Court Opinion

ID: 6415838
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:56:06.044438+00
Date Added: 2024-06-11T15:51:33.070499
License: Public Domain

Colt, J.
It is necessary to determine whether the contract declared on constitutes a partnership, or was only an agreement by which the plaintiff was to take a share of the net profits, not in the character of partner, but as agent, and as compensation for labor and services, or capital contributed.
Where creditors are not concerned, and the question arises between the parties only, the intention as ascertained from all the provisions of the instrument must govern. If payment for services rendered is to be made in proportion to the profits of the business, and the profits are referred to only as a measure of compensation, and if no .lien is given upon the property or assets of the business, to the exclusion of other creditors, then the mere fact that a party is, to the extent stated, indirectly interested in the profits, will not make him a partner. In general, a participation in profits is alone sufficient to establish a partnership, unless it appears, from other circumstances and stipulations, that such was not the intention, as where the party who contributes his services, money or goods to the prosecution of a particular business with one or more parties, relies solely on the personal responsibility of the latter, and does not intend to have any title or interest in the resulting property or its proceeds. Hawes v. Tillinghast, 1 Gray, 289.
Most of the stipulations in this contract are equally consistent with either theory. In substance, Wilcox agrees, on his part, « go into the manufacturing business, under a certain designated name, style and firm; to furnish the necessary capital to a limited amount, and to let the company have the use of certain coal lands, oil works and mining apparatus, in Ohio, with the right to take coal, for which he is to be paid by the com pony a certain rate per ton. Ryder, on his part, agrees to devote all his time and skill exclusively to the business, as general agent and manager; to lease certain oil works and personal *28property at New Bedford to the company at a stipulated rent and to give the company the use and benefit of his trade marks and patents free of charge. He is to receive for his services a certain sum per year, and one half of the net profits. Annual settlements are to be made, and all sums due Ryder are to be paid or credited. Interest is to be allowed to Ryder on his credits, and to Wilcox on the capital paid in. The word “ firm ” is used, and the contemplated business is spoken of as that of a “company.” The inference is, that the parties to the contract intended to be the members composing it; and that the plaintiff, having a common interest in the stock, looked to the property and business of the concern for his stipulated share,, and not solely to the personal responsibility of the defendant. The rights of the plaintiff and defendant to their share of the profits, and the allowances respectively provided for in the agreement, depend upon similar stipulations, and stand on the same ground. And all doubt seems to be removed by the concluding provision, by which all the operations of the limited partnership of Henry Ryder are embraced within its terms, and the contract is carried back to a previous date, in order to cover them. Without further explanation, this last stipulation must be held to carry into the new concern certain previous transactions, in the profits of which, as general partner, Ryder was entitled to participate; and is inconsistent with the interpretation that the only relation he sustained to the new business was that of agency. Upon the whole, we think that the relation created and continued was intended to be, and was, that of partnership, Williams v. Henshaw, 11 Pick. 79. Denny v. Cabot, 6 Met. 82 3 Kent Com. (6th ed.) 24. Story on Part. §§ 18 & seq.
It remains to consider whether the plaintiff’s case comes within any of those rules which permit one partner to maintain an action at law against another, for a violation of the partnership agreement.
It is alleged, in substance, that the defendant has excluded the plaintiff from the management and profits of the partnership business; has refused to make annual settlements, and payments thereon; and, although he has continued the business *29upon the premises and witt the tools of the plaintiff, and made large profits, has refused to recognize the plaintiff’s rights under the contract. The action is brought before the expiration of the time limited for the duration of the partnership, and without any formal dissolution of it. It is not for the recovery of an ascertained general or special balance belonging to the plaintiff. There can be no recovery at law of the profits of the business, so long as it is possible, upon a final settlement and account between the partners, that the plaintiff might be liable to refund. It is not sought to charge the defendant as upon an agreement preliminary to the commencement of business, made for the purpose of launching the partnership, like promises to furnish capital; or upon separate securities given by one partner to another on partnership account; or where there has been a voluntary separation of funds from the partnership stock, and one partner is alone interested in the contract relating to it.
It is said that an action at law for damages for the breach of an express agreement, entered into by one partner in favor of another, will only lie where the action can be properly tried without going into the partnership accounts, and the damages sought will belong exclusively to the plaintiff, and where the plaintiff will not be liable in any contingency, affecting the future joint business, to contribute to his own payment. Lindley on Part. 731, 740.
But, without stopping to inquire whether this action can be maintained without violating these rules, it is sufficient to say that, whatever the nature of the agreement, it must be one in which the defendant binds himself personally to the plaintiff. We cannot find, in the instrument declared on, that the defendant did bind himself personally to make good to the plaintiff any certain sum as his share, if the partnership assets should prove deficient. The stipulations in this regard are to be construed not as personal covenants between the parties as individuals, but rather as provisions defining and regulating the mode in which the business of the company should be conducted and the profits divided. The agreements, on the other hand, for contribution to the partnership funds and property which each is to *30make, are made binding by name on each, and would no doubt be classed with those express agreements which may be the foundation of an action. Venning v. Leckie, 13 East, 7. Brown v. Tapscott, 6 M. & W. 119.
The principles we are considering are illustrated in the case of Paine v. Thacher, 25 Wend. 450, where it was held that, if one partner promises another partner to pay him a compensation for personal attention to the business of the concern, this promise may be enforced at law, notwithstanding the existence of the partnership and written articles providing for such payment. Nelson, C. J., says, in this case, that the item for services had been adjusted, and there was an express promise to pay it, and the compensation was to be contributed “ as a part of the capital, to be furnished by the defendant in lieu of personal attention.”
It is plain that there can be no recovery at law for work and labor for the firm or for contributions to its funds, in the absence of an express agreement of the defendant; and the plaintiff does not aid his case by alleging a willingness to perform, and a prevention by the defendant.
The rights of the parties are regulated by the general principles of the law of partnership, when not changed by special agreement. They are joint owners and possessors of the capital stock, funds and effects of the company. Each has equal right to the possession, and equal right in the conduct and man agement of the joint business, and is clothed with like authority
In the opinion of the court, upon the case stated in this declaration, no action at law can be maintained. If the declaration could be taken as alleging an entire repudiation by the defendant of the contract and of the relation of partnership, with a claim of damages for such a breach of the contract, instead of compensation for services in conducting the business, and for a share of its profits, such an action might be maintainable. We do not so understand its allegations. A failure and refusal by the defendant to perform his promise and agreement is indeed charged, together with an exclusion of the plaintiff, and a refusal to acknowledge that he has any rights under the con *31tract. But it also alleges a refusal to make the annual settlement of accounts and annual payments, according to the contract, and sets forth a continuance of the business upon the premises and with the tools and appliances of the plaintiff, with large profits therefrom, from a participation in which be has been excluded. The remedy in such cases is in equity, where the power to investigate accounts, to compel specific performance, and to restrain breaches of duty for the future, affords the only relief which can be had.
In Capen v. Barrows, 1 Gray, 376, it was held that an action at law to recover damages, brought by one partner against his copartner, for neglect of partnership business, could not be maintained while the affairs of the firm remained unsettled, although it was expressly agreed that each partner should devote his whole time to the partnership business. The principle of that case is applicable here. Fanning v. Chadwick, 3 Pick. 420. Williams v. Henshaw, 11 Pick. 79. Met. Con. 133. Holmes v Higgins, 1 B. & C. 74. Demurrer sustained.