This section contains the nature of the case and procedural background.

Horton and Althouse were partners in a business of growing and distributing potatoes under the names of Gerry Horton Company and Gerry Horton Farms. They entered into a deal with Kaufman and Brown who were partners in the business of produce distribution under the name of Kaufman-Brown Potato Co. Horton and Althouse went bankrupt, and the issue of whether Kaufman and Brown were partners was before the court. Kaufman-Brown filed a claim in the bankruptcy proceeding. The contracts that were to determine the status of the parties involved the purchase of potato crops. The contract mentioned the fact twice that they were partners. The contracts also provided for the execution of crop mortgage as security for faithful performance by Horton and Althouse and for a promissory note to be executed in the amount which Kaufman and Brown were to pay in. After each contract had been completed, the mortgage and note were to be surrendered and canceled. The mortgage and not were executed solely as security for performance and that Horton and Althouse were not to be held liable for any losses resulting from causes beyond their control. There were no provisions for bank accounts, nor a firm name. The contract was executed, and potatoes were farmed and harvested and sol. Kaufman-Brown pursuant to their option purchased some. The total advance of Kaufman-Brown was $43,000 of which $20,000 remained unpaid. Kaufman-Brown got bad checks from Horton and Althouse, and those dishonored checks represent Kaufman-Brown's claim before the court. The lower court ruled against Kaufman-Brown, and they appealed.

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