Fougner v. First Nat. Bank of Chicago

• Decision Date: 24 March 1892
• Citation: 141 Ill. 124,30 N.E. 442
• Parties: FOUGNER et al. v. FIRST NAT. BANK OF CHICAGO et al.
• Court: Illinois Supreme Court

141 Ill. 124

30 N.E. 442

FOUGNER et al.

v.FIRST NAT. BANK OF CHICAGO et al.¹

Supreme Court of Illinois.

March 24, 1892.

Appeal from appellate court, first district.

Claim of the First National Bank of Chicago and Benbow B. Ferguson against Peter R. McLeod, insolvent. The claim was allowed over the objections of Anton Fougner, assignee, the American Tube & Iron Company, and the Northwestern Iron & Metal Company, and that judgment was affirmed by the appellate court. Objectors appeal. Reversed.

J. K. Wilson, Weigley, Bulkley & Gray, and Kraus, Mayer & Stein, for appellants.

Gregory, Booth & Harlan, for appellees.

The other facts fully appear in the following statement by WILKIN, J.:

On the 24th day of May, 1889, Peter R. McLeod made a voluntary assignment for the benefit of creditors, naming Anton Fougner, one of the appellants, as assignee, who duly qualified. The First National Bank of Chicago presented to the assignee a claim for $20,818.26, $15,000 of which was evidenced by a promissory note, made by said McLeod, payable to appellee Ferguson, and by him pledged to said bank after said assignment was made. The bank, it is admitted, holds said note subject to all defenses which might be made against it in the bands of said Ferguson. Appellee Ferguson also presented a claim for $3,298.93. To this claim, and so much of that of the bank as was evidenced by said promissory note, the appellants American Tube & Iron Company and Northwestern Iron & Metal Company and other creditors of the assignor objected. The ground of the objection was that the moneys for which the claims were filed were advanced by said Ferguson to McLeod as a partner in the business concerning which the assignment was made. On a hearing in the county court of Cook county, the objections were overruled, and the claims duly allowed. That judgment has been affirmed in the appellate court of the first district, and hence this appeal.

WILKIN, J., ( after stating the facts.)

The only question presented by this record is, was appellee Ferguson a partner with McLeod in the business concerning which the assignment by the latter was made? If he was, it is admitted he cannot maintain a claim against the assigned estate. Neither can said bank, which stands in his place. The contention that they were partners is based, first, on the following agreement: ‘(1) Said Ferguson agrees to enter into the business now carried on at Nos. 345 and 347 South Canal street, in said city, by said McLeod and MacHugh, under the name of P. R. McLeod, to advance to said business, to be used therein, the sum of five thousand dollars; to take general charge of the office, finances, books, correspondence, accounts, sales, or other matters connected with the business. (2) As compensation for his services and the use of the money so advanced by him, he shall receive a salary at the rate of twenty-five dollars a week, and such a proportion of the net profits of said business as said sum of five thousand dollars shall bear to the total present net investment in said business. (3) In estimating said profits, the salary of said Ferguson, and like salaries to said McLeod and MacHugh, being $25 per week each, shall be deducted, with the other expenses of carrying on said business, from the gross proceeds thereof; and no moneys other than said sum of $25 per week shall be drawn by either of said parties for private purposes. (4) This agreement shall last for one year from the date hereof, with the right to either of said parties to terminate the same at the end of the year, or at any time thereafter, by giving three months' notice in writing of the desire so to end the same; such notice to be given by the party desiring to terminate the agreement to each of the others; and in case of such determination said Ferguson shall be entitled to have repaid to him his said sum of five thousand dollars, and any further sums he may have advanced, and shall also receive his proper share of the net profits of the business at the time the agreement shall be so terminated.’ This contract is dated March 10, 1888. It purports to have been entered into by said McLeod and Ferguson and one Charles W. MacHugh, but the latter's relation to said business is not involved in this proceeding. It is admitted that the business mentioned in the first clause of this instrument is the same business in respect of which the assignment was made. Was the relationship of copartners created by the contract, or did Ferguson by its terms become the creditor and employe of McLeod? This, it is admitted, is to be determined by the intention of the parties, to be gathered from the instrument. It is generally said that, to constitute persons partners, they must share in the profits and losses. It is, however, well settled that it is not now necessary to show that there is an agreement to bear losses in order to make one liable as a partner. Sharing in the profits is the test. That, however, is also subject to the qualification that it must be a sharing in the profits, as distinguished from merely making the profits the measure of compensation for services or for the use of property or money in the business. The test of receiving profits is also subject to the further qualification that there must not only be a sharing in the profits, but it must be done as a principal, and not merely as an employe, or as interest on a loan of money, or for the use of property. This last qualification is founded on the case of Cox v. Hickman, 8 H. L. Cas. 268. In Holme v. Hammond, L. R. 7 Exch. 218, it is said the import of the opinions delivered in the house of lords in that case are correctly summarized by O'BRIEN, J., in Shaw v. Galt, 16 Ir. Com. Law, 375, thus: ‘The principle to be collected from them appears to be that a partnership, even as to third parties, is not constituted by the mere fact of two or more persons participating in or being interested in the net profits of a business, but that the existence of such partnership implies also the existence of such a relation between such persons as that each of them is a...