Connecticut. Supreme Court of Errors.

Connecticut reports: containing cases argued and determined in ..., Volume 37 online

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diflerent individuals and made with each just such an agree-
ment as this, could they all be held as partners with Andrews,
Canfield and Hutchinson ? Can Canfield call Hutchinson to an
account if Andrews should pay Hutchinson more than his
share of percentage on money advanced, or vice versd ?

Third. But let us assume that a dormant paiinership was
created, with Andrews as the acting and known partner, and
Hutchinson and Canfield as the silent and unknown members
ot the firm " H. 0. Andrews." The alleged partnership ex-
pired Sept. 1,.1868, or at the latest Nov. 1, 1868.

1, Neither Canfield nor Hutchinson is liable for any acts
or engagements of Andrews subsequent to that time, and no
notice of the expiration of the arrangement or dissolution of
the alleged co-partnership was necessary to relieve them firom
liability, because the world had no knowledge of the connec-
tion, and the plaintiff particularly dealt throughout with
Andrews alone, and in entire ignorance, until long after the

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Parker r. Canfield.

liabilities which form the immediate subject of this action
were incurred by Andrews, of any connection existing between
him and the parties now sought to be charged. The dormant
partner is liable, if at all, not because he intended to become
so, but because during the term of the connection he is re-
ceiving the emoluments and profits of the business. If he
receive no emoluments or profits why is he liable ? At the
expiration of the connection his liability ceases, because third
pereons never trusted to his credit, and no customer or cred-
itor was disappointed or misled if he silently withdrew from
a finn of which he was never known to be a member. The
doctrine of fair dealing would make Canfield liable if he had
held himself out as responsible for Andrews's acts, but under
the circumstances of this case he is clearly exempt from lia-
bility on all the contracts which are sought to be enforced in
.this action. Collyer on Part., § 536 ; Story on Part., § 159 ;
8 Kent Com., 68 ; Evans v. Drummondj 4 Esp., 89 ; Kelley
V. Hurlburt, 5 Cowen, 634 ; Seath v. Sansom^ 4 Barn &. Adol.,
172 ; Brooke v. Enderhy^ 2 Brod. & Bing., 70 ; Jones v. Shears^
4 Ad. & El., 832 ; Carter v. WhaUey, 1 Bam. & Adol., 11 ;
Crrosvenor v. Lloyd j 1 Met., 19.

2. The fact that the contracts made and the liabilities
incurred by the ostensible partner remaining in business were
by way of continuation or renewal of old contracts entered
into while the right to participate in profits existed, does not
relieve the plaintiflF from his dilemma, or subject the retiring
dormant partner to liability ; because the ground on which
one partner in a firm has a right, after dissolution, to bind
his former partner as to creditors who have received no notice
of dissolution, is that the creditor is justified in concluding
that the partnership continues, and to bestow fai^h and confi-
dence in the partnership name as before dissolution, in conse-
quence of that belief. 3 Kent Com., 68, note d; Story on
Part, §160; National Bank v. Norton, 1 Hill, 672,578;
Marlett v. Jackman, 3 Allen, 287 ; Ahel v. Sutton, 3 Esp.,
108 ; Kilgour v. Finlyson, 1 H. Bla., 166 ; Newmarch v. Clay,
14 East, 239 ; Lmk v. Smith, 8 Barb., 670 ; Lansing v. Graine^
2 Johns., 300 ; Warren v. Ball, 37 111., 76.

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Parker v. Canfield.

8. No Act or word of Canfield or Hutchinson is shown in-
dicative of their consent to or approbation of Andrews's con-
tinuation of the business of the alleged partnership after the
1st of September, 18ti8. They were entirely ignorant of his
renewal of old obligations. Andrews carried on the business
exclusively. They cannot be held liable for his acts or inten-
tions after the dissolution of the alleged partnership, unless
they participated in or were privy to them, or did something
by way of authority or ratification. Such authority or ratifi-
cation was deemed essential by the court in Roberts v. Ripley^
14 Conn., 649. See also Tillotson v. TiUotson, 34 Conn., 867.

Seymour, J. During the year 1865 the defendants Can-
field and Hutchinson became interested in the business which
the defendant Andrews was engaged in at New Haven. Prom
time to time during that year they furnished him with money
as capital under an arrangement that they, Canfield and
Hutchinson, should each furnish $5,000, and that they each
should have one-sixth of the net profits, and that the arrange-
ment should continue till September 1st, 1868. The affairs
of the company were to be under tlie management of Andrews,
and carried on in his name. Tlie details of the contract were
however not fully arranged, and it was always understood that
the agreement, when its terms were fully settled, should be
reduced to writing.

In January, 1866, counsel was applied to to draw the pa-
pers and the parties then learned that their agFccnient would
make them partners. Thereupon it was agreed by the
defendants that the money invested by Canfield and Hutchin-
son should be regarded as a loan, and the attorney was re-
quested to prepare a writing which should secure to them
one third of the profits without subjecting them to liability
as partners.

The writings, which are set forth at length in the commit-
tee's report, were accordingly prepared and executed.

The defendants while acting imder their verbal agreement
were clearly partners, both inter se and as to third persona*
But the plaintiff's debt arose from moneys furnished to Au-

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Parker v. Canfield.

drews while he was carrying on the business under the writ-
ings, and by the written agreement the relation of the
defendants to each other was materially changed. They were
no longer partners inier se^ and if chargeable at all, the de-
fendants Canfield and Hutchinson are chargeable only as dor-
mant partners.

The plaintiflF claims that parties participating in the profits
of a business are in general subject to the debts contracted
in the prosecution of that business, and that Canfield and
Hutchinson were under tlie written agreement, as well as
under the verbal arrangement, to participate in profits in such
manner as to fall within the operation of the general rule.
The defendants earnestly deny these claims of the plaintiff.

The sharing in the profits of a business was formerly re-
garded as decisive to charge the party so sharing with liabil-
ity as partner as to third persons ; but the modern cases
admit of exceptions to the general rule, and the defendants
contend that the exceptions have in truth subverted and sup-
planted the rule, so that now the mere participation of profits
is no ground whatever for charging the participant as a dor-
mant partner. On this point we cannot adopt the views of
the defendants. The rule itself is firmly established as part
of the common law of England and has been generally recog-
nized as law in this state. We concede that the rule is sub-
ject to important exceptions, the principal of which is that
of servants and agents, who are permitted to receive a certain
percentage of the profits of a business as compensation for
their services in that business. This exception was adopted
in Connecticut in ai nicely balanced case, thnt of Loomis v.
Marshallj 12 Conn, R.^ 69. The court deemed it ^ a matter
of public policy that enterprising citizens who possess industry
and skill, but are without capital, might be employed for a
compensation proportioned to the avails of their labor and
skill, without involving themselves and their employers in
the responsibilities of partnership."

In this class of cases the agent receives what is termed a
conmiission on the profits, as a mode of payment adapted to
secure and increase exertion.

Vol. XXXVII. — 34

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F^urker v, Canfleld.

This distinction between profits received as such by a prin-
cipal, and profits receiyed by an agent as compensation for
services, is nice and sometimes difficult of application, but is
fully established.

There are other cases where compensation from a share of
profits has been allowed for other benefits than services of
an agent, in which, under the idea that public policy required
the exception and that creditors are not injured but rather
benefited by it, such sharing of profits has been held not to
inciur the liability of a partner ; as in ttie case of Perrme v.
Hankinson^ 6 Halsted R., 181, where one received by way of
rent a portion of the profits of a tavern.

But, notwithstanding these exceptions, we think the general
rule remains beyond dispute, that participation in the profits
of a business is primd fade strong evidence of a partnership
in it.

But the defendants say that even if the general rule be as
we have stated it, Ganfield and Hutchinson do not come
within its operation, for they say that they were not to par-
ticipate in " the profits," but by the express terms of the
written agreement were merely to receive " a sum equal to
the profits," not as profits, but simply as compensation for
their services in procuring the loan for Andrews. This
point, and points immediately connected with it, were stron^y
urged in argument and have been carefully examined.

In Waugh V. Carver^ 2 H. Bla., 235, and in the cajses fol-
lowing the authority of that case, the rule and the reason of
it are briefly expressed in the language of Justice DeGrey:
" By taking part of the profits he takes from the creditors a
part of that fond which is the proper security to them for the
payment of their debts." Now it can make no difference
with creditors whether a sum equal to a certain share of the .
profits is taken, or the same share of the profits is taken eo
nomine. The fund on which the creditors rely is aflected to
the same extent and in the same manner, under the one form
of expression as under the other.

The rule and reason of it as expressed by Justice DeGrey,
have been much discussed by judges and lawyers. Judge

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Puker V, Canfield.

Story questions the original justice and wisdom of the rule,
but admits its binding authority subject to certain established
exceptions, and suggests that the rule is one of evidence, and
that " admitting that a participation in the profits will ordi-
narily establish the existence of a partiiership between the
parties in favor of third persons in the absence of all oppos-
ing circumstances, it remains to be considered whether the
rule ought to be regarded as anything more than presumptive
proof thereof and liable to be rci>ellcd and overcome by other
circumstances." Story on Partnership, § 38.

Judge Story's view of the matter when extended comes to
this, that participation in the profits of a business is high
evidence that the party thus participating is really and in
truth interested in the business itself as principal, and that
the party in whose name the business is done is really agent
of the parties receiving the profits, and that a party who re-
ceives a share of the profits of a business may in general
justly be considered one of the parties for whose benefit it is

Now if this be the true ground of the general rule, and we
are inclined to think it is one of its foundations, the rule and
the reason apply as well to a party who receives a sum equal
to a certain share of the profits of a business, as to a party
thus receiving such share of profits by the name of profits.
If the receipt of a share of the profits of a business is evi-
dence that the party receiving such share is interested in the
business itself, the receipt of a sum equal to such share and
measured by it, is like evidence, and if in the one case the
business is regarded as carried on for the benefit of the recip-
ient of the money, it must be equally so regarded in the other
case. Tlie mere use of the expression " a sum equal to the
profits" in lieu of the word " profits," does not change the
nature of tlie contract. There are indeed cases where money
received may appropriately be regarded as a sum measured
by profits rather than as profits themselves ; but whether
they shall be so regarded depends upon no arbitrary use of
phrases, but upon the nature of the contract and the real con-
sideration upon which the money is received. We have

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Parker v. Canfield.

already seenjthat a share of profits paid to agents to secure
exertion is not such a participation in profits as to make the
agent liable as partner, and in such cases the money so paid
is spoken of as a sum equal to or measured by profits, rather
than as a share in the profits themselves.

But the cases do not turn upon the use of a particular
phrase, but on the nature of the contract itself, and the
nature of the consideration on which the promise to pay part
of the profits to the agent is founded, namely, faithful service
in the business.

We must then examine the contract itself, and ascertain
from its nature what the real consideration was upon which
the defendants Canfield and Hutchinson were to receive what
it is stipulated they should receive under it, and whether it is
or is not substantially a share of the profits. The defendants
claim that by the express terms, under seal, of the contract
itself, the consideration is simply as a compensation for the
trouble, time and expense which Canfield and Hutchinson
were put to in procuring the money to loan to Andrews, and
that the consideration has no connection with the business to
be carried on, but is independent of it, and that the profits
are referred to as a mere measure of compensation for ser-
vices already performed, and indicate no interest in the busi-
ness, and do not arise from any interest in the business itself.

This construction of the contract seems to us forced and
unnatural. The committee finds that tlie defendants expected
large profits, and the turning point of the contract was to
secure a share of tbese large profits to the defendants. Can-
field and Hutchinson. These large profits for three years, as
being in consideration for past services, presents a dispropor-
tion too gross to be regarded as the true meaning of the

The mere procuring the money by Canfield & Hutchinson
as a past and completed event was an insignificant matter.
It derived all its value from its connection with the continued
use of the money in Andrews's business. The real consider-
ation then is procuring and actually lending the money for
the term of three years on the terms expressed or implied in

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Parker v. Canfield.

the writing. Canfield and Hutchinson were to receive the
sum stipulated because they furnished a loan of money to be
used in the business of Andrews, carried on by him at No. 60
State Street, on account of the benefit that business would
derive from the use of the money loaned. The sum stipulated
to be paid on such consideration is in its nature a profit.
That is its appropriate name, and the parties cannot change
its nature or obviate its consequences by giving it ijie name
of a sum equal to the profits. We think it is implied in the
written contract, as it was in the verbal arrangement, that
the money furnished by Canfield and Hutchinson, first as
capital and afterwards as a loan, should be used in the par-
ticular business of Andrews during the three years ; and we
attach some importance to this fact, not only by way of infer-
ence as above stated as to the true consideration of the
agreement to give a share of the profits to Canfield and
Hutchinson, but also as bearing upon the point to be spoken
of hereafter, that the business carried on by the aid of these
funds was in truth the business of all these defendants, pros-
ecuted for their joint benefit, and as to the time of its dura-
tion, its subject matter, and the amount of money that should
be used in it, moulded and controlled by the concurrence and
joint contract of them all.

The real consideration upon which Canfield and Hutchinson
were to receive the amount stipulated to be paid to them is
that they were interested in the business. Upon this basis
they were fairly entitled to a share of the profits. Upon any
other basis the agreement giving them a sum proportioned to
profits is unnatural and unreal. If a party is to receive
profits in consideration of furnishing capital, he is clearly a
partner, and is a partnjer quoad third persons even though it
shjDiild be stipulated that the capital should be regarded as a
loan and be repaid as such by the acting paiiner with interest,
and although it should be further stipulated that the party
furnishing capital should be regarded as a mere creditor in
respect to the money by him furnished and should have no
interest in the stock in trade. That is in substance the rela-
tion in which Canfidd and Hutchinson stand to the business

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Parker f». Cattfidd.

of Andrews. They have the' same interest in the results of
the business, and of the same kind, that Andrews himself
has, and the reason why this interest in profits is given tliem,
is that they under the name of a loan have furnished means
to carry on the business.

We have already seen that Justice DeQrey placed the lia-
bility of dormant partners on the ground that they take part
of the ^fund on which creditors rely, and that Judge Story
placed the liability on the ground that the receipt of a share
of the profits was evidence of an interest in the business
itself. In certain late English cases, much discussed, the lia-
bility is said to arise from an agency expressed or implied of
the ostensible partner. The dormant partners are regarded
as principals, and the liability is said to exist only when such
element of principal and agent is involved in tlie relation of
the parties to each other.

In the case under consideration the defendants are liable
under each and all these views of the foundation of liability.
There are no circumstances here to oppose the conclusion
derived from their participation of profits, that they have a
real interest in tlie business itself. The business is one in
which the defendants are all interested. The defendants are
all principals. Andrews as their agent is using funds fur-
nished by them all, in a manner agi-eed upon by them all, for
their joint benefit and profit.

The rule under which we hold these defendants liable as
partners has been much discussed and criticised, and has by
many been regarded as harsh and unreasonable, but as before
stated it is the recognized rule of the common law, and has
been adopted by general consent as the law of tliis state, and
recognized as sucli in the case of Loomia v. Marshall. Our
statute of limited partnership is founded upon the supposed
existence of the rule. By that statute funds may be furnished
for a partnership business, and a limited liability incurred by
the special partner. But if one may furnish funds to be used
in a particular trade, and take a note for the money and
receive a share of the profits of the business as a compensa-
tion for the use of the money, the statute is superseded.

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Parker v, Canfield.

67 the admitted exceptions to the general rule agents and
servantiS employed in a business may participate in profits as
a compensation for services without involving themselves in
the responsibilities of a partnership. If we should now
decide that parties lending money to be used in a business
may also participate in profits as a compensation for trouble,
time and expense in procuring the money lent, the two excep-
tions to the rule would annihilate the rule itself. By the
first exception the party conducting a business as its agent,
and by the second the pai-ty furnishing the capital, would be
exempt from liability, and thus there would be no case left
where parties could not by the force of words alone evade
the rule.

A business may in general justly be regarded as carried on
for the benefit of those who participate in its profits, and the
burdens and responsibilities of such business are in general
justly cast upon those for whose benefit it is conducted.
There may be exceptions, but we are clear that the case under
consideration justly falls within the general rule and must be
governed by it.

Another question was made in the case, whether the plain-
tifi^'s debt had not been paid or extinguished by renewal notes
received by the plaintiff" from Andrews alone since the termi-
nation of the partnership. K a party voluntarily takes the
note of one of several partners in discharge of a copartner*
ship debt the debt may be discharged, but these renewals
were before tlie plaintiff knew of the copartnership, and were
not expressly or by inference taken in payment or discharge*
The original indebtedness against the defendants therefore
still remains, and our advice to the Superior Court is that
judgment be rendered for the plaintiff against the defendants
for the full amount found due by the committee as originating
between January 8th, 1866, and September 1st, 1868.

In this opinion the other judges concurred

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Boies V. Hartford &> Kew Haven R. R. Co.

Harper Boies vb. The Hartford & New Haven RAHiROAD


In the case of depositaries for hire where the goods are lost, the authorities are
not agreed as to whether the burden of pnx^ of negligence is on the owner of
the goods or of reasonable care on the depositary. In England it is held that
the burden is upon the owner, but the courts in this country have in some
cases held otherwise.

The defendants, a railroad company, having transported for the plaintiff eigh-
teen bales of cotton, held the same at their warehouse to be called for by him,
but ultimately delivered to him but sixteen. The two other bales had bcSn in
some manner lost. In assumpsit against the defendants as warehousemen for
the non -delivery of the two bales, the plaintiff having offered no proof of neg-
ligence except what was to be inferred from the receipt and non-delivery of the
bales, and the defendants not having explained how the bales had been lost or
in any manner accounted for them, nor shown that they had exercised reason-
able care to prevent their loss, the court ruled that the defendants, to deliver
themselves from responsibility for the goods, were bound to prove either a de-
livery to the plaintiff or that they had exercised ordinary care in keeping them,

. and tliat under the circumstances the burden was not on the plaintiff to show
the manner of the defendants' negligence by means of which the loss occurred.
Held that this ruling, in the circumstances of the particular case, wiis correct.

Assumpsit against the defendants, in one count as common
carriers and in another as warehousemen, for two bales of cot-
ton ; brought to the Superior Court in Middlesex County, and
tried on the general issue, with notice, closed to the court,
before Phelps, J. The following facts were found by the

On the 7th day of January, 1869, the plaintiff purchased
in New York eighteen bales of cotton, which were forwarded
by steamer to New Haven, and thence by the defendants'
cars to Middletown. The whole number of bales were re-
ceived by the defendants on their arrival at Middletown, and
by them dei>osited in their buildings used as warehouses,
according to their custom, to be called for by the teamsters
of the plaintiff, who were to be sent from East Haddam for
them. Each bale was marked " H. Boies, Middletown," and
each had attached to it a tag similarly marked. Soon after
their arrival at Middletown the plaintiff paid the defendants
the freight upon the entire quantity.

The lot arrived in Middletown on or before the 9th of Jan-

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Boies V. Hartford & New Haven R. R. Co.

uarj, and was on that day all receipted for by one Carter, a
driver for one Brooks, who was the teamster of the plaintiflF,
and who by himself and his drivers did all the hauling of the
plaintiff's cotton from Middletown to East Haddam.

A regulation of the defendants then existing required of
teamsters to receipt for an entire lot of goods before receiving
any portion, and this receipt was required and given in pur-
suance of that regulation. At the time the receipt was

Online LibraryConnecticut. Supreme Court of ErrorsConnecticut reports: containing cases argued and determined in ..., Volume 37 → online text (page 24 of 61)