Straus v. Kohn

Mr. Justice Windes delivered the opinion of the court. The principal question presented is, were Eosenberg, Straus and Oesterreicher partners under the agreement set out in the statement in the sense that the contract of Oesterreicher alone and appellee was binding on Eosenberg.and Straus without their authorization or ratification. We are inclined to the opinion that the written agreement made Eosenberg, Straus and Oesterreicher partners, but in a limited sense, however. In Wilcox v. Dodge, 12 Brad. 517-28, this court, in considering the requisites of a partnership, speaking by Mr. Justice McAllister, quotes from Ewell’s Lindley on Part., 1, viz.: “ An agreement that something shall be attempted with a view to gain, and that the gain shall be shared by the parties to the agreement, is the grand characteristic of every partnership, and is the leading feature of nearly every definition of the term.” Again, on page 15, the same author says: “ Eothing, perhaps, can be said to be absolutely essential to the existence of a partnership, except a community of interest in profits resulting from an agreement to share them. But although this is so, the usual characteristics of an ordinary partnership, are a community of interest in profits and losses, a community of interest in the capital to be employed, and a community of power in the management of the business engaged in.” Again, on page 18, the same learned and accurate author says: “ But an agreement to share profits and losses may be said to be the type of a partnership contract. Whatever difference of opinion there,may be as to other matters, it admits of no doubt whatever, that persons engaged in any trade, business or adventure, upon the terms of sharing the profits and losses arising therefrom, are partners in the trade, business or adventure.” This court held that an agreement to share the net profits necessarily implied a sharing of the losses. In Morse v. Richmond, 6 Brad. 168, 171, a somewhat similar contract, for the purchase, subdivision and sale of a tract of land, was held by this court to constitute a partnership, especially because of community of interest in the enterprise, but of such a peculiar sort that in the absence of an express authority to borrow money and of evidence of usage, authority would not be implied in the managing partner to borrow money and give notes which would be binding upon the other partner without his privity or assent. This case was affirmed by the Supreme Court, 97 Ill. 303-10, the court holding that by all the tests laid down in the books there was every element of a partnership in the case. In Ulery v. Ginrich, 57 Ill. 532, the Supreme Court makes a distinction between an ordinary commercial partnership and one organized for mining or for farming purposes, and held that the directors or active agents of the latter will not, as incident to the business, “ possess the power to draw or accept bills or to draw or indorse notes for the company. In such cases there must be some proof that an express authority is given for this purpose, or that it is implied by the usages of the business, or the ordinary exigencies and objects thereof.” In Lockwood v. Doane, 107 Ill. 235-9, it was held that “ where parties agree to share in the profits of a business, the law will infer a partnership between them in the business to which the agreement refers; but this presumption may be disproved.” In the case at bar, the agreement states the parties to it have purchased by contract, for the joint account of Rosenberg, Straus and Oesterreieher, a piece of real estate, the title to be taken in the name of Straus, who was to hold the same for the benefit of all the parties jointly; the property was to be subdivided into lots for immediate sale; Rosenberg advanced $1,000 to enable the parties to obtain said contract; that Oesterreicher and Straus ha,ve agreed and did thereby agree to dispose of and sell the lots, and that the parties have agreed with each other that whatever profits may accrue out of the sale of said property shall be divided among them equally, each to receive one-third thereof. This agreement contains the “ grand characteristic of every partnership,” viz., the provisions with a view to gain, and a sharing of the gain by the parties, and also provides for a community of interest in the subject-matter of the partnership—the land. That makes it a prima facie partnership between the parties to the agreement, and there is no evidence to overcome the primafacie case. The sharing of the profits necessarily implies a sharing of losses, there being no agreement to the contrary. Appellants seem to place special reliance on the case of Morton v. Nelson, 145 Ill. 590, as controlling the case at bar, and holding that the agreement in question did not make a partnership. An examination of that case shows that the agreement then under consideration by the court did not show a community of interest in the subject of the alleged partnership. Two of the parties did not pay any part of the purchase money of the land nor of the cost of the building erected on it, nor was there any agreement to that effect, nor does it appear in what way these parties became interested, nor whether they contributed anything toward the joint enterprise by way of labor, services or otherwise. In the case at bar, the clear inference from the agreement is, that the several parties were to contribute equally,toward the purchase of the land. Rosenberg advanced $1,000 to enable the parties to obtain the contract of purchase of the land. The purchase was on joint account and it must be presumed each was to contribute toward the purchase money. Oesterreicher and Straus agreed to sell the lots and therefore in that way acquired community of interest in the land, if they were not bound to contribute toward the purchase money agreed to be paid. The other cases cited by appellant on this point we think are clearly distinguishable from the case at bar. Appellee had notice, however, of all the provisions of this agreement. He read it and knew that Eosenberg advanced the money to enable the parties to obtain the contract of purchase of the land, and that Straus and Oesterreicher had agreed to sell the lots. We therefore think that while there was a partnership, it was of a peculiar and special sort, of the terms of which appellee had notice. The right of one partner to bind another in the ordinary commercial partnership is based upon the theory of agency. Here Straus and Oesterreicher were to sell the lots; that was their duty or obligation in the joint adventure, with which Eosenberg was not concerned. The partnership is similar to the farming partnership which was in question in the Hiery case, and the land partnership in the Morse case, supra, and we are of opinion that there being no express authority from Eosenberg shown, Oesterreicher had no power to employ appellee to sell lots so as to bind the partnership to such agreement, without the privity or assent of all the members of the firm—in any event, of Eosenberg. As we have seen, there was no proof of any usage in this respect, nor of exigencies or objects of the business, which could be the basis of implied authority, nor was there proof to show a ratification. There was error, therefore, in refusing appellants’ instructions to find the issues for defendants. It follows, if we are correct in holding there was a partnership of the nature indicated, of the terms of which appellee had notice, the court should have excluded evidence of conversations between appellee and Oesterreicher in the absence of Eosenberg and Straus. We find no reversible error in the rulings of the court excluding evidence offered by appellants, of which complaint is made. . There was no evidence on which to base the clause, “ and the losses” in appellee’s first instruction, and that clause should have been eliminated from the instruction. It seems unnecessary to consider the other questions made by counsel as to the instructions, as error in that regard, if any there be, may be avoided on another trial. The judgment is reversed and the cause remanded.