Friedrich v. Martin , 43 N.Y.S.2d 575 ( 1943 )

Dowling, J.

This litigation arises out of a contract awarded to the Julius Friedrich Company, Inc., hereinafter referred to as the Friedrich Company, by the State of New York in August, 1930, for the paving of Empire Boulevard, Irondequoit, N. Y. The Friedrich Company began the performance of the contract in September, 1930, and completed the work to the satisfaction of the State in September, 1931, at a claimed profit of $13,140.61. The controversy involves the division of this alleged profit. To appreciate the issue it is necessary to understand the factual background.

Oliver Costich, for many years, was a well-known contractor in the city of Rochester. He was interested in several corporations which were engaged either in the real estate or in the contracting business. One of these concerns was the Roach-Thompson Co., Inc., which company Costich practically owned and controlled. Julius Friedrich was also a well-known contractor in Rochester. He operated the Julius Friedrich Company, Inc. which he owned and controlled. Costich and Fried-rich were warm friends. Prior to 1930, Costich had constructed a sewer system for the town of Irondequoit, which is near Rochester, N. Y. The work of installation was so carelessly done that the town prosecuted Costich both civilly and criminally. He successfully defended the criminal proceedings but not the suit for damages. The litigation cost him altogether seven hundred thousand dollars. One of the streets in which he had laid a sewer was Empire Boulevard. A lady who had been concerned in his prosecution lived on that street. When Costich learned that the State was advertising for bids for the pavement of Empire Boulevard he contacted his friend Fried-rich on August 1, 1930, and told Friedrich that he had to have that job on account of the defective sewer he had laid in that street. That if that matter should come up again there would be a lot of publicity. That he dared not figure on it himself and that he must have the job in the hands of someone who would keep the defects covered up. That “ I want you to take it in your name.” That he had a lot of material left from the Irondequoit job which was paid for. That he would furnish the pipe, the lumber, the machinery and everything, including the money, and put it “ against your time.” That the Friedrich Company should make the bid and that he and Friedrich would divide the profits arising from the job equally. Friedrich accepted the proposition and the Friedrich Company was awarded the contract. Costich supplied the lumber, the machinery, the materials and substantially all the money for the performance of the contract. Costich operated through the Roach-Thompson Company and Friedrich operated through the Friedrich Company. When the contract was completed Costich, Friedrich and their servants had a conference and reached an agreement that the contract had produced a profit of $13,140.61. This profit was paid over to Costich through the Roach-Thompson Company and upon Costich’s agreement to pay Friedrich his one half thereof in two weeks. Costich procured the money on the representation that he was in dire need of money at the moment. At the appointed time Costich refused to pay Friedrich his share. The matter stood in abeyance until 1935 when Friedrich brought action against Costich to recover his share of the profits. Costich defended and Friedrich’s complaint was dismissed at the close of his case on the theory that the cause of action belonged to the Friedrich Company. Whereupon Friedrich instituted this action joining the Friedrich Company as plaintiff so, as he alleged, there can be no doubt as to the proper party to receive payment, and the Roach-Thompson Company as a defendant with Costich. The complaint contains two causes of action, one on the contract made between Friedrich and Costich and the other on the theory of quantum meruit for services rendered to the defendants by Friedrich and the Friedrich Company. Costich answered denying liability and the Roach-Thompson Company answered denying liability and interposing a counterclaim for materials furnished and for the hire of machinery. Costich died on October 7, 1936, and his administrators with the will annexed were substituted as defendants.

The action came to ti;ial before a jury in March, 1942. Over the objections of the defendants that the witness was not competent to testify and that his testimony was inadmissible under section 347 of the Civil Practice Act and that the parties were not the same, the plaintiffs were permitted to read the testimony given by Julius Friedrich on the trial of his action against Costich. The court, however, limited the testimony to Friedrich’s claim against Costich personally. After that testimony had been read, and before the close of the plaintiffs’ case, Friedrich requested that the complaint' as to him be dismissed upon the merits. His motion was granted. His counsel also stated that Julius Friedrich waived any claim that he might have against the defendants. The -case was continued with the Julius Friedrich Co., Inc. as sole plaintiff. No application to amend the pleadings was made then or later. Friedrich then testified that he had sold his stock in the Friedrich Company to his sister-in-law and housekeeper and had taken from her, her demand note in the amount of $20,000 and that he had resigned his offices and severed his connections with the Fried-rich Company and then offered himself as witness in behalf of his former company!. The plaintiff and the defendants then stipulated, to save time, that his testimony as read be considered as his testimony in the case subject to the objections and exceptions of the defendants already taken to the reading thereof. At the close of the plaintiff’s case the complaint was dismissed as to the Roach-Thompson Co., Inc., but that company remained in the case to prosecute its counterclaim against the plaintiff company. The Roach-Thompson Co., Inc. offered evidence in support of its counterclaim and of the defense generally.

The court submitted two questions to the jury, namely: (1) “ Was this contract, as alleged in this complaint, actually made between the Friedrich Company and Oliver Costich individually? ” (2) “ Should you find that the plaintiff has met the bun-den placed upon it, and has proven to you that a contract did exist in the manner claimed by it, then you must turn to the second question in the case and determine the amount, if any, to which the plaintiff is entitled by virtue of the breach of the contract. ’ ’ The jury returned a verdict in favor of the plaintiff for $6570.30 with interest from January 1, 1932, and no cause for action on the counterclaim. From the order denying the defendant’s motion to set aside the verdict and for a new trial and from the judgment entered on the verdict, the administrators have appealed.

There is not a scintilla of evidence in this record that any contract was made between the Julius Friedrich Co., Inc. and Costich. No such contract was alleged in the complaint. The Friedrich Company never made any such claim against Costich. The evidence is quite clear that Friedrich and Costich treated the Friedrich Company and the Boach-Thompson Company as mere figureheads. Both of them took precautions to hide behind their corporations. As it turned out Costich’s fears were groundless as the sewer in Empire Boulevard was substantially all right. That the Friedrich Company and the Boach-Thompson Company were figureheads is evidenced, by the fact that the Friedrich Company opened a special account with its bank and a special set of books to handle the transaction and the money to finance the transaction and the material and machinery used on the job were supplied, by Costich through the medium of the Boach-Thompson Company. Neither Costich’s name nor Friedrich’s name appeared in the transaction except that Friedrich signed the contract for his company. Neither corporation shared, nor was supposed to share, in the profits of the enterprise.

The court committed reversible error in allowing Friedrich to testify as to personal transactions between him and Costich. The fact that he transferred his stock in the Julius Fried-rich Co., Inc. to his sister-in-law and housekeeper and resigned his offices in that company did not qualify him as a witness. The evidence established that he was still interested in the event. He testified that he told Costich when he asked him for his share of the profits “ Oliver, remember I have got to settle with the Friedrich Company; the Friedrich Company is paying me a salary and what I get out of this, my split, has to go toward paying back the salary I drawed from the Julius Friedrich Company.” It is fair to assume that, if that company recovered one half of the profits, Friedrich would not be called upon to reimburse it for the salary he had received from it. And it is likewise fair to assume that the new owner of the Friedrich Company, if the sale of the stock was not a fiction, would press him for payment in the event that the company failed to sustain a recovery. Furthermore Friedrich did not release the Fried-rich Company from any claim he had to the profits recovered by it. He did not testify that Costich agreed to pay one half of the profits to the Friedrich Company. He testified “ Q. Mr. Friedrich, your company, the Julius Friedrich Company which did the work on Empire Boulevard, you made that bid in the usual and ordinary way didn’t you? A. I took it for granted, I done the work and used our name.”

The action was not brought and the recovery was not had on an account stated. (Schütz v. Morette, 146 N. Y. 137,141.) The jury found for the plaintiff on a cause of action not pleaded. No objection was made to the evidence as inadmissible under the pleadings. By failing to so object the appellants would have waived their rights if the evidence had supported the verdict and the verdict was otherwise unobjectionable. (Northam v. Dutchess County Mut. Ins. Co., 177 N. Y. 73.) The verdict was contrary to the law and contrary to the evidence.

Friedrich’s complaint has been dismissed on the merits on his own motion. All the available evidence appears to be in the record. A new trial would avail nothing. The judgment should be reversed and the complaint dismissed.