Story Case

Roy Purcell, Francis Burke and four other men entered into a contract for the purpose of conducting a joint venture in drilling an oil well. Each agreed to pay one-sixth of the expense of drilling the well; further, it was agreed that should oil be discovered, a company should be incorporated, and each should receive one-sixth of the capital stock. They transacted business as "The Blue Valley Oil Association.", The letterheads and other stationery contained this name on the top, with the names of the officers on one side, and the word, "Promoters" on the other, beneath which were the names of the six men.

Oil was discovered and initial preparations made to incorporate a company. Prior to the completion of the company, a workman was injured at the well by an explosion of a steam boiler. Later this worker brought suit against the six men as partners. Whether the suit was properly started depends upon whether a partnership can be based upon a contract entered into by six men.

Ruling Court Case. Arnold Vs. Conklin, Volume 96 Illinois Appeal Reports, Page 373

Arnold, Conklin and several others joined in an effort to secure a telephone franchise from the city of Joliet, Illinois. It was agreed between the parties that all should work for the ordinance giving the franchise, and that all should be joint and equal owners in whatever ordinance was obtained, and share equally in the profits arising therefrom. Conklin presented a written agreement to the other parties, but this was not signed, because all the terms were not satisfactory. Nevertheless, the parties continued in their efforts and finally an ordinance was secured. Then Conklin formed a corporation and assigned everything to it, without accounting to Arnold and his friends. This action is brought against Conklin, as partner, for an accounting. Conklin maintained that they all were promoters and not partners, and suit could not be based on a partnership.

Mr. Justice Waterman delivered the opinion of the Court: "The mere joining of persons in an attempt to create a corporation does not, nor does the mere uniting in subscription for stock, or endeavoring to interest capitalists in an enterprise make the parties so doing, partners, for they are not the proprietors of a common business; this is not their intention. But this is lawful business undertaking, and the parties might, by agreement, show their intention, not only to be promoters, but to be partners, and to share equally in the ownership and profits coming from their joint venture. The evidence shows that the parties in this case intended to be partners in a venture and to have a common interest in its results. Therefore, they are partners. It does not matter that they called themselves partners, or even thought of that phase of their venture. The facts make them partners, and Arnold, the plaintiff, can recover."

Ruling Law. Story Case Answer

Persons commonly known as promoters, who unite in promoting a corporation, and in doing the work preliminary to the completion of a corporation, are not as between themselves partners, for it is not their intention to make themselves the proprietors of a common business, with a community of interests or joint interests in its results. However, they may make themselves liable as partners to third persons, by holding themselves out as such, or they may be partners because that is their intention; that is, they may agree to carry on a common business before incorporating. This was the intention in Arnold vs. Conldin. This was also the intention of Purcell, Burke and the other men in the Story Case; although they were called promoters, a partnership was created by their contract.

Therefore, the workman can recover in his action against the six men as partners.