Opinion ID: 1183168
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Heading Rank: 2

Heading: Sharing of the Profits

Text: The Uniform Partnership Law, adopted in Oregon in 1939, provides: (ORS 68.120) In determining whether a partnership exists, these rules shall apply:    (3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived. (4) The receipt by a person of a share of the profits of business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment:    (b) as wages of an employe or rent to a landlord; 6. It is well settled in Oregon that the receipt by a party of a share of the profits of a business or venture as compensation for his services in the enterprise does not by that fact alone constitute him a partner. In other words, in order to establish prima facie evidence that a party is a co-partner, it must appear his right to share in the profits results from the fact he is a part owner of them. Shebley v. Quatman, 66 Or 441, 134 P 68; Smith v. McGowan & Sons, 131 Or 522, 284 P 189; First National Bank of Eugene v. Williams, supra; Worden v. Beals, supra; Elliott v. Murphy Timber Co., 117 Or 387, 244 P 91, 48 ALR 1043; Preston v. SIAC, 174 Or 553, 149 P2d 957; Claude v. Claude, 191 Or 308, 228 P2d 776, 230 P2d 211; Eldridge v. Johnston, 195 Or 379, 245 P2d 239; Moore v. Willamette Iron & Steel Works, 127 Or 134, 271 P 49; Marnon v. Vaughan Motor Co., Inc., 184 Or 103, 194 P2d 992. As we said in Devereaux v. Cockerline, 179 Or 229, 170 P2d 727: The weight of authority seems to be that the presumption arising from a profit sharing agreement is rebutted by a mere showing that the only consideration for the agreement was the rendition of services.    Defendant Wallace was paid a portion of the receipts of the corn picking operation on the basis of the number of tons of corn he actually hauled. He was paid only for the exact services he performed and no more. He realized a profit from the operation of his truck only if this amount thus received exceeded his expenses. We quote from the testimony of Ralph Killinger, the plaintiff's first witness: Q What you paid your hauler was an expense item, wasn't it? A I just never considered it expense. I just considered the hauler's wages. Q But it wasn't part of your profit? A No. Q In other words, as far as you were concerned that was the wages of the driver and his truck? A Yes. Ralph Killinger also testified that George Killinger & Sons calculated their profits for the corn picking operation by deducting the expenses of operation and the amount paid to Wallace for hauling. This indicates that Wallace received a portion of the gross receipts rather than the net profits; and that the profits remaining after expenses and hauling were deducted belonged to the partnership of George Killinger & Sons. The profits derived from the operation by George Killinger & Sons and Wallace respectively were calculated independently and it is easily possible one could have suffered a loss while the other realized a gain. The amount that Wallace received was not his share of the profits as such but compensation for his services in hauling the corn. It will be fruitful to review our past disposition of this problem of shared profits. In Willis v. Crawford, 38 Or 522, 63 P 985, 64 P 866, this court denied equitable relief in the nature of an accounting to the plaintiff, a lawyer, who had agreed with the defendant, another lawyer, to share fees derived from legal services rendered to an individual. Although the two attorneys occupied the same office space, they had not ordinarily acted as partners, but in the particular transaction in question they rendered the services jointly and the client paid all the expenses. We held dividing the fees did not create a partnership on the basis of shared profits. In Wheeler v. Lack, 37 Or 238, 61 P 849, the plaintiff and defendant entered into an agreement to divide the brokerage commission in case either should refer to the other a customer to whom sales of property should be made. There was no provision in the agreement for the sharing of expenses or losses. We there held the plaintiff had failed to establish the existence of a joint adventure. In Marnon v. Vaughan Motor Co., 184 Or 103, 194 P2d 992, plaintiff invented a mobile lift truck and entered into an agreement with defendant whereby Vaughan Motor Co. was to produce the lift truck assuming all expenses of manufacture. Plaintiff set up dealerships throughout the United States to market the lift trucks and was paid eight per cent of gross sales. From this amount he paid all expenses of maintaining the dealerships. The decision held that Marnon was an agent and not a joint adventurer. Justice LUSK stated: He [Marnon] was not at that time, under any definition of joint adventure that we have seen or within the holding of any case to which we have been referred, a joint adventurer with Vaughan, because he did not share in the profits of the business as such, but under his agreement was entitled to his compensation of eight per cent whether there were profits or not.