Southern Fertilizer Co. v. Reams

11 S.E. 467, 105 N.C. 283

• Court: Supreme Court of North Carolina
• Decided: February 5, 1890
• Status: Published

Opinion

Shepherd, J.:

Several exceptions are made by the plaintiffs to the findings of fact by the Court below, and it is insisted that these should now be reviewed by us.

It appears from the record that the parties agreed that the Judge should find the facts, and it is well settled that where such an agreement is made the findings are conclusive. Cooper v. Middleton, 94 N. C., 86; Vaughan v. Lewellyn, 94 N. C., 472; Barbee v. Green, 92 N. C., 471; Battle v. Mayo, 102 N. C., 413.

The only exceptions thit will be entertained in such cases are, that there was no evidence to support the findings; that competent or incompetent testimony was rejected or admitted, and that the Court or referee refused or failed, after request made in apt time, to pass upon some material issue or question of fact, when there was testimony tending to support the same.

Much difficulty was experienced under the Code of New York upon the last mentioned question of practice, and it.is now provided by statute in that State that, “ before the cause is finally submitted to the Court or referee, or within such time afterwards, and before the decision or report is rendered, as the Court or referee allows, the attorney of either partjr may submit in writing a statement of the facts which he deems established by the evidence and rulings upon questions of law which he desires the Court or referee to make,” &c When the Court or referee refuses or fails to pass upon such facts, and the Court can see that they are material, the party making such request may, as a matter of right, have the case remanded for further findings. N. Y. C. C. P., 993.

Before this provision was made, it was held that where there was a failure “ to find upon all the issues involved in the action, the appellant must, upon the settlement of the case, require (the Court or referee) to make such findings upon questions of fact as are necessary to the proper present ation of the questions of la.w arising thereon.” People v. Railroad, 57 Barb., 209; Manly v. Insurance Co., 1 Lans., 20; Van Slyke v. Hyatt, 46 N. Y., 259; Smith v. Insurance Co., 62 N Y , 85. This, we apprehend (there bemg no statutory regulation), is the proper practice with us, and, if it is not observed, the case will not be remanded as a matter of right, unless it clearly appears from the report that tome material matter has been omitted, or that further findings are necessary to a just and intelligent disposition of the cause. Straus v. Beardsley, 79 N. C., 59; Norment v. Brown, 79 N. C., 363 Applying these principles to the case before us, we see no reason for disturbing the facts as found by his Honor. There is no exception that there was an absence of evidence to support the findings, nor that there was any improper ruling upon the admission or rejection of testimony. The exceptions are, in effect, that the Court found against the weight of testimony, which, we have seen, cannot be passed upon here. It is true that exceptions one, four, five and eight are addressed to the refusal or failure of the Court to find certain specified facts, but this by no means implies that the Court refused to consider or pass upon them at all, arid this must explicitly appear before this Court can entertain such exceptions.

We must therefore consider the case upon the facts set forth in the findings of the Court and the accompanying exhibits.

The plaintiffs are the judgment creditors of H. A Reams, and the indebtedness was contracted and judgments obtained prior to the business transactions between the said Reams and Eugene Morehead. No levy was ever made upon the tobacco, the subject of the insurance, and the tobacco having been destroyed by fire, plaintiffs are seeking, by proceedings supplementary to execution, to subject the money due upon the policies of insurance to the payment of their judgments. These policies were originally payable to Reams, but in 1884, before the loss, they were, with the consent of the insurance companies, made payable — some to “Eugene Morehead”; some to “Eugene Morehead, as his interest, may appear,” others to “E. Morehead & Co., as their interest may appear.” In these proceedings the insurance companies were summoned to appear, and they denied any liability upon the said policies. A receiver was thereupon appointed, who brought actions in the Superior Court of Durham County against the said insurance companies. In these actions Reams, Morehead, and E. Morehead & Co. were joined as plaintiffs.

All of the actions were removed to the Circuit Court of the United States where they were consolidated and tried, the plaintiffs recovering the full amount of the policies. The fruits of this recovery, some twenty-five thousand dollars, are now in the hands of the receiver, awaiting the direction of the Court in the present proceedings.

The plaintiffs contended that this money stands in the place of the tobacco; that Reams alone had an insurable interest, and that the money, being his, is subject to the payment of his indebtedness.

In support of their contention they insist that the money was recovered upon the theory that Reams was the sole owner of the tobacco, and that Morehead is estopped to claim any interest in the amount recovered. One of the defences in the Circuit Court was that Reams had made a false representation in effecting the insurance, in that he had stated that he was the sole owner of the subject of the insurance. The Court held that he was the sole owner of the tobacco, “within the meaning of the words of the policy,” and the opinion seems to treat Morehead as a creditor only, holding the policy as collateral securit}'-. This much it passes upon as material to the determination of the plea of the insurance companies, but it by no means declares that Morehead is not entitled to have the amount recovered applied to the satisfaction of his claims. It does not appear what testimony was before that Court, and we are therefore unable to see whether its opinion and judgment were based upon the same facts as are presented to us. Conceding, however, that the facts were the same, it is plain that the parties to the proceeding are not estopped by the rulings of the Circuit Court upon any matter incident to the trial before it. The suit was brought upon the understanding that it was only to determine the liability of the insurance companies, leaving the other questions to be settled in these proceedings. This clearly appears from the case upon appeal, which states that “ a joint recover}’ was effected (in the Circuit Court) under an agreement that the rights of the parties to the cause should be determined under the proceedings heretofore commenced.” This express agreement frees us from any supposed estoppel growing out of the trial in the said Court, and we are, therefore, to determine the questions presented solely upon the facts found by the Judge.

As the insurance companies have no interest whatever in this controversy, much, if not all, o'f the law peculiar to the defence of such companies against the insured is eliminated from the case. For instance, the contention that Morehead had no technical insurable interest has no application here. The companies alone can avail themselves of such a defence, which is based entirely upon grounds of public policy, which condemns “wagering” or “gambling” policies of insurance. It is very clear to us that whatever rights the judgment creditors may have in a fund like the present (Stamps v. Insurance Co., 77 N. C., 209), they must be pursued in equity, for the plaintiff creditors had no lien upon the tobacco, nor have they any legal interest whatever in the insurance money. On the contrary, the legal title is in Morehead and E. Morehead & Co., by reason of the assignment of the policies to them.

That such an assignment, with the consent of the company, is valid, is well settled. In Fogg v. Insurance Co., 10 Cush., 327, Chief Justice Shaw says: “But there is another ■species of assignment, or transfer, it may be called, in the nature of an assignment of a chose in action. It is this: ‘In case of loss, pay the amount to A. B.’ It is a contingent order or assignment of the monejq should the event happen, upon -which money will become due on the contract. If the insurer assents to it, and the event happens, such assignee may maintain an action in his own name, because, upon notice of the assignme.pt, the insurer has agreed to pay the assignee instead of the assignor. But the original contract remains. The assignment and assent to it form a new and derivative contract out of the original.” May on Insurance, 378.

The legal title, then, being in the assignees, under an express contract with the insurance companies, let us now examine the reasons advanced why the money recovered should be taken from such assignees and given to the plaintiffs. We will first consider the policies payable “to Eugene Morehead,” and “to Eugene Morehead, as his interest may appear.”

There is.no suggestion that the assignment is not supported by a full and valuable consideration, nor is there any intimation of actual fraud in reference to the transaction. It is contended, however, that Morehead was only a creditor of Reams, who assigned the policies to secure his indebtedness, and that this assignment, being in the nature of a mortgage, is void as against the plaintiffs for want of registration. The discussion of this question becomes unnecessary, for the reason that we are of the opinion that Reams and Morehead were partners, in which case it is conceded-that registration is not essential. It is earnestly insisted, however, that there was no partnership between these parties, and that Morehead was simply a creditor of Reams, receiving a part of the profits only as a compensation for the money lent.

We listened with great interest to the argument of the intelligent counsel for the plaintiffs. It was chiefly directed ■ against the old principle that a participation in the profits of a business was the unvarying test of copartnership.

We are aware that this rule, as a test in all cases, has been discarded in England and in a few of the American States, and that the text-writers are gradually breaking away from it, and are endeavoring, not without confusion and conflict, to construct some new criteria by which the relation is to be determined.

We think, however, that even under the rule as modified in England and elsewhere, the agreement in this case would be considered as constituting a partnership.

Ever since the decision of DeGhay, C. J., in 1775, in Grace v. Smith, 2 Wm. Blackstone, 998, it has been generally held that all persons who shared in the profits of a business incurred the liabilities of partners therein, although no partnership between themselves might have been contemplated. The decision was subsequently approved in the leading case of Waugh v. Carver, 2 H. Blacks., 235. This seems to have been the rule, without any qualification, until an exception was made in cases where the profits were looked to as a means only of ascertaining'the compensation which, under the contract, was to be paid for the services of an employee. Thus the law of England stood for nearly a century, and these general principles are still regarded in North Carolina, and most of the Stales as the “ordinary tests” of partnership. Jones v. Call, 93 N. C., 170; Mauney v. Coit, 86 N. C., 463; Motley v. Jones, 3 Iredell’s Eq., 144; Cox v. Delano, 3 Dev., 89; 2 Greenleaf Ev., 482.

No case, it seems, has yet arisen in this State in which the rule has worked such a hardship as to call for its modification, but in 1860, the House of Lords, in the case of Cox v. Hickman, considerably changed the ancient doctrine. The effect of the ruling in that case is thus stated by McKennan, J., in Mechan v. Valentine, 29 Fed. Rep., 276 “The rule, as determined by those two old cases (Grace v. Smith and Waugh v. Carver), was that to share in the profits was to make the sharer a partner. As I understand the decision in Cox v. Hickman, that is not altogether discarded. Participation in the profits may be, and still is, to be considered as evidence tending to establish the partnership relation, and, in the absence of any other proof, is to be regarded as sufficient to make that out. In Cox v. Hickman, it is still admissible, and is be considered as evidence touching the alleged relation of partnership, and is sufficient, if no other evidence is offered. But, as determined in that case, it is not conclusive. Other considerations are to be considered in connection with the participation in the profits, in determining whether the partnership relation has been created or not.”

To the same effect is 1 Lindley Partnership, 35, where, in speaking of the result of the decision in Cox’s case, it is said “that prima facie the relation of principal and agent is constituted by the agreement entitling one person to share the profits made by another to an indefinite extent, but that this inference is displaced, if it appears from the whole agreement that no partnership or agency was really intended.”

There is nothing in the facts of this case which requires us to make a departure from the old rule; nor is it necessary that we should attempt to lay down a new test of partnership.

Applying the rule, however, as above modified, we can find nothing in the agreement under consideration which rebuts the prima facie case of partnership arising out of the participation in the profits. Indeed, we think the circumstances all tend to sustain such a conclusion.

In support of the argument, that the money advanced by Morehead was only a loan, the plaintiffs cited the case of Richardson v. Hughitt, 76 N. Y., 55. There was no pretence in that case but that the money was, in fact, lent by Hughitt to the firm of Bench Bros. & Co., and that he was to receive one-fourth of the net profits upon the sale of certain wagons, “ with interest on the advances made at five and one-quarter per cent., so far as the cash received would go, and the balance in notes on interest at seven per cent.” This was held to be a loan.'

But there is a most important difference between that case and ours. There, it is apparent that the money advanced was to be repaid at all events. Its repayment was not contingent upon the success of the business. Indeed, the case expressly states that the advance was a loan, and that the agreement as to profits, &c., was simply a means of securing it and making compensation therefor.

In our case, the usual elements of partnership are present. Morehead advances the capital, and Reams is to contribute the services to the joint undertaking, which is the purchase and sale of tobacco. No personal liability is contracted by Reams for the money advanced, and the said capital is to be paid out of the partnership stock, and the balance, after the payment of expenses, &c.j is to be equally divided as profits between the parties. This, in our opinion, constitutes a partnership, for Morehead, under this agreement, has a proprietary interest both in the stock and the profits.

That such a transaction is not a loan is settled, we think, by high authority. We extract the following from 1 Bates’ Partnership, 49, which is well sustained by many decided cases: “What is a loan? The fact, however, that the interest expected or received is disproportionate, and the contract usurious, will not affect its construction. To constitute a loan, the money advanced must be returned, in any event, independently of the success or non-success of the business or the making of profits. If the repayment is contingent upon the profits, it is not a loan, for it is then made, not upon the personal responsibility of the borrower, but upon the security of the business.”

A glance at the agreement plainly shows that the foregoing principles govern our case and are decisive against the plaintiffs’ position that Morehead was only a creditor of Reams. Here, the payment, both of the capital and the compensation, was entirely dependent upon the success of the business.

It was urged on the argument that his Honor should have found that, in addition to profits, Morehead was to have interest on the money advanced. The testimony only shows that money was borrowed at interest by Morehead & Reams of Morehead & Co. This plainly does not support the contention ; but, granting that Morehead was to have interest on the money advanced, this would not so affect the agreement as to change the relation of the parties. There can be no doubt that a partnership ma.y borrow money at interest for the purpose of its business, and we can see no reason why it cannot borrow of a partner as well as of third persons.

Charging interest in such cases, where the facts are doubtful, may be very material in determining the character of the agreement, but it cannot of itself, as we have stated, change the relation of partnership to that of creditor and debtor, when the terms of the contract are ascertained, disclosing the existence of the partnership.

This view as to interest is fully supported by the charge of the learned Judge who tried the case of Mauney v. Coit, supra, which charge was afterwards sustained by this,Court. That case was very similar to this, and on the whole question of co-partnership, is direct authority against the plaintiffs.

Our conclusion, therefore, is, that there being a partnership between Morehead and Reams, the former must be paid out of the insurance money the amount advanced by him.

As to the two policies payable to “Morehead & Co., as their interest may appear,” it is only necessary to say that if the assignment is void for want of registration, the money is payable to Reams, under the original contract of insurance, and, as he was a partner of Morehead and jointly responsible to Morehead & Co. for the large amounts borrowed of them for the purposes of the business, and the insurance was upon partnership property, we can see no principle of law or equity which requires the fund to be diverted from the payment of the partnership liabilities and paid over to the individual creditors of Reams, whose debts were contracted anterior to the business transactions of Reams and More-head.

We are, therefore, of the opinion that there was no error in the ruling of his Honor, and that the judgment must be affirmed.

Affirmed.