Hazard v. Hazard

11 F. Cas. 927, 1 Story 371

• Court: U.S. Circuit Court for the District of Rhode Island
• Decided: November 15, 1840
• Status: Published

Opinion

STORY, Circuit Justice.

In the view which I take of this case, it is wholly unnecessary to go into the examination of several collateral matters, which are stated in the bill and answer and evidence, and which have been adverted to at the argument. The only question, which it appears to me is now before the court for consideration, is, whether under and in virtue of the informal agreement, in December, 1825, there was constituted a partnership between the parties for carrying on the factories. If there was, then there ought to be an interlocutory decree for an account. If there was not, then the bill ought to be dismissed, for although in positive terms it does not (as doubtless it ought) aver a partnership, yet the whole structure and frame of the bill is formed to this aspect of the case, and the bill would be unintelligible without it Now, upon the point, whether there was a partnership or not between these parties in the factory business, under the agreement, it is necessary to take notice of a well known distinction between cases, where, as to third persons, there is held to be a partnership, and cases where there is a partnership between the parties themselves. The former may arise between the parties by mere operation of law against the intention of the parties; whereas, the latter exists only when such is the. actual intention of the parties. Thus, if A and B should agree to carry m any business for their joint profit, and to divide the profits equally between them, but B should bear all the losses, and should agree, feat there should be no partnership between them; as to third persons dealing with the firm, they would be held partners, although inter sese, they would be held not to be partners. This distinction is often taken in the authorities. It. was very fully discussed and recognized in Waugh v. Carver, 2 H. Bl. 235; Cheap v. Cramond, 4 Barn. & Ald. 663; Peacock v. Peacock, 16 Ves. 49; Ex parte Hamper, 17 Ves. 404; Ex parte Hodgkinson, 19 Ves. 291; Ex parte Langdale, 18 Ves. 300; Tench v. Roberts, 6 Madd. 145, note; Hesketh v. Blanchard, 4 East, 144; Muzzy v. Whitney, 10 Johns. 226; Dob v. Halsey, 16 Johns. 34.

The question before us is, not as to the liar bility to third persons; but it is solely, whether between themselves the agreement was intended to create and did create a partnership. I have looked over the agreement carefully, and my opinion is, that no partnership whatsoever was intended between the parties; but thatBenjamin Hazard wasto beemployed asa mere superintendent, and not as a partner, and was to be paid the stipulated portion of the profits for his services as superintendent This, it is said, in the agreement was to be the sole reward of his services; and, if there were no profits, then he was to submit to lose the value of his services. It is not any where said in the agreement that the parties are to be partners in the business; nor that Benjamin Hazard is to pay any part of the losses. But language is used, from which, I think, it may fairly be inferred, as the full understanding of the parties, that the wholé capital stock was to be held by T. R. Ha'zSírd, as his sole and exclusive property, and'that the stock was to be furnished by hiriii and the proceeds thereof were to be delivered and sold by him, and charged to him, as his individual property, and debts and credits. Now, if this be so, there is no pretence to say, that the parties intended a partnership. '' A ' mere participation in the profits will not make the parties partners inter sese, whatever it may do as to third persons, unless they so intend it. If A agrees to give B one third of the profits of a particular transaction in business, for his labor and services therein, that may make both liable to third persons as partners; but not as between themselves. This was the very point adjudged in Hesketh v. Blanchard, 4 East, 144, where Lord Ellenborough said; “The distinction taken in Waugh v. Carver and others, applies to this case. Quoad third persons it was a partnership, for the plaintiff was to share half the profits. But, as between themselves, it was only an agreement for so much, as a compensation for the plaintiff’s trouble and for lending R. his credit.” The same doctrine was fully recognized in Muzzy v. Whitney, 10 Johns. 226. It is not necessary in the present case, to decide, whether Benjamin Hazard was, under the agreement, a partner as to third persons. That question may be left for decision, until it shall properly arise in judgment. And before it is decided, it might be necessary to examine a very nice and curious class of cases, standing,, certainly, upon a very thin distinction, if it is a clearly( discernible distinction, between cases of partnership, as to third persons, and cases of mere agency, where the remuneration is to be by a portion of the profits. This distinction is alluded to by Lord Eldon, in Ex parte Hamper, 17 Ves. 404, and by Lord Chief Justice Abbott in Cheap v. Cramond, 4 Barn. & Ald. 663, 670. In the latter case, the chief justice said: “Such an-agreement is perfectly distinct from the cases, put in the argument before us, of remuneration made to a trav-eller, or other deck or agent, (in proportion to the profits,) by a portion of the sums received by the master or principal, in lieu of a fixed salary, which is only a mode of payment adopted to increase or secure exertion.” ' It was also acted upon in Muzzy v. Whitney, 10 Johns. 226; Dry v. Boswell, 1 Camp. 329; Wish v. Small, Id., note; Benjamin v. Porteus, 2 H. Bl. 590; Wilkinson v. Frasier, 4 Esp. 182; and Mair v. Glennie, 4 Maule & S. 240, 244.

My judgment is, that in the present case the parties never intended any partnership in the capital stock; but a mere participation of interest in the profits; and feat fee one third or one fourth of fee profits allowed by the agreement to Benjamin Hazard, was merely a mode of paying him as agent for his superintendency of fee factories. In this view, I think, fee bill ought to be dismissed with costs.