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Fenwick v. Unemployment Compensation Commission

Decided: September 6, 1944.


On certiorari.

For the prosecutor, Jacob M. Goldberg.

For the defendant, Charles A. Malloy (Herman D. Ringle, of counsel).

Before Justices Parker, Heher and Perskie.


The opinion of the court was delivered by

HEHER, J. The determinative question here is whether one Arline Chesire was on January 1st, 1939, a partner or an employee of prosecutor in the conduct of a beauty shop in the City of Newark. If the latter was her status, then prosecutor was an employer within the intendment of the Unemployment Compensation Law. R.S. 43:21-1, 43:21-19 (h) (1). The Unemployment Compensation Commission found that such was the case. We deem this to be an erroneous appraisal of the relationship.

Prosecutor established the business in question in November, 1936. In the latter part of 1937, or the forepart of 1938, he employed Chesire as a "cashier and receptionist," at a weekly wage of $15. Sometime after the commencement of the employment, Chesire complained that her compensation was inadequate; and prosecutor testified that, in order to retain her services, they agreed that she should thereafter share in the profits of the enterprise. The inquiry is as to the nature of the relationship which thereby came into being.

The agreement was reduced to writing with the aid of counsel, and signed by the parties on December 12th, 1938. It is styled an "Agreement of Partnership." It is therein recited that prosecutor "is desirous of entering into a partnership with" Chesire; and thereby the parties agreed to "associate themselves into a partnership, to commence on January 1st, 1939." The "business of the partnership" was stated to be the operation of the beauty shop theretofore conducted by prosecutor in the City of Newark. It was further stipulated that the "firm name shall be that as provided for in the lease agreement between Florence Meola, trading as United Beauty Shoppe, and John R. Fenwick, nemely United Beauty Shoppe;" that "No capital investment shall be made" by Chesire, and that the "control of the management and operation shall be vested in" Fenwick; that Chesire "is to act as cashier and reception clerk," at a salary of $15 per week, and that "At the end of each year she is to receive in addition a bonus of 20% of the net profits, if the books of the partnership shall warrant a payment of such bonus of 20%," after Fenwick "shall have received his salary, expenses and other incidentals;" that "All liability shall be limited" to Fenwick, and that Chesire "shall not be liable as between the partners for any debts contracted by the partnership;" that "each party shall devote all of his time and attention to the business of the partnership, and shall not during the term of this partnership, either directly or indirectly, engage in any other business;" that the "salary" of Fenwick "is to be $50 per week, but he is in addition, to receive at the end of the year, a bonus of 80% of the net profits, as determined at the end of the year, and after deducting all salaries, expenses and incidentals, incurred in the management and operation of the business;" and that "This partnership shall continue, until terminated by either party, upon the giving of ten days notice to the other." The relationship, whatever it was, was terminated by mutual consent in the latter part of 1941.

The partnership relation is essentially contractual. It is grounded in the mutual assent of the parties, express or implied. Partnership liability in favor of third persons may arise by estoppel, but in such case there is no partnership in

fact or in law. The manifested intention of the parties is the primary consideration in resolving whether there is a partnership or a different legal relation. The parties are free to establish by contract such relation as they may deem appropriate to serve their own interests, provided it is not designed to effect an illegal object or otherwise to offend against positive law or sound public policy. Of course, a legal status dependent upon mutual consent may have, as a matter of law, certain attributes and incidents irrespective of the agreement of the parties.

The Uniform Partnership Law defines a partnership as "an association of two or more persons to carry on as co-owners a business for profit." R.S. 42:1-6. Rules are therein laid down for determining the existence vel non of a partnership. Among others, it is provided that the "receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business," but that "no such inference shall be drawn if such profits were received in payment," inter alia, "as wages of an employee." R.S. 42:1-7. If the profit-sharing is merely by way of measuring compensation for services, the status is not one of partnership. The act also declares the rights and duties of the partners to one another, "subject to any ...

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