Imágenes de páginas



for personal use in the immediately coming season,

lumber room. Indeed, this view seems to have and not unsuitable in quantity or quality or value. governed the assessors in the present matter, as we * Persons arriving in the United States' are citizens are informed that they did not assess as furniture, returning or foreigners visiting or emigrating. The paintings, etc., hung in a separate room or gallery statute applies to all equally. If as the result of intended for display only. Why then do they beour construction of the law it shall happen that come furniture if hung in a parlor or other room citizens returning from abroad may obtain, as to not reserved exclusively for them, but devoted to their personal wardrobes, a pecuniary advantage other household uses ? Only, if at all, because in over citizens who remain at home, that is but an the progress of civilization and the development of incidental advantage attendant on the oppor- the refining influences of art, there are now but few tunity to go abroad. If foreigners visiting households, however humble, that are restricted to or emigrating are not compelled to pay du

not compelled to pay du- the bare necessities of life, and that have not some ties on their unworn wearing apparel, it is merely little contribution to the gratification of taste. In exempting them from a tax the imposing of which this sense pictures may be called furniture, but this has a tendency to induce them to remain abroad. is not the popular sense of the word, nor is it the The words 'in actual use' require no such construc- sense in which the Legislature intended to use it. tion, and under the guarded rule we have laid It lacks the idea of household utility that makes down the government will, on the one hand, not the basis of the definition of household furniture. lose any revenue which the statute intends to give The legal decisions that can afford us light on this it, and does give it, and persons arriving from question are few. The case of Towns v. Pratt, in abroad will be enabled to bring with them their 33 N. H., has been already quoted. There the usual and reasonable wearing apparel in actual use, words household furniture were held not to include without being required to have worn it before land- a trunk, though used to keep clothes in, nor a ing.”

small, mahogany .cabinet box,' by which, say the FURNITURE. — Paintings and works of art are not court, we understand an article designed in its “household furniture," within a taxing act. Lea's material and workmanship rather for ornament Appeal, Penn. Com. Pleas, June 28, 1884. The than use.

Ministering to the taste of the court said: “The word “furniture’ is undoubtedly owner, rather than the necessities or convenience of susceptible of use in a sense that will include paint- the household.' On the other hand, there is a class ings, engravings and works of art and curiosity, of cases arising under wills, in which pictures, statused in the ornamentation of a house. Worcester's uary or ornaments are frequently included under dictionary gives a very pertinent example from the term furniture. These however are peculiar, Addison, there are many noble palaces in Venice; and rest upon the intention of the testator. A good their furniture is not very rich, if we except the example of this class is Richardson v. Hall, 124 pictures.' But is this its general, ordinary and Mass. 237, where there was a devise of the homepopular meaning, which the Legislature had in stead, with all the household furniture, plate, jewmind when it used the words 'household furniture,' elry, books, etc., showing an intent, as Colt, J., in describing the articles it meant to tax ? Web- says, 'that the house should remain the family's ster's principal definition is as follows: Whatever place of residence, and that they should keep up must be supplied to a house, a room, or the like, to the same establishment and the same style of living.' make it habitable, convenient or agreeable; goods, This class of cases affords us little assistance in the vessels, utensils, and other appendages necessary or construction of a taxing statute. The act of April convenient for housekeeping; whatever is added to 29, 1844, P. L. 497 (Purdon, 1380, pl. 147), under the interior of a house or apartment for use or con- which the present assessment is made, enumerates venience. This fairly represents the ordinary mean- a large number of things taxable, among which are ing of the word, and it does not include the idea of all household furniture, including gold and silver mere ornament. Ornamentation is not furniture, plate.' It is the established rule that the words of though incidentally to its own parpose it may con- statutes are to be taken in their ordinary and poputribute to the idea of furnishing. "The expression, lar sense, and it is plain that in this case the Legishousehold furniture,' says Sawyer, J., in Torons v. lature so intended, for they added the words 'inPratt, 33 N. H. 345, must be understood to cluding gold and silver plate,' as something which mean those vessels, utensils, or goods which are de- would not naturally be embraced in the term furnisigned in their manufacture originally and chiefly ture which had preceded. But in the class of cases for use in the family, as instruments of the house arising under wills plate constantly passed as furui. bold, and for conducting and managing household ture, and in the ancient fashions, lately revived by affairs.' Pictures are certainly not designed orig- the revolving circle of social customs, our grandinally and chiefly for use in conducting and manag- mothers thought more of their display of plate on ing household affairs.' They are clearly not furni- the sideboard than of pictures on their walls, and ture in the artist's or even in the dealer's hands, as considered a room at least as well ‘furnished ’by & table or bureau would be in the hands of the the former as by the latter. There was always manufacturer; nor would they probably be so con- therefore a larger sense in which furniture might sidered, if bought and stored away in a closet or include pictures as well as plate, but it was not the

[ocr errors]
[ocr errors]
[ocr errors]



[ocr errors]

ordinary and popular sense of the word. This was the puerile and groundless distinctions which have restricted to the universal implements of household

been introduced into the law of partnership, and the service, which every family was expected to have deplorable and bewildering confusion in which that

department of jurisprudence has been involved by in greater or less quantity and costliness, but all in

half a century's adherence to the unjust and still more some degree, and this, provided it exceeded in value absurd rule laid down in Grace v. Smith, 2 U. Bl. 998 ; the limit of the act, $300, was the furniture' and Waugh v. Horner, 2 H. Bl. 247, that mere particiwhich the Legislature intended to tax. This con

pation in the profits of a business renders the recipient clusion is fortified by the construction universally ship exists between the parties.

liable as partner to creditors, even though no partnerput on the act at the time of its passage. Some of

This rule is utterly without foundation in principle, the earlier American taxing acts used words house and has frequently wrought the greatest injustice in hold utensils' (5 Dane's Abridgment, ch. 136, art. its application. Mr. Baron Bramwell, referring to it in 14, § 23), and those which spoke of furniture' Bullen v. Sharp, L. R., 1 C. P. 86, characterized it as a

rule which had “caused more injustice and mischief meant the same thing. For forty years the act has

than any bad law in our books." been understood and administered, by tax-gatherer Mr. Justice De Grey, who is unquestionably the auand tax-payer alike, not to include paintings and thor of this abortion in the law, sagely remarks in similar objects. It is to be hoped that the exigen- Grace v. Smith that "every man who has a share of cies of the State will never require the taxation of the profits of a trade ought also to bear his share of

the loss.'' Why? is the question that at once sugart, which all civilized men in all ages of the world have sought to encourage and develop, but if such | doubts are forever set at rest, and all further argu

gests itself to the reader. His question is auswered, his a departure from established usage is to be made it ment is precluded by this unanswerable logic, “beshould be by a new and clear expression of the cause he (the sharer in profits) takes a part of that legislative will, not by a new reading of a statute

fund on which the creditor of the trader relies for pay. nearly half a century old."


This reasoning would disgrace a fifth-rate pettifogCRUELTY TO ANIMALS.- - In Brudy v. M' Argle, 14

ger. The conclusion of liability is not a logical seIr. L. R. 174, the Law Times says, "the question quence from the premise he assumes; and moreover was with respect to dishorning cattle, or cutting his assumption of the premise is unwarranted, because off their horns quite close to the skull, for the pur- it embodies a false statement of fact. A person who pose of keeping them from injuring one another receives a portion of the profits does not take from the when feeding in a yard, and obtaining a higher payment, for the very simple reason that there can be

creditor a portion of the fund on which he relies for price for them at market. The practice appeared no profits until all the debts have been paid. How to be one common among farmers, but it was can that be a fund for the payment of debts which can proved that it occasioned much suffering to the ani- have no existence until after all debts have been exmals, and the question really came to be whether it tinguished ?

Nor is it true that merely taking from the creditors was a sufficient justification that the act was done,

a portion of the fund to which they have a right to renot wantonly, but for the purpose of convenience sort for payment of their claims, renders the recipient and profit to the owner. The magistrates declined liable as partner to such creditors. Creditors hare an to convict on the merits, but the Exchequer Divis- undoubted right to resort to the entire partnership ion came to a different decision, and it is to be property for the collection of their demands.. Out of

this property clerks, agents and servants are paid for hoped that the judgment will be adopted in the fu

their services; landlords receive their rent, and all ture on similar occasions."

kinds of business expenses are paid. They who accept payment under these circumstances therefore take

from the creditors a part of the fund on which cred. PARTNERSHIF BY FARTICIPATION IN PROFITS.

itors have a right to rely for payment of their claims,

and are consequently under Justice De Grey's docHILE the uncertainty in which the law often is trine partners as to creditors, and liable as such; and


plored, yet we think that the blind reverence for au- risk of having insanity imputed to him by asserting thority, the unreasoning adherence to rules once es. that they are partners as to any one? tablished, no matter how unjust, absurd or opposed to If the responsibility of a person to creditors depends sound principle, is a still greater evil, and one that is upon his taking from them a portion of the fund to certain to bring forth an abundant harvest of refined which they have a right to resort for payment, then distinctions, which, to use the language of an eminent every manager, clerk, agent and porter is liable as jurist, “ Can be better felt than expressed,'' and which partner; and the creditors themselves who receive are wholly unintelligible to even a miud endowed payment of their claims will find to their surprise that with that nice discriminating power which can “sever they must disgorge in favor of other crediturs, who aud divide a hair 'twixt north and north-west side." must in turn hand back the ducats to the first-named Courts unwilling to overrule a doctrine once estab- creditors because they have taken from each other a lished, and at the same time convinced of its palpable portion of the property, out of which they each have a unsoundness and of the gross injustice involved in its right to enforce payment of their respective claims, application, and therefore unwilling to apply it to a and are therefore mutually liable as partners to each case in which the facts are not precisely the same as in other. the case in which it was originally enunciated, find no

The rule enunciated in Grace v. Smith continued to escape from their dilemma except by attempting to be orthodox in England till 1860, when the House of draw between the two cases a distinction so fine that Lords had the courage and good sense to declare it a no mental microscope is powerful enough to maguify rauk heresy. Cox v. Hickman, 8 H. L. C. 268. In this it into a difference perceptible to the mind's vision. case the liability of a person to creditors was placed The truth of these statements is fully exemplified by upon a foundation which cannot be shaken or under

[ocr errors]

mined. The real test of liability is whether the party sought to be charged as partner is a partner in fact. The doctrine laid down in this case has been uniformly followed by the English courts. Bullen v. Sharp, L. R., IC. P. 86; Holie v. Hammond, L. R., 7 Exch. 218; Yolumo v. Court of Wards, L. R., 4 P. C. 419; Ex parte Tennant, L. R., 6 Ch. Div. 303; Kelly v. Scotto, 49 L. J. (N. S.) Ch. 383; S. C., 42 L. T. (N. S.) 8:27; Gilpin v. Anderby, 5 B. & Ald. 594.

The purport of the opinions delivered in Cox v. Hickman in the House of Lords is very clearly and succinctly stated in Holme v. Hammond, supra: The principle to be collected from them appears to be that partnership, even as to third parties, is not constituted by the mere fact of two or more persons participating or being interested in the net profits of the business, but that the existence of such partnership implies also the existence of such a relation between those persons as that each of them is a principal, and each an agent for the others."

Blackburn, J., in Bullen v. Sharp, supra, in referring to Cox v. Hickman, says: “I think that the ratio decidendi is that the proposition laid down in Waugh v. Carter, viz., that a participation in the profits of a business does of itself, by operation of law, constitute a partnership, is not a correct statement of the law of Eugland; but that the true question is, as stated by Lord Cranworth, whether the trade is carried on on bebalf of the person sought to be charged as partner, the participation in the profits being a most important element in determining the question, but not being in it. self decisive; the test being in the language of Lord Wensleydale whether it is such a participation in the profits as to constitute the relation of principal and agent between the person taking the profits and those actually carrying on the business.

The case of volwoo v. Court of Wards, supra, is an exceedingly strong authority. It was a case of a loan of money, for which the borrower was to pay a share of the profits of the business in which the money was to be used. The borrower agreed with the lender to allow him to control the business in several important particulars; and yet it was held that the lender was pot thereby rendered liable to creditors as partner. We must not omit the terse and cogent argument of Mr. Baron Bramwell in Bullen v. Sharp. He says: "They say that the defendant is a partner with his son, and that if not partners inter se, they are so as regards third parties. A most remarkable expression. Partnership means a certain relation between two parties. How then can it be correct to say that A. and B. are not in partnership as between themselves; they bare not held themselves out as being so, and yet a third person has a right to say they are so as relates to him? A. is not the agent of B. B. has never held him ont as such; yet C. is entitled as between himself and B. to say that A. is the agent of B. Why is he so entitled if the fact is not so, and B. has not so represented ? "

Under these authorities it is clear that the question of liability to creditors in England depends entirely upou the existence of a partnership inter se. If a partnership has been established between the parties, of course all the partners are responsible for firm debts; but no one can be charged as partner who is not a partner in fact, unless he has by his aots or declarations estopped himself from claiming that he is not a partner.

There are therefore only two grounds of liability to creditors; the party sought to be charged as partner either must be a partner in fact or he must have estopped himself from denying the existence of a partnership relation between himself and another. Mr. Lindley, after reviewing the English cases,

comes to this sensible conclusion. He says: “ In fact the strong tendency of the above decisions is to establish the doctrine that no person who does not hold himself out as partner is liable to third persons for the acts of persons whose profits he sbares, unless he and they are really partners inter se; and it is perhaps not going too far to say that this is now the law." 1 Lind. on Part. 42. This was the rule of the Roman law, and is the doctrine of the modern foreign law throughout Europe. That the courts of this country have always felt the rule enunciated in Grace v. Smith to be unsound and unjust is manifested by the numerous exceptions to the rule which have been established in cases in which the rule could have been applied as reasonably as in any case in which it has been applied. One exception is in favor of servants and employees. The courts have uniformly held that an agreement to receive a certain percentage of profits as compensation for services does not render the participant in profits liable to the creditors of his principal or master. Bradley v. White, 10 Metc. 303; S. C., 43 Am. Dec. 435; Deming v. Cabbott, 6 Metc. 82; Richardson v. Hughitt, 76 N. Y. 55; S. C., 32 Am. Rep. 267; Burckle v. Eck. hardt, 1 Den. 341; S. C., 3 N. Y. 132; Loomis v. Marshall, 12 Conn. 69; S. C., 30 Am. Dec. 596; Nicholas v. Thielges, 50 Wis. 491; Smith v. Bodine, 74 N. Y. 30; Lewis v. Greicher, 51 id. 231; Ambler v. Bradley, 6 Vt. 119, Hanna v. Flint, 14 Cal. 73; Barber v. Cazalis, 30 id. 92; Higgins v. Graham, 51 Mo. 17; Edward v. Tracy, 62 Penn. St. 374;and cases cited in note 1 at page 20, volume 1, Lind. on Part.

Another exception to the rule is that a lease of a farm on shares, or of any property on condition that the lessee is to pay as rent a certain share of profits, will not impose upon the lessor the liability of a partner. McDonnell v. Battle House Co., 67 Ala. 90; S.C., 42 Am. Rep. 99; Beecher y. Bush, 45 Mich. 188; S. C., 40 Am. Rep. 465; Brown v. Jaquette, 94 Pem. St. 113; Putnam v. Wise, 1 Hill, 234; Christian v. Crocker, 25 Ark. 327; Holmes v. Old Colony R. Co., 5 Gray, 58; Donnell y. Harsh, 67 Mo. 242; Duinell v. Stone, 30 Me. 384; Jeter v. Penn, 28 La. Aun. 230; S. C., 26. Am. Rep. 98.

Numerous other authorities might be cited, but these are sufficient, as the point is well settled. This doctrine of non-liability applies in all cases in which the party sought to be charged as partner has received, or is to receive a share of profits as compensation for services performed or for the use of property furnished. Story on Part., SS 41-48; 3 Kent, 33. There has been frequently before the courts of this country the question whether an agreement to receive a certain portion of profits as compensation for the use of money loaned will render the participant in profits who merely lends lis money liable as partner to creditors. The decided weight of authority is against the liability. Williams v. South, 7 Iowa, 434; Hart v. Kelly, 83 Penn. St. 286; Smith v. Knight, 71 Ill. 148; S. C., 22 Am. Rep. 94; Harvey v. Childs, 28 Ohio St. 319; S. C., 22 Am. Rep. 387; Eastman v.Clark, 53 N. H. 276; 8. C., 16 Am. Rep. 192; Eagar v. Crawford, 76 N. Y. 97; Richardson v. Hughitt, id. 55; S.C., 32 Am. Rep. 267; Curry v. Fowler, 87 N. Y. 33; Boston & Col. Smelt. Co.v. Smith, 13 R. I. 27; S. C., 43 Am. Rep. 3; In re Francis, 2 Sawy. 286, Polk v. Buchanan, 5 Sneed, 721; Gibson v. Stone, 43 Barb. 285; S. C., 28 How. Pr. 468; Lord v. Proctor, Phila. 630; Campbell v. Dent, 54 Mo. 325; Benedict v. Heterick, 35 Supr. Ct. (N. Y.) 405. There are some authorities which apparently militate against this doc. trine; but a careful analysis of them will show that they are only apparently and not really opposed to it. Parker v. Canfield, 37 Conn. 250; S. C., 9 Am. Rep. 317; Leggett v. Hyde, 58 N. Y. 272; S. C., 17 Am. Rep. 244; Wood v. Mallett, 7 Ohio St. 172; Mason v. Partridge, 66


N. Y. 633; Rosenfield v. Haight, 63 Wis. 260; S. ('., 40 merely provided that Hyde should become a partner Am. Rep. 770.

at the end of the year if the firm and he should feel Mason v. Partridge is not in point, for it appears in satisfied;" that is, if they should then boih agree. that case that the parties had endeavored by agree- Under this agreement Hyde could not become a partment to restrict the liability of Partridge, who was ner without the firm's being satisfied at the end of sought to be charged as partner to the sum of $2,000. the year. The firm must therefore then consent. Nor There was therefore an actual partnership between the could the firm compel Hyde to enter the partnership parties, and of course Partridge was liable, because without his being satisfied at the end of the year. He the common law recognized no special or limited part- therefore must then consent. The only effect of the nership, and his attempt to restrict his liability as agreement was, that Hyde might become a partner at partner was therefore futile. In Rosenfield v. Haight the end of the year if they should both agree to it the court based its decision that Haight, whom credit- then. So might Hughitt in Richardson V. Hughitt ors were seeking to charge as partner, was liable as have become a partner at the end of the year if both such on the ground that he was to receive three-fifths himself and the firm had then agreed to it. There of the profits, not as compensation for the use of his this slight and immaterial difference between the two money, but as a party interested as priucipal in the cases, which in the fog of an il-considered opinion business.

looms up as a distinction of considerable magnitude, In other words the court held that the agreement fades away into a distinction involving no difference made Haight a partner in fact for all purposes, because in principle under the clear light of searching analysis. he was actually interested in the management and The case of Leggett v. Hyde should not have been deprosecution of the business. At page 266 the court cided as it was decided; and it is clear that the court say :

“But it is said in answer to this view that the would never have pronounced the judgment it did intention of the parties was, that Haight should pronounce had it not been fettered, or rather had it receive three-fifths of the profits as a mode of com- not deemed itself fettered by authority. It is true pensation for the use of his money, bat that he was not that at the time of the decision of that case the rule to participate in the profits as such. On looking at laid down in Grace v. Smith had been considered by the different clauses of the agreement, it is very clear the courts of that State, to be the correct rule. This to our minds that this construction is not correct." error crept into the jurisprudence of the State because The court expressly recoguized the sounduess of the of an unquestioning adherence to the unsound docdoctrine that there is no liability as partuer when trine enunciated in Grace v. Smith. That doctrine there is a mere participation in profits as compensa- | has at last been emphatically repudiated in Richard. tion for the use of money by distinguishing the case at son v. Hughitt. Wood v. Mallett, 7 Ohio St. 172, has bar from Richardson v. Hughitt, 76 N. Y. 55, in which been so far as it cau be construed as sustaining the printhat doctrine was enunciated :

ciple that mere participation in profits as compensa“ The case of Richardson v. Hughitt is much more tion for a loan creates a liability as partner, overruled similar to the one at bar, but still that is distinguish by the case of Harvey v. Childs, 28 Ohio St. 319; S. C., able. The court construed the agreement in that case

22 Am. Rep. 387. This case is an exceedingly strong as amounting to a coutract for a loan, and the pro- one, and it will be well to advert very briefly to the vision as to profits being intended merely as a mode of facts which were therein involved. The plaintiff providing compensation to the lender for the use of sought to recover of the defendant the value of cerhis money advanced.” The lender there received the tain hogs sold by plaintiff to one Potter, on the ground share of the profits not as a partner but on account of

that defendant was Potter's partner. The following the debt owing to him by the firm, the court holding are the facts on which it was claimed that defendant that he was only interested in the profits of the business was liable to the plaintiff as partner: Potter went to as a measure of compensation for the use of his money.

defendant and told him that he had contracted for Leggett v. Ilyde, supra, has been practically overruled about two car loads of hogs to be delivered the next by the Court of Appeals in Richardson v. Hughitt and day at Loudonville, and that he had no money to pay Curry v. Fowler, 87 N. Y. 33.

for them. He requested defendant to advance the In Richardson v. Hughitt the court attempted to dis- money and take an interest in the hogs, but defendant tinguish Leggett ve Hyde from the case at bar, and refused to do so. Potter then proposed that if defendbased that distinction upon the statement that in Leg- ant would let him have the money to enable him to gett v. Hyde the “money was advanced with a view to pay for the hogs he had bought and others he might a partnership and for the benefit of Hyde himself.” have to buy to make the two car loads, defeudant If the money had been advanced with a view to a should take possession of the hogs when carried to partnership in the immediate present, then the distinc- Loudonville as security for the money; take them to tion would have been sound, for the very obvious rea

Pittsburgh; sell them and take his pay from the proson that that fact would have rendered Hyde liable on ceeds of the sale; that he might have one-half of the the ground that he was a partner in fact. Such how- net profits, and that in no event should he sustain any ever was not the purport of the agreement. The loan loss, but that Potter should pay the money advanced was made with a view to a partnership not at the time by defendant in case the amount realized from the of making the loan, but “at the end of the year sale of the hogs should be insufficient.

* * if the firm and he should feel satisfied.” The defendant accepted the proposition and ad. Hyde was sought to be charged as partner by credi. vanced Potter $2,500. Afterward Potter, without the tors whose claims accrued before the end of the year, knowledge of defendant, bought of plaintiff the hogs. and therefore before he was to become an actual part the value of which the plaintiff sought to recover Hence he was not a partner at that time and the

from defendant in this case. These bogs formed part fact that there was a possibility of his becoming a part of the two car loads which were sold by defeudant in ner in the future does not render that case any Pittsburgh. The proceeds of the sale were not suffidifferent on principle from Richardson v. Hughitt, cient to pay defendant the money loaned, and Potter When the debts were contracted Hyde was å mere paid him the balance. lender of money to the firm as Hughitt was in the The court held that defendant was not liable as last case. By virtue of the agreement, executed at the partner. time of the loan, Hyde possessed no greater rights and The case is a very strong one, for the reasou that was under no greater obligations with respect to be- there not only was an agreement to share profits, but coming a partner than Hughitt, for the agreement the defendant was authorized to and actually did tako



possession of and sell the property. The only remain-lutely entitled to a repayment of their loan. Their ing authority which would seem to sanction the early right to a return of their advances depended upon the doctrine of liability from mere participation in profits success of the business, and so far from having under as compensation for a loan is Parker v. Canfield, 37 their agreement a right to insist on a repayment of the Conn. 250; S. C., 9 Am. Rep. 317. That case on a care- full amount loaned, they might be compelled to refund ful examination will appear to sustain no such rule. whatever they had already received by way of profits, It is apparent from the facts of the case that it was or on account of their loan. It was therefore not a the intention of the parties that a partnership should mere loan of money, to be repaid at all events, but the exist between the parties, and that the device of a investment of capital in business, with the risk of loss loan was resorted to under advice of counsel, in order of that capital in case the business should prove unthat certain of the partners might escape liability as successful. The parties having agreed to share losses, such.

were partners inter se under all the authorities, and This appears from the statement of facts in the they were liable for all losses, even beyond the amount opinion of the court, which is as follows: “In Janu- of their investment, because it was not in their power ary, 1866, counsel was applied to to draw the papers, to restrict their liability as partners without forming and the parties then learned that their agreement a special partnersbip under the statute. would make them partners. Thereupon it was agreed We will now refer more particularly to a few of the upon by the defeudants that the money invested by American cases already cited. In Curry v. Fowler, Canfield and Hutchinson (who were sought to be 87 N. Y. 33, the court say: "In Richardson v. Hughitt, charged as partners) should be regarded as a loan, and 76 N. Y. 55, it was held by this court that a person who the attorney was requested to prepare a writing which has no interest in the business of a firm or in the capishould secure to them one-third of the profits without tal invested, save that he is to receive a share of the subjecting them to liability as partners."

profits as compensation for services or for money The debts on which Canfield and Hutchinson were loaned for the benefit of the business, is not a partner, held liable as partners were debts that were contracted and cannot be held liable as such by a creditor of the after the agreement was attempted to be changed into firm. The case cited is very similar in its leading asa loan. Now it is clear that they were both partners pects to the one at bar.” in fact prior to that time. The court so expressly held. The question was directly involved. Fowler, who

“The defendants, while acting under their verbal was sought to be charged as partuer, had loaned $50,000 agreement, were clearly partners both inter se and as to certain owners of real estate to enable them to to third parties." There was nothing in the modifica- erect certain buildings thereon. Fowler was to receive tion of the agreement which indicated that that rela- as compeusation for the use of his money interest tion was to be changed. Canfield & Hutchinson were thereon and one-half of the profits arising on a sale. to lose no right to exercise the same control over the The claim was for work performed and materials furbusiness which they could exercise before as partners. nished in the erection of these buildings. Held, that The only purport of that modification was that for the Fowler was not liable as partner. In Boston and Colpurpose of shielding them from liability, their invest- orado Smelting Co. v. Smith, 13 R. I. 27; S. C., 43 Am. ment in the business should be “regarded as a loan." Rep. 3, the syllabus accurately states the decision : They were therefore still partners, and their attempt “An agreement to lend money and indorse to a certain to restrict their liability of course afforded them no amount for the purposes of the borrower's business, in exemption from partnership responsibilities.

consideration of a certain percentage of the net profits While the court referred with approval to the doc- of that business, does not constitute the parties parttrine of Grace v. Smith, yet what was said on the sub- ners as between themselves or as to third parties.” ject was mere obiter, as the court based its decision on The authorities are unanimous to the effect that an the ground that the two defendants, Canfield and agreement to receive a certain share of profits as comHutchinson, were parties in fact as well after as be- pensation for a loan does not render the parties partfore the modification of the original agreement. The ners inter se. Ruddick v. Otis, 33 Iowa, 402; Emans v. court say: "The business is one in which the defend. Westfield, 97 Mass. 230; Linter v. Milkin, 47 Ill. 197 ; ants are all interested. The defendants are all princi- Adams v. Fink, 53 id. 219; Pinkney v. Keyler, 4 E. D. pals. Andrews, as their agent, is using funds fur- Smith, 469; Salter v. Ham, 31 N. Y. 321. In Smith v. nished by them all in a manner agreed upon by them Knight, 71 III. 148, the Supreme Court of Illinois, after all for their joint benefit and profits."

referring to the two cases in that State cited first These are all the cases which appear to give any above, decided that the lender in that case could not countenance to the notion that participation in profits be a partner as to creditors, as he was not a partas compensation for a loan rendered the recipient liable ner in fact; that the only question in the absence of as partner. We have already referred to the Ameri- estoppel was whether the party sought to be charged as can cases, which most emphatically denounce that a partner actually was a partner. After citing those heresy in the law. We will now briefly advert to the two cases the court say: “Those cases were between English authorities. The case of Molwou v. Court of the alleged partners. It remains to inquire, as this is Wards, L. R., 4 P. C. 419, has been referred to already. a case between alleged partners and a third party, In that case the person whom the creditors attempted whether any act was done by Knight, Baker & Co. to to hold as partner advanced large sums of money to make them partners as to third parties. Notwithcertain merchants, and took as security a charge on standing this agreement, did they hold themselves out their business with extensive power of control, and to the public as partners?” The court thus expressly stipulated for a large commission on their profits held that the test of a partnership between the parties whilst any thing remained due to them, and for pay- is the test of a partnership as to creditors in the abment of bis principal and twelve per cent interest. sence of estoppel, and that therefore no creditor can The court held that the transaction was a loan, and hold a person liable as partner who is not in fact a that the lender was not liable as partner. This, like partner, provided he has not estopped himself from the case of Harvey v. Childs, supra, is a very strong denying the partnership relation. This case was also one, as the lender, like the lender in that case, had, by a case of a loan. The purport of the decision is clearly the terms of his agreement, a right to exercise an ex- stated in the syllabus: “A. agreed to advance money tensive control over the business. Pooley v. Dwier, 5 to B. from time to time up to a certain amount to enCh. D. 458, is not in conflict with this case. It was not able B. to carry on business, and B. agreed to pay ina case of loan. The so-called lenders were not abso. terest to A. an the average balance advanced, and also

[ocr errors]
« AnteriorContinuar »