Chaffraix v. Price, Hine & Tupper

On Rehearing. The opinion of the court was delivered by Manning, O. J. This cause has been argued before us with great elaboration, with signal ability, and at exceptional length, and the numerous and exhaustive briefs filed by the counsel in this and other suits involving the same issues attest the importance of the principles of law now to be determined. The statement of the facts and the transcription of the letter of J. B. Lafitte & Co. to the intervenors will appear in the opinion of the court read on the rendition of the judgment the rehearing of which was granted by our predecessors, and need not here be repeated. If the agreement made by the three firms, conformably to the proposition of Lafitte & Co.’s letter and in accordance with its provisions, constituted a partnership, then the plaintiffs must have judgment against the intervenors for the amount of their demand. Otherwise, not. It cannot bo denied that the question is' not free from obscurity. A list of decisions of unexampled length and completeness has been re *186 ferrocl to by the counsel of both parties, the plaintiffs and intervenors, and there is not only disagreement and conflict of authority upon the points involved, but a great dissimilarity of views among judges as to the signification to be applied to the language used by contracting parties. The distinction of Lord Eldon between a proportion of the profits and a sum equal to a given quantum of the profits, as affording the criterion of determining the question of partnership vel non, is too fanciful for practical use, but does not want supporters since his time. There can be no dispute-about the definition of a partnership under our law. The Code tells us that it is a synallagmatic and commutative contract made between two or more persons for the mutual participation in the profits which may accrue from property, credit, skill, or industry furnished in determined proportions by the parties. Civil Code, article-2772, new No. 2801. But there must be disputes, as frequent as the varying engagements of men in active business, as to whether particular contracts fall within that definition, and that is the gist of the present, controversy. Price, Hine & Tupper were to buy molasses in their own name, and when they handed J. B. Lafitte & Co. the receipts the latter handed them the money, and the money was furnished by Morton, Bliss & Co. The Price firm were to charge the Lafitte firm for the molasses at. the price they paid, with the addition of all expenses paid by them, but were to charge nothing for their services. The Price firm were to receive one-fourth of the profits, the Lafitte firm a like quantum, Morton, Bliss & Co. one-half. The plaintiffs insist that this agreement made the three 'firms ipso facto a commercial partnership. The intervenor denies that-the agreement can be thus interpreted, and contends that it is a commercial adventure on joint account, of common occurrence in the centres of commerce, recognized by tfie laws of all countries, and likened to the. associations en participation of France. It is useful to consult the adjudications of courts of other countries^ and particularly on questions of commercial law. It is true, as the plaintiff says, that the law of Louisiana must determine this controversy, but. decisions of courts, as interpreting the language of commercial men in their transactions, must carry great weight. The doctrine of Waugh vs. Carver, that a participation in the profits-of a business does, of itself and by operation of law, constitute a partnership, and makes all participators liable to third persons, has been tho fruitful source of discussion through all the succeeding cases. 2 H. BL 236. Its authority is now overthrown.- The editor of a late edition of Story on Partnership declares that after ■ being disapproved by all text writers, reluctantly followed by courts, and broken in upon by subtle exceptions and limitations, the doctrine of that case has been finally overthrown in England. Sixth edit; sec. 49, note 2, by Gray. And another *187 commentator on the same subject, after reviewing this case and others on similar points, concludes that the rule of Waugh vs. Carver is not established by the mass of either English or American authorities. Parsons on Partnership, 71, note 1. It is to the later decisions of the English courts that we must look for the law of the present day. In 1860 it was held in Nicholson vs. Ricketts, sec, 105, Eng. Com. Law Reports, 498, 2 Ellis and Ellis, Q. R, that the transactions of the parties, although a partnership was created by them, did not bind the defendants. The case was this: The defendants, carrying on business as merchants in London, entered into a contract with Yon Seutter & Co., merchants at Buenos Ayres, for the purpose of transacting exchange operations, the substance of which was that Yon Seutter & Co. should periodically draw and sell at Buenos Ayres bills on the defendants, to be accepted by them, and should periodically remit other bills to the defendants to the same amount, to keep the defendants out of cash advanced; thLt the proceeds of these operations should be applied to the common purposes of the two firms, and that there should be a community of profit and loss between them. In the course of these transactions, Yon Seutter & Co. drew certain bills on the defendants and sold them to the plaintiffs. The defendants refused to accept these bills when presented to them in London, and the plaintiffs thereupon brought the action against them, on the ground that the agreement and the community of profit and loss constituted the defendants partners with Yon Seutter & Co., and so rendered them liable. Held — that the plaintiffs had no cause of action against the defendants. Lord Chief Justice Coekburn placed the decision on the ground of want of authority in Yon Seutter & Co. to draw the bills, saying: “ In ordinary cases of commercial partnership there is no need of express authority. * * In partnerships not strictly commercial, if it is 'obvious from the nature of the partnership, or from the particular purposes to which the bills are to be applied, that the drawing of bills is essential, there also the law implies an authority to each partner to draw them. But here there being no express authority to Yon Seutter & Co. to draw so as to bind the defendants, but, on the contrary, an arrangement that the one firm should draw and the other accept, and that each should be bound so far only as their own signature was concerned, it seems to me no authority can be implied. The existence and the purposes of the partnership were unknown to the world. _ The principle therefore that where a partnership for particular purposes is held out to the world as existing, and it is reasonable to consider that drawing of bills is incidental to those purposes, one partner has an implied authority to bind the others by drawing bills, is here inapplicable.” It is assumed or admitted throughout the judgment then rendered *188 that a partnership was constituted under the circumstances stated, but the right of the Buenos Ayres member to bind the London member by drawing tlie bill was denied. It is apparent from this decision that when a partnership is created by operation of law, consequent upon a stipulation of participation in profits, it does not necessarily follow that the partners are unqualifiedly bound in the same manner and to the same extent as ordinary commercial partners. Armstrong vs. Stokes, 7 Law Reports 598, Queen’s Bench, is the latest expression (1872) of English judicial opinion upon the extent of the liability of parties under contracts similar to that under review. J. & O. Ryder & Co. wore commission merchants at Manchester, carrying on business sometimes for themselves, and sometimes acting in pursuance of orders from their constituents. Plaintiff was a merchant at same place. On the fifteenth of June, 1871, plaintiff’s salesman made a contract with Ryders’ salesman for shirtings to be paid for thirty days after delivery. The goods were delivered on the twenty-fourth of July, and payment was therefore duo on the twenty-third of August, but it was not made, and on the thirtieth of that mouth Ryders’ house stopped payment. It was not pretended that the plaintiff knew before the thirtieth of August that the defendants had anything jo do with the transaction, so as to afford evidence on the one hand that he had originally parted with the goods on the credit of the defendants, or on the other hand that lie had elected to give credit to Ryders to the exclusion of defendants. But after the stoppage of J. & O. Ryder & Co. it was discovered from their books that in this case they had been acting as commission merchants for the defendants, and the plaintiff’s case was that under the circumstances he was entitled to demand payment from the defendants as being undisclosed principals of the Ryders in the transaction. The evidence as to this was that the defendants are merchants at Liverpool, who had often before-given orders to J. & '0. Ryder for shirtings. There was no running account between the defendants and Ryders, but the defendants almost invariably paid cash on each transaction. The goods ordered in this case were sent on by Ryders on the second of August, with invoice containing the charges of the actual money that ought to have been paid to plaintiffs as the price of the goods, and of commissions, and on the eleventh of August, which was the first pay-day after the goods were received at Liverpool, the defendants with perfect bona fides paid Ryders the full sum. Mr. Justice Blackburn in rendering judgment discussed several of the cases -to which the brief of plaintiff’s counsel has referred us, and reviews at unusual length the dicta of various judges in them, and thus sums up: “We think that if the rigid rule thus laid down were to be applied to those who were only discovered to be principals after they had fairly *189 paid tlie price to those whom the vendor believed to be the principals, and to whom alone the vendor gave credit, it would produce intolerable hardship. It may be said, perhaps truly, this is the. consequence of that which might originally have been a nfistake, in allowing the vendor to have recourse at all against one to whom he never gave credit, and that we ought not to establish an illogical exception in order to cure a fault in a rule. But we find an exception (more or less extensively expressed) always mentioned in the very cases that lay down the rule, and without deciding anything as to the case of a broker, who avowedly acts for a principal, and confining ourselves to the present case, which is one in which, to borrow Lord Tenterden’s phrase in Thompson vs. Davenpoit, the plaintiff sold tlie goods to Ryder & Co., ‘ supposing at the time of the contract he was dealing with a principal,’ we think such an exception is established. * * * Wo confine our decision to the case where the defendants, after the contract was made, and in consequence of it, bona fide and without moral blame, paid J. & O. Ryder, at a time when the plaintiff still gave credit to J. & O. Ryder, and knew of no one else. AYe think after that it was too late for the plaintiff to come upon the defendants.” But tlio conspicuous and special feature of the opinion, and the practically useful one to us just now, is the demonstration that the courts have all along imputed a controlling influence to the fact of payment by the undisclosed principal to his agent, the actual purchaser, before the seller knew there was any one interested in the transaction but himself and his vendee. As early as 1801 the doctrine urged upon our acceptance by plaintiffs’ counsel was so far modified that Lord Mansfield held, if the undisclosed principal had really paid the actual purchaser he would not be liable to pay over again, if it would have been unfair to make liim do so. The dictum of Lord Ellenborough in Kymer vs. Suwercropp, 1 Camp. 109, relied on by plaintiffs in their brief, is explained by the fact that the persons employed were brokers, who always have a principal, and tlie .vendor knows in that case there is or ought to be a principal between whom and himself is established a privity of contract, and tlie principal also knows that the vendor is aware of this, and to some extent trusts his liability. Lord Tenterden in a later case (Thompson vs. Davenport, 9 B. and C. 86-8) said: “ Í take it to be a general rule that if .a person sells goods, supposing that at the time of the contract he is dealing with a principal, but afterward discovers that the person with whom lie has been dealing is not the principal in the transaction, but agent for a third person, he may recover the amount from the real principal, subject, however, to this qualification, that the state of account between his principal and his agent is not altered to the prejudice of the principa].” *190 And Maulé, J., in a yet later case refers to these dicta of the judges approvingly, saying they afford a sensible rule on the subject. Making the application to the case before us, there is no dispute as to the fact that Morton, Bliss & Co., through J. B. Lafitte & Co., had paid Price, Hine & Tupper for the molasses sold to the latter by the plaintiffs the instant of delivery, and to make them pay over again would produce the intolerable hardship described and deprecated in the ojDinion from which we have been quoting. We are warned by the earnest words addressed to our predecessors by tho plaintiffs’ counsel when a rehearing was prayed, of the fateful consequences that will attend or follow the enunciation of this doctrine: “ If this be the law, we may expect that all largo and wealthy speculators will hereafter make their purchases through some irresponsible party. In all large commercial operations involving risk and responsibility capitalists will never bo known as parties concerned. By screening themselves behind some irresponsible name they take the profit, if any, .and avoid all liability in case of loss.” The eminent judge who rendered the decision last quoted is too acute not to have foreseen such consequences if they would necessarily follow from the doctrine thus formally recognized. His country is pre-eminently a commercial one. His comprehensive learning and large experience pointed him out as one of the two judges who have in the last year been elevated to the peerage under a change in the English constitution, made on that occasion, and expressly in order to obtain his judicial assistance in the hearing of cases before tho House of Lords. Lord Blackburn thus opens to our view other inconveniences which would follow the approval of the doctrine maintained by plaintiffs’ counsel: “ The great inconvenience that would result if there wore privity of contract established between the foreign constituents of a commission merchant and the home suppliers of the goods has led to a course of business in consequence of which it has long been settled that a foreign constituent does not give the commission merchant any authority to . pledge his credit to those from whom the commissioner buys them by Ms order and on his account. It is true that this was originally (and in strictness perhaps still is^a question of fact, but tho inconvenience of holding that privity of contract was established between a Liverpool merchant and the grower of ovory bale of cotton which is forwarded to Mm in consequence of his order to a commission merchant at New Orleans is so obvious and wall known that we are justified in treating it as matter of law, and saying that in the absence of an express authority to that effect the commission merchant can not pledge Ms foreign constituent’s credit.” Law Rep., 7 Q. B., p. 605. There is less ambiguity in the French authorities than in the English, *191 but there are textual provisions in the Code of Commerce of France (Code de Oom., articles 47 to 50) that expressly legalize and define ■associations en participation, or commercial adventures on joint account. Savary thus defines them: “ Elle s’appelle ainsi pareequ’elle est sans nom, et qu’elle n’est connue de personno, comme n’important en fagon quelconque au public; tout ce qui se fait en la negotiation, tant en l’achát qu’en la vente des marchandises, ne regarde que les associés chacun en droit soi; de sorte que celui des associés qui achote est celui' qui oblige et qui paye au vcndeur; celui qui vend regoit de l’acheteur: ils ne s’obligent point tous deux ensemble envexs une tierce personno; iln’y a que celui qui agit qui est le soul obligé; ils le sont seulemcnt réciproquement l’un envers l’autre en ce qui concerns cette société.” Pothier’s definition is more concise: “Celle par laquelle deux ou plusieurs personnes conviennent d’etre de part dans une certaine negotiation qui sera faite par l’une d’entre elles en son nom seul.” Contrat de Société, p. 61. Pardessus explains the difference between partnerships and these associations: “La difference entre les sociétós et entre les associations est importante relativement aux actions des tiers. S’ils font la preuve d’une société collective, les engagements contractés par l’un des associés obligent solidairement les autres, puisque nous avons vu que le défaut d’acte social ou de publicitá donnóe a ses clauses ne pouvaít étre oppose aux tiers.” Droit Commercial, tome 4, No. 1047. Masse sums up his discussion by saying: “Or, si l’on consulte les anciens auteurs, tant de l’école italienne que de l’école frangaise, on les trouve tous unánimes sur ce point, que l’association en participation no constituc pas un corps moral dans lequel se confondrait la personne des participants.” Droit Commercial, tome 3, p. 483. Riviere’s definition is concise, and perfectly describes a commercial adventure on joint account: “Elle a toujours pour objet une entreprise particuliére * * l’opération terminée, la société est dissoute.” Rópétitions Écrites sur le Code de Commerce, 125. It is true, these jurisconsults are treating of an association legalized by the commercial code of their country, but that code only defined and formulated a contract which had long been recognized by the lex mercatoria common to all countries, and hence their commentaries upon such a contract or agreement for an adventure are not inutile in enabling us to understand the nature, effect, and attributes of such an agreement. 'It is conceded, however, that neither English nor French authorities will warrant us in construing an- agreement by their rules, if our own law, as interpreted by our own courts, imposes a different rule. In Millaudon’s case, this court settled conclusively that the laws and usages of commerce to which reference is to be had by our tribunals in interpreting *192 commercial contracts are those sanctioned by the law merchant of tlio United States, and explained and adjudicated by the Supremo Court. McDonald vs. Millaudon, 5 La. 403 . That court held the following language in discussing the principles and extent of the English decisions in Grace vs. Smith and Waugh vs. Carver: “Actual partnership, as between a creditor and the dormant partner, is considered by the law to subsist where there has been a participation in the profits. * * * That rule, however, has no application whatever to a case of service or special agency where the employee has no power as a partner in the firm and no interest in the profits as property, but is simply employed as a servant or special agent, and is to receive a given sum out of the profits, or a proportion of the same, as a compensation for his services.” Berthold vs. Goldsmith, 24 How. 542 . And in that opinion the court quote with approbation the case of Hallet vs. Desban, decided by this court, and say that the facts of different cases approach so near to each other that the difference between them is apparently unsubstantial, but a distinction does exist, and the only difficulty is in the application of the principle on which that distinction rests. The same question came before that court later, when it was insisted that the contract under review made the parties copartners. The language of the court upon that point was imperative and incisive, and excludes the idea of doubt: “We can not adopt that view of the subject. The adjridications which bear upon it are conflicting and irreconcilable. The caso of Berthold vs. Goldsmith is conclusive in this forum against the proposition.” Seymour vs. Freer, 8 Wal. 215. We are asked to review the decisions of this court, and the counsel for plaintiffs equally with the counsel for the intervenors insist that its decisions upon the question of partnership are favorable to the views advocated by each. The review .thus desired lias already been made in the case quoted, by the Supreme Court of the United States. The two opinions rendered then, and published in the Fourteenth Annual, discuss, analyze, and dissect all the previous cases from the Millaudon case down to the date of that judgment .(Hallet vs. Desban, 14 An. 529), and the court, after a full and exhaustive study and presentation of the question in all its aspects, as affected by the textual provisions of our Code, by the decisions of our court upon therii, and by the decisions of courts of sister S'.ates and of the United States upon the question of commercial .law involved, decided definitively that a community of profits is the criterion by which to determine the contract of partnership : but to render a party liable as a partner, he must share as principal, and not as mere agent, factor, or servant. We have been referred to Leggett vs. Hyde, 58 N. Y. Rep. 272 , decided in New York, and Brigham vs. Clark, 100 Mass. 430 , in Massachusetts, *193 as confirmatory of plaintiffs’ construction of tlie agreement in this case. The agreement in the latter case is wholly unlike the present, and the ruling can not be considered, applicable, but the Ncw-York couit distinctly affirms that the rule in Grace vs. Smith and Waugh vs. Carver has been exploded in England, simply because Parliament interfered and changed the law since the law as laid down in those cases was found objectionable, and hence we must be governed by it here (N. Y.) until the Legislature shall see fit to abrogate it as it did in England. Rut in a previous part of the same opinion the learned judge who was the organ of the court informs us that there has boon and is a legislative and practical recognition of the doctrine of Waugh vs. Carver,' as a rule of commercial law, in the State of New York, in tho limited partnership act. And so, there being statutory provision for tho retention and consecration of this rule there, it is not surprising that the rulo is adhered t-o by that court. Indeed, as you advance in tlie examination of this question, and trace' its history and development in the various decisions of the courts, it will be seen that in the effort to escape tho manifest wrong that would be inflicted by applying inflexibly tlie rule that any participation in the profits necessarily creates a partnership the courts encroached on that doctrine stealthily, and permitted the circumstances of each case to control the rule. Tho effort to apply the rule without qualification was gradually abandoned, and then arose conflicting dicta which have introduced more perplexity and confusion in the treatment of this question than any other known to the commercial law. It is not too much to say that a superabundance of authorities is accessible to the disputant for cither proposition, and that the distinction finally drawn by the judges from the circumstances of the eases before them will sometimes exhibit a court'in apparent contradiction to itself- upon the application of the rule to those circumstances. Tho general principles wo educe from this discussion, and which we consider control tho present caso, arc, that a community of interest is the basis of every partnership; but it is not correct to say that every community of interest necessarily constitutes' tho relation of partnership. Participation in tho profits will ordinarily establish the existence of a partnership, in the absence of all other opposing circumstances, between tlie participators in favor of third persons, but does not necessarily produce that effect. The fact that there is participation is presumptive proof that there is a partnership, but, like all presumptions, is liable to be overcome by circumstances. The rule does not outweigh or overcome or demolish tlie circumstances, but the circumstances • control the rule, and can repel the presumption created by it. The foundation oí the rule is manifestly artificial. In adjusting it to the circumstances of *194 each 'case you do not dislocate any part of the legal edifice erected upon it, -but adapt each of them to the other so as to produce symmetry. The circumstances of each case must guide the court, and if in considering them the participation in the profits is clearly shown to be in the character of an agent or employee, the presumption of partnership is repelled. In the case before us, the Price firm were to use their skill in purchasing the molasses advantageously, and no money was to be paid and no money was paid to them until the molasses was delivered to the Lafitte firm, who received it for Morton, Bliss & Co. and paid Morton, Bliss & Co.’s money for it. This shows the nature of the employment. In our opinion, when Lafitte & Co. received the molasses, and paid for it, it became the property of Morton, Bliss & Co., and the plaintiffs could have recourse upon no one for its price but their vendees, to whom they sold for cash, and of their own accord waived a rigid compliance by their vendees with the conditions of sale. They must bear the consequences of their own ac.t. They gave credit to the Price firm alone. Their recourse is upon it alone. It is therefore ordered and decreed that the judgment and decree of this court heretofore rendered remain unaltered: