Smith's v. Garth

STONE, J. To constitute a partnership inter sese, there must be a mutuality of risks — air interest both in the profits and losses. These risks or interests are not required to be equal; nor is it important that they shall [372] agree in kind. The investment may be unequal, and the parties may agree to divide the profits unequally; yet, if it be one of the terms of the contract, that each shall share in the risks and losses, and also in the profits to be realized, this constitutes them partners as between themselves. We will not attempt a collation of the authorities, but submit the following references, as sustaining the substance of these views: Waugh v. Carver, 2. H. Bla. 235; Grace v. Smith, 2 Wm. Bla. 998-1001; Hesketh v. Blanchard, 4 East, 144; Gallop v. Newman, 7 Pick. 282; Bailey v. Clark, 6 Pick. 372; Denny v. Cabot, 6 Metc. 82; 3 Kent’s Com. 23-4; Addis. on Contracts, (2d Am. ed.) 721-2; 1 Parsons on Contracts, 132; Turner v. Bissell, 14 Pick, 192; Vanderburgh v. Hull, 20 Wend. 70; Hodges v. Dawes, 6 Ala. 215; Moore v. Smith, 19 Ala. 774; Burckle v. Eckhart, 1 Denio, 337 ; Lecroy v. Wiggins, at last term. The case of Gilpin v. Enderbey, 5 Barn. & Ald. 954, (7 Eng. Com. Law, 314,) is in conflict with the principle above stated. In that case, the parties called their agreement a partnership, and formally reduced it to writing. Enderbey, in fact, incurred no risks, and was not interested in the profits. Stripped of its machinery, it was a naked loan of twenty thousand pounds sterling, for ten years, at an interest of ten per cent., to be paid semi-annually; and the principal to be refunded at the expiration of the ten years. No matter what the profits of the adventure, Enderbey’s emoluments were not to be increased. No matter what the losses, he was not to share in them. A more naked and palpable loan of money, at usurious interest, cannot be conceived of. Wo cannot recognize this case as authority. In the case of Morrisett v. King, 2 Burrows, 891, each party was to share in the shop-rent and materials necessary for carrying on the trade, and each was to share in the profits and losses. It is wholly unlike the case of Gilpin v. Enderbey, supra. Whether persons have so acted, or held themselves out to the world, as that third persons can charge them as [373] partners, is a different question, wbicb we need not now discuss. In the case wo are now eosidering, we think the character of the contract must be determined by the three receipts exhibited to the original bill. They furnish the written evidence which the parties themselves have made of their agreement; and the several oral admissions of Smith, which are put in proof, must, on well ascertained principles, be controlled by that written contract. Doubtless, he, Smith, referred to the stipulations contained in those writings, whenever he spoke of the interest of complainant in the lands purchased. Those writings are more than receipts. They are contracts, requiring Smith to repay the money with interest, and to divide the profits of the enterprise. We do not deny the ability of parties, by subsequent agreement, to change or modify the terms of their contract. — See Stoudenmeier v. Williamson, 29 Ala. We hold, however, that loose and casual conversations, made by one party apart from the other, and which make no allusion to a change of contract, cannot avail to overturn the terms of a written contract. The first and third of the receipts, in date, disclose substantially the same contract. Each bound Smith to pay the money in twelve months, with interest, and to pay to Garth half the profits of the speculation. The receipt for four hundred dollars agrees with the other two in every respect, except that it expresses no time when the money should be repaid. We think this receipt discloses a purpose and agreement to repay the money at all events, whether the lands, for the purchase of which it was to be expended, should be sold or not, and independent of the contingent profit or loss at which the lands might be sold. Thus construed, each contract or writing, so far as its legal import is material in this case, is in substance the same; namely, an agreement by Smith to pay the money and interest upon it in any event, and also to pay the one-half of the profits to be realized. This, if a valid contract, secured to Garth an interest in the profits. Did it impose on him any of the risk of the adventure ? In Morse v. Wilson, 4 Term Rep. 853, Lord Kenyon [374] said: “ The plaintiff, without having any partnership in contemplation, lent 2000Í. to II. 'Wilson, for which ho was to receive not only 51. per cent, interest, but also such surplus profits as should arise from these two shares in the business; he himself not being bound on the other hand to make good to the partners any part of the losses which the trade might sustain. The simple question is, whether this is not an agreement to receive more than the 51. per cent, allowed by law for the forbearance of a loan. Most unquestionably it is.” Ashhurst, J., said: “ Where the principle is secured at all events, and yet more than '51. per cent, may be got by the terms of the contract, it is usurious.” The other two judges concurred; Buffer, J., remarking as a controlling reason for his opinion, that “in this agreement provision is made to receive the profits, but none to engage for the losses of the trade.” This case seems to us to be identical in principle with the one under discussion, and to define the character of this transaction as a loan of money, and not a partnership 'dealing. — See, also, Grace v. Smith, 2 Wm. Bla. 998, 1001; 1 Parsons on Contracts, 134. If, by the terms of this contract, it had been stipulated that Garth should be repaid the money advanced, out of the 'proceeds of the land when sold, or out of any other partnership or joint effects, he would then have been involved in the risks of the adventure. In such case, a further stipulation that he should share the profits would not have been usurious. We need scarcely repeat that this contract is entirely unlike the one supposed. [3.] Having ascertained that this transaction is nothing, more or less than a loan of money by Garth, to be repaid with interest, it follows, that the money, when he jwted with it, ceased to be his, and became the property of Smith. Hence, there is nothing in this record from which a court of chancery can imply a trust in favor of Garth. The doctrine of resulting trust rests on a presumption; and that presumption cannot be indulged, unless the party who invokes its application can show that the purchase was made with his funds. — Boyd v. McLean, [375] 1 Johns. Ch. 582; Botsford v. Burr, 2 Johns. Ch. 405; Lewin on Trusts and Trustees, (14 Law Library,) 168; Sugden on Vendors, vol. 2, bottom p. 135; 2 Story’s Eq. §§ 1201, 1201 a. The above principles leave the complainant’s claim, whatever it may be, a purely legal demand, over which the court of chancery has no jurisdiction. The decree of the chancellor is reversed, and a decree here rendered, dismissing the complainant’s bill. Let the costs of this court, and of the court below, be paid by the appellee. Valede, J., not sitting.