Evans v. Warner — 20 A.D. 230

Majority

p. 230

Daniel H. Evans, Appellant, v. Charles M. Warner, Respondent.

Headnote

What.faets establish a pa/rtnevship inter sese — a, managing partner not entitled to a salary.

A parol agreement, .under which one person conducts a malt house while.another furnishes the capital, sell's the malt and collects its proceeds, accompanied by frequent mutual consultations and statements in regard to- the business, which is found- to have been conducted for the “ mutual benefit of the parties,” constitutes the persons partners inter sese,. and each is entitled, in the absence of any special agreement in that regard, to have and bear respectively an equal .proportion of the profits and losses. - •

The fact that the-business Was all conducted in the name of one of the parties, and that there was no express agreement between the parties that they were to ' be partners, does not .preclude the existence of a copartnership.

A managing partner, in whose name the business is conducted, is not entitled- to a salary where ho agreement of the partners to that effect is shown,

Appeal, by the plaintiff, Daniel H, Evans, from a.judgment of the -Supreme Court in favor of the defendant for $100, entered in. the office of -the clerk of the, county of Onondaga on the 15th day of January, 1896, upon the report of a referee.

The complaint alleged, that,' in September, 18.88, the defendant agreed with the plaintiff to. assist him in the business of malting 'by loans and -advances, of money and credit, which loans were to be - repaid with lawful interest; that in the years lS88.to 1891, inclusive, the defendant advanced to him money and credit, and furnished- barley to be used' by the plaintiff in the business of malting to the amount of $53,000 over and above all sums paid to the defendant by the plaintiff; that during said years the plaintiff sold- and delivered to defendant malt and sundry bags in the amount and value of $63,000, and demanded judgment for $10,000, with" interest. .

The -defendant answered, denying the allegations of the complaint, and alleging that the business of malting referred to was carried on by the parties as partners; that the business ceased in 1891; that it had -never been" settled,, and that the state- of the partnership accounts could only be ascertained upon settlement. And by way of counterclaim the answer alleged that plaintiff was indebted to defendant on a promissory note executed by him December lOj 1889,

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for the payment of $5,632.31 and interest, and demanded judgment for the counterclaim.

On the trial it was stipulated that the pleadings be deemed amended, so as to allow the referee to take and pass upon the accounts between the parties as copartners if he should find in favor of the existence of the copartnership, and for that purpose to receive any competent evidence that should be offered.

Upon the trial the referee took evidence as to the existence of the copartnership and as to the condition of the accounts between the parties as to the malting business.

The referee found that at the commencement of the action the defendant was the owner of the note set forth in the answer. No part of the note had been paid except seventy-seven dollars and thirty-seven cents, which the referee found should apply on the note, and the referee further found as follows:

“ That in the month of September, 1888, the plaintiff and defendant entered upon the business of buying barley and converting the same into malt at a malt house in Lyons, New York, and selling the malt wherever the same could be sold to advantage and collecting the proceeds'thereof; that this business was conducted under the name and style of ‘ D. Evans,’ and was continued by them until on or about the 1st day of November, 1891, when the business was discontinued.

“ That the malting business above referred to was conducted for the mutual benefit of the parties and as a joint adventure or copartnership. That there was no express agreement between the parties as to the division of the profits or losses of the said business.

“ That in or about the month of December, 1889, the parties had some correspondence and an interview as to the share of profits to which either should be entitled, the plaintiff suggesting that he should be paid a salary before a division of the profits should be made, the defendant answering that the division should be upon an equal basis. There the discussion as to the matter of division ended.

“ The plaintiff generally purchased the barley and attended to its conversion into malt at Lyons, frequently consulting the defendant thereto. The sales of the malt there produced were substantially all made by the defendant, who also collected the proceeds of such

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sales. That with the exception of about two hundred dollars, contributed by the plaintiff, the defendant furnished all the capital and credit for the conduct óf the business. That the defendant, in the course of • their business from time, to' time, furnished large amounts of money to the plaintiff for the conduct thereof, the money and credit thus furnished amounting in the aggregate to somewhere about $50,000 or $60,000. Much of this money was obtained by the discount at banks of Commercial paper made by the .plaintiff and indorsed by the defendant. The sum spoken of as contributed by the plaintiff has been credited to him upon the books of the company, and is thus allowed in the statement of accounts hereinafter made.”

The referee further finds that the net profit of the malting business, carried on by the parties, was $15,475.84, of which the defendant had received $8,362.24 and the plaintiff $6,951.31, and-deducting the $77.37 and the amount of the excess of profits that the defendant had received more than the plaintiff, and giving the parties credit on certain small accounts enumerated in the report, left a .balance due to the defendant upon the promissory note of $6,626.19, upon which, with the interest from the date of the report and costs, judgment was entered for- the defendant.

The plaintiff duly excepted to the report.

Other facts are stated in the opinion.

Frederick A. Layman, for the appellant.

Frank Hiscock, for the respondent.

The findings of the referee seem well sustained by the evidence.

The appellant .claims that the referee has not found that a copartnership existed between the parties, but has'only" found that'it was.either a joint adventure or a copartnership, and that there was no express agreement as to the profits or losses of the business, and his counsel argued that if it were a joint adventure it must have been a technical one, citing definitions of that term to show that it can have no application to the case in hand. ■

The referee does .find that the business was conducted for the “mutual benefit of the parties,” and he evidently intended to find, and the effect of his finding is, that it was a business venture or

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•copartnership where both parties were to share in the profits and losses as the business might result. (See O’Hara v. Harman, 14 App. Div. 170 , 171.)

The nature of the arrangement was the same by whichever name it might be called. Assuming that there was such an arrangement and the parties had not agreed upon the proportion of profits or losses, the law settles the proportion.

The profits of a copartnership are . to be divided equally-unless there is a contrary stipulation or. unless some fact or circumstance exists from which it may be inferred that the parties intended that the profits should be divided in certain Unequal proportions, and there is a presumption of law in favor of an equality of interest in case of the property as there is of the profits. (Pars, on Part. [2d ed.] 258 et seq. and notes ; Turnipseed v. Goodwin, 9 Ala. 372 .)

A careful review of the evidence fails to disclose any facts tending to show that the parties intended that the profits should not be •divided equally. On the contrary, there seems to have been a fair division of labor and responsibility between the parties as to the business carried on and in producing the profits that resulted from the business.

The plaintiff took charge of the work at Lyons; the defendant furnished the capital, attended to the selling of the malt, collected the pay therefor, and being the responsible party in the concern took the chances of losses and bad debts. The parties were in frequent consultation and statements w*ere rendered to each other of the business carried on from time to time, so that it would seem equitable and just that the profits of the undertaking should be ■divided equally. It is true there was no written agreement of copartnership nor were there express words of agreement passing between the parties that they were to be partners.

Before entering into this business the parties, with another person, had carried on the tobacco business as partners, which resulted ■ in a loss out of which the note set forth in the answer was created. The defendant was engaged extensively in the malt business, and he suggested to the plaintiff that money might be made in that business at Lyons; that there was a vacant ■malt house there; that he might go to Lyons and see if he could procure a lease of the building, which plaintiff did ; a lease was taken in the name of the plain

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■tiff by direction of the defendant; repairs were made upon the build-. ings at their joint expense ; several conversations as to the business-' ensued between'the parties, to the effect that they were to. go into the business together and perform the work and furnish, the capital,.: and do the things respectively -which they ultimately did do. Several witnesses testified as to admissions of the plaintiff that he and the-defendant were partners, and very important evidence came from the president'of the Lyons National Bank, at which a number of' notes of the concern were discounted. When the first note was presented (being $3,000) by the plaintiff for discount, the president testified, the note having ■ been made by the plaintiff and indorsed by the defendant, that the plaintiff said that he and the defendant were-in partnership in the malting business at Lyons.

The learned counsel for the plaintiff, however, insists that, as the--business was done in the plaintiff’s name, as he'was -the maker -of the notes given, as the bank account was kept in his name at Lyons, and the plaintiff’s correspondence was conducted under his letter head, and not that of the firm, and in view of other individual acts off the plaintiff in relation to the business, the inference of a copartnership ivas so far rebutted, when taken in connection with the cor- ■ responderme referred 'to in the referee’s report, that the finding that' there Avas a copartnership should not be sustained; but there seems - to be but little question in the eAÚdence but what the business was - carried on' in the plaintiff’s name by agreement between the jrarties, the defendant giving as a reason that, if his name was publicly connected with the concern, it Avould interfere with other malt trans- • actions had with other parties. .

The fact that a discussion arose betrveen the parties as to the pro- - - portion of profits subsequent to the commencement of the business and towards its close, Avhere the .plaintiff claimed a salary in addition to a share of the profits, and about which the parties disagreed, is of' no particular significance under the circumstances of the case, except to furnish a cause to the defendant for discontinuing the business ■ and to cease furnishing the capital for the concern. There having ■ been no agreement to pay the plaintiff a salary he Avas not entitled to it, in addition to a share- of the profits.

-A managing partner is not entitled to a salary in the absence off •an agreement to pay it. (Pierce v. Pierce, 89 Mich. 233 .) .

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The record is barren of any agreement that the money advanced by the defendant to the plaintiff was a loan to the plaintiff, to be repaid with interest, nor does it disclose any contract whereby the defendant was to purchase the malt of the plaintiff and pay him for it, so that the. plaintiff’s case, as set forth in the complaint, utterly fails, and this fact goes greatly to strengthen the defendant’s theory of the case.

Parsons, in his work on Partnership (p. 6), defines a partnership to be “ the combination by two or more persons of capital, or labor or skill, for the purpose of business for their- common benefit.”

Here words of agreement do not necessarily create or destroy an arrangement that the law asserts is a copartnershij).

Partnerships may be formed “ not only by express agreement, but may grow out of transactions or relations in which the word partnership ’ is not uttered. If there is such a joinder of interests and action as the law considers as the equivalent- of partnership, or rather such as it regards as constituting partnership, it will give to the persons engaged in it all the rights and-lay upon them all the responsibilities * * * which belong to partnership.”' (Parsons on Part. [2d ed.] 9.)

And, as illustrating this view, reference may be had to Mumford v. Nicholl ( 20 Johns. 611 ); Righter v. Farrell ( 19 Atl. Rep. 687 ); Fell v. Farrell (Id. 688 ; 134 Penn. St. 482 , 485); In re Hulton (62 Law T. Rep. 200); Vaiden v. Hawkins (6 South. Rep. [Miss.] 227); Blain v. Desrosiers ( 39 Ill. App. 50 ).

And in Chapman v. Hughes ( 37 Pac. Rep. 1048 ; 104 Cal. 302 ) it is said that where persons entering into a joint business enterprise contract to do all that in law is necessary to constitute a partnership, they are a partnership biter se, though they did not expressly intend to create such a relationship. (See, also, Quine v. Quine, 9 Smedes & M. [Miss.] 155 ; Pursley v. Ramsey, 31 Ga. 403 .)

Whether two or more persons associating in business are partners as between thenselves, depends upon their intentions as legally ascertained. (Salter v. Ham, 31 N. Y. 321 .)

If we should assume, with the appellant, that the referee has not found the existence of a partnership as a fact-, but only in the alternative, we are constrained to say, from a full examination of the evidence, that we are satisfied that the arrangement between the

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parties was a valid copartnership and that the referee’s conclusions are fully sustained by the evidence.

Several exceptions taken upon the trial as to the reception of evidence have been pressed upon our attention, but we are unable to'find in any of them reversible error.

The judgment should be affirmed, with costs..

.. All concurred, except Follett, <L, not sitting.

Judgment affirmed, with costs.

Cases cited

Mumford v. Nicoll 20 Johns. 611 N.Y. p. 235
Chapman v. Hughes 104 Cal. 302 Cal. 1894-10-02 p. 235
Salter v. Ham 31 N. Y. 321 N.Y. p. 235