Court Opinion

ID: 5187243
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:30:29.355529+00
Date Added: 2024-06-11T08:26:47.716418
License: Public Domain

Ingraham, J. (dissenting):
I cannot assent to the affirmance of this judgment, as to do so would expressly overrule the decision of this court in the case of Johnson v. Alexander (61 N. Y. Supp. 351; 46 App. Div. 6). The question in that case was as to the liability of the parties to an agreement almost exactly similar to the one in this case, and we there held that by the agreement all the parties to it became partners or joint adventurers, and were liable for materials furnished or contracts to carry out the object of the contract. We said in that case : “We are concerned only with the obligation towards third parties, and whether or not this agreement, constituted these defendants copartners or joint adventurers as to third parties supplying or furnishing materials necessary to the successful prosecution of the adventure. * * * The intention of the parties to this agreement is, therefore, clear. Its object, as before stated, was to secure net profits, to be divided among those interested. The net profits were to be ascertained by deducting all- the expenses incident to the adventure, including the cost of furnishing the necessary labor and materials. What, then, *602are the legal relations of these parties interested in such adventure, and who were to receive the profits, as to third parties ? ” Then, after examining and discussing the authorities, we said : “ This rule, thus stated by the highest court of the State, is the one which is controlling, and which it is our duty to apply. The extent of the rule is well illustrated by the exceptions to' it which have been recognized. Thus, the rule is general that participation in profits renders their recipient a partner in the business from which the profits are derived, as to third persons. * * * The general principle upon which these exceptions have been established is that in such cases the parties have'no interest in the profits or business, but simply have adopted a division of receipts as a method of ascertaining the amount of compensation for the services rendered or property used. But where the parties contemplate that profits, as such, should be divided, giving to the persons entitled to receive their proportion of such profits the right to call the remaining persons to account; giving each (one to the other) the right to enforce the agreement as a copartner, so that the profits, as a whole, vest in the adventurers, to be divided among them in the proportions agreed to — then, as to third parties, the copartnership is formed.” And we held that under the agreement each party to it was liable for the materials furnished which were necessary for the successful prosecution of the adventure ; and the rule there formulated applies to the agree-' merit under which the defendants acted in this case. The decision in that case was not influenced by the fact that the plaintiff had or had not knowledge of the copartnership agreement, but upon the liability imposed by law upon each party to that agreement because of the fact that they were .to share in the profits of the joint adventure and that each party to the agreement was entitled to a share of those profits as profits.
In this case, however, there is no agreement as between the parties by which these defendants were not to be liable to third parties for materials furnished to the joint adventure. It is true that a notice was given to the plaintiffs that these defendants were not so liable, but under the agreement as construed by us in Johnson v. Alexander (supra) all the parties were liable. We there held that under the contract the parties were liable irrespective of notice. The clause in the contract by which if appears that “ the *603party of tire first part not to be liable for any expense or cost for erecting or renting said stands, or for any deficiency, if the sum received for the renting or privilege connected therewith be not sufficient to pay for the same,” does not in terras refer to liability to third parties, but to the liability of the parties to the agreement as between themselves. The contract provided that the party of the second part was to furnish all materials and labor for the erection of the said stands and to build the same, also to provide and obtain all necessary'guards, watchmen, ushers, policemen, etc., that may be required for • the proper protection and renting of the stands, “ the party of the first part not to be liable for any expense or cost for erecting or renting said stands, or for any deficiency, if the sum received for the renting or privilege connected therewith be not sufficient to pay for the same.,” This agreement, it seems to me, is one between the parties to the contract as to their liability to each other, and not as to the liability of either of the partners to third parties. As was said by Chief Justice Huger in Hackett v. Stanley (115 N. Y. 629), “ but we think that the division of profits must still be considered the most important element in all contracts by -which the true relation of parties to a business is to be determined. We think this rule is founded in strict justice and sound policy. There can be no injustice in imposing upon those who contract to receive the fruits of an adventure, a liability for credits contracted in its aid, and which are essential to its successful conduct and prosecution. This liability does not, and ought not to, depend upon the intention of the parties in making their contract to shield themselves from liability; but upon the ground that it is against public policy to permit persons to prosecute an enterprise which, however successful it may for a time appear to be,' is sure in the end to result in advantage to its secret promoters alone, and the ruin and disaster of its creditors and others, connected with it.” And in discussing this rule'we said, in Johnson v. Alexander (supra): “ But where the parties contemplate that profits, as such, should be divided, giving to the persons entitled to receive their proportion of such profits the right to call the remaining persons to account; giving each (one to the other) the right to enforce the agreement as a copartner, so that the profits, as a whole, vest in the adventurers, to be divided among them in the proportions agreed to — then, as to third *604parties, the copartnership is formed ; ” and in speaking of the contract in that case, which, as stated by Mr. Justice Rumsby, is substantially like the one in question, we said : “ It is not, necessary for us to determine whether or not that would be true as between the parties to the agreement. We are dealing now with the liability of these joint adventurers to third parties who furnished the labor and material necessary for the ¡adventure. As to such third parties it was entirely immaterial what agreement the parties, as between themselves, had made. It is quite clear that under the agreement Chatterton was not to furnish this erected stand as his contribution to the partnership. He was to build and erect the stand, and, as between the parties, was to assume the obligation of procuring the lumber and labor to erect it, hut he was not to contribute the stand as his share to the joint adventure, because it was to.be paid for out of the proceeds of the joint adventure ; and while, under the agreement, he might have been responsible to the other parties to it for a failure to procure such material and labor, his act in procuring them as to third parties was 'the act of all the associates, and they were liable for the obligations incurred by him.” The construction that w.e gave to this contract, in Johnson v. Alexander, was not based upon either notice, or absence of notice, of the terms of the agreement to the plaintiff, hut upon the obligation assumed by'thei parties to it to third parties.
For these reasons I think the judgment should be reversed.
Judgment affirmed, with costs.