Walker v. Tupper , 152 Pa. 1 ( 1892 )

Opinion by

Mr. Justice Mitchell,

The fundamental question is whether the agreement between the four defendants made them partners as to the matter of plaintiff’s claim.

No general definition of partnership has yet been given which applies without qualification to all the infinite variety of business arrangements in this commercial age, but an essential element universally conceded is participation in profits as such. Even this does not necessarily create partnership. In Heckert v. Fagely, 6 W. & S. 139, it was said by Huston, J., “ the general rule that all who share in profits are liable as partners, has long been subject to many exceptions.” And in Edwards v. Tracy, 62 Pa. 374, the modern English law was stated by Shabswood, J., to be that direct participation in profits as such is cogent but not conclusive evidence of a partnership. Participation in profits is however the most generally accepted test, and though it is conceded that its presence is not conclusive in favor, its absence may be regarded as conclusive against partnership.

Applying this test to the agreement we fail to find any provision for the sharing of profits. It is an assignment of an interest in a lease, whereby the parties become tenants in common of an estate for years, with certain covenants among themselves for the development of the land. Two wells are to be put down at the expense of Hatry and Tupper, and a third by them but of which Reed and Todd are to pay one eighth of the expense. The agreement does not state to whom Reed and Todd are to pay, but by clear implication it is to Hatry and Tupper, the cotenants who are to do the work and pay the other seven eighths of the expense. No other parties are referred to, nor is there any hint of liability to any others. When such liability is intended it is expressly set forth as in the case of the bonus to the lessor. Then Reed and Todd are to be the owners of one fourth of the production after deducting the royalty. There are certain other stipulations as to other wells and as to operating expenses which may possibly raise a different aspect in regard to partnership but which are not concerned in the present ease and which therefore we need not consider. In all these covenants and stipulations thus briefly summarized, there is no blending of estates into a common title in all the parties, nor any provision for the division or participation in profits. The title of each owner remains distinct as it was before. If one should sell, his vendee would acquire an undivided interest in the estate itself, not a mere right to an account and the balance due his vendor. Their estates never merged into the joint ownership of a firm, but remained as they were at first, tenancies in common in the land itself. Nor was there to be any distribution of profits, “ it is understood and agreed that said first parties are to be the owners of the full equal one fourth of all the production,” precisely the share to which their estate of one fourth in common entitled them. The division of the production in specie might not necessarily negative the idea of a partnership, but it would raise a presumption against it to overcome which an actual intent to become partners should clearly appear. The distinction between product and profit is expressed by the present Chief Justice in the clearly analogous case of Brown v. Jacquette, 94 Pa. 113: “ There is no division of profits, no responsibility on the part of Brown for losses, and no joint ownership in anything. The landlord is to receive one half the product of the farm. This must not be confounded with profits. The product of the farm is one thing; the profit is another and a very different matter. The product may be large, the profit inconsiderable.”

In no view of the agreement can it be reasonably contended that the parties meant to create a partnership as to the matter now before us, and we are of opinion that their relations under it were not such that the law will raise an implication of partnership without an actual intent.

Nor did Reed and Todd incur the liability of partners by holding themselves out as such. There is no privity of contract between them and plaintiff, and no evidence of any dealing between them. The plaintiff’s contract was with Hatry and Tupper, and the most that he testifies on this subject is that Tupper told him Reed and Todd were “ interested ” in the lease, and that Hatry told him they received part of the oil. Even if these be construed as declarations of partnership, such declarations are not evidence against the others: Edwards v. Tracy, 62 Pa. 374.

The defendants Tupper and Hatry are in a different position. They were clearly partners, and the presumption was that plaintiff’s settlement by taking Hatry’s individual notes was not payment unless the notes were paid, and the burden of showing a contrary intent was on defendants. On the other hand the receipt in full raised a presumption of payment, and the burden of showing the contrary was on plaintiff. The two presumptions stood opposed to each other, and the inclination of the balance between them was to be decided in the light of all the circumstances by the jury. This was expressly held in Jones v. Shawhan, 4 W. & S. 257, where a note was taken by the plaintiff in a mechanics’ lien, and a receipt in full given. “ The presumption is,” said C. J. GflBSON, “that a larger security is not exchanged for a smaller one, but the creditor may nevertheless choose the smaller. . . . By the receipt at the foot of the bill it appeared that the plaintiff had accepted the owner’s note, ‘ in full of the above; ’ which certainly was evidence to rebut the presumption and ought to have been left to the jury.” See also Seltzer v. Coleman, 32 Pa. 493. But it is argued that there was no evidence of any agreement, or in fact of anything being said on this subject at the time of settlement, and therefore the presumption from the receipt must prevail. If the presumption stood unopposed this would certainly be so, but it was met by the counter presumption from the fact that the settlement in which the receipt was given was not for money, but partly at least for notes which are not yet paid. Independent of the authority of Jones v. Shawhan it would seem that the balance of the presumptions must be settled by the jury. Suppose the order of the evidence were inverted. Suppose plaintiff had proved the contract and the doing of the work, and then resting had been met by the receipt in full, it would certainly have been competent for him in reply to show that the receipt represented not money but notes, and the question whether he had overcome the presumption from the receipt would necessarily have gone to the jury. The present case raises precisely the same issue though the order of proof was reversed. ■ Besides, there was in this ease some evidence, perhaps not much nor very weighty, in addition to the opposing presumptions. Plaintiff testified to the circumstances of the settlement, his desire for cash and his acceptance of notes, because it was the best he could do, the custom in such matters for one person to pay the bills, etc. All this was left to the jury with correct instructions as to the law and the burden of proof, and the verdict has settled that the notes of Hatry were not taken as actual payment. Plaintiff therefore had a right of action on his contract against Hatry and Tupper. Though it does not appear expressly, it is strongly implied by the whole case, that they were not entitled to plead the misjoinder of Reed and Todd (act of April 14,1851, § 13, P. L. 615), and as there was no error in the trial as to them, the judgment may well stand without the delay and expense of another trial: Edwards v. Tracy, 62 Pa. 374, 383.

Judgment reversed as to Reed and Todd, at the costs of appellees, and judgment affirmed as to Hatry and Tupper.