G. Wessels & Co. v. E. Weiss & Co. ( 1895 )

The agreement between the defendants made them partners at common law and in this state. The case of Waugh v. Carver, 2 H. Blackstone, 235, decided in 1793, which followed Grace v. Smith, 2 Wm. Blackstone, 998, decided in 1775, was followed and adopted to its full extent in Purviance v. McClintee, 6 S. R. 259, in 1820. The well settled rule of Waugh v. Carver was overruled in England in 1860 by the case of Cox v. Hickman, 8 H. L. C. 268, but there has been no departure from it in this state except by legislation in 1870. In the opinion in Edwards v. Tracy,62 Pa. 374, decided in 1869, SHARSWOOD, J., pointed out the new English rule of Cox v. Hickman, but followed the old one of Waugh v. Carver, saying: "It is entirely too late now to question either the rule or the exception. We are bound to stand super antiquas vias by our own decided cases." In the opinion in Lord v. Proctor, 7 Phila. 630, decided at nisi prius the same year, he said that the rule in Waugh v. Carver was too ancient a landmark in our law to be now disturbed, and that it had accordingly been followed in Edward v. Tracy. Since the act of 1870 there has been no change in judicial decision. The question whether the agreement between the defendants made them partners as to third parties did not arise in Hart v. Kelley,83 Pa. 286. The agreement had been rescinded, and the claim in suit was for goods sold before it went into effect or after it had been abandoned. Caldwell v. Miller, 127 Pa. 442, reaffirms the rule, and both Walker v. Tucker, 152 Pa. 1, and Gibbs' Estate, 157 Pa. 59, came within the well recognized exceptions almost as ancient as the rule itself, which were made to avoid the injustice of its universal enforcement.

This rule has been so long established as a part of our jurisprudence that it is needless now to consider whether it is philosophical and in harmony with the principles governing the partnership relation. The departure from it in this state — and it was doubtless the wiser course — has been by legislation. The act of April 6, 1870, provides that a loan of money to an individual or a firm upon an agreement to receive a share of the profits of the business as compensation for the use of the money and in lieu of interest shall not make the party loaning the money liable as a partner except as to the money loaned, provided that the agreement for the loan shall be in writing and that the party shall not hold himself out as a general partner. This legislation distinctly recognized the rule as it had existed in this state for fifty years and in England from 1775 to 1860, and modified it to conform more nearly to the modern English rule of Cox v. Hickman, supra.

The affidavit of defence contains a denial of the partnership, but it admits or leaves unnoticed all the allegations of fact in the statement. It is a denial therefore of a conclusion of law only, and raises the single question whether under the facts as stated the defendant, Schmidt, is liable as a partner. As he would have been liable before the act of 1870 it remains only to determine whether he comes within its protection.

This cannot be unless he has complied with its provisions. The exemption from liability is on condition that the agreement shall be in writing and that the share of the profits shall be in lieu of interest. Only a part of the agreement in this case was in writing, the stipulation for interest on the loan being oral. The interest to be paid was six per cent, and the defendant was to receive in addition thereto fifteen per cent of the profits. The fifteen per cent was not to be paid in lieu of interest, but in addition to it. The six per cent was not to be received as a part of the profits in lieu of interest, but was payable as interest in any event, whether there were profits or not. This agreement is not in compliance with the requirements of the statute either in letter or spirit, and its effect is to impose a liability as a partner.

The judgment is reversed and the record is remitted with direction that judgment shall be entered for the plaintiff unless other just or equitable cause shall be shown.