Rosenblum v. Springfield Produce Brokerage Co.

• Decision Date: 29 November 1922
• Citation: 137 N.E. 357,243 Mass. 111
• Parties: ROSENBLUM et al. v. SPRINGFIELD PRODUCE BROKERAGE CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

243 Mass. 111

137 N.E. 357

ROSENBLUM et al.

v.SPRINGFIELD PRODUCE BROKERAGE CO.

Supreme Judicial Court of Massachusetts, Worcester.

Nov. 29, 1922.

Report from Superior Court, Worcester County; Richard W. Irwin, Judge.

Suit for an accounting and discovery by Abraham Rosenblum and Joseph Rosenblum against the Springfield Produce Brokerage Company. Reported for determination by the Supreme Judicial Court on the writ, including the officer's return thereon, the bill, and defendant's demurrer. Decree overruling demurrer affirmed.

The agreements under which the accounting was sought were between the Springfield Produce Brokerage Company, the South Deerfield Onion Storage Company (the name under which Joseph Rosenblum was doing business), and Abraham Rosenblum. The bill alleged the making of the agreement, that no more business remained to be done thereunder, that defendant had made reports of the state of the business from time to time, but plaintiffs had never verified them by an inspection of defendant's books, that to have a final settlement they were entitled to inspect the vouchers upon which the book entries depended, that they had not been permitted to inspect defendant's books as the contract provided, but had been refused such permission, that they believed and had reason to believe there were errors and omissions in the accounts and books, and that the informal reports given did not show the true total of the accounts or profits, on information and belief that quantities of onions had been shipped out to apply on debts of defendant or its treasurer, and that, on information and belief, defendant had drawn from the funds advanced by plaintiffs substantial and large sums of money, and appropriated them to purposes of their own. Defendant demurred on the grounds: (1) That it was beyond the corporate power of defendant corporation to make the alleged contracts on which plaintiffs relied; (2) that the matters complained of were in the event of disagreement to be left to a board of arbitration, which scheme of settlement did not permit plaintiffs to maintain the suit; (3) that there was no equity in the bill, and plaintiffs had a plain, adequate and complete remedy at law.John C. Hammond, Thomas R. Hickey, and Thomas J. Hammond, all of Northampton, for plaintiffs.

Walter L. Stevens and John R. Callahan, both of Northampton, for defendant.

RUGG, C. J.

This is a suit in equity wherin the plaintiffs seek an accounting under two contracts to which they and the defendant are the sole parties. The first of these contracts, dated on July 28, 1919, recites that the three parties have ‘entered into a co-operative agreement to buy and sell onions in the Connecticut Valley this season.’ The next paragraph is in these words:

‘The Springfield Produce Brokerage Co., Inc., and the South Deerfield Onion Storage Co., are to be the active operators in connection with this deal, and these two companies agree to keep an accurate item of all of its purchases and sales dating from July 28, also an expense account in connection with its business. These expenses with the exception of the services of Mr. Wirt Goodwyn, president and treasurer of the Springfield Produce Brokerage Co., Inc., and Mr. Joseph Rosenblum owner of the South Deerfield Onion Storage Co. shall be chargeable at the end of the season to what will be known as a joint expense account. Said expenses are to be deducted from the profits if there are any, and if not, each party to this contract shall bear an equal share of said expenses. The books of the two said companies shall be subject to inspection at any time by a duly authorized representative of any party to this contract.’

Then follows a paragraph providing for the lease for the season of certain warehouses belonging to the defendant for a stipulated price ‘to this joint account.’ The next three paragraphs are in these words:

‘It is understood and agreed by all parties concerned that the Springfield Produce Brokerage Co., Inc., and the South Deerfield Onion Produce Co., shall conduct its business of buying and filling orders as in the past, but shall not have the right to embark in any speculative transaction in onions without the consent of the three parties to this contract. The duties and obligations of Mr. A. Rosenblum are that of a silent partner. He is to furnish the necessary capital for the conduct of this business, without charging interest on money advanced for this purpose, but he shall have the privilege of rendering an expense account for all the money disbursed in connection with the buying or selling of any onions owned or controlled by the three parties to this contract, and said expenses shall be charged to the joint account in the same manner as the expenses of the other two parties to this contract.

‘It is understood that the services of Mr. Rosenblum and Mr. Goodwyn being given free of charge, shall constitute an offset for the use of the money supplied without interest by Mr. A. Rosenblum. It is mutually understood and agreed that there is nothing in this contract which shall apply to any onion transaction which Mr. A. Rosenblum shall have this season outside of the Connecticut Valley.

‘It is also agreed that at the end of the season all parties to this contract shall render a proper accounting to each other of their receipts and disbursements, and they are to share equally in the loss or profits accruing from the operation of this business on a joint account basis.’

On August 26, 1919, a certificate signed by the other two parties was issued to the plaintiff A. Rosenblum stating that, as he was furnishing all the capital for onions stored in warehouses of the defendant, warehouse receipt covering all onions stored should issue to him, concluding with the statement that the only interest of the signners ‘in this deal, is the net result of profit or loss accruing from this transaction, as per contract of July 28th, 1919.’

The averments of the bill, after setting out the contracts, are in substance that pursuant thereto the plaintiff A. Rosenblum advanced to the defendant more than $100,000, and large amounts of onions were purchased and sold, and that no more business remains to be done under the contracts; that the defendant refuses to permit examination of its books; that the plaintiffs believe large quantities of these onions have been shipped to pay debts of the defendant and its treasurer, and that there have been other irregularities in the conduct of the defendant. There are prayers for discovery as to the books and accounts of the defendant, for ascertainment of the amount due each party under the agreements, and for general relief.

The first ground of demurrer urged by the defendant is that the contracts constitute a copartnership which was beyond the corporate power of the defendant.

[1] It is familiar law that corporations are not authorized to enter into ordinary partnerships. Whittenton Mills v. Upton, 10 Gray, 582, 71 Am. Dec. 681;Williams v. Johnson, 208 Mass. 544, 552, 95 N. E. 90;Hosher-Platt Co. v. Miller, 238 Mass. 518, 523, 131 N. E. 310.

Whether a partnership was attempted between these parties depends entirely upon the construction of the written instruments because there has been no hearing, there has been no finding of facts, and the case is presented on demurrer. It seems not practicable at present to phrase a comprehensive and precise definition adequate to embrace all arrangements which are partnerships and to exclude all which are not. See Meehan v. Valentine. 145 U. S. 611, 12 Sup. Ct. 972, 36 L. Ed. 835;McMurtrie v. Guiler, 183 Mass. 451, 67 N. E. 358; Pooley v. Driver L. R. 5 Ch. Div. 458; Estabrook v. Woods, 192 Mass. 499, 502, 78 N. E. 538; Draft Uniform Partnership Act in Terry's Uniform State Laws, pp. 415, 416, 419, 420. Resort has been had to various tests from time to time as aids in the solution of questions presented for decision. One often applied is sharing in the profits and losses of a business venture. This however, is not an unfailing rule because there are numerous instances of joint owners who have a common interest in the profits and losses of an adventure and who are not partners. Thorndike v. De Wolf, 6 Pick. 120;French v. Price, 24 Pick. 13;Buck v. Dowley, 16 Gray, 555;Atkins v. Lewis, 168 Mass. 534, 47 N. E. 507; Jackson v. Robinson, 3 Mason, 138, Fed. Cas. No. 7144; Magee v. Magee, 233 Mass. 341, 345, 123 N. E. 673.

One term of the contract or one aspect of the relationship cannot be fastened upon to the exclusion of other parts. The whole scope of the arrangement must be examined and each of its parts considered in relation to all the other parts in order to ascertain the real intent of the parties and the genuine meaning of the contracts.

Analysis of the agreements here in issue leads us to the conclusion that a copartnership was not intended by the parties, and is not the necessary result of the contracts. This is a suit between the parties, not involving the rights of third persons, and in such cases a partnership commonly is held to exist only when such is the intent of the parties. The documents appear to have been drawn with some degree of care and business sagacity. They do not name the relationship established between the parties as a partnership but as a ‘co-operative agreement.’ Expenses connected with it are termed ‘joint account’ and ‘joint expense account.’ No common or separate books of the transactions to which the contracts relate are to be kept. Each of the two ‘active operators' is to keep his individual and distinct account. It is expressly provided that each active operator ‘shall conduct its business of buying and filling orders as in the past.’ The fair import of these words is that each is to continue its business as therefore, detached and independent from the other. Each is to buy and sell in his own name, on his own judgment as to prices, and untrammeled as to the customers with whom he...