14 Barb. 471 | N.Y. Sup. Ct. | 1851
The judge who tried the cause decided that the defendants, under the pleadings and evidence, were jointly liable to the plaintiffs for the moneys loaned by the latter, and which were used in and about the business of manufacturing iron at the Ulster Iron Works, in 1847. This is correct, if by the terms of the agreement of September, 1843, Horace Gray and the Ulster Iron Company sustained the relation of partners, as respected third persons, and the money was loaned to the supposed partnership or to the agent of the partnership as such. If they are to be made to respond jointly for the debt due to the bank, it must be on a construction of that agreement; the money having been used at the works during its continuance in the business of manufacturing iron.
It is now well settled that the rule is not universal that a communion of profits creates partnership. A party may stipulate for a compensation proportioned to the profits of a particular trade or business, and not be a partner even as to third, persons; but if he stipulates for an interest in the profits of the business, as such, which would entitle him to an account as a partner, then he is to be holden liable to third parties as a partner. The compensation of a servant or other employee, for per
The agreement of September, 1843, is set forth in the complaint, and not being denied by the answer, is to be taken as true. By that agreement, the Ulster Iron Company leased to Horace Gray, for the term of five years, certain real property in Saugerties, in the county of Ulster, on which were mills, machinery and water power for the manufacture of iron. As rent of the demised premises, Gray stipulated to pay to the company “ one fourth part of the net profits arising from the premises, and the manufacture of iron thereon, after deducting all charges, excepting commissions on sales at Hew-York, the personal services of Gray, and the general superintendence at Saugerties,
Is this a stipulation for a-qoroportion of the profits as a measure of compensation for the use and occupation of the demised premises, or is it, in contradistinction thereto, an agreement for a specific interest in the profits as profits? I think that it is clearly of the latter character. The provisions of the agreement look to a direct interest, by the company, in the profits to be actually made from the manufacture of bar iron on the premises. The contract between the parties, is, in effect, this. A company, incorporated for the manufacture of iron, having mills, machinery and water power, agree with an individual for the use of the same for five years. The object of the contract
It is unnecessary to decide whether under this agreement, as between the parties themselves, they would be partners ; but as respects third persons, it appears to me that that relation legally exists. What was to be received by the company was only payable out of profits actually made in the manufacture of iron. They had then a direct interest in such profits. As was said in Dob v. Halsey, (16 John. 40,) “ he who takes a part of the profits indefinitely, shall by operation of law bo made liable for losses; upon the principle, that by taking a part of the profits, he takes from the creditors a part of that fund which is the security for the payment of their debts. (See also Everett v. Coe, 5 Denio, 180; Hasketh v. Blanchard, 4 East, 144.) The case is not like that of Heimstreet v. Howland, (5 Denio, 68,) where one leased a ferry to another, the latter to take charge of the business, pay all the expenses, and pay over to the
/"it is urged that the Ulster Iron Company, being a corpora-* tion, could not legally form a partnership with an individual.^ This company was incorporated in 1831, for the purpose of manufacturing iron. It might, therefore, lawfully exercise the powers expressly granted to it, and those necessarily to be implied, to enable it to answer the specific purpose of its creation. I entertain no doubt that under its charter, the company waS capable of making the contract with Gray set forth in the pleadings. iThat contract related to the business for which the company was incorporated, and was but a mode of furthering the specific purpose of its creation. Strictly, perhaps, corpora-1 tions should be, and are restricted from contracting partnerships I with individuals or corporations, and as between the parties to 1 the contract, acting upon equal knowledge, a question of validity | might be raised; but a corporation may contract with an indi- f vidual in furtherance of the object of its creation, the effect of Í which contract may be to impose upon the company as respects f the community, the liabilities of a partner, 'j I cannot think that a corporation may so shape its contracts relating to the business for which it was incorporated, as to' share jointly with an individual in the profits of such business ; subtract its interest in the profits, from the fund on which the creditors of the concern had a right to rely for the payment of the debts due to them; and when called upon by such creditors, be permitted to escape liability altogether, on the ground that the profits were realized as the partner of an individual, which relation the corporation could not legally occupy. I know of no sound reason why a corporation, more than a natural person, who participates in the profits, as such* of a particular business in which it may lawfully engage, should not be holden liable to the public for losses.:
It is further insisted by the counsel for the company, that the// money was not loaned to the supposed partnership, or to the agent of the partnership as such; that the loans were made to Burt as agent of Horace Gray, on his drafts on H. Gray &
Parker, Harris and Wright, Justices.]
New trial denied.