Heran v. Hall

Court of Appeals of Kentucky · 1840 · Corporations

40 Ky. 159 (1840)

Updated August 22, 2026

CorporationsPartnershipProfit-sharingContribution for lossessingle adventuremoney capitallabor as capitalprofits

Facts

Heran and Hall entered an unwritten agreement concerning corn to be bought in Illinois and Missouri and shipped to New Orleans. Under the agreement, Heran was to furnish the money capital, Hall was to purchase and ship the corn, and the profits were to be divided equally. The venture lost money, and Heran sought to recover from Hall one half of the lost capital. The evidence about the exact terms and legal effect of the agreement was vague and indeterminate.

Issue

When one party furnishes the money capital for a single venture and the other contributes only services in exchange for half the profits, is the service-contributing party liable to the money-contributing party for one half of the loss of capital? More specifically, did this agreement make Hall a joint owner of the corn or otherwise make part of Heran's money an advance for Hall's share of capital?

Rule

As a general rule, especially in a single adventure, when one party's capital is money and the other's is labor or personal service, they are not technical partners inter se merely because they share profits. Nothing else appearing, even if they are considered partners in the stock, the party whose capital is labor is not liable to the party whose capital is money for contribution for loss of capital, because each sustains the corresponding loss of his own capital.

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In Louisville, Nora Bennett orally agreed with Eli Mercer to pursue a one-time purchase of lumber in Indiana for resale in Nashville. Nora would supply all purchase money, Eli would locate sellers and arrange transport, and any profits would be split equally. The venture lost money, and Nora sued Eli for half of her lost investment.

Under the governing rule, is Eli most likely liable to Nora for contribution toward the loss of Nora's capital?

Explanation. In a single adventure, where one party contributes money capital and the other contributes only labor or personal services, a mutual interest in profits does not by itself make them technical partners inter se for purposes of contribution for capital losses. Nothing more appearing, the labor-contributing party is not liable to the money-contributing party for loss of that money capital.