Case Name: Heier v. Althoff
Court: Montgomery County Court of Common Pleas
Jurisdiction: Ohio
Decision Date: 1930
Citations: 28 Ohio N.P. (n.s.) 69
Docket Number: 
Parties: Heier v. Althoff.
Judges: 
Reporter: Ohio nisi prius and general term reports (new series)
Volume: 28
Pages: 69–75

Head Matter:
Common Pleas Court of Montgomery County.
Heier v. Althoff.
Marshall & Harlan, Scherrer & Scherrer, for defendant.
W. S. Rhotehammel, I. L. Jacobson, for plaintiff.

Opinion:
Snediker, J.
Testimony was taken in this case so that the court might determine preliminarily as to whether á partnership exists between these parties. The plaintiff sues for an accounting on the theory that there was a partnership between himself and the defendant with respect to certain public contracts entered into by the plaintiff with the county of Montgomery. For this work it became necessary for him to finance these contracts. The defendant was then a representative of the Royal Indemnity Company, of New York. As such, he had written bonds for the plaintiff on other work and thereby became acquainted with the plaintiff and with his business.
The claim of the plaintiff is that after he had secured the respective contracts on which he seeks an accounting, the defendant entered into an agreement with him whereby the defendant was to be a silent partner with the plaintiff on these jobs and at that time, particularly oh the Lutz Avenue and Maple Avenue work. By the terms of that agreement the plaintiff was to supervise the work and the defendant was to contribute capital when needed for the purpose of meeting payroll and other bills which weekly payments on estimates to the plaintiff would not cover. The plaintiff also claims that there was to be allowed him for supervision a weekly compensation, as well as an amount for the use of his trucks, and that when all of the work was completed the plaintiff and the defendant were to share equally in the profits realized. The bank account was kept in the name of the plaintiff; checks thereon were countersigned by the secretary of the defendant, of all of which the defendant had full knowledge. Plaintiff claims that the secretary of the defendant issued certain checks to him to cover bonds; that without the plaintiff's knowledge the defendant procured from the secretary numerous checks to the total of $5,500, to which plaintiff claims the defendant was not entitled, and that this money has been misapplied and misappropriated and no account given to plaintiff therefor. There is also a claim that this defendant has received other assets of the partnership, and a further claim of slanderous reports and charges made by the defendant against the plaintiff which makes the partnership unendurable and influences the plaintiff to ask for its dissolution and for the accounting.
The defendant denies that any partnership agreement existed between the plaintiff and defendant, says that he had no agreement with the plaintiff as to salary, denies that there is anything due the plaintiff, states that he did agree to advance money to plaintiff to finance the Lutz Avenue, Maple Avenue and Overlook Avenue contracts, and that by way of compensation for such financing, he was to receive 50 per cent, of the profits; that there was a profit, the exact amount of which is to him unknown, and that the plaintiff has wholly failed to account to him for any part thereof. The defendant says that after the completion of the work on these jobs he rendered the plaintiff a written account of the receipts and disbursements, as shown by his, the defendant's books, and the defendant prays that plaintiff be required to produce an account of the monies had and received by him, and that the defendant be granted a judgment for such sum as may be found due him and for such other and further relief as he is entitled to in equity.
The cause of action of the plaintiff, involving a claim of partnership, the ascertainment of whether or not such partnership existed between the defendant and the plain tiff becomes important,' and it is essential that our inquiry be limited to a determination as to whether or not there was such a partnership inter sese. We have not before us any claim of a creditor who insists on his right to regard the relation between Heier and Althoff as that of partners.
The authorities are not uniform with regard to such a condition as the evidence discloses in this case, which was that the plaintiff, being a general contractor and in need of funds for the prosecution of his work, either applied for or was induced to accept money therefor from the defendant which money was in fact used therein, with an understanding that at the termination thereof there should be an equal division of the profits.
In addition to the foregoing there was a supervision of the fund by the lender. There was not any right on his part recognized by the plaintiff or asserted by the defendant to supervise, control or restrict the carrying out of the contracts. Whatever may have been taken out by the plaintiff or whatever he may have been entitled to take out as weekly compensation on account of his own time or the use of his material and properties, was an expense, the amount of which was withdrawn and eventually resulted in a depletion of the profits which were to be divided. No fixed compensation other than the division of the profits accrued to or was received by the defendant. There was not in their transactions a right or the exercise or assumption of the right on the part of the defendant to represent the business in the capacity of agent therefor.
Counsel for the plaintiff have submitted to the court some Ohio authorities which do not bear directly upon the exact state of the case before us, and we may say that all cases of this kind, differing somewhat in their particulars and ramifications, must be determined from their own facts. Wood & Oliver v. Vallette and Lewis, found in 7 O. S., at p. 172 is not decisive of our case. In the opinion the Supreme Court say:
"But it is not necessary, in this case, to find that the writing under consideration constituted a partnership inter sese, between the parties. The question is, does the legal effect of the contract constitute the defendants partners, toward third persons dealing and becoming creditors, within the limits of the enterprise?"
We see, then, that the exact question which we are to determine was in no sense discussed or decided by that opinion.
Another case relied upon by plaintiff is that of Wade v. DeHart et al., 26 Ohio App. Rep., p. 177. There the court say:
"The evidence discloses further that both plaintiff and James DeHart negotiated for the supplies and materials and that there was to be a sharing of profits in the venture."
This is quite a different situation than the one in the case at bar. Authorities which are more applicable to our facts are to the following effect:
"A partnership, as between the parties themselves, is largely a question of intention; the agreement or intention of the parties should govern in all cases. But a mere participation in profits and loss does not necessarily constitute a partnership; there must be such a community of interest as empowers each party to make contracts, incur liabilities, manage the whole business and dispose of the whole property, a right which upon dissolution of the partnership by the death of one passes to the survivor and not to the representatives of the deceased." 29 Mo. App., p. 587.
In this case the court quotes authority to the same effect, and says:
"It is stated by Judge Storey in Campbell v. Dent, 54 Mo., 325, to be largely a question of intention. The agreement or intention of the parties should govern, in all cases. If they intend a partnership in the capital stock or in the profits or both, they will be held as such as between themselves and third persons."
Also see 24 Mo. App., p. 506.
A like case is found in 24 Ill. App., p. 628. In the case of Mehan, plaintiff, v. Valentine, executor, defendant, the Supreme Court of the United States laid down the rule that:
"The receiving of part of the profits of a commercial partnership in lieu of or in addition to interest by way of profits for a loan of money does not make the lender a partner." 145 U. S., 601.
In the body of this opinion the language of the court is:
"How far sharing in the profits of a partnership shall make one liable as a partner has been a subject of much judicial discussion, and the various definitions have been approximate rather than exhaustive.
"The rule formerly laid down, and long acted on as established, was that a man who received a certain share of the profits as profits, with a lien on the whole profits as security for his share, was liable as a partner for the debts of the partnership, even if it had been stipulated between him and his copartners that he should not be so liable; but that merely receiving compensation for labor or services, estimated by a certain proportion of the profits, did not render one liable, as a partner."
Here are quoted numerous authorities.
"Mr. Justice Story, at the beginning of his Commentaries on Partnership, first published in 1841, said:
"Every partner is an agent of the partnership; and his rights, powers, duties and obligations are in many respects governed by the same rules and principles as those of an agent. A partner, indeed, virtually embraces the character both of a principal and of an agent. So far as he acts for himself and his own interest in the common concerns of the partnership, he may be properly deemed a principal; and so far as he acts for his partners he may as properly be deemed an agent. The principal distinction between him and a mere agent is, that he has a community of interest with the other partners in the whole property and business and responsibilities of the partnership; whereas, an agent, as such, has no interest in either."
And again:
"The true rule, ex aequo. et bono, would seem to be that the agreement and intention of the parties themselves should govern all the cases. If they intended a partnership in the capital stock, or in the profits, or in both, then that the same rule should apply in favor of third persons, even if the agreement were unknown to them. And on the other hand, if no such partnership were intended be tween the parties, then that there should be none as to third persons, unless where the parties had held themselves out as partners to the public,- or their conduct operated as a fraud or deceit upon third persons."
Further along, the Supreme Court say:
"And it is now equally well settled that the receiving of part of the profits of a commercial partnership, in lieu of or in addition- to interest, by way of compensation for a loan of money, has of itself no greater effect." (Followed by numerous authorities.)
That is, that it does not make the person -so receiving such share of the profits a partner of the person to whom the money has been loaned for the purposes of the business.
In his work on "Modern Law of Partnership," Rowley states that:
"It is well settled that the receipt by one of a share of the profits of a business or of compensation for his services in such business or enterprise does not ipso facto constitute him a partner therein."
In the 28 O. S., at p. 319, the Supreme Court held:
"Participation in the profits of a business, though cogent evidence of a partnership is not necessarily decisive of the question. The evidence must show that the persons taking the profits, shared them as principals in a joint business, in which each has an express or implied authority to bind the other."
And this decision is followed and quoted from with approval by numerous authorities in this state ever since it was handed down, one of the last of which is the case of Southern Ohio Public Service Co. v. Public Utilities Commission, 115 O. S., pp. 405-413. The Supreme Court in the last mentioned case lays stress upon this language of the opinion in the Harvey case:
"Therefore, on principle, the true test of a partnership, at least, is left to be that of the relation of the parties as principal and agent, to be proved by any competént evidence; for, when they sustained that relation, a joint liability may be said to have been incurred by the au thority, or on behalf of each of the parties so related. The tendency of the more modern authorities, both English and American, is to this conclusion."
We do not find in this record any authority on the part of the defendant which involves the relation of principal and agent. Whatever measures were used by him to control the output of the loan (and here we refer to the fact that the checks were countersigned by his employee), were a safeguard thrown about their proper application in which he was interested, because his compensation for the loan involved a participation in the profits.
We do not find, therefore, that between this plaintiff and the defendant either the intention or the fact warrants us in saying that a partnership existed.
We notice that both of the parties ask for an accounting; the plaintiff, as we have said, upon the theory that a partnership existed, and the defendant, because of a concealment of the true profits realized from these contracts.
It appears from these claims that there is a complication of accounts. Lawrence, at Section 1136 of his work on Equity says:
"It is frequently declared that controversies otherwise purely legal in character may fall within the province of equity because of their intricacy, complexity, and the number of items involved, especially where they are 'mutual, i. e., where each party makes claims against the other. Usually such expressions merely mean that complicated transactions are more conveniently unravelled by a judge, master, or commissioner than by a jury, and that a court of equity jurisdiction as ordinarily organized is more convenient and appropriate for the purpose.
" 'Great complication' and 'difficulty in the way of an adequate remedy at law," when used in connection with accounting, mean such an account as a court of law, with the aid of all the legal machinery at its command, is unable to solve so as to do substantial justice."
"Juries are not" ideal tribunals for such purposes. Chancery offers 'superior facilities.' "
Whatever aid can be afforded by this court these parties are entitled to, and such orders will be made as are proper.