Mason v. Hackett

By the Court,

Whitman, J.

This appeal is on the part of defendant Hackett, against whom a judgment was rendered in the District Court of the Second Judicial District, as a copartner of defendant Perry; and a subsequent order made denying a new trial.

The only question presented is as to the correctness of the findings of fact by the Court trying the case, it being admitted that its conclusions of law are logically deduced therefrom. The evidence on the part of plaintiffs was that they and their assignor, J. Rosenstock, sold goods to R. Perry & Go.; that a portion of such goods was delivered upon written orders of appellant signed R. Perry & Co.; that neither plaintiffs nor their assignor were aware at the time of the sales wh6 constituted the firm of R. Perry & Co.; that neither of them knew the defendant Hackett, or supposed that he was a member of the firm; that afterward they, with their attorney, held conversations with Hackett, in which he declared that he was a partner in the profits, or was interested in the profits, but in no manner liable for the debts of the firm.

Hackett, testifying for himself, and on behalf of plaintiffs, said that he u7as employed as the general agent and manager of Perry; that he was instructed by Perry to sign the name of R. Perry & Co. to orders for goods, checks, etc.; that he received a salary of one hundred dollars per month, and one-third of the profits over three hundred dollars per month, as further compensation; that he was liable to discharge at any time; furnished no capital; had no control over the business save as such agent, and no interest in its profits or losses, save as stated; that his salary thus derived averaged from thirty to fifty dollars per month in excess of the one hundred dollars, and was therewith charged to himself and credited to Perry on the books, which were kept in Perry’s name ; that the sign of R. Perry & Co. was on the store when he first went there; and that the business wTas conducted in that firm name by Perry’s’ direction; that he bought no goods, save in the absence of Perry.

Hackett is corroborated by Perry, except that the amounts drawn in excess of the one hundred dollars were by him considered as donations. Perry further swears, not only that Hackett was not his partner, but that he never had a partner in mercantile business in the State of Nevada.

There is no conflict in this testimony. Hackett’s unsworn statements are simply amplified in his evidence ; thus the only point for consideration is, whether such participation in the profits of Perry’s business as is disclosed by the evidence renders Hackett liable to plaintiffs as a partner.

The general rule of law would compel every man who has a share in the profits of a trade to bear the losses as a partner; but it is always proper to look at the particular circumstances of the case to ascertain whether such participation be not merely a compensation for services, or something other than an interest in the profits as profits. In the language of Wilde, J.: “ On this point the distinction appears to us to be well established, that a party who participates in the profits of a trade or business, and has an interest in the profits as profits, is chargeable as a partner with respect to third persons; but if he is only entitled to receive a certain sum of money in proportion to a given quantum of the profits, as a compensation for his labor and services, he is not thereby liable to be charged as a partner.”

This doctrine is sustained by the weight of American authority. (Denny et al. v. Cabot et al., 6 Met. 82; Holmes et al. v. Old Colony R. R. Corporation, 5 Gray, 58; Turner v. Bissell, 14 Pick. 192; Loomis v. Marshall, 12 Conn. 70; Burckle v. Eckhart, 3 Comst. 132; Berthold et als. v. Goldsmith, 24 Howard, 536.)

The curious upon this and other questions of liability as partner will find an able review of the same, and collection of authorities, in the American Law Review, October, 1867, and January, 1868.

With regard to taking profits as compensation for services, the writer says: “ Whether this compensation is fixed as so much money, or is to be ascertained in proportion to the profits, it does not cease to be compensation for the services of an agent as agent, at least so long as such agent is neither held out to the world as a partner, nor does any act sufficient to induce third persons to believe him an actual partner.”

Adopting this as the correct rule by which to test this case, and applying it to the evidence, there appears no warrant for the findings of the District Court.

Its order and judgment are therefore reversed, and the cause remanded.