Beecher v. Bush

• Decision Date: 12 January 1881
• Citation: 7 N.W. 785,45 Mich. 188
• Court: Michigan Supreme Court
• Parties: BEECHER and others v. BUSH and others.

7 N.W. 785

45 Mich. 188

BEECHER and others v. BUSH and others.

Supreme Court of Michigan

January 12, 1881

Where there is no partnership as between the parties, and third persons have not been misled by concealment of facts or deceptive appearances, a partnership as to third persons will not be construed to exist.

B., the owner of a hotel, "hired the use" of the same to one W., to be kept openland used as a hotel by W., B. to receive therefor a sum equal to one-third of the gross earnings or receipts. B. had no control over the business. Held, that he was not liable to third persons as a partner of W.

Error to superior court of Detroit.

Henry M. Cheever, John Atkinson, and Jos. P Whittemore, for plaintiffs in error.

Wm. B. Jackson and C.I. Walker, for defendants in error.

COOLEY, J.

The purpose of the action to the court below was to charge Beecher as partner with Williams for a bill of supplies purchased for the Biddle House in Detroit. Beecher was owner of the Biddie House, and Williams proposed in writing to "hire the use" of it from day to day, and open and keep it as a hotel. Beecher accepted his proposals and Williams went into the house and began business, and in the course of the business made this purchase. The proposals are set out in full in the special verdict. The question is whether by accepting the proposals Beecher made himself a partner with Williams in the hotel business; and this is to be determined on the face of the writing itself. It is conceded that Beecher was never held out to the public as a partner, and that the bill of supplies was purchased on the sole credit of Williams and charged to him on the books of the plaintiffs below. The case therefore is in no way embarrassed by any questions of estoppel, for Beecher has done nothing and suffered nothing to be done which can preclude him from standing upon his exact legal rights as the contract fixed them.

Nor do we understand it to be claimed that the parties intended to form a partnership in the hotel business, or that they supposed they had done so, or that either has ever claimed as against the other the rights of a partner. It is perfectly clear that many things which are commonly incident to a partnership these parties meant should be wholly excluded from their arrangement. Some of these were of primary importance. It is plain, for example, that Beecher did not understand that his credit was to be in any way involved in the business, or that he was to have any interest in the supplies that should be bought, or any privilege to decide upon them, or any legal control whatever until proceeds were to be divided, or any liability to losses if losses were suffered. These are among the common incidents to a partnership; and while some of them, and possibly all of them, may not be necessary incidents, yet the absence of all is very conclusive that the parties had no purpose whatever to form a partnership, or to give to each other the rights and powers, and subject each other to the obligations of partners. In general this should be conclusive. If parties intend no partnership the courts should give effect to their intent unless somebody has been deceived by their acting or assuming to act as partners; and any such case must stand upon its peculiar facts and upon special equities. It is nevertheless possible for parties to intend no partnership and yet to form one. If they agree upon an agreement which is a partnership in fact, it is of no importance that they call it something else; or that they even expressly declare that they are not to be partners. The law must declare what is the legal import of their agreements, and names go for nothing when the substance of the arrangement shows them to be inapplicable. But every doubtful case must be solved in favor of their intent otherwise we should "carry the doctrine of constructive partnership so far as to render it a trap to the unwary." Kent, C.J., in Post v. Kimberly, 9 John. 470, 504.

We have then a case in which the party it is sought to charge has not held himself out, or suffered himself to be held out as a partner either to the public at large or to the plaintiff and has not intended to form that relation. He is not therefore a partner by estoppel nor by intent; and if he is one at all, it must be by construction of law. What then are the indicia of partnership in this case; the marks which force that construction upon the court irrespective of the intent of the parties; that in fact control their intent and give to to the parties bringing suit rights which they were not aware of when they sold the supplies? In the elaborate and able brief which has been presented in behalf of the defendants in error it is conceded that the fact that Beecher was to receive each day a sum "equal to one-third of the gross receipts and gross earnings" for the day would not necessarily make him a partner. What is claimed is that the fact is "cogent evidence" that Beecher was to participate in the results of the business in a manner that indicated he was a principal in it, and was not receiving compensation for the use of property merely. The view of the law here suggested is undoubtedly correct. There may be a participation in the gross returns that would make the receiver a partner, and there may be one that would not. The question is in what capacity is participation had. Gross returns are not profits and may be large when there are no profits, but it cannot be predicated of either gross returns or profits that the right to participate is conclusive evidence of partnership. This is settled law both in England and in this country at this time, as is fully shown by the authorities cited for the defendants in error. It was recognized in Hinman v. Littell, 23 Mich 484; and in New York, where the doctrine that participation in profits proves partnership has been adhered to most closely, it is admitted there are exceptions. Eager v. Crawford, 76 N.Y. 97.

But we quite agree with counsel for defendants in error that no case ought to turn upon the unimportant and mere verbal distinction between the statement in the papers that Beecher was to have a sum "equal to" one-third of the gross receipts and gross earnings, and a statement that he was to have one-third of these receipts and earnings. It is perfectly manifest it was intended he should have one-third of them; that they should be apportional to him regularly and daily, and not that Williams was to appropriate the whole and pay a sum "equal to" Beecher's proportion when it should be convenient. We can conceive of cases where the difference in phraseology might be important, because it might give some insight into the real intent and purpose of the parties, and throw light upon the question whether that which was to be received, was to be received as partner or only by way of compensation for something supplied to the other, but the intent in this case is too manifest to be put aside by any mere ingenuity in the use of words. Loomis v. Marshall, 12 Conn. 69, 79.

In Cox v. Hickman, 8 H.L.Cas. 268, 506, Lord Cranworth stated very clearly his views of what should be the test of partnership. "It is often said," he says, "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 is no doubt in general a sufficiently accurate test; for a right to participate in the profits affords cogent, often conclusive evidence that the trade in which the profits have been made was carried on in part for or on behalf of the person setting up such a claim. But the real ground of the liability is that the trade had been carried on by persons acting on his behalf. When that is the case he is liable in 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 the relation of principal to the persons acting ostensibly as the traders by whom the liabilities have been incurred, and under whose management the profits have been made." There is something understandable by the common mind in this test; there is nothig artificial or arbitrary about it; it falls in with reason and enables every man to know when he makes his business arrangements whether he runs the risk of extraordinary liabilities contracted without his consent or approval.

It is said and we believe justly in Bullensharp, L.R. 1 C.B. 86 that the decision in Cox v. Hickman brought back the law of England to what it should be, and Mr. Baron Bramwell, referring to what was declared to be law in Waugh v. Carver, 1 H.Bl. 235, expressed the hope "that this motion is overruled," adding that it is "one which I believe has caused more injustice and mischief than any bad law in our books." Page 127. It is certainly overruled very conclusively in Great Britain. Kilshaw v. Jakes, 3 B. & S. 847; Shaw v. Gault, 16 Irish C.L. 357; Holme v. Hammond, L.R. 7 Exch. 218; Ex parte Delbane, 7 Ch.Div. 411. And though in New York courts hampered somewhat by early cases have not felt themselves at liberty to adopt and follow the decision in Cox v. Hickman to the full extent, it would be easy to show that the American authorities in the main are in harmony with it. Indeed that is very well shown in Eastman v. Smith, 53 N.H. 276, where the authorities are collated. It must be admitted, however, that the attempts at an application of the test to the complicated...