Case ID: abb-ct-app_4/html/0274-01.html
Source: Caselaw Access Project
Author: {"author": "Edwards, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

SMITH v. WRIGHT.
    December, 1854.
    Affirming but overruling 5 Sandf. 113.
    In a suit for damages on the breach of a contract, the complaint is defective unless it avers a formal tender of performance on the part of the plaintiff (no excuse being shown).
    Two mercantile firms mutually agreed each to put out contracts for sale and delivery of produce at future days, all profits of such adventures and all losses, to be equally divided between the firms. Held, that the members of one firm were liable with the other, as partners, upon a contract which the other firm made and signed in their own name, pursuant to this agreement.
    Israel Smith sued Jacob Wright and Theron Losee, and Austin W. and William H. Otis, and Oliver .Glover, in the New York .superior ¿court, for breach of contract.
    The complaints alleged that the defendants Wright and Losee, then composing the firm of Wright & Losee, and the defendants the Otises and Glover, composing the firm of A. W. Otis & Co., mutually agreed to make contracts, in the names of their respective firms, with divers persons, for the sale and delivery of flour and other produce, at a future day, with a view to realize the rise or increase in the prices of produce which they then anticipated would take place in the market, and upon the express agreement that such contracts should he made for the joint account and benefit of said two firms, and that the profits resulting therefrom should be equally divided between them, and the losses, if any, should be borne, by the said two firms, in equal proportions. It did not appear that this agreement was in writing.
    The complaint then alleged that in pursuance of this agreement the firm of Otis & Co., for the joint benefit and account of the two firms, entered into a contract in writing with the firm of Collomb & Iselin, which contract was set forth at length. It was signed "A. W. Otis & Co.”
    The complaint then alleged that Otis & Co. did not deliver the flour or any part thereof, although requested so to do by E. & W. Herrick, who held the contract when the flour was deliverable, and although said E. & W. Herrick were ready and willing to accept the same, and to pay for the same at the rate or price aforesaid, but defendants wholly neglected and refused to deliver any part thereof.
    The contract and cause of action was subsequently assigned to plaintiff, who brought this action.
    The defendants Wright & Losee demurred, that the contract, being signed by Otis & Co., was not sufficient to charge Wright & Losee; and that it did not appear that any demand of the flour or tender of the price had been made.
    
      The superior court held that the arrangement of the two firms was not a partnership between them; and that if it were, the signature of one of the firms to the contract on which the action was brought would not avail to bind the other firm, unless it be alleged that the parties had agreed that the'signature of one firm should bind the other. They therefore sustained the demurrer. Reported in 5 Sandf. 113. The plaintiff appealed.
    
      
      J. II. Rodman, for plaintiff, appellant.
    That the parties were partners, cited Story on Part. § 30; Dob v. Halsey, 16 Johns.; Everett v. Chapman, 6 Cow. 347; Champion v. Bostwick, 18 Wend. 172; Wright v. Hooker, Seld. Notes, No. 6, p. 44. If not partners, but agents one for the other, each signed in their own names for their principals by express authority. 2 R. S. 13C, § 8; Story on Agency, § 270; Thompson v. Davenport, 9 B. & C. 78; also 2 Smith Lead. Cas. 212, and note; Jones v. Littledale, 6 Adol. & E. 486; Higgins v. Senior, 8 Mees. & W. 834; Patterson v. Gaudasequi, 15 East, 62; Addison v. Gaudasequi, 4 Taunt. 574.
    
      B. W. Bonney, for defendants, respondents.
    As to the statute of frauds, cited, 2 R. S. 136, § 3; Davis v. Shields, 26 Wend. 341, 350, 352; Shindler v. Houston, 1 Comst. 261. That the two firms were not partners together,' Story on Part. c. 4, §§ 30-52; Loomis v. Marshall, 12 Comst. 69; Turner v. Bissell, 14 Pick. 192; Dob v. Halsey, 16 Johns. 34-40; Smith v. Wright, 5 Sandf. 113.
   Edwards, J.

[After stating facts.]—The first question which is presented is whether the agreement which is set forth in the complaint created a partnership.

The well-established rule is, that if a person partakes of the profits of any branch of trade or business he is answerable as a partner for the losses. The reason of this is that if he takes a part of the profits, he takes from the creditors a part of the ■fund which is the proper security for the payment of their debts. Grace v. Smith, 2 W. Black, 998; Dob v. Halsey, 16 Johns. 34; 3 Kent, 27. The only qualification of this rule which has ever been acknowledged is, that when á person stipulates to receive a sum of money in proportion to a given quantity of the profits as a reward for his services, he is not chargeable as a partner. . Story on Part. 32, 33, 34, 45, and authorities cited in note; Cary, §§, 9, 10, 11; Gow, 14, 19; Collyer, 14, 15, et seq. And the propriety of even this qualification was doubted by Lord Eldon. Exp. Hamper, 17 Ves. 401. In the present case, according to the terms of agreement between the defendants, the business was to be carried on for their joint account and benefit, and not only were the profits arising therefrom to be shared between them, but tbe losses were also to be borne by them in equal proportions. There is nothing in the agreement which in the least degree indicates that the shares of any of the parties were to be received as a compensation for services rendered. In the case of Champion v. Bostwick (11 Wend. 571; S. C. in error, 18 Id. 175), it was shown that three persons ran a line of stage-coaches from Utica to Rochester, the route being divided between them into three sections, the occupant of each section furnishing his own carriages, horses, and drivers, and paying the expenses of his own section; but the money received, as fare of passengers, deducting therefrom only the toll paid at turnpike gates, was divided amongst the parties in proportion to the number of miles run by each. Upon this state of facts, it was held that they were jointly liable as copartners to a third person, not a passenger, for an injury received through the negligence of the driver of the coach of one of them. In the case of Everitt v. Chapman (6 Conn. 347), the parties had agreed that each one should manufacture and sell the portion so manufactured by him, each party to participate in the profits. It was held that all the parties were liable as copartners to a third person, who sold hides to one of the parties, in ignorance of the partnership, and charged the samoe to him.

These cases have introduced no new principle, and I have alluded to them merely because they are in many respects similar to the one before us; The fact that the agreement in question was made between two firms already in existence, can make no difference as to the liability of the parties, for, as far as the agreement is concerned, the two firms stand upon the1 same footing as two individuals would. Neither can it make any difference that the contract which is now sought to be enforced as the joint contract of the parties, was made in the partnership name of one of the firms, for the partnership agreement between the defendants authorized such a contract. Wright v. Hooker, 10 N. Y. 51; Everitt v. Chapman, ubi sup. The court below, in giving their opinion, say that “ the ground upon which a" participation in the profits of a trade is held to make parties liable to third persons, though they never intended to be partners between themselves, as it was advanced by De Grey, Ch. J., in Grace v. Smith, and was adopted in Dob v. Halsey, is entirely wanting in this case. Here Wright & Losee could not take any of the fund on which the creditors of Otis & Co. relied for payment.”

If the court mean that Wright & Losee could not take any of the fund which constituted the capital stock employed in the separate • business of Otis & Co., or the profits arising therefrom, or that Wright & Losee could not take any of the fund employed in their joint business, except so far as it constituted the profits arising from such business, the remark is correct, although it is not apparent how that can have any bearing upon the question before us. But if the court mean that the interest which Wright & Losee had in the profits of that business which was carried on under the agreement with Otis & Co. did not give them a right to take' any part of the fund upon which the creditors in respect to such business relied, the remark is founded upon an entire misconception of the general rule, and of the decision referred to; for Db Gbey, Oh. J,, expressly says that, “ if any one takes part of the profits, he takes a part of that on which the creditor relies for payment.” All the interest which is necessary to constitute a partnership is an interest in the profits, and such an interest necessarily constitutes a partnership, unless, as has been stated, the interest in the profits is given as a compensation for services. The error into which the court below have fallen, is in confounding a community of interest in the property out of which the profits are to arise with a community of interest in the profits themselves. The latter is all that has ever been considered necessary to create a partnership as against a third person. Whether the defendants were partners as between themselves, it is not necessary to inquire. They were so in reference to third persons, and the court below erred in coming to a different conclusion.

But, although there is sufficient allegation of a copartnership, still, I think that the complaint is defective in. not alleging a performance, or, what is regarded as equivalent, an offer or a tender of performance on the part of the plaintiff, or those through whom he claims. The contract in suit was for the sale of flour, at a price agreed upon. The payment of the price was the consideration for the delivery. The payment and the delivery were to he concurrent acts, and, as was recently held by this court in the case of Lester v. Jewett, 11 N. Y. (1 Kern.) 453, neither party is entitled to recover from the other without alleging an offer or tender of performance on his part. I think that for the reason last stated, the complaint is defective, and that the judgment should be affirmed.