Greenwood v. Brink — 8 N.Y. Sup. Ct. 227

Majority

p. 227

ALFRED GREENWOOD and HARRY ALDRIDGE, Respondents, v. MARY A. BRINK, Appellant.

Headnote

Partnership—profits—participation in — d Go. — chapter 281 of 1833.

Participation in the profits of a firm, unless enjoyed under an express agreement that it is given in lieu of compensation for services, and that it gives no interest in the business, makes a man a partner.

Under chapter 281 of Laws of 1833, which makes it a penal offense to assume a copartnership name where no partnership exists, it is a sufficient answer to show that the firm name actually represents persons, who are liable as partners to third persons and creditors.

Appeal from a judgment of the Supreme Court, in favor of plaintiff, for ninety-three dollars and seventy-five cents and costs. The action was brought to recover the value of goods sold to defendant. The answer alleges that the plaintiff, Greenwood, was doing business under the firm name of Alfred Greenwood & Co., and that in fact he had no partner, and that the designation “ & Co.,” did not represent any partner; that, in so doing, Greenwood violated chapter 281, of the Laws of 1833. The defendant, Harry Aldridge, claimed a one-half interest in the claim, by assignment from Greenwood. The plaintiff demurred. The demurrer was overruled, with leave to reply. The plaintiff served a reply, but did not formally withdraw the demurrer. On the trial, the judge charged, “ that participation in the profits makes a man a partner, and it is not necessary that they should say anything about the losses.” “ It is possible, however, for a firm to employ clerks and give

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them, as a compensation for their services, a certain amount of the profits; but it must be distinctly understood between the parties that that is as compensation, and that they have no interest in the business whatever.”

E. H. Berm, for the appellant.

The answer that the goods were sold contrary to law, was a good defense. ( 43 How., 176 ; 29 id., 489.) The demurrer, not having been withdrawn, admitted the allegations of the answer. (Cutler v. Wright, 22 N. Y., 472 , 482.) No partnership existed in this case. (Baldwin v. Burrows, 47 N. Y., 199 ; Pattison v. Blanchard, 5 id., 186; Burckle v. Eckhart, 3 id., 132; Vanderburgh v. Hull, 20 Wend., 71 ; Clark v. Gilbert, 32 Barb., 581 ; Conklin v. Barton, 43 id., 435 ; Man. Brass Manufacturing Co. v. Sears, 45 N. Y., 797 .)

C. J. G. Hall, for the respondent.

The receipt of the reply was an election to accept that plea from the plaintiff. (Munn v. Barnum, 12 How., 563 ; Spelman v. Weider, 5 id., 5.) To constitute partnership, an agreement to share in losses is not necessary. (Manhattan Brass Manuf. Co. v. Sears, 45 N. Y., 797 ; Leggett v. Henneberger, 1 N. Y. Supreme Ct. Rep., 418.)

The demurrer to the answer having been overruled by the court, and leave given to reply on payment of costs of the demurrer, and the plaintiffs having served a reply and paid the costs, the demurrer must be regarded as abandoned, although not formally withdrawn.^[4] A reply, having been expressly permitted by the order of the court, was proper, and formed part of the record.^[5] The order, on the overruling of the demurrer, was obtained on defendant’s motion, and the provision requiring a reply and payment of costs, must be deemed to be granted on his motion. The record, therefore, properly before the court on the trial, was the complaint, answer and reply, and the issue to be tried arose upon the answer and reply. The answer admitted all the material allegations of the complaint, and entitled plaintiffs to judgment for the goods sold,

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unless the defendant should affirmatively establish that the goods were sold to her by Greenwood, in a firm name, in violation of the statute, when, in fact, there was no firm at the time of the sale. On that issue, evidence was given to the jury on both sides, and the jury found adversely to the defendant.

The only question in the case, is whether the court was correct in charging the jury that “ participation in the profits ” (of a firm) “ makes a man a partner, and it is not necessary that they should say anything about losses.” The court accompanied this charge with the explanation that it is competent for a party or firm to employ clerks, and give them, as a compensation for services, a certain amount of profit, but it must be distinctly understood between the parties that it is as compensation, and that they have no interest in the business whatever, and he left it to the jury to say whether the arrangement between Greenwood and Aldridge, gave the latter an interest in the business, or a share in the profits as a partner, or whether Aldridge was to receive a share in the profits as compensation merely. I do not think there was any error in this ruling. Both of the plaintiffs testified, substantially, that Aldridge was a partner, with the understanding that he should put in his services and be interested in the business, and have one-fifth of the profits, over and above losses, for his share. They assumed a firm name, and carried on business in such name, Aldridge representing the “ & Co.” Upon their testimony, they would not be permitted to say they were not partners as to third persons and creditors, whatever the law might hold as between themselves. And I think it is a sufficient answer, under the statute making a penal offense to assume a copartnership name where no partnership exists, to show that the firm name actually represented persons, who were liable as partners to third persons and creditors.

It is well settled, by the law merchant, that a participation in the uncertain profits of trade, as a return of capital advanced, constitutes such participator a partner in the concern in which the capital is invested, and makes him liable to third persons, although he is to receive back his whole capital and interest, without deduction for losses or liabilities, as between himself and partners.^[4] One who

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takes a share of the profits, as such, of a trading firm, becomes a partner as to third persons, on the ground that those profits form a portion of the fund, upon which creditors have a right to rely for payment.^[4] The modifications of the rule, in this State, require that the servant, compensated by a share of profits, shall have no community of interest in the capital stock of the concern, and shall not, by any arrangement, be deemed a partner as between himself and the members of the firm, and shall not suffer his name to be used as a partner, nor be the person represented by the & Co.;^[5] in short, he must not 'hold himself out, in form or in fact, as a partner ; otherwise he falls within another rule.^[6]

The issue tendered by the answer, having been disposed of favorably to plaintiffs, they were entitled to a verdict, because no issue had been taken on the allegations of the complaint. The plaintiff might have failed in the action if the defendant had denied the allegation of the complaint, for some of those allegations were disproved (to wit, the sale by Greenwood alone) by the proof of partnership, and, unless the court had permitted an amendment, the defendant would have succeeded on such an issue.

There was no issue to which to apply the variance between the proofs given to defeat the allegations of the answer and the averments of the complaint, and the only issue in the case being disposed of against the defendant, it follows that the judgment must be affirmed.

Lawrence and Daniels, JJ., concurred.

Judgment affirmed.

The recent English decisions upon this question, hold that a participation in the profits of a trade or business, even when it is not shown to be simply as compensation to an employee, is not conclusive evidence of a partnership, and, that whether that relation does or does not exist, must be determined by the contract between the parties. (Cox v. Hickman, 8 H. L. Cas.,p. 267; Mollevo v. The Court of Wards, L. R., 4. Privy C., p. 419 ; Bullen v. Sharp, L. R., 1 C. P., p. 86.)— [Rep.]

* Pott v. Eytor, 8 Man., Grang. and Scott, 31; Id., 641.

† † Burckle v. Eckhardt, 3 N.Y., 132 ; 45 id., 797.

‡ ‡ Burns v. Rowland, 40 Barb., 368 ; Parker v. Barker, 1 Brod. & Bing., 9.

Footnotes

* Brown v. The Saratoga R. R. Co., 18 N. Y., 495 ; Cutler v. Wright, 22 N. Y., 472 , per Selden, J., p. 483.
† † Code of Procedure, § 153.
* Oakley v. Aspinwall, 2 Sand., 7; Waugh v. Carver, 2 H. Blk., 235 ; 1 Smith Lead. Cas., 491; Dob v. Halsey, 16 John., 34 .