A. L. Webb & Sons v. Hicks

An action between the same parties, touching the same subject-matter, was before this Court and is reported in 116 N.C. 598, in which the facts were set out fully. On the trial of that action the Superior Court dismissed it and, on appeal, this Court, as upon demurrer ore tenus, held that there was no error, on the ground that no cause of action was stated, and on the certificate of this Court the action was dismissed below. The present action was begun within the time allowed by the statute. Jury trial was waived and it was agreed by both parties that the court find as facts the same facts as are set out in the former case. For the purpose of determining the question now presented, the following facts may be stated. On 12 December, 1890, W. J. McDiarmid and A. A. McDiarmid, being insolvent, conveyed and assigned all their property to M. McD. Williams, in trust, to collect and sell the same and pay their creditors in the order therein prescribed. That prior to said assignment the same property was encumbered with mortgages, deeds in trust, etc. That these deeds were foreclosed by sales, and J. Y. Gossler and R. W. Hicks became the purchasers on 5 January, 1892, and received a deed, and on same date the assignee Williams (246) executed a quitclaim deed to Gossler and Hicks.

It is admitted that in January, 1891, all the creditors of W. J. McDiarmid Brother, including the defendants Hicks and Gossler, entered into a written agreement (Exhibit A), which differs in some respects from the assignment, reciting the several debts, and that Gossler Company had purchased from the debtor certain lumber, and that they were willing that M. McD. Williams should remain to run the business therein contemplated, and "Whereas it is to the interest of all parties concerned that the property shall not be sacrificed at a forced sale for cash under said mortgages, judgment and assignment, but that the business should be carried on as it heretofore has been, for the benefit of the creditors, in order that the full value of said property shall be realized for the payment of the creditors in full."

The agreement then provides that the assignee Williams and creditor, in consideration of the premises, "may and shall continue the business as it has heretofore been carried on (manufacturing and dressing lumber and distilling turpentine at the same places) for the term of one year from 1 January, 1891, at the end of which time he shall render an account of the said business to the said creditors, at which time it may be determined, whether the business shall be further continued or wound up by a sale of the property. Said Williams is to conduct the said business . . . economically and prudently." It also provides for his compensation in lieu of his commissions on receipts and disbursements under the assignment, and directs the order in which the creditors shall be paid by him. Said Williams, in the course of his duties under said agreement, bought some articles and drew drafts on the plaintiffs for money to carry on the business, the plaintiffs having knowledge (247) of the written agreement referred to, marked Exhibit "A" before the drafts were accepted. These are the facts. The judgment of dismissal in the first action, for the reason stated, cannot bar the present action, because there was nothing adjudicated except that fact.

The main question is, Do the facts show a partnership between those who signed Exhibit "A"? When the facts are undisputed, what constitutes a partnership is a question of law, and the usual, not the universal, test is participation in the profits and losses attending the enterprise. Jones v.Call, 93 N.C. 170; Koots v. Tuvian, 118 N.C. 393.

"A partnership is the contract relation subsisting between persons who have combined their property, labor or skill in an enterprise or business as principals for the purpose of joint profit." 1 Bates Law of Partnership, 1; Story on Partnership, ch. 1, sec. 2.

In determining whether the relation constitutes a partnership, the intention is to be considered. If that relation is established, however, it matters not whether they declare that they are or are not partners. The intention of the parties will be determined from the effect of the whole contract, regardless of special expressions. If the actual relation assumed and the rights and obligations created are those of partners, the actual intention or declared purpose of the parties cannot suspend the consequences. 1 Bates Partnership, sec. 17. The contract wherethird persons' claims are not in question will be liberally construed, as to the actual understanding and the purposes the parties had in view.Hitchings v. Ellis, 12 Gray, 449; Tayloe v. Bush, 75 Ala. 432. (248)

The creditors had the right to have the property sold by the assignee at once and the proceeds applied to their debts, but for the expressed purpose of gain and enhancement of the value and to avoid loss and sacrifice by sale, they agreed to have the business continued and thereby obtain a profit, and they were to reap the profit, if any, and must bear the loss and expense, if any. As we understand it, the barrels bought and the money drawn was turned into the new business, as it could not be continued well without expense, and that would render the defendants liable on the ground that whoever gets and uses goods ought to pay for them. Pool Hunt v.Lewis, 75 N.C. 417. Our conclusion is that the judgment of his Honor was erroneous.

Reversed.

Cited: S. c., 125 N.C. 201.