President of Adams Bank v. Rice , 84 Mass. 480 ( 1861 )

Bigelow, C. J.

The contention in the present case is not whether, in the absence of an express agreement between the parties for the formation of a copartnership, the nature and character of the relation between them, and the mode in which they transacted their business and carried on a joint dealing, were such that the law will imply the existence of a copartnership; nor is it a question whether a person is clothed with the character of a copartner, contrary to his intent, as to third persons by operation of law, so as to render him liable on contracts made in the course of an alleged joint dealing. The inquiry in the present case is of a different character. It is admitted that the parties intended to form a copartnership, and, in pursuance of. such intention, agreed to become partners together, and that subsequently they actually carried on business as joint traders. The question therefore is, whether, owing to the peculiar nature of the stipulations by which they undertook to regulate among themselves their joint dealings, the law will imply that they sustained toward each other a different relation from that into which they intended to enter.

That they were liable to third persons as copartners cannot be doubted. They held themselves out to the world as such in express terms, and, whatever may have been their relation to each other inter sese, they were clearly chargeable as members of a copartnership by reason of having induced others to deal with them in that capacity. Story on Part. §§ 64, 65. On a careful analysis of the agreement between them on which their association and connection in a joint business were based, we are of opinion that they also sustained toward each other the relation of copartners. Not only was it the express contract of the parties to form a copartnership, but they entered into stipulations and conducted their business in a manner which clearly show the existence of the essential ingredients which in law constitute that relation. There was a contribution of capital and labor by one of the parties, and of labor, skill and credit by the other, for the carrying on of a joint business; there was an actual joint trading; there was a purchase of property in their joint names; the title to property vested in them jointly; they were both liable for all the debts contracted; and they dealt with each other and with the world on the basis that a copartnership existed between them.

The only ground on which the petitioners contend that the agreement and acts of the parties did not create a partnership is, that there was no express stipulation between them for a community of profits, and that one of them in lieu thereof was to receive a specific sum in payment for his services. This position might be maintained, if that part of the contract which provides for the mode in which his compensation was to be made is to be interpreted literally and without reference to the subject matter of the agreement or to the intent of the parties, as manifested by other stipulations into which they entered. But this is not the true mode of interpreting the contract. We are to look at the situation and circumstances of the parties at the time it was made, the objects they had in view in forming a connection in business and in carrying on a joint dealing, and the nature and effect of all parts of the contract between them, in order to arrive at a just conclusion as to the real intent of the parties ,in making this particular stipulation. Viewed in this light, it is not correct to say that one of them was not to share in the profits of the joint business. The parties expressly agreed to form a copartnership and to carry on a business in their joint names. The declared purpose in making the contract was, in case of death of one of the parties, to vest the property in the survivor, so that he might control it and be able to close the joint business in like manner as in case of a surviving copartner. They imposed no limitation or restriction on their liability as copartners, either among themselves or as to third persons. There is nothing in the agreement or in the acts of the parties under it to indicate that either of them intended to assume any other relation than that which subsists between persons who hold toward each other the relation of co-partners. Under such an agreement, it is a reasonable, natural and legal inference that the parties, in stipulating that one of them should draw out a fixed sum for the first year, intended and understood that it was to be a deduction from the profits Neither of them probably contemplated the contingency that no profits would be realized. On the contrary, it was probably anticipated that a much larger amount of profits would be earned than the sum which it was agreed that Delahanty should receive as his share for the first year. It was therefore in effect an agreement that he should receive a share of the profits which should not exceed in any event the sum of fifteen hundred dollars. Nor would it be going too far to say that it would harmonize with the intent of the parties as shown by other parts of the agreement, to hold that its true interpretation was that if there were no profits realized, no sum should be drawn out by Delahanty. But it is not necessary to go to this extent. It is sufficient that it was agreed that the sum to which he was to be entitled was to constitute a charge on the profits. The facts in this case are not unlike those which appear in Gilpin v. Enderbey, 5 B. & Aid. 954. The agreement there was, as in this case, to form a copartnership, and it was stipulated between the parties that one of them was to receive out of the profits the specific sum of two thousand pounds per annum ; or if there were no profits, or they were insufficient to pay this yearly sum, it was to be taken out of the capital. This was held to be a partnership. The agreement as to the fixed sum to be paid to one of the copartners annually, and other stipulations between the parties, constituted a contract which the court said was a partnership “ of an unusual kind.”

It was urged in behalf of the petitioners, that a strong implication against the existence of a copartnership was to be derived from that part of the agreement by which it was provided that Delahanty was to have an interest in the business the second year. The inference which the petitioners draw from this stipulation is that it shows that he was to have no interest in the joint business the first year. But we do not so understand it. Its true meaning is that his interest was to be based on the extent of the business after the first year, instead of being confined to a specific sum. On these grounds we are of opinion that there was a subsisting copartnership at the time of the death of Fox, which authorized his surviving copartner to institute proceedings in insolvency.

Petition dismissed.