Solomon v. Solomon

• Decision Date: 31 January 1847
• Docket Number: No. 2.,2.
• Parties: Henry Solomon, plaintiff in error. vs. Frances Solomon, Ex'x of James Solomon, deceased, defendant in error.
• Court: Georgia Supreme Court

2 Ga. 18

Henry Solomon, plaintiff in error. vs. Frances Solomon, Ex'x of James Solomon, deceased, defendant in error.

No. 2.

Supreme Court of the State of Georgia

JANUARY TERM, 1847.

In Equity from Twiggs Superior Court. Tried before Judge Scarborough, at October Term, 1846.

For the facts of the case, see the opinion of the Supreme Court.

Johnson, Harris, Rockwell and Cole, for the plaintiff in error.

Argument of Mr. Rockwell.

Partnership is defined to be a voluntary contract between two or more competent persons, to place their money, labor, effects and skill, or some or all of them, in lawful commerce in business, with the understanding that there shall be a communion of profits between them. Story on Part. 2. Gow on Part. 1. Montague 1. Collyer on Part. 2.

The view of dividing the benefit resulting from the partnership, is the main object of the agreement. As between themselves and apart from the operation of law, where the rights of third persons do not intervene, this division of benefit may be the sole end of their stipulations. The partnership contract is founded purely upon the consent of the partners, and whatever they agree in good faith to perform, contravening no principle of law, is binding upon all. Hence, although a community of interest is the essence of allpartnerships, it is by no means necessary that there should be a community of loss. Among the Romans it was held, that one partner might by agreement be entitled to a share in the profits without being accountable for any part of the loss. Inst. lib. 3, tit. 26, sec. 2. Watson on Part. 56. And although this proposition, with a slight modification, has been adopted in the Common Law, to wit: that each partner shall share in the losses so far as they constitute a charge upon, or a deduction from the profits, Collyer on Part; 3 Mees. & Wels. 359; Story on Part. 28; yet cases are by no means novel, where a partner has been by agreement permitted to share the gross profits of the common business.

It is competent for the partners to agree that the profits shall be equally divided between them, and if there be no profits the loss shall be borne by one or more, and that the other shall be ' inter sese' exempt. 5 B. & A. 954. 3 Mees. & Wels. 357. Story on Part. 28. So the proportion in which they are to share the profits or losses, may be varied at their pleasure, whether they contribute equally to the common stock or not.

The law has left these matters to the discretion of the parties, taking care that no fraud, imposition, or undue advantage is practised by either side. Agreements between partners as to the limitation of the partnership, the manner in which the business is to be conducted, the capital to be employed, the proportion in which profits are to be divided and losses borne, time and mode of settling accounts between them, the powers and duties of each partner, and various other matters connected with the transaction of the partnership business, are entirely the subject of personal and private stipulation and arrangement, and in whatever way they may be ultimately settled between themselves, unless they interfere with or contravene some principle or rule of law, they cannot be impeached. Gow on Part. 9.

The contract of partnership may be verbal or in writing. Sto. 119. And as no particular solemnity is necessary to call it into being, none is necessary to qualify, alter, supersede, or dissolve it. The terms of this contract may be changed at pleasure by mutual consent, and it has been held, that a course of dealing long enough to demonstrate that the partners have agreed to change the original articles of partnership, shall be held conclusive of such change, Turn. & Russ. 523.

Particular transactions may be abstracted from the general partnership account, so as to avoid the operation of the general rule oflaw, that actions at law cannot be maintained by one partner against another, and give rise to such actions. The books abound in such examples. 3 Mass. E. 364. 10 Moore, 341. 3 Bing. 54. 7 B. & C. 419. 1 Mann. & Ey. 238. Collyer 143 et seq. Such actions may be maintained without an express promise. Holt N. P. C. 368. In the several States, however, the rule upon this subject is conflicting. It has been usually held, that an action at law would lie to recover a final balance without an express promise to pay it. 1 Binney E. 191. 1 Wash. C. C. R. 435. In Massachusetts, a final settlement is not necessary. 9 Mass. E. 539. Ib. 540. 12 Mass. E. 34. 14 Ib. 116. 3 Pick. 420. 6 Pick. 179. It has been held, that parties may separate any portion of the partnership affairs from the rest, and adjust that portion. 6 N. H. R. 547. 1 Wend. E. 532. 4 Tyrwh. E. 335. These authorities conclusively prove, that not only a variation of the articles of partnership may be made by the consent of the partners, and such variations \' inter se\' be upheld by the Court, but that the operation of the rules of law will be varied by the changing phases of the partnership business.

I. With these principles in view, it is proposed to consider the questions presented by this record, to wit, as to the charge of the Court below " that if a partner draws upon the partnership funds and applies the proceeds to his own use, he is liable to account to his copartner for a moiety with interest from the time he received the funds. " Were this true as a general principle, the settlement of partnership accounts would be an unfailing source of constant and perplexing litigation. The opinion is suggested by counsel, with deference, that the allowance of interest as against a partner, constitutes the exception to the general rule, and it is allowed, when at all, as a punishment for some default. In the case of Dexter vs. Arnold, 3 Mason, 289, it was held, that interest is not allowed on partnership accounts generally, until after a balance is struck on a settlement between the partners, unless the parties have otherwise agreed or acted in their partnership concerns. In the case of Miller vs. Lord, 11 Pick. B. 11, the Court says, "in general when the articles of partnership permit the partners to withdraw certain sums annually without containing any stipulations in regard to interest thereon, interest will not be allowed." It would thus seem that a stipulation is necessary to carry interest on the account, when the sums are drawn in good faith and by consent. Here the item constituting the subject-matter of the suit, was asum of $3,500, drawn by one partner with the consent of the other, here being no articles of partnership, and no stipulation either at the formation of the partnership, or the time of drawing the amount, that it should bear interest. The only cases where interest has been allowed on partnership accounts against a partner, before a balance struck, will be found to be where the money has been withdrawn mala fide, or retained improperly. Such, for example, are the cases of Simpson vs. Feltz, 1 McCord Ch. R. 220, and Stoughton vs. Lynch, 2 John. Ch. R. 209. The general Common Law rule is, that the law does not imply a contract on the part of the debtor to pay interest on a sum he owes, although the debt may be of a fixed amount, and have been frequently demanded. 1 Campb. R. 50; 2 Ib. 426; 1 Bos. & Pul. R. 307; 9 Barn. & Cresw. R. 378; 4 Man. & Ry. R. 305; 5 Cowen R. 587. It is not due in the absence of express stipulation, even in the case of written instruments, unless they be commercial instruments of a negotiable nature. 9 Barn. & Cresw. R. 378; 6 Bingh. R. 709; 4 Moo. & Pay. 589, S. C. The charge of the Court on this point is therefore deemed erroneous.

II. It is not denied that quoad third persons a participation in the profits of a business, and a community of interest in the capital stock, creates in law, ordinarily, a partnership between the parties. But in the case at bar the question is, how the acts of the parties in relation to this sum of $3,500 drawn by Henry Solomon from the partnership fund for his own use, with the assent of James Solomon, are to be construed as between themselves. The refusal of James Solomon to receive the same amount for himself, and his declarations, clearly prove that he preferred to receive the sterling exchange thereon, and incontestably show a severance of that amount from the partnership fund on the part of James Solomon; for on this amount the profit was to be his exclusive profit. Here it is material to observe, that the legal term "communion of profit" imports a joint and mutual interest in the profit. It cannot, surely, be said that as to the sum of $3,500, which James Solomon preferred to leave in the hands of the factor, and on which he desired to realize to himself the sterling exchange, there was a joint and mutual interest in the profits existing between the two partners. The intentions of the parties as expressed by their acts and ascertained by the testimony, and which constitute the true guide for the Court in determining this question, absolutely forbid such a conclusion. Mr. Justice Huntingdon, in delivering the opinion ofthe Court in Loomis vs. Marshal, 12 Conn. R. 69.—(which was a question of partnership quoad third persons) says, "that the parties to this agreement did not intend to create a partnership, as between themselves, is very obvious from the facts set forth in this motion, connected with the stipulations contained in the agreement; and if they are liable as partners, they are made so by construction of law. If they are all jointly liable, their liability arises from the fact, that they have entered into a contract, which as between themselves and the plaintiff, controls their clear intention, if not express stipulation, to the contrary. Whether these defendants have entered into such terms, is to be determined by a fair construction of the agreement which they have executed." The defendants were held not to be partners. If then, as to third persons, the intentions of the parties may be looked to to...