Case Name: Consolidated Machinery and Wrecking Company, Respondent, v. Harper Machinery Company and William O. Burton, Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1920-01-16
Citations: 190 A.D. 283
Docket Number: 
Parties: Consolidated Machinery and Wrecking Company, Respondent, v. Harper Machinery Company and William 0. Burton, Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 190
Pages: 283–289

Head Matter:
Consolidated Machinery and Wrecking Company, Respondent, v. Harper Machinery Company and William 0. Burton, Appellants.
First Department,
January 16, 1920.
Partnership — joint adventure — when action at law to recover share of profits cannot be maintained — failure to prove account stated as basis for legal action — when remedy is in equity for accounting — complaint dismissed.
Where parties have entered upon a joint adventure an action at law cannot be maintained to recover a share of the profits by one of the parties against the other unless there has been an accounting, a balance struck and an express promise to pay.
Evidence in an action at law brought to recover a portion of the profits of a joint adventure involving the purchase and sale of hoisting cranes examined, and held, not to indicate that there had been an accounting, or balance struck between the parties, or any promise to pay any sum by one of the parties to the other, but that on the contrary the evidence offered on that issue merely showed that there was an agreement to relieve the plaintiff from all responsibility of the erection of the cranes and to make an allowance to the defendants for the cost of erecting the same and that said agreement did not terminate the joint adventure.
Under the circumstances the plaintiff’s remedy was a suit in equity for an accounting.
The rule that an account stated can only be attacked for fraud, mistake or manifest error does not apply in a case where the existence of the account stated is denied.
Held, that evidence offered by the defendants and erroneously excluded was not offered for the purpose of impeaching the account, but as tending to disprove the plaintiff’s claim that an account had been stated.
As the plaintiff failed to prove its case at law there should not be a new trial but the complaint should be dismissed.
Smith, J., dissents in part, with opinion.
Appeal by the defendants, Harper Machinery Company and another, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 8th day of February, 1919, upon the verdict of a jury rendered by direction of the court, and also from an order entered in said clerk’s office on the 10th day of February, 1919, denying defendants’ motion for a new trial made upon the minutes.
Alvin T. Sapinsky of counsel [William Travers Jerome and Isidor J. Kresel with him on the brief], Joseph & Alvin'T. Sapinsky, attorneys, for the appellants.
Jerome A. Strauss of counsel [Max D. Steuer with him on the brief], William Solomon, attorney, for the respondent.

Opinion:
Page, J.:
The facts are substantially stated in the opinion of Mr. Justice Smith. The parties having entered upon a joint adventure, an action at law cannot be maintained to recover a share of the profits by one of the parties against the other unless there has been an accounting, a balance struck and an express promise to pay. The theory of the plaintiff's case is that an account became stated between the parties by the execution of the agreement of May 8, 1918, and that plaintiff thereby became entitled to receive as its share of the profits of the joint enterprise the sum of $10,000. The object of the joint adventure was the purchase and sale of two large cranes. A contract was made, dated May 4, 1918, with the Brooklyn Edison Company for the sale, delivery and erection of these cranes (which are referred to in the contract as coal bridges) for $82,200, payable $50,000 on the signing of the contract, and $16,100 when the first coal bridge was ready to operate, and $16,100 when the second coal bridge was ready to operate. In the negotiations preceding the execution of the contract $35,000 apiece was specified as the price of the cranes, and $12,200 for the expense of erecting them. On the signing of this agreement the $50,000 was paid. On May 8, 1918, an agreement was entered into between the Harper Machinery Company and W. O. Burton, parties of the first part, and the Consolidated Machinery and Wrecking Company, party of the second part, as follows:
" Parties of the first part agree to relieve the parties of the second part from all responsibility of erection of two (2) coal bridges which we own jointly by all the parties, and for which a sale has today been consummated by the Brooklyn Edison Company. The parties of the first part are to be allowed the sum of Twelve thousand two hundred ($12,200.00) dollars from the contract for delivery, erection and insurance in transit of these cranes. The parties of the second part agree that from the next payment to be made on account of these cranes, which is to be Sixteen thousand one hundred ($16,100.00) dollars, the parties of the first part retain Six thousand one hundred ($6,100.00) dollars as their share for the erection, transportation and insurance, and the parties of the second part agree that on the final payment that the same allowance be made. The parties of the first part and the parties of the second part herewith agree that the divisions of the balance of these two further payments which will be Ten thousand ($10,000.00) dollars each is to be divided 50% to the parties of the first part and 50% to the parties of the second part."
There is nothing in the terms of this agreement that indicates that there has been any accounting between the parties or that any balance had been struck, nor is there any promise to pay any sum by one of the parties to the other. It shows upon its face that it was executed on the same day that the contract of sale to the Brooklyn Edison Company' was " consummated," and all that it purports to accomplish is to reheve the plaintiff from all responsibility of the erection of the cranes, and the allowance to the defendants of the $12,200 which had been added to the price of the cranes for that purpose. The remaining payments, after the deduction of the cost price of erection, were to be divided in the proportion provided in the original agreement of joint adventure. This in terms provided that the division of the profits should be made after deducting all necessary and agreed upon expenses pertaining to the sale, transfer or disposal otherwise of the cranes. There is no mention in this paper of any accounting of either party for expenses that they may have paid out in the business of the joint adventure, nor is provision made for any liabilities that may have been incurred. It was not made at the termination of the joint adventure. There remained things to be done before the final payments were due. If this instrument was intended as an acknowledgment of an obligation to pay a balance due after the statement of an account, that intention would have to appear from facts extraneous the instrument. In order to establish its cause of action upon an account stated, the plaintiff would have to show that there was an accounting (Woodriff v. Hunter, 65 App. Div. 404, 412) that embraced all the partnership transactions; that the debits and credits were produced and a balance struck, with the assent of all the partners (Volkening v. De Graaf, 81 N. Y. 268, 270); and that this instrument was intended as a promise to pay such balance. Not alone did the plaintiff not show these facts, but all evidence tending to show the surrounding circumstances and subsequent acts of the parties was excluded on its objection. Two facts did appear which tend to disprove plaintiff's claim that an account was stated. It appeared in plaintiff's case that the joint adventurers were liable to pay a brokerage fee, and no evidence was produced to show that it had been paid. The plaintiff also alleged as a second cause of action that certain disbursements were made by it, some of which were made prior to the alleged statement of the account. Although the cause of action was withdrawn, the pleading was before the court, and the defendant proved that plaintiff had rendered an account of these expenses to the defendant prior to the commencement of the action and subsequent to May 8, 1918, the date of the instrument.
The plaintiff failed to prove that there was an account stated, and such evidence as was permitted to be given tended to disprove plaintiff's contention. The plaintiff's remedy is a suit in equity for an accounting. The rule that an account stated can only be attacked for fraud, mistake or manifest error does not apply in a case where the existence of the account stated is denied. The complaint alleged and the answer denied that an account was stated. The evidence offered by the defendant and erroneously excluded was not offered for the purpose of impeaching the account but as tending to disprove the plaintiff's claim that an account had been stated. There should not be a new trial. The plaintiff failed to prove its case, and the complaint should be dismissed.
The judgment and order should be reversed, with costs to the appellant, and judgment directed for the defendants dismissing the complaint, with costs.
Clarke, P. J., Laughlin and Philbin, JJ., concur; Smith, J., dissents as to dismissal of complaint.