McDonnell v. Battle House Co. , 67 Ala. 90 ( 1880 )

BRICKELL, C. J.

— The facts in this case are, that on the 15th day of August, 1876, the Battle House Company leased to E. H. Rivers & Co., for the term of two years, commencing on the ensuing first day of October, the hotel situate in the city of Mobile, known as the Battle House, and for rent was to be paid monthly ten per cent, of the gross receipts from the keeping of the hotel, and its appurtenances. The company were to select and employ at their own expense, a competentjbook-keeper, who was acceptable to the lessees, by whom he was to be furnished with board and lodging, and he was to render monthly to the company, and to'the lessees, a statement of the gross'receipts; paying to the company ten per cent, thereof. On the 1st of June, 1877, the lease, with the assent of the company, was transferred to Moses J. Mason. On the 10th February, 1878, by verbal agreement the mode of paying rent was changed, so that as money was received, ten per cent, thereof was set apart and paid over daily, instead of monthly. After 10th February, 1878, Mason purchased from the appellant McDonnell, supplies which were used in keeping the hotel during the term of the lease, and the purpose of this suit is to recover for them of the appellee. There are objections made to some of the instructions given by the City Court upon the ground that they were misleading, or invaded the province of the jury. If the instructions are in this respect objectionable, it is not of importance, if on the undisputed facts, there is, or is not, a right of recovery; and that is the only question we deem it necessary to consider.

It is not assumed that the company and its lessees, intended the formation of a partnership, or intended to conduct jointly the business of keeping the hotel. The only relation they contemplated was that of lessor and lessee, of landlord and tenant, and the payment of ten per cent, of the gross receipts of the business as rent, as compensation for the use and occupation of the premises. The argument is, that by construction of law, as to third persons, as there was a community of interest in the gross receipts of the business, the parties sustained the relation of partners, although as between themselves there is only the relation of landlord and tenant. It is sometimes true, that contrary to their inten-. tion, persons ..become partners as to third' persons dealing with them, when they do not intend to form that relation. This occurs in that large class of cases, when there may not be a community of interest in the property or capital employed in a particular business ; yet, one of those engaged in it has a specific interest in the profits of the business, as profits,— a clear right to participate in the net profits. This, by construction of law, creates a partnership, for «the reason, as was said by De Grey, O. J., that “every man who has a share of the profits of a trade ought also to' bear his share in the loss. And if any one takes part of the profits, he takes Íiart of that fund on which the creditor of the trader relies or payment.” — Grace v. Smith, W. Black, 998. But a community of interest in the profits — the net profits, as such, is essential to a partnership. Community of interest is the basis of the relation. — Collyer on Part. 44; Parsons on Part. 41; Loomes v. Marshall, 12 Conn. 77; Moore v. Smith, 19 Ala. 780. When there is no community of interest in the net profits, and no such dealing as induces others to rely upon them as partners, whatever may be the relation of parties, they are not partners as between themselves, or as to third persons.

In this case, as rent the Battle House Company were entitled to one-tenth of the gross receipts of the business. In no event was it liable for any losses which might ensue, nor was the profit of the business a matter of concern to it. Whether profits were being derived was not an inquiry they could make at any time during the lease. The books abound with cases, much stronger than the present, in which it has been held that mere participation in. the gross profits of a business did not create a partnership. There is no error prejudicial to the appellant in any of the rulings of the City Court.

Affirmed.