Munro v. Whitman

Taloott, J.: This action was commenced for an accounting as between partners. The referee has dismissed the complaint, on the ground that there was no partnership. In this he has proceeded entirely upon the ground that, at the time of the agreement by which the relations of the parties was established, nothing was said about any possible losses, none of the parties contemplating such a contingency. In the conclusion that the parties were not partners, because of the absence of any agreement to share the losses, the referee clearly committed an error. True, a person may, by the agreement between the par [555] ties, be entitled to share the profits of the business without constituting him a partner, but in such case it must appear that he was to receive a share of the profits as a compensation for his labor and services. The whole foundation on which the principle rests is, no partnership inter sese was intended by the parties. That the agent is not clothed with the general powers, rights and duties of a partner; that the share of profits given to him is not designed to make him a partner, either in the capital stock or the profits, but to excite his diligence and secure his personal skill as an agent of the concern, and is contemplated merely as a compensation therefor. (Story on Partnership, §§ 47, 48.) A lawful agreement may be made that one of the partners should bear a less proportion, or even no part 'of the losses. (Id., §§ 22, 23.) In the case of Lamb v. Grover (47 Barb., 317), chiefly relied upon by the referee, Lamb agreed to furnish groceries to sell, in the village of Oakland, and to pay the rent of the store in which the goods were to be sold, and Adams agreed to sell the groceries for one-half of the profits on the sale of the goods. The referee found in that case, that the share of profits to be received by Adams was in payment and in compensation for the services rendered by him in the business. In such a case it is clear that there was no partnership created by the agreement. The doctrine that persons cannot be partners as between each other, unless they agree to participate in the losses, is founded on the language of the judges in many cases, and in some is the apparent ground of the decision. (Parsons on Partnership, chap. 5, p. 41, note a.) But.the result of all the cases and the modern doctrine seems to be, that the exemption from losses is a fact which, though not conclusive, is strong evidence that the party thus exempted is not an actual partner; and, taken in conjunction with other circumstances, may clearly show that fact. (See Parsons on Part., note a, supra,; Vanderburgh v. Hull & Bowne, 20 Wend., 70; Burckle v. Eckart, 1 Denio, 337; S. C., 3 Comst., 132 ; Ex parte Langdale, 18 Vesey, 301.) Bindley states as leading propositions in the law of partnerships as follows: “ Prop. 2. Partnership is prima faoie the result of an agreement to share profits, although nothing may be said about losses. [556] “ Prop. 3. Partnership is prima, facie the result of an agreement to share profits; although community of loss is stipulated against.” (Lindley on Partnership, book 1, chap. 1, pp. 13, 17.) The fact reported in the case before us, and which the referee relies on as conclusive to show, of itself, that there was no partnership, brings the case within the second proposition thus stated by Mr. Lindley, and affords prima facie evidence that the agreement between the parties did contemplate a partnership. There was much evidence bearing upon the question whether the intent of the parties was to create a partnership inter sese, and the referee should have determined and reported whether the share of the profits was simply intended as a compensation to the defendant for the time and services employed by him in the business, or whether, from the agreement to divide the profits, the usual result of the creation of a partnership followed. The fact that nothing was said about participating in the losses is only evidence on the question of the intention, and may, in conjunction with the other circumstances of the case, clearly establish that the parties did not intend to create a partnership. So, too, the assumption of a firm name, though affording strong evidence that a partnership was contemplated, and probably conclusive in favor of third parties, is not at all conclusive as between the parties themselves, who might, notwithstanding, lawfully agree that as between themselves, the defendant was not to have the rights, or come- under the obligations of a partner. Judgment reversed, and a new trial is ordered before another referee, costs to abide the event. Present — MulliN, P. J., SMITH and Taloott, JJ. Judgment reversed, and new trial ordered before another referee, costs to abide event.