Case ID: ala_30/html/0728-01.html
Source: Caselaw Access Project
Author: {"author": "'WALKER, «J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

SCOTT vs. CAMPBELL.
    [ACTION ON PROMISSORY NOTE — SET OPJ? — PARTNERSHIP,]
    1. Action at law between partners.- — An action at law lies on a promissory note, given by one partner to bis co-partner, on tbe formation of tbepartnerskip, for one half the value of the stock of goods furnished by the latter.
    2. What constitutes partnership. — -An agreement between two partners, on the dissolution of their firm, to the effect that one should take all the goods on hand, and the notes and accounts due the firm, and, in consideration of the other’s interest therein, should pay all the outstanding debts of the firm, “and give him, from that time forward, one-third interest in the profits arising from the sale of said goodsthe latter “agreeing to share one-third of the losses that might accrue from said sale of said goods, and to act as clerk in the sale of said goods” for the former, — constitutes them partners inter sese.
    
    3. Set-off at law. — A demand accruing to defendant under a contract with plaintiff which constitutes them partners inter sese, is not available as a set-off' at law.
    Appeal from tbe Circuit Court of Coosa.
    Tried before tbe Hon. Kobert Dougherty.
    This action was brought by John A. Campbell against Marion M. Scott, and was founded on tbe defendant’s promissory note for $1184 75, dated January 16, 1851, and payable one day after date, to tbe plaintiff or bearer. Tbe only plea was tbe general issue, “with leave to give in evidence any matter that would be admissible under appropriate special pleas.” Tbe evidence in. tbe case, all of which is set out in tbe bill of exceptions, consisted, on tbe part of tbe plaintiff, of tbe note sued on ; and, on tbe part of tbe defendant, of tbe plaintiff’s answers to interrogatories under tbe statute, and certain articles of copart-nership between them. Tbe plaintiff’s answers to tbe interrogatories disclose all tbe material facts, which were as follows:
    “Defendant and plaintiff formed a co-partnership to sell goods, at Socopatoy, in 1851. Scott came to Socopatoy, and went into business, on tbe 6th January, 1851. The partnership was dissolved about tbe 1st April, 1852. Plaintiff put into tbe concern $2,779 49, in goods. Scott, at the formation of said partnership, paid plaintiff $200 in money, and gave him bis note for $1184 75, (which is tbe note now sued ron,) making in all $1389 7 5, for half of said stock of goods, and as bis share of said capital stock; each thus putting in $1389 75 in goods. Said partnership was dissolved about tbe last of March, or tbe first'of April, 1852, by mutual consent. The terms of dissolution were, that plaintiff was to take all tbe remaining stock of goods then on band, and tbe notes and accounts due said firm ; which goods and accounts be kept. In consideration of Scott’s interest in said goods, notes and accounts, plaintiff agreed to pay the outstanding debts of said concern. Scott received none of the accounts on said dissolution. Plaintiff further agreed, in consideration aforesaid, to give Scott, from that time forward, one-third interest in all the profits arising from the sale of said goods; Scott agreeing to share one third of the losses that might accrue from said sale of said goods from that time, [and] to act from thence as plaintiff’s clerk in the sale of said goods. There was no agreement as to paying Scott anything for his services up to the time of dissolution.” The plaintiff further admitted that, under this contract, the sum .$266 66 was due to the defendant.
    The court charged the jury, that if they believed the evidence, they must find for the plaintiff, for the amount of the note, with interest thereon; to which charge the defendant excepted, and which he now assigns as error.
    Morgan & MARTIN, for the appellant.
    R. M. Cherry, contra.
    
   'WALKER, «J.

The fact that the note sued on was given by the defendant for the purchase from plaintiff of an interest in the stock of goods which was the basis of the partnership at its commencement, does not deprive the plaintiff of his remedy at law on the note, and render it necessary for him to go into chancery. — Bumpass v. Webb, 1 Stewart, 19. The plaintiff had, therefore, a right of recovery upon the note, unless some ground of legal defense against the note was made out for the defendant. If there was any such ground of defense, it consisted in a right of set-off, for a sum less than the amount of the note, due to the defendant under the contract which was proved by the plaintiff’s answers to the interrogatories propounded to Mm by the defendant. Those answers acknowledge, that the defendant is entitled, under that contract, to the sum of $266 66. Consequently, the defendant was entitled to a set-off for that amount, unless it was a demand not available at law; and if that demand was the proper subject of a set-off at law, the court erred in its charge to the jury. The fate of the appeal, therefore, is suspended upon the single point, whether the defendant’s demand could be enforced at law.

Under the contract admitted by the plaintiff, as the same is set out in his answers to the interrogatories, it is clear that the relation of partners existed between him and the defendant after the dissolution, not only as to third persons, but inter sese. If the agreement had been merely that the plaintiff should compensate the defendant for his services as clerk, by giving him one third of the profits, the relation of partners, as between themselves, would not have resulted; nor would such partnership have been inferred, from the fact that the defendant’s compensation as clerk was to be determined by ascertaining how much one third of the profits, after the deduction of losses, would be. — Hodges v. Dawes & Co., 6 Ala. 215; Moore v. Smith, 19 Ala. 780; Ellsworth v. Tartt, 26 Ala. 736; Collyer on Partnership, §§ 44 ; Story on Partnership, §§ 48, 49. The evidence does not tend to show such a state of facts. The agreement that the defendant should have one third of the profits was not in consideration of his services as clerk, but of his interest in the debts and stock of goods. The plaintiff’s statement is, that the agreement was “in consideration aforesaidand, looking back at a former part of the answer, it is seen that this consideration was the defendant’s interest in the goods, notes and accounts due the firm. The defendant’s agreement was, not simply that the losses should be deducted before his share of the profits was ascertained, but that he would share one third of the losses. Here, therefore, was an unqualified agreement to bear one third of the losses. It is clear that such an agreement produces a partnership, and the defendant must resort to a court of chancery to recover upon his demand. While it is plain that, upon the proof, the defendant is entitled to recover the sum of $266 66 ; it is equally plain that his remedy is in chancery, and not at law.

The judgment of the circuit court is affirmed.

L