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Opinion of the Court.

established commercial law." Winship v. Bank of United States, 5 Pet. 529, 561, 562. And the Chief Justice referred to Waugh v. Carver, 2 H. Bl. 235; Ex parte Hamper, 17 Ves. 403, 412; and Gow on Partnership, 17.

How far sharing in the profits of a partnership shall make one liable as a partner has been a subject of much judicial discussion, and the various definitions have been approximate rather than exhaustive.

The rule formerly laid down, and long acted on as established, was that a man who received a certain share of the profits as profits, with a lien on the whole profits as security for his share, was liable as a partner for the debts of the partnership, even if it had been stipulated between him and his copartners that he should not be so liable; but that merely receiving compensation for labor or services, estimated by a certain proportion of the profits, did not render one liable as a partner. Story on Partnership, c. 4; 3 Kent Com. 25 note, 32-34; Ex parte Hamper, above cited; Pott v. Eyton, 3 C. B. 32, 40; Bostwick v. Champion, 11 Wend. 571, and 18 Wend. 175, 184, 185; Burckle v. Eckart, 1 Denio, 337, and 3 N. Y. 132; Denny v. Cabot, 6 Met. 82; Fitch v. Harrington, 13 Gray, 468, 474; Brundred v. Muzzy, 1 Dutcher (25 N. J. Law) 268, 279, 674. The test was often stated to be whether the person sought to be charged as a partner took part of the profits as a principal, or only as an agent. Benjamin v. Porteus, 2 H. Bl. 590, 592; Collyer on Partnership (1st ed.) 14; Smith Merc. Law (1st ed.) 4; Story on Partnership, § 55.; Loomis v. Marshall, 12 Conn. 69, 78; Burckle v. Eckart, 1 Denio, 337, 341; Hallet v. Desban, 14 La. Ann. 529.

Accordingly, this court, at December term, 1860, decided that a person employed to sell goods under an agreement that he should receive half the profits, and that they should not be less than a certain sum, was not a partner with his employer. "Actual participation in the profits as principal," said Mr. Justice Clifford in delivering judgment, "creates a partnership as between the parties and third persons, whatever may be their intentions in that behalf, and notwithstanding the dormant partner was not expected to participate in the loss beyond the

Opinion of the Court.

amount of the profits," or " may have expressly stipulated with his associates against all the usual incidents to that relation. That rule, however, has no application whatever to a case of service or special agency, where the employé has no power as a partner in the firm and no interest in the profits, as property, but is simply employed as a servant or special agent, and is to receive a given sum out of the profits, or a proportion of the same, as a compensation for his services." Berthold v. Goldsmith, 24 How. 536, 542, 543. See also Seymour v. Freer, 8 Wall. 202, 215, 222-226; Beckwith v. Talbot, 95 U. S. 289, 293; Edwards v. Tracy, 62 Penn. St. 374; Burnett v. Snyder, 81 N. Y. 550, 555.

Mr. Justice Story, at the beginning of his Commentaries on Partnership, first published in 1841, said: "Every partner is an agent of the partnership; and his rights, powers, duties and obligations are in many respects governed by the same rules and principles as those of an agent. A partner, indeed, virtually embraces the character both of a principal and of an agent. So far as he acts for himself and his own interest in the common caicerns of the partnership, he may properly be deemed a principal; and so far as he acts for his partners he may as properly be deemed an agent. The principal distinction between him and a mere agent is, that he has a community of interest with the other partners in the whole property and business and responsibilities of the partnership; whereas an agent, as such, has no interest in either. Pothier considers partnership as but a species of mandate, saying, Contractus societatis, non secus ac contractus mandati." Afterwards, in discussing the reasons and the limits of the rule by which one may be charged as a partner by reason of having received part of the profits of the partnership, Mr. Justice Story observed that the rule was justified, and the cases in which it had been applied reconciled, by considering that "a participation in the profits will ordinarily establish the existence of a partnership between the parties in favor of third persons, in the absence of all other opposing circumstances," but that it is not "to be regarded as anything more than mere presumptive proof. thereof, and therefore liable to be repelled and overcome by other circumstances, and not as

Opinion of the Court.

of itself overcoming or controlling them;" and therefore that "if the participation in the profits can be clearly shown to be in the character of agent, then the presumption of partnership is repelled." And again: "The true rule, ex quo et bono, would seem to be that the agreement and intention of the parties themselves should govern all the cases. If they intended a partnership in the capital stock, or in the profits, or in both, then that the same rule should apply in favor of third persons, even if the agreement were unknown to them. And on the other hand, if no such partnership were intended between the parties, then that there should be none as to third persons, unless where the parties had held themselves out as partners to the public, or their conduct operated as a fraud or deceit upon third persons." Story on Partnership, §§ 1, 38, 49.

Baron Parke (afterwards Lord Wensleydale) appears to have taken much the same view of the subject as Mr. Justice Story. Both in the Court of Exchequer, and in the House of Lords, he was wont to treat the liability of one sought to be charged as a dormant partner for the acts of the active partners as depending on the law of principal and agent. Beckham v. Drake (1841) 9 M. & W. 79, 98; Wilson v. Whitehead (1842) 10 M. & W. 503, 504; Ernest v. Nicholls (1857) 6 H. L. Cas. 401, 417; Cox v. Hickman (1860) 8 H. L. Cas. 268, 312. And in Cox v. Hickman he quoted the statements of Story and Pothier from Story on Partnership, § 1, above cited.

In that case, two merchants and copartners, becoming embarrassed in their circumstances, assigned all their property to trustees, empowering them to carry on the business, and to divide the net income ratably among their creditors, (all of whom became parties to the deed,) and to pay any residue to the debtors, the majority of the creditors being authorized to make rules for conducting the business or to put an end to it altogether. The House of Lords, differing from the majority of the judges who delivered opinions at various stages of the case, held that the creditors were not liable as partners for debts incurred by the trustees in carrying on the business

Opinion of the Court.

under the assignment. The decision was put upon the ground that the liability of one partner for the acts of his copartner is in truth the liability of a principal for the acts of his agent; that a right to participate in the profits, though cogent, is not conclusive, evidence that the business is carried on in part for the person receiving them; and that the test of his liability as a partner is whether he has authorized the managers of the business to carry it on in his behalf. Cox v. Hickman, 8 H. L. Cas. 268, 304, 306, 312, 313; S. C. nom. Wheatcroft v. Hickman, 9 C. B. (N. S.) 47, 90, 92, 98, 99.

This new form of stating the general rule did not at first prove easier of application than the old one; for in the first case which arose afterwards one judge of three dissented; Kilshaw v. Jukes, 3 B. & S. 847; and in the next case the unanimous judgment of four judges in the Common Bench was reversed by four judges against two in the Exchequer Chamber. Bullen v. Sharp, 18 C. B. (N. S.) 614, and L. R. 1 C. P. 86. And, as has been pointed out in later English cases, the reference to agency as a test of partnership was unfortunate and inconclusive, inasmuch as agency results from partnership rather than partnership from agency. Kelly, C. B. and Cleasby, B., in Holme v. Hammond, L. R. 7 Ex. 218, 227, 233; Jessel, M. R., in Pooley v. Driver, 5 Ch. D. 458, 476. Such a test seems to give a synonym, rather than a definition; another name for the conclusion, rather than a statement of the premises from which the conclusion is to be drawn. To say that a person is liable as a partner, who stands in the relation of principal to those by whom the business is actually carried on, adds nothing by way of precision, for the very idea of partnership includes the relation of principal and agent.

In the case last above eited, Sir George Jessel said: "You cannot grasp the notion of agency, properly speaking, unless you grasp the notion of the existence of the firm as a separate entity from the existence of the partners; a notion which was well grasped by the old Roman lawyers, and which was partly understood in the courts of equity." And in a very recent case the Court of Appeals of New York, than which no court

Opinion of the Court.

has more steadfastly adhered to the old form of stating the rule, has held that a partnership, though not strictly a legal entity as distinct from the persons composing it, yet being commonly so regarded by men of business, might be so treated in interpreting a commercial contract. Bank of Buffalo v. Thompson, 121 N. Y. 280.

In other respects, however, the rule laid down in Cox v. Hickman has been unhesitatingly accepted in England, as explaining and modifying the earlier rule. Re English & Irish Society, 1 Hem. & Mil. 85, 106, 107; Mollwo v. Court of Wards, L. R. 4 P. C. 419, 435; Ross v. Parkyns, L. R. 20 Eq. 331, 335; Ex parte Tennant, 6 Ch. D. 303; Ex parte Delhasse, 7 Ch. D. 511; Badeley v. Consolidated Bank, 38 Ch. D. 238. See also Davis v. Patrick, 122 U. S. 138, 151; Eastman v. Clark, 53 N. H. 276; Wild v. Davenport, 19 Vroom (48 N. J. Law) 129; Seabury v. Bolles, 22 Vroom (51 N. J. Law) 103, and 23 Vroom (52 N. J. Law) 413; Morgan v. Farrel, 58 Conn. 413.

In the present state of the law upon this subject, it may perhaps be doubted whether any more precise general rule can be laid down than, as indicated at the beginning of this opinion, that those persons are partners, who contribute either property or money to carry on a joint business for their common benefit, and who own and share the profits thereof in certain proportions. If they do this, the incidents or consequences follow, that the acts of one in conducting the partnership business are the acts of all; that each is agent for the firm and for the other partners; that each receives part of the profits as profits, and takes part of the fund to which the creditors of the partnership have a right to look for the payment of their debts; that all are liable as partners upon contracts made by any of them with third persons within the scope of the partnership business; and that even an express stipulation between them that one shall not be so liable, though good between themselves, is ineffectual as against third persons. And participating in profits is presumptive, but not conclusive, evidence of partnership.

In whatever form the rule is expressed, it is universally held

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