Whiting v. Leakin

Yellott, J., delivered the opinion of the Court. The hill of complaint in this cause was filed by the appellees in the Circuit Court of Baltimore City, and in it they aver that they are the administrators of James Whiting, deceased, and that the said James, being possessed of a large stock of hardware and a good trade, did, on the first day of May, 1865, enter into a co-partnership with his two sons, Albert L. Whiting and James A. Whiting. The existence of a written contract is not alleged, and the proof shows that the formation of this association in business was by oral agreement. By the terms of this agreement, as averred in the bill and established by the evidence in the cause, the father, owning the whole of the capital stock, contributed the use of it to the firm and received one-half of the net profits, and his two sons, contributing their services in conducting the business, each received one-fourth of the net profits. The firm was designated and known as James A. Whiting & Co., and under that name its business was transacted. The system adopted, in keeping the accounts of the firm, was to put the cost of merchandise in one column and the product of sales in another, the difference representing the gross profits, from which a deduction for losses, clerks’ hire and all expenses gave the net result, which was divided between the father and his two sons in the proportions already mentioned. On the 31st of July, 1876, Albert L. Whiting withdrew from the association, and his death occurred soon after his withdrawal; but the business was conducted on the same basis by the father and his son James A. Whiting, the latter continuing to receive one-fourth of the net profits, until the death of the father on the 4th of January, 1883. The proof shows that after the father’s death, J ames A. Whiting was fully cognizant of his right, as surviving partner, to settle up the business of the firm, but that, in consequence of his declining to exercise this right, letters [263] of administration on the estate of the deceased were granted on the 27th day of January, 1883, to his two sons James A. Whiting and W. H. Whiting. There being a difference of opinion between these administrators in relation to the proper adjustment of the accounts, they were removed on the 27th day of March, 1885, and, on the 24th day of April, in the same year, the appellees were appointed administrators in their place and stead by the Orphans’ Court of Baltimore City. This cause having progressed, on bill, answer and proof, to a hearing, the Circuit Court decreed “thatthe parties account with each other,” and referred the matters in controversy to the auditor with directions to state an account from the pleadings and proof. The Court also decreed adversely to the defence of the Statute of Limitations relied •on by the defendant in his answer. There having been no opinion filed in this cause in the 'Court below, it is impossible for this Court to know what disposition was made in relation to the exceptions to evidence which appear in the record. The learned Judge who sat in the case may have rejected the evidence excepted. to, or, it is probable, that he may not have deemed it necessary to pass upon these exceptions ; for it is clearly apparent that there is sufficient evidence in this record, to which no exceptions have been taken, to determine this controversy by the passage of the decree from which the defendant has appealed. The relief sought for is against James A. Whiting, and he has been properly made sole defendant in the cause. In his answer he denies the existence of a partnership, because the whole capital was owned by his father; and he alleges that he received one-fourth of the net profits as a remuneration for his services. If he received a portion of the profits in payment of wages or salary for services rendered the firm, this would not, as the law is now settled, constitute him a partner, although it was other [264] wise determined in the old case of Taylor vs. Terme & Jauffret, 3 H. & J., 506, which decided that “if a person derives a benefit from a trade, in which another is engaged,, hy receiving a portion of the profits, he is liable as a partner, though he acts only in the character of an agent, and receives such profits as a compensation for his agency.” But this decision is in conflict with the determination of this Court in the more recent cases,- and it is now an acknowledged principle that if a portion of the profits are received by an employe in the firm as a compensation for services rendered in some special capacity, such employé does not thereby acquire the rights and incur the responsibility of a partner! Kerr vs. Potter, 6 Gill, 404; Sangston vs. Hack, 52 Md., 173; Reddington vs. Lanahan, 59 Md., 429. And the same principle is recognized in most, if not in all, of the States, and it is said to be a well settled rule that a party who stipulates to receive a sum of money in-proportion to a given quantum of the profits as a reward for his labor, is not chargeable as partner. Loomis vs. Marshall, 12 Conn., 70; Leggett vs. Hyde, 58 N. Y., 272. But no such case is disclosed .by this record. It cannot be denied that there was an association, under the designation of James A. Whiting & Go., in which there was a, combination of capital, skill and business capacity for the purposes of trade and profit. The father’s name waS" James Whiting, and one of the sons was James A. Whiting. * This son’s name is placed at the head of the firm. It is known and designated as the firm of Whiting & Go. The act of the parties, in so naming the firm, seems to be tantamount to an announcement that, James A. Whiting was one of its members. The designation is suggestive of the formation of a partnership,, which may be inferred from facts and circumstances. Now a partnership is defined to be “ a voluntary association of two or more persons for the purposes of lawful [265] trade.” That a partnership must consist of at least two persons is said, by a learned writer on the subject, to he one of those things which does not need to he established hy demonstration. Cary on Part., 1. The existence of a firm known as James A. Whiting & Co., is a fact about which there is no dispute. If the two sons, apparently doing business with their father, were not partners, who composed the company ? There was no other person claiming to be a member except the father, and a company is supposed to be an association. One individual is not usually a company. From these facts and especially from the fact that James A. Whiting’s name was, with his own knowledge and acquiescence, selected to designate the association, a partnership between father and sons might reasonably be inferred. Heise vs. Barth, 40 Md., 259. But there seems to be conclusive proof in this record of the formation of the alleged partnership. The answer of James A. Whiting to the bill of complaint filed against him by the administrators of A. L. Whiting, was introduced as evidence in this cause, and has not been excepted to by the defendant as inadmissible. In that answer James A. Whiting admits the existence of a partnership between his father, his brother and himself. The testimony of the father in that suit has also been offered in evidence and not excepted to. The father says “I fixed the name of the firm James A. Whiting & Co., when I took them in as partners.” It is contended that as the father supplied all the capital and the sons received a portion of the net profits, there was no partnership. But this position is not tenable. There can be no doubt, in view of the numerous decisions to that effect, that the capital of a firm “ may consist of the mere use of the property owned by one member of the firm.” Citizens’ F. M. Co. vs. Doll, 35 Md., 106; Ward vs. Thompson, 22 Howard, 330. [266] (Decided 17th December, 1886.) It was urged iu argument, that as the father said in his testimony that he could discharge his sons when he saw fit, they were mere employes. But his whole testimony must have its due weight. He says expressly that he took them in as partners. There being no time agreed upoD during which the partnership was to continue in existence it could be dissolved at the option of either party and James Whiting could thus free himself from the association, or, to use his own expression, discharge his sons whenever he deemed it advisable to do so. Peacock vs. Peacock, 16 Ves., 49; Heath vs. Sansome & Evans, 4 B. & Adolph., 172; Marquand vs. N. Y. Manuf Co., 17 John., 525. The defence of the Statute of Limitations cannot be maintained, because in this case limitations cannot possibly be a bar. Upon the death of the senior partner the appellant became one of the administrators of the deceased. As such all debts due from him to the firm, became assets in his hands by operation of law. These assets were legally, and therefore not wrongfully, held by him until he was removed by the Orphans’ Court in 1885. As there could be no suit instituted against him while he legally retained these assets in his hands as administrator, and as sufficient time has not since elapsed, the bar of limitations cannot be interposed. There being no error in the rulings of the Court below its decree must be affirmed. Decree affirmed, with costs to appellees, and cause remanded.