Joseph T. Hull, Walter S. Rafferty and Edward B. Hosier, Composing the Firm of Rafferty & Company, Respondents, v. John C. Barth, Appellant, Impleaded with John Spitler

Joseph T. Hull, Walter S. Rafferty and Edward B. Hosier, Composing the Firm of Rafferty & Company, Respondents, v. John C. Barth, Appellant, Impleaded with John Spitler. Partnership agreement to share in the profits of a, hotel —■ liability for supplies furnished to it — oral agreement, preceding a written one, merged therein. A lease of a hotel provided that the rent should be fifteen per cent of the gross receipts and that the lessee should conduct the business in his own natne and should not contract any indebtedness for which the lessor might be held liable or use the latter’s name in the business without his written authority. Subsequently the parties entered into a written agreement which provided that the lessor should supply all the capital necessary for the operation of the hotel, during the term of the lease, and should receive one-fourth of the net profits arising from the business after the terms of the lease had been complied with; that the lessee should devote his entire time to the management of the business, and should receive three-fourths of the net profits after the terms of the lease had been complied with, and should be entitled to draw, not exceeding twenty-five dollars per week, to meet his expenses, such amounts to be deducted from his share of the profits. The agreement further provided that the lessor should have the custody of all moneys and receipts and should sign all checks, and that no division of profits should be made until it was shown by the books that a profit had been earned. Held, that the agreement constituted the lessor and lessee partners in the business, conducted pursuant to its terms; that the lessor had a proprietary interest in the business and was liable for supplies purchased on credit with his knowledge for use in the hotel; That the lessor could not relieve himself from liability as a partner by proof that, at the time he agreed to furnish the capital and before the execution of the written contract, it was orally agreed between him and the lessee that the capital should he loaned to the lessee, and that the lessor was to receive for the loan twenty-five per cent of the net profits; that such oral agreement was merged in the subsequent writing and was not binding upon creditors who dealt with the lessor and lessee upon the faith of the partnership relation. Appeal by the defendant, John 0. Barth, from a judgment of the Supreme Oourt in favor of the plaintiffs, entered in the office of the clerk of the county of Hew York on the 29th .day of March, 1899, upon the verdict of a jury rendered by direction of the court. This appeal was transferred from the first department to the second department. William J. Lippmann, for the appellant. A. B. Cruikshank, for the respondents. [MAJORITY — Hirschberg, J.:] Hirschberg, J.: The action is brought to recover a balance due for goods sold and delivered for use at the Ocean Hotel, at Long Branch, H. J. The defendant John C. Barth is the owner of the hotel, and he leased it to his co defendant, John Spitler, by an instrument dated February 24, 1897, for the summer season of that year. In this lease Spitler agreed to open the hotel not later than June twenty-seventh, and to keep it open at least until September first, but not later than October fifteenth. The rent was to be fifteen per cent of the gross receipts, and Spitler agreed to conduct the business in his own name, and not to contract any indebtedness for which Barth might in any way be held liable, and not to use Barth’s name in any way in the business without his written authority. On the 2d of March, 1897, the parties executed an additional agreement, of which the following is a copy: “ Agreement. “ This agreement made this 2d day of March, 1897, by and between John 0. Barth, party of the first part, and John Spitler, party of the second part, is as follows : “ For and in consideration of the mutual covenants contained herein we agree as follows: John 0. Barth agrees to supply all the capital required to open and maintain the Ocean Hotel at Long Branch, summer season of 1897, in consideration of which said party of first part is to receive one-fourth of the net profits arising from said hotel business after all the terms of a certain lease granted by J. 0. Barth to Jno. Spitler have been complied with. All moneys and receipts to be in the custody of said party of first part, who shall keep proper and true account of same and sign all checks. “Ho division of profits shall be made until it is shown hy the books that a profit has been earned. Party of second part shall give his entire time to managing said hotel business from April 1st, 1897, till Sept. 1st, 1897, and in'the division of profits shall receive three-fourths of the net profit after the terms of lease before mentioned shall have been complied with. Party of second part shall be entitled to draw money, from time to time, to meet his necessary expenses not to exceed twenty-five dollars per week, however. All amounts so drawn to he charged to his account and deducted from amount due him at final settlement. “ This contract shall be binding alike on the party of first and second part, and shall expire with the close of the summer season of 1897. “(Sd.) JOHH 0. BARTH. “Witness: JOHH SPITLER. “ Bertha Barth.” The case has been twice tried. The first trial resulted in a dismissal of the complaint, apparently upon the ground that this agreement did not constitute the defendants, partners, in the absence of a provision for contribution in respect of losses. On appeal, however, the Appellate Division in the first department held that this agreement made the defendants copartners in the management of the business, and that the landlord Barth was accordingly liable for the value of goods furnished for use during the season. (Hull v. Barth, 37 App. Div. 359.) In the opinion of the court (p. 361), the distinction is pointed out between the contribution of capital in a business to be requited by a share in the profits as such, and payment for the use of capital as a loan by a share in the profits as a measure of compensation merely. On the second trial the material facts were undisputed. The execution of the agreement was established as was also the fact that the defendant Barth contributed all the capital. The business was conducted under the management of the defendant Spitler, hut the defendant Barth resided in the hotel, received the money which he kept deposited in his own name, and drew all checks for the payment of bills incurred. He knew that the hotel supplies were purchased on credit. A bookkeeper was employed whose work was always open to Barth’s inspection, and the books were delivered to and retained by Barth. Every element was, therefore, present which is essential to the creation of a partnership. One contributed, all the capital and the other all his time. Ho losses were contemplated. The profits were to be divided in the proportion of one and three, and the custody of the money and the receipts by Barth, as well as the keeping of the books and accounts and the signing of the checks, was in strict conformity with the requirements of the agreement. The defendant Bartli, however, endeavored to avoid the legal effect of the written agreement by evidence of an oral understanding between himself and Spitler at the time he agreed to furnish the capital and before the execution of the written contract. He testified in effect that he agreed to loan to Spitler the capital needed to enable the latter to conduct the business, and that he was to receive for the loan twenty-five per cent of the net profits. .Manifestly this characterization of the arrangement could have no greater effect as between the defendants and third persons, than could a distinct verbal agreement that they should not be partners, followed by the execution of a written contract which clearly established that relation. The talk is not only merged in the subsequent writing, but the fact that the parties by the writing held themselves out to. the world as partners will bind them to the liability of partners in favor of creditors dealing with them, as the plaintiffs did, on the faith of that relation. On his own evidence it is clear that Barth possessed a proprietary interest in the business and in its profits as such, and that he was, accordingly, liable to the creditors of the firm. (Mason v. Partridge, 4 Hun, 621; Magovern v. Robertson, 116 N. Y. 61.) There is nothing in the rulings on the trial which affects the result. There was no question of fact to be submitted to the jury. The judgment should be affirmed, with costs. All concurred, except Bartlett, J., absent. Judgment affirmed, with costs.