5 Sandf. 113 7 N.Y. Super. Ct. 113

Israel Smith, Respondent, v. Job Wright and Theron Losee, impleaded with Austin W. Otis and others, Appellants.

When two mercantile firms agree to share profit arid loss upon contracts for the purchase or sale of merchandise, to he made by each firm in its own name, and to be executed with its separate funds, they are not liable as co-partners, either as between themselves or to third persons.

As each firm, under such an agreement, is bound to make and fulfil its own contracts, there is no such union of funds or services as gives them a community of interest in the property purchased or sold. Henee, some of the essential ingredients of a partnership are wanting. Even if the effect of such an agreement were to render the firms partners in every transaction under it, still upon an executory contract made and subscribed by one of the firms in its own name, the other could not be made liable either as partners or as principals.

Such a contract, as against the firm not subscribing it, would be void under the. statute of frauds.

The court could not infer that the name of the firm actually signed was used on the particular transaction as the partnership name of both firms.

Judgment at special term overruling demurrer to complaint reversed and judgment rendered for defendants.

(Before Sandfoiíd, Mason, and Campbell, J.J.)

May 20;

June 21, 1851.

This was an appeal from a judgment at special term, overruling a demurrer to the complaint. It is necessary to state the pleadings in order that the points raised by the counsel, and the decision of the court may be understood.

The complaint is in these words :

The plaintiff complaining shows to this court, that in the spring of the year 1847, as this plaintiff is informed and believes, the said defendants Job Wright and Theron Lose'e, then composing the firm of Wright & Losee, merchants, doing business In the city of New York, and the defendants; Austin W. Otis, William H. Otis, and Oliver Glover, composing the firm of A. W. Otis <fc Co., merchants, doing business in the same place, mutually agreed to make contracts ór agreements in the names of their respective firms, with divers persons, for the sale and delivery of flour and' other produce at a future day, with a view to realize the rise or increase in thé prices óf' *114produce which they then anticipated would take place in the market, and upon the express agreement that such contracts should be made for the joint account and benefit of said two firms, and the profits resulting therefrom should be equally divided between them, and the loss, if any, should be borne by the said two firms in equal proportions.

That in pursuance of this agreement the said firm of A. W. Otis & Co., did on the eleventh day of March, 1847, for the Joint account and benefit of said two firms as aforesaid, make and enter into a contract in writing with the firm of Collomb & Iselin, merchants of the said city of New- York, which contract is in the words and figures following, to wit:

- For the consideration of one dollar to us in hand paid, we agree to deliver to Mess. Collomb & Iselin, in all the month of June, 1847, at our option, two thousand barrels superfine flour, to be New York City Inspection, in fiat hoops, in merchantable order, to be Genesee, Ohio, or Michigan, not over four different brands in each one thousand barrels, at five dollars fifty cents per barrel, payable as delivered.

New York, March 11,1847.

A. W. OTIS & Co.

Of all which the said defendants, Wright & Losee, had notice.

That on the 15th day of May, 1847, the said Collomb & Iselin, for a valuable consideration, assigned and transferred, the said contract and all their right, title and interest therein, to A. A. Thurber of the said city of New York, who thereby became the lawful holder and owner thereof.

That on or about the same time the said A. A. Thurber for a valuable consideration, assigned and transferred the said contract, and all his right, title and interest therein, to the firm of E. & W. Herrick, merchants of said city, who thereby became the lawful holders and owners thereof, of all which the said defendants had.notice.

That when the said two thousand barrels of flour in the said contract mentioned, were by the terms thereof deliverable to the said E. & W. Herrick, as the holders and owners of the said contract, to wit, in all the month of June, aforesaid, the *115said A. W. Otis & Co., did not deliver the same or any part thereof to them, although requested so to do, by the said E.. <fc W. Herrick, and although the said E. & W. Herrick, were ready and willing to accept and receive the same, and to pay for the same at the rate or price aforesaid, nor did the said defendants, Wright & Losee, deliver the same or any part thereof—but the Said defendants wholly neglected and refused to deliver the same or any part thereof.

And this plaintiff further says, that in. the month of June,. 1847, and on the 30th day thereof, flour of the kinds agreed to be delivered by the said contract, was worth in the city of New York, from seven dollars and twelve cents to seven dollars and twenty-five cents per barrel. Whereby the said E.. & W. Herrick sustained damages to the sum of three thousand two hundred and fifty dollars, being the difference between the' contract and the market price of said two thousand barrels of flour, and became entitled to recover that sum of money from the said defendants, as their damages by reason of non-performance of the said contract.

And this plaintiff further shows, that on or about the fifteenth, day of March, 1849, the said A. A. Thurber, and the said E. & W. Herrick, for a valuable consideration,, assigned and transferred all their right, title and interest in the said contract to, the said plaintiff, who thereby became and now is the lawful holder and owner thereof, and who thereby became entitled to, recover the said sum of three thousand two hundred and fifty dollars from the said defendants, as the damages occasioned by the non-performance of the said contract.

For which sum the said plaintiff prays judgment with the costs of this suit.

The demurrer is as follows :

Job Wright and Theron Losee, two of the- defendants in this' action, by Charles S. Roe, their attorney, demur to the amended! complaint in said action, and specify the following grounds of objections to said complaint.

I. For that it does not appear by said complaint, how or in what manner said Job Wright and Theron Losee, are liable to *116the plaintiff -on the alleged contract in said complaint set forth, nor is such a case stated in such complaint as is sufficient to charge said Wright & Losee, in favor of the plaintiff under the said alleged contract.

II. For that it does not appear by said complaint, that-E. & W. Herrick therein mentioned, offered to receive the flour mentioned in the alleged contract in said complaint set forth.

III. For that it does not appear by said complaint, that said E. & W. Herrick demanded- the flour mentioned in said alleged contract, or tendered or offered to pay the price thereof, or were prepared to pay such price.

IY. For that it does not appear by said complaint that the plaintiff in said action, or ¡any other person or persons, were ready or willing, or offered to receive the flour mentioned in the said alleged contract.

Y. For that it does not ¡appear by said complaint, that the plaintiff or any other person or persons, demanded the flour mentioned in said alleged contract, or tendered or offered to pay the price thereof, or were prepared or ready to pay such price.

YI. For that it does not appear by the said complaint, that Collomb & Iselin in the said complaint, and alleged contract named, ever demanded the flour mentioned in such alleged contract, or -offered to receive the same, or ever tendered or, offered to pay the price thereof, -or were prepared or ready or willing to receive such flour, or to pay theprice thereof. Nor does it'appear that A. W. Otis & Co., or the said Wright & Losee, did not in due time deliver to said Collomb & Iselin all the flour in said .alleged .contract mentioned.

B. W Bonney, for defendants, Wright & Losee, insisted upon the following points and authorities.

L The grounds of objection (causes of demurrer) to the complaint are well stated in the demurrer and in such form as to properly raise and present for decision, under the provisions of the code, the general question of the sufficiency of the statements in the complaint to enable the plaintiff, to recover. Code of 1848, § 122, 123; do. of 1849, § 144, 145; De Witt v. Swift, *1173 Howard’s Prac. R. 280; Durkee v. The Sar. & Wash. R. R. Co., 4 Howard’s Prac. R. 226.

But if necessary the defendants will be permitted to amend their demurrer. The same objection might be taken by answer as at the trial, and, if the court is satisfied it is a valid objection, it would be worse than useless now to overrule it and permit the same question to be raised, hereafter, in another form, and then to prevail. Code of 1848, § 127,149 ; do. of 1849, 148, 173.

II. The complaint states no sufficient cause of action against Wright & Losee. The alleged contract upon which the action is brought is clearly within the statute of frauds, and it is expressly shown by the complaint not to have been subscribed by them ; nor by any person in their name or behalf. 2 R. S. p. 135, § 3, (2d ed. p. 70;) Davis v. Shields, 26 Wendell, 341; Shindler v. Houston, 1 Comst. 251.

III. The name “A. W. Otis & Co.” subscribed to the alleged contract on which the action is brought, did not bind the defendants Wright & Losee. They were not members of the firm of A. W. Otis & Co., nor had that firm authority to subscribe their name to any contract. It was not the effect of the alleged agreement between the two firms, nor was it the intent of the parties to that agreement, that either firm should have power to use the name of the other, or to make any contract with third parties, binding upon the other.

IV. There is no sufficient allegation in the complaint of any demand of the flour mentioned in the supposed contract, or of any offer or readiness to accept the flour, or pay for the same.

V. The supposed contract is to deliver to “Collomb & Iselin,” not to their order or assigns, and there is no allegation in the-complaint that defendants did not deliver or offer to deliver the whole of the flour to Collomb & Iselin.”

Under the alleged contract the defendants could not be required to deliver the flour elsewhere than to Collomb & Iselin, or at their store.

VI. The defendants Wright & Losee are entitled to judgment on the demurrer. If, however, the court shall be of opinion that the complaint is sufficient and the demurrer not well taken, the defendants will be allowed to withdraw the demurrer and *118answer the complaint, on payment of the costs of the appeal. Code of 1849, $ 174.

J. H. Rodman, for plaintiff,

contended that the demurrer was frivolous, and that the judgment at special term should be affirmed with the costs of both hearings. The contract, he said, was clearly binding upon the firm of A. W. Otis & Co., and that the appellants were properly charged as copartners with that firm, and as such were equally liable, at law, and in equity. It was immaterial in what name the contract was made, or the general business of the firms as copartners was carried on, provided the name was one which they had agreed to use' as a partnership name, and this was so, whether the contract was liable to be affected by the statute of frauds, or not.

He cited Story on Agency, § 270, note; and 2 Smith’s Lead. Cases, 212, note to Thompson v. Davenport.

By the Court.

Sandford, J.

By the agreement" set forth in the complaint, two separate firms, transacting mercantile business, were to operate separately, and in their respective names, in the sale of flour and other produce. Such operations were to be for the joint account and benefit of the two firms ; which is explained in the agreement itself to mean, that the two firms should share equally in the profits and loss arising from their separate dealings, in this particular branch of their general business. Each firm was to contract, as it did in all its other business, in its own name and without any control from the other. On the fulfilment of a contract, made, for example, by A. W. Otis & Co., and their receipt of the price, Wright & Losee would not, under this agreement, be part owners of the fund so received. They would have no share, right or interest in it, and they could not arrest it by injunction, in the hands of Otis & Co., even if they were to establish that the latter were insolvent and owed to them either profits in the contract thus closed, or in other like transactions, or in both.

There was no union of funds contemplated by the agreement. Each firm was to make and fulfil its own contracts': There was no union of services, because it might so happen that one of the *119firms would be unable, or deem it unwise, to make any contracts at all; and yet, in the absence of bad faith, it would participate in the profits, and would certainly be liable to share the losses, of the contracts made by the other firm.

The whole effect of the agreement was to bind two distinct mercantile houses, acting in their own names, separately and independently of each other, to share the profits and losses, when they should be ascertained, arising from one particular department of their trade. We'think that this did not consti-' tute the two firms copartners in the contracts, which the respective separate firms made in the transaction, of that portion of their business.

It is very clear, that there was no intention in these firms to create such a relation between themselves. In the absence of such intention, and of a community of interest in the property out of which the profits are to arise, no partnership will be created between the parties and third persons, if the whole transaction is clearly susceptible of a different interpretation, or excludes some of the essential ingredients of a partnership. (Story on Part. § 30.) We have noticed some of the circumstances which lead to a different interpretation of this agreement. The ground upon which a participation in the profits of a trade is held to make parties liable to third persons, though they never intended to be partners as between themselves, as it was advanced by De Grey, Ch. J., in 2 W. Bl. 1000, and was adopted by the Supreme Court of this State in Dol v. Halsey, 16 John. 34, is entirely wanting in this case. Hence Wright & Losee could not, by the terms of this agreement, take any of the fund on which the creditors of Otis & Co. relied for payment. We have already said they have no right or interest in such fund. Their right to profits, received by Otis & Co., under the agreement, would make them creditors of that firm, with no advantage over other creditors, and with the disadvantage of a liability to counter claims for losses, or for profits, in their own contracts for the sale of produce.

When closely analysed, the case is not different from that of one who should agree to pay to a merchant a stipulated sum and agree to share his losses, in consideration that he should account to the former for half of the profits of his business for *120pne year. Here each party agreed thus to account and share, in consideration of the like agreement of the .other. They were pot partners between themselves, and we see no good reason why they should be deemed partners as to third persons.

If we were to assume that the effect .of the agreement was to make Wright & Losee partners with Otis <fe Go. in the contracts of the latter for produce, there is a further difficulty in the way of the plaintiff. The investment npon which the suit is brought, is an .executory contract, for the sale of goods to the .amount of eleven thousand dollars, and unless subscribed by Wright & Losee, the parties sought to be charged, it is void by the statute of frauds. The complainant do.es not aver that Otis ,& Co., who subscribed .the contract in their own name, were the agents of Wright & Losee; and if such an averment had been made, it would not have aided the case. We have decided in a case now before us, (Fenly v. Stewart and Tunnicliff,) that on a similar executory, contract, subscribed by A. W. Otis & Co., in their own name, the defendants in that suit could not be charged, although it was proved that Otis & Co. were their agents in making the contract.

The plaintiff, not relying upon the ordinary principle of agency, argues that the .contract in question is subscribed by Wright & Losee because, pro hac vice, they ai'e members of the firm of A. W. Otis & Co., in whose name it is subscribed. That it is immaterial in what name the contract is made, or the general business of the partnership is carried' on, provided the partners agree to nse that name.

There can be no doubt of the latter proposition, and it is equally true that the signature of the copartnership name to a contract not under seal, is a subscription of it by all the partners, within the meaning of the statute of frauds. But it is very essential, and so the plaintiff’s point assumes, that there shall be a copartnership name which the partners have agreed tp use as suph. Now this complaint states no such name, nor any such agreement establishing it. Who composed the firm of A. W. Otis & Co. ? The complaint answers the question by its statement, that it was composed of the two Otises and the defendant, Clover—but does not state that those persons, together with. Wright and L.osee, composed that firm. Nor does it allege that *121the two firms described in it, agreed to transact business under the name of either the one, or the other. It is claimed by the plaintiff that the complaint shows the formation of a partnership by all the persons composing these two distinct firms, but it is entirely silent as to the name or style which they assumed for the dealings of such new partnership.

The court cannot remedy this by inference ; and if it could, it would be absurd to infer that the five partners agreed that their new firm should have two names, viz. Wright & Losee, and A. W. Otis & Co., and that when either Wright or Losee made a contract, the firm name should be “ Wright & Losee,” and should be so subscribed and used, and when either of the other three contracted, the firm name should be “ A. W. Otis & Co.” throughout the transaction. No other inference would meet the difficulty, and we have neither the right nor the inclination to adopt the one suggested.

The plaintiff has therefore failed to show that the contract in question was subscribed by Wright & Losee, and it cannot be enforced against them. The judgment at the special term must be reversed, and a judgment entered in favor of the defendants on the demurrer to the complaint.

Smith v. Wright
5 Sandf. 113 7 N.Y. Super. Ct. 113

Case Details

Smith v. Wright
Decision Date
Jun 21, 1851

5 Sandf. 113

7 N.Y. Super. Ct. 113

New York



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