John Holt & Co. v. Kernodle

The plaintiffs proved that they were the proprietors of a blacksmith shop, in which they had two slaves engaged; and (200) that about 1 January, 1836, they employed a blacksmith by the name of John Willis, to work in the shop with the slaves, upon the following terms, which were not reduced to writing, towit: The plaintiffs were to furnish the shop, coal, iron, and two slaves to work in the shop; they were also to furnish everything else necessary to carry on the business, and likewise a house and provisions for Willis and his family. The plaintiffs were first to be paid out of the profits of the business for the coal, iron, and other materials furnished by them for carrying on the business, and also for the rent of the house Willis might live in, and for the provisions furnished his family, and then the balance of the profits, if any, were to be equally divided between the plaintiffs and Willis. The business was commenced and continued by the plaintiffs and Willis, from January, 1836, until some time in September or October of the same year, when they dissolved and separated, Willis being, as he stated, at that time indebted to the plaintiffs for articles furnished to his family. The declarations of Willis as to his indebtedness to the plaintiffs were objected to by the defendant, but received by the court. It was admitted by the defendant that the work for which the warrant was brought, towit, the ironing of his wagon, was done at the shop of the plaintiffs, in 1836; but he proved that, in 1834, Willis being pressed for money, agreed to iron his wagon for a certain sum, which the defendant then advanced to him; the wagon was accordingly sent to Willis, and remained with him unfinished, until he went to work with the plaintiffs, when it was carried to the plaintiffs' shop, and ironed as above stated. The defendant further proved that on the trial of the warrant before the justice he offered Willis as a witness to prove the above contract, when he was objected to by the plaintiffs, upon the ground that he was a copartner with them.

(201) The defendant contended that Willis was a copartner, and ought to have been joined in the suit; and thereupon moved to nonsuit the plaintiffs. The court refused the motion for a nonsuit, but charged the jury that if they were satisfied from the evidence that Willis was to have a share of the profits of the shop from the beginning, he would be a necessary party to the suit; but if the contract was that the plaintiffs were first to be paid for the iron, coal, provisions, and house rent, and the shop, while Willis was there, had not realized enough to pay for the supplies furnished, but Willis had left the plaintiffs, indebted to them on that account, then he was not a necessary party to the suit. The court further instructed the jury that although Willis might have taken the wagon of the defendant to the shop of the plaintiffs, and ironed it in pursuance of his contract with the defendant in 1834, yet this would not deprive the plaintiffs of their right to recover, if they had no knowledge of such contract, and Willis was not a partner at the time the work was done.

The plaintiffs had a verdict and judgment, and the defendant appealed. Of course, this action cannot be sustained if (202) Willis was one of the firm of John Holt Co.; and the opinion of the Court is that upon the plaintiffs' evidence, and much more on that of the defendant, Willis is to be taken to have been a partner; and the criterion on which the question was submitted to the jury was altogether a mistaken one.

A partnership as between themselves has been well said to be constituted by an agreement between two or more persons to join stocks of money, property, or labor, and to divide the profits. But as to third persons, who may deal with the firm, a partnership may arise upon a principle of public policy, so as to bind a person for all the liabilities of the firm, and, indeed, make him a party to all its contracts, although that person bring into the business neither effects nor services, but merely lend his name as a partner, or otherwise hold himself out to the world as such. There are numerous adjudications to the effect of these propositions; but the leading case is Waugh v. Carver, 2 H. Bla., 235, which sufficiently states both of them. The ordinary test, however, of a person being a partner is his participation in the profits of the business; and we believe there can be no instance imagined in which there is to be a participation in them, as profits, in which every person having a right to share in them is not thereby rendered a partner to all intents and purposes. It is so between the parties themselves; because the one of them does not look to the other, personally, for restoring to him his capital or remunerating him for his labor; but each looks to the assets or joint fund for those purposes, and ascertains his interest by taking an account of the concern. Much more does sharing in the profits constitute a partnership as to the rest of the world; because, as was said by Chief Justice Eyre, by taking a part of the profits the party takes from the creditors a portion of that fund which (203) is the proper security for the payment of their debts. It is also immaterial whether the shares be much or little, Rex v. Dodd, 9 East, 527; for the question is, with what persons, as forming the firm, the contract was made, so as on the one hand to make those persons chargeable with it, or, on the other, enable them to enforce it. However small the interest one may have in the fund, or how remote soever that interest may be, provided it be an interest in the profits as such, he is thereby constituted a party to each contract of the firm, and must be joined in an action on it.

In the record it is stated expressly, upon the plaintiffs' own proofs, that after defraying certain specified charges, "the balance of the profits, if any, were to be equally divided between the plaintiffs and Willis." This we think fatal to the present action, because it shows that Willis had an interest in the profits, not so large, perhaps, as that of the other parties, but as distinctly defined; that he looked to them and to them alone for his remuneration; and not to the present plaintiffs, under any circumstances.

His Honor, however, left it to the jury to find otherwise, upon the following distinction: That as the iron, coal, provisions for Willis, and rent were, by the agreement, first to be paid out of the assets, if the jury believed that enough had not been made to pay those charges, but that Willis was indebted to the other parties when he went away, then he, Willis, was not a necessary party to the suit. This distinction we deem entirely fallacious. It does not state that Willis would not be a partner in the case supposed, but only that he need not be a plaintiff. Now, he must be a party to the action if he was a party to the contract; and he was a party to the contract if, in point of law, he was a member of the firm when the contract was made. That he was a partner has been already shown; and, therefore, he was a necessary plaintiff, unless, as laid down to the jury, it be true that he ceased to be a partner, or, at least, a proper plaintiff, for the reason that, in point of fact, there was no surplus of profit in which Willis could share, after satisfying to his copartners their preferred charges. The idea is a novelty, and is certainly not correct. It would make the parties (204) to every action by a partnership depend on the accounts between the partners, which the jury is wholly incompetent to take. Besides, it would make the plaintiffs vary, from time to time, with the change of the fortunes of the firm. If, for example, at the time the work was done for the defendant the business was a gaining one, so that upon a division some profit would have fallen to Willis, then he would have been a necessary party to an action then brought for the price; but if, afterwards, the business became a losing one, so that upon a division Willis would receive no share of the profit, then he need not be a party to the suit. This can only mean that in this last case Willis is not to be taken as continuing to be a party to the contract, although unquestionably, when made, it was entered into with him as one of the parties to it. The result to which we are thus brought disproves the proposition from which it is deduced. Besides, it is an error to suppose that one who was a partner has no interest in the fund because, by reason of losses, he would draw no share upon a final settlement. The firm may owe debts, for which, of course, he is liable; and he is consequently a necessary party to actions by the firm, because he has an equal right with the other partners to receive the fund, that he may see it applied in exoneration of himself, in discharge of the debts.

At the bar a class of cases was relied on to support the judgment which we think do not apply. they are those of Benjamin v. Porteus, 2 H. Bl., 590; Dry v. Boswell, 1 Camp., 329, and others of that kind, in which it appeared upon the agreement that the parties intended an agency of the one for the other; and it was consequently held that there was not a partnership, although the agent was to be remunerated by wages in proportion to the profits, or even by a sum partly furnished by the profits. In some of those cases the distinctions are very fine, and carried to a nicety at which even Lord Eldon expressed his regret. Exparte Hamper, 17 Ves., 112, 404. It is not, however, needful that we should go through them, for they are all distinguishable from the present case by the circumstances noticed by his lordship: That in none of them did the party agree for a part of the profits as such, so as thereby to entitle him to an account, but was to be remunerated (205) according to the amount of gross earnings or sales, or bythe other contracting party, in proportion to a given quantum of the profits. But in our case there is no intent to turn Willis into a servant or agent; and he looked for compensation, not at all nor in any event to the other parties personally, but wholly to the funds of the concern, or, in other words, to the profits as such.

This point is decisive of the cause, and, therefore, it is useless to advert to the others made at the trial.

PER CURIAM. Venire de novo.

Cited: Reynolds v. Pool, 84 N.C. 39; Sawyer v. Bank, 114 N.C.

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