Story Case

Henry Reeve and Reno Powers were in the business of manufacturing oleomargerine butter, transacting business under the firm name of Reeve & Powers. Reeve was the treasurer of the company, and Powers the manager. Contrary to the provisions of statute, this firm artificially colored its butter, and sold it in this way to the trade. After the firm was in existence for some time, a dispute occurred between the parties and Reeve refused to pay Powers any money; the latter, thereupon, brought an action for an accounting against Reeve as a partner. If the evidence shows that the business was conducted contrary to statute, what should the Court do with the case?

Ruling Court Case. Respass Vs. Central Trust And Safe Deposit Co., Volume 112 Kentucky Reports, Page 606; Same Case, Volume 56 Lawyers' Reports Annotated, Page 479; Volume 99 American State Reports, Page 317

Respass and Sharp were partners in the business of managing a racing stable, and, in connection with that business, were engaged in oookmaking, or making wagers upon race horses. Sharp died, leaving on deposit to his credit some $4,000, known as the "bankroll" of the bookmaking concern in which each of the partners had an equal interest. This action was brought by Respass against the Central Trust and Safe Deposit Company, executor of Sharp, asking for an accounting as to the business in which they had been engaged; he made special claim to the $4,000 which Sharp left on deposit.

Decision

The business in which these two partners had been engaged was an illegal one; and, although it is evident that Sharp left money in which Respass had an interest, according to their agreement, the Court will not lend its aid in settling affairs of an illegal partnership. "We conclude that in this country," said Mr. Justice Du Belle, "in the case of a partnership in a business confessedly illegal, whatever may be the doctrine where there has been a new contract in relation to, or a new investment of, the profits of such illegal business, and whatever may be the doctrine as to the rights or liabilities of a third person who assumes obligations, with respect to such profits, or by law becomes responsible therefor, the decided weight of authority is that a Court of Equity will not entertain a bill for an accounting." Accordingly, it was held that Respass was entitled to no legal assistance in getting his share of the profits of the partnership.

Ruling Law. Story Case Answer

A partnership may be formed for the purpose of carrying on any lawful business which either or any of the partners could have carried on individually. Of course, they may be formed for carrying on a business which is unlawful or contrary to public policy; but it is ineffectual so far as creating any enforcible rights and liabilities as between the partners. The courts do not sit to assist scoundrels in straightening out their nefarious trades; where partners engage in an unlawful business they are left where they are found. In the Story Case, if the Court finds evidence that Reeve and Powers were coloring their oleomargerine, this fact will render their business illegal and deprive Powers of the assistance of the courts.