Story Case

Henry Piper, James Edmondson, and ten others formed a society at the University called the Strut Club, organized for the purpose of staging and acting dramatic plays. At one of the meetings of the club, it was decided by a unanimous vote that Amos Brown should be employed to train the members for a play which they planned to produce. It was agreed to give Brown $200 at the conclusion of the performance. Brown coached the players, but when the final production of the play proved a financial failure, Brown could not collect his money. He, therefore, brought suit for the amount against Piper and Edmondson, who were financially responsible, alleging that they were partners in the business. Can Brown recover in this suit!

Ruling Court Case No. 1. Burt Vs. Lathrop, Volume 52 Michigan Reports, Page 106; Same Case, Volume 17 Northwestern Reports, Page 716

The several defendants in this case organized an association for the purpose of resisting patent suits, contesting the right of the defendants to use certain hard rubber material in dentistry. The rules of the association required that each member should pay $5 into the treasury, and to pay such assessment as should be levied from time to time. In pursuance of the power given by the association, the officers of the organization employed the plaintiff, Burt, as an attorney, to resist the patent suits above mentioned. He defended their interests in Court but was unable, when his services were completed, to collect the amount due him. He brought this action against the defendants, alleging that they were jointly liable for the services rendered, upon the theory that they were partners.

The Court held: "We can find in this arrangement nothing analogous to a partnership. There was no common business, and nothing involving profit and loss in a business sense. No one was empowered to make contracts binding upon the subscribers personally, and no one was to be liable except for assessments, nor even for those except as he saw fit to pay them to keep his membership. It was nothing more than a combination which may have made the parties in some respect responsible to each other, but which did not, we think, authorize any contract with third persons which should bind any member personally beyond his assessments."

Accordingly, it was held that the defendants were not jointly liable for the debt in question; therefore, the plaintiff was entitled to nothing from them, on the basis of a partnership.

Ruling Court Case No. 2. The Queen Vs. Robson, Volume 16 Queen's Bench Division, Page 137

In England, prior to the time when the present controversy arose, there was a statute which provided a certain punishment for persons who embezzled money from a copartnership. The prisoner, Robson, was indicted and convicted under this statute, charged with having embezzled money from the Young Men's Christian Association, of which he was a member.

He contended that the Young Men's Christian Association was not a copartnership within the meaning of the statute. If his contention were right, then the conviction could not stand under this particular statute, and other procedure must be adopted.

It developed at the trial that the Association was formed for the purpose of extending the "kingdom of the Lord Jesus Christ among young men and the development of their spiritual life and mental powers." Any one was eligible to membership, upon election by a majority of the other members, provided such person was of good moral character. The property of the Association was vested in trustees, who became members by being appointed trustees. It further appeared that the Association had raised money to build a hall as a meeting place; all but a small amount had been paid; the prisoner, Robson, had raised the balance but did not account for it all.

Decision

This Association is not a partnership within the meaning of the statute. It was not organized for pecuniary profit. Lord Coleridge, Chief Justice, said in part: "It seems to me that this conviction cannot be supported. I cannot find any authority throwing any doubt on the accuracy of the passage in Lindley on Partnership, which makes the participation in profits essential to the idea of partnership, and states that, although in former times the word 'copartnership' was used in the sense of 'co-ownership', the modern usage has been to confine the meaning of the term to societies formed for gain." It was accordingly decided that the conviction of the prisoner, under this particular statute, was unlawful and could not stand.

Ruling Law. Story Case Answer

In defining the relation of partnership, it is said that it is the union of capital, property, labor, or skill of the parties for their common profit; and by this is meant, that the union is for the purpose of making pecuniary profit. There are numerous instances where persons may join in a common enterprise, but with no aim of making pecuniary profit; they may join together for social, charitable, benevolent purposes. In the instances mentioned no relation of partnership arises. As between themselves, their rights and duties depend upon their contract.

In the Story Case, Piper and Edmondson were not partners with the other active members of the club, because the club was not formed for the purpose of financial gain. In cases like this, however, where a group is active for a non-profit purpose, those who take a part in making a contract with third persons are liable as principal contractors, and suit should have been brought directly on an individual contract against Piper and Edmondson, or against others who took an active part in the club.