Everett v. Coe , 5 Denio 180 ( 1848 )

By the Court, Beardsley, Ch. J.

That we may be prepared to give a satisfactory answer to the question whether the defendant was a partner of Marble & Penny, it is first necessary to look at the contract entered into between them in the spring of 1844, and determine, in one particular, its true sense and meaning. By that contract Marble & Penny agreed to take of the defendant the Farmers’ Factory, at Paris, Oneida pounty, and to run the same on certain terms therein specified. The first of these terms or conditions was that the defendant should furnish the necessary means to enable them to prosecute the business, that is to say “ for the purchase of cotton, the payment of help, and for all the expenses attending the starting and future operation of the mill for the manufacture pf cotton goods.” This was to be done by the defendant. Marble & Penny, on their part, were “ to superintend the manufacture of said goods, and to allow said Coe,” (the defendant,) “ above all expenses incurred in said business, a profit of one cent on the yard for all cloths manufactured,” by them, “ in said mill, not exceeding 6000 yards per week.” The question is here presented, was this “one cent on the yard” to be paid at all events without regard to the profit or loss of the business, or was it only payable out of profits actually made. If the former is what the parties intended and what the contract imports, it was only providing a fluctuating and dubious compensation, instead of a fixed rate of interest for the use of the necessary capital which the defendant was to advance to carry on the business. Such an arrangement, although it might be unequal and oppressive, as it also might serve as a cover for usury, would still not make the parties to it copartners. There would be no common interest in the capital employed, or the profits, if any were made, and indeed, as to one of the parties no interest whatever in either capital or profits. The amount to be received by the defendant for the use of money advanced by him, whether more or less, would depend solely on the number of yards of cloth, within a certain limit, manufactured each week, and not at all on the gain or loss in the business But if the amount to be received by the defendant for the money advanced by him, was only payable out of profits actually made, he then had a direct interest in such profits ; and as the amount to be paid would subtract so much from the fund on which the creditors of the concern had a right to rely for the payment of debts due to them, the defendant, as to such third persons, would be clearly liable as a copartner. This is a well settled principle. (Dob v. Halsey, 16 John. 40 ; Chase v. Barrett, 4 Paige, 159; Hesketh v. Blanchard, 4 East, 144; Waugh v. Carver, 2 H. Bl. 247; Bostwick v. Champion, 11 Wend. 580.)

Such being the rule of law which must, govern the case, it only remains to inquire whether the defendant was to be reimbursed for the use of the money advanced by him, out of the profits actually made, or was to be paid therefor, profits or no profits, by Marble & Penny.

The amount to be allowed the defendant for the use of the money advanced by him, is mentioned as “ a profit of one cent on the yard,” a form of expression which would seem to indicate that the payment was to be made from profits and not otherwise. But the terms used are not decisive of the question, for they may have been intended to indicate that the amount to be allowed the defendant was a profit oi remuneration, to him, for the use of his money, and not a share of the profits made in its use. It seems to me, however, if we look a little farther into this agreement we shall feel very little doubt as to what was intended. After providing that the defendant should be allowed “ a profit of one cent on the yard for all cloths manufactured,” not exceeding 6000 yards per week, the agreement goes on to declare that “ the balance of said profits” should be paid to Marble & Penny for their services, and that they should also be paid “ the entire profit arising from the manufacture and sale of all goods made by” them beyond said 6000 yards a week. This part of the agreement seems to be free from all reasonable doubt on the subject, and the other parts are entirely consistent with it. The profit allowed to the defendant was part of the same profit out of which Marble <fc Penny were to be paid for their services; that is, it was a share of the entire net profits of the business, and nothing else. The defendant was to advance the necessary capital to carry on the concern, which was to be under the care and superintendence of Marble & Penny; the advances made by the defendant were first to be repaid, and out of the profits which might remain he would be entitled to his “ one cent on the yard,” and Marble <fc Penny to the residue. This'being the true meaning of the agreement between the defendant and Marble & Penny, a,partnership existed between them, and the defendant was liable to the plaintiff for the goods sold. They were sold to the partners and were used for their benefit. In this respect the referee erred, and without looking at the other point made on the argument, although hardly raised at the hearing before the referee, the report must be set aside.

Ordered accordingly.