Court Opinion

ID: 5250013
Source: CourtListenerOpinion
Date Created: 2022-01-06 18:10:33.917046+00
Date Added: 2024-06-11T08:27:55.816436
License: Public Domain

Page, J.:
I cannot find in the facts of this case a cause of action for money "damages. Dalury and Rezinas were copartners conducting a hotel and café at Coney Island. Before the formation of the partnership Rezinas had conducted the business, having a ground lease for a term of fifteen years. Upon this land he had erected the hotel and other buildings. The latter he rented to tenants for more than sufficient to pay the ground rent. Rezinas was indebted to Dalury and other persons, and the copartnership was formed, Dalury releasing Rezinas from obligations to himself, assuming certain other obligations, and contributing cash to the amount of $4,000 or thereabouts, Rezinas contributing the hotel business *458and the lease of the premises. In a short time dissensions arose and Dalury physically withdrew from the business, being induced thereto by fear of violence from Rezinas. Negotiations for a settlement were pending from December to March, when Dalury commenced an action for a dissolution of the copartnership and an accounting. A receiver was appointed by stipulation of the attorneys naming a person to be appointed. There was an arrears of rent due and the landlord instituted proceedings to dispossess Rezinas and his subtenants. To this proceeding Dalury was made a party. On the return of the precept an attorney appeared for Dalury and offered to file an answer, whereupon the proceeding was discontinued as to him, and final order in favor of the landlord entered and a warrant duly issued and executed. The landlord thereafter leased the premises to the defendants Crickellas and Booras, dummies for Rezinas. The receiver, pursuant to an order of the. court, sold the furnishings of the hotel at auction, Crickellas and Booras being the purchasers, for the sum of $350. The receiver thereafter accounted and was discharged. Dalury filed objections to the account and withdrew them. It is alleged and was stated by counsel that he would prove that all these proceedings were had as a result of a conspiracy on the part of all these defendants to oust Dalury from the partnership property and deprive him of his investment therein. It is not claimed that the default in rent arose by reason of this conspiracy, but that Rezinas was habitually in default, and that Rezinas had money with which he could have paid the rent. It was not stated that this money was funds of the copartnership. Apparently it is assumed either that the landlord* having allowed Rezinas to be in arrears in the past, he was under some obligation to allow him to continue in arrears without resorting to dispossess proceedings, or that Rezinas was compelled to advance from his own individual funds money to pay rent due from the copartnership. I know of no such obligation resting upon either. The rent was in arrears and the landlord had the right to institute and prosecute proceedings to recover possession of his premises. The legal effect of this proceeding was to terminate the lease and vest the right of possession in' the landlord. He then had the *459legal right to let the premises to whomever he desired. There was, therefore, nothing wrongful or illegal in these acts. Likewise as to the sale of the partnership assets by the receiver. He had been appointed by the court on the consent of both parties in the action for dissolution of the copartnership; he was directed to sell by order of the court and in pursuance of said order sold. His accounts have been approved and he has been discharged. If there was any irregularity in the sale, or if the price realized was grossly inadequate, the court was open to Dalury to make his objections and seek redress. He, however, withdrew his objections. We must now accept the sale as a legal sale, legally made. These proceedings could only be impeached for fraud or irregularity in the conduct of the proceedings, and that in a direct attack and not collaterally. Therefore, both the dispossess proceeding and the sale-were legal remedies legally pursued by those having a legal right thereto. Admitting, as we must, for every fact stated in the complaint and opening of counsel must be assumed to be true, that these acts were done as the result of an agreement among the defendants for the purpose of eliminating the plaintiff from the copartnership and depriving him of his interest in the property, or even that the acts were done maliciously, the plaintiff has no cause of action for damages. It is a well-settled rule of law that no action lies where a person has been damaged by another through the doing of a lawful act or in the enforcement of a legal remedy, no matter if the purpose and intent of the act were malicious. It is the act done that must be considered, and not the intent with which it was done. In fact this principle is so well settled that it has become crystallized into a maxim of the common law, nullus videtur dolo facere qui mo jure utitur. Nor does a lawful act become unlawful because two or more combine to do the act. A conspiracy is an agreement between two or more persons to do an unlawful act. If the act to be done be not unlawful, then the agreement or combination to do it is not a conspiracy, and injury caused thereby is not actionable, except a combination which assumes a public or quasi public aspect. It has long been the settled law in this State that the basis or gist of an action for conspiracy is the damage caused by the wrongful act of one or more persons, *460and that the only materiality of the allegations with respect to the conspiracy or combination with those who are not the direct actors is to connect them with and make them responsible for the acts of others. (Cohen v. Fisher & Co., 135 App. Div. 240; Prospect Park & Coney Island R. R. Co. v. Morey, 155 id. 347, 351; Von Au v. Magenheimer, 126 id. 257, 262; affd., 196 N. Y. 510, and cases cited.) Mr. Justice Shearn recognizes this rule, but assumes to find in the breach of Rezinas’ fiduciary obligation to his copartner an actionable wrong, which would sustain a recovery for damages at law against all who, in agreement and combination with Rezinas, ousted plaintiff from the business and enabled Rezinas to misappropriate to his own use plaintiff’s investment.
The basis for this claim must of necessity be that the acts of Rezinas gave rise to a cause of action at law in the plaintiff against his copartner. But what was the plaintiff’s investment in the copartnership? Certainly it cannot refer to the amount originally contributed. This action is not to recover an amount that the partner has been induced to put into the business in reliance upon fraudulent representation, but is to recover his interest in what remains after the capital has been employed in and subjected to the risks of-the business and at most all he would be entitled to recover is the balance that would be found due upon an accounting in the action for dissolution. It is not alleged that such action had terminated nor that any balance had been struck and any amount found due. The partnership had not terminated and the action would be ex delicto for a conversion of the partnership assets. _ It is well settled that one partner cannot sue the . other at law, as distinguished from an action in equity, with respect to partnership transactions, except after a full accounting, and balance struck, and such an action is on contract and not ex delicto. If one partner betrays his trust, and converts to his own use partnership property, he incurs the usual liability that one partner incurs to another respecting partnership affairs, i. e., to be held liable in an accounting, but he cannot be sued by the other partner for damages in an action for conversion. (Belanger v. Dana, 52 Hun, 39, 42; Hollister v. Simonson, 36 App. Div. 63; 170 N. Y. 357; Covert v. Henneberger, 53 How. Pr. 1; Cary v. *461Williams, 8 N. Y. Super. Ct. 667.) The fact that the partner may have conspired with others with intent to acquire the interest of the copartner, so long as the proceedings were lawful and in the assertion of a legal right, gives no cause of action at law. (Contrast opinion in Weinstein v. Welden, 80 Misc. Rep. 348, with opinion of reversal in 160 App. Div. 554; latter affd., 220 N. Y. 693. See, also, NeudecJcer v. Kohlberg, 81 N. Y. 296, 299.) As the plaintiff could not recover judgment against Rezinas in this action, he has no cause of action herein against any of the defendants.
Mr. Justice Shearn finds some justification for the action on a theory of fraud in the sale by the receiver, being a fraud upon the court, .and that, therefore, the injured party is not required to resort to the accounting of the receiver and have the order opened and set aside but may recover his damage directly in an action. (Citing Verplanck v. Van Buren, 76 N. Y. 247, and Swan v. Saddlemire, 8 Wend. 676.) In both of those cases the judgments were obtained, not by a party pursuing a legal remedy in enforcement of a legal right, but in enforcing a fictitious claim by means of false books of accounts and contracts, which of course was a fraudulent use of legal proceedings to enforce a non-existent right. In the case at bar the sole allegation of fraud in the sale was that the property was struck down to dummies of Rezinas and at an inadequate price, pursuant to a conspiracy. If such a state of facts existed the fraud was not upon the court, nor in the prosecution of the remedy, and could only be relieved against upon the accounting of the receiver or if the party was ignorant of the fact in an action in equity to set aside the sale and for a resale of the property.
If the plaintiff has been injured it is not necessary to reverse the settled law of this State and give him relief in this action. The courts have been open to him and he could have secured his rights by appropriate action on his part. The action for a dissolution of the copartnership brought by him as plaintiff was pending. Rezinas could have been called to account in that action for any breach of duty to his copartner that had deprived him of his interest in the copartnership assets. Next it is claimed that the plaintiff was. made a party to this dispossess proceeding, and when his lawyer appeared *462and proposed to file an answer the proceeding was discontinued as to him. He was not a necessary party. The discontinuance of the action as to him did not deprive him of his right to file an answer (Code Civ. Proc. § 2244), or having notice he could himself have paid the rent, or as he claimed by virtue of an assignment of the lease to ' the copartnership he* could have redeemed the premises within ©ne year. (Code Civ. Proc. § 2256.) Also in the matter of the sale by the referee, if there was anything done in derogation of his rights, he had full opportunity to present his objections to the referee’s accounts and obtain a judicial determination of his rights.
In my opinion the learned trial justice properly dismissed the action and the judgment should be affirmed.
Clarke, P. J., concurred; Shearn, J., dissented.