Opinion
No. 260.
April 7, 1930.
Appeal from the District Court of the United States for the Southern District of New York.
Suit by I.F. Chapman against John J. Dwyer. Decree for plaintiff, and defendant appeals.
Reversed, with leave to plaintiff to amend his pleadings and apply for transfer and trial at law.
The plaintiff is a lawyer in California whose practice in part did consist of the search for missing heirs and their representation when found in the settlement of estates. The defendant is a New York lawyer who has long been engaged in such practice. Before the things which led up to this action occurred, they had assisted each other in several searches for heirs and the subsequent settlement of the estates in which they were interested. In each case finally closed, the fee had been divided on a percentage basis; not always the same, but always mutually satisfactory and apparently dependent upon the amount of work each did and the number of lawyers, aside from themselves, who were to share in the division.
This matter had its inception in a letter written by the plaintiff to the defendant on January 24, 1921, as follows: "Did you ever hear of the estate of Joseph Pennsyl in Arizona, and if so, did you make any investigation?" To this letter a reply was sent in the defendant's name from his office: "In re Joseph Pennsyl. I have your letter of the 24th ult., concerning the above. We have no information concerning any such estate. If it is worth while, and you believe we can assist you, send particulars." Then, through an exchange of letters, these attorneys gave to each other whatever information they obtained regarding the matter, and made suggestions as to what they thought would best make for a successful consummation of the business. This was the situation when, on March 31, 1921, Dwyer telegraphed Chapman: "Pennsyl found and represent brother and next of kin." A letter followed in confirmation giving further details. Chapman replied, and additional correspondence ensued. In due time, Dwyer went to Arizona, where he took part in the settlement of the estate without Chapman's assistance and established the claims of his clients as heirs. He received part of the fee in money, and the remainder was to be realized from the sale of certain Arizona real estate. On September 5, 1922, Chapman wrote Dwyer:
"Dear Sir: In going over my register of estates I find that the Pennsyl estate has been pending longer than any other. I wish you would please advise me when you think it can be closed. If it would be of any convenience to you I am willing to go to Arizona and put in the proof. Will you please let me hear from you on this subject?"
And on September 16, 1922, Dwyer replied:
"In re Pennsyl"I have your letter of the 5th inst. concerning the above. I have made two trips to Arizona concerning this matter and during my second visit the case was tried and we met with much stronger opposition than I anticipated. The Jury took the case about 7 p.m. and reported a verdict between 1 and 2 p.m. the next day. We learned afterwards that, strange to relate, the Jury gave practically no consideration to the claim of our opponent but some of them were strongly in favor of finding that no one had proved kinship.
"We are endeavoring to dispose of the property. Much of the personal estate was used to pay charges including costs of administration and the great bulk of the estate is the real estate. It is extremely difficult to sell this property for what it is worth, at the present time. There are many people willing to buy it but are utterly unable to finance the matter. We will probably have to sell it for a comparatively small sum in cash, and wait probably a few years for the balance. However, it is becoming less difficult to borrow money on good security and we may be able to find a purchaser who can borrow the necessary money.
"I will close the matter without any unnecessary delay."
On May 5, 1923, Chapman wrote again:
"In re Joseph Pennsyl"Considerable time has elapsed since the Pennsyl estate was distributed. I wish you would advise me what is being done and when it will probably be finally settled.
"Bleakmore and Platt are interested in the matter and I am unable to give them any information when asked. As I have written you before I am involved with them financially and want to get their indebtedness to me cleaned up.
"I wish you would please advise me fully in the matter."
And Dwyer replied July 18, 1923:
"In re Joseph Pennsyl"I duly received your letter of May 5, 1923, concerning the above.
"I am not in the least concerned because of any interest Mr. Bleakmore or Mr. Platt may have in this matter. If they should never receive a cent it will please me very much.
"I wish I could answer your question `when it will be finally settled.'
"I have written a number of letters urging my correspondent to sell the property, if possible. I urged him to do this the last time I was there, but I have heard of no prospective purchaser until quite recently, when my correspondent wrote me that he believed he could sell it `on time.' This probably means a small amount of cash and a delay of several years before payment is finally made. I fear that we will have to sell without much cash or hold the property for a long time, or else sell it for much less than it is worth, and I am quite willing to do the latter.
"There is no one any more anxious than myself to sell this property and close the matter, and I assure you that I am doing everything in my power to bring about a sale."
On this same day, and of course before he received Dwyer's letter of that date, Chapman wrote Dwyer a letter in which he indicated a growing feeling of impatience at the way matters were dragging and his resolve to discontinue the missing heir business. Dwyer replied in explanation of delays generally inherent in that kind of business, and, after expressing regret at Chapman's decision to discontinue it, together with some dissatisfaction with the attention he had lately been giving to matters "which I sent you," said, in reference to the Pennsyl Case:
"In the first case you say that Bleakmore informed you he had received information the matter had been `closed some time.' You of course know very well that Bleakmore is a liar and a thief, and I cannot believe for a moment that you would hesitate to believe me in preference to Bleakmore. It is of course probable that Bleakmore meant judgment had been rendered in favor of my clients. This is true but getting judgment and converting property into cash are entirely two different matters. If either you or Mr. Bleakmore have any doubt on this subject, you can readily ascertain by inquiring at Safford, Arizona, that the property has not been sold, and if either of you can find a purchaser for it quicker than we can, I will be very glad to have you do so and we will pay the commission usually paid for obtaining a customer.
"You refer to your practice of keeping your `associates fully posted.' This is quite commendable where your associate is one whom the client is holding responsible. You must remember that in this case your only interest is the amount due you for supplying me with information. If you wish to pay either Bleakmore or Platt anything, of course this is strictly your own business, but I certainly would pay them nothing. It may be true that they mentioned the matter to you, but they did not give you any information for the purpose of transmitting it to me. They continued to actively compete with me and even secured representation from people who may be distant relatives. It was only after they were convinced that I had in fact found the heirs that they ceased to compete with me. You have no client holding you responsible for anything in this matter and you are not obliged to supply anyone with information, so nothing is to be gained by taking your time and mine in corresponding concerning the matter. When the property is sold and I receive my share, I will pay you for supplying information concerning the estate, and if you represented a client who had an interest in the estate of course it would be my duty to advise you with reasonable frequency of the status of the matter."
To this letter Chapman replied August 1, 1923. He then for the first time claimed one-half of the fee. Dwyer refused to pay more than a reasonable fee based on the amount of work Chapman had performed, and this action was brought to enforce the plaintiff's claim. It was put on the theory that the parties had been engaged in a joint venture which entitled the plaintiff to an injunction, to appointment of a receiver for the profits, to have them impressed with a trust in favor of the plaintiff, and to an accounting in equity on the basis of an equal division.
John J. Cunneen, of New York City, for defendant-appellant.
Grover C. Sniffen, of New York City (William M. Cannon, of New York City, of counsel), for plaintiff-appellee.
Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges.
Unless the parties were engaged in a joint venture in the Pennsyl Case, the plaintiff's remedy is not in equity but at law to collect whatever may be due him for services rendered and expenses incurred.
Although the legal significance of joint adventure has come to be widely recognized, it was unknown to the common law, and does not readily admit of short and satisfactory definition. Joint adventurers assume a fiduciary relationship in a single undertaking for profit which gives equity jurisdiction over controversies arising between them concerning the subject-matter as if they were in a technical partnership, Spier v. Hyde, 92 App. Div. 467, 87 N.Y.S. 285; Kraemer v. World Wide Trading Co., 195 App. Div 305, 187 N.Y.S. 16; Braddock v. Hinchman, 78 N.J. Eq. 270, 79 A. 419; but a joint adventurer is not limited to an accounting in equity. He may also sue at law. Joring v. Harriss (C.C.A.) 292 F. 974-978.
These parties undertook to find the Pennsyl heirs as a preliminary to any settlement of the estate. They exchanged information and advice in furtherance of the project. Neither knew where the heirs were, when or how they could be found, if found at all, or which of them, if either, would be successful in the search. They had no express agreement covering what each should do or how the fee should be divided if any fee was eventually obtained. In this search Dwyer was the one who happened to be successful in finding the heirs. They became his clients. While there was no fee or profit to be derived directly from this part of the enterprise, it was so necessary to the ultimate success through settlement of the estate that the search for the heirs was an integral part of the entire business and so undertaken for profit. Thus we have in this respect these characteristics of a joint venture, in that the parties combined their skill and knowledge, with each contributing his own expenses, to obtain clients to represent for profit. When Dwyer had secured the clients, he, with no help from Chapman, did the legal work necessary in settling the estate and obtaining the fee which made the preliminary work worth while; yet Chapman never withdrew from the business and always stood ready and willing to do what he could to help. That Dwyer neither requested him, or gave him an opportunity, to assist did not change his status at all, for there was no particular thing he was bound to do which he refused or failed to perform. That their relationship was not a partnership is apparent, but that this affair was a joint venture is not equally clear.
Were it enough that each should help or be willing to help without compensation except from the proceeds of the undertaking, there would be no difficulty. That much may be fairly implied from the correspondence between them. But parties who assist each other in doing a piece of work are not clothed with the legal quality of joint adventurers so simply. If they were, it would be necessary only for two or more to work together in a common attempt to accomplish some profitable result and make their pay in some way dependent in whole or in part upon their success. In addition to this, there must be an understanding, express or implied, that each shall share in the profits as such so that each has an equitable interest in the profits themselves. That is what gives rise to the jurisdiction of a court of equity to hear and determine controversies between the parties and to impress a lien upon the profits as in the liquidation of partnership assets. See In re Taub (C.C.A.) 4 F.2d 993; Hill v. Curtis, 154 App. Div. 662, 139 N.Y.S. 428, 429. The latter was a case where attorneys joined in the prosecution of claims on a contingent basis under an express written agreement providing that each should pay one-half of the expenses and "that the profit, fee, compensation or other emolument which shall or may be received from the prosecution of said claims, shall be equally divided by and between the said parties hereto." It was held that this was a joint venture and the action for an accounting properly cognizable in equity, since the agreement provided for a proprietary interest in the profits. In Zuby v. Height (Sup.) 188 N YS. 88, 89, the agreement was that the plaintiff should share in the defendant's business "to the extent of one-third of the net profit," and was to have a weekly drawing account to be deducted from his share of the profits, all in return for services rendered in aid of the business. It was held that a share in the net profits was but a basis of computing the compensation to be paid an employee and not enough to create a joint venture.
In this case the business might have been carried out as a joint venture if the parties had had an agreement sufficient to make it so. The burden of proving such an understanding, express or implied, was on the plaintiff. The gist of such an agreement to be proved was that the plaintiff should have an interest in the fee, as such, considered as the res rather than the right to be paid his fair compensation to be determined, either on the basis of what he did or what success attended the efforts of both. The important facts, so far as they do appear, are shown by the correspondence. The inferences to be drawn therefrom are the controlling elements. This leaves the determination of whether or not the parties were joint adventurers a matter of law. With the burden on the plaintiff to show equitable jurisdiction by showing a joint venture and the inferences to be drawn from the facts proved tending to show that Dwyer, with Chapman's acquiescence, and probable approval, took over and did almost all the work himself, there is quite as much reason to believe that the parties understood that Chapman was to be paid in the end whatever they might agree to be, or what in fact should be, just remuneration for what he had done, as that any agreement is to be implied whereby he was to have some ownership in the fee itself. How they settled the few other business matters they had and did settle before this, for all of them were not closed, does not help us in determining this question, for each case was settled as the parties agreed, and there was no such uniformity of treatment over a period of time sufficient to create a custom of proprietary interest in fees and of equal fee division, in the light of which their correspondence in this case is to be read to disclose its real meaning. First National Bank v. Burkhardt, 100 U.S. 686, 25 L. Ed. 766.
The proof preponderates in favor of these parties standing in the relation of debtor and creditor rather than that of joint adventurers, and accordingly the decree is reversed, with leave to the plaintiff, if he is so advised, to amend his pleadings and apply for transfer and trial at law.