Buford v. Lewis

Hill, C. J. (after stating the facts). Concede, for the moment, that the relation between Carroll and Lewis was a partnership : Then, when Carroll, in order to relieve an asserted claim against the property, and to buy the other half-interest in the property, thereby increasing the respective, holdings of himself and Lewis from one-fourth to one-half each, executed a note to Buford in accomplishment of this two-fold purpose, it would be binding on Lewis, if in fact they were partners. If it be conceded that it was not within the apparent scope of Carroll’s authority to do this, yet Lewis acquiesced in it and was to receive the benefit of it. The sole, inquiry is whether the facts constituted Carroll and Lewis partners. To determine whether a given agreement amounts to a partnership between the parties themselves is always a question of intention. But a different test prevails where the rights of third parties are concerned. It was formerly held that participation in profits was conclusive evidence of partnership in actions by creditois. That rule has been modified so that a participation in profits is not conclusive, but “it is a cogent test for trying the question,” and “is conclusive unless there are some circumstances altering the nature of the contract.” Culley v. Edwards, 44 Ark. 423; Johnson v. Rothschilds, 63 Ark. 518; Rector v. Robins, 74 Ark. 437; Herman Kahn Co. v. Bowden, 80 Ark. 23. In Johnson v. Rothschilds, supra, this statement from the Supreme Court of Florida (Diibos v. Jones, 16 So. 392) was approved: “To constitute a loan in such a case, the money advanced must be returnable in any event. It is not a loan if repayment is contingent upon the profits, for in such case it is made, not upon the personal responsibility of the borrower, but upon the security of the business. Neither must the transaction be a mere device to obtain the benefits of a partnership without incurring its responsibilities, for in such case, whatever else the parties'may call it, it will be construed to be a partnership.” In this case the advance of $1,000 to Carroll was not a loan, because the money was not returnable in any event; its repayment was contingent upon the profits. The loan was not made upon the personal responsibility of the person to whom it was advanced, but upon the security of -the business. No note was taken from Carroll to Lewis, but a device was contrived by which Strong gave a mortgage upon the entire property, at the same time conveying a half-interest in the property to Carroll, which was in turn assigned to Lewis. This mortgage was evidently to secure to Lewis' a preference over -possible creditors of the new concern, for it was not pretended anywhere that Strong owed him* $1,000, for which the mortgage’ was executed. The only thousand dollar transaction between them was the purchase of a one-half interest in the business for Carroll, or Carroll and Lewis, as the case may be. In Rector v. Robins this court cited with approval Meehan v. Valentine, 145 U. S. 611, and this excerpt from that decision is applicable here: “In the present state of the law upon this subject, it may perhaps be doubted whether any more precise general rule can be laid down than, as indicated at the beginning of this opinion, that those persons are partners who contribute either property or money to carry on a joint business for their common benefit, and who own and share the profits thereof in certain proportions. If they do this, the incidents or consequences follow, that the acts of one in conducting the partnership business are the acts of all; that each is agent for the firm and for the other partners; that each receives part of the profits as profits, and takes part of the fund to which the creditors of the partnership have a right to look for the payment of their debts; that all are liable as partners upon contracts made by any of them with third persons within the scope of the partnership business; and that even an express stipulation between them that one shall not be so liable, though good between themselves, is ineffectual as against third persons. And participating in profits is presumptive, but not conclusive, evidence of partnership.” Lewis advanced the money upon the business, and his recompense was to be a fourth interest in the profits, until Strong went out on the execution of the note sued on to Buford; and in consideration of it, then his interest was t'o be one-half of the profits. He entrusted Carroll with the entire management and control of the business. Therefore it is seen that, in addition to the strong presumption arising from the participation in the profits, the facts also bring the case within the rule laid down in Culley v. Edwards, that where the relation of principal and agent existed between persons taking the profits and those carrying on the business, such relation determined the partnership. The evidence of these parties themselves shows that all the elements necessary to constitute a partnership existed between them so far as third parties were concerned; and the court erred in not so holding. The judgment is therefore reversed and the cause remanded with directions to enter judgment in conformity with this opinion