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Burns v. Niagara, Lockport & Ontario Power Co.

Supreme Court of New York, Appellate Division

June 9, 1911

RILLA A. BURNS, Respondent,

Page 281

APPEAL by the defendants, the Niagara, Lockport and Ontario Power Company and others, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 3d day of January, 1911, upon the decision of the court rendered after a trial at the New York Special Term overruling the defendants' demurrers to the amended complaint.


Fred D. Corey, for the appellants.

Frederic R. Kellogg, for the respondent.


Appeal from interlocutory judgment overruling demurrers to the amended complaint.

The complaint shows in brief that defendant Luther made a contract with the Niagara, Lockport and Ontario Power Company for the construction of a canal from the Niagara river to Lake Ontario for certain considerations not relevant to this appeal; that, in consideration of promises of co-operation on their part, Luther agreed to give to Elmer Z. Burns, Fred D. Corey and F. F King, each, one-quarter of the moneys, stock and bonds which he (Luther) might realize out of the enterprise; that said Burns, Corey and King each fully performed the services required of them; that thereafter Luther assigned all his right, title and interest in the said promotion agreement to Paul L. Brady, John Bogart and Joseph G. Robin, in consideration whereof said Luther was to receive a certain amount of bonds and five per cent of the common stock of

Page 282

the power company, including any increase therein; that thereafter the defendant Iroquois Construction Company acquired, by assignment, the said construction contract, and in consideration therefor assumed the undertakings and obligations of said Brady, Bogart and Robin, including the agreement of the latter to deliver to Luther the specified amount of bonds and stock. Then follows a somewhat detailed statement of the relations and transactions between the power company and the construction company, resulting in the issue of a large amount of stock and bonds by the power company, a part of which, as it is said, has been delivered to the construction company, and a part retained by the power company pursuant to the instructions and under the control of the construction company. It is alleged that all the stock thus physically withheld by the power company has been paid for and is legally issuable. It is alleged that the contract was assigned and the stock and bonds issued with full knowledge, on the part of every one concerned, of the rights of Burns, King and Corey, and that the stock is not and has not been purchasable upon the market, but, for certain reasons, is of great, unique and rapidly-increasing value. It is claimed that by virtue of the facts set forth in the complaint Elmer Z. Burns, plaintiff's assignor, became the equitable assignee of the defendant Luther to the extent of one-quarter of the bonds and stock which Luther became entitled to receive under his contract with Brady, Bogart and Robin. There are the usual allegations of lack of legal remedy and demand. The relief demanded is that Luther be declared to be a trustee for plaintiff (as well as Corey and King) to all the rights which Luther acquired under his contract with Brady, Bogart and Robin, and that plaintiff be declared to be the equitable assignee and owner of one-quarter of the stock and bonds agreed to be delivered to said Luther, and that said Luther be required to make such assignment and to do and perform such acts as may be necessary to fully confirm plaintiff in such ownership and entitle her to such possession of the bonds and stock. Appropriate relief is also asked against the several defendants, to the end that plaintiff may ultimately receive from the Iroquois Construction Company and the Niagara, Lockport and Ontario Power Company, or one

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of them, the amount of stock and bonds to which she claims to be entitled, or, failing that, a sum of money representing the value of such stock and bonds. Nearly all of the defendants demur, their grounds being: First, that the complaint does not state facts constituting a cause of action against each of the demurring defendants; second, that causes of action have been improperly united; third, that there is a misjoinder of parties plaintiff, in that the defendants Luther and Corey should have been made plaintiffs. The theory of the complaint is that Luther, having embarked upon an enterprise out of which he hoped to realize a profit, and wishing the assistance of Burns, Corey and King, agreed that he would divide his profit when realized into four parts and give one part to Burns, one part to Corey and one part to King. This was a valid agreement and created a trust which equity will enforce. (Hirsh v. Auer, 146 N.Y. 13.) Having assumed this trust relation, it became Luther's duty to take all reasonable and proper steps to obtain possession and make distribution of the trust fund. He still remained in control of the promotion or construction contract, and could make such arrangements as he saw fit to have it carried out, but when he had made those arrangements and thereunder became entitled to receive stocks and bonds as his profit, he was bound to take such steps as might be necessary to secure them, even to the extent of bringing suit. The complaint alleges that he has been requested to sue, but he has declined to do so. This justifies the commencement by the plaintiff of the action the trustee should have brought, and furnishes a reason why the latter should be made defendant instead of plaintiff. In seeking to impress the trust created by Luther upon the stock and bonds still held by the power company, or those already issued to the construction company, it is necessary for the plaintiff to trace the history of the transaction from its beginning to its end, and it is entirely proper to join as defendants all those who have been directly concerned, not necessarily because affirmative relief is asked against all of them, but in order to cut off their equities, if they claim any, and thus establish a clear path to the final relief desired. This is not stating a separate cause of action against each defendant, or uniting

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causes of action in one count. Possibly some of the defendants are not absolutely necessary parties, but any of them may prove to be necessary, and they are, therefore, all proper parties in accordance with the general rule in equitable actions that all persons who are or may be materially interested in the subject-matter of the action are proper parties to the end that there may be a complete decree binding upon all. ( Mawhinney v. Bliss, 124 A.D. 611; affd., 194 N.Y. 590; Shepard v. Manhattan R. Co., 117 id. 446; International Paper Co. v. Hudson River Co., 92 A.D. 56.) The plea that Luther should have been joined as a party plaintiff has already been referred to. Corey's demurrer to the effect that he should have been joined as plaintiff rather than as defendant seems to rest upon a mistaken reading of the complaint, in which the pleader was careful to allege that Luther promised to give to each of those whose assistance he invoked one-quarter of what he himself might realize. It is not alleged that he promised to give three-quarters to them collectively. The complaint does not justify the construction that Luther, Burns, Corey and King became partners or joint adventurers in the enterprise. Its plain reading is that the enterprise remained Luther's, and that what he promised to Burns, Corey and King was pay for their services and not profits as partners. We think the demurrers were rightly overruled.

The judgment is, therefore, affirmed, with costs, with leave to defendants to withdraw their demurrers and answer within twenty days, upon payment of ...

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