Cothran v. Marmaduke & Brown

Watts, J. Com. App.

Upon the trial the court instructed the jury that, “ If defendant loaned or advanced money to J. & D. Oaviness to be used in the purchase and sale of cotton, hides, etc., and was to receive a part of the profits of the business as a consideration for such loan or advance, I instruct you that he was a partner, but if, on the other hand, he was to receive a fixed sum from the profits of the business as a compensation for the use of his money, he was not a partner.”

Appellant insists that the court erred in the criterion furnished for the purpose of determining whether or not he was in fact a partner. Both at common law and in equity, where a party by agreement had a right in the entire net profits, which entitled him to a definite share as profits, he was considered a partner. Chester v. Dickinson, 54 N. Y., 1.

It is not essential to constitute a partnership that the parties were by agreement to share in the losses, but it is sufficient if they are to have a community of interest in the profits as such. Goode v. McCartney, 10 Tex., 195; Manhattan Brass Co. v. Sears, 45 N. Y., 797.

In Story on Partnership, § 58, it is said “ that he who is to take a part of the profits shall by operation of law be made liable to losses as to third persons, because by taking a part of the profits he takes from the creditors a part of that fund which is the security for the payment of their debts.”

In determining the question the court will look to the actual relation consequent upon the engagements of the parties, and in favor of creditors they will ordinarily apply the doctrine that the party who shares in the profits must also bear his share of the liabilities. And it is said that this is applied as a rule of law. That to obviate its force and effect, it is not sufficient that the parties did not intend a partnership, or that they intended there should be none. To do this, it must be shown that they intended and constituted a distinct and different relation excluding that of partnership. Owens v. Mackall, 33 Md., 382; Parker v. Canfield, 37 Conn., 250; Eastman v. Clark, 53 27. H., 276; Leggett v. Hyde, 58 N. Y., 272.

It has been held that, as to third persons, it is sufficient to show a communion of interest in the profits to establish the relation of partnership. Sheridan v. Medora, 10 N. J. Eq., 469; Lengle v. Smith, 48 Mo., 276.

From these authorities it would seem that if appellant advanced the money, upon the agreement that he was to share in the net profits resulting from the enterprise, this would entitle him to an account to ascertain the result of the enterprise. And this, together with the further fact that such profits constitute partnership property to which creditors could resort, would constitute appellant a partner.

The true distinction is this: Where a clerk or agent by agreement is to receive a fixed portion of the profits as compensation for his time or labor, that he does this as clerk or agent and not as principal; for the partnership fund or effects may be legally used in paying such clerk or agent for his time and services. Therefore the fact that the effects are not resorted to for this purpose, until profits have accrued and become effects, would not make the clerk or agent receiving such effects as compensation for his services a partner. But when one advances money under an agreement that the principal is to be refunded, but for compensation he is to share in the net profits of the adventure, this makes him a partner, for he is then to share in the profits as a principal and not as a clerk or agent.

There is no error in the charge of which appellant can complain.

The other errors assigned and relied upon are not well taken. The verdict is fully sustained by the evidence, and the judgment ought to be affirmed.

Affirmed.

[Opinion adopted November 23, 1883.]