Southern Can Co. v. Sayler

Digges, J., delivered the opinion of the Court. Owen A. Hartlove, a resident of Baltimore City, trading as the Hartlove Packing Company, was engaged in the packing of canned goods, operating during the year 1925 five canneries in different parts of the state. P. D. Gradman and I. J. Gradman, trading as P. D. Gradman & Brother, were residents of Littletown, Pennsylvania, and were also engaged in the packing of canned goods. During the year 1925 they operated a cannery known as the Melrose Cannery, located in Melrose, Maryland.

On the 14th day of April, 1925, the Southern Can Company, the appellant here, agreed in writing to sell at designated prices to P. D. Grad-man & Brother all the sanitary tin cans that the buyer should use in packing at all factories owned or controlled by the buyer during the term of the agreement. The term of the agreement was from April 13th, 1925, to December 31st, 1925. By lease dated April 13th, 1925, the appellant also leased to Gradman & Brother, at a rental of one hundred ³⁰⁶ dollars per year, a machine fitted to close No. 2 cans. On the same day the Hartlove Packing Company, by O. A. Hartlove, guaranteed to the appellant the payment of all bills in accordance with the can contract for P. D. Gradman & Brother, for which at the end of the season a brokerage was to be paid to the Hartlove Packing Company by the appellant, of one dollar per thousand cans; terms of payment providing for settlement thirty days from date of invoices, and all invoices to be mailed to the Hartlove Packing Company at their Baltimore office.

On the 2nd day of May, 1925, the following agreement was entered into by and between P. D. Gradman and I. J. Gradman, trading as P. D. Gradman & Company, and Owen A. Hartlove, trading as the Hartlove Packing Company: “This Agreement, Made this 2nd day of May, 1925, between P. D. Gradman and I. J. Gradman, trading as P. D. Gradman & Company, of Littlestown, Pennsylvania, hereinafter called Oanners, and Owen A. Hartlove, trading as the Hartlove Packing Company, hereinafter called Company. “Whereas the said Oanners own and conduct a cannery at Melrose, Maryland, which cannery is fully equipped to can vegetables, and “Whereas the said Oanners desire to employ the said Company for the purpose of selling all goods canned at said cannery, and “Whereas the said Company has agreed to make advances of money to said Oanners for the purpose of purchasing raw materials, can’s, cases, labels, etc., and also advance them cash for their payroll from time to time. “Now, therefore, in consideration of the premises and the faithful performance thereof the parties hereto mutually agree as follows: “(1) That the said Oanners do hereby give unto the said Company the exclusive right to sell all canned goods packed at the Melrose Cannery aforesaid, and all goods so packed shall be labeled in the name of the ‘Hartlove Packing Company,’ and the said Hartlove ³⁰⁷ Packing Company shall endeavor to sell, bill and make collections for the articles sold by them, and for said services the said Company shall be paid five per cent. (5%) commission on the gross sales, and in addition thereto said Company shall be given credit of one and a half per cent. (1% % ) discount on all gross sales. "(2) The term of this contract shall start upon the execution hereof and continue until December 31, 1925. “(3) The said Company agrees, if requested, to furnish all necessary cans, cases and labels for packing said goods, to advance sufficient sums from time to time to pay for all raw stock purchased and used in said Melrose Cannery, and also advance sufficient money from time to time to pay the weekly payrolls at said cannery. “(4) A strict account shall be kept by all the said parties and said Company shall have a lien upon all goods packed at said cannery as security for the payment of all cans, labels, eases and brokerage and liens as aforesaid, and when sufficient goods are sold to pay for said advances, etc., then the said Company shall make regular payments for the remaining goods sold.

Both parties hereto shall keep a complete account of everything done by them, which accounts shall be open to inspection at any time to a representative from the other of said parties. “(5) At the end of the season aforesaid an accounting shall be made by each of said parties to the other thereof, and the said Oanners agree to pay said Company an extra compensation for making the advances, etc., aforementioned, one-half of the net profits resulting from the operation of said cannery, and in figuring said net profits the brokerage and discount, cans, labels, cases, money advanced on raw stock, etc., as aforesaid shall be charged as expenses for running said cannery. “(6) It is further understood that the said Company shall have the right to determine the salary and wages to be paid at said cannery, and that if said pay ³⁰⁸ roll does not meet with his approval, then the said Company shall not be required to make any advances unless the said payroll shall meet with the entire approval and satisfaction of said Company. “(7) The said Canners shall be fully responsible for the management and control of the said Cannery and shall protect the same by proper insurance policies from loss by fire and shall also carry any other insurance policies which might be required under the laws of the State of Maryland; and it is the intention of this agreement, that this agreement shall not in any manner affect the ownership of said cannery and that the said Canners shall be liable for all losses in connection therewith, and that the said Company shall be repaid for all moneys advanced and for cans, labels, cases, raw stock, etc., at the end or during said season, regardless of whether the goods sold for said reason shall realize a profit to said Canners. “(8) It is further understood that the said Canners shall devote their exclusive time to the management and operation of said cannery at Melrose, Md., and will not permit anything of any nature to interfere with the conduct of same. “(9) All goods manufactured shall be labeled as aforesaid under the name of the “Hartlove Packing Company” and stored in its name, and immediately thereafter the Company shall be notified that said goods are at the disposition of said Company, and said Canners agree not to remove any of said goods without first getting the written consent of said Company. “Witness the hands and seals of the parties hereto the day and year first above 'written. “P. D. Gradman & Company, “P. D. Gradman. (Seal) “I. I. Gradman. (Seal) “Hartlove Packing Company, “O. A. Hartlove. (Seal) “Test: Thos.

M. Glass.” Owen A. Hartlove died on November 5,1925. On November 9, 1925, his son, Owen G. Hartlove, was appointed admin ³⁰⁹ istrator of his estate. On December 24, 1925, P. D. Grad-man and Isadore J. Gradman, co-partners trading as P. D. Gradman & Company, filed a petition in the Orphans’ Court of Baltimore City, alleging the death of Owen A. Hartlove, that said decedent, during his lifetime, was engaged in the packing and canning business under the name of the Hart-love Packing Company; that the petitioners were owners of a canning plant located in Melrose, Maryland, which plant was opened about the 1st day of July, 1925; alleging substantially the agreement between them and Owen A. Hart-love, and filing a copy of the same; that the business of the petitioners was a seasonal one, and the entire season’s packing had been completed and the product sold prior to the death of Owen A. Hartlove, but up to that time no accounting had been had between the parties to the contract. The petitioners further allege that during the past few weeks they have had an accounting with the administrator, showing that after the deduction of all advances and other sums due the said Owen A. Hartlove under the contract, and the allowance to him of fifty per cent, of the profit upon the season’s business, there was in the estate of said Hartlove funds of the partnership, belonging to the petitioners, amounting to $2,877.19; that the administrator admitted the correctness of their claim, and is willing to pay over to them the amount claimed, provided he is authorized to do so by the Orphans’ Court; and further alleging that they are advised that said funds, being partnership funds, constitute no part of the estate of the said Owen A. Hartlove, except to the extent of his share thereof.

Upon this petition the Orphans’ Court of Baltimore City authorized and directed Owen G. Hartlove, administrator, to pay the petitioners the sum of $2,877.19. On the 2nd day of March, 1926, Herman Gamse & Brothers filed a similar petition in the Orphans’ Court, alleging that the estate of Owen A. Hartlove was indebted to them in the sum of two hundred and thirty-five dollars for labels furnished to the Melrose Cannery, and that, in the ac ³¹⁰ counting between Gradman Brothers and the estate of Owen A. Hartlove, the said estate was allowed a credit for this sum; and praying that the Orphans’ Court might pass an order directing that the administrator should pay Herman Gamse & Brothers the said sum; which order was passed by the Orphans’ Court and the amount of two hundred and thirty-five dollars paid by the administrator to Gamse & Brothers. Subsequently, on the 16th day of August, 1926, the Metal Package Corporation filed a bill in Circuit Court No. 2 of Baltimore City against Owen G. Hartlove and others for the purpose of having receivers appointed for the property and assets alleged to belong to Owen A. Hartlove, deceased; and in pursuance of said bill, receivers were duly appointed and qualified. Whereupon the administrator paid'over and delivered to the receivers all the property then in his hands as administrator.

The stipulation in the record discloses that, at the time the Southern Can Company made the contract with the firm of P. D. Gradman & Brother, and also made the lease referred to, the firm of P. D. Gradman & Brother consisted of P. D. Gradman and I. J. Gradman; that at the time the said Owen A. Hartlove, trading as the Hartlove Packing Company, made the contract of May 2nd, 1925, with P. D. Grad-man & Company, said P. D. Gradman & Company was composed of P. D. Gradman and I. J. Gradman; that all the cans furnished by the Southern Can Company were used by P. D. and I. J. Gradman, trading as P. D. Gradman & Company, in putting up the products of the Melrose Cannery under the agreement of May 2nd, 1925; that the season of 1925 was the first season that the Melrose Cannery was operated by the Gradmans; that the Melrose Cannery was rented by P. D. Gradman & Company, the Hartlove Packing Company having nothing to do with the renting of the said cannery; that the rent paid for the same for the season of 1925 was two hundred and twenty-five dollars, which, sum was treated as an item of expense in the accounting between P. D. Grad-man & Company and the administrator of Owen A. Hartlove. ³¹¹ Upon a hearing of the ease, the lower court decided that Owen A. Hartlove was not a co-partner of P. D. Gradman & Company in the conduct of the Melrose Cannery; and the petition of the appellant was by decree dismissed. The question here for decision is: Were Owen A. Hart-love and P. D. Gradman & Company partners in the conduct of the Melrose Cannery during the season of 1925; this being the only question presented by the appeal. The appellant here makes no claim that Owen A. Hartlove held himself out to be a partner of the Gradmans, nor that the cans were delivered to the Melrose Cannery with any knowledge that Hartlove was a partner; their claim being that Hartlove was in fact a member of the partnership, and as such, liable to creditors for goods delivered to the partnership and used in the business of the partnership while he was a member; that Owen A. Hartlove was a dormant partner and not a partner by estoppel. In other words, to enable the appellant to recover, it must be shown that Owen A. Hartlove and P. D. Gradman & Company were partners inter sese.

Code, art. 73A, sec. 7, par. 1, provides: “Except as provided by section 16, persons who are not partners as to each other are not partners as to third persons.” Section 16, referred to, deals with partners by estoppel or holding out. Paragraph 4 of section 7 provides: “The receipt by a person of a share of the profits of a business is prima, facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment: * * * (d) as interest on a loan, though the amount of payment vary with the profit of the business.” Section 6 of the same article thus defines a partnership: “A partnership is an association of two or more persons to carry on, as co-owners, a business for profit.” Article 73A is a uniform law which has been adopted at this time by sixteen of the states of the Union. The definition of a partnership, as prescribed by this article, is one of the many definitions adopted by courts of last resort prior to the enactment of the statute. This Court ³¹² in the case of Rowland v. Long, 45 Md. 439 , said: “Whatever conflict there may he in the decided cases as to what are the elements necessary to constitute a partnership, and however difficult it may be to lay down definite rules as applicable to all cases, it is well settled, we think, that where two persons agree to carry on a trade or business for their mutual benefit, one to furnish the money and the other to perform certain labor and services, and each to share the profits to be derived from said trade or business, they become liable as partners to third persons, although no partnership was contemplated by the parties themselves.

In such a case, each party has an interest or property in the profits as profits, and is entitled to an account for the same.” In the later case of Thillman v. Benton, 82 Md., at p. 73, it was said: “We take it then to be well settled that a partnership is a contract of some kind involving mutual consent of the parties, and when such a contract is entered into between two or more persons for the purpose of carrying on a trade or business, with the right to participate in the profits of such trade or business, then such a contract constitutes a partnership unless there be other facts and circumstances which show that some other relation existed.” The Court, in referring to the case of Rowland v. Long, supra, then distinguished it from the case under consideration by stating: “There being no other facts in that case to rebut the presumption arising from a participation in the profits of the trade or business, or to show that any other relation existed between the parties.” It seems well settled that the association of two or more persons to conduct a business in which the parties have an interest and where the parties share in the profits, unexplained, constitutes a partnership; but if it is clear from the agreement and acts of the alleged partners, together with the facts and circumstances surrounding the conduct of the business, that the parties themselves did not intend to create a partnership, none will be held to exist. The declared intention of the parties in the agreement, as to whether they intend ³¹³ to form a partnership, is not controlling; for even if the parties deny an intention by their agreement to form a partnership, if what they have done creates the legal relation or status of a partnership, courts will so interpret the agreement and declare the rights and liabilities of partners to exist. As was said in Thillman v. Benton, supra, quoting Mollwo, March & Co. v. Court of Wards, L. R. 4 P. C. 419: “If cases should occur where any persons under the guise of such an arrangement, that is, the guise of an arrangement, as creditor and debtor, are really trading as principals and putting forward as ostensible traders, others who are really their agents, they must not hope by such devices to escape liability, for the law in cases of this kind will look at the body and substance of the arrangement, and fasten responsibility on the parties according to their true and real character.” It is a question of substance and not of form. There are a number of tests applied by the courts to determine the existence vel non of a partnership.

As a result of an examination of many cases, one is certain to reach the conclusion that no one fact or circumstance can be taken as an unfailing criterion as to the existence of a partnership. The test of sharing profits, in the ea rly English decisions, was held to be conclusive, upon