There was a former appeal in this case from an interlocutory judgment entered therein in favor of the plaintiff and against the defendants, and lipón such appeal the judgment was reversed (78 App. Div. 151). In the "opinion there written the substance of the pleadings forming the issue between the parties was stated, and also the principal contracts relied upon by the parties were set out in full in their pleadings, and considered by the court in making disposition of the appeal. It is not necessary, therefore, that the issues be stated herein in detail, or that the contracts be again set out in full. The issues upon the trial, save in one respect Avhicli is not controlling in the disposition of this appeal, are the same as they were before. The contracts relied upon which determine the ■rights of the parties are the same, and Ave have noAV to consider whether the construction placed upon the principal contract by the learned court below is correct, and whether the effect given to the •¡testimony nan be sustained. In this view, it becomes necessary to call attention to the exact relations which existed between the plaintiff and the defendants at the time of the inception of the enterprise, resulting in the claims that are made in this action.
At the instance and request of the defendants, the plaintiff procured options on 10,100 shares of stock, being a controlling interest in the G-oodson Type Casting and Setting" Machine (Company, a corporation organized under the laws of the State of Minnesota. When the plaintiff entered upon the business of procuring options upon this stock, it was Avitli the understanding between himself and the defendants that he was to give his services in connection therewith free of charge, and the defendants were to furnish the money to pay for the stock 'when the options should be" obtained. This agreement was oral, Avas carried out, the plaintiff obtained the options, and the defendants paid therefor at the rate of ten and eleven dollars a share for the stock so obtained. In February, 1899, *471after the options were secured, plaintiff and the defendant Hyde had a conversation relating to the interest as compensation whic'h ' the plaintiff should receive in connection with the venture. After the matter had been discussed, the defendant Hyde wrote out the following memorandum, which was O. K.’d by Hyde and the plaintiff at the time:
“ 10,100 shares in the pool. 5,100 H. & G-. 5,000 250 Chas. L. Spier. 4,750 at 22 1/2—about $106,875. O'; K. H. O. K. S.
“ H. & G, receive $106,000.
“ Spier receives 250 shares of stock in the pool.
“How, if we sell the stock above 22 L/2, Hr. Spier will be entitled to receive the difference between 22 1/2 and 27, to be taken in stock at 22 1/2 per share. If we sell at over 27, then profits to be equally divided between Garrison, Spier & Hyde.”
This conversation and the preparation of this writing by the defendant Hyde are undisputed. It is to be observed that by the provisions of this writing the 10,100 shares of stock were to be pooled, and of these shares in the pool the plaintiff’s interest was 250 shares. The unit of value for this stock was fixed at twenty-two dollars and fifty cents per share, which sum was first to be accounted for to the pool. If the pool stock upon a sale sold for twenty-seven dollars, then the plaintiff was entitled to receive the difference between such sums upon his shares'. If the stock sold above twenty-seven dollars, then the .profits upon the whole were to be equally divided between the plaintiff and the defendants. It is evident from this arrangement that Spier’s direct interest in the pool at that time was in the 250 shares of stock, coupled with a contingent interest in the whole; the defendants’ interest was in the remainder, subject to plaintiff’s contingent interest. Under this arrangement, therefore, the plaintiff’s interest was in a specified number of shares of stock. He owned those shares for the services which he rendered, and the defendants owned the remaining shares of the pool stock for the money which they advanced or which was *472tobe advanced. The stock at this time had not.come into the possession of any of the parties in interest. It was represented by the options which the plaintiff had obtained. Subsequently, the 10,100 shares of stock were taken in the name of the plaintiff. He, however, never had actual possession of these shares, as physically they came to the hands of .the defendant Hyde. .The plaintiff executed an assignment of the shares of stock either to Hyde or the defendants, and Hyde retained possession of them. The intention of the parties at this time, so far as it was expressed in this memorandum^ was to sell these shares of . stock at an advance, reap the profits on the terms prescribed and make the división based upon the prices obtained. If the transaction had stopped here, it is quite evident that the plaintiff would be regarded as the' owner of the .250 shares of stock, as that was the apportionment under the . arrangement. He had the same title to his 250 shares that the defendants had to the remainder, and upon a sale of the same, or Other disposition being made, he could enforce his right to the 250 shares, and to whatever profit was made in the whole number of shares above twenty-seven dollars per share. In the disposition, however, which was made of this stock, the' defendants -were to have a controlling voice based upon the fact that they furnished the money with which to make the purchase. The relation, however^ which was thus .created between the plaintiff and the defendants was joint in interest.
Whether it became a technical partnership as a matter of law, or whether it constituted a mere joint venture is not of consequence. The respective interests were settled. Such interests were placed in a common pool} to be’used and disposed of for the benefit of all, and the legal rules applying to such an agreement are precisely the same as are those which apply to a partnership in technical sense, and rights are to be enforced upon the same principles. (King v. Barnes, 109 N. Y. 267; Marston v. Gould, 69 id. 220.) Such relation is fiduciary in character, and the most scrupulous good faith in dealing is required at the hands of the party who has been invested with the power to deal with the property, and in equity he may be called upon to account for the property so held. He .becomes.a trustee for his associates in interest, is their agent in the transaction and is not only bound to account for the property and *473its proceeds, but the burden is imposed upon him to show that he has discharged his trust witli fidelity. (Marvin v. Brooks, 94 N. Y. 71.) It is of small consequence that the language used in conferring power to deal with respect to the property intrusted to the hands of the trustee is broad to the extent of permitting him to-deal with it as he chooses. It does not discharge him from the obligation of good faith in dealing; nor is he discharged from fairly-accounting for all he received, or from protecting the rights and interests of the associate's whom he represents. Rather is his obligation increased thereby. It confers upon him no arbitrary power to deal with the property without regard to the rights, and interests of his associates, for the relation being fiduciary he is not only under a moral, but also under a strict legal obligation to act in good faith, and to fulfill the trust committed to his care with complete-fidelity.
In process of development it was concluded by the parties that the 10,100 shares of stock could be used to better advantage by the formation of a new corporation, which should enter into a contract with the Minnesota corporation and take over, so far as possible, its stock and holdings. The capital stock of the Minnesota corporation was 20,000 shares. The 10,100 shares, upon which the plaintiff held options, were, therefore, the controlling interest. The defendants, however, after the agreement heretofore mentioned, did not own a controlling interest of such corporation. Plaintiff’s holding was absolutely' essential to the carrying out of the scheme to form a new corporation, which they would be able to control in its creation, and in dealing with the Minnesota corporation, and thereby be enabled to dictate the terms upon which such corporation should be formed, so far as the statute of the State of Hew Jersey permitted. It is, therefore, plain that the plaintiff was an essential factor in the success of such scheme, and the'shares allotted to him were necessary to go into the common pool in order to make it a success. The defendants recognized this condition, and, therefore, made the proposition to the plaintiff, contained in the letter,, called the contract of March 27,1899. This contract superseded the prior arrangement in February, and, undoubtedly, whatever rights the plaintiff now has, which may be enforced by action, are to be determined by a construction of this contract. The contract itself, how*474ever, did not disturb the relations which existed between the plaintiff and the defendants. The' defendant Hyde was the active manager and manipulator. He was, in legal effect, the agent and trustee for his associates, and so remained under this contract, and continued so to remain during the whole course of the dealings in thé execution of the proposed plan. Whatever views Mr. Hyde may have held with respect to the duties and obligations which he owed to the plaintiff, and whatever the powers of which he conceived himself to be possessed by virtue of the contract, he recognized the fact that Garrison and Spier were his associates after the contract was executed, and so testified. This relation, however, is not of special significance in construction of the contract of March twenty-seventh.' As. to that contract the plaintiff was informed concerning it, accepted its terms, and no claim is made that he. was misled as to its conditions, or that he was not at that time fully informed concerning his rights.
It must be borne in mind, in considering the contract, that plaintiff was the owner of 250 shares of stock, and that he had. a contingent interest in the remainder of the shares owned by the defendants. This interest made him a necessary party to the reorganization, and it was so recognized by the defendant Hyde, for ■ after reciting an intention, if the patents proved satisfactory, to form a corporation, he states: “We should like to have your assistance.” And again: “ If you join us ” a provision would be made \for profits. It cannot be questioned but that this contract provides for the placing of the 10,100 shares of stock then owned by the pool. The agreement so recites, and that such stock was to be charged for at the rate of twenty-two dollars and seventy-five cents per share, which was an advance of twenty-five cents a share over the agreement made in February. It then expressed the hope to have the stock underwritten or sold, and, if such expectation were realized,1 to reserve a part of the money from such source as working capital and to defray expenses. If the plaintiff joined in this proposal the contract provided that the profits upon the 10,100 shares, if pooled, would be estimated as the net sum realized upon the sale of the stock, after deducting the twenty-two dollars and seventy-five cents per share and expenses, and “ after deducting further whatever sum of money those depositing stock in the pool may desire to reserve,” *475for the use of the company as working capital. The contract then provides that all questions relating to modifications or change were to be determined by the defendants. And as consideration for the plaintiff’s services in the matter, and in consideration of his subsequent devotion of his entire time for the promotion of the new company, there woúld be set apart for him, as full compensation, viz., his stock and his services, fifteen per cent upon whatever net profits may be found to have been realized by a sale of the pooled stock, “ after the entire 10,100 shares have been pooled and sold.” Down to this point in the contract it is plain and unambiguous, and it gave to the plaintiff in terms fifteen per cent of the whole of the net profits of the Venture, after deducting the price of the stock at twenty-two dollars and seventy-five .cents per share, the expense of promotion and the setting aside of a working capital. There is not a syllable in this contract which refers to any stock to be issued by the new company except as there is the expression of intention hereafter noticed. The whole subje'ct-matter of the arrangement related exclusively to the 10,100 shares of the Minnesota corporation, which had theretofore been pooled, and it was of profits in relation to that 10,100 shares of stock which should be made that the plaintiff was to receive fifteen per cent in consideration of the transfer of his stock and the rendition of his services. " Then follows the clause : “ It is understood, however, that this 15$ interest 3-elates only and applies solely to the 10,100 shares of stock of the new company and to the net profits, if any, to be derived from the sale thereof on the basis as above' stated.” At first l-eading this clause appears to be a positive, distinct limitation of the plaintiff’s interest to 10,100 shares of stock of the new company. It is to be observed, however, that such is not its entire language or meaning.Plaintiff’s lights cannot be construed solely from this clause of the contract, for by its terms it refers to the preceding provisions of the contract and makes the profit upon the number of shares of stock to rest upon the basis stated therein; consequently resort must be had to that basis in order to anive'at a correct conclusion. The preceding provisions of the contract are: “The new company may be called' the Goodson Grapliotype Company, and it is our intention to exchange -10,100 shares of its stock for an equal number of shares of the" Goodson Typecasting & Setting Machine Company. *476W e expect to place this 10,100 shares of stock of the Grraphotype Company (i. e., the new company) in portions from time to time in a pool to be charged to the pool at the rate of .$22.75 per share.” It thus appears that the intention thus expressed in the letter, which contained the proposal, and, therefore, the basis for the contract, that the 10,100 shares of the old stock should be exchanged for 10.100 shares of - the stock of the new company on precisely the same basis as to value as the stock of the old company, and it was that stock received in the exchange which was to be pooled at the same rate. It is quite evident that if the stock of the old company was to be used entirely in exchange for an equal numberi of shares of stock of the new company and there were no more shares of stock of the new company issued, then there would be no exchange of value, but simply an exchange of Securities, representing the same value; so that there would be simply the exchange o.f securities of the popí, and the profits were to be based and paid upon what was realized from this stock as pooled. If that scheme were carried out, therefore, whatever profits, either in the form of stock, or cash, or otherwise, which arose by reason of the use of the pooled stock of the old company, it was to have equal representation in all respects in the same number of shares of the'stock of the new, and it was upon this basis that the limitation in the contract was made of the plaintiff’s fifteen per cent. So that in any event, no matter what it was called, or what mutations the 10,100 shares of the stock of the old company underwent, its equivalent in value was to be represented by securities which were taken in exchange, and it was upon that basis that plaintiff’s fifteen per cent of the profits was reserved. Such intention was not carried out. The defendants were not obligated to carry out that particular plan, as the contract contained a provision authorizing modification and change by the defendants, and this related to the terms of. the sale of the pool stock,, and to the reservation of proceeds for expenses, and in modification and changes in plan. Undoubtedly, there was given this right in the broadest terms, but such right could not be exercised in such form and manner as to deprive the plaintiff of his property, or of the interest which he was to receive. There were no 10.100 shares of stock of the new company exchanged for 10,100 shares of stock in the old company, On the contrary, the last-men*477tioned stock was made the basis for the whole issue of stock by the new corporation. It paid expenses, it provided a working capital, it resulted in profits to a very large amount, and the defendants seemed to, have reaped from the transaction what would be to modest men a handsome fortune. Consequently, no construction of this contract ought to be adopted which- deprives this - plaintiff of the benefits which were represented by the property which he owned, the arrangement which he made and the contract which he signed. The defendants could not by change and modification manipulate the 10,100 shares of stock by a different method from that represented in the contract, and then exclude the plaintiff from profits based upon a consideration of an equal number of shares of stock, much lessened in value by reason of the amount of the issue, and say that the separation of an equal number of shares, nominally of the same value, would answer its requirements. In the fulfillment of this contract, the relation which the defendants bore to the plaintiff was fiduciary in character, and they owed him a duty of carrying out the terms of this Contract so as to protect his interest. If they made changes and modifications they could not make them at the expense of the plaintiff without, his consent, given upon a full disclosure of all the facts. While they might make modifications and changes in. broadest form, yet they were required, in making such modifications and changes, to protect the plaintiff’s property interest in the subject-matter, and so that he might realize therefrom the equivalent of what hé would have realized had no change been made. It seems clear, therefore, that the fifteen per cent, which was to represent the plaintiff’s interest under the proposed scheme, was fifteen per cent of the value of the 10,100 shares of the old company and the contemplated exchange of this stock was for stock of the new company, equal in value to the stock of the old, and the defendants could not, by modification and an increase of capital stock, swell the volume to be issued and then determine plaintiff’s rights thereunder, based upon an equivalent number of shares of the new company. We are of opinion, therefore, that the last clause of the contract must be construed in connection with the facts,-as they existed prior to the time when it was made, of the contemplated scheme expressed in its provisions and of the acts of the parties thereunder. Really, the question goes not s.o much to the construction of this contract, *478but rather to the manner and method of its execution. If it had been carried out, as proposed, plaintiff’s fifteen per cent would have been based upon the value of the stock of the old company, whether ' it was represented by it or its equivalent in the new. As executed, the shares of stock of the new company were very much reduced in value. But the stock of the old company was the basis for and represented all of the stock issue of the new. We are, therefore, of opinion that the construption placed upon this contract by the learned court below was correct.
It does not follow from this view, however, that the plaintiff is necessarily entitled to the judgment which has been rendered. It is conceded that on May eighth, after the contract between Talbot J. Taylor & Co.*—who were the underwriters of the issue of stock of the new corporation — had been executed, the parties hereto entered' into another contract, which, in terms, defined the plaintiff’s interest and the amount which he was entitled to receive, arising out of the whole transaction. If that contract were made by the defendants with the plaintiff after full and complete discharge of the duties which they owed to him, and without misrepresentation or fraud upon their part, then there is an end of this lawsuit, and the judgment appealed from cannot be sustained. In considering this branch of the case we must bear clearly in mind the relations which existed between these parties at the time when this contract was signed. That relation upon the part of the defendants still remained fiduciary in character and they were bound at that time to make full and complete disclosure of all of the facts connected with the transaction, and in dealing with the plaintiff they were bound to discharge the obligation of disclosure of existing conditions with scrupulous good faith and integrity. The plaintiff was then in the employ of the defendant Hyde and was in large measure subject to his control and direction. Mr. Hyde evidently believed that such relation upon his part did not require a full disclosure of all of the transactions, but only of such as lie chose to make. Upon this subject the defendant Hyde was asked and answered: “Q. And you were the pool manager and owed him the duty of confidentially telling him everything that took place? A. Ho, I thought I could tell *479him what I chose. It is not my habit of telling my subordinates anything that I do unless I choose to do so. There are certain things that a man has to keep to himself. In this case 1 told Mr. Spier what I thought he ought to know.” Both defendants testified that on the morning of the day-when this contract was executed by the plaintiff that the defendant Hyde upbraided and scolded the plaintiff for dereliction of duty which he was employed-by Hyde to perform, and for which he received a salary of fifty dollars per week. And it was after such upbraiding that he proposed the terms upon which the contract of May eighth was based. It is fairly disclosed by the testimony that the defendant Hyde occupied quite a different attitude to the plaintiff as an associate than to Garrison, liis other associate. Between the two defendants there were evidently terms of equality -in dealing and disclosure. The plaintiff was regarded as a subordinate, as he was in fact in employment and was deemed to be only entitled to such disclosure as the defendant Hyde saw fit to make regarding the transaction. From this relation there is some ground for saying that the parties did not at that time deal upon terms of equality, and this fact is to be taken into consideration in weighing the testimony which has convinced the trial courts that the defendants were guilty of misrepresentation. The plaintiff testified that at the time in question, and prior to the signing of the contract, the defendant Hyde stated to him that the profits of the pool were only about 2,475 shares, and that plaintiff’s percentage of that would be about 361 and a fraction; that he was ignorant upon the subject, and that upon this representation he was induced to make the agreement. The plaintiff denied any knowledge of the contract which, had "then been made with Talbot J. Taylor & Co., and testified that at that time he did not know what were the profits- of the pool, to which he was entitled, and that he accepted the defendant Hyde’s statement as a truthful statement of his entire interest under the contract, and, relying thereon, entered into the contract of May eighth. If this representation was made at that time it constituted an untruthful "statement of plaintiff’s interest as provided for in the contract of March twenty-seventh, for, as we have seen, he was then entitled to fifteen per cent of the profits of the pool stock, and they were largely in excess of the number of shares of stock which the defendant Hyde claimed represented the entire pool interest, the *480subject of division. At this time the defendants knew the condition and knew approximately what profits would result to them if the Taylor contract were carried out. It is also fairly disclosed by the evidence and the actions of the parties that at this time both defendants understood plaintiff’s interest under the contract of March twenty-seventh and in the pool. The purpose of the meeting at this time was to arrange about the interest which plaintiff should ¡receive, based upon the supposition that the Taylor contract would be fulfilled. It was testified by a disinterested witness, Williamson, that Mr. Hyde stated to him about noon of May eighth that by reason of the changed relations in the nature of the deal with Taylor & Co. “ he had been 'obliged to squeeze or reduce the holding or share that Mr. Spier was to have in stock.” Subsequently the witness modified this statement by leaving out Spier’s name, who die would not testify was mentioned by name, but the witness distinctly understood that the squeezing out referred to Spier. The defendant Hyde was interrogated upon this subject and gave this version: “And you stated to Mr. Williamson you had thereupon concluded to squeeze Spier? A. I am not sure that any conversation occurred with Mr. Williamson that day. Mr. Williamson seemed to think that conversation did occur, but I am not clear that it did. I didn’t tell Mr. Williamson ,that I was going to squeeze Spier. Q. Did you say- that you had been 'obliged to squeeze or reduce the holding that Spier was to have in the pool ? A. Mr. Williamson says that; I don’t, I deny that I used those terms. I am not sure I made any such statement on that date. I am not sure I did not. I am quite positive that I did not tell him I was squeezing Mr. Spier.I am not absolutely positive, but I don’t believe I did.” This is far from a denial of Williamson’s testimony, and its strong tendency is to lead the mind to believe that in the relations which existed between the defendants and the plaintiff his rights and interests were not cared for with that degree of fidelity which the relation and the law required. The conduct of the parties in respect to the transaction itself is open to suspicion. The defendant Garrison was notified by Mr. Hyde that he was going to have an important conversation with Mr. Spier, and he desired him to be within hearing distance, so that he might listen to what -took place, and a stenographer in the office was directed to occupy a convenient place where *481he could listen to what occurred, and this taken hr connection with the inequality of relationship between the defendant Hyde and the plaintiff, with the fact, for I think it must be so accepted, that the plaintiff was to be squeezed or his holdings reduced, and were in fact reduced, and that all were directed to listen during the process, leads the mind to the conclusion that the. plaintiff did not have that fair measure of protection which the law casts about him in his dealing with the defendants. And taking all these facts into consideration and the further fact that the plaintiff’s profits under the agreement were reduced to the least possible amount, and that the defendants reaped from the same transaction a large and bountiful harvest, quite prepared the mind of the court for accepting the version of the transaction as given by the plaintiff, and in reaching the conclusion therefrom that the fact was that all the matters were not fully and fairly disclosed by the defendant Hyde at the time of this transaction, and thereby find that by failure of disclosure and by fraudulent representations that the contract of May eighth did not become a legal, binding contract upon the plaintiff, and that he is entitled to enforce his rights in this action.
It is said, however, that the representations, even if made by the defendant Hyde, were of future expectations and not of present facts, and that in any event the representations as to the value of the pooled interests were mere matter of opinion and could not by any possibility have been ascertained. The Taylor contract was a fact presently existing. The terms and provisions of that contract were the basis in respect of which the defendants were dealing. Each of them knew that if this contract was fulfilled approximately what they would obtain. It provided in express terms for the capital stock of the corporation, its issuance to the defendant Hyde what should be set apart for working capital and how it should be provided. The number of shares of stock was known, and the parties were adjusting their relation and rights in respect of its existence. It was quite true that the corporation had not been formed, and also true that the contract with Taylor & Co. was conditional, but the contract with the plaintiff was based upon the conditions which appeared in the Taylor contract, and those conditions were known and their future fulfillment was not a matter to which the representations related. For if the existing contract was not *482carried out and fulfilled, then the contract which was- made with the plaintiff on May eighth failed. It was made to depend thereon. So the representations with respect to-which the parties were-dealing were of present existing facts, although their binding obligation depended upon future-events. The opinion expressed, if it could so be called, as. to the number of shares which would be in the pool was based upon the facts as they then appeared, and the opinion was based upon a certainty, if only the contract should be carried out. The representation, opinion or statement which was made by the defendant Hyde was of a material fact then existing and established by the contract, and not a- rniere- matter of opinion or the expression of an expectancy of what might occur. We reach the conclusion, therefore, that. the. fiduciary relation between these parties existed at the time of the contract of May eighth; that the representations then made, by the-, defendant Hyde were not of expected; events-, but of existing facts,-, that the court was justified in finding that the defendants- were guilty of a, breach of their fiduciary relation, and that, the representations, claimed by the plaintiff to have- been- made were made and that they were sufficient in- avoidance-of the contract. These views find support in Cowee v. Cornell (75 N. Y. 91); Butler v. Prentiss (158 id. 49); Kountze v. Kennedy (147 id. 124); Hickey v. Morrell (102 id. 454); Gray v. Richmond Bicycle Co. (167 id. 348); Brooks v. Martin (2 Wall. 70); Smith v. Land & House Property Corporation (28 Ch. Div. 15). The finding of the court, answers all of the requirements of a-, finding- which established a. fraud. Although we. reach the conclusion that a recovery in this case should he sustained, yet we also conclude that the- judgment which has- been entered herein is much broader than that to- which the plaintiff is entitled. His. interest is fifteen j>er cent of all profits derived from- the 10^.100- shares- of the stock of the old company, no matter- what, form: su'ch shares, of stock assumed or how the- profits were derived from its use. By the judgment which has been entered the; defendants are required to account for other shares of stock in which, the plaintiff, has no- interest. If the defendant purchased other shares of' stock of the old company which were still outstanding, the plaintiff would have no interest, therein, nor would plaintiff have, any interest in profits- made therefrom. . The accounting should, therefore, be limited to the 10,100 shares, of the stock, o-f the *483old company and' the. profits; derived5 therefrom, whioh is the measure of the plaintiff’s right;of recovery». Hor do we think that a receivership is necessary at this time to protect plaintiff’s rights. The interlocutory judgment provides-for an accounting, and when that is taken and the- amount is determined, to which the plaintiff is entitled, the court can in the final judgment make such provision as is deemed necessary for the full protection of'the plaintiff’s interest.
The-judgment should, therefore, be modified asr expressed in this opinion, and as modified affirmed; no costs of this.appeal allowed to either party.
O’Beien and McLaughlin, JJ., concurred;. Yan Beunt, P. J\, concurred in result; Ingeaham, J., dissented.
The substance of this contract is set out in the dissenting opinion of Ingraham, J., post, page 483.— [Rep.