163 Ark. 211 | Ark. | 1924
(after stating the facts). It is conceded by counsel for the plaintiffs that the sole question upon this appeal is whether the legal effect of the written agreement entered into between the defendants, and which is copied in onr statement of facts, is such that the ButlerMeMurray Drilling Company, or the members thereof, became associated in business as partners with Alphonzo Riggs and William Pautz.
The general rule is that to constitute a partnership there must be a community of interests inter se, and that the parties should share the profits and losses. A well-known exception to the general rule is that, where one is only interested in the profits of a business as a means Of compensation for services rendered by himself, or for the rent or hire of property furnished by him in the prosecution of the business, he is not a partner. All the cases fully .sustain the doctrine that, where the profits are merely a measure of compensation, no partnership is created.
It is admitted by counsel for plaintiffs that the effect of the first part of the agreement is that Rigg's and Pautz agreed to transfer to Butler and McMurray a one-eighth interest in the leases which they held for the use of a drilling rig and tools of the Butler-McMurray Drilling Company.
It is insisted, however, that the- common property of all the parties was the leases,-and that the latter part of the contract, which placed upon Riggs the -duty of developing and selling the leases in small lots and accounting to the parties according to their respective shares, after paying all expenses, made them partners. They rely upon the principles of law decided in cases like Beebe v. Olentine, 97 Ark. 390, and Hayes-Thomas Grain Co. v. Wilcox, 144 Ark. 621.
In the first mentioned case, the parties entered into a contract to purchase jointly, for the purpose of speculation, numerous tracts of land. Each was to pay an equal amount of the purchase price and to share equally in the final profits arising from future sales. The court held that this showed an intention -on their part to form a partnership for the purchase and sale of timber lands. This had all the elements of a partnership. The parties, by their contract, engaged in a joint enterprise and shared the profits and losses equally.
Neither do we think the case last cited is in point. In it the A. F. Wilcox Contracting Company and the J. R. Vansant Construction Company entered into a contract in which there was a community of interest between them in a contract between the contracting company and an improvement district and the profits arising therefrom. The agreement between the construction company and the contracting company was that the former would finance the latter and advance all sums of money to pay for work, labor and materials used in improving the street, as provided in the contract between the improvement district and the contracting company. The court said that there were all the elements of a joint enterprise and a joint contribution to a common end and a sharing of profits. This created a partnership between the contracting company and the construction company.
We do not think the written contract entered into between the defendants in the case at bar, by its terms, or on its face, constituted a partnership. Under the agreement the Butler-McMurray Drilling Company hired to Riggs and Pautz its drilling outfit, to be used in drilling not more than two oil or gas wells upon certain leases owned by Riggs and Pautz, and they were to receive as-compensation for the use of their equipment a one-eighth * interest in the leases. Butler and McMurray were not generally interested in the development of the .leased property, but only had a special and specific interest, and were in no sense partners. The agreement provides that the drilling equipment should be used in drilling not more than two wells upon the leases. It provides that the drilling shall be prosecuted with diligence, and that the drilling equipment shall be redelivered to Butler and McMurray immediately after completing the second well, if drilled, but in no case later than five months from the date of the agreement.
It was further provided that all expenses of the upkeep of the equipment during its use by Riggs and Pautz should be paid by them and that the equipment should be turned back to Butler and McMurray in as good condition as when received, ordinary wear and tear excepted.
The agreement further provided that Riggs and Pautz should bear all the expense of labor, materials, and other costs in putting down the wells. Butler and McMurray had nothing to do whatever with the drilling operations.
It will be noted that the agreement provides that the parties may, by further agreement, extend the contract to additional leases upon other parts of Howard County for development, upon a like plan of such other plan as may be provided by an additional contract.
Thus it will be seen that the written agreement provides for a future arrangement with Butler and McMurray in case the business proved to be profitable, but it nowhere states that they were going in as partners or refers to them as such. Riggs and Pautz assumed the entire responsibility for the drilling operations, and Butler and McMurray had no voice whatever in the work of drilling for oil and gas.. They only received a certain interest in the leases for the use of their drilling machinery.
The circuit court was right in holding that they were not partners. We think the agreement on its face and the attending circumstances bring this case within the principles of law decided in Mehaffy v. Wilson, 138 Ark. 281. In that case Wilson owned certain timber land's and a sawmill outfit, which he furnished to Russell for the purpose of cutting the timber and manufacturing* it into lumber. The contract specified that Wilson was to be paid for his timber at a stipulated price and that he was to receive a part of the net profits as compensation for the use of the sawmill and other buildings on his land. The court held that Wilson was the sole owner of the mill and machinery, and that there was no community of interest in the property. Wilson was not responsible for any losses and did not share in the profits as profits, but was only to receive a certain per cent, of them as compensation for his services and the nse of his mill and other houses. The court held that these conditions did not constitute a partnership between him and Russell.
That case is directly in point, and the facts are so similar in kind as to make it decisive of the question considered on this appeal. We are not able to perceive any distinction existing between the two cases, and hold that the principles decided in it are conclusive of the case at bar.
This was the view taken by the circuit judge upon the trial of the case, and it follows that the judgment of the circuit court was correct and will be affirmed.