Opinion
01-19-1914
VERMEULE v. VERMEULE et al.
R. H. McCarter, of Newark (McCarter & English, of Newark, of counsel), for complainant. Sherrerd A. Depue, of Newark (Lindabury, Depue & Faulks, of Newark, of counsel), for defendants.
Bill by Cornelius C. Vermeule against John D. Vermeule and others. Bill dismissed.
R. H. McCarter, of Newark (McCarter & English, of Newark, of counsel), for complainant. Sherrerd A. Depue, of Newark (Lindabury, Depue & Faulks, of Newark, of counsel), for defendants.
EMERY, V. C. The occasion of filing this bill was the commencement of a suit in the Supreme Court of this state by John D. Vermeule, one of the two original defendants, against complainant, Cornelius C. Vermeule. The suit was brought In September, 1901, to recover the amount claimed to be due upon three notes; two of them being notes for $5,000 each, drawn by C. C. Vermeule, payable to his own order, and indorsed by defendant John D. Vermeule for the accommodation of the maker, discounted for complainant's benefit, and which J. D. Vermeule, as indorser, paid at maturity, at the maker's request. The third note was a note of a Maine corporation called the York Cliffs Improvement Company for $10,000, dated November 24, 1897, and payable to John D. Vermeule on demand, executed by complainant as treasurer of the company. Upon this note was an indorsement that it was given to be held by J. D. Vermeule as collateral security for moneys to be advanced by him to the company to pay its then outstanding bills payable, accounts payable, and current expenses, and a further indorsement signed by the complainant, "I hereby assume liability for all moneys to become due or to be secured by this note to the extent of eleven twenty-sevenths of the entire amount." In the suit at law defendant J. D. Vermeule alleged that the $10,000 was subsequently advanced to the company, which failed to repay, on demand, and judgment for eleven twenty-sevenths thereof, with interest, was claimed on the guaranty of C. C. Vermeule.
Previous to the commencement of this suit in New Jersey, the defendant John D. Vermeule had commenced an action against the complainant in the Supreme Court of the state of New York to recover the amounts claimed to be due upon the same three notes, in which action the complainant had set up a number of defenses, including defenses thereto claimed to be equitable defenses to the action, and which are the basis or foundation of the present bill to enjoin the suits at law. An injunction was prayed against further prosecution of the suit in New York as well as the suit in New Jersey.
As to all three of the notes, the generalclaim alleged by the bill is that they were given in the course of and in connection with a copartnership existing between the complainant, the defendant John D. Vermeule, and the defendant Joseph N. Kinney in a speculative enterprise of exploiting, developing, and marketing lands at the seaside resort, York Cliffs, in the state of Maine, and were given to raise funds to be used in this partnership. And it was further claimed that no final accounting had been made of these partnership transactions between the partners, that the other two partners had, in reference to certain transactions set out in the bill, become accountable to him, and that no equitable settlement of the affairs of the partnership could be made, unless the claims against the complainant arising out of said notes were adjusted in connection with the settlement of the affairs of the partnership. As to the two $5,000 notes, the further claim was made by the bill that, by reason of certain dealings relating thereto specially set out in the bill between the complainant and J. D. Vermeule, including the assignment to the latter of the complainant's book account against the company, and of certain shares of complainant in the stock of the company, which stock J. D. Vermeule held as collateral for the notes, these two notes of $5,000 each were paid, as between defendant Vermeule and complainant, and complainant was no longer liable to J. D. Vermeule upon them.
The answer of J. D. Vermeule and the affidavits filed on his behalf denied the formation or existence of any partnership to any extent or for any purpose, and claimed substantially that the notes in question were, as between the parties thereto, special and separate transactions not connected with any other accounts or transactions between them. And the special defense set up to the two notes claimed to have arisen out of the dealings between the two Vermeules alone being a legal rather than an equitable defense, the preliminary injunction against further prosecuting the suits at law was denied, both because of the doubts raised as to whether a partnership existed, and also because, even if a copartnership did exist, the affidavits seemed to warrant the conclusion that these notes were special transactions in which the complainant had expressly agreed to pay these debts, and must pay them, if liable, getting allowance for the payment, if entitled to it, on any final accounting. The prosecution of the suit to verdict and judgment should not therefore be enjoined. 2 Lindl. Partn. *566. This denial of a preliminary injunction was, however, without prejudice to renewal of the application after judgment at law. Upon the trial at law verdict was found for the defendant in the suit at law, the complainant herein, upon the two $5,000 notes, and a verdict against complainant upon his guarantee of the York Cliffs Improvement Company note. Judgment in favor of John D. Vermeule against the complainant was entered in the Supreme Court on June 5, 1906, and on August 1, 1906, the amount of the judgment, with interest and sheriff's execution fees ($5,694.01), was paid into this court, as a condition of enjoining execution. After this judgment at law complainant brought suit in the Supreme Court of Maine on October 27, 1906, against the York Cliffs Improvement Company to recover from it this amount of $5,694.01, thus paid by complainant into court as surety on the company's note of November 24, 1897, and on April 26, 1909, complainant recovered judgment for this amount, with interest from August 1, 1906, the date of payment into court, $6,551.90, and costs. This judgment against the company obtained in Maine was satisfied by sale of the company's lands on execution on the 10th day of July, 1909. This suit in Maine brought by complainant against the York Cliffs Improvement Company in October, 1906, was still pending and undetermined at the close of the taking of proofs at the original hearing in this cause in February, 1909, but was proved at a further hearing on July 29, 1910, had upon an opening of the proofs and filing an amendment to the answer.
It was further specially claimed by the bill that, in the course and prosecution of this alleged partnership, two corporations were organized in the state of Maine to take over the partnership lands for the purpose of delevoping and marketing the lands, but that the organization and operation of the corporations and their ownership were incidental to the prosecution of the partnership, which, as is alleged continued after their formation, and still continues. The bill specially charges that a large hotel property belonging to the company, which was erected at an expense of over $125,000, advanced by the three partners as a "syndicate," was mortgaged by the hotel company to a trust company, of which defendant J. D. Vermeule was vice president, to secure $50,000 for advances by J. D. Vermeule and Kinney, for their advances to that amount over and above the amount contributed by the "syndicate" as a firm, and that this mortgage had been foreclosed by the trust company, at J. D. Vermeule's instance, and the company's equity foreclosed by a sale to the trust company which now holds the title. This title, the bill alleges, the defendants claim is held in trust for them alone; but complainant claims that it is held in trust for the firm, and constitutes part of the partnership property, for which an accounting and allowance should be made. The bill does not specify or claim any other special property as being assets of the firm to be taken over. It prays the dissolution of the alleged partnership, the appointment of a receiver, if necessary, and an accounting with an injunction against.the pending suits by the defendant J. D. Vermeule, for the purpose of having claims upon them brought into the partnership account.
Complainant is a resident of New Jersey; but both the defendants are residents of other states, J. D. Vermeule of New York, and Joseph N. Kinney of Maine or Pennsylvania. Defendant Vermeule was brought into court on the application for injunction by service upon his attorney in the New Jersey suit, and subsequently filed an answer in the suit. The defendant Kinney, the other alleged partner, was not served with process, and did not appear in the suit. The answer of the defendant J. D. Vermeule denied the alleged partnership, as did also J. N. Kinney in an affidavit filed on behalf of the defendant J. D. Vermeule.
At the hearing the only asset or property claimed to belong to the alleged partnership was the equity of the defendants J. D. Vermeule and Joseph N. Kinney in the hotel property after the foreclosure; it being claimed that this property, although owned by the company, and mortgaged by it, was still, as between the members of the "syndicate," partnership property, and therefore, upon the purchase, still subject to an accounting therefor as between the partners, and without regard to or taking into account the transfer of it to the company. The trust company which holds the legal title is not a party to the suit. No other property or asset was suggested as an asset of the alleged partnership concerning which an accounting should be made; but it was claimed that an accounting was necessary as between the partners in order to account for and settle as between themselves their proportionate liabilities on obligations which were originally or in form personal obligations of complainant, but which were, as complainant claims, obligations of or assumed by the "syndicate" or partnership, and therefore the subject of accounting between them, in connection with the $10,000 note of the company partly guaranteed by Kinney and C. C. Vermeule. These personal obligations were the notes secured by the mortgages given on the purchase of the lands which were, or were claimed to be, purchased on behalf of the partnership, the title to which was taken in the name of complainant He afterwards conveyed all these lands to the York Cliffs Improvement Company, which, upon the conveyance, assumed the payment of the mortgages given by him; but, these mortgages (five in number) not having been paid, complainant claims that this proportionate liability of the members of the "syndicate" or partnership should now be a matter of account and adjustment in connection with the $10,000 note. In April, 1909, the complainant commenced two suits in the Supreme Court of Maine against John D. Vermeule, one suit to recover five-twelfths of the amount for which complainant was liable on the notes secured by three of said five mortgages, the Daniel Weare mortgage for $3,000, the Phillips mortgage for $2,000, and the Parsons mortgage for $3,300, being $8,300 in all, and another suit to recover one-third of the amount of complainant's liability on the other two mortgages, the Daniel Weare mortgage for $9,000, and the Bowden mortgage for $2,400, $11,400 in all. In September, 1909, defendant John D. Vermeule brought a suit in the Supreme Court of Maine against the complainant to recover the entire amount of three of the notes given by the complainant on three of these purchases of land—the Bowden note for $2,400, and the Daniel Weare note for $3,000, and the Parsons note for $3,300, which notes were, as he claims, indorsed and delivered to him by the payees, respectively. And in the same month, September, 1909, complainant also brought a suit in the Supreme Court of Maine against the York Cliffs Improvement Company to recover from it the entire amount of its assumption on all the five mortgages, $19,700. All of these suits were pending and undetermined at the time of the further hearing in this cause.
No suits of any kind other than the present suit appear to have been brought, either in Maine or elsewhere, against Joseph N. Kinney, the other defendant named in the original bill in the present suit, or against his executors who were substituted as defendants in 1907, after Kinney's death, on an amendment to the bill. Neither Kinney nor his executors have appeared in the suit, and on an order of publication against his executors a decree pro confesso was taken against them before the final hearing.
The questions argued at the hearing were substantially these: First. The nature of the relation between the parties in reference to the lands in question, and whether or not it was that of partnership or joint adventure in connection with the same. Second. Whether complainant is entitled to an accounting in this court for the purpose of adjusting and settling the accounts of the partnership or joint adventure, including his liability on or payment into court of the judgment obtained against him.
Although the bill is undoubtedly framed solely on the theory of a partnership, and this is the only relationship expressly alleged, and the complainant himself throughout all his evidence gives, or attempts to give, all the transactions between them the color and usually the name of partnership transactions, counsel at the hearing claim the right to an accounting on this bill, even if it should be held that the relation between the parties is that of joint adventure rather than that of a technical partnership. There is a well-settled distinction made by our courts between the two classes of cases, and in many respects the distinction is vital; but in reference to the special question now ultimately involved, viz., that of a right to an account in equity, our courts hold that joint adventurersare entitled to such account, and on that basis accounts as between joint adventurers or joint owners have been ordered on bills alleging the existence of partnership, and apparently based on this claim alone. Warwick v. Stockton, 55 N.J.Eq. 61, 36 Atl. 488 (V. C. Pitney, 1896); Jackson v. Hooper, 76 N.J.Eq. 185, 74 Atl. 130 (V. C. Howell, 1909). both approved on this point in Braddock v. Hinchman, 78 N.J.Eq. 270 (Err. & App. 1911). In these cases, however, the bills seem to have set out specifically the transactions, or many of them, as to which the existence of a partnership was claimed, and the bills prayed general relief. This is the case with the allegations and prayer of the present bill. I think it is clear from the evidence that no partnership inter sese, in the legal or technical sense as defined by our courts, existed between the parties; but it is also clear that there was originally a joint adventure in which they were interested, and, on this basis of complainant's right to relief under the bill, I will consider the evidence to determine the nature of this joint adventure, its continuance, and whether complainant's right to an accounting of the same against the defendant is made out. Complainant and defendant are the only two witnesses produced to give oral evidence as to the agreement between them, which complainant now always describes or refers to as a partnership, and which relation the defendant denies. There exists, however, a great mass of written evidence, extending through nearly ten years, consisting of the contracts, letters, statements, accounts, and other documents relating to their transactions, as well as the books and accounts of the two Maine companies which took over or held all the properties in which these parties were jointly interested, and a careful examination and consideration of these documents in connection with the conduct of the parties will solve these questions of fact at issue almost, I think, to the point of demonstration,
Substantially, the evidence shows these facts: Previous to December, 1890, complainant and one George M. Canarroe were jointly interested in several tracts of land at York Cliffs, Me., containing about 200 acres, which were purchased for the purpose of laying out and selling in lots, and the organization of a company to take over the lands for development was part of the plan on which the property was held at the time defendant J. D. Vermeule acquired an interest therein. The title to all this property was taken in the name of the complainant; Canarroe merely holding receipts for the money contributed by him, for the reason (as stated by complainant's letter to J. D. Vermeule proposing that the latter join them) that Canarroe preferred this arrangement to an actual transfer of an interest in the land, as he believed they would soon want to organize a stock company. Previous to this application to defendant, surveys had been made of the land under the direction of complainant, who was a civil engineer, and the property was got into shape for selling in lots; the accounts relating to these expenses being kept by complainant, and in his name. On the purchase of the property, and taking title solely in his name, complainant had given his personal notes to the amount of $11,400, secured by mortgages on the lands purchased, $9,000 on a tract called the "Weare" tract, and $2,400 on the "Bowden" tract. The negotiations between complainant and J. D. Vermeule for the purchase of a one-third interest in these lands contemplated the purchase of about 180 acres of additional lands and the organization of a company to take them over, and plans for its capitalization were at the same time submitted by complainant in writing, showing a large profit (in stock) to the owners on this basis. Improvements to the property by building and otherwise were also in contemplation; but, at the time J. D. Vermeule acquired an interest, these as well as the incorporation were all matters for future final decision, and no definite plans were agreed or acted on beyond the holding of the property in C. C. Vermeule's name, and his control or management of it, pending such decision, at the common expense of the joint owners. All of these expenses (surveying, etc.) incurred before J. D. Vermeule purchased one-third interest were to be settled. As a result of these negotiations, C. C. Vermeule, on January 21, 1891, by a written agreement, agreed to sell, and J. D. Vermeule agreed to purchase of C. C. Vermeule, a one-third interest in these lands, which stood in complainant's name, for $6,500, to be conveyed to him on demand, and by the agreement J. D. Vermeule expressly assumed a pro rata liability for the $11,400 mortgages. By another written agreement between them, made May 28, 1891, the defendant agreed to purchase an additional one-twelfth interest in these same lands, the five-twelfths interest thus to be conveyed by complainant on demand to be subject to these mortgages. The latter agreement further agreed to convey an undivided half interest in two additional tracts of lands for which complainant then held options or contracts for which he had paid a small sum, $97.10, "subject to liabilities for future payments agreed to be made for the same." J. D. Vermeule paid one-half of this sum of $97.10, which was included in a check given by him on May 29, 1891, for $1,523.74, the balance due on his entire account with C. C. Vermeule up to April 1, 1891, for his expenses $1,475.17 to that date, in relation to the original properties made up on a five-twelfths basis. About July 1, 1891, complainant received a conveyance of the Daniel Weare tract for $4,000, giving his personal note for $3,000, secured by mortgage, and on July 24, 1891, received a conveyance of the Phillips tract for $3,000, givinghis personal note for $2,000, secured by mortgage. Each of the three parties, as appears by the statements of accounts, contributed proportionately (five-twelfths to the Vermeules, and two-twelfths to Canarroe) to the purchase money for these last two tracts, and to the expenses of management, including maps for the property; but Canarroe does not seem to have entered into any written agreement with either of the other parties with reference to liability for the future payments on them. The plan for organization of a corporation to take over all the properties and continue the work of development was definitely decided on in March, 1892, and up to this time considerable sums had been spent in building and improvements, and additional purchases were contemplated. From the time J. D. Vermeule joined in the enterprise or adventure up to the time the lands were finally taken over by the company, the complainant had the management and control of the property and of its development, and advancing the money or incurring the obligations necessary for this purpose, rendering from time to time statements of his accounts with the balances due from each of the persons interested. These statements, up to the time of the organization of the company, and until the defendant Kinney became interested, were made out as accounts of "Vermeule, Canarroe & Vermeule." There was no express or direct agreement between the parties creating a partnership between them in reference to these properties, or conferring on either of them the power of partners to deal with partnership property, and a decision as to the status of the parties must be based on the inferences to be drawn from their acts in relation to the properties and complainant's control over them.
For the purpose of carrying out the plan of developing and managing the property, and bringing the lands into the market for sale in lots, a company called the York Cliffs Improvement Company was incorporated under the laws of Maine in April, 1892, by these three joint owners of the lands in connection with three other persons, and, as expressed in its charter, "for the purpose of purchasing, selling, holding, acquiring, and improving by the erection or construction of hotels, houses, or other structures of and upon real estate and leaseholds, or improving the same, etc., in York county and elsewhere in Maine." The capital stock authorized was $300,000, and in connection with the organization of the company, and at about the same time, the purchase or taking over at once from the complainant of the lands to which he held the title for the sum of $120,000 was authorized or decided on, this consideration to be paid to complainant by $84,500 in stock, $15,500 in cash, and $20,000, either in cash, or by assuming mortgages on the property. The transfer, however, was not actually carried out until December, 1892, and, pending this transfer, the three parties interested continued to make further proportionate advances for the improvement and development of the property; the complainant continuing to manage the property and improvements, and submitting to J. D. Vermeule and Canarroe statements of his accounts in relation to the property. The last statement made for the account between these three persons as solely interested was made on May 1, 1892, and included a statement of the entire outlay to date, among them being the organization expenses of the company, and the balances were divided and settled on the proportionate basis of five-twelfths to the Vermeules and two-twelfths to Canarroe. About August 1, 1892, complainant, with the consent of J. D. Vermeule and Canarroe, and expressly acting "on behalf of himself and his associates, owners of the property known as York Cliffs," agreed to sell to defendant Kinney five-thirteenths of the holdings of these owners for $10,000. These holdings, as specified in this agreement, included all the lands included in the Vermeule agreements (except two lots which had been sold), and also two additional tracts, one of about 50 acres, which was purchased at or about this time, called the Parsons tract, and another, an option or contract for a tract, called the Winn tract Complainant took the title and contracts for purchase in his own name, and on the Parsons purchase had given his personal note for $3,300, dated August 10, 1892, payable in two years. The agreement with Kinney stated that "the property described is subject to mortgages aggregating $20,000, bearing 6 per cent. Interest," but did not, as did the Vermeule agreement, contain any agreement on Kinney's part to assume liability for the mortgages or any portion thereof. The facts that the original plan of the transfer of all the property of the owners to the company already organized for that purpose was in course of execution, and that this transfer included an assumption of all the mortgages by the company, and that the amount in full-paid stock which was to be received by the owners for the lands, beyond this assumption, was about $80,000, probably explain the absence on Kinney's purchase of any agreement of assumption. Mr. Kinney was a capitalist whose, aid was needed in the burdensome task of financing the enterprise, both before and after it was actually taken over by the company. After the organization of the company, accounts of the advances made by members of the "syndicate" continued to be kept by complainant until about November 2, 1892, when the plan for turning over all the property to the company began to be carried out. The last "syndicate" account from complainant's books was to November 2, 1892. From November 5, 1892, the account of all such advances was kept in the company books alone, and inthese books each member's advance was credited to his separate account, as a debt from the company to him.
During November and December, 1892, these plans for turning over the "syndicate" property to the company were completed, and in December full details of the plans for the issuing of the stock and obligations of the company for this "syndicate" property and the advances to date by the syndicate were prepared and submitted by complainant in connection therewith, and also the accounts as between the members themselves called "Settlement Account of the York Cliffs Syndicate" and "Division of Assets." This latter paper dated December 15, 1892, was signed and submitted by complainant and approved in writing by both J. D. Vermeule and Kinney on December 21, 1892. By this plan, which was carried out, the improvement company received from C. C. Vermeule his conveyance of the "syndicate" lands, issuing therefor to complainant alone $100,000 of full paid capital stock, and assuming the payment of the mortgages to the amount of $19,700. This single certificate complainant surrendered, and separate certificates were issued to each of the four members of the "syndicate" for the proportionate shares to which they were entitled according to the statements, being 367 shares to T. D. Vermeule, 366 shares to C. C. Vermeule, 167 to Kinney, and 100 shares to Canarroe; their proportionate shares being eleven-thirtieths, eleven-thirtieths, five-thirtieths, and three-thirtieths. For the "syndicate" advances to the improvement company, which at the date of the settlement (December 15, 1892) amounted to $11,800 on the books of the company, the company was, in addition, to give its obligations, and these were apportioned among the members according to their proportionate shares, and the share of each was credited as a personal loan from each to the improvement company on its accounts with him. As part of this settlement, each member also received a proportionate number of shares of the stock of another company, called the York Water Company, which shares had been purchased in connection with the development of the improvement company, and also his proportionate amount of the balance due on a loan which had been made for the purposes of the water company. This balance of water company loan then amounted to $2,241.59, and a proportionate amount of this loan was on the settlement credited to each member on the books of the water company as a personal loan from him.
This method of division and settlement was proposed by the complainant in his plan and report of December 8, 1892, to his fellow members for adoption, "as permitting the dissolution of the syndicate, upon the carrying out of which he would either ask for a surrender of all agreements or the execution of a general release." In the approval of this distribution of assets by the statement of December 8th, which approval was signed by J. D. Vermeule and J. N. Kinney on December 21, 1892, they acknowledged the receipt of all balances due to them from complainant as treasurer of the York Cliffs Syndicate. This division and receipt did, so far as the complainant and the defendants J. D. Vermeule and J. N. Kinney were concerned, actually divide all the assets of the syndicate, and settled all obligations upon which the members of the syndicate were jointly responsible, either express or implied, by reason of their previous conduct of the joint enterprise. This division of assets made in connection with the conveyance of all its property to the improvement company carried into complete effect the purpose of the original plan, and practically effected the dissolution of the then existing or "new" syndicate, composed of the two Vermeules, Canarroe, and Kinney. This dissolution and division left the notes given by complainant on the purchases of the property conveyed by him to the company still outstanding; but, as to the payment of these, complainant was apparently sufficiently safeguarded by their assumption by the company, which paid the syndicate for the lands $80,000 beyond the mortgages in its full-paid capital stock. For this or some other reason, complainant, in his plans for division, made no reference to the necessity of any additional guaranty or protection against his liability thereon. Neither Canarroe nor Kinney on their purchases had ever expressly assumed any such liability, and Kinney's purchase of an interest in the syndicate in August, 1892, was made after the assumption of the mortgages by the company had been already formally agreed on as part of the terms of sale, and his agreement with complainant expressly stated only that the purchase was "subject to the mortgages," and did not contain any express agreement of assumption.
Neither Kinney nor Canarroe can therefore, merely as members of the syndicate, be held liable on any implied obligation arising on the conduct or course of business of the parties, and, as between the members of the "syndicate," the only claim for contribution which can arise is that of the defendant J. D. Vermeule, under his express written agreements made by him in his contracts of purchase. These obligations on his part, if they exist, are not, however, matters of any syndicate or partnership account, but arise from the separate contracts between complainant and J. D. Vermeule, which, although they arose out of a joint adventure, are their separate and individual contracts in reference thereto, made between themselves only, and are not in any way dependent upon partnership or joint adventure accounts between these two.
At the hearing complainant claimed that there was an item of $591.53 due to him, which had been included in his statementof December 8, 1892, as an asset of the syndicate, but payment of which, as he now claims, was not provided for. I find, however, that in the final division of December 21, 1892, this amount was charged against each member proportionately for the first time, and was paid, and, even if it had not been, the fact that the settlement of the syndicate liabilities was then made on statements furnished by complainant, and that now for the first time any mistake is claimed by complainant, makes it inequitable to reopen for settlement accounts of the "syndicate" which conveyed the property to the company.
I conclude, therefore, that the complainant has shown no property or obligation of any "syndicate" which entitles him to call for an accounting in equity from either of the defendants for any transaction between them relating to their joint enterprise or adventure up to the time of such conveyance and division, and that, by the understanding of all the parties thereto, the existing syndicate was then dissolved, and its affairs settled.
The substantial question remaining is whether, after this settlement of the affairs of the syndicate up to the conveyance to the company, the three parties to the present suit, the Vermeules and Kinney, either continued or took up again as between themselves the relation of partners or joint adventurers with reference either to the property of the company or its management and operation, and whether, as the result of their subsequent financial relations to the company, either as partners, joint adventurers, or otherwise, the complainant is now entitled to an accounting in this court to settle their reciprocal obligations, and, for the purposes thereof, is entitled to include the amount paid into court on the judgment obtained on the note upon which suit was brought. Complainant claims that the same relation afterwards existed, and that the accounting is necessary as to these against both J. D. Vermeule and the estate of Kinney. Defendant Vermeule denies any such relations, and the determination of this question of fact also depends, not upon any express agreement, but upon the action and conduct of the parties, evidenced also by the numerous written documents passing between them.
The substantial facts relating to these subsequent relations are as follows: At the time of the syndicate division of assets, the raising of large sums of money for the building of a hotel and other purposes was in contemplation, and to provide for raising money, if necessary, complainant, in his report of December 8th, proposed that an agreement be drawn up between the members of the syndicate to subscribe for their proportionate amounts of stock, or to furnish their proportionate share of any loan which might be called for by either of the companies, such loan to be made individually, and that this agreement as to loans might be included in the general releases to be signed on the division of the assets and dissolution of the syndicate. No such formal written agreement appears to have been made; but after the dissolution of the old syndicate, of which Canarroe was a member (and in which he received his full share both of stock and obligations on division), further advances were in fact made by complainant, J. D. Vermeule, and Kinney to a very large amount (over $125,000) for the building of the hotel and other purposes. These advances when made were made by each of the three persons directly to the company itself, and the advances which these three persons united in making to the company were designated on the company books as "temporary loans," and were evidenced by demand notes of the company, payable to its own order, and given to each of the three persons or members of the "syndicate" in the proportionate amounts advanced by him. From time to time complainant submitted the "syndicate accounts" to the defendant and Kinney, together with statements showing the amounts necessary to be raised in the future and advanced to the company for the purpose of meeting its current expenses and other obligations. Upon these "syndicate" statements, these "temporary loans" appearing on the company books were usually called "syndicate loans," and it was customary for the three members, after the submission of the statements, to agree upon the amount which it was necessary to assess upon each of the three interests, as Canarroe, after the transfer and settlement, did not contribute any further. The assessment as between the three parties was made upon the basis of eleven twenty-sevenths to the Vermeules and five twenty-sevenths to Kinney, instead of the former division of eleven-thirtieths, and five-thirtieths, and three-thirtieths, when Canarroe contributed.
These advances were made to the York Cliffs Company direct, and for the advances made on demand notes, or thereafter to be made, the three members of the "syndicate," on June 12, 1893, entered into a written agreement that payment on any of these notes by the company should be made pro rata, and that the money raised by sales of company land or stock should be first applied to the payment of these notes, unless otherwise agreed by all of them. Notes of this character were issued as a regular series, and contained a reference to this agreement between the parties to whom they were originally issued, thus giving notice to all subsequent holders of the notes. Some of their respective subsequent advances were also made oh subscriptions for additional stock to be issued to them individually, and for these treasurer's certificates were given to each. The advances as originally made to the company from time to time on these demand notes were not equal, J. D. Vermeule advancing much beyond any proportionate share,and on December 20, 1893, upon statements of the "syndicate accounts" then submitted by complainant, which were accompanied by statements of the company's financial condition, it was agreed between them that, to the extent of $54,000, the advances to the company should be considered "syndicate loans," which each should make proportionately, and for which the unsecured demand notes of the company should stand, and that all advances over this amount by either of them should be considered "excess advances." Assessments upon "syndicate shares" to equalize proportions in the "syndicate loan" were made, and in the proportions of eleven twenty-sevenths to the Vermeules and five twenty-sevenths to Kinney, and were afterwards settled by the parties on that basis, and the party in arrear on his assessment sent to the company (not to complainant) his check for the deficiency. For these "excess advances" beyond the "syndicate loan" as settled on, the persons advancing received demand notes secured by collateral bonds, being the bonds secured by mortgage on the hotel property for $100,000, to secure the bonds as issued, and defendant Vermeule and Kinney advanced in this manner $50,000 in all, being the whole amount actually issued, Vermeule advancing $34,375, and Kinney $15,625 (on a basis as between themselves of 11 to 5), and these advances were separately credited to their individual accounts on the company books, on which they were carried as "collateral loan." Complainant made no advances of this character. There was no agreement between any of the parties as to the extent to which they would make further advances, either for the "syndicate loan" or the "excess advances." The last assessment, appearing by the evidence to have been made on syndicate shares, to adjust as between the three the advances for the "syndicate" or "temporary loan," on unsecured demand notes of the company, was made in connection with the next statement of syndicate account, dated May 16, 1894, submitted by complainant with statements of the company showing the amount required to be raised. This assessment was at the rate of $380 per syndicate share, and, by payments to the company already or subsequently made, advances to this date were settled on this basis. It appears, however, by the agreements subsequently signed by the parties In November, 1897, that the total "syndicate" or "temporary" loans to the company on its unsecured demand notes amounted finally to $68,580 (principal sum), upon which about $17,000 of interest was due, and that, of this total sum, the company owed $27,940 to each of the Vermeules, and $12,700 to Kinney; the proportions being eleven twenty-sevenths and five twenty-sevenths.
At about this time (May, 1894) another business relation commenced between complainant and J. D. Vermeule with which Kinney had no connection whatever. This was the Indorsement of complainant's notes to aid him in raising money. These notes were for $5,000 each, discounted in bank for complainant on the credit of J. D. Vermeule's indorsement. One was given October 12, 1894, the other on July 12, 1895, and the indorser received an assignment of 100 shares of complainant's stock in the improvement company as security upon each indorsement. These notes seem to have been renewed from time to time until October, 1898, after which the notes, as they came due, were paid or taken up by J. D. Vermeule, and these notes thus taken up are the two $5,000 notes upon which suit was brought.
In addition to his advances to the "syndicate" or "temporary" loan and to the "collateral loan," defendant J. D. Vermeule continued to make further individual advances to the company to a very large amount upon the agreement that, if not paid on demand, he should be secured by mortgage on the company's lands. Neither complainant nor Kinney shared at all in these, which from September, 1895, to August 21, 1897, amounted, with interest, to $27,000, and about the latter date mortgages for that amount were given. Complainant continued during all this time to be the general manager of the company, and in the fall of 1897 endeavored to bring about a sale of the company's property and of the stock therein held or controlled by the syndicate. The sale fell through; but the agreements signed and drafted in connection with the proposed sale, together with the "syndicate statements" then submitted, are very strongly insisted on as showing that a partnership then certainly existed as between the members of the syndicate, in which the same proportionate interests continued, and are also relied on as showing that the company's holding and disposition of the property was one of the "partnership" or joint adventure transactions, and that an accounting should be taken of the connection and subsequent dealing of both of the defendants with relation to the company's property as a part of the continuing partnership business. The subsequent dealings specially insisted on as partnership matters relate to the hotel property and the right to an accounting from these two defendants as partners of what they realized from the sale of the hotel property, under the mortgage given to secure their "collateral bonds." The mortgage was given to a trust company, which foreclosed its mortgage and bought in the property for the benefit of the bondholders. These bonds taken by defendants under the circumstances above stated were their separate individual transactions with the company, in which complainant never had, and never had claimed to have, any Interest as member of the syndicate or otherwise. In complainant's proposed sale in 1897 of the company's property and of their holdings of stock, theamounts due to defendants respectively upon these collateral loan bonds were to be paid or secured to the defendants respectively. This proposed agreement of sale was a plan by which these three syndicate members to whom the "syndicate" or "temporary" loan was still due proportionately, but not jointly, and who still held or assumed to control 1,341 out of 1,500 shares of the stock of the company, agreed to dispose of their holdings of stock only, and to convey all the property of the two companies free and clear, and to divide between themselves alone all the net proceeds of sale after paying the companies' debts secured by mortgage, and also the time notes and open accounts. This division was to be in the proportion of eleven twenty-sevenths to each of the Vermeules and five twenty-sevenths to Kinney, "being in the same proportion as their interest in the capital stock and unsecured demand notes of said companies." The entire proceeds for division on the basis of the property of the two companies being sold free and clear was $247,215, of which $100,000 was to be in bonds secured on a new mortgage of the company's property; the balance being in cash. This sale, if carried through, would have distributed among these three owners of stock exclusively the proceeds of sale of all the property of both companies after paying their debts; but the total amount received either in bonds or cash would have been about 90 per cent of their total actual investment in the share and unsecured obligations of the company. This arrangement to pay for their stock, partly by the purchaser mortgaging the company's property, control of which was secured by their majority holdings, was apparently at the expense of the other stockholders, to that extent, and was evidently a plan by which these parties hoped to recoup themselves for their unsecured individual advances to the companies and investments in its stock, and to get out of the companies, leaving the other stockholders to shift for themselves with the new holders of the majority stock. The plan or proportion for division is not evidence, at it seems to me, of the continuance of existence of any partnership or joint adventure interest in their company stock or obligations, or any basis for treating the company itself and its ownership or control as being merely a partnership or joint adventure asset of these three majority holders. And the Court of Errors and Appeals, in Jackson v. Hooper, 76 N.J.Eq. 185, 74 Atl. 130, held any such agreement for company ownership or control, as partnership property, to be invalid, even if proved to have been made between the holders of all the stock of the company.
The parties had a common interest as shareholders and creditors of the company which they joined to realize on by means of this special agreement for their sole benefit; but this agreement did not make them partners in any respect, nor is it evidence of the continuance or existence of a partnership. The same observations apply to another agreement made between these three parties on the same date (November 24, 1897) in anticipation of the failure of the proposed sale. This agreement provided for conveyances of land by the company to complainant, as trustee, to pay the unsecured demand notes and interest, and interest on the collateral bonds held by each of them. The proceeds of these lands when sold were to be divided between these three parties "in proportion to their respective interests in such indebtedness, payment to be made at the rate of $90 for each $100 indebtedness canceled."
The last transaction in relation to advances to the company in which all of these three parties joined, or agreed to join, took place on November 24, 1897, the same day with the signing or submission of the agreement relating to the proposed sale of the company's lands to pay their unsecured claim. At that time, according to the statements submitted, the current expenses and accounts payable (which were to be paid out of the proceeds of sale, if it went through) amounted to $10,100. This money defendant J. D. Vermeule agreed to advance on the company's unsecured note, but only in connection with a written agreement on the note itself, that as between themselves the other syndicate members should be liable to him for the same proportion of the company note which had obtained between them in the "syndicate loan." This was the only "syndicate" transaction or advance made while the three parties acted together, after the "syndicate" property was conveyed to the company, and the syndicate assets had been divided, in which the transaction or advance was not in legal form fully settled at the time as between the parties by the receipt direct of the company's notes to the individual members for their respective proportionate advances. And this transaction carried on the face of it the means of settlement between the parties by the individual agreements of the other two members each for himself for his separate settlement with J. D. Vermeule of the amounts he should afterwards advance on this special account.
It was upon complainant's guaranty of payment on this note that the verdict was obtained against him in the Supreme Court suit. In the following year complainant, by letter of October 13, 1898, wrote to defendant J. D. Vermeule, in which he referred to one of the $5,000 notes coming due, and to the litigation of complainant's affairs, and the payment of the indebtedness growing out of his heavy investments in the improvement company. Complainant states that he has succeeded to some extent, but that the parties who purchased his holdings have finally failed to exercise their option to take up the balance of his stock (200 shares), and that he has now little expectation that they willdo so. He says that he has no means for providing for these two $5,000 notes "other than this stock now held by you"; that it was useless for him "to attempt to carry the burden any longer, because, under the present and prospective conditions, this stock will only be valuable to the majority interests. In order to avoid having these notes protested, I am willing to assign to you the balance of my book account with York Cliffs Improvement Co., something over $2,000, in addition to the stock. If you choose to protest, I must submit; but, even if any additional liability on my part can be established, which I doubt, still I have nothing left to meet it, as I had borrowed over $40,000 to put in this enterprise, and it has taken all to repay it." On the following day, October 14, 1898, an assignment of the book account was inclosed by C. C. Vermeule in another letter to J. D. Vermeule, in which he says: "I inclose the assignment herewith. As soon as the notes are taken care of, I shall be willing to receipt for the amount to you, so that you can look directly to the company for this as you would for any other part of your loans."
This letter is important as giving C. C. Vermeule's statement that the notes represented amounts which had been advanced by C. C. Vermeule to the company on account of his portion of the "syndicate" loans, and that the money had been raised by J. D. Vermeule's indorsement of his note, and that all these loans that any member of the syndicate had made were individual and not partnership loans. The assignment assigned to J. D. Vermeule all complainant's balance to his credit on the company's book, amounting to about $2,000; the consideration for the assignment being stated to be the payment without protest of the two notes above referred to of $5,000 each, the notes being made by him, and indorsed by J. D. Vermeule, he holding as security for such indorsement 200 shares of the improvement company stock.
Complainant from about October 31, 1898, ceased to be an officer of the company, which from this time was under the control of J.
D. Vermeule and Kinney, as majority stockholders.
In the year following complainant's retirement from the company litigations began between the company, now controlled by J. D. Vermeule and Kinney, and persons holding or claiming to hold some of the stock formerly in complainant's name, and involving claims under by-laws of the company of the right to tender such stock in purchase of lands of the company claimed to be sold, or intended to be sold, for cash for the payment of its debts, and, in the litigations arising out of these disputes, which were brought in the state of Maine, it was claimed that the complainant was the real party interested.
Following these litigations in Maine, the defendant J. D. Vermeule commenced suit in New York against the complainant upon the two notes of $5,000 each, and to recover eleven twenty-sevenths of the company note upon which complainant was the guarantor, in which suit the complainant, among other defenses, set up that the suit involved a partnership accounting. The defendant thereupon commenced suit upon the three notes in New Jersey, whereupon the present bill was filed.
Up to the time of filing the defense in the New York suit, followed by the present bill, no claim of the existence of any partnership or joint adventure requiring an adjustment by a further accounting appears ever to have been made.
Upon the whole evidence, I conclude that there is no foundation for the claim upon which the bill is based. The evidence shows that no property or assets of any kind have been owned jointly by these parties since the conveyance of the "syndicate" property and the division of the syndicate assets; that all of the transactions in which the parties joined after this time related to advances to the company by the parties individually, and their repayment by the company, and every one of these transactions, except the note on which judgment was obtained against the complainant, was adjusted and settled between the parties at or about the time they were entered into, by making them in their legal form transactions between the separate members and the company directly; that this guaranteed note thus excepted provided by its written indorsements and guarantees for the independent settlement under it of the respective obligations of the parties to each other; that the ownership or control of the improvement company's stock or property, as partnership or joint adventure assets, or as incidental thereto, is not proved, and would be invalid for that purpose, if proved, under the decision in Jackson v. Hooper, 76 N.J.Eq. 185, 74 Atl. 130; that there are no obligations incurred by or on behalf of the syndicate or any of its members, or in relation to its former properties now outstanding, except complainant's personal obligations for purchase money on the purchase of the properties, which obligations were assumed by the company; that as to these defendant Kinney, on his written purchase of an interest in the lands, never assumed any obligation, and is under no obligation to account to complainant; and that defendant Vermeule's liability arises from his sole separate and individual written contract relating to his liability, and is not the subject of this suit for partnership or joint adventure accounting. This liability of the defendant Vermeule is now the subject of litigation in complainant's suit against defendant, brought in the most appropriate tribunals, the courts of the state where the contract was made and the lands located, and whose laws must control the question of liability.
The evidence further shows that the two $5,000 notes sued on in the court of law were separate individual transactions between complainant and defendant Vermeule, in which Kinney had no part, and they are not the subject of any partnership or joint adventure accounts. In reference to either of the three notes, therefore, complainant has not shown any right to an equitable accounting, and, the rights of the complainant and defendant J. D. Vermeule in reference to these notes being as between each other altogether of a legal character, the bill must be dismissed, and defendant may apply for payment to him of the amount paid into court upon his judgment.