Brady v. Erlanger , 149 N.Y.S. 929 ( 1914 )

Scott, J.:

In the year 1907 plaintiff and defendant embarked upon a joint adventure which involved the leasing for a term of years, and the management of a theatre in the city of Chicago known as the Auditorium Theatre. There were no formal or written articles of copartnership, but there seems to be no doubt that at the outset it was understood that the parties were to have equal shares in the enterprise. Later on each permitted other persons to share his interests. The active management of the enterprise was left, apparently by tacit consent, in the hands of defendant. The lease of the theatre was to run for ten years at an annual rent of $67,500, and it was stipulated that the lessees should furnish security to the extent of one year’s rent. This security was given by a firm of which defendant was a member. In order to avoid personal responsibility upon the lease defendant caused to be organized a corporation with a small capital to execute the lease and to carry on the theatre. Besides defendant himself, all the incorporators, stockholders and directors of this corporation were employees of defendant; the business was conducted from the office of the firm of which he was a member, by the employees of that firm. No stock of the corporation was ever issued to plaintiff.

The judgment below proceeded upon the theory that, by mutual consent of the parties, the whole enterprise was turned over to the corporation thus formed, and that whatever right plaintiff had to a participation in the profits of the enterprise was through the corporation. This is not the effect of the evidence nor was it the intention and understanding of the parties as indicated by their course of business. Certain payments were made to plaintiff on account of profits made but they were so paid, not as dividends upon any share in the company owned by him, but as payments on account of his interest as a partner with defendant in the joint enterprise. As has been said, none of the stock had been issued to him, but all of it which was issued (apparently not more than five shares) was issued to and held by defendant, or those whom he had selected to be directors of the corporation. It is clearly shown that defendant absolutely dominated and controlled the corporation.

The true state of affairs as the evidence shows was that defendant organized the theatre corporation to take over his interest in the joint enterprise, and as a medium, through which he could, with a minimum of risk to himself, carry on the theatre as a business enterprise. There is nothing whatever in the evidence to indicate that it was ever understood or agreed that the theatre corporation should take over or acquire plaintiff’s interest in the joint adventure, or that plaintiff ever accepted that company as joint adventurer with him in place of defendant, or that he was consulted as to its organization. Undoubtedly he knew of the fact that such a company had been created, and that the lease of the theatre was taken and the business conducted in its name, but this falls far short of acquiescence by him in the substitution of the company for cojoint adventurer in place of defendant. As between the original parties, it is quite clear that plaintiff and defendant remained cojoint adventurers to the end, the corporation acting as alter ego for defendant.

Under these circumstances we consider that plaintiff is entitled to the accounting which he asks. His original share in the enterprise was one-half. There is, we think, a preponderance of evidence to establish the fact that plaintiff agreed, by acquiescence at least, that one Lederer, who was to manage the theatre, should receive twelve and one-half per cent of the profits to be deducted from the fifty per cent appertaining to plaintiff. This left thirty-seven and one-half per cent payable to plaintiff in which he admitted one Grismer to an equal participation with himself. It is objected that by reason of this interest G-rismer should have been made a party to the action in order to avoid any further claim on his part against defendant. It is not clear that the transaction with G-rismer brought him in as a partner with defendant in the enterprise, but even if he should be deemed to be a proper party to the action the failure to join him does not lead to. a dismissal of the complaint because he can be brought in at any time, even after judgment, upon a proper application.

Defendant through the corporation which he controlled sold the lease of the theatre without consultation with plaintiff and without his consent. He also caused the corporation to award and pay him a large sum out of the purchase price as commission for making the sale. He also, without consent of plaintiff, entered into an agreement, apparently for a large consideration, whereby the theatre was excluded from presenting a certain class of theatrical performances. It is alleged that this was an improvident act, so far as concerns the joint adventure, and induced by consideration of advantage to defendant but not advantageous to plaintiff.

As to all these matters, as well as to the profits made before the sale of the lease, plaintiff is entitled to an accounting, upon which defendant, having assumed to act without consent of plaintiff in the sale of the lease, the compensation to be paid himself, and the agreement as to the class of performances to be produced, will be called upon to justify these acts by showing that in what he did or procured to be done he acted in good faith in the interest of himself and plaintiff as joint adventurers.

The case was very thoroughly tried, and there seems to be no probability that there is any evidence bearing upon the questions at issue which was not brought out. Nothing would be gained, therefore, by putting the parties to the expense and delay of a new trial, and an appropriate case is presented for disposition by this court.

The judgment appealed from will be reversed, with costs and disbursements to appellant in all courts, and an interlocutory judgment granted for an accounting. A decision containing findings of fact and conclusions of law and an interlocutory judgment may be presented to be settled on notice.

Ingraham, P. J., Lahghlin, Dowling and Hotchkiss, JJ., concurred.

J udgment reversed, with costs and disbursements to appellant in all courts, and judgment ordered as directed in opinion. Order to be settled on notice.