1 Haughey v. Strickler, 2 Watts & Serg. 411; Barcroft v. Haworth, 29 Iowa, 462 (1870); Byington v. Woodward, 9 Iowa, 360.
2 Town v. Hendee, 27 Vt. 258 (1855); Fitch v. Harrington, 13 Gray, 468 (1859).
3 3 Kent, Comm. lect. 43, p. 32, 33, 4th ed.; Waugh v. Carver, 2 H. Bl. 235, 246; Post v. Kimberly, 9 Johns. 489: Ex parte Watson, 19 Ves. 459; Fox v. Clifton, 6 Bing. 776; Parker v. Barker, 1 Br. & B. 9; Goode v. Harrison, 5 B. & Al. 147; Bond v. Pittard, 3 M. & W. 357; 2 Bell, Comm. B. 7, ch. 2, p. 623, 624, 5th ed. See Reynolds v. Hicks, 19 Ind. 113 (1862).
4 Ibid.; Stearns v. Haven, 14 Vt. 540; Benedict v. Davis, 2 McLean, 347; Perry v. Randolph, 6 Sm. & M. 335.
5 Stearns v. Haven, 14 Vt. 540; Story on Partnership, § 65; Young v. Axtell, cited 2 H. Bl. 242; Guidon v. Robson, 2 Camp. 302; Whitman v. Leonard, 3 Pick. 177; Griswold v. Waddington, 15 Johns. 57; Casco Bank v. Hills, 16 Me. 155; Kirk v. Hartman, 63 Penn. St. 97 (1869). See Ford v. Whitmarsh, Hurl. & Walm. 53; Fitch v. Harrington, 13 Gray, 468; Wood v. Pennell, 51 Me. 52; Irvin v. Conklin, 36 Barb. 64; Bowie v. Maddox, 29 Ga. 285. See Pratt v. Langdon, 12 Allen, 544.
6 Forbes v. Davison, 11 Vt. 660; Gilbert v. Whidden, 20 Me. 367; Griffin v. Doe, 12 Ala. 783. See Charman v. Henshaw, 15 Gray, 293.
§ 293. Second. Whenever a party receives a proportional share of the net profits of the partnership, however small it may be, he is liable to third persons as a partner, whether he have any interest in the property of the partnership or not. Neither, in such case, does it make any difference, whether or not there be an express agreement between the parties, not to be liable as partners; for that agreement would only limit their responsibility to each other. If there be a participation in the profits, after deducting the losses, the parties will be liable as partners to third persons, whatever be the mode of apportioning the share of each. An agreement, therefore, that one party shall receive a compensation proportioned to the net profits, creates the same liability as if the agreement were that he should receive a direct share in them. The reason upon which this rule is founded is, that a mutual interest in the net profits would entitle each party to an account, and would give each a specific lien for his proportion, or a preference in payment over the other creditors. Therefore, in case of loss, as his security would be increased, his liabilities ought also to be extended.1
§ 294. The modern doctrine seems to be, that participation in the profits is not conclusive evidence that a person, not held out as an ostensible partner, is such, but is only cogent evidence of that fact; and that the real and true test in such cases is, whether the party sought to be charged as partner has authorized the ostensible partners to carry on the trade in his behalf.2
1 Bond v. Pittard, 3M.&W. 357; Dry v. Boswell, 1 Camp. 329, 330; Waugh v. Carver, 2 H. Bl. 235, 246; Ex parte Rowlandson, 1 Rose, 89, 92; Coll. on Part. B. 1, ch. 1, § 1, p. 24, 229. 2d ed.; Miller v. Bartlet, 15 S. & R. 137; Ex parte Hamper, 17 Ves. 404; Ex parte Watson, 19 Ves. 461; Turner v. Bissell, 14 Pick. 192; Loomis v. Marshall, 12 Conn. 69; Champion v. Bostwick, 18 Wend. 175, 184; Cary on Part. 11, containing a defence of the principle; Perrine v. Hankinson, 6 Halst. 181. See Bucknam v. Barnum, 15 Conn. 67; Cushman v. Bailey, 1 Hill, 526; Macy v. Combs, 15 Ind. 469 (1860).
2 Cox v. Hickman, 8 H. L. C. 268; Kilshaw v. Jukes, 3 B. & S. 847 (1863); Niehoff v. Dudley, 40 111. 406 (1866); Bullen v. Sharp, Law R. 1 C. P. 86, reviewing Waugh v. Carver and other cases. Bromley v. Elliot, 38 N. H. 287; Berthold v. Goldsmith, 24 How. 536; Hallet v. Desban, 14 La. An. 529; Pratt v. Langdon, 12 Allen, 544; Gouthwaite v. Duckworth, 12 East, 421, seems contrary.
§ 295. But if two or more parties participate in the gross profits of a partnership, by which is meant the profits before the losses are deducted, or the gross receipts, although the presumption is that they are partners, it may be repelled by clear proof of a different intention and understanding between them.1 Nor does the mere mode of participating in gross profits alter the liabilities of the parties; for if a person receive a certain compensation for his labors or services proportioned to the gross profits, or in the nature of a commission upon them, he will not be considered as a partner, if it be distinctly proved that the contract was intended to be one of mere agency, and that the participation in gross profits was only designed as a convenient mode of estimating the compensation of the agent.2 The reason upon which this rule is said to be founded is, that a compensation fluctuating with the profits, and uninfluenced by the losses, gives a person no direct interest in the profits, sufficient to entitle him to an account, or to give him a lien for his share, and therefore works no injury to the other creditors.3
§ 296. The distinction is between a participation in the net profits, whether by a compensation proportioned thereto, or by a direct share therein, on the one hand, which will render a party, so partaking, a partner; and a participation in the gross profits or receipts, whether it be direct, or by a compensation, graduated by the gross profits indeed, but in its nature excluding the idea of partnership, which will not render the parties liable as partners.4
1 See Parker v. Canfield, 37 Conn. 250 (1870). And this prima facie presumption applies to one who receives a sum equal to a certain share of the profits. lb.
2 See Crawford v. Austin, 34 Md. 49 (1870).
3 A lay or share in the proceeds or catchings of a whaling voyage does not create a partnership in the profits of the voyage, but is in the nature of seamen's wages, and is governed by the same rules. See Coffin v. Jenkins,
3 Story, 112; Wilkinson v. Frasier, 4 Esp. 182; Perrott v. Bryant, 2 Younge & Coll. 61; Baxter v. Rodman, 3 Pick. 435; Grozier v. Atwood,