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and 122 New York State Reporter sation should be in excess of his legal fees, and the amount of whose compensation might depend upon the party in whose fayor he decided the case; as the defendants, having refused to consent to the enlarged compensation, would not pay more than the legal fees, while the plaintiff, having expressed a willingness to consent that the referee should fix his own fees, would not be likely to object to any charge that the referee might make."
The courts of this state have uniformly held that any action of a 1eferee from which an inference can—not "must" or "should”—be drawn which affects his impartiality, is sufficient to justify the court in appointing another referee in his place, or setting aside his report when one has been made (Reynolds v. Moore, supra, and cases there cited); and we think that a request of a referee for additional compensation, refused by one of the parties to the litigation, with the subsequent renewal of the request, brings the case within this rule. Assuming that the referee understood that he was only following a custom in relation to referee's fees in the county of New York, and that he did not think that there was any impropriety in his action, we are satisfied that he placed himself in a position from which the parties refusing to consent to an increased compensation could infer that his rulings would be influenced by their refusal to comply with the referee's request as to his fees, and that, having placed himself in that position, he became disqualified from further acting as referee.
It follows that the order appealed from should be reversed, and the motion granted, without costs, and the case remitted to the Special Term to appoint a new referee. All concur.
(94 App. Div. 326.)
MARCUS v. SEGEAL et al. (Supreme Court, Appellate Division, First Department. May 13, 1904.) 1. PARTNERSHIP-CONTRACT—CONSTRUCTION.
A contract provided that, defendant S. being about to engage in a certain business, it was agreed between him and plaintiff and the other de fendant that they should enter into a copartnership for that purpose, S. being required to invest $5,000 in the business, and the other partners their skill, labor, and services during the existence of the partnership; each of the partners to share equally the profits and losses. The fourth clause of the agreement provided that, so far as the partners other than S. were concerned, the agreement should be considered as a contract of employment by s., with the exception that the parties were entitled to their porportionate profits and their weekly drawings previously fixed. Held, that the fourth clause of the agreement should be construed to relate merely to the management of the affairs of the business for which the capital furnished by S. was contributed, and did not deprive the agree
ment of its effect as creating a partnership. Appeal from Judgment on Report of Referee.
Suit by Benjamin H. Marcus against Benjamin H. Seageal and another. From a judgment on a referee's report in favor of defendants, plaintiff appeals. Reversed.
Argued before VAN BRUNT, P. J., and McLAUGHLIN, PATTERSON, INGRAHAM, and LAUGHLIN, JJ.
Louis J. Jacoves, for appellant.
INGRAHAM, J. The action was brought for an accounting. The complaint alleged that the plaintiff and the defendants were copartners under articles of copartnership, a copy of which was annexed to the complaint. The answers of the defendants consisted of a general denial. The case was tried before a referee, who found that between March 23, 1901, and the month of May, 1901, the plaintiff and defendants were engaged in business in the city of New York under and by virtue of a certain agreement, which is the agreement annexed to the complaint ; that in the month of May, 1901, disagreements and dissensions arose between the plaintiff and the defendant Segeal, and that as a result of such dissensions and disagreements the business relations between the plaintiff and the defendants were severed. The referee also found, as a conclusion of law, that a copartnership was not created between the plaintiff and the defendants by virtue of the above-mentioned agreement, and that the plaintiff could not maintain his action in equity. From the judgment entered upon that report, this appeal is taken.
The sole question to be determined upon this appeal is whether or not a copartnership was constituted as between the parties to it. There is no allegation that there were any debts outstanding, or that a dissolution of the business and an accounting are necessary, except to determine the interest of the partners in the copartnership assets. The agreement was dated March 23, 1901. The defendant Segeal was the party of the first part, the plaintiff the party of the second part, and the defendant Frankel party of the third part. It recited that Segeal was about to establish a business for the purpose of buying, selling, and manufacturing skirts in the city of New York, and was desirous of investing the sum of $5,000 to carry on said business; that the plaintiff was a practical designer and willing to enter into a copartnership upon the conditions specified, and the defendant Frankel was an experienced salesman and desired to enter said copartnership with the plaintiff and Segeal to carry on said business. It then provided that the parties thereto were “to be copartners for a period of one year from date in the manufacturing, buying and selling ‘skirts' and that the firm name of said copartnership shall be 'B. Segeal.'” The defendant Segeal agreed to invest and keep invested in the business the sum of $5,000 during its continuation, and the other parties were to invest their skill, labor, and services during the existence of the copartnership. The profits were to be divided equally between the parties at the rate of one-third each during the continuation of the copartnership, and each of the parties was to draw the sum of $20 per week. There were further provisions as to the duty that each party to the agreement was to perform; and, in addition to the clauses before mentioned, there was added what was called the “fourth clause,” to which attention will be called.
There can be no doubt but that this agreement, leaving out the fourth clause, would constitute a copartnership. It is so expressly provided in the first clause, and every clause of the agreement, with the exception of the fourth, speaks of the business to be conducted as a copartnership, regulates and prescribes the duties of the several copartners, and provides for a division of the profits, as such, among those interested in the business equally, and that the losses should be borne in the same pro
and 122 New York State Reporter portion. The distribution of the profits and the liability for the losses, as between the parties to the agreement, was entirely inconsistent with the idea that either of the parties to the agreement became an employé of either of the other parties. Such an agreement for distribution of profits as such, with a liability for losses in the business, is necessarily a copartnership agreement, and is entirely inconsistent with a contract of employment by which one party becomes the employé of the other.
The fourth clause of this agreement provides :
"Fourth. It being further understood and agreed that in consideration of the amount of money invested by the party of the first part, and no money being invested by the parties of the second part and third part, that this agreement be construed, as far as the parties of the second part and third part are concerned, an agreement of employment by the party of the first part during the period aforementioned, and with the exception that the said parties be entitled to their proportionate profits and their weekly drawings as aforementioned."
Reading this clause in connection with the other provisions of the agreement, it seems to me quite evident that the intention of the parties was to prevent either the plaintiff or the defendant Frankel from making any claim to the capital contributed by Segeal. The clause does not provide that the parties shall not be copartners, or that the other provisions of the agreement in that respect should be modified, but the consideration for the provision is that Segeal had advanced all the capital of the copartnership, and it was understood that in regard to the management of the affairs of the business for which this capital would be liable the parties, as between themselves, agreed that the plaintiff and Frankel were to be considered employés. The question here is whether or not the plaintiff is entitled to an accounting in relation to this business, so that it can be ascertained whether any profits are coming to him or whether there are any losses for which he is responsible. That it was the intention of the parties to the agreement that he should be entitled to a share of the profits and should be liable for a share of the losses is clearly expressed; and this share of the profits was not to be paid to him for his services as a clerk or emplové, but because he was to enter into a copartnership to be formed to conduct this business; and the right to share in the profits as such gives him a right, upon a dissolution or termination of the copartnership, to have his rights settled by an accounting, so that he may secure his share of the profits, if any exist, and his liability for losses ascertained, and the agreement terminated, so that his liability for future obligations might be terminated. There is nothing in this fourth clause that so changes the relation of the parties that the plaintiff should not have the right to such an accounting. I think, therefore, that the construction given to this contract by the referee cannot be sustained.
The respondents make a point that there is no certificate of the referee settiing the case and ordering it on file. It is difficult to understand this point, in view of the certificate, which is signed by the attorneys for both sides, that the case as printed contains all the evidence, as well as the exhibits offered on the trial, with a direction by the referee that the case, with this stipulation a part of it, is settled, and that the printed record be filed with the clerk of this court. But irrespective
of such a certificate, the construction of this contract was a question of law, and did not in any way depend upon the evidence.
It follows that the judgment appealed from must be reversed, and a new trial ordered, with costs to the appellant to abide the event. All concur.
UNITED GOLD & PLATINUM MINES CO. v. SMITH. (Supreme Court, Appellate Division, First Department. May 13, 1904.) 1. CORPORATIONS-STOCK-ISSUANCE-RIGHTS OF HOLDERS-INJUNCTION.
An agreement for the merger of certain mining companies into plaintiff company provided that to defendant, who beld “as trustee” a majority of the stock of a merged company, should be issued “as trustee" a corresponding amount of plaintiff's stock. Thereafter defendant, by virtue of his controlling interest, caused a board of directors of plaintiff, named by him, to be elected, who elected defendant treasurer of plaintiff, whereupon he issued to himself as an individual 130,000 shares of its stock. Thereafter one of the companies merged authorized the issuance of notes to be offered, with a bonus of 500 shares each of its stock, which notes defendant was authorized to negotiate. He acquired some of these notes, entitling him to 8,000 shares of the company's stock, which he exchanged for stock in plaintiff company. Plaintiff charged that these shares were issued irregularly and without consideration, and defendant, in his affidavits opposing an injunction before answer, merely stated that he had taken up the notes for the 8,000 shares for value, and that he received the 130,000 shares from one of the merged companies under a resolution granting the same to him in consideration of $25,000, which he was informed by his bookkeeper he had advanced to the company. It appeared, however, that such advancement was to be treated as a debt of the merged company, to be repaid from money received from the sale of shares, and it did not appear that any board of directors of plaintiff authorized the exchange, or that there was a proper authorization and issue of the stock. Held, that an injunction restraining defendant from
voting or selling such stock was justitied. Appeal from Special Term, New York County.
Suit by the United Gold & Platinum Mines Company against Charles E. W. Smith. From an order granting an injunction restraining defendant from voting on or disposing of certain shares of plaintiff company, defendant appeals. Affirmed.
Argued before VAN BRUNT, P. J., and HATCH, PATTERSON, O'BRIEN, and LAUGHLIN, JJ.
Walter W. Cooper, for appellant.
O'BRIEN, J. The order appealed from restrains the defendant from voting upon or disposing of 130,000 shares of the plaintiff's stock which it is averred he has wrongfully obtained in his own name upon the claim that he was entitled to them by virtue of a resolution of a predecessor company, and from voting upon or disposing of 8,000 shares of plaintiff's stock which it is alleged he holds wrongfully claiming he obtained them for a consideration. The complaint presents two causes of action with respect to the 130,00o and the 8,000 shares, respectively, asking as to each a return of such shares to the treasury of the company.
With respect to the 130,000 shares, the complaint avers that the
and 122 New York State Reporter plaintiff company is a corporation organized under the laws of Arizona, with a capital stock of 2,000,000 shares, and was formed pursuant to a so-called “merger” agreement, whereby the property of the American Gold & Platinum Mines Company was to be merged, and the stock of each of the two latter companies to be exchanged for the stock of the United Gold & Platinum Mines Company at a stated ratio. The merger agreement further provided that to this defendant Charles E. W. Smith, who held as trustee a majority of the stock of both companies, should be issued as trustee the corresponding amount of stock of the plaintiff company. The complaint avers that "instead" of so receiving was trustee” the stock of the plaintiff company as provided in the merger agreement, the defendant, who, by virtue of his controlling interest, caused to be elected a board of directors of plaintiff by him named, and caused himself to be elected treasurer of the plaintiff, did issue and cause to be issued to himself individually the said 130,000 shares of stock, and, at a meeting called for January 12, 1904, in New York City, threatens to vote on such stock unless restrained. With respect to the 8,000 shares, the complaint avers that after the merger agreement the American Company passed a resolution, June 16, 1902, authorizing the issue of notes not exceeding $20,000, in sums of $1,000 each, and with such notes offered a bonus of 500 shares each of the stock of the American Company, and that the defendant appropriated eight of such notes of the American Company, and has issued to himself, for the bonus shares of the American Company, 8,000 shares of plaintiff company, and threatens to vote upon such 8,000 shares. No answer has been interposed to the complaint, and a motion was made for an injunction, upon which motion the complaint and affidavits were submitted setting forth the above facts.
The defendant in his opposing affidavits averred, with respect to the 8,000 shares, merely that he had taken up the notes in question for value; and, with respect to the 130,000 shares, he avers that by a resolution of the American Company stockholders it was resolved that he should receive, in consideration of $25,000 (which sum he is informed by his bookkeeper was the amount he had advanced to that company), and moneys to be advanced and services rendered and to be rendered by him, stock of the American Company; and this resolution of the stockholders of that company was ratified by resolution of its directors, ard, for such amount of stock which he thus received, stock of the plaintiff company was, as provided in the merger agreement, issued to him, and he now holds in his own right the 130,000 shares. The resolution of the stockholders of the American Company states, after referring to the consideration mentioned, that the said $25,000, and other sumis he may thereafter expend, "shall be repaid to him out of the first money received in the treasury of the company by sales of the treasury stock."
The learned judge at Special Term, in granting the injunction, called attention to the fact that, although the resolution of the American Company mentions the $25.000 as included in the consideration for the issuing of the stock to the defendant, it thereafter permits that amount to remain a charge against the company. With respect to this $25,000, it will be noticed that the defendant himself says, merely, that his