Case Name: The Merchants National Bank of Plattsburgh, Respondent, v. Erastus H. Barnes, Appellant, Impleaded with Others
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1898
Citations: 32 A.D. 92
Docket Number: 
Parties: The Merchants National Bank of Plattsburgh, Respondent, v. Erastus H. Barnes, Appellant, Impleaded with Others.
Judges: 
Reporter: Appellate Division Reports
Volume: 32
Pages: 92–98

Head Matter:
The Merchants National Bank of Plattsburgh, Respondent, v. Erastus H. Barnes, Appellant, Impleaded with Others.
Partnership — not created by an agreement by which one party is to put in his tinte and the other party is to pay expenses, sell the product and pay a certain per cent of the proceeds to the former — admission of a partnership in an answer in another action.
A partnership is not created between the parties to an agreement, under the terms of which the parties of the first, part are to “put in their time so much as may be necessary to the management of harvesting, piling and housing ice,” “and are to receive therefor one-fourth of the net profits realized on sale and settlement after the ice is disposed of,” and the parties of the second part “ agree to furnish the lumber and the money necessary to pay help and all other expenses in harvesting and housing and selling such ice. To sell such ice, using their best judgment as to time, price and persons, and after deducting all expenses to which they have been put and all advances, to pay to said” parties of the first part “ one-fourth of the net profits of such ventures.”
Under such an agreement the ice housed belongs to the parties of the second part, and the parties of the first -part have no interest in the profits as such, the one-four.th thereof being simply the measure of the amount of compensation tobe paid to them for their services.
The fact that, in an answer in an action (prepared by counsel and verified by the defendant therein, but withdrawn immediately after being served) a statement is contained that the answering defendant was a member of a firm, is insufficient, in the face of an uncontradicted and unmodified contract defining the relations of the parties, to support a finding in another action that such defendant was a member of a firm composed of the parties to such contract.
Appeal by the defendant, Erastus H. Barnes,, from a-judgment of the Supreme Court- in favor of the plaintiff, entered in the office of the clerk of the county of Clinton on the 11th day of December, 1897, upon the verdict of a jury.
■ The complaint alleges that the defendants, on the 5th day of March, 1890, became partners in business under the firm name of John Brown & Co., and, as such partners, in June or July, 1890, borrowed $4,000 of the plaintiff, and on October 20, 1890, had rediiced the indebtedness to $3,000, and thereupon under said firm name gave to the plaintiff their promissory note to the order of A. M. Warren and indorsed by him, dated that day for said $3,000, payable with interest.two months after that date; that said note was renewed from time to time and some payments made thereon; that on the 12th day of May, 1896, the defendants, as such firm, were owing the plaintiff $2,889.83 upon account thereof, and in consideration thereof gave the plaintiff the following note with the indorsement of the payee thereon :
“ $2,889.83. Plattsburgh, N. Y., May 12, 1896.
“ Four months after date we promise to pay to the order of A. M. Warren twenty-eight hundred eighty-nine and 83-100 dollars at the Merchants National Bank of Plattsburgh, N. Y. Value received, with use.
“JOHN BROWN & CO.”
That neither the same nor the indebtedness, represented by the note has been paid.
The defendant Barnes, in addition to a general denial, answered denying that he ever was a partner of the other defendants,- or member of any firm of John Brown & Co.; that if there ever was any such firm it ceased before any part of the alleged obligations were incurred ; that the note was made by the defendant John P. Brenan in the name of said firm without authority, and set up the six years’ Statute of Limitations.
It was shown upon the trial that on the 5th day of March, 1890, the defendants Brown and Brenan, and the defendant Barnes, acting for E. H.- Barnes & Co., of which said defendant Barnes and E. Dwight Church were members, made the following agreement:
“Memorandum made March 5th, 1890, by and between John Brown and John P. Brenan of one part and E. H. Barnes & Co. of the other, is as follows, to wit:
“ Said Brown & Brenan are about to put in their time so much as may be necessary to the management of harvesting, piling and housing ice at Gravelly Point and on Martin’s farm on the .shore of Lake Champlain, and to put up properly all the ice at such places as they reasonably may from this time on until the ice melts or is unfit to house, and are to receive therefor one-fourth of the net profits realized on sale and settlement after the ice is disposed of.
“ The said Barnes & Co. agree to furnish the lumber and the money necessary to pay help and all other expense in harvesting and housing and selling such ice. To sell such ice using their b.est judgment as to time, price and persons, and after deducting all expenses to which they have been put and all advances, to pay to said Brown & Brenan one-fourth of the net profits of such ventures. Said Barnes & Co. to furnish the necessary tools and all necéssary articles and materials.
“After having realized what sum has been put in expenses'and advances, etc.,, the said Barnes & Co. are to pay over thereafter monthly the said net profits herein promised to said Brown & Brenan.
“ This contract is intended also in all its terms to apply to and include the ice to be put in the -ice house in Baker’s lumber yard in the.village of Plattsburgh.
■“ Dated March 5th, 1890. “ JOHN BROWN,
“ J. P.. BRENAN,
“ E. H. BARNES .& CO.”
The said Brown and Brenan thereupon harvested and housed upon the .shore of Bake Champlain large quantities of ice, prosecuting the work with a large force of help so long as the ice was fit to house, drew upon Barnes, or ¡Barnes & Co., froin time to time, and rendered accounts to the- defendant Barnes, or Barnes & Co., for the expenses they incurred, all of 'which drafts were promptly paid by Barnesj or Barnes & Co., to the. amount, including moneys otherwise advanced or paid, of $84,626.61...
On September 30,1896, Brown and Brenan settled with Barnes & ‘Co. Brown and -Brenan meantime had received some items upon' Barnes & Co.’s account and they credited them therewith. There was some difference as to the exact- balance.due them from Barnes ■& Co., but it was settled at $2,500,. which sum Barnes & Co. paid to Brown and Brenan, and took from them the following receipt:
“Plattsburgh, New York, September 30, ’90.
■ “ Received of E. H. Barnes & ■ Co. twentyrfive hundred dollars ($2500 00-100)'at which amount the within account is settled in full of all demands to date- of whatsoever name or nature, and in acknowledging receipt whereof we hereby agree to, and do waive any further charges against E. H. Barnes & Co. that might hereafter appear as having been incurred by- us individually or collectively in the harvesting and purchase of ice during -the season of 1890, undér contract with E. H. Barnes & Co.
“ JOHN BROWN .& CO.
“ Witness : Frank E. Rogers.”
Most of the drafts thus drawn were deposited by Brown and Brenan in the plaintiff’s bank to the credit of an account which they opened with the plaintiff in the name of John Brown & Co. Brown and Brenan deposited in such account about $4,000 of their own money, and in addition made notes in such name and procured the plaintiff to discount them. The note for $3,000, dated October 20, 1890, was a renewal of a like note made June 18, 1890, but whether the June note was a renewal of previous notes the witnesses could not say. These notes were made by Brown and Brenan without the knowledge or authority of Barnes & Co.
The plaintiff made no claim against the defendant thereon until after his first answer in the suit of Brown and Brenan, in 1896, against Myers & Co., in which answer Barnes alleged that he was a member of the firm of John Brown & Co., which answer he obtained leave to withdraw upon his allegation of a mistake as set forth in the opinion.
Neither Barnes nor Barnes & Go. had any dealings with the plaintiff and neither made any representations to it. Brown and Brenan conducted their part of the business under the contract of March 5, 1890, in the name of John Brown & Co., and in suits brought by them alleged that they composed- that firm.
Thomas F. Conway and John F. Bladr, for the appellant.
L. L. Shedden, for the respondent.

Opinion:
Parker, P. J.:
The contract of March 6, 1890, created no partnership between the defendant Barnes and Brown and Brenan. It was simply a contract by which Brown and Brenan were to harvest and-house upon the shores of Lake Champlain large quantities of ice for Barnes & Co., at the latter's expense, and were to receive " therefor " from Barnes & Co. one-fourth of the net profits which the latter should realize upon the sale thereof after the latter had deducted all expenses. Brown and Brenan used the firm name of John Brown & Co. in carrying out their part of the transaction, both in their dealings with Barnes & Co. and with others. The contract does not mention such firm name.
Barnes & Co. employed Brown and Brenan. to use the former's money, tools, articles and materials so far as the latter could reasonably employ the same for harvesting and housing the ice. Thereupon the stored ice would belong to Barnes & Co., who agreed to sell it and pay one-fourth of the net profits to Brown and Brenan for their services. Brown and Brenan reserved no interest in the ice. They were not required to advance any money. When the ice- was housed it would belong to Barnes & Co., and Brown and Brenan would have to wait for the pay for their services until Barnes & Co: should sell the ice.
The agreement as made was carried out. Brown and Brenan did gather and house the icé and Barnes & Co. paid all the . expenses. It does not appear that any profits were realized upon the sale of the ice, and we assume there were none.
It is plain that, as between themselves, no partnership was created between Barnes or Barnes & Co. and the other defendants.
The creation of any debt by Brown and Brenan against Barnes & Co. to the plaintiff for advances was not authorized, and was not necessary since Barnes & Go. were not remiss in supplying to Brown and Brenan the necessary funds upon their request or drafts.
As between the parties to the agreement the debt to the plaintiff was not.a partnership one, but the separate debt of Brown and Brenan, which, if incurred in anticipation of Barnes & Co.'s advances, should have been paid therefrom.
But Brown and Brenan were to receive " therefor," that is, for ' their services, " one-fourth of ' the net profits realized on sale and settlement after the ice is disposed of," and Barnes & Co. agreed " to pay to said Brown & Brenan one-fourth of the net profits of such" ventures."
It is, therefore, urged that they were partners as to- third persons, and, hence, as to the plaintiff. This would be so if Brown and Brenan had retained an interest in the profits as such, as distinguished from the measure of the amount of compensation, Barnes & Co. agreed to. pay them for their services, or as distinguished from the one-fourth share of Barnes & Co.'s profits which the latter agreed to pay them.
As pointed out in Leggett v. Hyde (58 N. Y. 272, 278), " the specific interest in profits which is to make a person- a partner must be a proprietary interest in them existing before the division of them into shares," quoting with approval 3 Kent's Commentaries (*25, note b), where it is said, " the test of partnership is a community of profit; a specific interest in the profits as profits, in contradistinction, to a stipulated portion of the profits as a compensation for services."' This test is well established in this State. (Hackett v. Stanley, 115 N. Y. 625 ; McLewee v. Hall, 103 id. 639 ; Cassidy v. Hall, 97 id.159 ; Richardson v. Hughitt, 76 id. 55; Smith v. Bodine, 74 id. 33 ; Leggett v. Hyde, 58 id. 272 ; First National Bank of Meriden v. Gallaudet, 122 id. 655.)
Barnes & Co. were not partners of the other defendants as to third persons. Barnes & Co. did not hold themselves out to the plaintiff or to the public as partners with the other defendants, and, therefore, they did not become liable upon that ground. (McLewee v. Hall, supra.)
In July, 1896, the defendant Barnes verified an answer in which it was alleged that he " has now, and at all times mentioned in said, amended complaint, had an interest as copartner in the business of said John Brown & Co."
Brown and Brenan had brought an action against F. W. Myers. & Co., claiming to recover for ice which they as partners under the firm name of John Brown & Co, had sold them between March 1. and May 31, 1890. Barnes had been interested with Myers & Coin buying this ice, and if any sum was unpaid thereon, he supjmsed it was payable to Barnes & Co. Myers & Co. consulted with counsel in Plattsburgh, and they interposed an answer alleging that Barnes was a member of the firm of Brown & Co., and also alleged, payment. Myers & Co.'s counsel desired Barnes to interpose an answer*, and wrote to him inclosing a copy of Myers & Co.'s answer.. Barnes answered the letter, saying, " Mr. Myers is right in his.allegation that I was interested in the firms, of F. W. Myers & Co. and John Brown & Co. I can give no additional facts for the defense of plaintiff's complaint, and wish, you would kindly attend to this matter and advise me of any steps necessary for me to take to protect the interests of F. W. Myers & Co., as well as my own." Counsel at Plattsburgh thereupon mailed him the answer containing the above allegation, and Barnes verified it. Afterwards being in doubt as to the correctness of his answer in this respect, he con- suited his home counsel in New York, and stated to them the facts in full, and was advised by them that the answer was not correct: He thereupon procured leave to withdraw the same, and then served :an amended answer in which such allegation did not appear.
This answer thus withdrawn and the letter constitute the only evidence of the defendant's membership.of the firm of John Brown & Co. As explained, they are mere soinUllce, and insufficient in the face of the uncontradicted and unmodified contract to support a finding of the existence of Barnes' partnership with Brown and Brenan.
Whether a person is a partner with others is often an embarrassing question, and a mistaken ¡admission of the fact seasonably corrected, both admission and correction being made after the transactions upon which the rights of the parties depend, should not be permitted to change such rights. (1 Lindley Part. *87, 88; Ridgway v. Philip, 1 Cromp. M. & R. 415; Vice v. Anson, 7 Barn. & C. 409.)
Here the test of the partnership is the written agreement of March 5, 189.0, and by that test the defendant Barnes never became .a member of the firm of John Brown & Co.
The judgment should be reversed, new trial granted, costs to abide the event.
All concurred, Mbrwin, J., in result.
Judgment reversed and a new trial granted, costs to abide the event.