246 N.Y. 213, 158 N.E. 77 (1927)
In the spring of 1921, the firm of Knauth, Nachod & Kuhne found itself in financial difficulties after its partners engaged in unwise speculations. John R. Hall, a partner and friend of Mr. Peyton, obtained a loan of almost $500,000 of Liberty bonds from Peyton which the firm could use as collateral to secure bank advances.1
Negotiations followed involving Hall, Peyton, Perkins, and Freeman, during which a proposal that some of them become partners was refused. The parties instead executed three documents on June 4, 1921, as part of one transaction: the agreement, the indenture, and the option.2
Under these documents the respondents agreed to loan $2,500,000 worth of liquid securities to be returned by April 15, 1923, which the firm could hypothecate for up to $2,000,000, in exchange for compensation measured as forty percent of the firm's profits, not less than $100,000 nor more than $500,000.
The documents named Peyton and Freeman as trustees who were to receive income from the securities, remain informed of transactions, and could substitute or deal with the securities under the conditions set forth to protect their interests as lenders.3
The firm was to insure Hall's life for $1,000,000 with the policies assigned to the trustees.4 The trustees could inspect the books, receive information, and veto speculative business.5
The option permitted the respondents to join the firm later by purchasing interests at a stated price or to form a corporation. Firm members placed resignations with Hall that could be accepted if Hall and the trustees agreed.6
Whether the three documents executed on June 4, 1921, created a partnership between the defendants Peyton, Perkins, and Freeman and the firm of Knauth, Nachod & Kuhne?7
Partnership results from contract, express or implied.8 If the contract be complete and expresses in good faith the full understanding and obligation of the parties, then it is for the court to say whether a partnership exists.9 If as a whole a contract contemplates an association of two or more persons to carry on as co-owners a business for profit a partnership there is.10 On the other hand, if it be less than this no partnership exists.11 An arrangement for sharing profits is to be considered but it is to be weighed in connection with all the rest. It is not decisive. It may be merely the method adopted to pay a debt or as interest on a loan.12
No. Upon examining the documents, it is clear that the primary purpose was to provide a loan of liquid securities to the struggling firm in exchange for a share of profits as compensation.13
The detailed provisions regarding the trustees' rights to information and veto power over speculative ventures served to protect the lenders' interests in the collateral and the repayment.14 The requirement that Hall's life be insured and the assignment of firm interests further secured the transaction without granting the respondents control over daily operations.15 The option to join the firm at a later date was contingent and did not create an immediate partnership relationship.16 When these elements are weighed together, the contract falls short of creating an association of co-owners carrying on the business for profit.17
The three documents executed on June 4, 1921, did not create a partnership between the defendants and the firm of Knauth, Nachod & Kuhne.18