Court Opinion

ID: 3584556
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:34:58.283535+00
Date Added: 2024-06-11T13:54:53.583325
License: Public Domain

He was of opinion that a new trial should be granted, and the evidence submitted to a jury to decide, whether Eckhart held himself out to the plaintiff as a partner or co-contractor with James Gibbs  Co., and whether the plaintiff was induced to contract, and did so, on that hypothesis. Such, he said, should be the judgment of this court, even if the court should think that the defendants were not partners inter se, nor as to third persons in general, because if Gibbs and Eckhart so acted and talked, in the presence of the plaintiff, at the time of making the contract, as to induce a reasonable man to believe they were partners, although all the rest of the world knew they were not, yet as to him they are liable as such. (Hoare v. Dawes, Doug.Rep. 371; Cooper v. Eyre, 1 H. Black. 37; 9 Bing. 297;Dickenson v. Valpy, 10 B.  C. 140; 1 Smith's Lead. Cas. 729.)
Upon the question whether there was in fact a partnership as to third persons, the judge proceeded as follows. "But a full examination of the cases has satisfied me that the facts sworn to by Duncan McPherson constituted Eckhart a partner of the firm of Gibbs  Co., in respect of that branch of their business, which he calls the western produce business, as between the said defendants *Page 139 and third persons dealing with them in that particularbusiness. The contract proved by him is that James Gibbs  Co. employed Eckhart to purchase and forward western produce, and it was agreed that he should have one-fourth of the profits arising from said business, as a remuneration for his trouble; that he acted in all matters connected with that business under the order of James Gibbs  Co., and exercised no kind of ownership over the produce, and never was looked upon or considered as a partner of the firm. That Eckhart was not considered as a member of the firm, has no bearing upon the case. That is a question of law upon ascertained facts. Nor is it of importance to the decision of this cause, that Eckhart in fact acted in pursuance of ordersfrom Gibbs  Co. It is not pretended that it was a part of thecontract, that he should be subordinate, if that would alter the law of the case. This contract allowed Eckhart to participate in the profits of the branch of business in which he was engaged, and made him liable, as between himself and Gibbs  Co., to the loss of his time, labor and expenses, if no profits were made. He was entitled to one-fourth of the profitsspecifically, and would be entitled to an account of those profits, and to hold them as against the separate creditors of either, or all of the other members of the firm. (Dob v.Halsey, 16 John. 40; Gouthwaite v. Duckworth, 12 East,
421; Pott v. Eyton, (T. Term, 1846,) 54; Eng. Com. LawRep. 32.) In this last case Tindal, Ch. J. lays down the rule thus: "Traders become partners between themselves by a mutual participation of profit and loss; but as to third persons
they are partners if they share the profits of a concern; for he who receives a share of the profits, receives a part of that fund upon which the creditors of the concern have a right to rely for payment, and is therefore to be made liable for losses, although he may have expressly stipulated for exemption from them." (See 1 Smith's Lead. Cas. 726; 18 Wend. 175; 4East, 144.) Barry v. Nesham, 3 Manning, Granger  Scott,
641, is in point. The above rule has been long established by adjudications in England and in this state, and should be adhered to by us. *Page 140 
The reason that a dormant partner is made liable for the debts of the firm, is not that the goods were sold, or the debt contracted wholly, or in part, upon his credit; but only because he participates in the profits of the concern, and abstracts so much from the fund which is in equity due to the creditors. And it is for the same reason that a person who participates in those profits is made liable to creditors, although he contributes nothing to the fund but his services; and who is not a general partner because he does not share in the losses. The above rules are based on great and sound principles of public policy, and the courts ought not to depart from the English doctrine which holds a person liable to the debts of the firm, if he takes a share of the profits, although he takes them as a compensation for services, unless they are prepared to release a dormant partner from his responsibility also. It was never thought to make a difference that the share of the profits stipulated for were great or small. A dormant partner who receives a tenth of the profits, is held responsible in the same degree as the one who receives nine-tenths. Nor should the person who receives of the profits, as profits, of a concern, any amount, although in the name of wages, or compensation for services, be exempt from a similar liability to the creditors. The reason of the rule is the same in both cases, and the consequences should be the same. The following English authorities, commencing with Waugh v. Carveret al. in 1795, and ending with Pott v. Eyton in 1846, will show with what regularity the line of decisions has been sustained in their courts. (2 H. Black. 235; Ex parte Hamper,
17 Ves. 403; Ex parte Langdale, 18 id. 300; Ex parteWatson, 19 id. 459; Myers v. Sharpe, 5 Taunt. 74;Cheap v. Cramond, 4 B.  Ald. 663; Smith v. Watson Lock, 2 B.  C. 401; Reid v. Hollingshead, 4 id. 867;Chuck, ex parte, 8 Bingh. 469; Green v. Beesley, 2Bingh. N.C. 108; Ex parte Digby, 1 Deacon, 341; Pott v.Eyton, 3 Mann. Granger  Scott, 33.)
The first case in our own courts, in which the subject is noticed, is Muzzy v. Whitney, (10 John. 226,) in which it was held that where the defendants agreed with the plaintiff "to let *Page 141 
him have the share of the profits, if any, in making the second ten miles of the Chenango turnpike road, in proportion to the help he afforded in completing the same, the one half to be taken from the part of each defendant," there was no partnership interse. But the court based their decision on Hasketh v.Blanchard, (4 East, 144,) and other cases, which clearly decide that they would be holden as partners, quoad third persons. In Dob v. Halsey, (16 John. 34,) it was held that where one Moore agreed to superintend the saw-pits and lumber yard of the plaintiffs for one year, in consideration of his receiving one-third of the net profits, he was a partner, not only as to third persons, but also inter se. The case ofChampion v. Bostwick, (18 Wend. 175,) is a direct authority in favor of the principle, that where one is paid for his services by a share of the profits according to the English rule, he is a partner as to third persons. In Cushman et al. v.Bailey and Conkling, (1 Hill, 526.) it was decided that where C. loaned to B. $1000 for a year, and leased him a store for the same period, and stipulated that his son should attend the store as B.'s clerk without specific compensation; in consideration of which B. agreed to invest $3000 in the store, conduct it during the year, and at the expiration thereof repay the $1000 and surrender the premises, if required, accounting for the business done, and render to C. one equal third of all the profits, c. the agreement constituted a partnership as to third persons. Here too the English rule is fully recognized.
The case of Vanderburgh v. Hull and Bowne, (20 Wend. 70,) is one where one Sherwood was called by Hull and Bowne, the plaintiffs, to prove their demand against the defendant, and on his voir dire disclosed that he was employed as the agent of the plaintiffs, in a foundry conducted by them, at an annual salary of $300, and in addition to that, one-third of the profits of the foundry, if any were made, but had nothing to do with the losses. The plaintiffs found the capital, stock, c. and he gave his services. The defendant objected to the witness on the ground of interest, and also that he should have been joined as co-plaintiff. Mutual releases were then executed between the plaintiffs and witness, and he was allowed to testify. The *Page 142 
supreme court, on a bill of exceptions, decided that Sherwood was not a partner, because he was not liable for losses — because the share of profits was intended as payment for the labor of the witness; and the cases in 5 Taunt. 74, 2 H. Black. 590, and 1Camp. 331, were cited as in point. In the first case cited by Justice Nelson, it was conceded by both counsel and court, that the parties in that case were partners in the profits, though not in the goods, and of course would be liable to third persons. So in the other cases, a distinction is taken between being partners in the goods and partners in the profits. In the first case they are partners inter se; in the latter not, except as to third persons.
I concede that the case of Vanderburgh v. Hull and Bowne
was rightly decided, for the reason that the witness was not a partner of the plaintiffs, as between themselves — a proposition which the defendant should establish, before he could make the objection of non-joinder available; because he was not suing as a creditor of the firm, and was not, therefore, in a position to raise the question. Only those who are partnersinter se are bound to join in a suit, as plaintiffs, to recover a debt due them. (Teed v. Elworthy, 14 East, 209;Atkinson v. Laing, 1 D.  E. 16.) And in this respect I cannot but think the supreme court erred in deciding the case ofDob v. Halsey. In that case Moore had no joint interest in the timber sued for, nor was he responsible for losses, asbetween himself and the plaintiffs. He was a partner in theprofits only, but inter se; they were not partners within the English rule.
It was not the intention of the court in Vanderburgh v. Hulland Bowne, to establish a new rule, as to what facts constitute a partnership between partners and third persons, nor to innovate upon the old one; nor did the facts of that case, and the point to be decided, call for the consideration of the question arising on this record. I therefore respectfully dissent from the remark of the learned justice in Burckle v. Eckhart, (1 Denio,
342,) that "so far as that court was concerned, it had been settled that a mere agent or servant who is to obey orders, and has no interest in the capital stock, will not be a partner,even as to *Page 143 third persons, merely because he is to be compensated for his services by receiving a share of the profits which may arise from the business in which he is employed." That court decided directly the other way in Dob v. Halsey, (16 John. 34;Cushman v. Bailey, (1 Hill, 526;) Bostwick v. Champion,
(11 Wend. 580; S.C. in court of errors, 18 id. 184, 5,opinion of Walworth, Ch.) In this last case Mr. Justice Nelson admits that the proprietors of the stage line were not partners,inter se, but holds them so as to third persons, because theyshared in the profits.
The private arrangement existing between Gibbs and the other members of his firm was unknown, and immaterial to the plaintiff at the time the contract was made. If Gibbs conceived the services which Eckhart contributed to the common stock equal to money, he had the right to do so. The law so esteems it; and if Eckhart was to act a subordinate part to the head of the firm, in the management of the joint interest, it does not in the least affect the question. Two things are certain, he was actively engaged in purchasing and forwarding western produce, (including the very purchase on which this suit is founded,) and was entitled to one-fourth of the profits coming from that business. There is not a case in the books, either English or in this state, which hold such a case not a partnership, as between the vendor of property and persons thus purchasing. In addition to the above facts Gibbs declares to the plaintiff, at the time of the purchase, "that Eckhart had a share in the business," and Eckhart replied "that it was so." This remark must have been understood by the plaintiff to mean that Eckhart had a share in the business then transacting, or why such a remark at that time? If an authority is needed to show that a declaration made at such a time, should be taken secundum subjectam materiam, it will be found in the judgment of Lord Kenyon, in De Berkom v. Smith,
(1 Esp. N.P.C. 29.)
For the above reasons the judgment should be reversed and a new trial directed.
Judgment affirmed. *Page 144