Meadows v. Mocquot
Facts
The parties entered a verbal agreement in 1891 concerning a cotton buying, ginning, and selling venture. The plaintiff furnished all money used in the business, kept the accounts, collected the sale proceeds, and applied those proceeds to reimburse himself for advances and to pay expenses; the defendant bought, ginned, shipped cotton, and managed the operational details. Their testimony conflicted on whether the defendant agreed to share losses, but both parties admitted that before any profits could be divided, the plaintiff's money was to be restored to him. The plaintiff claimed total losses of $892.02 and sought to recover half from the defendant.
Issue
When one party to a venture contributes money and the other contributes labor, and the money is to be returned to the money contributor before any profits are divided, may the money contributor recover from the labor contributor for part of the loss of that money?
Rule
The universal test of partnership is community of profit and a specific interest in profits as profits, as distinguished from a stipulated share of proceeds as compensation for services. Where one party contributes money and the other labor, and the money contributor retains ownership of the principal so that the firm has only the use of the money, then, absent something more, each bears the loss of his own contribution: the money contributor loses the money and the labor contributor loses the value of his labor, and the labor contributor is not liable to contribute toward the loss of the capital.
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