Houston & Texas Central Railway Co. v. Geo. H. McFadden & Bro.

These two writs of error were granted to the same judgment. The case as made in the Court of Civil Appeals is very fully reported in 40 Southwestern Reporter, page 216; and we refer to that report for a statement of the proceedings had in the cause.

When we acted upon the two applications, we were of opinion that the Court of Civil Appeals erred in reversing the judgment of the District Court in favor of the Fort Worth New Orleans Railway Company and in rendering judgment against it, and we therefore granted the writ as to that applicant. We were also of the opinion, that there was no error in the judgment against the Houston Texas Central Railroad Company. But it is the practice of this court, whenever two applications are made in the same case and one is granted, to grant the other as a matter of course; hence we granted the application of the latter company. However, since the submission of the case we have reviewed the assignments presented on its behalf with the result that we see no reason to change our first opinion. We think the conclusions of the trial court and of the Court of Civil Appeals upon the case of that company correct.

The cotton, for the loss of which the suit was brought, was to be shipped from Ft. Worth to Houston over the Fort Worth New Orleans Railway and over the Houston Texas Central Railway, and thence to Galveston, to be delivered to a steamer for transportation to Germany, — one Dillingham as receiver of the Houston Texas Central Railway Company, acting through a local agent, executing the bill of lading. The Fort Worth New Orleans Railway Company did not appear as a party to the contract upon the face of the bill. The cotton was destroyed by fire on the line of the Houston Texas Central Company. The plaintiffs in the trial court claimed that the defendant companies were jointly liable as partners; but that court held that the facts proved were not sufficient to establish the partnership and gave judgment for the Fort Worth New Orleans Company. It was upon this point the Court of Civil Appeals held that the trial court was in error, and reversed and rendered the judgment against that company.

The third paragraph of the findings of fact by the trial judge reads as follows: "This line of railway from Fort Worth to Houston was operated as one property by the said Charles Dillingham under some arrangement, the character of which is not disclosed by the evidence. It is shown that the Fort Worth New Orleans Railway Company was not, at the time of this shipment, operating its road other than as it was being operated by the said Dillingham, and that it received from said Dillingham some part of the gross receipts of the operation of the line, but what this part was, or how paid, is not shown by the evidence, nor does the evidence show in what way the expenses of operating the several roads were paid, or by whom." It was upon the facts as found that the learned judge predicated his conclusion that the partnership was not proved. It was upon the same facts that the Court of Civil Appeals reached a contrary result.

Do the facts that Dillingham as receiver of the Houston Texas Central Railway Company was operating both roads jointly and that a portion of the gross receipts was paid to the Fort Worth New Orleans Company established a partnership either between the parties or as to third persons? We think not. While the relations of the receiver to the Fort Worth New Orleans Company are obscure, the facts found would indicate that the arrangement between the parties was that Dillingham was to have the use of the Company's road and that he was to pay for such use a portion of the gross proceeds of the traffic. This would constitute the relation of lessor and lessee and not that of partners. If such a lease were authorized by statute, the lessor would not be responsible for the acts of the lessee in operating the line. If without authority of law, then the purported lease would not have protected the company from liability for any wrong which may have accrued from the operation of its own road. But in neither case could the parties to the arrangement be treated and held responsible as partners. The mere participation of two persons in the gross receipts of an enterprise in which their capital, skill and labor may be combined cannot of itself make them partners. To constitute a partnership the parties in the business or transaction must be entitled to share in the net profits. It is not sufficient that they participate in the "gross profits," as they are sometimes called. Beecher v. Bush, 45 Mich. 188; see also Buzard v. Bank, 67 Tex. 89. A partnership may exist in which the partners agree to divide the gross receipts, but that circumstance alone does not establish the relation. A partnership may have existed in this case, but the relation does not follow as a legal result from the facts found by the trial court.

If the Fort Worth New Orleans Company was not in fact a partner it cannot be held to be such as to third persons, in the absence of some proof that it permitted itself to be held out as such.

We conclude that the judgment of the Court of Civil Appeals in so far as it reverses the judgment of the District Court ought to be reversed; and that the judgment of the District Court should be in all things affirmed. And it is so ordered.

Judgment of Court of Civil Appeals in part affirmed andreversed in part. Judgment of District Court Affirmed.