Hanthorn v. Quinn

69 P. 817, 42 Or. 1, 1902 Ore. LEXIS 135

• Court: Oregon Supreme Court
• Decided: August 4, 1902
• Status: Published

Opinion

Mr. Justice Bean,

after stating the facts, delivered the opinion of the court.

There is no controversy as to the amount to be recovered in case the defendant is liable. Nor is there any serious question that the written contract set out in the complaint does not embody the terms of the agreement between the parties. The defendant alleges, and gave some evidence tending to show, that it should have contained a provision exonerating him from liability for any losses incurred in conducting the enterprise, and that it was omitted from the agreement by mistake; but it is very clear from the testimony that the written instrument contains the actual terms of the contract between the parties, and was so understood by them before it was executed. The defendant admits that the question of probable losses was discussed while the contract was in course of preparation, but says it was understood that he should not be liable for any loss, and it was intended that such a provision should be inserted in the contract. Judge Taylor, who prepared the contract, on the other hand, says that the question was mentioned, and he told the parties that then was the time to settle all such matters, as the written contract after its execution, would prevail; that plaintiff and defendant talked the subject over, and finally came to an agreement upon that point, which was first reduced to writing in pencil, read over to the parties, and, after having been finally agreed upon, embodied in the contract, which was then read over to and signed by the parties in duplicate. The plaintiff says that when, in the preparation of the agreement, they came to the question of profits and losses, the defendant and his wife suggested that he should take all the chances, but he refused to accede to that proposition, and told them, if they insisted upon it, he would go no further with the agreement; that it was finally understood and agreed that they should share equally in the losses, if any, and the contract was prepared and executed accordingly. The written contract must therefore be taken to express the real agreement of the parties, and the only question for determination is whether, under its provisions, the defendant is liable for one half the expenses incurred by the plaintiff in the unsuccessful attempt to establish and conduct a fishery on the premises described therein.

The complaint alleges, and the court below found, that the plaintiff and defendant were partners in the enterprise, and that defendant is liable as such for one half the losses. A partnership is defined as a voluntary contract between two or more persons agreeing to put their money, effects, labor, and skill, or either or all, in some lawful enterprise or business, with a view of dividing the profits or sharing the losses which result therefrom (Flower v. Barnekoff, 20 Or. 132, 25 Pac. 370, 11 L. R. A. 149); or, as defined by Mr'. Justice Moore, it is “an agreement, entered into between two or more persons, to unite their labor, skill, money, and property, or either or all of them, in a lawful enterprise for their mutual account”: Willis v. Crawford, 38 Or. 522 (63 Pac. 985, 64 Pac. 866, 53 L. R. A. 904). In determining whether a partnership exists between two or more persons, the intention of the parties must govern, and, where the facts are given, the question is one of law for the court, from the whole contract, regardless off what the parties may call their agreement, or of special expressions or provisions therein: 1 Bates, Partn. § 17. Among the essential elements of every partnership are a community of interest in the property and business, and the right of survivorship. Every member of a partnership is a principal having a joint interest in the property, — is an agent of his associates, — and, upon the death of his partner, is entitled to retain and dispose of the partnership effects in the settlement of its affairs. A mere agreement to share in the profits and losses of an enterprise does not of itself create a partnership: Bates, Partn. § 29; Shrum v. Simpson, 155 Ind. 160 (57 N.E. 708, 49 L.R.A. 792); Eastman v. Clark, 53 N. H. 279 (16 Am. Rep. 192). “One essential element of a partnership,” says Mr. Justice Sbepley, “is a community of interest in the subject-matter of it. *•* From this arises the right of each partner to make contracts, incur liabilities, manage the whole business, and dispose of the whole property of the partnership, for its purpose, in the same manner and with the same power as all the partners could when acting together. Another element is that, upon the dissolution of the partnership by the death of one of the partners, the survivors become entitled to retain and dispose of the partnership effects for a settlement of all its affairs, and for a distribution of the remaining fund. However the arrangement of business may assimilate it to a partnership, if it be such that on the death of one interested this becomes impossible, it will be evidence that there was no proper partnership existing”: Dwinel v. Stone, 30 Me. 384. And in Roper v. Schaefer, 35 Mo. App. 30, the law is said to be “that simple participation in the profits and losses of a business does not constitute a partnership, but there must be such a community of interest as enables each party to make contracts, manage the business, and dispose of the whole property; and this rule is the same as to third persons, unless the party sought to be charged has so acted as to lead the plaintiff to believe a partnership to exist, and to act upon such a belief.” So, also, in Ashby v. Shaw, 82 Mo. 76: “The relation of partnership does not exist between persons associated in a common undertaking, unless each one has the right to manage the whole business, and to dispose of the entire property involved in the enterprise,, for its purpose, in the same manner and with the same power as all can when acting together. ’ ’

By the application of these principles to the facts, it is not difficult to determine whether a partnership actually existed between the plaintiff and the defendant. Turning to the written agreement, from the terms of which this question must be determined, we fin'd that its salient features are: (1) That the defendant and wife “let, leased, and demised” to the plaintiff, “his heirs and assigns, for a term of ten years, * * for fishery purposes,” certain described rights and premises, in consideration of the sum of $1 and other valuable' consideration; (2) a joint use was given the plaintiff with the defendant of a certain wharf; (3) the plaintiff was given the privilege of pasturage for “all horses and other stock used by” him “in carrying on and operating a fishery” on the leased premises; and (4) the lessor warranted peaceable use and enjoyment of the premises to the plaintiff, “his heirs, executors,” etc. In consideration of these covenants and agreements on the part of the defendant, the plaintiff agreed: (1) that he would take charge of the premises, and “will, in the first instance, each year, advance all moneys necessary therefor, and will construct all necessary buildings, and make all necessary improvements,” etc., “in order to establish and operate upon said leased premises a fishery,” etc.; (2) that he would “operate, conduct, and carry on said fishery,” and dispose of the fish caught, as provided in the contract; (3) that he would keep books of account covering all the transactions, which should be open to the inspection of all parties interested; (4) that at the end of each fishing season, he would pay to the defendant ‘ ‘ one half the net proceeds derived from said fishery, after paying all expenses and indebtedness incurred in establishing, conducting, and operating the same.” So far, it is clear. The contract is nothing more than a mere lease from the defendant to the plaintiff of certain fishery grounds, with an agreement on his part to establish a fishery thereon, to operate the same, and pay to the defendant one half the net proceeds as rental. But the next clause is the one that has given rise to this litigation. By it plaintiff and defendant mutually agreed “that they will each bear one half of the cost and expense of said buildings, improvements, and gear and plant, and the necessary cost and expense of maintaining and operating said fishery, and everything connected therewith, and that they will share equally in the profits and losses of said fishery. ’ ’ The plaintiff’s position is that by this stipulation, in connection with the previous agreement on his part to, “in the first instance, each year, advance all moneys necessary therefor,” and construct the necessary buildings, etc., in order to establish and operate a fishery, etc., the parties became in effect partners, jointly interested in the business, and liable equally for the losses incurred therein. Standing alone, and without reference to the context, the clause would seem to support the plaintiff’s contention, but it must be interpreted in connection with the other provisions of the contract, and the evident purpose of the agreement, so as to carry out the intentions of the parties thereto.

Taking the agreement as a whole, we do not think it created the relation of partners between the plaintiff and defendant. On its face it purports to be, and is, nothing more than a lease by defendant to the plaintiff of certain described premises and fishing rights for the term of ten years, and has none of the ordinary characteristics of a partnership agreement. There is to be no community of interest between the plaintiff and defendant in the property belonging to the proposed fishery, or in the business, nor is the defendant to have any control thereof, or make any contracts with reference thereto. The plaintiff is given the entire and exclusive possession of the leased premises, and of the management and control of the fishery and of the business connected therewith. The defendant has no voice in the matter whatever. He has no power to make contracts, incur liabilities, to bind the fishery or property, to manage the business, sell or dispose of the fishery or its products, and, if the plaintiff had died, could not, as a partner, have retained and disposed of the property. The situation of the parties, the evident purpose and object of the agreement, its terms and provisions, and the manner in which the business was to be conducted, are wholly inconsistent with the theory of a partnership. Under such an interpretation of the contract, the defendant was putting into the partnership business valuable fishing grounds and wharfage rights without any compensation whatever, and was irrevocably vesting in the plaintiff, not only the exclusive possession ra the leased premises for the term of ten years, but the right to make such contracts, incur such liabilities, and expend such sums of money in connection with the proposed fishery, during the entire term of the lease, as in his judgment might seem advisable, and the defendant would be liable for one half thereof, although excluded from any participation in the management or control of the business. It is impossible to believe that either of the parties intended any such agreement.

It may be said, however, that it is immaterial, for the purpose of this case, whether the plaintiff and defendant became partners under the terms of the agreement, since it is provided therein that they will each bear one half the cost and expense of establishing and operating a fishery on the premises described in the complaint, and will share equally in the profits and losses thereof. But before the plaintiff can recover under this provision, unless the defendant is to be deemed a partner, and the case disposed of on equitable principles applicable to such relationship, he must show that he has complied with the terms of the contract on his part; and this, it is substantially admitted, he failed to do. Under the contract, he agreed to construct all necessary buildings, make all necessary improvements, and supply all necessary gear and plant, “in order to establish and operate upon said leased premises a fishery,” advancing, in the first instance, all moneys necessai'y therefor. And before he has a right of action against the defendant, under the profit and loss clause of the agreement, he must show that he has, in fact, established and operated a fishery upon such premises; and this he has not done. By the agreement, the defendant stipulated that he would bear one half of the cost and expense of such buildings, gear, and plant as might be necessary to establish the fishery, and one half of the expense of operating the same, and would share equally with the plaintiff in the profits and losses of “said fishery.” But unless a fishery was in fact established'by the plaintiff, as provided in the contract, there was no obligation on his part. He did not agree to make any advances, or in any way reimburse the plaintiff for money expended in an abortive attempt to establish one. Now the evidence shows, and it is not seriously disputed, that plaintiff never did establish a fishery on the leased premises, because he did not succeed in removing the snags, piling, and other obstructions, so that the ground could be successfully used for seining purposes. After three or four years of ineffectual effort, finding that the expense was so much more than had been anticipated, he practically abandoned the enterprise. The evidence shows that it was possible to clear the ground so that it could have been made available for fishing purposes. The fact that the work was more expensive than plaintiff or any one else anticipated is no excuse for his failure to comply with the terms of his contract. " If, ” as said by the Supreme Court of Minnesota in Stees v. Leonard, 20 Minn. 494 (Gil. 448), "a man bind himself, by a positive, express contract, to do an act in itself possible, he must perform his engagement unless prevented by the act of God, the law, or the other party to the contract. No hardship, no unforeseen hindrance, no difficulty short of impossibility, will excuse him from doing what he has expressly agreed to do. This doctrine may sometimes seem to bear heavily upon contractors, but, in such eases, the hardship is attributable, not to the law, but to the contractor himself, who has improvidently assumed an absolute, ivhen he might have undertaken only a qualified, liability. The law does no more than enforce the contract as the parties themselves have made it. Many cases, illustrating the application of the doctrine to every variety of contract, are collected in the note to Cutter v. Powell, 2 Smith Lead. Cas. 1.”

And, in Stone v. Dennis, 3 Port. 231, at page 241, it is said: "Where a contract does not contain, .on its face, anything impossible, illegal, or immoral, and where there does not appear to have arisen anything subsequent, in the making of it, which renders it so, and it is founded upon a sufficient consideration, the party making it is held to its performance. It is the duty of the contracting parties to provide against contingencies; they are presumed to know whether the completion of the duty they undertake be within their power. Therefore, to excuse them from the performance of their contracts, they must bring themselves within some one of the above provisions. Without it, however hard the case may be, the party is held to his contract.” In the recent case of Sun Pr. & Pub. Co. v. Moore, 183 U. S. 642 (22 Sup. Ct. 240), Mr. Justice White says: “A court of law possesses no dispensing powers; it cannot inquire whether the parties Have acted wisely or rashly in respect to any stipulation they may have thought proper to introduce into their agreements. If they are competent to contract within the prudential rules the law has fixed as to parties, and there has been no fraud, circumvention, or illegality in the case, the court is bound to enforce the agreement. Men may enter into improvident contracts where the advantage is knowingly and strikingly against them; they may also expend their property upon idle or worthless objects, or give it away, if they please, without an equivalent, in spite of the powers or interference of the court.” It follows, therefore, that, however onerous the agreement on the part of the plaintiff to establish and operate a fishery upon the leased ground proved to be by actual experience, the hardship affords no excuse for his failure to perform his contract, or ground for relief as against the defendant. He did not, in fact, establish and operate a fishery; and this was a condition precedent to his right to enforce against the defendant the provision requiring the latter to share in the profits and losses of the fishery to be established. It follows that the decree of the court below must be reversed, and it is so ordered. Reversed.