Wilson Printing Ink Co. v. Bowker

It is not essential that the parties, defendant should have intended a partnership, nor is it material that they did not intend one. The agreement.

Edward M. Shepard, for appellant:

I. Sharing in. profits alone is not sufficient to constitute a partnership(Citing Hackett v. Stanley, 115 N. Y. 625 ; Cassidy v. Hall, 97 Id. 159; Curry v. Fowler, 87 Id. 33 ; Richardson v. Hughitt, 76 Id. 55, Keogh v. Minrath, 30 N. Y. State Rep. 129).

II. A lease of real or personal property at a rental to be measured by a share of the profits does not make the lessor partner (Citing 1 Bates on Partnership, 61; Taylor v. Bradley, 39 N. Y. 129 ; Thayer v. Augustine, 55 Mich. 187 ; Holmes v. Old Colony R. R. Co., 5 Gray, 58 ; McDonnell v. The Battle House Co., 67 Ala. 90 ; Kellogg Newspaper Co. v. Farrell, 88 Mo. 594 ; Wild v. Davenport, 19 Vroom [N.J.] 129).

Philip Carpenter, for respondent :

l. The agreement between defendants made them partners as to creditors (Citing Hackett v. Stanley, 115 N. Y. 625 ; Leggett v. Hyde, 58 Id. 272; Bank v. Galludet, 122 Id. 655 ; Manhattan Brass Co. v. Sears 45 Id. 797 ; Haas v. Root, 26 Hun, 632 ).

Van Wyck, J. concurred; Newberger, J. dissented.

In the absence of an estoppel, no marr can be charged with liability on a contract to which he

The learned trial judge directed a verdict for the -plaintiff on the ground that “ sharing in the profits was sufficient to constitute a partnership as to third personsand, for the same reason, the judgment was .affirmed on appeal to the general term of the court below. ♦ •

In Grace v. Smith (2 W. Bl. 998), and in Waugh v. Carver (2 Hy. Bl. 235) it was held that participation in the profits of a partnership raises an irrefutable presumption of liability for the debts of the partnership, for the reason that, by taking a part of the profits, the •defendant diminishes the fund to which the creditors -of the firm must have recourse for satisfaction of their •demands. The argument involves an obvious fallacy, for first it assumes that the portion of profits which the ■defendant takes by so much reduces the resources of the business ; whereas the presumption is that the loan, .service, or other consideration, in requital of which he is paid, augmented those resources to the extent of his share in the dividend ; and, secondly, if every payment by which the funds of the firm are diminished makes the payee a partner, then every servant and agent of-the partnership is responsible for its obligations—a palpable reductio ad absurdum. ' From the principle that •one who receives'a part- of the profits is a partner as to-the third persons, the inference was deduced that so •also is one who merely stipulates for such participation, although this extension of the rule has not for support the reason assigned for the original proposi

The appellant was held liable on a note, to which-he was not, in fact, a party, • either directly or indirectly; because, and merely because, in return for the hire of a chattel to the maker, he had stipulated for a part of the profits that might be earned by the use oí the chattel in the bailee’s business.

It is the law of this State, as declared by the court of appeals, that a right to a share of the profits in compensation of services rendered to the partnership does, not involve a liability for the partnership engagements (Cassidy v. Hall, 97 N. Y. 159 , 168; Leggett v. Hyde, 58 Id. 272 ). And so of a loan of money to the partnership, for a part of the profits (Curry v. Fowler, 87 N. Y. 33 ; Richardson v. Hughitt, 76 Id. 55 ; Keogh v. Minrath, 30 N. Y. St. Rep. 129 ; Eager v. Edwards, 76 N. Y. 97 . And see Boston, etc., v. Smithy 13 R. I. 27 ; 43, Am. Rep. 3 ; Ford v. Smith, 27 Wise, 261 ; Ruddick v. Otis, 33 Iowa. 402 ; Beckwith v. Talbot, 2 Col. 639 ; Dale v. Pierce, 85 Pa. St. 474 ; Saraston v. Hack, 52 Md. 173 ; Gluck v. Paxhall, 67 Ga. 541 ; Flint v. Marble Works, 53 Vt. 669 ; Austin v. Thomson, 45 N. H. 113 ; Oliver v. Gray, 4 Ark. 425 ; Smith v. Knight, 71 Ill.

The rule, therefore, upon which the court below decided the case against the appellant, namely, that a sharing of profits constitutes partnership as to third persons, is not the law of New York or of other States. The question, then, is : Does the fact that profits are to be paid for the hire of a chattel for the partnership business modify the principle? Is it possible to distinguish between the letting of a chattel and the loan •of money or the hire of services? Equally with the •chattel, the money and the services are employed in the business of the partnership ; and if the taking of -profits for the use of the latter does not impose a partnership liability, why should the taking of profits for the use of the former ? A difference between the cases is inconceivable. “ An indefinite compensation out of the profits for the use of property, real or personal, and •dependent on the success of the business, is in lieu of rent, and does not constitute the owner a partner inter .se, nor liable as partner to third persons because of «sharing the profits—for exactly the same reason that protects an employee when so paid ” (1. Bates on Partnership, 61 ; Kellogg v. Farrell, 88 Mo. 594 ; McDonnell v. Battle House, 67 Ala. 90 ; Holmes v. R. R. Co., 5 Gray, 58 ; Thayer v. Augustine, 55 Mich. 187 ).

For affirmance of the judgment the respondent relies on First Natl. Bank v. Gallaudet, 122 N. Y. 655 ; Hackett v. Stanley, 115 Id. 625 ; Leggett v. Hyde, 58 Id. 272 ; and Manhattan Brass Co. v. Sears, 45 Id. 797 ; but it is ■obvious upon examination that each of those cases is «essentially distinguishable from the one under review.

In First Natl. Bank v. Gallaudet there was not only a participation of profits, but a joint interest in the patent, the subject matter of the partnership, and the court said:

In Hackett v. Stanley the court placed the liability of the defendant upon the grounds : First, that the contract contemplatéd that he" was to bear a proportionate share of the losses of the business; and secondly,that even after the repayment of his loan he was still to receive one-half the profits of the business—facts clearly imptying a partnership, but not apparent in the case at bar.

In Leggett v. Hyde the defendant was not only entitled to demand one-third of the profits every half year, but those profits were designated specifically as profits of “ capital in the business ’’—a fact distinguished by the court as the ratio decidendi.

In Manhattan Brass Co. v. Sears, as in Bank v. Gallaudet, the parties were “ joint owners ” of the patent right, and the profits were to be paid as such, and not as mere compensation for the advance; whereas here the defendant was the sole owner of the presses; they were merely “ let,” and the share of profits was to be received as payment for their hire.

The question presented is not free from doubt, and the learned court below are not without argument and authority for their position; still, upon a critical consideration of the cases, we are of opinion that the preponderance of reason and precedent is with the appellant, and that he is not liable as a partner.

Allen, P. J. and Bischoff, J. concurred.