153 N.Y.S. 810 | N.Y. App. Div. | 1915
Lead Opinion
This is an action against the executrix of John B. McDonald, deceased, for an accounting with respect to his profits under a contract between him and the city of New York for the construction of the original subway for the transportation of passengers; and it is based upon a parol agreement alleged to have been made between the plaintiff and McDonald, by which the plaintiff advanced to McDonald the sum of $30,000 to make up a fund of $150,000, which was required to be deposited in cash with a proposal for the work, upon an agreement by him to return it to plaintiff if it should not be forfeited to the city,
McDonald died on the 17th day of March, 1911, and this action was commenced on the 25th day of January, 1912. The trial court found that the only cause of action established in favor of the plaintiff was one at law, and that it was barred by the Statute of Limitations, which was duly pleaded. The learned counsel for the plaintiff does not question the correctness of the decision if the plaintiff had only a cause of action at law for his share of the profits, or for an amount equal thereto; but it is contended that, by virtue of the agreement, the bid and contract became a joint adventure between the plaintiff, and others who similarly contributed to the fund, and McDonald, and that plaintiff became the equitable owner of one-fifth of the profits, and that in making the bid and conducting the enterprise McDonald became in effect the agent or trustee for, and assumed a fiduciary relation toward the plaintiff and the others similarly situated, which gave plaintiff an absolute right to a full accounting, notwithstanding the fact that he and the others similarly situated received and accepted a portion of the profits, which at the time they supposed was all they were entitled to receive, and without regard to whether there is evidence that there remained other profits undistributed.
It was evidently assumed on the trial that any testimony offered by the plaintiff with respect to a personal transaction with the decedent would be objected to and excluded as incompetent, for he was not called as a witness. It was shown, however, that on the 12th day of January, 1900, a check drawn by the plaintiff for $15,000 to his own order and indorsed by him in blank, and another check drawn by a corporation, with which he was identified, to the order of McDonald, were indorsed by McDonald and the proceeds used to make up the cash deposit of $150,000 accompanying McDonald’s bid. The contract for the construction of the subway was awarded to McDonald sometime prior to January 20, 1900, and on that day he assigned the fund thus deposited to August Bel
“Referring to the agreement made with you under this date by which you are to pay to me one-fifth (l/5th) of the twenty-five (25) per cent of the profits of the Rapid Transit Construction contract coming to you under the contract of February 21st, 1900, with the Rapid Transit Subway Construction Company, I hereby agree to return to you one-quarter (1/4) of said one-fifth (l/5th) when the same has been paid to me.” This letter bears the following indorsement:
“ I hereby assign the above to
“(Signed) JOHN B. McDONALD.
“Dated December 24, 1901.”
This is the only evidence tending to explain how Belmont & Co. came to issue a participation certificate to McDonald for more than six twenty-firsts of the twenty per cent, and it is argued therefrom that by the indorsement McDonald surrendered the letter and that the one-fourth of the five per cent of the profits was included in his certificate in accordance therewith. It was stipulated on the trial that McDonald and his associates were also given the privilege of subscribing for other stock of the operating company at par, and that plaintiff availed himself of that privilege. It appears that the stock was worth double.its par value within a couple of years after it was issued. The plaintiff received 1,905 shares of the stock of the operating company on account of his two twenty-firsts of the twenty percent of the profits; hut it does not appear how much he took at par in addition thereto.
Tn opening the case Mr. Levy, of counsel for plaintiff, stated that plaintiff’s claim was that each of McDonald’s friends who advanced $15,000 was to receive one-seventh of the ultimate
A question arose on the trial with respect to the competency of the testimony of Bunkle and Carroll with respect to interviews with McDonald, and the testimony was received over objection as to its competency under section 829 of the Code of Civil Procedure, subject to a motion to strike it out to be made in the brief to be submitted. Bo ruling appears to have been made by the trial court with respect to such motion, and in the opinion of the court the question was deemed immaterial, on the ground that without it the documentary evidence shows an agreement between McDonald and the contributors to divide •his profits in the proportion of one-tenth for each $15,000 advanced. The court arrived at this conclusion on the theory that the participation certificates issued to the Belmonts, Freedman, Morse and Vanderbilt were for bankers’ services, which, however, is not shown by the certificates or otherwise than by McDonald^ statement to that effect to Bunkle, and that the remaining ten twenty-firsts were divided in the proportion of one-tenth for each $15,000 advanced, McDonald evidently taking his certificate for the amount contributed by him and the amount advanced by Freedman and the other $15,000 not advanced by Bunkle which evidently was also advanced by McDonald or by another friend of his. There is no evidence showing who composed the firm of Belmont & Co. I am of opinion that the documentary evidence does not shoiu the agreement made between McDonald and his friends who contributed to the
It is quite clear that McDonald and his friends, who contributed to the fund of $150,000 under the agreement as shown by the testimony of Bunkle, did not become partners, and I am of opinion that they did not become joint adventurers, for the contributors had no interest in the enterprise other than to receive a share in the net profits or an amount equal to a percentage thereof. They were to render no services, and they were to have no voice in making the contract or in the performance thereof. So far as they were concerned the enterprise was McDonald’s and his only. They risked the money they advanced to him on his agreement to divide his profits with them; but the profits were to be his, not theirs. It was not intended that the money they advanced was to continue in the enterprise. It would have been forfeited at the election of the city if the contract had been awarded to McDonald and he had failed to execute and to give the security required by the city on its execution; on his making the contract and furnishing the security required the money would be released, and it was doubtless expected that it would be returned to them as it was. It may be that they would have been entitled to an accounting for the moneys which McDonald received from them (Marvin v. Brooks, 94 N. Y. 71); but concededly they have had that, and while it is true that they had confidence in and trusted their friend McDonald, he did not in the execution of the contract or in negotiating an assignment thereof assume a fiduciary relation toward them; he did not become a trustee for them or their agent, even if their agreement with him con
If, however, the agreement without creating a fiduciary relation between the contributors and McDonald entitled the former to an accounting on the theory that they had an interest in the profits as such, still I am of opinion that the plaintiff was'not entitled to recover. When the plaintiff received from McDonald the participation certificate for two twenty-firsts of the twenty per cent of the profits, it is fairly to be inferred from the evidence that he knew, or is chargeable with knowledge, of the manner in which the remainder of McDonald’s profits was distributed. He and McDonald were personal friends, and it is a reasonable inference that McDonald at least gave to him the same explanation that he gave to Runkle and that, like Runkle, he accepted it as satisfactory and thereby approved of the distribution made by McDonald. Moreover, it is to be inferred that plaintiff was familiar with the steps taken subsequently for he was elected a director of the operating company and voted for the resolution directing the issuance of 25,000 shares of stock to McDonald and his associates, including
It follows that the judgment should be affirmed, with costs.
Ingraham, P. J., McLaughlin and Dowling, JJ., concurred.
Concurrence Opinion
I concur on the first ground that whatever cause of action plaintiff may have had was one at law, and is barred.
Judgment affirmed, with costs.