Zabriskie v. Coates

Hatch, J.:

The plaintiff brings this action to recover for work, labor and material, claimed to have been furnished by him under a contract with the defendants as copartners, for the erection of a clubhouse upon the property of the defendants, and also to recover upon certain assigned claims for work, labor and services, performed upon the same property by the assignors. The referee held that the defendants were not, at the time of the rendition of the work and the furnishing of the materials, either by the plaintiff or the other persons, copartners, and consequently that no liability existed against them as such on account of any claim held by the plaintiff, and upon this finding he dismissed the plaintiff’s complaint, with costs. The undisputed proof in this case, furnished by the defendants themselves, clearly established the existence of such relations as charge them with liability as partners, if the facts upon which the plaintiffs claim and that .of his assignors is based have sufficient proof to establish the performance of the work and labor and the furnishing of the materials, as claimed by him. It appears from the testimony of both defendants, who are brothers, that they had inherited some property from their father, and also from a cousin ; ■that the defendant Arthur R. Coates was the trustee of the latter ■estate, with authority to hold and disburse the funds thereof; that • :at the time of the making of the contract with the plaintiff, Arthur R. Coates held in his own name two certain tracts of land in which .his brother had an interest, and for the purchase and improvement ■of which the funds of both have been jointly used. While the ■property was so held in the name of Arthur, he caused to be constructed upon the same certain fences, buildings and a race track, it being the evident contemplation of the defendants at that time to construct a fair ground, with a race track and suitable structures thereon for the purpose of making use of the same as a place for Folding agricultural fairs and horse races. This scheme was carried -out by the organization of a corporation known as the Northern New Jersey Fair Association of Paterson, New Jersey, the incorporators being the two defendants and one Thomas S. Hoxey. The •certificate organizing this corporation and the amendment thereof were duly filed in the proper office on the 12th day of August, 1889, and the articles provided that it commence business on the 10th •day of September of that year. Subsequently, upon the election of •officers, Arthur R. Coates was elected president and treasurer, and ■ Joseph S. Coates, secretary ; and both of them, with T. S. Hoxey, were elected directors. Four thousand nine hundred and eighty ■shares of the stock of the corporation wrere issued to Joseph S. ■ Coates, five thousand shares to Arthur R. Coates, and twenty shares to T. S. Hoxey; and between August 9 and October 20,1890, shares of stock were issued to various other persons in amounts varying from two to fifty shares each. Prior to the issuing of the stock ■to the defendants, they figured up approximately how much cash • each had put into the venture, and the stock was issued to them respectively according to the amount of money each had paid in and the indebtedness which had been contracted for improving the property prior to the formation of the corporation and the division of the stock was upon such basis. While the corporation was formed and entered upon its business career on the 10th day of September, 1889, yet it did not at that time have title to any of the property which was owned by the defendants, nor did it obtain such title until the making and execution of a deed by Arthur R. Coates on "the 4th day of August, 1890, when for the first time it became possessed of the legal title to the property upon which it carried on the business for which it was created.

It is clearly evident that the defendants were jointly interested in the property held in the name of Arthur, and subsequently conveyed by him to the corporation, and that the improvements which were made thereon were understood by each to be for the purpose of creating a suitable place for the holding of agricultural fairs and horse races thereon. The whole venture, if profitable, was to inure to the benefit of both, and if unprofitable, each was to suffer a loss in proportion to his interest. The division of the stock of the corporation was based upon the interest which each held in the property which was subsequently conveyed to it, and it is, therefore, clearly beyond dispute that this was a joint enterprise, in which each was to share the profits and losses. Under such circumstances, as to third parties who should contract with them in respect thereto, they became liable as partners; and this whether there was any agreement of partnership or not (Magovern v. Robertson, 116 N. Y. 61); and each in the enterprise became the agent of the other, and liability attached equally. (Stroher v. Elting, 97 N. Y. 102; Meehan v. Valentine, 145 U. S. 611, 623.) While it is true that mere community of interest would not suffice to constitute a partnership (First National Bank v. Gallaudet, 122 N. Y. 655), yet it is equally true that where the enterprise is joint and for the mutual benefit of both, and each is to share in the profits and losses, they become liable as partners, and their rights and liabilities are to be determined upon the same principles as would apply to a partnership. (Wilcox v. Pratt, 125 N. Y. 688 ; Central City Savings Bank v. Walker, 66 id. 424; Sage v. Sherman, 2 id. 417, 427.)

This being the status of these defendants, we are to see what their relations with the plaintiff were, and when such relations were established. The contract for the erection of the clubhouse, and probably the work which was performed upon the property by the assignors of the plaintiff, were prior to the transfer of the property to the corporation, the contract having been made in March, 1890, while the transfer was not until August of that year. Consequently when the contract was made with the plaintiff to erect a clubhouse, the only parties then holding legal title in the property were the defendants, and it is quite doubtful if any legal liability at that time could have been created against the corporation for improvements upon this property. Certainly there is no proof in this ease which is legally sufficient for such purpose. In the deed which was made by Arthur R. Coates to the corporation, it was recited that the corporation was to receive the property subject only to the mortgages thereon, and was not to be charged with any other liability on account thereof. So that, taking the undisputed proof in the case, it clearly appears that when this contract was made with the plaintiff, it was the contract of the defendants; and they being jointly .interested in the scheme to improve the property and transfer it to the ■corporation, liability attached to them for the value of the work and materials which were furnished by the plaintiff and by his assignors prior to the transfer. This conclusion must result in the reversal of the judgment.

In addition thereto, we think error was committed in the reception of testimony, to which, as it may become important upon another trial, we conclude to call attention. For the purpose of ■showing that the defendants were acting as officers of the corporation and not as individuals, witnesses.were called who testified to .their acts and declarations in connection with their duties, and acts performed by them at the time when an agricultural fair was being held, and upon other occasions. It was not shown that the plaintiff was present at such times, or heard the declarations of the defendants or had any knowledge thereof; consequently the testimony'was inadmissible to bind him, and could not. be made the basis of a legal conclusion that his contract was with the defendants as officers of the corporation instead of as individuals. The testimony for the most part was declarations of the defendants, either of words or . acts, which it is clear could not be binding upon the plaintiff.

For these reasons we think the judgment should be reversed and a new trial granted.

All concurred, except Woodward, J., absent.

Judgment reversed and new trial granted before a new referee • to be appointed at Special Term, costs to abide the event.