Opinion ID: 2068880
Heading Depth: 2
Heading Rank: 2

Heading: Individual Partner Liability

Text: Trizechahn first questions whether the Superior Court erred in releasing Appellees Arbogast and Wettach from individual liability based on Subclause (i). As a threshold matter, the law of this case, as it comes to this Court, is that, if there is any release from individual liability, such release may only apply to Arbogast and Wettach. [3] In the Superior Court, Arbogast argued that Paragraph 28(i) also released all of the remaining partners from individual liability. He based this claim on the theory that a promisee's decision to release a joint promisor constitutes a release of all other joint promisors. The Superior Court rejected this contention, see Trizechahn Gateway, 930 A.2d at 539, and we declined to review the issue, see Trizechahn Gateway LLC v. Titus, 598 Pa. 782, 959 A.2d 320 (2008) ( per curiam ). With that background, Trizechahn argues that it would be error to interpret Subclause (i) as applying to Arbogast, because to do so would effectively destroy the legal concept of a partnership in this instance, as one partner would then be excused from partnership obligations by the happenstance that he signed the lease, while all partners enjoyed the substantial benefits from the leasehold during their years of occupancy. Trizechahn notes, in this regard, that such a clause, if applied as Arbogast suggests in the context of a partnership of two, would allow the partner who took responsibility for finding rental space and entering into a lease to make the other partner solely liable for damages resulting from a subsequent breach, which would turn the idea of a partnership on its head. Brief for Appellant at 21. Trizechahn maintains, as well, that contract clauses that are exculpatory in nature, or tend to diminish the legal rights normally accruing as the result of a legal relationship, are disfavored and must be strictly construed. See Topp Copy Products v. Singletary, 533 Pa. 468, 471, 626 A.2d 98, 99 (1993) (citing Dilks v. Flohr Chevrolet, 411 Pa. 425, 434, 192 A.2d 682, 687 (1963)). Here, Trizechahn submits that the only reasonable construction of Subclause (i) is that it was intended to be exculpatory as to agent-signers such as brokers or attorneys because, absent signing the lease, those individuals would have no possibility of incurring personal liability from a breach. In the alternative, Trizechahn argues that, if the Superior Court was correct in suggesting that the lease provision was ambiguous, it should have remanded for the admission of parol evidence to resolve the ambiguity rather than determining from an appellate posture that only Appellees' evidence would have been credible. Appellees Arbogast and Wettach respond that under Section 8321(a) of Pennsylvania's Uniform Partnership Act, [4] 15 Pa.C.S. § 8321(a), every partner is an agent of the partnership for purposes of carrying on partnership business, and thus, the Superior Court correctly recognized that they signed the leases in a representative capacity. [5] Thus, in view of the content of Subclause (i), they contend that the Superior Court appropriately concluded, in effect, that the parties had modified the principles of partnership liability by agreeing to the release in question. Appellee Wettach, like the Superior Court majority, highlights the phrase in Paragraph 28(i), for any reason whatsoever, and proffers that such broad terminology necessarily includes the reason or cause of Arbogast's and Wettach's otherwise possible liability as a partner of the tenant. Brief for Appellee Wettach at 5. Upon our review, we agree with Judge Orie Melvin that the most rational way to construe Subclause (i) is to limit its impact to the elimination of any liability arising solely by virtue of the signing of the lease agreement in a representative capacity, since this is how such a clause would typically operate relative to a broad class of signers, such as corporate officers or attorneys, who would not otherwise bear individual liability for representative acts within the scope of their authority. It simply is counterintuitive to presume a landlord would relieve one of several partners from individual liability merely by the fortuitous circumstance that he was selected to represent the interests of the partnership (and, concomitantly, the other partners) in executing the lease. Arbogast's argument is colorable, however, since the precise wording of Subclause (i) is extremely broad and, facially at least, covers any person signing as an agent, providing that he shall [n]ever be deemed or held individually liable hereunder for any reason or cause whatsoever.  Master Lease at 12, ¶ 28(i), RR. 139a (emphasis added). Therefore, as Arbrogast forcefully maintains, since his status as a partner otherwise would be a reason or cause supporting liability, a literal interpretation of Subclause (i) would relieve him even from the liability he would bear by virtue of such status. See 15 Pa.C.S. § 8327(2) (mandating, without exception, that all partners are liable jointly for all debts and obligations of the partnership). Nevertheless, the scope of a general partner's agency to act on behalf of the partnership is ordinarily limited to matters undertaken in furtherance of the partnership's interest as a whole. See 15 Pa.C.S. § 8321(a) (Every partner is an agent of the partnership for the purpose of its business and the act of every partner ... for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership[.] (emphasis added)). See generally 59A AM. JUR.2D PARTNERSHIP § 207 (`Every partner... is ... a general and authorized agent of the firm and of all the partners, for all purposes within the scope and objectives of the partnership.'). To read the present no-liability provision as being intended to protect Arbogast only from personal liability, we would have to presume that the scope of the agency at the time of execution extended to securing to himself a personal benefit in the affairs of the partnership to the potential detriment of the other partners. [6] This would allow Arbogast's signing of the master lease to effectively create two classes of partnershimself, and all the other general partners with the rights of the second class being inferior to those of the first. This, in turn, would be in substantial tension with the fiduciary nature of the relationship between individual partners who act as agents of the partnership, and the partnership itself. In view of the limited scope of the agency relationship underlying a partner's execution of a lease on behalf of the partnership, we hold that a general no-liability clause for agent-signers does not extend to relieve a signing partner of his individual liability arising from his status as a partner, in the absence of credible evidence that the effectuation of such an unusual non-recourse agreement was within the scope of the signing partner's agency in the first instance. We do not foreclose the possibility that the general partners might, in some circumstances, create an arrangement permitting one partner to secure an advantage relative to the others by allowing, upon entry into a contract by which the entire partnership is bound, absolution from personal liability for the executing partner only. The point here is that, to contract around the General Assembly's clear rules placing partners on equal footing in such an improbable manner, it is appropriate to require evidence that the other, potentially disadvantaged, partners consented to the arrangement. Notably, in this case, no proffer to such effect has ever been advanced; indeed, Abrogast himself does not hold a view that his partners intended to permit him to enter into what would be, effectively, a personal side-agreement. Instead, according to Abrogast, Subclause (i) was always intended to relieve every partner from individual liability, effectively, to create a nonrecourse lease relative to all of the individual members of the T & M partnership. See, e.g., Brief for Appellee Abrogast at 22-23. As previously noted, however, the law of this case is to the contrary. That being the case, we conclude that the basic controlling legal principles set forth in the Uniform Partnership Act must obtain, placing all partners on equal footing relative to the liability they otherwise would share under partnership law. In summary, Section 8327(2) controls under the present circumstances, and Paragraph 28(i) of the master lease cannot properly be understood to immunize any of T & M's general partners from individual liability borne as a consequence of their legal relationship as partners. Accordingly, Appellees Arbogast and Wettach should not have been released from individual liability in this litigation.