John Holt & Co. v. Kernodle, 23 N.C. 199, 1 Ired. 199 (1840)

June 1840 · Supreme Court of North Carolina

23 N.C. 199, 1 Ired. 199

JOHN HOLT & CO. vs. GEORGE KERNODLE.

An agreement between two persons to carry on a certain trade, upon the terms that one of them is to contribute his labour, and the other to furnish all the materials necessary for the business, and to supply the labourer with provisions for himself and his family; and that out of the profits of the business, the materials and provisions are first to be paid for, and then the balance of the profits, if any, to be equally divided between the parties, constitutes them parties, and renders the labourer a necessary party in a suit brought for work and labour done in the course of the business, although previous' to bringing the suit the parties may have dissolved the partnership, and separated before enough of profits were realized to pay for the materials and provisions; and the labourer may have left indebted to the other for the provisions furnished to his family.

This was an action of Assumpsit, for work and labour done, commenced by a warrant before a single justice,' and carried by successive appeals to the Superior Court of Guilford; where it was tried, on the last circuit, before his honor Ju%e Dick-

The plaintiffs proved that they were the proprietors of a blacksmith shop, in which they had two slaves engaged; and that about theolst of January, 1836, they employed a blacksmith by the name of John Willis, to work in the shop with the slaves, upon the following terms, which were not reduced to writing, to wit: The plaintiffs were to furnish the shop, coal, iron, and two slaves to work in the shop; they were also to furnish every thing else necessary to carry on the business, and likewise a house and provisions for Willis and his family. The plaintiffs were first to be paid out of the profits of the business for the coal, iron, and other materials furnished by them for carrying on the business, and also for the rent of the house Willis might live in, and for the .provisions furnished bis family, and then the balance of the profits, if any, were to be equally divided between the plaintiffs and Willis. The business was commenced and continued by the plaintiffs and Willis, from January, 1836, until sometime in September or October of the same year, when they dissolved and separated, Willis being, as he stated, at that time indebted to the plaintiffs for articles furnished to his family. The declarations of Willis as to his indebtedness to the plaintiffs, were .objected to by the defendant, but received by the Court. It was admitted, by the defendant, that the work for which the warrant was brought, to wit, the ironing of his wagon, was done at the shop of the plaintiffs, in the year 1836; but he proved that, in the year 1834, Willis being pressed for’money^ agreed to iron his Wagon for a certain sum’, which the defendant then advanced to him; that the wagon was accordingly sent to Willis, and remained with him unfinished, until he went to work with the plaintiffs, when it was carried to the plaintiffs’ shop, and ironed as above stated. The defendant further proved, that on the trial of the warrant before the justice; h'e offered Willis as a witness to prove the above contract, when he was objected to by the plaintiffs, upon the ground that he was a copartner with them.

The defendant contended that Willis was a copartner, and ought to have been joined in the suit; and thereupon moved to nonsuit the plaintiffs. The Court refused the motion a nonsuit; but charged the jury that if they were satisfied from the evidence that Willis was to have a share of the profits of the shop from the beginning, he would be a necessary party to this suit; but if the contract was, that the plaintiffs were first to be paid for the iron, coal, provisions and house rent; and the shop, while ‘Willis was there, had not realised enough to pay for the supplies furnished, but Willis' had left the plaintiffs, indebted to them on that account, then he was not a necessary party to thd suit. The Court further instructed the jury, that although Willis might have taken the wagon of the defendant to the shop of the plaintiffs, and ironed it in pursuance of his contract with the defendant, in 1834, yet this would not deprive the plaintiffs of their right to recover, if they had no knowledge of such contract, and Willis was not a partner at the time the work was done. The plaintiffs had a verdict and judgment, and the defendant appealed.

J. T. Morehead for the defendant.

It is insisted, for tlie defendant, that the conclusion of law, upon the facts proved by the plaintiffs, creates the relation of partners bétween them and Willis; and the Court should have nonsuited the plaintiffs. It is not essential to a legal partnership that it be confined to commercial business. It may exist between attorneys, conveyancers, mechanics, artisans or farmers, as well as between merchants and bankers. Coóper vs. Eyre, 1 H. Black. Rep. 43. If one person advances funds, and another furnishes his services or skill in carrying on a trade/ and is to share in the profits, it amounts to a partnership. Dob vs. Halsey, 16 John. Rep:^. It is sufficient that his interest.in the profits is not intended as a mere substitute for a commission of brokerage. Reid vs. Hotlingsfiead, 4 Barn, an'd Cres. 867.

W. A. Graham for the plaintiffs.

The agreement by a proprietor t'o pay a hireling a shkfe óf the profits, after reserving á certain part to himself, does not make such hireling' a partner; or, at the most, he can only be regarded as such in liabilities to others, but he is not a necessary plaintiff. Dry vs. Boswell, 1 Camp. N. P. Rep. 329— Wish vs, Small,-Ibid 331, in note — Benjamin vs. Porteus, 2 H. ^-eP- 590 — Meyer vs. Sharpe, 5 Taun. Rep. 74 (1 Eng. C. L. Rep. 20') — Smith vs. Waison, 9 Eng. C. L.Rep. 122.

Ruffin, Chief Justice.

Of course this action cannot be

sustained,, if Willis was one of the firm of John Holt & Co.; and the opinion of the Court is, that upon the plaintiffs’ evidence, and much more upon that of the defendant, Willis is to be taken to have been a partner; and that the criterion on which the question was submitted to the. jury, was altogether a mistaken one.

' Á partnership as between themselves, has been well said to be constituted by an agreement between two or more persons to. join stocks of money, property or labour, and to divide the profits. But as to third pérsohs, wh'o may deal with the firm, a partnership may arise, lipón a principle of public policy, so as to bind a person for all the liabilities of the firm, and, indeed, make him a party to all its contracts, although that person bring into the business ileither effects nor services, but merely lend his name as a partner, or otherwise hold , himself out to 'the world as such. There afe numerous adjudications to the effect of these propositions; but the leading case is Waugh v. Carver, 2 H. Bla. 235, which sufficiently states both of them. The ordinary test, however, of a person being a partner, is his participation in thd profits, of the business; and we believe there can be Ho instance imagined in which there is to be a participation in them,- as profits, in which every person having a right to share in them, is not thereby rendered a partner to.jáll intents and purposes. It is-so, between -the parties themselves; because the one of them .does not look to the other, personalty, for restoring to him his ■capital, or remunerating him for his labour; but each looks; to the assets or joint fund, for those purposes,-and ascertains his. interest by taking an account of the concern. Much •mqre does.sharing in the profits constitute a, partnership as to. the rest of the .world; because, as was said by Chief Justice Eyre, by taking a part of the profits, the party, takes from the creditors a portion of that fund, which is the proper security for the payment of their debts. It is also terial, whether the shares be much or little. Rex v. Dodd, 9 East. for the question is, with what persons, as forming the firm, the contract was made, so as on the one hand, to make those persons chargeable with it, or on the other, enable them to enforce it. However small the interest one may. have in the fund, or how remote soever that interest may be,, provided it be an interest in the profits as such, he is thereby constituted a party to each contract of the firm, and must be joined in an action on it.

In the record, it is stated expressly, upon the plainriffs’ own proofs, that after defraying certain specified charges. “ the balance of the profits, if any, were to be equally divided between the plaintiffs and Willis.” This we think fatal to the present action; because it shews that Willis had an interest in the profits, not so large, perhaps, as that of the other parties, but as distinctly defined; that he looked to them and to them alone for his remuneration; and not to the preseut plaintiffs,. under any circumstances.

His Honor, however, left it to the jury to find otherwise,' upon the following distinction: That as the iron, coal, provisions for Willis, and rent, were, by the agreement, first to be paid out of the assets, if the jury believed that enough had not been made to pay those charges, but that Willis was indebted to the other parties, when he went away — then he, Willis, was not a necessary party to the suit. This distinction we deem entirely fallacious. It does not state that Willis would not be a partner in the case supposed; but only that he need not be a plaintiff. Now, he. must be a party to the action, if he was a party to the contract; and he was a party to the contract, if, in point of law, he was a member of the firm when the contract was made. That he was a partner, has been already shewn; and, therefore, he was a necessary plaintiff, unless, as laid down to the jury, it be true, that he ceased to be a partner; or, at least, a proper plaintiff, for the reason that, in point of fact, there was no surplus of profit in which Willis could share, after satisfying to his copartners their preferred charges. The idea is a novelty, and is, certainly, not correct. It would make the parties to every action by a partnership depend on the accounts between the part-which the jury is wholly incompetent to take. Besides, it would make the plaintiffs vary, from time/to time. with the change of the fortunes of the firm. If, fo/example, at the time the work wa§ done for the defendant, the business was .a gaining one, so that, upon a division, some profit "would have fallen to Willis, then he would have been a necessary party to an action then brought jfor the price: But, if afterwards, the business became a losing one, go that, upon a division, Willis would receive no share of the profit, then he need not be a party to the suit. This can only mean, that in this last case, Willis is not to be taken as continuing to be a party to the contract, although unquestionably, when made, it was entered into with him as one of the parties to it. The result to which jve are thus brought, disproves the proposition from wh,ie.h it is deduced. Besides, it is an error to suppose that one who was a partner, has no interest in the fund, because, by reason of losses, he would drawpo share upon a final settlement. The firm may o\ye debts, for which, of course, he is liable; and he is consequently a necessary party to actions by the firm, because he has an equal right with the other partners to receive the fund, that he may see it applied in exoneration of himself, in discharge of the debts.

At the bar, a class qf cases \vas reljqd on to support the judgment, which we think do nqt apply. They tire those of Benjamin v. Porteus, 2 H. Bl. 590—Dry v. Boswell, 1 Camp. 329, and others of that kind; in which it appeared, upon the agreement, that the parties intended an agency of the one for the other; and it was, consequently, held that there was not a partnership, although the agent was to beremunerated by wages in proportion to the profits, or even by a sum partly furnished by the profits. In some of those cases, the distinctions are very fine, and carried to a nicety at which even Lord EiDpp expressed his regret. Ex parle Hamper, 17 Ves. 112, 404. it is not, however, needful that we should go through them; for they are all distinguishable from the present case, by the circumstances noticed by his Lordship: ; That in none qf them did the party agree for a part of the i profits as such, so as thereby to entitle him to ail account but was to be remunerated according to the amount of gross earnings or sales, or by the other contracting party, in proportion to a given quantum of the profits. But in our case, there is no intent to turn Willis into a servant or agent; and he looked for compensation, not at all nor in any event to the other parties personally, but wholly to the funds of the concern, or, in other words, to tlje profits as such.

This point is decisive of the cause; and, therefore, it is useless to advert to tl}e .others made at the trial.

Per Curiam. Judgment reversed and a. venire de novo.