Ross v. Drinker — 2 N.Y. Super. Ct. 415

Majority

p. 415

William E. Ross versus William W. Drinker.

Headnote

The plaintiff employed the defendant to procuro consignments for him, and to act as his agent in certain mercantile business, to be carried on in the name of the plaintiff. The defendant, as a compensation for his services, was to receive one half of the profits of the business; but he had no authority to contract debts in the name of the plaintiff, nor was he to be liable to third persons for any responsibilities created for the concern. No profits were ever realized, but on the contrary, losses ensued, and the plaintifi" brought an action of assumpsit against the defendant for money had and received to his use, as appeared by the books, which the defendant had kept. Held, that the foregoing facts did not constitute such a partnership between the parties, as would bar the action at law; and the plaintiff having recovered a verdict against the defendant, for the balance of his account, the court refused to set it aside.

The question in this case was, whether the defendant was a partner with the plaintiff" or not. It was an action of indebitatus assumpsit, for money had and received, money lent and advanced, &c.; and the defendant, for the purpose of defeating a recovery, in an action at law, set up a partnership with the plaintiff, as his defence.

At the trial of the cause, it appeared that the defendant had been in the employment of the plaintiff, under the agreement hereinafter mentioned, and that, from entries made in the books of the plaintiff, by the defendant himself, (who had kept them,) a balance of 4000 dollars and upwards, was due from the latter to the former. It appeared also, that after the commencement of this suit, the defendant filed a bill in chancery against the plaintiff ; but no injunction or stay of proceedings, was ever issued against the action at law.

The defendant, for the purpose of proving the partnership, introduced the plaintiff’s answer to his bill in chancery, from which it appeared, that the plaintiff being about to establish himself in the city of New-York, as a merchant, but being inexperienced in mercantile affairs, at the solicitation of the defendant, received him into his employment, as an agent or assistant, agreeing at the same time, to give him one half of the profits of his business, as a compensation for his services. The defendant on his part, was

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to procure consignments for the plaintiff, keep his books, and give him advice as to the manner in which the business should be conducted ; but he was to have no. power of signing the plaintiff’s name, for the purpose of creating responsibilities a gainst him, nor was he to be liable to third persons for the debts of the plaintiff;, and the benefits to be received by him from the connexion, were to be restricted to his agency, and the profits aforesaid.

The defendant, for the purpose of creating a confidence in his capacity, on the part of the plaintiff, had told him, that if any loss should follow as a consequence of his mismanagement that he would bear one half of it; but there was no agreement to bind him to that effect; and the plaintiff, "knowing the defendant to be irresponsible, did not consider the promise of any conseqence one way or the other.

The complainant, by his answer, expressly denied that 'there was a partnership between himself and the defendant, although he admitted the foregoing facts; and he stated that he employed the defendant, upon "the terms aforesaid, as his .assistant and boolc-keeper. It was, however,'further agreed, that at a future time, the defendant should become the partner of the plaintiff, whenever he could relieve himself from certain mercantile embarrassments, which were hanging over him; but that agreement, the plaintiff, by his answer declared, had never been carried into effect.'

Under the agreement aforesaid, (which was not reduced to writing,) the plaintiff hired a store in his own name, advanced the capital necessary for the carrying on of the business, the defendant furnishing nothing but his personal services; and the business was transacted in the name of the plaintiff alone. In the course of it, however, whenever goods were purchased, the defendant was in the habit offending to the plaintiff his notes, to be endorsed by the latter, and given in payment for such goods ; but this arrangement was made as a favor to the plaintiff, with an understanding that he should always take up said notes when due; and he did so, without putting the defendant to any inconvenience.

There were many transactions between the parties, and vari

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Otis interchanges of accommodations and favors; some of which would countenance the idea of a partnership, and others would not; and the defendant produced letters from the plaintiff, coining expressions which supported, in some degree, the defence upon which he relied.

The plaintiff, on his part, produced the letters of the defendant, to various correspondents, wherein he represented himself aS the mere agent of the plaintiff, denying all connexion with him as a partner; and in various conversations with witnesses, the defendant had also denied the existence of a partnership between himself and the plaintiff.

It appeared, from the plaintiff’s answer to the defendant’s bill, that there never had been any profits in the business, but on the contrary, that it had resulted in loss, and that the connexion had been dissolved by the plaintiff himself, without consulting the defendant in any way.

After the whole testimony had been closed, the counsel for the defendant insisted, that the agreement disclosed in the plaintiff’s answer to his bill in chancery, and the facts of the case, showed a partnership between them, and that there could be no recovery against the defendant at law: the plaintiff’s only remedy being in a Court of Equity.

The Judge charged the jury, that the agreement disclosed by the answer did not, per se, in his judgment, create or constitute a partnership, between the plaintiff and the defendant, so as to defeat the action at law, under the circumstances of this case; especially as it appeared from the answer to the defendant’s bill, that the business had been carried on at a loss, instead of a profit. That the other evidence in the case, was to be passed upon by them; and if they should be of opinion that it made out a partnership, and showed an agreement to that effect, then, that the plaintiff could not recover at law. That the books of the plaintiff, which were kept by the defendant, coupled with the answer in chancery, would enable the jury to fix, with reasonable precision, the balance due from the defendant to the plaintiff; but as there might be some inaccuracy in the items, he recommended the jury, with the consent of the parties, to find a verdict in favor of the plaintiff,

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if the fact of partnership was not in their opinion established, for an amount sufficient to cover his whole demand, subject to a liquidation of the accounts by referees. The defendant having excepted to the charge, the jury returned a verdict in favor of the plaintiff for 4000 dollars.

Mr. E. N. Mead and Mr. Geo. Brinkerhoof, in behalf of the defendant,

now moved for a new trial. They contended, that the agreement, under which the parties were engaged in business, as proved by the plaintiff’s answer in chancery, and the other testimony produced at the trial, constituted them co-partners, or showed such a connexion between them, in the nature of a co-partnership, as to bar the plaintiff from maintaining an action at law against the defendant. A communion of profit and loss, (they said,) constituted a partnership as to all the world; and where the amount of compensation, to be received by one person, for services performed for another, is indefinite or uncertain, and made to depend upon the profits of the business in which the apparent agent is engaged, that constitutes a partnership between the parties. [Dob. v. Halsey, 16 J. R. 34. Muzzy v. Whitney, 10 J. R. 226.]

As to third persons, there was no doubt that Drinker had made himself liable for the debts of Ross, by agreeing to receive one half of the profits of the business, carried on in the name of the plaintiff. These profits constituted the fund among other things, from which the creditors were to be paid; and by consenting to take a portion of that fund for his services, the defendant made himself liable for the debts of the concern. This is a well settled principle of the law of partnership. [1 Camp. R. 329.]

The plaintiff, it is true, has denied in his answer, the existence of a partnership; but that is a conclusion of law which he cannot deny; for if he admits an agreement, which in judgment of law constitutes a partnership, his denial cannot affect the agreement, or alter the conclusion which the court must draw from it. The agreement is disclosed by the answer, and the court must say whether that constitutes a partnership or not

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In this case, the business carried on, in the name of Ross, was for the joint benefit of himself and Drinker. One party brought money into the concern; the other, knowledge of business, talents, industry and personal services. Those services formed a fair equivalent for the capital, and the profits to be derived from the plaintiff’s capital, used by the defendant, for the common benefit of both, were to be equally divided between the parties. How can we escape the conclusion, then, that the transactions between the parties, were partnership transactions, and that a Court of Chancery is the only tribunal which can do justice between them?

The very claims of the plaintiff show a partnership. The action is for money had and received. The plaintiff proves, that the defendant received the money, and the latter asserts, and before a proper tribunal, would have an opportunity of proving, that the amount with which he stands charged, constitutes a part of the losses of the business. The plaintiff in his answer, absolves the defendant from his liability for losses, and yet, by suing him for the capital put into his hands, he effectually charges him with losses, which are the- foundation of the present demand. In the books of the plaintiff, the defendant is charged with losses; and how can an equitable balance be struck in a court of law ? Chancery is the proper tribunal for the liquidation of partnership accounts, and thither the plaintiff should go for relief if he has any just cause of complaint. There the whole transaction can be examined ; the master can take the books into his possession; the parties can appear and make explanations, and equal justice can be done to both.

But we rely upon the proposition with which we set out; namely, that the agreement disclosed by the answer in chancery, in judgment of law constitutes a partnership, and that the plaintiff has not, therefore, a right to maintain this action. If this position be true, there must not only be a new trial, but the court will, by their opinion, inform the plaintiff that he cannot support an action at law at all, after the disclosures made by his answer. Before assumpsit can be maintained, a balance must be struck. If any thing remains unsettled, a court of law cannot interfere between the parties, but they must be left to the only tribunal which can

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do equal justice between them. [Atwater v. Fowler, 1 Hall's R. 180 . Rogers v. Rogers, Ib. 391. 394.]

Mr. J. Greenwood and Mr. Foote, contra, for the plaintiff, contended,

that there was no partnership between the plaintiff and the defendant, and that there could not, therefore, be any objection to the action. That it was apparent, from the answer in chancery, upon which the defendant relied, that he was a mere agent, or clerk in the employment of the plaintiff, whose compensation was made to depend upon a contingency. He had no power to use the plaintiff’s name; he was not authorized to contract debts ; he had no discretion except as a mere agent. He, himself, had repeatedly denied the existence of the partnership, and could now be permitted to shield himself from a just responsibility, by holding up the forms of the law. They denied that the defendant was a partner at all in any sense of the term.

The principle, they said, upon which a person is made liable as a partner, to third persons, (except in cases of plain agreements,) is, that he withdraws a part of the fund from the creditors.- In this case, the defendant could not withdraw the fund, for he had no right to touch it, until all the debts of the concern were paid. He was to be compensated by profits, which means, that he was to partake of what might remain, after the creditors were all paid, and the plaintiff’s capital had been returned to him. But in this case there were no profits, and the defendant had not a legal right to touch the fund. Instead of conducting himself like an honest agent, he receives funds to be applied in the business of his employer, appropriates them to his own use, and then leaves the plaintiff to pay the debts, and bear all the losses. He cannot now set up a partnership as his defence, but is liable, in this action, for the money which he received to the plaintiff’s use. [ Waugh v. Carver, 2 H. Bla. 235. 2 W. Bla. 998. 4 East. 144. 10 J. R. 226. 1. Camp. 329. 4 Esp. R. 182. 3 Kent's Com. 11.]

If the parties were not partners, as to third persons, a fortiori, they were not partners inter se. To constitute a partnership between two individuals, there must be an agreement between

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them as to profit and loss. This agreement, it is true, need not always be expressly proved, for it may be inferred from the acts of the parties. In this case, there is no express agreement proved, and the Judge submitted all the acts of the parties, from which an agreement might be inferred, to the jury; and the jury found against the fact of a partnership. Unless, therefore, the court shall be of opinion, that the plaintiff’s answer in chancery discloses an agreement, which per se constitutes a partnership, there cannot be a new trial. The answer negatives the idea of a partnership ; it denies it, and shows no facts from which it may be inferred, as a conclusion of law. The defendant was a mere agent, who might have been dismissed at any moment. A partnership is usually for some definite period ; but here, nothing was said as to time. This strengthens the position we take. Partnership, as between the parties, is a contract. The plaintiff denies any such agreement, and the defendant denies it. In the absence of proof, is the court to infer a contract which both parties repudiate 1 As to third persons, a man may be made liable even against his will; for if he permit his credit to be held out to the world, for the benefit of another, he may be compelled to suffer the consequences. But, as between the parties themselves, there must be an agreement, and here none is shown by the party who relies upon it. [4 Barn. & Ald. 663. The counsel for the plaintiff also commented upon the case of Dobbs v. Halsey, at length, to show that the principles of that case did not interfere with this. As to the charge of the Judge, in relation to referring the cause, for the purpose of ascertaining the exact balance due to the plaintiff, they cited, Dunlap’s Practice, 543, and the statute as to references.]

The Court refused to grant a new trial, being of opinion that the agreement, disclosed by the plaintiff’s answer to the defendant’s bill, did not constitute a case of partnership. And, as all the other testimony was left to the jury, and they found against the partnership, the court were of opinion, that their verdict ought not to be disturbed, being supported by the evidence.

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New trial denied, and the verdict to stand subject to a liquidation of the accounts by referees.

[J. Greenwood, Att'y for the plff. C. N. Mead, Att’y for the deft.]

Note.—This cause was originally brought before the court, for argument, at its preceding J une Term. It then appeared, that the defendant had filed a bill in chancery, against the plaintiff embracing the same subjects of controversy, which were presented by the action at law; but the defendant had obtained no injunction to restrain the proceedings at law, nor had he any stay of proceedings from a Judge. The court were of opinion, that it was irregular for a party to proceed in this court, when it was apparent that another tribunal, whose jurisdiction could not be questioned in cases of partnership, had the same subject before them. The court, therefore, ordered the argument to be postponed, in order to give the defendant an opportunity to restrain the plaintiff from proceeding at law, by a proper application to Chancery. The defendant having neglected to do this, the cause was brought on at this term, and disposed of as appears by the case.