Sun Insurance v. Kountz Line

122 U.S. 583 (1887)

SUN INSURANCE CO.
v.
KOUNTZ LINE.

Supreme Court of United States.

Argued January 17, 18, 1887. Decided May 23, 1887. APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF LOUISIANA.

Mr. John A. Campbell and Mr. O.B. Sansum for appellants.

Mr. Charles B. Singleton and Mr. Richard H. Browne for appellees.

MR. JUSTICE HARLAN, after stating the case as above reported, delivered the opinion of the court.

It is not claimed that the four transportation companies, organized in 1872, can be held jointly liable for the loss of the produce and merchandise shipped on the Yeager by reason of their being, in fact, partners, having a right to participate in the profits of the business conducted by and in the name of the "Kountz Line." They did not share or agree to share the profits or to divide the losses of that business, as a unit. On the other hand, it is not disputed that, according to well settled principles of law, a person not a partner or joint trader may, under some circumstances, be held liable as if he were, in fact, a partner or joint trader. "Where the parties are not in reality partners," says Story, "but are held out to the world as such in transactions affecting third persons," they will be held to be partners as to such persons. Story's Part. § 64. And in Gow on Partnership (p. 4) it is laid down as an undeniable proposition, that "persons appearing ostensibly as joint traders are to be recognized and treated as partners, whatever may be the nature of the agreement under which they act, or whatever motive or inducement may prompt them to such an exhibition." And so it was adjudged in Waugh v. Carver, 2 H. Bl. 235, 246, where it was said by Lord Chief Justice Eyre, that if one will lend his name as a partner he becomes, as against all the world, a partner, "not upon the ground of the real transaction between them, but upon principles of general policy to prevent the frauds to which creditors would be liable." We do not mean to say that such liability exists in every case where the person sought to be charged holds himself out as a partner or joint trader with others. The qualifications of the general rule are recognized in Thompson v. First National Bank of Toledo, 111 U.S. 529, 536, where it was held, upon full consideration, that "a person who is not in fact a partner, who has no interest in the business of the partnership, and does not share in its profits, and is sought to be charged for its debts because of having held himself out, or permitted himself to be held out, as a partner, cannot be made liable upon contracts of the partnership, except with those who have contracted with the partnership upon the faith of such partnership." At the same time, the court observed that there may be cases in which the holding out has been so public and so long continued as to justify the inference, as matter of fact, that one dealing with the partnership knew it and relied upon it, without direct testimony to that effect.

As there is no evidence of any direct representation by these transportation companies, or any of them, to the shippers of the cargo in question, as to their relations in business with each other, or as to their relations respectively with the Kountz Line corporation, or the Kountz Line, the inquiry in this case must be whether they so conducted themselves, with reference to the general public, as to induce a shipper, acting with reasonable caution, to believe that they had formed a combination in the nature of a partnership, or were engaged as joint traders, under the name of the Kountz Line.

In our judgment, this question must be answered in the affirmative. It could not, we think, be otherwise answered, consistently with the inferences which the facts reasonably justify.

The finding of facts, as we have seen, shows that the steamboats Henry C. Yeager, Katie P. Kountz, Carrie V. Kountz, and Mollie Moore were employed in the business of transporting freights and passengers on the Mississippi and its tributaries. They were placed by their owners, or were permitted by their owners to be placed, before the public as being engaged in the same trade, and as constituting, together, the "Kountz Line." They had a common agent, which was invested with, or was permitted during a series of years to exercise, unlimited authority in their general management, and in respect to rates of transportation. That agent — the Kountz Line corporation — with the knowledge of the transportation companies, publicly announced that it was ready to contract for the carrying of goods and produce by the "Kountz Line boats." We say this was done with the knowledge of the owners of the boats, because the persons conducting the entire business of the Kountz Line boats were officers, with plenary authority of the transportation companies and of the Kountz Line corporation. The court below finds that the transportation companies used and employed their several boats in carrying freight and passengers on the Mississippi River and its tributaries. But with the intent, or with the effect, to mislead shippers, they took care, never, by their respective corporate names, to make, or to allow others in their behalf to make, any contracts, or to enter into any engagements, touching such business. It is expressly found that, during the whole period from the organization, on the same day, in the year 1872, to the date of the shipment on the Yeager in 1880 — a period of nearly eight years — they did not transact any commercial business whatever, by their respective corporate names. They severally empowered or permitted the Kountz Line corporation, their common agent, to do business for them, using, in their discretion, when making transportation contracts, either the name of the Kountz Line, composed of all the companies, or the names of the respective boats of that line. In no instance was business transacted by the Kountz Line corporation, as representing the particular transportation company owning the boat on which the shipment was made. Those companies, therefore, stood before the world as having united for the purpose of engaging, in the same trade, under the name and style of the Kountz Line, having a common agent — the Kountz Line corporation — fully authorized to represent them, and each of them, in respect to matters connected with such business. They held themselves out as united in a joint enterprise, under the name of the Kountz Line, and they are jointly liable for the default or negligence of those placed in charge of any of the boats of that line. That the transportation companies owned no property in common, and that each was entitled, as between it and the others, to receive the net earnings of its own boat, is immaterial in view of the fact that they held themselves out, or permitted themselves to be held out, as jointly engaged in the business of transporting freights and passengers, in the same trade, on the Mississippi and its tributaries. So far as the public was concerned, that which was done by their common agent, the Kountz Line corporation, in the prosecution of the business of the several boats constituting the Kountz Line, is substantially what would have been done had the transportation companies entered into a formal agreement to conduct the transportation business, jointly, under the name of the "Kountz Line," through an agent having full authority to represent that line, and the several boats composing it, in the making of contracts with shippers. The latter had the right to infer, from all the circumstances, that the boats, constituting that line, were jointly engaged in such business.

As there is no serious conflict in the adjudged cases as to the general propositions of law to which we have referred, it would serve no useful purpose to review the authorities to which our attention is invited by counsel. Whether, in a particular case, there has been such a "holding out" as to create joint liability, must always depend upon its special facts. No one of the cases cited resembles the one before us in its facts.

This case seems to be unlike any found in the books in the peculiar relations existing between these transportation companies, the Kountz Line corporation, and the stockholders of each of them. We decide nothing more than that, under the facts of this case, The H.C. Yeager Transportation Company, The K.P. Kountz Transportation Company, The Carrie V. Kountz Transportation Company, and The M. Moore Transportation Company, were and are jointly liable for the loss of the produce and merchandise shipped May 21, 1880, on the steamboat Henry C. Yeager. The Circuit Court erred in not so adjudging.

The decree is reversed, and the cause is remanded, with directions to that court to set aside all orders inconsistent with, and to enter such orders and decree as may be in conformity to, the principles of this opinion.

MR. JUSTICE GRAY, not having heard the whole argument, took no part in this decision.

On the same day, (May 27, 1887,) on an application made on behalf of the plaintiff in error, the court ordered that the mandate in this case be stayed, and leave be granted to file a petition for a rehearing.