The original action was brought by Harvey against Childs and Potter, to recover $158.40, for seventeen hogs sold by Harvey to Potter.
Potter is in default. Childs denies his liability. His liability is claimed solely on the ground that he was a partner of Potter in the adventure for which the hogs were purchased.
The partnership claimed rests on the following state of facts: Potter went to Childs, and told him that he had
The question to be considered, then, is, are the defendants, by construction of law, to be regarded partners as to the plaintiff, being a third person, in the debt incurred to him by Potter in his own name ?
What shall be regarded, as to third persons, a test of partnership between parties who do not consider themselves to be partners, and who have done nothing to estop them from denying that they are such, has been much discussed by courts and elementary writers, and the problem seems to be one of difficult solution. It is needless to review here the numerous cases on the subject; a statement of results is sufficient.
The effort has been to draw a distinct line between cases where one has a community of interest in the profits of a business, as distinguished from' those where one is entitled to receive a sum of money out of the profits as a creditor, or a sum proportioned to a quantum of profits, or a share of the profits as a compensation for services or labor.
Although a partnership may be said to rest upon the idea of a communion of profits, nevertheless the foundation of the liability of one partner for the acts of another, is the relation they sustain to each other, as being each principal and agent. That relation,- it would seem, then, constitutes the true test of a partnership liability, and rests upon the just foundation that the joint liability was incurred on the express or implied authority of the party sought to be charged.
But if the relation of principal and agent be regarded as the test of a partnership and consequent joint liability, the question still remains, what shall be deemed sufficient evidence of that relation, orto raise the implication of authority to incur the liability in question ?
To this end numerous tests have been supposed to exist; but the best considered and least objectionable is that of a community of interest in the profits of a business or transaction as a principal or proprietor. Par. on Part. 71 and note; Coll, on Part., secs. 25, 44. See also Story on Part., secs. 36, 38, 60; Berthold v. Goldsmith, 24 How. 536.
But this test is valuable as a rule chiefly because it evinces a relation between the parties, where each may reasonably be presumed to act for himself and as agent for the others, and to that.extent establishes the fact that the liability was incurred on the authority of all so participating in the profits. Participation in the profits of a business, however, can not be regarded as a rule so uni
The case of Cox v. Hickman, decided by the House of Lords in 1860, has become a leading case on the subject. 99 E. C. L. 47; 8 House of Lords Cases, 268. It is summarized in the subsequent case of Bullen v. Sharp, 1 Law Reporter, 112, by Blackburn, J., as follows: “ I think that the ratio decidendi is that the proposition laid down in Waugh v. Corner, viz., that a participation in the profits of a business does of itself, by operation of law, constitute a partnership, is not a correct statement of the law of England; but that the true question is, as stated by Lord Cranworth, whether the trade is carried on on behalf of the person sought to be charged as a partner, the participation in the profits being a most important element in determining the question, but not being in itself decisive; the test being, in the language of Lord Wensleydale, whether it is such a participation in the profits as to constitute the relation of principal and agent between the person taking the profits and those actually carrying on the business.” Add. on Cont. 163.
These cases were decided before the passage of the act of parliament in relation to partnerships. But, so far as relates to this question, in a subsequent case, Bramwell, J., declared, in effect, that the act was only declaratory of the common law, as held in Cox v. Hickman. Holme v. Hammond, 7 Law, 218-236.
The question was much considered in Eastman v. Clark, 53 N. H. 276, where the authorities are fully collated and
In the absence of any known stipulation to the contrary, every party of a trading firm, within the scope of the joint business, in contemplation of law, is clothed with implied authority to enter into simple contracts on behalf of the firm in furtherance of the business of the partnership, and thereby bind each member of the firm. Where, therefore, as in the case of Wood v. Vallette, 7 Ohio St. 172, and the later case of Leggett v. Hyde, 58 N. Y. 272, money is advanced, to be used in a trading business, and returned in a year with a share of the profits made during that time, it may well be implied that the business was conducted on behalf and by the authority of the person advancing the money and sharing the profits, for it is to the continuing trade, in the ordinary way,'that he looks for his profits.
But such cases are plainly distinguishable from one where money is advanced, to be embarked in a single transaction, where no credit is contemplated. In such case there is no ground for the implied authority to incur debts, such as exists in regard to a general trading business. Add. on Cont. 161.
Moreover, Childs had no legal interest in any of the hogs until they were delivered to him at the cars, nor had he any equitable interest in hogs, before such delivery, that were bought by Potter and not paid for by money received from Childs. He had, then, no interest whatever in the hogs bought of Harvey on credit, when the debt to him was incurred ; and Potter, before delivery to Childs, might have sold them without being liable to account to Childs. The fact is apparent that it was the understanding of the parties that Potter had bought for himself, and, if need be, was in like manner to buy enough more hogs to make two carloads ; and it can not be doubted that, until their delivery, at least, all the hogs belonged to Potter alone, and at most were only regarded as his contribution to the enterprise. If so regarded, the case is like that of Wilson v. Whitehead, 10 M. & W. 502, where it was agreed between three parties that one should edit, another print, and the other publish a paper, and share equally in the net profits. The printer was to furnish the paper and charge the firm at cost prices. It was held that the printer alone was liable to the person of whom he bought the paper. Parke, B., said: “The question is, did the other defendants authorize Whitehead to purchase the paper on their account or on his own ? It appears to me, on the true construction of the contract, that the latter was the case. When the paper was in his possession he was at liberty to have appropriated it to any other purpose.”
But the truth is, Potter was the owner of the hogs until they were sold by Childs} for Childs declined to take any
There was, then, strictly speaking no mutuality or community of interest between them in the hogs. Childs had no interest in them other than as security for a debt, and to find in half the profits of their sale the measure of his reward for the use of his money, to be paid out of Potter’s property.
The relation of the parties was that of debtor and creditor, of bailor and bailee, and not that of partners. They had no mutual interest in the hogs in common as principals or proprietors, nor was either acting as principal for himself and agent for the other. If, however, that relation could be said to exist after the hogs were delivered to Childs, there is no ground for an inference that the debt to Harvey, previously contracted by Potter, was incurred upon the authority of Childs. On the contrary, the facts rebut any implication of such authority, and are consistent only with the supposition that the debt was incurred without authority from Childs, who was doubtless no less surprised to learn of the debt than Harvey was, after the failure of Potter, to find the existence of a rule of law under which he had unwittingly given credit to another and responsible party. We may, in conclusion, therefore, well adopt in this case tlie language of Judge Story (Part., see. 36): “Now, it is incumbent upon those who insist that a partnership exists between the parties, as to third persons,
This disposes of tbe material question made by the record. The court of common pleas gave judgment in favor of the plaintiff, against both Childs and Potter. The district-court, on error, reversed the judgment as to Childs. It follows that the judgment of the district court must be affirmed.
Judgment accordingly.