Massachusetts General Laws, c. 109, §§ 4 and 5, relating to limited partnerships.

Counsel for petitioner in this proceeding contend that, inasmuch as Williams filed an answer to the involuntary petition denying the alleged acts of bankruptcy, insolvency, partnership, etc., and claimed a jury trial, the court below erred in sending the question of partnership to a master to find and report the facts and in entering an order or decree based thereon; that the question whether Williams was a partner was necessarily involved in the question of his alleged insolvency, and, being given the right to a jury trial by section 19a of the Bankruptcy Act (Comp. St., § 9603 [a]) upon the question of insolvency and the acts of bankruptcy, he was also entitled to have the question of partnership, which he claims was necessarily involved therein, determined by a jury.

If the question of Williams' membership is necessarily involved in the question of the firm's insolvency, the determination of which would be material in deciding whether the firm should or should not be adjudged a bankrupt, we do not find it necessary now to pass upon that question, as the proceeding has not reached the stage of adjudication. The Bankruptcy Act (Comp St., $$ 9585-9656) contemplates and provides for the taking of certain steps prior to adjudication, one of which is the sequestration of the estate of the alleged bankrupts, and another the submission of an offer of composition, and it cannot be doubted that the bankruptcy court, where composition is offered by some members of an alleged firm before adjudication, or sequestration of the property of any one of the alleged partners is asked for whose membership is denied, has power to direct a preliminary inquiry into the mcmbership of such alleged partner, for the purpose of aiding the creditors and itself in determining whether an offer of composition should be accepted and approved, or the sequestration of the estate of such member should be had. Whether the affirmative answer given to the question in this case amounts to anything more than the ascertainment of the existence or nonexistence of probable cause for the taking of either of these preliminary steps (composition or seqestration) we need not inquire. The ascertainment of the fact in the manner and for the purpose it was desired to be used here was undoubtedly proper.

This being a petition to revise, the question presented is whether the District Court, on the facts reported by the master, erred in its ruling or order that Williams was a partner. If Williams, under the terms of the agreement of April 2, 1919, was a partner, his failure to file the certificate required by Massachusetts General Laws, c. 109, §§ 4 and 5, relating to limited partnerships, made him liable as a general partner; but if, under the terms of that agreement, he was not a partner, but stood to the firm in the relation of a creditor, the provisions of sections 4 and 5 of said chapter 109 would be without application. Pierce v. Bryant, 5 Allen (Mass.) 91, 93, 94. In that case it was said that:

"The intent of the statute is to relax this rule [the rule of the common law making partners liable in solido for firm debts] only on certain conditions, and within fixed and prescribed limitations. If these are not fulfilled, or are disregarded, then the statute applies rigorously the rule of the common law, by subjecting all the members of the firm indiscriminately to the liabilities of general partners.

It appears from the findings of the master as above set out that on April 2, 1919, the alleged bankrupts entered into a written agreement as to the conduct of a brokerage business which states their true relationship to that business, their respective rights in the control and management of the business, their interests, if any, in its assets, its period of duration, the right of withdrawal on the part of Williams, the right to continue the business in case of the death of a member and its duration in such case, the liquidation of the contribution of Williams in case of his withdrawal, and the distribution of the funds of the partnership upon dissolution. There is no finding that any party to the agreement has ever held himself out in any manner or done any acts inconsistent with the relationship and rights of the respective parties under the written agreement. The relationship, therefore, of Williams to the other parties to the contract, and his rights thereunder, are to be ascertained from the terms of the contract itself. This calls for a construction of the instrument, and while it involves the ascertainment of a fact, being a question of construction, it is a question for the court.

The question is, not what the parties may have erroneously understood their rights and obligations were, but what they actually were as defined and provided for in the contract.

It has been said, and no doubt wisely, that it is not prudent to define a partnership; but there are certain things generally recog nized as essential which may be stated, and they are probably nowhere better stated than by Judge Cooley in Beecher v. Bush, 45 Mich. 188, 200, 7 N. W. 795, 799 (40 Am. Rep. 465), where, after reviewing the cases generally, he says:

"Except when one allows the public or individual dealers to be deceived by the appearances of partnership when none exists, he is never to be charged as a partner unless by contract, and with intent he has formed a relation in which the elements of partnership are to be found. And what are these? At the very least the following: Community of interest in some lawful commerce or business, for the conduct of which the parties eventually are principals of and agents for each other, with general powers within the scope of the business, which powers, however, by agreement between the parties themselves may be restricted at option, to the extent even of making one the sole agent of the others and of the business."'

We do not think the contract of April 2 discloses the existence of these elements. Williams certainly had no right to represent the firm of Burgess, Lang & Co., nor any of the other persons who were confessedly members of that firm, for the contract expressly provided that he should have no authority to sign checks or notes in behalf of the partnership, or to execute contracts or other written instruments, or to use the firm's name or otherwise act for said partnership, and he never undertook to do so. It is true that he had the right to look at the books of the concern if he saw fit; but if he concluded that the business was being improperly managed, or its funds wasted, he had no right to prevent such things. from being done or to require a dissolution, and the granting of the right to look at the firm's books was as consistent with his being a creditor as a partner. The entire control and management of the business was expressly given to Burgess, Lang, and Palmer. They alone had the right and power to act for the partnership, to sign checks, notes, contracts, etc., and to use the firm name, and their decision, or the decision of any two of them, was made binding in all matters relating to the business.

Furthermore it appears that the title and entire legal and equitable ownership in all the property and assets of every kind belonging to the partnership was to be and remain solely in Burgess, Lang, and Palmer. As Williams had no title, legal or

equitable, in any of the assets of the business, he had none in the capital employed in the conduct of the business or in the earnings or profits as they accrued, and the essential elements or evidentiary facts, from which a community of interest as between him and the three acknowledged partners of the firm could be found, do not exist. While Burgess, Lang, and Palmer, in the conduct of the firm's business, each acted as principal and as agent for one an other, neither of them could be found to have acted as agent for Williams, for he had no community interest in the business of the firm upon which such agency could be predicated. Although the

contract speaks of a part of the return or compensation which Williams was to receive for the contribution or loan made by him to the firm as net earnings, that term was not employed to designate net earnings or profits as such, and in which he had title and community of interest, for the contract expressly vested title to all the assets, of whatever nature, in Burgess, Lang, and Palmer.

Williams was given the right to terminate his relationship under the contract, whatever it was, April 2 of any year or after the year 1921, on giving one year's notice, and this notwithstanding that, by the express provision of the contract, the partnership, which it purported to create and define, was to continue until the 2d day of April, 1924, and thereafter until the 2d day of April, 1929, unless notice to the contrary in writing was given "by one of the partners at least 6 months before April 2, 1924." The phrase one of the partners," as used in paragraph 4 of the contract, clearly was not intended to include Williams, for, in paragraph 3, Williams' rights were expressly defined and, as defined, did not give him a right to terminate the partnership, but simply to withdraw his money. The same is true of the phrase "surviving partners," as used in paragraphs 13 and 14.

Then, again, upon dissolution of the partnership, the distribu tion of the assets, which was to take place as between Williams and the other parties to the contract, was not on the basis of the proportion which each had contributed to the business; but Williams' was to be paid first what he had contributed, and thereafter the other parties were to receive proportionately what they had contributed, if the funds were insufficient to pay them in full. As respects creditors other than himself, Williams' right to payment of his advancements was deferred, but he was none the less a credi

tor. The fact that he was erroneously called a partner did not, of itself, make him one.

On the question of what elements are necessary to constitute one a partner, see Rosenblum v. Springfield Produce Brokerage Co., 243 Mass. 111, 137 N. E. 357; Ross v. Burrage, 233 Mass. 439, 124 N. E. 267; Denny v. Cabot, 6 Metc. (Mass.) 82; Partridge v. Kingman, 130 Mass. 476; Brotherton v. Gilchrist, 144 Mich. 274, 107 N. W. 890, 15 Am. St. Rep. 397; London Assurance Co. v. Drennen, 116 U. S. 461, 6 Sup. Ct. 442, 29 L. Ed. 688; De Rees v. Cosiaguta (C. C. A.), 275 Fed. 172; Marcuse & Co. (C. C. A.), 281 Fed. 928; same case under name of Giles et al. v. Vette et al., 44 Sup. Ct. 157, 68 L. Ed. —, decided January 7, 1924; Eastman v. Clark, 53 N. H. 276, 296, 297, 16 Am. Rep. 192.

In No. 1678, the order or decree of the District Court is reversed, and the case is remanded to that court for further proceedings not inconsistent with this opinion, with costs to the petitioner.

In No. 1695, the appeal is dismissed, with costs to the appellees.

MARGARET G. Lawrence ET AL. V. ATLANTIC PAPER And Pulp
CORPORATION.*

U. S. Circuit Court of Appeals, Fifth Circuit, April, 1924.
Rehearing denied May, 1924.

Nos. 4257, 4258.

JURISDICTION, PROCEDURE, EVIDENCE AND RULES IN GENERAL-JurisdictION AS DEPENDANT ON PLACE OF BUSINESS-CORPORATION "PRINCIPAL PLACE

OF BUSINESS" HELD TO BE IN GEORGIA ALTHOUGH CHARTER PROVIDES FOR PRINCIPAL OFFICE IN NEW YORK CITY.

"The principal place of business" of a New York corporation is in Georgia where the evidence shows that the corporation's accounts and corporate seal were kept in Georgia where all of its property is located and all of its business conducted although the charter provides that the principal office is in New York City and it appeared that meetings of the directors and executive committee were held in New York in the offices of a firm of which one of its directors was a member.

(See Collier, 13th Ed., p. 62 Am. B. R. Digest, § 20.)

298 Fed. 246.