Edwards v. Tracy

62 Pa. 374, 1870 Pa. LEXIS 7

Opinion

The opinion of the court was delivered,

by Sharswood, J.

The defendants were sued in the court below as partners. Daniel Tracy, George H. Benton and Edward B. Beebe were in business under the firm name of Tracy, Benton & Co. The goods of the plaintiffs were sold and delivered to them. Richard Vandervier and A. B. Thorn composed a firm in New York, in the same busines, and the allegation of the plaintiffs was that they were dormant partners of Tracy, Benton & Co. Tracy and Vandervier and Thorn, respectively, appeared by attorney. The other defendants did not appear, nor was any plea put in except on behalf of Vandervier and Thorn. The case, however, was tried without any notice of the irregularities.

The plaintiffs offered to prove the declarations of Daniel Tracy, one of the defendants, that Vandervier and Thorn were members of the firm of Tracy, Benton & Co., not in the presence of either Vandervier or Thorn, to be followed by acts and declarations of Vandervier and Thorn, or one or either of them, to the same effect. This offer was rejected by the court, an exception was taken by the plaintiffs, and it forms the subject of the 1st assignment of errors.

The declarations of a party to the suit as to the existence of a partnership are unquestionably competent to prove him to have been a member of the alleged firm, and who were admitted by him to have been the persons composing it. Such declarations are not, however, competent evidence against the others, and it is the duty of the court so to instruct the jury: Taylor v. Henderson, 17 S. & R. 453; Johnston v. Warden, 3 Watts 101; Haughey v. Strickler, 2 W & S. 411; Lenhart v. Allen, 8 Casey 312; Bowers v. Still, 13 Wright 65; Crossgrove v. Himmelrich, 4 P. F. Smith 203. The same rule has been applied to the admissions of a defendant not served with process, and not, therefore, a party to the issue: Porter v. Wilson, 1 Harris 641. The objection taken below was that the acts and declarations of Vandervier and Thorn should have been first given in evidence to charge them; but it is plain that the same objection would have been equally good against their separate declarations to connect the others with them. The acts or declarations of each must, in the nature of things, be given in evidence separately and successively; otherwise, nothing of the kind would be available but a joint declaration by all together. Practically, it would exclude all such evidence. If A admits that he is a partner with B, and B admits that he is a partner with A, it is evidence of a partnership as to both: Drennen v. House, 5 Wright 30, and it matters not which declaration is first offered. Nor does the fact that there was an agreement in writing between the defendants prevent the admission of this species of testimony. This was expressly so held in Widdifield v. Widdifield, 2 Binney 245. “ Might not evidence be given,” asks Chief Justice Tilghman, “of their confession of a general partnership subsequent to the articles, or of their acting in such a manner as was inconsistent with anything but a general partnership ? How are the world tq know anything about instruments of writing made in secret between persons in trade ?” We think there was error, therefore, in the rejection of this offer.

The 2d error assigned is in rejecting a letter written by Daniel Tracy to third persons for the purpose of showing'a partnership with Yandervier and Thorn. But this letter, or a copy of it, should have been attached to the bill of exceptions by a pro ut, in order to enable this court to see whether it did tend to show that for which it was offered: Stafford v. Stafford, 3 Casey 144; Gratz v. Gratz, 4 Rawle 411; Rice v. Groff, 8 P. F. Smith 116. It is true that this is not the reason stated by the learned judge for the rejection; but as Mr. Justice Kennedy remarks in Gratz v. Gratz, it would not be right to test the admissibility of evidence by the insufficiency of the reason assigned by the court below for rejecting it. A right judgment is not to be reversed on account of a wrong reason given for rendering it.

The 3d and 7th assignments of error may be considered together. They relate, to the question whether upon the true construction of the written agreement of June 28th 1865, between the defendants, they thereby became partners as to third persons. That it was a partnership inter se has not been, and cannot be seriously pretended. It is headed “ Memorandum of terms upon which Yandervier & Thorn consign to Tracy, Benton & Co., Titusville, Pa., merchandise to be sold for their account; viz., Yandervier & Thorn.” Such it appears to be. Tracy, Benton & Co. were to hire a store at a specified rent, of which Yandervier & Thorn were to pay one-half, and to supply and own the store fixtures.. Tracy, Benton & Co. were to receive the goods consigned to them, dispose of them to the best advantage, keep the business and money distinct from all other transactions, remit the proceeds promptly to Yandervier & Thorn, not engage in any business that would in any way interfere with the selling of such merchandise as Yandervier & Thorn might, from time to time, consign to them; and not sell or dispose of any merchandise except such as might come from or through Yandervier & Thorn. In con sideration of these services they were to receive a commission on the sale of the merchandise consigned to them equal to one-half the net profits above the cost of said goods to Vandervier & Thorn. It may be conceded that if, under this agreement, Tracy, Renton & Co. would have been liable as partners for debts contracted by Yandervier & Thorn in the purchase of goods to supply the stock of the store, the correlative propositibn must also hold good — that Yandervier & Thorn would be liable for goods purchased by Tracy, Benton & Co. Eor, although articles of partnership may deny to one of the partners any right to bind the firm by his separate act, within the scope of the partnership business he nevertheless has the power, inasmuch as the world cannot know, and are not to be affected, by any such limitations. Each partner is the general agent of his copartners in all matters within the scope of the business carried on by the firm: Lindley on Part. 260; Loudon Savings Fund v. Hagerstown Bank, 12 Casey 498. It is well settled law in this state that a participant in profits directly as such, no matter what may be the arrangement between the parties, is, as to third persons, a partner: Gill v. Kuhn, 6 S. & R. 337; Churchman v. Smith, 6 Whart. 148. The reason is that the creditors trust to the common stock, and therefore no man shall be allowed to lessen that fund by taking part of the profits which belong to it without incurring the responsibility of a partner: Purviance v. McClintee, 6 S. & R. 259. “ In the present state of the law,” said Chief Justice Tilghman, “we cannot afford to part with any of the safeguards against fraud. It is impossible to know the secret agreements of merchants. It is of importance that creditors should not be deprived of that fund to which they had a right to look, as it was the visible sign held out to them by which they were to judge of the amount of the partnership property.” The dictum of Chief Justice De Gray, in Grace v. Swith, 2 Wm. Blackst. 998, — “that every man who has a share of the profits of a trade ought also to bear a share of the loss,” was adopted as the ground of judgment in Waugh v. Carver, 2 H. Blackst. 235, where it was laid down “ that he who takes a moiety of all profits indefinitely shall, by operation of lato, be made liable to losses, if losses arise, upon the principle that, by taking a part of the profits, he takes from the creditors a part of that fund which is the proper security to them for the payment of their debts.” That case has been followed in England in many other cases, down to a very recent period: 1 Smith’s Leading Cases 504; 3 Kent’s Com. 27; Lindley 36. It remained unshaken for more than seventy years. “ The reasoning on which it proceeds,” said Baron Bramwell, in Bullen v. Sharp, to be presently cited, “ seems to have been generally acquiesced in at the time; and when more recently it was disputed, it was a common opinion (in which I for one participated) that the doctrine had become so inveterately part 'of the law of England that it would require legislation to reverse it.” Notwithstanding all this it may now be considered as substantially overruled in England by Cox v. Hickman, 8 House of Lords Cases 268; and Bullen v. Sharp, 1 Common Pleas, Law Rep. 86, in the Exchequer Chamber.

It is not necessary here, and it would be presumptuous, to enter upon a consideration of the able and elaborate opinions of the judges in those cases, in which it was concluded that a direct participation in profits as such was cogent, but not conclusive, evidence of a partnership. A distinction, which, it must be admitted, is of a very refined and shadowy character, has been authoritatively established both there and here, that while a right to share in the profits may constitute a partner, a commission equal to such a share, as a compensation for services, does not: Ex parte Hamper, 17 Ves. 404; Ex parte Watson, 19 Ves. 459 ; Miller v. Bartlett, 15 S. & R. 137; Dunham v. Rogers, 1 Barr 255. That this exception to the general rule is founded upon a-distinction without any difference has been generally conceded, and it is used by Baron Bramwell in Bullen v. Sharp with great force as an argument against the soundness of the rule itself. It is entirely too late now to question either the rule or the exception. We are bound to stand super antiquas vias, by our own decided cases; for nothing is truer, or more important, than the maxim: Omñis innovatio plus novitate perturbat, quam utilitate prodest. The interest of Tracy, Benton & Co. in the profits being, by the terms of the agreement, “ a commission upon the sale of the merchandise consigned to them, equal to one-half of the net profits upon such sale,” did not make them partners, nor attach to them either the rights or responsibilities of such partners.

But the agreement adds: “Any loss that may occur, Tracy, Benton & Co. agree to pay one-half.” Here, indeed, is the pinch of the case. If this clause is to he construed in its broad sense, which would make Tracy, Benton & Co. liable for a moiety of the losses which might arise to Vandervier & Thorn in the purchase and sale of the goods — for example, from a fall in the market prices of the commodities — then, indeed, it would be difficult to see how they could stand in any other relation than as partners even inter se. They would seem to have in that case a direct interest in the commodities, or stock, itself, and to be in no way distinguishable from those having a direct participation in profits and losses. “ Traders,” says Tindal, C. J., “ become partners between themselves by a mutual participation of profit and loss; but as to third persons, they are partners if they share the profits of the concern:” Pott v. Eyton, 3 Manning, Granger & Scott 39. It is not necessary, however, to express any decided opinion upon this point; because we think the clause in question does not rea sonably bear so broad a construction. Looking at tbe whole scope of the agreement, the loss referred to was meant to be confined to that which might arise in the sale and disposition of the goods consigned by Yandervier & Thorn to Tracy, Benton & Co. The learned judge below thought that a loss by fire was excluded, and perhaps he was right; for the agreement evidently implies that the duty of insurance and, therefore, the risk from fire, rested upon Yandervier & Thorn alone. They were to pay the freight and be at the cost of delivering the goods at -Titusville, so that any liability of Tracy, Benton & Co. was not contemplated until such delivery. The agreement constitutes them factors, or commission merchants, with power to sell the goods consigned to them, but no authority is given to buy other goods. On the contrary, they stipulate not to sell or dispose of any merchandise, except such as might come from or through Yandervier & Thorn. Now, it is dear that an agreement by a factor, selling .goods consigned to him for a commission, that he would be liable, either in whole or in part, even for fire or robbery, or for bad debts made in the sale of the goods on credit, would not constitute him a partner with his principal. Every factor who sells under a del credere commission, assumes the entire responsibility for the sales made by him; and it has never been pretended that it either conferred upon him the authority, or visited him with the liability, of a partner. We are of the opinion, then, that the learned judge below was right in holding that the agreement of June 28th 1865 did not create a partnership, and these assignments of error, consequently, are not sustained.

There is no error in the answer to the plaintiff’s 2d point, which is the ground of the 4th assignment. The violation by Tracy, Benton & Co. of the agreement of June 28th 1865 by the purchase and sale of other goods than those consigned to them, even with the knowledge of Yandervier & Thorn, and their not keeping separate accounts of the sales as they were bound to do, was certainly no reason for subjecting Yandervier & Thorn to liability, as partners, for goods bought by Tracy, Benton & Co. in their own name and on their own credit. The business of the store was not carried on in the name of Yandervier & Thorn, but of Tracy, Benton & Co.; and there was no holding out of them as partners, or interested in purchases made by Tracy, Benton & Co.

The plaintiff’s 3d point was in effect affirmed by the court, and if the judge added, “We have no recollection of such evidence, unless you can infer it from the acts of Thorn before and after Yandervier & Thorn took possession of the store,” it- is not easy to perceive how the plaintiffs were injured by that remark. In point of fact it is not pretended that there was any other evidence than that referred to by the judge, and this was submitted to the jury as requested by the plaintiffs.

The 6th assignment of error is that “ the court erred in charging the jury that unless they believe, from the evidence, that Tracy, Benton & Co. and Vandervier & Thorn were partners in business, their verdict must be for the defendants.” It is contended that the plaintiffs were, at all events, entitled to a verdict against Tracy, Benton & Oo., but only one of them had appeared to the action, and he had not pleaded. How could there have been a verdict against those who were not parties to the issue ? In the absence of evidence that the names of the members of the firm of Tracy, Benton & Co. were filed in the office of the prothonotary of the Court of Common Pleas of the county where the partnership was carried on, in pursuance of the 13th section of the Act of April 14th 1851, Pamph. L. 615, the defendants could not plead, or take advantage of “the inclusion of the names of persons not members of said partnership,” and had all of them been in court and parties to the issue, the plaintiffs, having made out their case against Tracy, Benton & Co., would have been entitled to a verdict against them, even if Vandervier & Thorn were not partners. This point, indeed, does not appear to have been presented or brought to the notice of the court; nor the irregularity of trying an issue joined by some of the defendants before a judgment against those who were in default. As the case, however, goes back, the record may be amended, and the matter made right on another trial.

Judgment reversed, and venire facias de novo awarded.