Martin v. Peyton
158 N.E. 77 (1927)

Hall’s firm was having some financial trouble. He reached out to some friends Peyton, Perkins, and Freeman (defendants/respondents here) and they loaned $2,500,000 worth of good securities, so that the firm could use them as collateral to secure bank advances. There were a few control-related provisions in the agreement – e.g., trustees kept advised/informed, right to veto any business they find speculative, etc.

  • P claimed D were partners and, as such, liable for its debts.
  • D claimed they were creditors, not partners.

Side Note: Martin was the firm’s creditor.

Were the investors partners or creditors?

Creditors. Affirmed.

Respondents’ measures taken as precautions to safeguard the loan were ordinary caution and did not imply an association with the business.

  • In other words, the creditors’ rights didn’t go so far as to place control of the day-to-day operations in their hands and make them liable as partners.