pay debts and liabilities of said firm out of the avails thereof, and he has collected large sums, the amount of which the plaintiff does not know and cannot ascertain; that said business so carried on and managed, and its good will, have increased in value, and the net profits of the same have been large, although their amount is unknown to plaintiff, and cannot be ascertained; that the plaintiff has requested, of said defendant a statement and account of said copartnership transactions, which defendant has refused to give, and that no final settlement of the accounts of said partnership has ever been made, and that upon a final accounting a balance will be found to be due from the defendant to the plaintiff. It is then alleged that the plaintiff has no adequate remedy at law, and asks for an accounting and the usual relief.

The answer admits the partnership, but asserts that at the time of the death of Greenslete the debts exceeded the assets of the firm; admits that the defendant has continued the business and that no final account has been made, but alleges that the plaintiff has received statements and full information of the condition of the assets, accounts, etc., of such copartnership as far as it has been possible to ascertain or know the same. The answer then sets up some alleged failures on the part of Greenslete to fulfill all the terms of the partnership agreement, and then "for another further and separate answer and defense to the complaint herein alleges that he as the sole surviving partner of the said William H. Greenslete, deceased, has, as he is informed and believes true, the sole right and power to wind up the affairs of said partnership business and convert the remaining assets thereof into money, collect the outstanding accounts, and pay the debts owing, and thereafter make distribution of any remaining proceeds, if such there be, to the plaintiff, who is the wife and legal representative of her intestate, and this defendant; that he has since the death of the plaintiff's intestate proceeded with reasonable diligence so to do, but has been unable to accomplish it, in that he has been unable to collect all of the outstanding claims and book accounts, and also convert all of the merchandise assets into money and pay debts owing by such copartnership; that some of said debts are still owing, and he believes can and will be within a reasonable time collected, and that the merchandise assets will also within a reasonable time be sold at a reasonable price and converted into money without sacrifice, which will doubtless result in case he is forced to sell the same at public auction," etc.

Upon the trial of the action the defendant appears to have taken the position that it appeared from a certain inventory of March 5, 1917, about four months after the death of Greenslete, that the firm was insolvent, and that the defendant thereupon took over the business and conducted it in his own name, mingling new goods with those then in stock for the purpose of closing out the goods without sacrifice. In other words, the position of the defendant is that, the inventory having disclosed that the firm was insolvent, he was at liberty to terminate the relationship of a surviving partner, and to purchase goods in his own name, and to sell them in connection with the old

(182 N.Y.S.)

stock, and thus to close up the business. This is likewise the attitude upon this appeal; the learned referee having given judgment in favor of the plaintiff.

This position is wholly untenable. The defendant, upon the death of his copartner, became the legal owner of the partnership assets, charged with the duty of closing up the affairs of the concern and paying over to the estate of the deceased partner a just portion of the excess, if any, remaining after the partnership obligations were discharged. In other words, a copartnership imposes upon each partner the duties and obligations of a fiduciary as between themselves while living, and upon the death of either of them the survivor continues to occupy that fiduciary relationship to the estate of the deceased partner; he is bound to exercise the utmost good faith, and cannot deal with the assets for his own benefit.

"It is a well-settled and salutary rule," say the court in Dutton v. Willner, 52 N. Y. 312, 318, "that 'a person who undertakes to act for another in any matter shall not, in the same matter, act for himself.' It is only by a rigid adherence to this simple rule that all temptation can be removed from one acting in a fiduciary capacity to abuse his trust, or seek his own advantage in the position which it affords him. One consequence of a violation of the rule is that the agent must, at the option of his principal, account to him for any profit he may have made by the transaction. It matters not how fair the conduct of the agent may have been in the particular case, nor that the principal would have been no better off if the agent had strictly executed his power, nor that the principal was not in fact injured by the intervention of the agent for his own benefit. If the agent deals with the subject-matter of his agency, or, by departing from the instructions of his principal, obtains a better result than could have been obtained by following them, the principal can claim the advantage thus obtained, even though the agent may have contributed his own funds or responsibility in producing the result. The rule which places it beyond the power of the agent to profit by such transactions is founded upon considerations of policy, and is intended, not merely to afford a remedy for discovered frauds, but to reach those which may be concealed, and also to prevent them, by removing from agents and trustees all inducement to attempt dealing for their own benefit in matters which they have undertaken for others, or to which their agency or trust relates [citing authorities]. All profits and every advantage, beyond lawful compensation made by an agent in the business, or by dealing or speculating with the effects of his principal, though in violation of his duty of agent, and though the loss, if one had occurred, would have fallen on the agent, are for the benefit of the principal." Ridgely v. Keene, 134 App. Div. 647, 649, 119 N. Y. Supp. 451; Bain v. Brown, 56 N. Y. 285, 288, 289.

"The rule applies where there is a confidential relation between parties, creating or tending to produce a conflict of duty and interest by a trustee or agent, in dealings or transactions relative to the subject-matter of his trust or agency." Lingke v. Wilkinson, 57, N. Y. 445, 450, 451; Taylor v. Klein, 47 App. Div. 343, 346, affirmed 170 N. Y. 571.

"When agents, and others acting in a fiduciary capacity, understand that these rules will be rigidly enforced, even without proof of actual fraud, the honest will keep clear of all dealings falling within their prohibition, and those dishonestly inclined will conclude that it is useless to exercise their wits in contrivances to evade it." Bain v. Brown, supra.

In the case now before us the defendant, occupying a fiduciary relation, has concededly mingled the assets of the copartnership with goods purchased on his own account and sold from the same store, and within the influence of the firm good will, that prevailed before the

death of the partner. He has made a profit out of the transaction, though his alleged inventory of the 5th of March, 1917, indicated an insolvent concern. He has, by his own admissions, failed to discharge the obligations of a surviving partner, and we see no reason why the law should not take its course as applied by the referee in this case.

The judgment appealed from should be affirmed.

(111 Misc. Rep. 658)

RUBEL BROS., Inc., et al. v. DUMONT COAL & ICE CO., Inc.

(Supreme Court, Special Term, Kings County. May 7, 1920.)

1. Covenants ~69 (1), 70—Do not run with land unless there is privity. Owner's covenant not to use land for a certain purpose does not run with the land and bind a subsequent purchaser, unless privity of estate exists between such purchaser and covenantee; and such privity can exist only in case the agreement is and can be regarded as an instrument of conveyance or grant of an easement.

2. Easements 3 (1)—Are covenants running with land.

The grant of an easement is in nature and substance a covenant running with the land.

3. Easements 12 (2)-Use of word "grant" not essential.

The use of the word "grant" is not essential to creation of an easement. 4. Covenants 60-Easements 12 (1)-Contract essentially personal does not create an easement or covenant running with land, although it so provides.

That which is essentially a personal contract cannot be made into either an easement or a covenant running with the land, by a stipulation between the parties to the contract that it shall be an easement or covenant running with the land.

5. Easements 1-Must be necessary or useful to enjoyment of dominant tenement.

Easement rights are not such rights as would be of merely personal benefit to one who happens to be owner of the dominant tenement, but must be necessary or useful to the enjoyment of dominant tenement itself, whoever may be the owner of it.

6. Covenants 70—Restrictive covenants as to use of residence property are easements.

Restrictive covenants against the use of property for business purposes, when made for the benefit of residential property, have the essential quality of easements. in that they are for the benefit of the dominant tenement. 7. Easements 61 (3)—Against use for business not enforced in equity when not beneficial.

Enforcement of restrictions or easements against the use of land for business in a court of equity is dependent on the continuance of conditions which make its observance beneficial to the dominant tenement. 8. Covenants 69 (3)-Easements

13-Restrictive covenant not to use

land for certain business held a personal agreement.

Coal and ice company's agreement with adjoining owner, which had made contract to sell its land to other persons contemplating entering the coal and ice business, whereby adjoining owner agreed that land would not be used for such business, and that such agreement should constitute a covenant running with the land, held a personal contract to prevent competition, and not an easement or covenant running with the land.

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

9. Covenants

(182 N.Y.S.)

84-May be enforced against alienee aside from existence of

an easement. Equity will sometimes impose the burden of a covenant relating to land on the alienee of such lands, on principles altogether aside from the existence of an easement, or the capacity of a covenant to adhere to the title, when equities arising from the facts and circumstances of the particular case warrant the court in so doing.

10. Covenants 53-Easements 2-Cannot be created unless recognized by law.

Owner cannot create new kinds of easements, or covenants running with the land, which are not authorized or recognized by law.

11. Injunction 58-Restrictive covenants not enforced by equity, if contrary to public policy or interest.

Though equity is not controlled entirely by the strict rules of law relating to easements and covenants running with the land, and will depart therefrom if the equities of a particular case require it, it will never interfere by way of injunction or in any manner to enforce restrictive covenants, when convinced that they could receive no support or countenance at law, because contrary to its policy and in conflict with public interest. 12. Injunction 62 (1)-Covenants as to use of land not to be enforced, where contrary to public policy.

Covenant forbidding the use of land for certain business, made for benefit of adjoining owner engaged in such business, will not be enforced by injunction, since to so do would be to give adjoining owners a monopoly. 13. Injunction 24-Not to be granted, where contrary to public interest. Injunctive relief may be refused, where the granting of it would be detrimental to public interest and welfare.

Action by Rubel Bros., Incorporated, and another, against the Dumont Coal & Ice Company, Incorporated. Judgment of dismissal. See, also, 110 Misc. Rep. 32, 180 N. Y. Supp. 662.

S. A. Telsey, of Brooklyn, for plaintiffs.

Joseph H. Kutner and Alfred G. Reeves, both of New York City, for defendant.

SCUDDER, J. This action is brought to enjoin defendant the Dumont Coal & Ice Company, Incorporated, from carrying on a coal and ice business on a piece of land owned by it. The action is based upon an agreement entered into on September 16, 1916, between a prior owner of defendant's land, the Empire City Lumber Company, and the respective owners of two adjacent parcels of land, namely, the plaintiff Albert H. Ackerman, and the Rockview Coal & Ice Company, the predecessor in title of the land owned by the plaintiffs, Rubel Bros., Incorporated.

The recital of this agreement contained a description of each of the parcels of land of the parties to it, and a statement to the effect that it was the desire of the parties to restrict the use of the land of the Empire City Lumber Company against the use of said land for the conduct of any business for the vending of coal and ice, for the benefit, respectively, of the lands of the two other parties to the agreement, and that the lands of each of said parties should become dominant tenements, and the land of the Empire City Lumber Company should become the servient tenement. The consideration re

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

182 NEW YORK SUPPLEMENT

(Sup. Ct.

cited was $1 and other good and valuable consideration. By this agreement the Empire City Lumber Company, for itself, its successors, and assigns, covenanted in substance and effect that there should not be maintained upon its land any track, switch, or siding for transporting or conveying of coal or ice, and that no structure would be erected or maintained thereon for the transacting of any coal or ice business, and that neither coal nor ice would be kept or stored upon the land for the purpose of dealing therein, and that no coal or ice business, wholesale or retail, would be conducted on said land, until January 1, 1937. It was further covenanted that the aforesaid covenant should be binding upon the Empire City Lumber Company, its successors and assigns, and inure to the joint benefit of the other parties to the agreement, their successors and assigns, and should be binding upon and run with the land of the Empire City Lumber Company, and should be in each and every respect a covenant running with the land. The agreement was under seal, and was recorded shortly after its execution.

In order to understand the meaning and the purpose of the agreement, and the relation to it of the parties to the action, it is necessary to give an outline of the facts and circumstances which attended its execution and the subsequent events. The properties of the several parties to the agreement were located in a section of the borough of Brooklyn known as East New York. They adjoined the Long Island Railroad, and, by reason of the fact that they could be connected with the railroad by sidings, all of them were peculiarly available for conducting upon them of a coal and ice business.

The Rockview Coal & Ice Company, one of the parties to the agreement, was owned and controlled by two brothers, Samuel and Isidore Rubel. They, in the name of the corporation, conducted on its premises a large retail coal business. Although the plaintiff Ackerman was a party to the agreement, he seems to have acted at the instigation or in aid of Rubel Bros. During the pendency of the present action, he conveyed his premises to the plaintiff Rubel Bros., Incorporated, and he is no longer party in interest. It would therefore seem unnecessary to consider its connection with the transaction. The Empire City Lumber Company, the covenantor in the agreement, conducted a lumber business on its premises, and was not engaged in the coal and ice business. At the time of entering into the agreement, it was in an insolvent condition, and had a $10,000 mortgage on its property. It seems that prior to the securing of this restrictive agreement by the Rubel Bros. from the Empire City Lumber Company, some 30 small coal dealers or peddlers, who were customers of Rubel Bros. and had become dissatisfied, associated themselves together for the purpose of organizing a company of their own from which to purchase coal. They obtained a contract for the purchase of the property of the Empire City Lumber Company, with the object of using it as the place of business of the proposed company, and thereafter incorporated a company under the name of the Municipal Coal Company, and assigned the contract to it. Shortly prior to the time set for the closing of this contract of sale, on the day before or the same day,