McGovern v. Mattison

Follett, Ch. J. Persons having a proprietary interest in a business, and in its profits, are liable, as partners, to creditors. Manhattan Brass & Man. Co. v. Sears, 45 N. Y., 797; Leggett v. Hyde, 58 id., 272, 278; Mason v. Partridge, 4 Hun, 621; affd 66 [614] N. Y., 633; Burnett v. Snyder, 81 N. Y., 550, 555; Ontario Bank v. Hennessey, 48 id., 545; Berthold v. Goldsmith, 24 How., U. S., 536, 541; Haas v. Roat, 16 Hun, 526; S. C., 26 id., 632; Rosenfield v. Haight, 53 Wis., 260; 40 Am. Rep., 770. It is stipulated -in the contract that the parties thereto should do-what they reasonably could to make the business a success, that the defendants should have an interest in the goods in the store equal to the amount of their endorsement, and that at the end of the year an inventory should be taken in the presence of two of the defendants, the net profits ascertained, and one-third of them paid to the defendants “in consideration of their said endorsement and their general interest in the business.” Every one of the signers had a right to require that the assets of the business should be applied in payment; (1) of the debts of the business; (2) of the sums contributed by each; (3) of the sum due each for profits earned. An execution creditor of Mrs. Robertson (the debt not having been contracted in the business), could not, by a levy upon the goods, have acquired a lien prior to the equitable lien of the defendants, to have had them applied in payment of the debts of the business and of the amount put into the business directly, or by way of their endorsements. Such being the rights of the parties to the contract, they had a proprietary interest in the business and in its profits, and are liable for the amount due the plaintiffs. The cases holding that a person entitled to a share of the profits of a business in payment for services rendered, or as a compensation for money advanced, is not a partner, are not in.point. The distinction between the rights and liabilities of persons so situated, and the rights and liabilities of persons having a proprietary interest in the assets and profits of a business has been clearly drawn by the cases decided in the courts of this state. The case at bar can not be distinguished in principle from Mason v. Partridge, supra. The stipulation in the contract that the defendants should not be liable beyond their endorsement, limits their liability as between them and Mrs. Robertson; but, under the findings, it does not exempt the defendants from liability for the plaintiffs’ claim. It is quite apparent that the defendants knew that the business which they initiated was conducted under the name of the Busti Union Store, and' not under the name and on the credit of Mrs. Robertson. The judgment should be reversed and a new trial granted, with costs to abide the event. All concur, except Bradley and Haight, J.J., not sitting.