Case ID: abbn-cas_27/html/0153-01.html
Source: Caselaw Access Project
Author: {"author": "Ehrlich, C. J. Pryor, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

WILSON PRINTING INK CO. v. BOWKER.
    
      N. Y. Common Pleas, General Term;
    
    
      June, 1891.
    Partnership.] A person is not to be regarded as partner, even as to third persons, merely because he stipulates that in return for the hire of a chattel he shall receive a part of the- profits that might be earned by the use of the chattel in the bailee’s business.
    
      Appeal írom a judgment of the general term of the city court affirming a judgment on a verdict directed for the plaintiff and an order denying a motion for a new trial.
    The action was brought by the W. D. Wilson Printing Ink Co. against Louis J. Hoffman and Richard R.. Bowker on the following note.
    $227.30 New York, February 23, 1888. Fifteen days after date we promise to pay to the-order of W. D. Wilson Printing Ink Co., limited, Two-hundred and twenty-seven dollars, at 330 Pearl street, city.
    Value received. -
    Hoffman Press,
    Louis J. Hoffman.
    The complaint alleged that the defendants were partners doing business under the name of the Hoffman Press. The only evidence of a co-partnership was an agreement by which the defendant Bowker agreed to-furnish the defendant Hoffman the use of two printing presses and share in their profits; the material part, of the agreement was as follows:
    “ It is my intention to provide as soon after May 1st. as practicable, two cylinder presses w hich are to be let to you at the rate of 6 per cent, interest on actual cost with 10 per cent, on the same for wear and tear,, actual insurance, and half profit on the same after deducting rent, labor, ink and other necessary expenses."
    The opinion of the general term of the city court in affirming judgment upon a verdict in favor.of plaintiff was as follows:
   Ehrlich, C. J.

It is not essential that the parties, defendant should have intended a partnership, nor is it material that they did not intend one. The agreement. executed by them made them partners as to creditors. (Hackett v. Stanley, 115 N. Y. 625 ; Leggett v. Hyde, 58 Id. 272), and this is the only question presented for determination here. Sharing in profits was sufficient to-constitute a partnership as to third persons (Hackett v. Stanley, supra; Manhattan Brass Co. v. Sears, 45 N. Y.. 797). It follows that the verdict was properly directed in favor of the plaintiff, and that the judgment entered upon it must be affirmed with costs.

Edward M. Shepard, for appellant:

I. Sharing in. profits alone is not sufficient to constitute a partnership(Citing Hackett v. Stanley, 115 N. Y. 625 ; Cassidy v. Hall, 97 Id. 159; Curry v. Fowler, 87 Id. 33 ; Richardson v. Hughitt, 76 Id. 55, Keogh v. Minrath, 30 N. Y. State Rep. 129).

II. A lease of real or personal property at a rental to be measured by a share of the profits does not make the lessor partner (Citing 1 Bates on Partnership, 61; Taylor v. Bradley, 39 N. Y. 129; Thayer v. Augustine, 55 Mich. 187 ; Holmes v. Old Colony R. R. Co., 5 Gray, 58; McDonnell v. The Battle House Co., 67 Ala. 90; Kellogg Newspaper Co. v. Farrell, 88 Mo. 594; Wild v. Davenport, 19 Vroom [N.J.] 129).

Philip Carpenter, for respondent :

l. The agreement between defendants made them partners as to creditors (Citing Hackett v. Stanley, 115 N. Y. 625 ; Leggett v. Hyde, 58 Id. 272; Bank v. Galludet, 122 Id. 655 ; Manhattan Brass Co. v. Sears 45 Id. 797 ; Haas v. Root, 26 Hun, 632).

Van Wyck, J. concurred; Newberger, J. dissented.

Pryor, J.

In the absence of an estoppel, no marr can be charged with liability on a contract to which he is not a party, either immediately or mediately, either personally or by act of a duly authorized representative. It is not pretended that the appellant has pre•cluded himself from disputing his responsibility on the ■note by assuming the relation of an ostensible partner; but his liability is inferred from the postulate that he was an actual partner in the business of the “ Hoffman Press.” .Was he such partner ?

The learned trial judge directed a verdict for the -plaintiff on the ground that “ sharing in the profits was sufficient to constitute a partnership as to third personsand, for the same reason, the judgment was .affirmed on appeal to the general term of the court below. ♦ •

In Grace v. Smith (2 W. Bl. 998), and in Waugh v. Carver (2 Hy. Bl. 235) it was held that participation in the profits of a partnership raises an irrefutable presumption of liability for the debts of the partnership, for the reason that, by taking a part of the profits, the •defendant diminishes the fund to which the creditors -of the firm must have recourse for satisfaction of their •demands. The argument involves an obvious fallacy, for first it assumes that the portion of profits which the ■defendant takes by so much reduces the resources of the business ; whereas the presumption is that the loan, .service, or other consideration, in requital of which he is paid, augmented those resources to the extent of his share in the dividend ; and, secondly, if every payment by which the funds of the firm are diminished makes the payee a partner, then every servant and agent of-the partnership is responsible for its obligations—a palpable reductio ad absurdum. ' From the principle that •one who receives'a part- of the profits is a partner as to-the third persons, the inference was deduced that so •also is one who merely stipulates for such participation, although this extension of the rule has not for support the reason assigned for the original proposition, namely, an actual diminution of the firm assets. Unsatisfactory as was the argument for the conclusion,, nevertheless, it was long the law of England that an interest in the profits of a partnership imposed a liability for the partnership obligations, and the principle was generally prevalent in the courts of this-country. But in i860 the rule and the reason of it underwent a searching scrutiny in the House of Lords,, under the criticism of Lord Chancellor Campbell and the ex-Chancellors Brougham, Cranworth, and Werisleydale, with the result that the doctrine was utterly-exploded as a principle of English jurisprudence (Cox v. Hickman, 8 H. L. Cases, 268). The question on the present appeal is: ■ Does the principle prevail as a; rule of law in the State of New York ?

The appellant was held liable on a note, to which-he was not, in fact, a party, • either directly or indirectly; because, and merely because, in return for the hire of a chattel to the maker, he had stipulated for a part of the profits that might be earned by the use oí the chattel in the bailee’s business.

It is the law of this State, as declared by the court of appeals, that a right to a share of the profits in compensation of services rendered to the partnership does, not involve a liability for the partnership engagements (Cassidy v. Hall, 97 N. Y. 159, 168; Leggett v. Hyde, 58 Id. 272). And so of a loan of money to the partnership, for a part of the profits (Curry v. Fowler, 87 N. Y. 33 ; Richardson v. Hughitt, 76 Id. 55; Keogh v. Minrath, 30 N. Y. St. Rep. 129 ; Eager v. Edwards, 76 N. Y. 97. And see Boston, etc., v. Smithy 13 R. I. 27; 43, Am. Rep. 3 ; Ford v. Smith, 27 Wise, 261 ; Ruddick v. Otis, 33 Iowa. 402 ; Beckwith v. Talbot, 2 Col. 639; Dale v. Pierce, 85 Pa. St. 474; Saraston v. Hack, 52 Md. 173 ; Gluck v. Paxhall, 67 Ga. 541; Flint v. Marble Works, 53 Vt. 669; Austin v. Thomson, 45 N. H. 113; Oliver v. Gray, 4 Ark. 425; Smith v. Knight, 71 Ill. 148 ; 22 Am. Rep. 94 ; Bradley v. White, 10 Metc. 303 ; 43 Am. Dec. 435 ; Culley v. Edwards, 44 Ark. 423 ; 51 Am. Rep. 614).

The rule, therefore, upon which the court below decided the case against the appellant, namely, that a sharing of profits constitutes partnership as to third persons, is not the law of New York or of other States. The question, then, is : Does the fact that profits are to be paid for the hire of a chattel for the partnership business modify the principle? Is it possible to distinguish between the letting of a chattel and the loan •of money or the hire of services? Equally with the •chattel, the money and the services are employed in the business of the partnership ; and if the taking of -profits for the use of the latter does not impose a partnership liability, why should the taking of profits for the use of the former ? A difference between the cases is inconceivable. An indefinite compensation out of the profits for the use of property, real or personal, and •dependent on the success of the business, is in lieu of rent, and does not constitute the owner a partner inter .se, nor liable as partner to third persons because of «sharing the profits—for exactly the same reason that protects an employee when so paid ” (1. Bates on Partnership, 61 ; Kellogg v. Farrell, 88 Mo. 594; McDonnell v. Battle House, 67 Ala. 90; Holmes v. R. R. Co., 5 Gray, 58 ; Thayer v. Augustine, 55 Mich. 187).

For affirmance of the judgment the respondent relies on First Natl. Bank v. Gallaudet, 122 N. Y. 655 ; Hackett v. Stanley, 115 Id. 625 ; Leggett v. Hyde, 58 Id. 272 ; and Manhattan Brass Co. v. Sears, 45 Id. 797; but it is ■obvious upon examination that each of those cases is «essentially distinguishable from the one under review.

In First Natl. Bank v. Gallaudet there was not only a participation of profits, but a joint interest in the patent, the subject matter of the partnership, and the court said: The evidence warranted the inference of a partnership. Such relation arises from a business jointly carried on by persons pursuant to an arrangement that they are to share in the profits as such. The fact, however, that a person is to receive a portion of the profits may be dependent upon. a right so qualified by the •arrangement, or controlled by the circumstances under which they are to be received, as to furnish no evidence of partnership.” In the case at bar there was no joint interest in the presses let to hire, nor any stipulation for profits as such but as rent for the use of the presses. The citation plainly sustains the appellant’s contention.

In Hackett v. Stanley the court placed the liability of the defendant upon the grounds : First, that the contract contemplatéd that he" was to bear a proportionate share of the losses of the business; and secondly,that even after the repayment of his loan he was still to receive one-half the profits of the business—facts clearly imptying a partnership, but not apparent in the case at bar.

In Leggett v. Hyde the defendant was not only entitled to demand one-third of the profits every half year, but those profits were designated specifically as profits of “ capital in the business ’’—a fact distinguished by the court as the ratio decidendi.

In Manhattan Brass Co. v. Sears, as in Bank v. Gallaudet, the parties were “ joint owners ” of the patent right, and the profits were to be paid as such, and not as mere compensation for the advance; whereas here the defendant was the sole owner of the presses; they were merely “ let,” and the share of profits was to be received as payment for their hire.

The question presented is not free from doubt, and the learned court below are not without argument and authority for their position; still, upon a critical consideration of the cases, we are of opinion that the preponderance of reason and precedent is with the appellant, and that he is not liable as a partner.

Judgment reversed and new trial, costs to abide event.

Allen, P. J. and Bischoff, J. concurred.