5 Mont. 438 | Mont. | 1885
This is an action on an account for goods, wares and merchandise alleged to have been sold by plaintiffs to the defendants, as partners, during the year 1881. There was a verdict and judgment for defendant Nickel, and a motion for new trial overruled, from the order overruling which, and from the judgment, the plaintiffs appeal.
The action is against Frederick C. Anderson, Rudolph Schoulder and Henry Nickel, who are charged as partners; and the question to be determined is whether, under the facts and the law, the defendant Nickel was a partner with the defendants Anderson and Schoulder, and, as such, liable to the plaintiffs with them for the goods aforesaid.
A few days subsequent to the execution of this agreement, finding that the same had no date, Nickel, as he claims in his testimony, went to Schoulder and had him execute his note for $500, dated April 1, 1881, to him, Nickel, he thinking that the agreement was not good, because the same had no date, but he retained the agreement, and the note was delivered to him.
Anderson testified that the note was not given until sometime in the following August, after the attachment in this case had been issued; that “Nickel asked Schoulder to give him a note for $500 so he could show it and prove he was not a partner, and so he would not be attached when the sheriff came down to serve the paper,” all of which Nickel denied.
The rights of these parties must be determined by the effect to be given to this purchase of one-fourth of the net profits of the mill. If, as Anderson claims, the note
In the case of Eastman v. Clark, 53 N. H. 276, decided in 1873, the court says: “ It has been supposed a sharing
“ But what was the meaning and effect of the English cases before 1860? This is an important question, for this reason, among others, that before I860 the American authorities were generally intended to be a mere following of the English; and when we ascertain the meaning and effect of the English cases before 1860, we shall learn what the mass of American authorities were intended to be.” The judge then goes into a careful histoiy and analysis of the English cases for nearly one hundred years prior to 1860, commencing with that of Bloxham v. Pall, 2 Wm. Bl. 998, in 1775; Grace v. Smith, and Waugh v. Carver, 2 H. Bl. 235, in 1793, in which the sharing profit test had its birth; reviewing Hoare v. Dawes, 1 Doug. 371, 1780; Cooper v. Eyre, 1 H. Bl. 37, 1778; Steville v. Robertson, 4 D. & E. 720; Benjamin v. Porteous, 2 H. Bl. 590; Wilkinson v. Frasier, 4 Esp. 182, 1802; Hasketh v. Blanchard, 4 East, 144, 1803; Dry v. Boswell, 1 Camp.
“Neither is such a test established by a preponderance of the weight of American cases decided without reference to Cox v. Hickman. The subject has been much considered in Massachusetts, and the result is far from being a simple absolute sharing profits test. Reynolds v. Tappan, 15 Mass. 370; Rice v. Austin, 17 id. 197; Baxter v. Rodman, 3 Pick. 435; Grozier v. Atwood, 4 id. 234; Cutler v. Winsor, 6 id. 335; Turner v. Bissell, 14 id. 192; Denny v. Cabot, 6 Met. 82; Bradley v. White, 10 id. 303; Holmes v. O. C. R. R. 5 Gray, 58; Fitch v. Harrington, 13 id. 468; Julis v. Ingalls, 1 Allen, 41; Gunnison v.
In the case of Cox v. Hickman, supra, Lord Carnworth said: “A right to participate in the profits is in general a sufficiently accurate test; for a right to participate in profits affords cogent, often conclusive, evidence that the
Commenting on this statement of Lord Carnworth, the court, in Eastman v. Clark, supra, says: “By‘a sufficiently accurate test,’ he meant satisfactory evidence. His remark suggests how easily a piece of evidence could be transformed into a legal test sub modo, by tribunals accustomed, as English courts are, to deliver their judgment on questions of fact. When Lord Carnworth said sharing profits affords cogent evidence of a partnership, he expressed his opinion on a question of fact; and the evident soundness of such an opinion tends to obliterate the distinction between the law and the fact of the subject. Sharing profits, in the absence of all other evidence, would, as a matter of fact, be cogent evidence of a partnership; but every item of cogent evidence is not a legal test; it moreover is generally not impossible
Mr. Lindley, in his valuable work on partnership (1 Lind. Part. 42), commenting on the cases subsequent to that of Cox v. Hickman, says: “ There can be no doubt that in all these cases the decisions would have been the other way had they occurred before Cox v. Hickman; and they are particularly valuable as showing that the principles on which that case was decided by the House of Lords may now be safely relied upon in opposition to the old rule which before that important decision was considered too firmly settled to be questioned. In fact, the strong tendency of the above decisions is to establish the doctrine that no person who does not hold himself out as a partner is liable to third persons for the acts of persons whose profits he shares, unless he and they are really partners inter se; and it is perhaps not going too far to say that this is now the law. For the guidance, however, of those who may think the writer has gone too far in representing the old law as completely suspended, the following more limited propositions are submitted, as at least conclusively established, and as applicable even in cases not within 28 and 29 Yict. c. 86:
“1. That persons who share the profits of a business are, like other persons, only liable for the acts of themselves, and by their real or ostensible agents.
“2. That whether", in any particular case, the relation of principal and agent does, or does not, exist between one person who carries on a business, and another person who shares its profits, depends, not upon the mere fact that the business is carried on, more or less, for the benefit of the latter, but upon all the circumstances of the case.
“8. That the relation of principal and agent is not constituted merely by an agreement which entitles one person to share the gross returns of a business or adventure conducted by another.
“5. That the relation of principal and agent is not constituted merely by an agreement which entitles one person to be paid sums varying with the profits made by another.
“6. That the relation of principal and agent is not constituted merely by the existence of a trust entitling one person to share the profits made by another.
“7. That prima facie the relation of principal and agent is constituted by an agreement entitling one person to share the profits made by another to an indefinite extent; but that this inference is displaced, if it follows from the whole agreement that no partnership agency was really intended.
“8. That the courts, in all these as in other cases, will be astute to defeat fraud and to hold partnerships to be created if they are intended, although the intention may be carefully concealed.”
The intention of the parties must control. The relation of partners is formed by contract, or by the acts of the parties which amount to a contract. Says Mr. Collyer, in his able work (1 Collyer on Part. 7, note 9): A partnership inter se results from the intention of the parties, to be gathered from the contract, if there be one, or, if not, from their relation to, and dealings with, the property and each other. A mere community of interest in property does not create the relation, but it must be evident that the parties intended to create it, and must be voluntary. The intent of the parties, as expressed in the contract, if there be one, or, if there is no contract, as gathered from the transaction itself, and their manner of dealing with the common property, will control, so far as the rights of the parties themselves are concerned; for, being the creation of a contract express >or implied, the parties, as between themselves, cannot be
“In the absence of a contract, this intent is to be gathered from the acts of the parties and the character of the transaction. If the parties deal with the property in which they have a joint interest, as partners, each sharing the profits arising from it, and paying his own proportion of the expenses for its maintenance, although no agreement, in fact, exists between them, they are partners inter se, their intent being gathered from their acts.
“ But, if an agreement exists, this is the only evidence of the real status of the parties to each other.” Coulter v. Thomas, 25 Vt. 73; Robins v. Laswell, 27 Ill. 365; Stevens v. Fawcett, 24 id. 483; Phillips v. Phillips, 49 id. 437; Neihoff v. Dudley, 40 id. 406; Lintner v. Milliken, 47 id. 178; Clark v. Reed, 11 Pick. 446; Hazzard v. Hazzard, 1 Story, U. S. 371; Salter v. Ham, 31 N. Y. 321.
If there is no partnership inter se, there can be none as to third persons, unless a party, by his acts, has put himself in such a position that he is estopped from denying that he is a partner. And as we have seen that the mere sharing of profits, since the case of Cox v. Hickman, does not, in England, make him who receives such profits a partner in the business or enterprise by which they are earned, it only remains for us to ascertain from the modern authorities if the same doctrine prevails in the United States.
In 1873 the supreme court of Missouri said: “It is true that in the case of Waugh v. Carver, 2 H. Bl. 247; vol. 2, part II, Smith’s Leading Oases, 674, and in other cases referred to, it 'has been held that one who receives a share in the general profits is liable to third persons for the losses and debts contracted in the prosecution of the business, and it is upon this principle, as stated in
“Judge Story, in his work on Partnership, in treating of this subject, states: ‘In short, the true rule, ex aequo et bono, would seem to be, that the agreement and intention of the parties themselves should govern all cases. If they intend a partnership in the capital stock, or in the profits, or in both, then that the same rule should apply in favor of third persons, even if the agreement were unknown to them. And, on the other hand, if no such partnership were intended between the parties, then that there should be none as to third persons, unless where the parties had held themselves out as partners to the public, or their conduct operated as a fraud or deceit upon third persons.’ Story, Part. 6th ed. sec. 49, and note, where the authorities are discussed. In order to constitute a communion of profits between the parties, which shall make them partners, the interest in the profits must be mutual. Each person must have an interest in the profits as a principal trader. . . . The single circumstance that he is to have a share of the profits does not necessarily make one a partner so as to bind him by the acts or admissions of one who carries on the business. Buckle v. Ekart, 1 Denio, 337; Denny v. Cabot, 6 Met. 82; Turner v. Bissell, 14 Pick. 192; Devinel v. Stone, 30 Me. 384; Wiggins v. Graham, 51 Mo. 17. Erom these authorities, it will be seen that one who receives a part of the profits is not necessarily a partner, even as to third persons, and in the present case, the statement of the defendant given in evidence must alb be taken together; he denied that he was a partner, but admitted that he had an interest in the profits; this he might have, and still not be a partner.” Campbell v. Dent, 54 Mo. 332. In 1876 the. supreme court of Ohio (28 Ohio
“ The case of Cox v. Hickman, decided by the House of Lords in 1860, has become a leading case on this subject. 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. Carver, viz., that a participation in the profits of a business does, of itself, by operation ofi law, constitute a partnership, is not a correct statement of the English law, but that the true question is, as stated by Lord Oarnworth, 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, of 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 the case of 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 ably reviewed. The case was decided in 1872. The conclusion arrived at is stated by Smith, J., as follows: ‘ The real ultimate question in all cases like the present is one of agency. Did the person sought to be charged stand in the relation of principal to the person contracting the debt? Participation in the profits is not decisive of the question, except so far as it is evidence of the relation of principal and agent between the persons taking the profits and those actually carrying on the business.
“ 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 a case there is no ground for the implied authority to incur debts, such as exists in regard to a general trading business.” Add. on Contracts, 161.
In 1881 Judge Cooley, in Beecher v. Bush, 45 Mich. 193, speaking for the supreme court of Michigan, said: “It is nevertheless possible for parties to intend no partnership and yet to form one. If they agree upon an arrangement which is a partnership in fact, it is of no importance that they call it something else, or that they even expressly declare that they are not to be partners. The law must declare what is the legal import of their
“The view of the law here suggested is undoubtedly correct. There may be a participation in the gross returns that would make the receiver a partner, and there may be one that would not. The question is, in what capacity is participation had? Gross returns are not profits, and may be large when there are no profits; but it cannot be predicated, either of gross returns or profits, that the right to participate is conclusive evidence of partnership. This is the settled law, both in England and in this country, at this time, as is fully shown by
Judge Oooley then quotes from Cox v. Hickman, supra, the language heretofore quoted in this opinion, and says: “There is something understandable by the common mind in this test; there is nothing artificial or arbitrary about it; it falls in with reason, and enables every man to know, when he makes his business arrangements, whether he runs the risk of extraordinary liabilities contracted without his consent or approval. It is said, and we believe justly, in Bullen v. Sharp, L. R. C. P. 86, that the decision in Cox v. Hickman brought back the law of England to what it should be, and Mr. Baron Bramwell, referring to what was declared to be law in Waugh v. Carver, expressed the hope ‘ that this notion is overruled,’ and adding that it is ‘ one which I believe has caused more injustice and mischief than any bad law in our books.’ It is certainly overruled very conclusively in Great Britain. Kilshaw v. Jakes, 3 B. & S. 847; Shaw v. Ganet, 16 Irish C. & R. 357; Holme v. Hammond, L. R. 7 Exch. 218; Ex parte Delhasse, 7 Ch. Div. 511. And though in New York the courts, hampered somewhat by early cases, have not felt themselves at liberty to adopt and follow the decision in Cox v. Hickman to the full extent, it would be easy to show that the American authorities in the main are in harmony with it.”
JThe judge then cites and comments upon the following cases: Champion v. Bostwick, 18 Wend. 175; Eastman v. Clark, 53 N. H. 276; Farmers' Ins. Co. v. Ross, 29 Ohio St. 429; Mussier v. Trumpbour, 5 Wend. 274; Everitt v. Chapman, 6 Conn. 347; Loomis v. Marshall, 12 Conn. 69; Moore v. Smith, 19 Ala. 774; Bowman v. Bailey, 10 Vt. 170; Price v. Alexander, 2 Green (Ia.),
In 1883 the supreme court of the United States, in Thompson v. First Nat. Bank of Toledo, 111 U. S. 540, by Mr. Justice Gray, said: “Mr. Justice Lindley in his treatise on the law of partnership, sums up the law on this point as follows:
“ ‘ The doctrine that a person holding himself out as a partner, and thereby inducing others to act on the faith of his representations, is liable to them as if he were, in fact, a partner, is nothing more than an illustration of the
“ The current of authority in this country is in the same direction. Benedict v. Davis, 2 McLean, 347; Hicks v. Cram, 17 Vt. 449; Fitch v. Harrington, 13 Gray, 469; Wood v. Pennell, 51 Me. 52; Sherrod v. Langdon, 21 Ia. 518; Kirk v. Hartman, 63 Penn. St. 97; Hefner v. Palmer, 67 Ill. 161; Cook v. Penrhyn Slate Co. 36 Ohio St. 135; Uhl v. Harvey, 78 Ind. 26. The only case cited at the bar, which tends to support the ruling below, is the decision in the commission of appeals, in Poillon v. Secor, 61 N. Y. 456. And the judgment of the court of appeals in the later case of Central Savings Bank v. Walker, 66 N. Y. 424, clearly implies that, in the opinion of the court, a person not, in fact, a partner, cannot be made hable to third persons on the ground of having been held out as a partner, except upon the principle of equitable estoppel, that he authorized himself to be so held out, and that the plaintiff gave credit to him.” Says Mr. Justice Clifford, in Berthold v. Goldsmith, 24 How. 542: “Participation in the profits, however, will not alone
Says Mr. Parsons (Pars, on Part. 2d ed. V3): “And the same principle holds us to this other conclusion, that a mere payment, or promise to pay, out of the profits, a sum of money, as a specific portion of the profits, does not necessarily constitute the payee a partner, and gives him no interest in the profits, and no right to the profits, hut only a personal claim against the promisor for such money, or for such a share of the profits after they are áscertained and may be divided. If two men were bargaining for a house and the seller says: c Your business is so prosperous, you can afford to pay me all I ask;’ and the buyer replies, “You mistake, the profits of my business are not so large as you think;’ and the seller rejoins, ‘ Well, I will, at all events, take one-fourth part of your next year’s profits for the house,’ and a written contract is executed on these terms, it would be simply absurd to contend that this sale of a house made the seller liable for all the business debts of the buyer.”
Absurd as this may’have been, it is no more so for buying one-fourth of the profits by the sale of a house, than purchasing the same for money. In neither case would the purchaser become a partner: first, for the reason that the parties did not so intend, and second, the transaction did not establish the relation of principals and agents for each other in the purchaser’s business. The real question is one of agency. Nickel, by the purchase of one-fourth of the net profits of the Centennial mill, did not thereby establish the relation of principal to the persons contracting the debt. Whether this relation
; Partnership as between the parties themselves is a voluntary contract between two or more persons, for joining together their money, goods, labor and skill, or any or all of them, under an understanding that there shall he a communion of the profits between them, and for the purpose of carrying on a legal trade, business or ad
■ It is a general principle that governs all partnerships in trade, that each individual partner constitutes the others his agents, for the purpose of entering into all contracts for him within the scope of the partnership. Id. 269.
By the purchase of one-fourth of the net profits of the Centennial mill, Nickel did not thereby become the owner of any interest in the mill or in the partnership property of Anderson and Schoulder; he did not thereby become a' joint tenant with them in such property, and he did not thereby constitute them his agents for carrying on the business of the mill.
It is unnecessary to consider the questions raised upon the instructions to the jury, for if by this purchase of net profits Nickel did not become a partner with Anderson and Schoulder, as between themselves, and is not a partner as to these plaintiffs by virtue of his conduct, then the plaintiffs’ claim must fail.
The judgment is affirmed, with costs.