Sheldon v. Little

• Decision Date: 01 October 1940
• Docket Number: 1061
• Citation: 15 A.2d 574,111 Vt. 301
• Parties: ADELAIDE W. SHELDON v. C. RUSSELL LITTLE
• Court: Vermont Supreme Court

15 A.2d 574

111 Vt. 301

ADELAIDE W. SHELDON v. C. RUSSELL LITTLE

No. 1061

Supreme Court of Vermont

October 1, 1940

May Term, 1940.

1. Partnership Determined by Contract.---2. Intent Shown by Conduct.---3. Intent Found by Construction.---4. Constituent of Partnership.---5. Contributions to Partnership.---6. Profit Sharing Not Always Partnership.---7. Partner's Interest in Profits.---8. Partner's Interest in Business.---9. Facts not a Partnership.---10. Finding Grounds for Reversal.---11. Relaxing such Rule.---12. Remand to Prevent Injustice.

1. Where the rights of the parties inter se merely are concerned and no question as to third parties is involved, whether or not parties are in partnership is determined by what the parties intended by their contract.

2. The intent of persons' relations between themselves may be shown in their express agreement or inferred from their conduct and dealings with one another.

3. When there is no indication of the intent of parties to an agreement other than a written statement thereof, their intent is ascertained by a construction thereof.

4. The indispensable constituent of a partnership is that the parties shall be jointly interested in the profits and affected by the losses of the business.

5. The joint interest in the profits and losses of a partnership may result even though one furnishes the capital and the other contributes his labor and skill.

6. If the parties have a specific interest in profits as profits the relation constitutes a partnership, but one having not a specific interest in the business but only a stipulated proportion of the profits as compensation is not a partner.

7. One having an interest in the profits of a business is a partner only if he has a proprietary interest in them as principal before they are divided.

8. A proprietary interest, as principal, in undivided profits involves ownership of an interest in the business that produces the profits.

9. Where a business is run as the property of one party, without whose approval expenses could not be increased, who could discharge the other upon payment of a bonus, who could sell subject to a refusal to the other, and the other had an option to purchase in case of the death of the one, the arrangement gave the one a sole proprietary interest, and a whole interest in the profits before division and the other merely took a share of the profits as compensation for his services and the parties were not partners.

10. The Supreme Court does not search for grounds upon which to reverse a judgment.

11. But when a question is presented which is fundamental to the excepting party's rights the Court may relax the rigor of the rule and consider the question.

12. A case may be remanded so that no injustice may be done.

COMMON COUNTS IN ASSUMPSIT. Plea of general issue. Trial by Rutland County Court, March Term, 1939, Adams, J., presiding. Judgment for the plaintiff, defendant excepting. The opinion states the case.

Judgment reversed and cause remanded.

Philip M. M. Phelps for the defendant.

Stafford Abatiell & Stafford and Fenton, Wing & Morse for the plaintiff.

Present MOULTON, C. J., SHERBURNE, BUTTLES, STURTEVANT and JEFFORDS, JJ.

OPINION

BUTTLES

The plaintiff here seeks to recover in general assumpsit for balances alleged to have been agreed between the parties on accountings between them for the years 1926, 1927, 1929, 1930 and 1931 respectively, to be due from the defendant to the plaintiff. A claim originally made for a portion of the year 1932 was later eliminated by agreement. Trial was by court findings of fact were filed and judgment rendered for the plaintiff. Exceptions were allowed the defendant, but the only such exception which the defendant has briefed in this Court is to the overruling of his motion, seasonably made, to dismiss the action. This motion was predicated on the grounds that the parties were partners during all of the time covered by the plaintiff's claim; that there had never been an accounting between the parties of the partnership business, or a full statement of that business; that such accounting should be had, and that the plaintiff's cause of action is one of accounting and not in assumpsit. Defendant concedes that if the relationship between the parties was not that of partners there was no error in the overruling of his motion.

From the facts found it appears that prior to March, 1925, the plaintiff and defendant each conducted an insurance business in Fair Haven, Vermont, that of the defendant being such that he gave only a part of his time thereto. On March 5, 1925 the parties executed a written agreement providing for the consolidation of their two insurance agencies. Thereafter the consolidated business was conducted in accordance with such agreement until October 1, 1932, when the parties ceased to do business together under such agreement or in any other way. During all of the time that the business was so conducted it was actively managed by the defendant who took general charge of the same, kept the books and handled the finances. Meanwhile the plaintiff was away from Fair Haven much of the time and took no active part in the business except that during the year 1932 she gave it some attention and participated in its management. At the end of each year except 1932 the defendant submitted to the plaintiff a written report or statement purporting to give certain data regarding the business for that year. Each of these reports states the amount of money or value that each of the parties had received from the business during the year and the difference between those amounts. All of these reports are exhibits in the case and are referred to and made a part of the findings. Each of them contains a tabulation of expenses and a tabulation by months of what appears to be, in each instance, the commission income of the business. None of the reports are balanced and on each report the difference between the sums of the two tabulations referred to exceeds by a substantial amount the sum of the amounts received by the plaintiff and the defendant.

Said written agreement provided that the said agencies, after being consolidated, should be run as the property of the plaintiff and under the name as theretofore of the Sheldon Agency; that the defendant should have the supervision and management of said agency, bringing to the Sheldon office the books, files, papers and other personal property previously used by him in his own agency and continue there the general business of the consolidated agencies, devoting his entire working time to the management and development thereof; that the plaintiff might give such time to the management of the business as she cared to give from time to time, but should be under no obligation at any time to give the same her personal attention and care; that from the gross income of the business there should be paid the running expenses including rent, heat, light, office supplies, stenographer and other incidental expenses usual in the conduct of such a business, and that the net profits after the payment of such expenses should be equally divided between the parties to the agreement. Other provisions of the agreement will be considered later.

The question for determination is whether the plaintiff and defendant were partners or sustained some other relation to each other. Where the rights of the parties inter se merely are concerned, and no question as to third parties is involved, the criterion to determine whether the contract is one of partnership or not must be: what did the parties intend by the contract which they made as between themselves? Duryea v. Whitcomb, 31 Vt. 395, 397; 47 C. J. 654; London Assur. Corp. v. Drennen, 116 U.S. 461, 6 S.Ct. 442, 444, 29 L.Ed. 688. This intention may be shown by their express agreement or inferred from their conduct and dealings with one another. 47 C. J. 656. But we have here no indication of the intention of the parties other than their written agreement, so that their intention is to be ascertained by a construction of that writing. Gilmore on Partnership, 7, Sec. 3.

Many definitions of partnership have been given, no one of which would, perhaps, fit all cases, and various tests for determining the existence of the partnership relation have been applied by the courts. The test most generally applied subject to various conditions and limitations, is that of profit sharing. This Court has recently said that the indispensable constituent of a partnership is that the parties shall be jointly interested in the profits and affected by the losses of the business. Johnson v. Marsh and Ufford, ante, 266, 15 A.2d 577, Farmers' Exchange v. Brown, 106 Vt. 65, 68, 169 A. 906; Brigham v. Dana, 29 Vt. 1, 10; Chapman v. Devereux, 32 Vt. 616, 619; Griffith v. Buffum and Ainsworth, 22 Vt. 181, 184, 54 Am. Dec. 64. Such joint interest may result even though one party furnishes the capital or stock and the other contributes his labor and skill. Brigham v. Dana, supra. But there is a clear distinction between agreements whereby the parties have a specific interest in the profits themselves as profits, and agreements which...