To determine whether persons are in fact partners, we must look at their intention, and this is deducible from their declaration as to their intention, and the agreements that they make regarding the subject-matter; and, where the contract under which the business
engagement is made contains the express or implied disavowal of an intention to assume the partnership relation, no partnership will be found to exist, unless such declaration is so at variance and so inconsistent with their engagement as to be irreconcilable. If the actual engagements are incompatible with the expression of intention, the latter must yield to the former; but, where they can be reconciled, the latter must govern. Mr. Justice COOLEY says in Beecher v.Bush, 45 Mich. 193: "If parties intend no partnership, the courts should give effect to their intent, unless somebody has been deceived by their acting or assuming to act as partners; and any such case must stand upon its peculiar facts, and upon special equities." And Chancellor Kent, in the case of Post v. Kimberly, 9 Johns. 504, after admitting the rule that expressions of intention must yield to actual engagements, says: "But every doubtful case must be solved in favor of the intent; otherwise, we should carry the doctrine of constructive partnership so far as to render it a trap to the unwary." We see no reason to force partnership relations and obligations upon parties who did not desire or intend to assume them, especially where the interests or rights of third parties are not to be affected. With this in view we will examine the contract between these alleged partners, in the light of the circumstances surrounding the transaction.
The Canton Bridge Company was a manufacturer engaged in providing material and manufacturing and erecting bridges from iron, having an extensive factory at Canton, Ohio, and doing business in that and other States. An examination of the written contract between the plaintiff and Mr. Wheaton will show its first provision to be a recital of the fact that "the Canton Bridge Company has this day appointed R. D. Wheaton its agent to contract for bridges and general iron work, and to do any otherwork in connection with the general business, when directed," in several States. It agreed to advance all
money necessary to pay all general expenses incurred in said business, upon detailed statements of account, rendered monthly. Wheaton promised to devote his entire time and ability to the business, in consideration of which the Canton Bridge Company agreed to pay to Wheaton one-half ofthe net profits. These were to be arrived at by deducting the expenses from the contract price of jobs, the balance to be divided equally; losses, if any, to be divided in the same way. There was a further agreement that the company should buy a one-half interest in certain tools owned by a firm, then existing, of R. D. Wheaton Co., said interest belonging to one Darst.
Under this contract the parties were to share the profits and losses, but the Canton Bridge Company was to furnish the material and labor, or advance the necessary funds to pay for the same. There is nothing to indicate that Wheaton was to own any share in these materials. He was to give his services, and that was all of the obligation that he assumed. The contract does not bind him to put a dollar into the common enterprise. These things being true, it is entirely consistent that he should be an agent, as the contract states, and that he should be"paid" by the company for "his services," and that his salary or compensation should be one-half of the profits. Numerous decisions support the proposition that a share of the profits may be treated ascompensation merely. See authorities cited in the opinion of Mr. Justice MCGRATH in Dutcher v. Buck, 96 Mich. 163.
Does the sole remaining fact, viz., the sharing of losses, necessarily make the parties partners, against the express agreement that Wheatonwas agent, to be "paid" by plaintiff for his "services," — for whateverlabor it should direct him to perform in relation to its property? It would seem to be reasonable to conclude that the provision concerning losses was designed to induce care on the part of the agent in taking contracts. It carried his interest in case of unprofitable work a little beyond the line of
the mere loss of profits, and no reason suggests itself why that might not be consistent with the existence of an agency, instead of a partnership. In Beecher v. Bush, 45 Mich. 199, numerous cases are cited to the proposition that a share of the profits may be compensation forservices. Ordinarily, an agreement to put service against capital, and share the profits and losses, will warrant the inference of a partnership; but such does not absolutely constitute a partnership, as a legal conclusion, where other circumstances show that no partnership was created or intended. See 1 Bates, Partn. § 29, where this subject is discussed, and numerous instances cited to show that the intention controls where not inconsistent with the undertakings of the parties. We understand this to accord with the views expressed by Mr. Justice COOLEY in Beecher v. Bush. Among the cases cited in support of this proposition by the author quoted is Morgan v. Stearns, 41 Vt. 398, in which it is said, that "sharing in the profits and loss of the business is not decisive as between the parties, as this may have been merely an arrangement with a view to compensation for services." Again, where plaintiff was to cultivate defendant's farm, each to pay half of the expenses, and divide the profits equally, a charge that they were partners was held erroneous. Donnell v. Harshe, 67 Mo. 170. This arrangement plainly covered a sharing of the losses, as well as profits; and such contracts are of every-day occurrence, yet no one thinks of treating them as partnerships, though they might be if the parties so intended. In McDonald v. Matney, 82 Mo. 358, B., the owner of a bank, agreed to give A. one-third of his net profits for a year; A. to bear one-third of the losses, and to attend to the business, but B. to have entire control. The court said that mere participation in profit and loss does not necessarily constitute a partnership inter se, but that it is a question of intention. Where plaintiff was to share in profits and losses of defendant's
business for three years, in the proportion of 171/2 per cent., and to act as salesman, but not to have the right of partnership in the firm, and the capital then standing to his credit on the books was to remain in at 7 per cent., but he could draw an annual amount for his support, it was held that the parties were not partners inter se. Osbrey v.Reimer, 51 N. Y. 630. See, also, Stevens v. Faucet, 24 Ill. 483;Fawcett v. Osborn, 32 Ill. 412; Mair v. Glennie, 4 Maule S. 240;Dwinel v. Stone, 30 Me. 384; Ross v. Parkyns, L. R. 20 Eq. 331;Walker v. Hirsch, 27 Ch. Div. 460; Bullen v. Sharp, L. R. 1 C. P. 86.
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To determine whether persons are in fact partners, we must look at their intention, and this is deducible from their declaration as to their intention, and the agreements that they make regarding the subject-matter; and, where the contract under which the business
engagement is made contains the express or implied disavowal of an intention to assume the partnership relation, no partnership will be found to exist, unless such declaration is so at variance and so inconsistent with their engagement as to be irreconcilable. If the actual engagements are incompatible with the expression of intention, the latter must yield to the former; but, where they can be reconciled, the latter must govern. Mr. Justice COOLEY says in Beecher v.Bush, 45 Mich. 193: "If parties intend no partnership, the courts should give effect to their intent, unless somebody has been deceived by their acting or assuming to act as partners; and any such case must stand upon its peculiar facts, and upon special equities." And Chancellor Kent, in the case of Post v. Kimberly, 9 Johns. 504, after admitting the rule that expressions of intention must yield to actual engagements, says: "But every doubtful case must be solved in favor of the intent; otherwise, we should carry the doctrine of constructive partnership so far as to render it a trap to the unwary." We see no reason to force partnership relations and obligations upon parties who did not desire or intend to assume them, especially where the interests or rights of third parties are not to be affected. With this in view we will examine the contract between these alleged partners, in the light of the circumstances surrounding the transaction.
The Canton Bridge Company was a manufacturer engaged in providing material and manufacturing and erecting bridges from iron, having an extensive factory at Canton, Ohio, and doing business in that and other States. An examination of the written contract between the plaintiff and Mr. Wheaton will show its first provision to be a recital of the fact that "the Canton Bridge Company has this day appointed R. D. Wheaton its agent to contract for bridges and general iron work, and to do any otherwork in connection with the general business, when directed," in several States. It agreed to advance all
money necessary to pay all general expenses incurred in said business, upon detailed statements of account, rendered monthly. Wheaton promised to devote his entire time and ability to the business, in consideration of which the Canton Bridge Company agreed to pay to Wheaton one-half ofthe net profits. These were to be arrived at by deducting the expenses from the contract price of jobs, the balance to be divided equally; losses, if any, to be divided in the same way. There was a further agreement that the company should buy a one-half interest in certain tools owned by a firm, then existing, of R. D. Wheaton Co., said interest belonging to one Darst.
Under this contract the parties were to share the profits and losses, but the Canton Bridge Company was to furnish the material and labor, or advance the necessary funds to pay for the same. There is nothing to indicate that Wheaton was to own any share in these materials. He was to give his services, and that was all of the obligation that he assumed. The contract does not bind him to put a dollar into the common enterprise. These things being true, it is entirely consistent that he should be an agent, as the contract states, and that he should be"paid" by the company for "his services," and that his salary or compensation should be one-half of the profits. Numerous decisions support the proposition that a share of the profits may be treated ascompensation merely. See authorities cited in the opinion of Mr. Justice MCGRATH in Dutcher v. Buck, 96 Mich. 163.
Does the sole remaining fact, viz., the sharing of losses, necessarily make the parties partners, against the express agreement that Wheatonwas agent, to be "paid" by plaintiff for his "services," — for whateverlabor it should direct him to perform in relation to its property? It would seem to be reasonable to conclude that the provision concerning losses was designed to induce care on the part of the agent in taking contracts. It carried his interest in case of unprofitable work a little beyond the line of
the mere loss of profits, and no reason suggests itself why that might not be consistent with the existence of an agency, instead of a partnership. In Beecher v. Bush, 45 Mich. 199, numerous cases are cited to the proposition that a share of the profits may be compensation forservices. Ordinarily, an agreement to put service against capital, and share the profits and losses, will warrant the inference of a partnership; but such does not absolutely constitute a partnership, as a legal conclusion, where other circumstances show that no partnership was created or intended. See 1 Bates, Partn. § 29, where this subject is discussed, and numerous instances cited to show that the intention controls where not inconsistent with the undertakings of the parties. We understand this to accord with the views expressed by Mr. Justice COOLEY in Beecher v. Bush. Among the cases cited in support of this proposition by the author quoted is Morgan v. Stearns, 41 Vt. 398, in which it is said, that "sharing in the profits and loss of the business is not decisive as between the parties, as this may have been merely an arrangement with a view to compensation for services." Again, where plaintiff was to cultivate defendant's farm, each to pay half of the expenses, and divide the profits equally, a charge that they were partners was held erroneous. Donnell v. Harshe, 67 Mo. 170. This arrangement plainly covered a sharing of the losses, as well as profits; and such contracts are of every-day occurrence, yet no one thinks of treating them as partnerships, though they might be if the parties so intended. In McDonald v. Matney, 82 Mo. 358, B., the owner of a bank, agreed to give A. one-third of his net profits for a year; A. to bear one-third of the losses, and to attend to the business, but B. to have entire control. The court said that mere participation in profit and loss does not necessarily constitute a partnership inter se, but that it is a question of intention. Where plaintiff was to share in profits and losses of defendant's
business for three years, in the proportion of 171/2 per cent., and to act as salesman, but not to have the right of partnership in the firm, and the capital then standing to his credit on the books was to remain in at 7 per cent., but he could draw an annual amount for his support, it was held that the parties were not partners inter se. Osbrey v.Reimer, 51 N. Y. 630. See, also, Stevens v. Faucet, 24 Ill. 483;Fawcett v. Osborn, 32 Ill. 412; Mair v. Glennie, 4 Maule S. 240;Dwinel v. Stone, 30 Me. 384; Ross v. Parkyns, L. R. 20 Eq. 331;Walker v. Hirsch, 27 Ch. Div. 460; Bullen v. Sharp, L. R. 1 C. P. 86.
In the case of Monroe v. Greenhoe, 54 Mich. 9, "a man arranged with a firm that he would buy standing timber, and cut, pile, and ship it, being paid therefor its cost and a certain sum per thousand. The firm was to sell it, and, after paying all expenses, was to divide the net proceeds with him equally, and he was to bear half the losses. But he had nothing to do with disposing of it after shipment, and the firm had no control over it before. Held, that this arrangement did not amount to a partnership as to the unshipped lumber, at least; and the parties concerned could not be taxed as a firm upon such lumber." In that case Mr. Justice CAMPBELL, speaking for a unanimous bench, said: "We do not think this agreement made any partnership, in the proper sense of the term, except, possibly, in such lumber as was actually loaded on the cars, and there are difficulties in the way of holding even that."
Dutcher v. Buck, 96 Mich. 160, should not be held conclusive of the question in this case. There was, in that instance, "community of property, interest, and profits." Such was not the case here, for there was not community of property. Wheaton was owner of nothing, while the plaintiff was owner of all materials, and its credit might be pledged upon the basis of monthly payments for labor and such materials as it did not furnish. Again, in the case before us the status of the parties is made clear, and
it is apparent that the relation of principal and agent was intended. It does not appear so clearly in Dutcher v. Buck.
The circuit judge was therefore in error in his instruction that the plaintiff and Wheaton were copartners, and that a verdict must be rendered for the defendant. The judgment should therefore be reversed. A new trial is directed.
LONG and GRANT, JJ., concurred with HOOKER, J.