Cunningham v. Staples

The only question presented by this appeal is upon the existence, vel non of the partnership between the parties, as charged in the bill.

While it is true that a mere holding out by two or more persons as partners does not make them partners inter se, if they did not agree or intend to form a partnership, yet the acts, declarations, and conduct of business associates are competent evidence against them, and may furnish satisfactory proof, that they are partners inter se, with another. Causler v. Wharton,62 Ala. 358; Russell v. Hayden, 201 Ala. 517, 78 So. 871; 30 Cyc. 408.

In the instant case the complainant testified that he and respondent went into business under an agreement to contribute equal amounts of capital and personal service, and to share equally in the profits of the business. He stated that nothing was said about sharing the losses, if any were suffered.

Respondent admitted his entry into the business with complainant, and his share in its management and prosecution, but declared that his agreement was to become a partner only when he could supply his share of the capital by selling his farm which he was never able to do.

But, from beginning to end, his conduct and declarations were wholly inconsistent with any other theory than that of an already existing partnership between him and complainant in the conduct of the business enterprise upon which they had, confessedly, jointly, embarked. Respondent's own earlier view of the relationship that resulted from his agreement with complainant is made decisively apparent by his letter written on May 26, 1924, to a railroad official about a spur track for their use, in which he stated in answer to an inquiry:

"Our firm is only a partnership not incorporated; the partners are J. L. Staples and J. P. Cunningham."

Our conclusion is that the evidence overwhelmingly supports complainant's version of the agreement, and confirms the finding of the trial court that a partnership existed between him and respondent for the prosecution of this business.

Appellant's chief contention is that the absence of any provision in the partnership contract for sharing the losses, as well as the profits, of the business, deprives the contract of an essential element, without the existence of which a partnership could not, and did not, exist. That the agreement must include a sharing of both the profits and the losses of the business has always been the law in this state, as illustrated by a long line of cases. White v. Toles, 7 Ala. 569; Howze v. Patterson, 53 Ala. 205, 25 Am. Rep. 607; Heller v. Berlin, 208 Ala. 640, 95 So. 10.

But an express stipulation for the sharing of losses has never been regarded as necessary. In Howze v. Patterson,53 Ala. 205, 25 Am. Rep. 607, an agreement to jointly purchase, transport, and sell a lot of merchandise, and to divide the proceeds proportionately, was held to create a partnership. In McCrary v. Slaughter, 58 Ala. 230, an agreement to divide the crops jointly cultivated and produced, after paying the expenses, each bearing his own proportion, was held to create a partnership. Autrey v. Frieze, 59 Ala. 587, exhibits a similar contract. In Lee v. Ryan, 104 Ala. 125, 16 So. 2, an agreement for the joint operation of a saw mill — one to furnish the logs and the other to saw them, "on the halves" — was held to create a partnership. In Causler v. Wharton,62 Ala. 358, 362, it was said:

"Neither writing, nor any other particular form need be observed in the formation of a trading or laboring partnership. Mutual consent of two or more competent minds can make this, as it can make other contracts. And, like most other contracts, it may be implied from conduct and circumstances, if significant and expressive enough to convince the mind."

In Nelms v. McGraw, 93 Ala. 245, 247, 9 So. 719, 720, it was said:

"The main question for consideration is the intention of the parties, legally ascertained; for a partnership as between the parties cannot exist unless such be their intention. The usual tests are, community of risks — mutual, though not equal participation in the profits and losses; but participation in the profits alone is not necessarily decisive proof of a partnership. * * * A person may be interested in, or receive a part of the profits of a business, without becoming a partner."

And in Tayloe v. Bush, 75 Ala. 432, quoted with approval in Zuber v. Roberts, 147 Ala. 512, 515, 40 So. 319, 320, it was declared:

"In determining whether a partnership was created, the intention of the parties is the single question for consideration."

Where a sharing of the profits is manifestly a mode of compensation merely for the use of money or property, or for services, and no community of expenses or of loss in operation is indicated, the cases uniformly hold that no partnership is created. Pulliam v. Schimpf, 100 Ala. 362, 14 So. 488.

In the instant case, the agreement, as we find from the evidence, was to form a partnership; to be equal partners, "halvers;" to contribute equally to the capital employed in the business; to jointly acquire the property necessary; to give all of their time and skill to the business; to divide the profits of the business equally; and both parties uniformly treated the business as one of partnership. This, under the authorities cited, leaves no doubt as to the true relationship of the parties under their agreement.

We are referred by counsel for appellee to section 9372 of the Code:

"An agreement to divide the profits of a business implies an agreement for a corresponding division of its losses, unless it is otherwise expressly stipulated."

This section, however, did not become operative as law until the new Code became effective on August 17, 1924, and hence is not applicable to this contract.

It results that the decree of the circuit court must be affirmed.

Affirmed.

ANDERSON, C. J., and GARDNER and THOMAS, JJ., concur.