Court Opinion

ID: 7186127
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:52:34.773378+00
Date Added: 2024-06-11T16:16:04.581748
License: Public Domain

Merrick, C. J.,
dissenting. This suit has been brought to charge the defendant as a partner of J. B. Steel.
The whole ease turns upon the construction of a contract by which Norman, Steel & Co., appointed the defendant in 1840, their confidential clerk and bookkeeper, at a salary of $1200 per annum for two years, and made this further agreement, viz : “ that from and after the expiration of said two years, and for and during the space and term of two years thereafter, that is to say, from the 3d day of November, 1842, until the 3d day of November, 1844, the said James Desban shall receive as compensation for his said services one-fourth fart of the entire net profits of the business of said firm, and at the end of the said two years, that is to say, on the 3d day of November, 1844, the said James Desban shall have it in his option to remain for two years longer in his capacity aforesaid at the said compensation of one-fourth part of the entire net profits of the said firm.”
Norman, Steel & Co., dissolved partnership in July, 1843, and the business after this time was conducted in the name of Steel alone. Steel made his power of attorney to the defendant fully authorizing him to conduct his affairs, to draw bills of exchange and promissory notes, to sell and buy real estate and slaves, to lease, let and hire houses, to receive shipments of goods, sign customhouse bonds, grant mortgages, pledges, &e., &c.
Desban continued in the employment of Steel as clerk and book-keeper until 1854, under his agreement, to receive one-fourth part of the entire net profits of the business of said Steel for his compensation. During this period, Steel became indebted to the plaintiff for the loan of money in suit which was used in the business of the house.
Did this agreement of Desban to receive as compensation for his services as clerk and manager of the affairs of the concern, the one-fourth of the net profits of Steel’s business, make Desban a dormant partner ?
The learned Judge of the Fifth District Court (who has been followed in his conclusions by a majority of the court,) after a very elaborate and able exposition of the authorities, was of the opinion that the contract partook more of the nature of the letting of industry, locatio operarum than partnership and that the defendant was not bound. It may be true, perhaps, that the defendant, as between himself and Steel ivas only a clerk; that he was bound to conduct the business as Steel directed, and was entitled to no voice in the management of the affairs, and was liable to be discharged by Steel at any moment, saving his right to claim an indemnity if he were discharged without sufficient cause.
But on the other hand, the engagement has some of the elements of a partnership in this, the defendant with extensive powers of administration brought into the concern his industry against Steel’s capital, and for this industry he was to receive one-fourth of the net profits. And he was subject to lose his entire services in case of loss.
The profits could not be ascertained until the debts were paid or deducted each year, and at the termination of his employment he had an action to compel Steel to account.
The contract we have to consider then partakes of the nature of letting, hiring and of partnership. Which shall control ? Under the civil and French law the contract would be construed with reference to third persons perhaps, as it would between the parties to the same, as the locatio operarum.
*534Bat the law of Louisiana must be consulted on this question. If the civil law prevails, the judgment of the lower court can be rightfully affirmed. If any other rules have been adopted they ought to be applied.
On the subject of what was intended by the Code in its reference to the commercial law, our predecessors said in 1833, that “ when the tribunals of this country were first called upon to interpret this and a similar provision in our law, there was great doubt as to what laws and usages of commerce reference was there made. It was finally concluded, though not without hesitation, that they must have had in view the usages and laws prevailing in our sister States, unless these laws and usages conflicted with the positive legislation of Spain, or were in opposition to the local usages prevailing in Louisiana. 'Whatever difficulty attended this decision when first made, there can be none in following it now. A considerable time has elapsed since it was made public. Contracts almost innumerable have been executed in reference to it. Rights have been repeatedly adjusted under its authority. Property to a large amount acquired in relation to it; and stronger than all, the legislature of the State by their silence on the subject, have authorized the belief that the court correctly interpreted the previous expression of their will.” The court concludes, “We must therefore look to the law merchant of the United States for the consequence attending acts such as are proved in this case on the defendant.” McDonald v. Millaudon, 5 L. R. 408.
This decision has been considered as settling the law in relation to commercial partnerships from that day to the present time. See Bank Tenn. v. McKeage, 11 Rob. 136. Pinton v. New Orleans and Carrollton Railroad, 3 An. 30.
But on the particular question before us, it appears to be conceded that the current of authorities under the commercial law, are adverse to the pretensions of the defendant. Wherever a party receives a compensation for services in the profits, as such, or in other words, wherever the party can call upon his employer to account in equity for the profits there, by the commercial law he is bound towards third persons as a partner. Vaugh v. Carver, 2 Henry Black, 246-7. Hisketh v. Blanchard, 4 East, 146. 3 Kent, 25 note b, 4 ed. Story, 35.
The case at bar is precisely such a case, and the judgment of this court has just been demanded upon the settlement of the account of profits between these parlies. Deshan has demanded and received, as he was entitled by his contract, the one-fourth of the net profits.
He was entitled to this therefore as a principal, that is, he had a direct claim for the one-fourth of the net profits as such. He was not to receive a per centage upon the profits which would be but a mode of ascertaining the compensation, but he was entitled to one-fourth of the profits themselves. He was, therefore, a partner; for his compensation was, (in the language of Smith, in his mercantile law,) dependant on them for existence.
Desban was interested in the debts, for they had to be paid before his net profits could be ascertained, and his agreement bound him for a share of the losses, for if the concern was unsuccessful, he lost his entire services. He ran the risk of losing his labor, and Steel the risk of losing his capital. The case comes within the summary of the common law as laid down in the opinion of the majority of the court. Mr. Justice Story says that, “ Where the agreement either expressly or by fair implication admits, that the parties are to share in losses as well as profits, that circumstance will ordinarily at common law be held to make them partners as to third persons, and in many cases also between themselves, upon the ground that such is the proper and essential accompaniment of a partnership, and that *535it is inconsistent with the notion that the share of the profits is designed to be a mere remuneration for services,” Story, \ 55.
In another place he says, “ The true meaning of the language on interest in the profits, as profits, (which has probably been borrowed from the subtle and refined statement of an eminent Judge,) seems to be, that the party is to participate indirectly, at least, in the losses as well as in the profits, or in other words, he is to share in the net profits, and not in the gross profits.” Story, g 34.
As heretofore observed, it seems to be conceded, that if the case were to bo governed by the rules of the commercial law that it would be with the plaintiff.
An examination of the authorities from the common law will not, I think, show that supposed inconsistency mentioned in the opinion of the majority of the court.
Of necessity in a commercial age, nice distinctions will always accompany the administration of justice, and courts have only to inquire whether such distinctions really exist, and in the event of their existence to enforce them.
I think I have shown that the commercial law has been recoguized by our courts as the law of Louisiana, and that it is in plaintiff’s favor.
If we examine such Articles of the Civil Code of 1825, as seem applicable to the case, we shall find that the provisions of the common law on this subject seem to have been adopted ex industria by the Legislature. They were not contained in the Code of 1808, and would seem to have been introduced for the purpose of rendering the law of Louisiana on this subject harmonious with that of our sister States.
Article 2772 declares that, “It is of the essence of this contract (partnership) that a profit is contemplated, and that each of the parties is to partake therein,” * -:«• « * _
Article 2784. “ A participation in the profits of a partnership carries with it a liability to contribute between the parties to the expenses and losses. But the proportion, like that of the profits, may be regulated by the stipulation of the parties, and where they make none, is provided for by law.”
Article 2785. “ A stipulation that one of the contracting parties shall participate in the profits of a partnership hut shall not contribute to losses, is void, both as regards the partners and third persons. But in the case of a partnership in com-mendam, hereinafter provided for, the liability to loss may be limited to the amount of stock furnished.”
Now, under our Code, the industry which the defendant was to furnish is of precisely the same dignity as money or any other capital. C. C. 2780. But if a capitalist had furnished money in any other form than in commendam, with an express agreement that he was not to be considered a partner, nor bound for losses, but should receive one-fourth of the profits, he would be held as a partner. Why should not the person whose only capital is his skill and industry, be subjected to the same liability particularly as he is daily violating the provisions of Art. 2820, which in no manner permits the partner in commendam to act as agents for the other partners ?
The Civil Code, therefore, makes a participation in the profits the criterion by which we are to judge whether an individual is or is not a partner. The cases cited from our own reports and relied on by the defence, viz : Bulloc v. Pailhos, 8 N. S. 174; 9 L. R. 317, and 4 L. R. 139, were controversies between the parties themselves, and what was said by the court in those cases has no relation to third persons.
I have no doubt that the commercial law, as it stood at the time of the adop*536tion of the Code of 1825, is the law governing this case. And as it was adopted by the Legislature, it must continue the same, until repealed by the power which gave it force and vigor.
In my opinion, the judgment ought to be reversed, and rendered in plaintiff’s favor.