Court Opinion

ID: 9834079
Source: CourtListenerOpinion
Date Created: 2023-09-01 23:16:45.367914+00
Date Added: 2024-06-11T07:44:11.458868
License: Public Domain

On Motion for Rehearing.
In a rather vigorous motion the appellant attacks the original opinion, asserting that it is based upon the holding that he was a joint adventurer with the other parties composing the mining partnership engaged in drilling the second well. We possibly erred in not more clearly defining the legal status of appellant and in using the term “joint adventurer,” and the error is made the ground of considerable pointed criticism and vehement argument against the correctness of the opinion. That the parties were engaged in developing a lease, and the further fact that their interests were not represented by stock, either in the corporation or a joint-stock association, fixes their relationship as that of partners. In a mining partnership, if they had simply owned the lease, without any effort to develop it, they might have been tenants in common, but the process of development was going on when the appellant purchased his one-sixteenth interest, and, according to his own testimony under the rules announced in Munsey v. Mills & Garitty, 115 Tex. 469, 283 S. W. 754, and the other cases cited in the original opinion, the owners'were partners,'and constituted a mining partnership. According to Bolding’s testimony, he was a dormant partner in the firm. The agreed statement shows that in January he paid McNeese and Wiley, who were active partners, $600, and received from them a letter evidencing that he was the owner of a one-sixteenth interest in the lease, which then had one well on it. The fact that he visited the well and that the drillers were instructed to give him any information he might call for .is immaterial, so far as fixing his status is concerned.
“The rule is well stated in a. federal case [Bigelow v. Elliot, Fed. Cas. No. 1399, 1 Cliff. 28], which holds that persons who jointly participate in the profits of trade or business ostensibly carried on by another for his sole use and benefit, are equally liable, when discovered, with the ostensible owner to all creditors of the firm, whose debts were contracted during the time of such participation without knowledge of the same, or of the actual relation between the parties at the time the credit was given and that liability exists notwithstanding the parties may have *1119privately stipulated that they shall not be partners and in contemplation of law really are not such as between .themselves. A study of the various cases upon the question will show the above statement to be in accord with a great majority of these eases. The term ‘secret partner’ is sometimes used as synonymous with dormant' partner, and sometimes in a slightly different and broader sense. In the Am. & Eng. Enc. of Law, the following definition of dormant partner is given: ‘A dormant partner is one who takes no active part in the business, and whose name does'not appear in the title of the partnership, and who is unknown to those who give credit to the firm.’ The same work designates a secret partner as ‘one who participates in the business but keeps his relations with the firm a secret,’ thus making participation or non-participation in the business the distinction between the two, while later in the discussion of the cases, the distinction is practically obliterated, several cases being cited to the effect that a dormant partner may act as clerk, or agent.” 1 Rowley’s Modern Law of Partnership, § 139; 20 R. C. L. p. 1072, § 318, page 1057, § 302.
Under the rule in the Munsey Case, supra, the appellant became a dormant partner with McNeese and Wiley, not only by operation of law, but as the inevitable result of the circumstances surrounding his purchase of an interest in the lease. 1 Rowley’s Modern Law of Partnership, 153.
The case of Freeman v. Huttig, 105 Tex. 560, 153 S. W. 122, Ann. Cas. 19161E, 446, is not authority upon any proposition to be considered in this case. In that case it was sought to hold an incoming partner for debts of the old firm, and it further'appears that all parties expected to organise a corporation at the time the new partner came into the firm. Neither is the case of Randall v. Merideth, 76 Tex. 669, 13. S. W. 576, authority here, because it is conceded in the original opinion that even the active member of a mining partnership has no implied authority to borrow money upon the credit of the firm, but all of the authorities hold that a managing partner or active partner may bind the firm for necessaries in the way of labor and materials employed and lised in the prosecution of the work. 1 Rowley’s Modern Law of Partnership, § 153.
That a dormant partner who participates in the profits may be held subject to the normal liabilities against his firm, however secret he may keep his relations, seems to be settled by the great weight of authority, as shown by the Texas cases cited in the original opinion. The law will not permit him to secretly share in the profits of a firm without at the same time sharing the risks and bearing his part of the losses as to third persons. This rule holds true even where the dormant partner was not known as a member of the firm, at the time of the creation of the debt, and in spite of any agreement entered into between the parties purporting to limit the liability of the dormant partners; so the question of estoppel is also an immaterial one in determining this appeal. 20 R» C. L. p. 1072, § 319; 30 Cyc. 397; 1 Bates on Partnership, §§ 156 and 157; 1 Rowley’s Modern Law of Partnership, §§ 486, 500; Moore v. Williams, 26 Tex. Civ. App. 142, 62 S. W. 977.
Believing that a proper judgment has been rendered, the motion is overruled.