In Cassidy v. Hall, 97 N.Y. 159, 170, the members of a firm entered into a contract with a corporation that gave them an interest in promoting its business.Summary of this case from Lincoln v. Craig
Argued October 8, 1884
Decided October 28, 1884
Wm. B. Hornblower for appellants.
Fred. M. Littlefield for respondents.
The written contract entered into between the defendants Hall, Nicoll Granbery and the United States Reflector Company did not, by its terms or on its face, constitute a copartnership, either inter sese or as to third persons. After stating that it was contemplated the defendants should assume control of the company when, if ever, they shall be satisfied that the business of said company is a profitable one, and that it fully realizes their expectation, and that it is expedient that some arrangement should be made whereby the profitableness of the business may be ascertained and proven to the satisfaction of the defendants, the agreement provided for an advancement of money by the defendants, for the benefit of the company, upon orders, for goods manufactured by the company, which they should approve. It also contained other provisions in regard to the advancements to be made by the defendants and for securing the same, and for a percentage to be paid the defendants upon the orders. It bore date of April 22, 1880, and was to continue in force until February 1, 1881. It was afterward extended until August 1, 1881. A chattel mortgage was also executed to the defendants upon the property of the company to secure the advances made by them. Under the agreement the advances were to be made only upon such orders as the defendants approved, and the most that can be claimed from it is that the defendants were the financial agents of the company to make advances and discount their paper, for the purpose of relieving the company from the financial embarrassment under which it was evidently laboring, for which they, the defendants, were to receive a proportion of the face of the orders upon which the advances were made as a compensation for the risks they incurred and for the use of the money advanced by them. They were not generally interested in the affairs of the company, but only for a special and specific purpose and in no sense were they partners. This view was upheld by the judge upon the trial and by the opinion of the General Term. We think the courts below were right in this respect, and, within the decisions in this court, it is well settled that when a party is only interested in the profits of a business as a means of compensation for services rendered, as was the fact under the contract in the case at bar, or for money advanced, he is not a partner. This question was distinctly presented in Richardson v. Hughitt ( 76 N.Y. 55), and it was there held that a person who has no interest in the business of a firm or in the capital invested, save that he is to receive a share of the profits as a compensation for services or for money loaned for the benefit of the business, is not a partner and cannot be held as such by a creditor of the firm. In that case advances were to be made upon personal property, to be manufactured and delivered, for which, when sold, the defendant was to receive one-fourth of the profits and his advances with interest at five and a half per cent. The case cited is directly in point, the same principle is involved and there is a striking analogy in the facts which renders it applicable to the question now considered. We are unable to perceive any such distinction existing between the two cases which authorizes a holding that the case cited is not in point. That case was approved and upheld in Curry v. Fowler ( 87 N.Y. 33), and the principle decided is fully sustained in Eager v. Crawford (76 id. 97) and Burnett v. Snyder (id. 344). These cases are conclusive upon the question considered, and none of the decisions in this State are adverse to the doctrine which is therein laid down. We do not deem it necessary, in view of the fact that the law upon the question discussed is well settled in this court, to examine the English authorities bearing upon the subject.
There was no proof upon the trial that the defendants claimed or held themselves out to be partners of the United States Reflector Company, or that they represented themselves as connected with the company in that capacity. The written agreement provided for a future arrangement with the defendants in case the business proved to be profitable, but did not state that they were going in as partners. Upon being asked on one occasion if the bills of certain parties would be paid, they replied that they would, and further that they would discount them for five per cent, thus asserting that their relationship with the company was not that of partners.
The plaintiffs claim that the conduct of the defendants and their connection with the business of the company was such as to create a partnership as to the plaintiffs, and they rely upon the acts and declarations of the defendants proved upon the trial, which it is claimed evince that they held out to the world and to the parties dealing with them that they were partners. These acts consist of efforts made by the defendants to place the company in a sound financial condition; in giving directions to the employes of the company; in seeking to obtain orders in connection with the business, and to establish the credit of the company and to build up its business, all of which we are not prepared to say was inconsistent with the contract into which they had entered and the purpose which evidently was to re-establish the business of the company upon a sound financial basis and to render it successful. All this might be done without making defendants liable as partners and in conformity with the object and purpose with which the agreement was entered into between the defendants and the company, and after a careful examination of the various acts and declarations which are relied upon, we are unable to see that any of them, or all taken in connection, can be regarded as holding out to the world that the defendants were partners and actually did make themselves liable as such for the debts of the United States Reflector Company.
As to the declarations proved to have been made by the defendants in regard to the responsibility of the company and the credit to which it was entitled, or the defendants' obligation to pay such debts the most that can be claimed for them is that the defendants thereby made a contract of guaranty which was not reduced to writing, and, therefore, within the statute of frauds, or an original promise to see the bills paid. They do not establish that the defendants were partners, and as this action is not brought upon any original promise or any guaranty, but upon the claim that a partnership existed, they are insufficient to uphold the plaintiffs' right to recover. The statements proved were entirely consistent with the view that no partnership existed and import to the contrary, and it might well be that the defendants were willing to become responsible for the demands of the plaintiffs without incurring the liability of partners for all the debts of the company.
One of the witnesses upon the trial testified that there was a sign on the factory of the United States Reflector Company which read, "Hall, Nicoll Granbery's Factory, Top Floor," but there is no proof that either of the plaintiffs ever saw or knew of the sign, or that any one else saw or knew of it who had dealings with the company, or that any reliance was placed upon that fact by the plaintiffs when their debt was incurred. This evidence, of itself, would be insufficient to establish the plaintiffs' right to recover in this action against the defendants as partners. It may perhaps be said, in one sense, as the defendants were furnishing money to aid the company, had a mortgage on its property, were seeking to re-establish its financial condition, and were interested in all goods manufactured, that there was ground for claiming that the factory was the factory of the defendants. The declarations of one of the defendants to customers of the firm, in the absence of any creditor, referring to the factory as their own, and stating that they had their sign up, which are not shown to have been known to the plaintiffs or relied upon by them, do not, of themselves, establish a partnership. They may be explained very intelligibly by regarding them merely as a statement that they were interested in the concern. The last remark will apply also to the fact that one of the defendants, on one occasion, spoke of the work "they were doing," referring to the United States Reflector Company.
No other declarations, as to the relationship of the defendants to the company, tend to establish that they were partners; no remarks were ever made by the defendants to the plaintiffs on that subject, nor is there any proof which shows that the plaintiffs believed that defendants were such partners, and that they parted with their property, relying upon the fact that a copartnership existed between the defendants and the United States Reflector Company.
We think it is very apparent that no representations were proved which tended to establish that the defendants were copartners with the company, and as such liable for the demand of the plaintiffs. All of the acts and declarations proven were consistent with the agreement entered into by the defendants with the company; no case was made out against them as partners, and the court erred in denying the motion for a nonsuit.
The judgment should, therefore, be reversed, and a new trial granted, with costs to abide the event.