Arnold v. Conklin

Mr. Justice Waterman delivered the opinion of the court. The bill in this case proceeds upon the theory that appellants and Conklin, by mutual agreement, became and were partners in the enterprise of procuring an ordinance permitting the establishment of a telephone exchange in the city of Joliet; that they were to be mutual and equal owners of such ordinance as might be obtained, and to share equally in whatever profits might arise therefrom. It is urged by appellees .that Arnold, Ryan and Conklin were but promoters, and that mere promoters are not partners. In support of this contention, various authorities are cited, among them Lindlev on Partnership, star paging 21, 22 and 23. It is doubtless the case that the mere joining of persons in an attempt to create a corporation, or to obtain an ordinance or statute authorizing the organization of a corporation, does not, nor does the mere uniting in subscriptions for stock, or endeavoring to' interest capitalists in an enterprise make the parties so doing, commonly known as promoters, partners. A partnership, that is, among the parties to it, can be created only by mutual agreement, and by mutual agreement there are very few, if any, lawful business undertakings in respect to which a partnership might not be created. The question presented here as to the relation sustained by Arnold, Ryan and Conklin to each other, is not so much what they were undertaking to do, as what the agreement between them was. As to this, Rjmn and Arnold testified that it was agreed among them that 'they should be partners, and should share equally in the ownership and profits arising therefrom, of whatever ordinance might be granted. True it is, that no agreement had been reduced to writing, and that, as it was contemplated that other persons should be taken into the enterprise, there was not any definite understanding as to what share in the undertaking should be retained for the promoters and what should be turned over to capitalists who might be induced to furnish the necessary money. Nevertheless, the testimony of Arnold and liyan established the creation of a partnership between themselves and Conklin. Whether it was a partnership to th e extent that either was constituted an agent to create obligations and incur liabilities binding upon the others, it was, at least, an agreement that, as between themselves, the three should unite in the prosecution of the enterprise they undertook, and should share equally in the profits arising therefrom. It may be that, strictly speaking, the agreement between them is the more correctly defined as an equal part ownership 'than a partnership, but it was an undertaking and agreement that all should contribute to the proposed end, and that what was obtained, or what was gained by the united efforts of all or the single effort of any should be divided equally among the three. It is therefore immaterial that Conklin, after going to Ohio and consulting with other parties, presented a written agreement to appellants, to which they did not assent. Such refusal to agree to an extension or enlargement of the understanding between the three did not terminate the previous arrangement made by them nor release Conklin from his obligation to appellants; - nor does such refusal seem to have been so considered by Conklin, as in December thereafter he obtained from appellants two drafts, each for the sum of $50, upon which he obtained money to enable him to prosecute the joint undertaking. We see, therefore, no reason why Conklin is not bound to account to appellants for whatever profit he, Conklin, made as a result of the mutual undertaking, joint effort and expenditures. Conklin having succeeded in interesting a number of other persons, they, with him, proceeded to act without any reference to appellants, and, so acting, the city of Joliet has recognized them as the parties to whom the ordinance, approved June 26,1899, was given, and they, in pursuance of such recognition, have expended large sums of money and established a telephonic exchange in accordance with the terms of the ordinance. It does not appear that at the time of the granting of the ordinance to the Northwestern Telephone Company there was any such telephone company in existence. The application for such" ordinance and the acceptance of the same was a violation of the laws of this State, and the city of Joliet might have refused to recognize the ordinance as having any validity, because granted to a supposed corporation, which had then no existence. The city did not see fit to do so. The corporation was thereafter created, and is now operating under said ordinance. It does not appear that any of the capitalists had either knowledge or notice at the time the Northwestern Telephone Company was incorporated, said ordinance was accepted, or at any time up to the period when the bill in this case was filed, of any of the rights or claims of appellants. All the appellees, save Conklin, seem to have engaged in the enterprise, expended their money in good faith, and not to be bound to or under any obligation to account to appellants, or either of them, for anything whatever. It is urged by appellees that if appellants have any remedy it is in a court of law, and not in equity. As we are of the opinion that appellants have no equitable claim upon any of appellees save Conklin, it is unnecessary to consider this position, save as to Conklin. Conklin, in his answer, (he did not testify in the case,) denies that there was any partnership whatever. He does not put his defense upon the ground that appellants’ bill does not make or state a cause cognizable in a court of equity, but only in a court of law. True it is, that partners having the means to prove their own partnership will be held to strict proof. 17 American & English Ency. of Law, pp. 1312 and 1314. But we regard the partnership between appellants and Conklin as established by the testimony of the former, while Conklin is, for reasons best known to himself, discreetly silent. It is also true, as is urged by the appellees, that a mere agreement to form a partnership does not create a partnership, but the agreement between appellants and Conklin went much further than this. It was a definite understanding and arrangement that they would mutually unite for the prosecution of the joint undertaking, and would equally share the profits thereof. The decree of the Circuit Court dismissing the bill for want of equity is affirmed as to all of appellees, save Edward E. Conklin, and the decree as to Edward E. Conklin is reversed and the cause remanded with directions to the court below to require him to account in accordance with the prayer of the bill. The costs of this appeal will be taxed against Edward E. Conklin. Eeversed and remanded with directions.