Kerr v. Potter

| Md. | Jun 15, 1848

Spence, J.

delivered the opinion of this court.

The question upon which this case entirely depends, is, whether Kerr and Potter, stood in the relation to each other of partners inter se. If they stood in this relation to each other, the order of the Chancellor granting the injunction, the order continuing the injunction, and the order appointing a receiver were all, and each of them correct, if not, erroneous.

In the examination of this question, all that class of cases in which courts of equity have adjudged the parties to be partners in relation to third persons, are left out of view. This controversy is one to which the creditors are not parties, but one in which Potter claims to be an actual partner of Kerr, and entitled to the rights and equities of a partner inter se. It can only be upon the hypothesis, that Potter is a partner of Kerr, and holding with him a community of rights and interests in the capital stock and effects of the concern, which creates his lien from which his equities arise. Otherwise his claim can present no other reason, or ground for the interposition of a court of equity, on the ground of lien, than that of any other creditor of Kerr.

We will enquire, whether upon the authorities, when applied to the evidence in this cause, Kerr and Potter, stood in the relation to each other of partners inter se. Chancellor Kent, in the 3d ml. of his Commentaries, page 32, says “there is a just and marked distinction, between partnerships as respects the public, and partnerships as respects the parties; and a person may be held liable as a partner to third persons, although the agreement does not create a partnership between the parties themselves.” At page 27, the same author says, “ actual intention is requisite to constitute a partnership inter se.” See 1 Story’s Rep. 371, Hazzard vs. Hazzard.

This is not one of those cases so frequently found in the books, where courts, to ascertain the intention of the parties, are obliged to form their conclusions by deductions, drawn by analogy from principles of law applied to the facts and circumstances. The parties themselves in their articles of agreement of the 23d January, 1845, have declared their intention in the most unequivocal language, as follows: “And it is hereby declared to be the meaning of the articles of agreement aforesaid, that thereby the said Moses Potter is not made a partner in trade, of the said E. M. Kerr, but that the allowance of one-fourth of the net profits, after deducting the expenses of the business, and also deducting interest on the amount of the capital at the rate of six per cent, is a compensation for the services of the said Moses Potter, in lieu of clerk hire.” We think this declaration and the explanation showing they are not partners inter se, in the articles of agreement are conclusive of this question. It was insisted in the argument, that if Potter were held liable for the debts of the concern, and not to be treated as a partner inter se, and entitled to all the rights and equities as such, would be unfair and fraudulent. The answer to this is, that Potter might have known that he was not the actual partner of Kerr, and if he performed acts himself, or stood by and saw others perform them, which would render him liable to the creditors of the establishment, the credit given was voluntary, and gave him no other equity than would result to any other individual, who had become responsible for Kerr's indebtedness.

But it was insisted, that this liability of Potter to the creditors, gave them an equity to come upon the partnership stock and effects, and the case of ex parte Digbtj and ex parte JBuckston, in 38 Eng. Com. Law Rep. 495, was relied on as maintaining this doctrine. This was a case in bankruptcy, and the controversy was between the assignees under the joint fiat, and the assignees under a separate fiat. A controversy in fact between the representatives of the joint creditors on the one hand, and the separate creditors on the other. The assignees under the separate fiat praying that the joint fiat might be annulled, and the assignees under the joint fiat that the separate fiat might be superseded. Now, as we have before stated, this is not a controversy between creditors, involving the question of joint and separate claims, but is simply one involving the question whether Potter was the actual partner of Kerr, and had a lien on the stock and effects of the concern. If this were an application by a creditor charging that Kerr and Potter were partners in trade, and that he was a creditor of the firm, the dissolution and the insolvency of the firm, and the improper appropriation of the funds of the firm to the payment of the separate creditors, there might be some analogy.

We think, therefore, upon the case as made by the bill, answers, exhibits and proof, there is error in the Chancellor’s order awarding the injunction, the order continuing the injunction, and the order appointing a receiver.

In this case we do not decide any question as to the rights of creditors.

The Chancellor’s orders are reversed, and the cause remanded, that an account may be stated of the profits, while Potter acted as clerk or salesman of Kerr.

ORDERS REVERSED AND CAUSE REMANDED.

Dorsey, C. J. dissented.