#### John G. Ludowieg, Respondent, *v.*James Talcott, Appellant.

(Supreme Court, Appellate Term,

April, 1905.)

Partnership — Defendant not shown to be a partner—Goods consigned to factor — Action for purchase price — Evidence — Erroneous ruling as to defendant’s liability.

Defendant by written agreement was constituted and appointed sole factor and selling agent of a firm which agreed to consign to him, for a sale upon commission, an entire stock of goods then held and owned by the firm, or thereafter owned by it, during the continuance of the agreement. All sales of goods so consigned were to be made by him at the risk of the firm and invoiced to purchasers in his name. He was to purchase and own the books of account used in the business and have the exclusive supervision and control of the consigned goods, supervise • all credits, take out insurance in his own name and in return he agreed to advance to the firm not to exceed sixty per cent of the net cash value of the consigned goods in his possession and seventy-five per cent of the net value of the outstanding accounts for sales. A sign was placed at the entrance of the firm’s premises reading: “James Talcott, Annex. Worthington, Smith *&*Company Department ”. But defendant was given no voice as to the character or quantity of the goods to be purchased by the firm, nor was he to share in the profits as such or bear any of the losses. Held, that defendant was not a partner; that the apparently wide powers and control given to him over the goods and their procceeds were only such as were necessary to preserve and insure his liens for money advanced upon the goods to be sold.

In an action against defendant for goods sold to the firm, memoranda slips provided or permitted by defendant to be used for the purpose of selling the goods and appropriately framed for that purpose, but which sometimes were used by the firm on the return of goods to the seller, are inadmissible unless it is made to appear that such use of them by the firm was with defendant’s consent and knowledge.

A ruling that if defendant held himself out as principal debtor, or if he was so held out by the firm with his authority, consent or connivance, he was liable for the amount of the sales, even though it did not appear that the seller was actually misled thereby into selling the goods and extending the credit, is reversible error.*

* See Thompson v. First Nat. Bank, etc., 111 U. S. 529; Central City Savings Bank v. Walker, 66 N. Y. 424.

*78Appeal from a judgment entered in favor of the plaintiff upon the verdict of a jury in the City Court of the city of New York, and also from an order denying defendant's motion for a new trial.

Hughes, Rounds *&*Schurman (George W. Schurman, of counsel), for appellant.

Jay C. Guggenheimer, for respondent.

Scott, J.

The plaintiff, as assignee of Epsen, Stewart & Loeb, Limited, sues to recover the purchase price of goods alleged to have been sold by that house to- the defendant. The answer makes a general denial, and, alleging that the plaintiff’s assignor was a foreign stock corporation, and the sale was made in this State, pleads that said assignor has not complied with section 15 of the General Stock Corporation Law (L. 1892, chap. 687) by procuring a certificate authorizing it to do business in this State. It will be necessary only to examine the questions raised by the general denial. The agreement for the purchase of the goods was made by a Mr. Lawrencelle, employed by and representing a firm in this city known as Worthington, Smith & Co., composed of George B. McLaughlin and William R. Smith, doing business at Ho. 7 West Twenty-second street. In every instance the goods were billed by the sellers to Worthington, Smith & Co-. When goods were returned credit bills were sent to- that firm. When Worthington, Smith & Co. wTent into bankruptcy in 1902 plaintiff’s assignor made a statement of the account in which all the items were charged to Worthington, Smith & Co. Indeed, until after this bankruptcy it does not appear ^that plaintiff’s assignor did any act, or sent out any bill, or made any entry from which it can be inferred that it understood or believed that it was selling goods to defendant or extending credit to- him. The defendant’s relation to the firm of Worthington, Smith *&*Co-, was defined by a written agreement read in evidence. It was proved by defendant, and *79not disputed that no relation or obligation whatever existed between him and that firm (except as to a single matter not relevant to these transactions) save that which was created by the written agreement. By that agreement first executed by McLaughlin and afterwards adopted by the firm of Worthington, Smith *&*Co., defendant was constituted and; appointed sole factor and selling agent for the firm which agreed to consign to him, for sale upon commission, the entire stock of goods then held and owned by the firm or thereafter manufactured or owned by it, including all goods thereafter during the continuance of the agreement purchased, or manufactured or received for sale. The goods were to be consigned by the firm to Talcott, and all sales were to be made by him and invoiced to purchasers- in the name of “ James Talcott - Department.” He was to- purchase and own the books of account used in the business and employ and pay a bookkeeper to have supervision of all such books of account. He was to supervise the credits, keep books of account at his main office, furnish the necessary employees for the collection of accounts and attend to such collection and the details thereof at his own expense. The firm Avas to pay all other expenses incurred in the business. Insurance was to be taken in defendant’s name, and he was to have the exclusive supervision and control of the said consigned goods and to decide all questions as to the credit to be given to purchasers, and all correspondence, accounts, remittances, checks, bills receivable and proceeds of sale, as well as the goods, were to be in the exclusive possession and control of defendant, as factor. In return the defendant agreed to advance to the firm not to- exceed sixty per cent of the net cash value of consigned goods in his possession, and seventy-five per cent of the net value of outstanding accounts for sales of consigned goods, after deducting from the gross amount of sales ten per cent to cover discounts, and also any amount previously loaned on the goods so sold, and his expenses and commissions. He was to receive for his services a commission of four per cent upon the net amount of the sales of consigned goods, and a less commission upon goods consigned, but not sold, and returned to the firm). In*80terest was to be charged and credited in the account current between the firm and defendant. A sign was to be placed at the entrance to the firm’s premises reading “James Talcott —Annex-Department.” All sales were to be at the risk of the firm, and a veto power was given to defendant as to the persons to be employed in and about the sale of the consigned goods. The lease was to be in the name of, or assigned to defendant, and he was to have the actual and exclusive possession and control of the premises and of all goods thereat consigned to him. The sign that was placed at the entrance to the place of business of Worthington Smith & Go. read as follows:

> “ James Talcott, Annex.

> “ Worthington, Smith & Company Department.”

It is quite clear that this agreement created no partnership in fact between Worthington, Smith *&*Co. and the defendant. His relation to the firm was solely that of a selling agent advancing moneys to his principals. The apparently wide powers and control given to him over the goods and their proceeds were only such as were necessary to preserve and ensure his lien for m.onays advanced upon the goods to be sold. In order to protect himself in this regard it was essential, or deemed to be so, that he should have legal control of the premises in which the goods were kept; that his name should appear as having some right to such control; that he should hold the insurance; that he should have the ultimate power of determination as to. the persons employed to sell the goods, and the persons to whom they were sold on credit. It is observable, however, that he was given no voice as to the character or quantity of goods to be purchased by the firm; that he was not to. share in the profits as such, or to bear any of the losses. It appeared that forms of bill heads or invoices were prepared and printed for use in connection with the sale of the consigned goods. These bill heads were made out as payable “ To James Talcott — Worthington, Smith *&*Co. Dept;,” and instructions were printed on them to make remittances in checks payable to the order of James Talcott. There were *81also what were known as memorandum slips intended to accompany goods sent to prospective purchasers for approval and acceptance. These were also made out in the name of “ James Talcott — Worthington, Smith *&*Co. Dept.” Since Talcott was so entitled under his agreement, and for the purpose of preserving his lien, it was proper that the bill and memorandum slips should show that payment for goods sold were to be made to him. It happened in a number of cases, however, that the firm of Worthington, Smith & Go. had occasion to return goods to plaintiff’s assignor, and in doing so used these memorandum slips. It does not appear that these slips were provided for any such purpose, and indeed they were inappropriate therefor, and it is shown that neither the defendant nor any agent of his knew that such use was made of them or authorized such use, for we can find no principle upon which Worthington, Smith & Go. can be considered as defendant’s agents so far as relates to the purchase of goods. As has been pointed out, defendant’s relation to that firm under their agreement was simply that of factor or selling agent. With the purchases he had nothing to do. Memorandum slips and bill heads he provided or permitted to be used for the purpose of selling goods, and they were appropriately framed for that purpose. It may be that in selling and billing goods upon which defendant had a lien, Worthington, Smith *&*Go. acted as his agent with his knowledge and consent, and that they were authorized to use these slips and bill heads in connection with sales. But defendant had nothing to do with purchases by Worthington, Smith & Go.; the bill heads were not adapted for the return to the seller of goods not purchased, and were not intended to be used for such purpose. We are of opinion that it was error to permit these memorandum slips to be introduced in evidence until it had been made to appear, as it was not, that they had been used in connection with returned goods with defendant’s consent or knowledge. It was thus conclusively shown that defendant was not in fact a partner in the firm of Worthington, Smith & Go. So much seems to have been conceded on the trial, and it does not appear to have been contended that he could in any *82aspect of the case be held liable as a partner. We think that it may also be said to have been shown that he was not in fact the purchaser of the goods sold by plaintiff’s assignor. There is no evidence that he was the principal debtor, and the documentary and other evidence shows that he was merely the factor for the purchasers, making advances upon their goods after they were purchased, and having only so much control over these goods as was necessary to preserve his factor’s lien. The precise ground upon which it was sought to hold defendant, as staged by plaintiff’s counsel, was that he “ held himself out to be the business in this particular case — and the owner.” By this we understand the contention to be that defendant had done> or suffered to be done, certain, acts which indicated that he was the real person doing business under the name of Worthington, Smith & Oo. Of this there were really but two items of evidence. The first consisted of the memorandum slips sent to plaintiff’s assignor with returned goods. Of these we have already spoken. The second item consisted of the sign upon the door already quoted. We cannot say, as a matter of law, that the peculiar wording of this sign was calculated to lead an observer to believe that the- business it advertised was conducted by defendant. Assuming that it presented a question of fact, properly left to the jury, as to what impression it was calculated to convey, we come to the crucial question involved in this appeal. If the defendant can be held liable upon the ground stated by plaintiff’s counsel, it must be because he is to be held estopped, so far as concerns plaintiff’s assignor, to deny that he was the real party conducting the business carried on under the name of Worthington, Smith & Oo. The significant fact in this connection is that it was not claimed upon the trial, and there is not a particle of evidence to show that plaintiff’s assignor in selling goods to Worthington, Smith & Co. and extending credit therefor relied upon any belief or any representation made by anyone in any form that defendant was the real purchaser or was the owner of the business conducted by and ■ under the name of Worthington, Smith *& Oo.*The plaintiff contended and the court held that if defendant held him*83self out as principal debtor, or if he was so held out by Worthington, Smith & Co. with his authority, consent or connivance he was liable for the amount of the sales by plaintiff’s assignor even although it did not appear that the sellers were actually misled thereby into selling the goods and extending the credit. We are unable to accede to this rule of law. It finds its sole support in this State in a proposition laid down by Hr. Parsons in an early edition of his work on Partnership, adopted by Commissioner Dwight in Poillon v. Secor, 61 N. Y. 456, and so far as xve have been able to ascertain finds no support whatever in any other jurisdiction. Hr. Parsons himself in a later edition of his work ■withdrew this proposition and enunciated a directly opposite rule (Parsons Partnership, 4th ed., p. 104), and expressly states that Poillon v. Secor and Young v. Axtell, 2 H. Black. 242, also cited by Commissioner Dwight, cannot be considered as correctly stating the law. Upon the facts Poillon v. Secor bore no resemblance to the present case, and presented rather a case of agency, than of estoppel. Evart Estoppel, 514. It is said by the learned justice below, in his opinion .denying a new trial, that Poillon v. Secor has never been expressly overruled in this State. This may be so, but it certainly has never been followed, in the particular in which it is deemed to be applicable to the present case. On the other hand the whole current of decisions and the settled rule of law is that one cannot be held as principal or partner by estoppel, when in fact he is neither, unless it be made to appear that the person seeking to so hold lfim knexv of the acts or representations and: relied upon them to his detriment. Elmira Iron and Steel Rolling Mill Co. v. Harris, 124 N. Y. 280; Whitney v. Wardell, 78 Hun, 609; Taylor v. Meyer, 47 App. Div. 455. It is only upon the doctrine of estoppel that defendant is to be held, if he can be held at all, for he was in fact not a principal, and the case as made wholly fails to establish one of the essential elements of estoppel — reliance upon the representations alleged to have been made. The other exceptions urged by the appellant it is not necessary to examine. The case was tried and submitted to the jury upon *84what we must consider an erroneous theory of the law, and for that reason the judgment and order must be reversed and a new trial granted, with costs to appellant to abide the event.

Leveutritt and Greekbauii, JJ., concur.

Judgment reversed and new trial ordered, with costs to appellant to abide event.