that the defendant is in the minority, that he was elected for a year only and until his successor should be installed; that B. F. Jennings was made his successor by having the duties of the office added to those of his own, that Goodsel acted as manager under him, that Beale performed none of the duties of superintendent from Nov. 23 to Dec. 8, that he then took possession and has since kept it.
The damages here would meet the test of irreparable injury in Kerr, Inj. 17; Ripon v. Plobart, 3 M. & K.175.
Jos. Buffington, of Buffington & Buffington, with them WIcCain & Leason, for appellee.
Injunction is a mere preventive remedy. Mammoth Vein Coal Co.’s Ap., 54 Pa. 188; .Richards’s Ap., 57 Pa. 113 ; Audenricd v. R. R., 68 Pa. 370.
April 23d, 1888.
Its purpose is simply to preserve the status in quo until final decree. Farmers’ R. R. v. R. R., 53 Pa. 224; Mammoth’s Ap., supra; New Boston Coal and Mining Co. v. Water Co., 54 Pa. 171.
The case must be a clear one to justify interference by injunction. Brown’s Ap., 62 Pa. 21; Mammoth Co.’s Ap., supra; Pfund v. Berlinger, 9 Phila. 549; Kennedy v. Burgin, 1 Phila. 441; Minnig’s Ap., 82 Pa. 376; Rhea v. Forsyth, 37 Pa. 506.
An injunction cannot be used to take property out of the possession of one party and put it into the possession of another. Farmers’ R. R. v. R. R., supra; Brown’s Ap., supra; Pfund v. Berlinger, supra.
The granting of an injunction is the exercise of a high power, and should be used with the highest discretion. Harkinson’s Ap., 78 Pa. 203 ; Bonaparte v. R. R., 1 Bald. C. C. 218; Audenried v. R. R., supra.
Irreparable injury is such as cannot be compensated in damages. Rhodes v. Dunbar, 57 Pa. 286; New Boston Coal and Mining Co. v. Pottsville Water Co., supra; Harkinson’s Ap., supra; Clark’s Ap., 62 Pa. 447; Richards’s Ap., supra.
The mere allegation of irreparable injury is not sufficient; facts must be stated to satisfy the court of the existence of such danger. Hilliard, Inj., § 32.
In this case, the defendant is perfectly solvent. He can be made to respond in damages, if loss is sustained through his negligence. Marsh’s Ap., 69 Pa. 34. The remedy, then, is adequate at law.
Where a person is acting as a de facto officer, even of a private corporation, the remedy is an ouster by quo warranto and not by injunction. High, Inj., 3d ed., pp. 492-3, §§ 6 and 7; Hagner v. Heyberger, 7 W. & S. 104.
Tidewater Pipe Co., Limited v. Satterfield, was the reverse of our case. There the injunction was granted to those who were out of possession from interfering with those who were in possession.
No allegation is made that Beale is not thoroughly competent. He is in possession under a claim of right. Under the articles of partnership, he was to have charge of the mill, presumably as long as the partnership lasted. He was not a mere employee; it was one of the terms of the contract that his skill should be an element in the firm during its continuance, otherwise he would not have invested his funds.

Opinion:
Per Curiam,
Decree reversed, and it is further ordered that, before the issuing of said injunction, the plaintiffs file a bond with the usual conditions and with good and sufficient sureties, to be approved by the judge of the common pleas, in the sum of six thousand dollars.