By the written agreement, the signers "agree to take the number of shares set against our names, at $25 per share, for the purpose of starting a grocery store, — said stockholders to decide upon the location for said store, and make all other arrangements necessary to carry into operation said store." There being no purpose to organize a corporation, this was an agreement to become unincorporated "stockholders" of "a grocery store." The defendants, Dodge and Manahan, did not sign the agreement, and did not become stockholders. Manahan gave the stockholders $50, which was given back to him; but he was neither a partner nor a creditor. He neither took nor agreed to take any "shares" in the store; he did not hold himself out, nor consent to be held out, as a stockholder; and he has in no way made himself liable for the debts or losses incurred in the business of the store. The defendants, Colburn and G. A. Duncklee, signed the agreement, but did not become stockholders by taking, that is, paying for, the shares. they agreed to take; and the facts of an estoppel are not found against them. It does not appear that they induced the plaintiff to believe and act upon the belief that they were stockholders. The case does not raise the question of their liability for damages for their non-performance of their agreement to become stockholders, or the question of their liability to become stockholders on a bill for specific performance of their agreement. This bill for dividing losses among stockholders cannot be maintained against those who have never been stockholders.
The other defendants and the plaintiff became stockholders by performing their agreement "to take the number of shares set against our names, at $25 per share, for the purpose of starting a *Page 325 grocery store." Whether specific performance of this agreement to become stockholders could have been enforced on a bill in chancery, and whether damages for its nonperformance could have been recovered in a suit at law, are now immaterial questions. Those who became stockholders by voluntarily and specifically performing their agreement to take shares, accepted, as between themselves, the rights conferred and the obligations imposed by the writing. which is the best evidence of their intention and understanding. If the writing did not correctly state the contract they intended to make with each other, it could have been reformed on a bill in equity, or abandoned by common consent. Having been neither changed by legal process, nor rescinded by the parties, it is binding upon them like any other written contract, and cannot be varied by parol.
Those who took the shares they agreed to take considered themselves "stockholders;" they so described themselves in the agreement: and "stockholders," in the agreement, means "partners." They became stockholders, without being incorporated and without any design of forming a corporation, "for the purpose of starting a grocery store," and they carried their purpose into execution. In pursuance of the agreement, they delivered to the plaintiff sums of money equal to the shares set against their names, at $25 per share, to be invested in goods to be bought for the store. The money thus raised was the property of the firm; and the goods bought with the money were the property of the firm. There was no loan or gift of the money, the goods, or the proceeds of the goods. The purpose of starting a grocery store was accomplished in April, 1875. In less than two years all the shares except those, of Savage were sold by their owners, and were bought by Savage. And the question is, whether each stockholder is liable to contribute, in proportion to his number of shares, for the payment of debts of the store contracted and losses of the store incurred while he was a stockholder.
The "shares" which, by the written agreement, the "stockholders" were to take, were shares of the stock of which, by the agreement, they were to be holders; and that stock was the capital stock of the store which it was their purpose to start. There was no other stock of which they became holders, in pursuance of the agreement. They were to own shares of undivided property; there was to be a community of interest; and the property which they were to own in common was to be "a grocery store." The store which it was their purpose to start was not a mere building, but a grocery business, including its capital stock, profits, and losses. There would be a balance of profit, or a balance of loss: profits and losses producing that balance, were certain. Losses (by expense and leakage, if not otherwise) were as inevitable as profits; and the maintenance of an exact and continuous equilibrium of losses and profits was impracticable. In April, 1876, the *Page 326 books showed $459.71 as a balance of profit. Each cent of profit, when received from a customer, was not to be set aside and kept as a separate fund with a preserved identity. If that course had been taken, the fund of profits, being a part of the price received for goods sold, would have been the fund of the stockholders of the store. The profits were to be mingled with and become a part of the stockholders' capital. The capital stock, owned in common, would be money, goods, fixtures, and implements of the business, and claims for goods sold on credit, if sales on credit were made.
The business in which the capital was to be employed was buying and selling the goods of a grocery store. The stockholders engaged in that mercantile business were to be joint principals carrying on the business. This is the natural and obvious meaning of the written contract of unincorporated "stockholders," taking "shares" "for the purpose of starting a grocery store;" there is no competent evidence giving the contract a different meaning: and such principals are partners. Eastman v. Clark,53 N.H. 276, 294. The community of interest in the profits and losses of the business, like the community of interest in the original capital, was an unavoided incident, and an unsevered and [and] unalienated part of the community of interest in the grocery business started by the stockholders, and carried on by nobody else as principal during the time they held their shares of the capital. During that time they were not creditors of the principals by whom the business was carried on. That it was carried on during that time by their debtors as principals, is a fact that has not been and manifestly cannot be found. There were no such debtors; and without debtors there can be no creditors.
The written contract did not provide that anybody but subscribing stockholders should have any interest in the business; and nobody but such stockholders acquired any interest in it, during the time for which contribution is sought. There was DO gift or contract by which, during that time, any part of the business, chattels, money, debts, credits, profits, or losses of the store belonged to any one but the stockholders. They carried the original contract into execution without any departure from its legal meaning. They owned their shares from the moment they created stock by taking shares, until they sold them. Until they sold them, the business started by them did not cease to be theirs. No share was sold to any one who was not an original member of the firm. By sales of shares, the number of the partners was diminished; but the business was the business of partners until stockholder Savage became the owner of all the shares. Then, and not till then, and by his purchase of all the shares of his copartners, the partnership was finally dissolved. When a shareholder sold his shares he withdrew from the firm, and did not become liable to contribute for debts afterwards contracted, or losses afterwards incurred; but he was not discharged from his liability to bear, by contribution, his share of *Page 327 debts contracted and losses incurred while he was a partner. The "further liability" from which he was relieved was that which would subsequently arise in the continuance of the business of the store, and not that which had already arisen. For debts contracted by the firm after his retirement he might be liable to creditors (Zollar v. Janvrin, 47 N.H. 324), but not to his copartners. Long after the amicable and harmonious dissolution of the firm, the present controversy arose, from the fact that the stockholders did not wind up the business and pay the debts out of the capital stock, and, when they severally sold their shares, did not severally require indemnity from the purchaser against the vendor's liability for existing debts. And for his own omission each stockholder is alone responsible.
The liability of the subscribing stockholders depends, not upon their opinion of the legal meaning of "partnership," but upon their knowledge and understanding of the facts of their shareholding enterprise, proved by competent evidence. Their shares were not given away. No one understood that he was a donor or a donee of any of the shares taken by the subscribers. If they had loaned their capital, they would have been creditors of the borrowers for the amount loaned. If they had loaned it to members of the grange, and the latter had been the principals in the grocery business, the shareholders, being members of the grange, would have been both lenders and borrowers, and as borrowers and principals would have been partners, whose names should have been filed with the town-clerk (G. L., c. 117, ss. 1 and 2); and this bill, amended if necessary, could have been maintained. But it is not found that more than one person understood himself to be a borrower of any part of the capital. Simpson alone understood the capital was loaned to the grange; and his unilateral understanding could amount to no more than his loan of his own shares to himself. The shareholders knew they were unincorporated stockholders from the time they took their shares until they sold them. Their belief or understanding, that during that time they were not "partners" in the legal sense of the word, was a mistaken and immaterial view of the law. They entertained the erroneous opinion, that for some unexplained reason their liability was limited in extent to the amount of the shares they took at $25 per share. Their liability to that amount they understood. How they were incurring liability to that amount if not as principals in the business of the store, and how they were principals and not partners in that business, are unanswered questions.
A limitation of their liability to the amount of money paid as their shares of the original capital, would have been an important safeguard which they could have obtained as special partners, under the statute of limited partnerships (G. L., c. 118), if they could have found some one willing to relieve them of the unlimited liability of general partners by taking it all upon himself as a general partner, associated *Page 328 with special partners. Without taking any steps to obtain such a limitation, they assumed its legal existence. They were necessarily to be the owners of the profits as profits, while they held their shares. But the losses might exceed the profits; the balance of loss might be more than $25 per share; and in supposing it was not necessary for them either to get some one to bear the excess of loss beyond a certain limit, or bear it themselves, they fell into a not uncommon error of law. They contemplated losses, for they understood they were liable to lose their shares of the original capital. Their intention not to bear any excess of loss beyond that limit was not carried out by a bilateral agreement that while such balance of profit as might accrue should be theirs, such balance of loss as might accrue, beyond the amount of $25 per share, should fall upon somebody else. Their understanding of such an actually existing limit of their known and acknowledged liability was, in effect, an understanding of a grocer that, although goods are bought for his store and become his by purchase, neither he nor any one else is to be a debtor for them, if he has previously lost, or if he afterwards loses, the original capital of his grocery by fire or robbery, or by the expenses and bad debts of his business.
If their liability had been affected by their understanding that it was limited to the amounts paid in by them as their shares of the original capital, this bill could be maintained. Upon that understanding they would be liable to those amounts. Their sale of their shares would not have discharged the limited amount of their liability for debts and losses incurred while they were members of the firm. But the supposed limitation of their liability was mere legal error.
The business of the store was begun and continued under the general management of "a committee" of three stockholders, appointed by the grange of which the stockholders were members, and recognized by them as a committee. All knew that the business was thus begun and continued, and no one made any objection. Everything appears to have been done by unanimous consent, because, upon the supposed legal limitation of their liability as a basis of their venture, there was no cause of dissent or dissatisfaction. No one understood that the committee were the only principals, or were carrying on the whole or any part of the business at their separate risk, or were entitled to more of the profits, or subject to more of the losses, than were appurtenant to the number of shares they had taken as original subscribers. As unincorporated stockholders who start a grocery by furnishing shares of its capital stock are partnership grocers, language being used in its ordinary legal sense, so the title of "a committee" for managing the business of the grocery signifies the agency of the managers. The committee were agents, and were understood to be agents by all parties in interest; and they were not made sole principals by a lack of skill in bookkeeping that was harmless, or by acting as agents *Page 329 in conducting the business in a manner known and approved by every member of the firm. They hired money with which goods were bought for the store; and the plaintiff, being one of the committee, has repaid the hired money out of his own funds. The result is as if his money had been paid for those goods. All the partners knew that goods were bought for the store on credit, or with hired money; and their silent acquiescence, with knowledge, was a ratification and authorization of that method of doing their business and increasing their grocery capital.
Shares were sold by stockholders at different times. When the plaintiff and Woodward, being two members of the committee, sold their shares to Savage, the other member, November 7, 1876, the right of the other stockholders to continue the partnership with a less numerous firm was not impaired. Not only was no attempt made to infringe it or deny it, but it was fully recognized and maintained. If the action of the plaintiff and Woodward had affected the rights of their copartners, and had not been authorized, the latter would not have been bound by it. If it had affected their rights and had been authorized by them, they could not complain of it. They did not complain, and there was no cause of complaint. The transaction was, in legal effect, a proper sale to Savage of such shares as the plaintiff and Woodward could sell at a certain price, and a proper agreement of Savage that he would buy the other shares at the same price if the owners would take it. All the other stockholders were left in the full enjoyment of their previous position. They could continue to be shareholders with unimpaired rights, or cease to be shareholders by selling their shares to whom they pleased, or by winding up the business. They accepted Savage's offer, and sold their shares to him, and thus dissolved the firm without controversy, and without any cause of controversy.
The sale of their shares by stockholders was much more than an approval of the action of the committee. It was a distinct claim that what they sold was theirs until they sold it. They did not defraud the purchaser by selling him something that belonged to others, or something that did not exist. They sold their shares, not of loaned money or loaned capital stock, but of the grocery store, which had been started by taking shares, and of which Savage became sole owner by taking the shares he agreed to take, and buying all the others. They sold the number of shares they had originally taken, and had held until they chose to hold them no longer. They sold, not their shares of a part of the store, but their shares of the whole of it. The whole included all the goods, money, credits, and apparatus that constituted the capital stock of the store, profits not excluded. And that capital stock included goods, or profits and proceeds of goods, bought for the store with money which the plaintiff and the other members of the committee hired on notes which the plaintiff, being liable to pay, has paid. *Page 330 The hiring of the money is immaterial. The case is as if the money had come from the plaintiff's pocket at first, as it did at last. The practical and legal result of the transaction is, that, by their sale of their shares, the other stockholders appropriated to their own use their shares of goods, or the profits and proceeds of goods, bought for the store and paid for by the plaintiff. Such a ratification of his action leaves no equitable or technical ground on which all the losses can be thrown upon him by stockholders who have thus taken their shares of the capital and profits.
The part of the capital raised by taking shares, and by Manahan's gift, was less than $1,400. The average amount of goods in the store was from $5,000 to $7,500. The larger part of the capital was goods, and proceeds of goods, bought with money hired by the committee. Savage finally became sole owner of all the shares. And when the other stockholders sold their shares of the whole capital stock, they knew that a part of the stock was goods, or the profits and proceeds of goods, bought on credit or with hired money. They knew that only a part of the stock, of which they were selling their shares, had been bought with their original capital or its proceeds. The larger part of what they sold has been paid for by the plaintiff. By their sale of their shares of the whole capital of the store, with knowledge that a part of it had been obtained on credit (with hired money or otherwise) as an increase of their original capital, they confirmed the act of enlargement on credit, and took their shares of the increase; and by their confirmation of the act and appropriation of the property, they bound themselves to pay their shares of the cost of the increase. They accepted, and converted to their own use, property, or the profits and proceeds of property, which was bought for their store, and for which they have not paid; and by their sale of their stock they unequivocally asserted that before that sale they were stockholders of the store, invested with all the rights and subject to all the liabilities of unincorporated shareholders of a grocery. Their community of interest in profits and losses was demonstrated by their sales of their shares of a capital stock that had not been loaned or given away, but had been used in a business in which profits and losses must occur.
Bill dismissed as to Dodge, Manahan, Colburn, and G. A. Duncklee. Decree for the plaintiff against the other defendants.
FOSTER, J., did not sit: the others concurred. *Page 331