Thillman v. Benton

Robinson, C. J., delivered the opinion of the Court. The real question we have to decide in this case in whether the articles of agreement between Von Hafften and Gailey trading as the Sanitary Milk Company and the defendant made the latter a member of the firm, for if he was a partner, then he is liable for the trade obligations of the partnership. And before considering the terms of this agreement ⁷¹ it may be as well to state what according to well-settled principles is necessary to constitute a partnership. In doing so we shall not attempt to define what is a partnership, for it would be a difficult matter to formulate a definition to meet every case.

In his very able treatise on Partnership, Mr. Justice Lindley gives fifteen definitions from textwriters and judges, and it is not too much to say that no two of them exactly agree. At one time it was held that a mere participation in the profits of a trade or business made one by operation of law a partner, and this, too, even though he never meant to assume that relation, and had never held himself out to the public as a partner. This rule was first announced in Grace v. Smith, 2 Wm. Black, 995, decided in 1775, in which De Grey, C. J., said that every one who shares the profits ought also to bear his share of the loss, and for the reason, that by taking part of the profits, he takes part of that fund on which the creditor relies for the payment of his debt.

And this principle was fully approved and adopted in the well known case of Waugh v. Carver, 2 H. Black, 235, decided in 1793. These cases were properly decided on the facts, but the grounds on which the judgments are based, have never been considered as being satisfactory, for as was said in Mollwo, March & Co. v. Court of Wards, L. R. 4 P. C., 419, “the same consequences might follow in a far greater degree from the mortgage of the common property of the firm, which certainly would not of itself make the mortgagee a partner.” Finally in the leading case of Cox v. Hickman, 8 House Lord Cases, 268, the Lord Chancellor Campbell, Lord Brougham, Lord Cranworth and Lord Wensleydale, all sitting, the question was fully considered and the rule laid down in Grace v. Smith, and Waugh v. Carver, was in a great measure qualified, if not entirely overruled. In delivering his judgment Lord Cranworth says: “ It is often said that the test or one of the tests whether a person not ostensibly a partner is nevertheless in contemplation of law a partner, is whether he is entitled to participate in the profits. This ⁷² no doubt is in general a sufficiently accurate test, for a right to participate in profits affords cogent, often conclusive evidence that the trade in which the profits have been made was carried on in part for or in behalf of the person setting up such a claim.

But the real ground of liability is that the trade in which the profits have been made' was carried on by persons acting on his behalf. When that is the case he is liable to the trade obligations and entitled to its profits or to a share of them. It is not strictly correct to say that his right to share in the profits makes him liable to the debts of the trade. The correct mode of stating the proposition is to say that the same thing which entitles him to the one makes him liable to the other, namely, the fact that the trade has been carried on in his behalf, i. e., that he stood in relation of principal towards the persons acting ostensibly as the traders by whom the liabilities have been incurred and under whose management the profits have been made.” In the subsequent case of Mollwo, March & Co., in the Privy Council, Sir Montague Smith says: “The judgment in Cox v. Hickman had certainly the effect of dissolving the rule of law which had been supposed to exist and laid down principles of decision by which the determination of cases of this kind is made to depend not on arbitrary presumptions of law, but on the real contracts and relations of the parties.

It appears to be now established that although a right to participate in the profits of trade is a strong test of partnership, and that therfe may be cases where, from such perception alone, it may as a presumption not of law, but of fact, be inferred; yet that whether that relation does or does not exist must depend on the real intention and contract of the parties.” And in the still later case of Badeley v. Consolidated Bank, Law, Rep. 38 Ch. Div. 239, decided in 1888, Cotton L. J., after stating that the rule laid down in Waugh v. Carner, that the participation in the profits of a business does of itself by operation of law constitute a partnership eannot ⁷³ now be considered the law, says, “ I take it the law is this, that participation in profits is not now conclusive evidence of the existence of a partnership, but it is one of the circumstances and a very strong one which are to be taken into consideration for the purpose of seeing whether or not a partnership exists, that is to say, whether there was a joint business, or putting it in another way, whether the parties wei'e carrying on the business as principals and as agents for each other — whether it is a joint business, or the business of one only.” 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. And if there be a partnership in fact, then the public has the right to assume that every partner has authority from his copartner to bind the whole firm in contracts made according to the ordinary usages of trade. And this principle applies not only to persons acting openly and avowedly as partners ; but also to others, who though not so acting are by a private agreement or arrangement partners with those who appear ostensibly to the world as persons carrying on the business.

Without extending this opinion by special reference to the cases it is sufficient to say that the current decisions in this country are in full accord with the principles laid down in the English cases to which we have referred. The American cases are fully considered and reviewed by Mr. Bates in his carefully considered book on partnership. And before leaving this part of the case we deem it proper to say a word about Rowland v. Long, 45 Md. 439 , referred to in the argument. The Court was dealing with that case as it was presented by the record, and there is nothing said in the decision when read in connection with the facts which con ⁷⁴ flicts in any manner with the