Butler v. Finck , 28 N.Y. Sup. Ct. 210 ( 1880 )

Beady, J. :

The defendant was charged with the conversion of certain railroad bonds that had been stolen from the plaintiff. When the testimony was given on either side, the court, on application, directed a verdict in favor of the plaintiff for $28,894.83, and judgment was thereupon entered.

■ It. appéared in evidence that about January 1, 1878, the defendant made an agreement with Ids brother-in-law, William A. Bushnell, at the request of -the latter, to conduct certain stock speculations, for which he was to receive, as payment for his services, one-third of the profits. The defendant knew that Bushnell was a bookkeeper in the plaintiff’s employment, and that he had no independent means, but lived upon a salary winch he drew from the employment mentioned. The agreement made between the defendant and Bushnell, in substance was, that the former should get information, which, by its character, would justify the purchase of stocks, and that lie was to give his attention to the purchase and sale thereof, thus agreeing to manage the stock account for his benefit and that of Bushnell, the latter furnishing the margin; this agreement was carried out by both parties until April 23, 1879, when the defendant claimed, as his share of the profits, and received from Bushnell, through his broker, the sum of $6,818.48; the margins furnished by Bushnell under the agreement mentioned were bonds wbicb be abstracted from tbe safe or place where they were deposited in the office in which he was employed, but of that the defendant does not seem to have been advised until June 8, and after Bushnell had absconded. On June 28, the defendant was met by the plaintiff, and the latter, ref erring to the fact that Bushnell had taken his bonds and used them as a margin, asked the defendant to account for the moneys he had received. The defendant refused to do this, but asserted that the money was his share of the profits on the stock transactions; and he kept this money, and declined to talk with the plaintiff about it, but referred the plaintiff to his attorney. It also appears that when the $6,818.48 was paid to the defendant, he did not ask what it came out of, and did not know how much there was in the account he had been managing. It further appears, however, that this sum was one-third of the ' profits actually made in the transactions which he alone conducted, and was agreed upon between himself and Bushnell after the latter’s examination of the accounts. - It also appears that Bushnell was also dealing in stocks upon his individual account, without reference to the joint account, the management of which was left to the defendant, and for which he was to receive the -compensation mentioned. The defendant swears positively that the sum received by him ' was one-third of the profits made by his services when he ceased to ' manage the joint.account. And this is not contradicted. Thus it appears that so far as the use of the margin is concerned, it resulted in a profit, and it could not have been necessary, therefore, to have drawn upon the principal employed in the operations which he conducted.

The learned justice in the court below, directed a verdict for the jfiaintiff, on the assumption that they were copartners in the transaction, and that the defendant was responsible under the case of the Manhattan Brass Manufacturing Company v. Sears (45 N. Y., 797), not only for the amount that he received, but for the entire ' amount which was lost by the abstraction of the bonds, the plaintiff having been obliged to defray large sums of money to recover pos- ' session of them. The decision just mentioned seems to establish the ’ doctrine that a joint proceeding in which one or more of the parties is to receive a portion of the profits constitutes-a partnership, not ■only mter sese but as to strangers, and establishes the habihty of each of the persons united together, for the debts which are incurred in the prosecution of the joint enterprise. But of the cases rehed upon to sustain this doctrine it may be said that there has been no question as to the existence of the copartnership, and the result of the unlawful acts has been brought into and used by the firm; and it generally appears that the assets of the firm were not sufficient to reach the claims of its various creditors.

In this case it is not asserted affirmatively, whatever circumstances may exist tending to show it, that the defendant knew of the manner in which Bushnell obtained the margin. He swears positively that he did not know it; and if there were any reason for beheving otherwise, a question of fact was presented for the determination of the jury. It may very well be that, considering his relations to Bushnell, who was his brother-in-law, and the nature of his employment, comparatively humble as it was, that he ought to have made inquiry as to the mode in which he obtained .the margin, and not to have accepted BushnelTs statement on that subject as entirely satisfactory. But whether he was put upon inquiry was a circumstance bearing upon the issue just suggested, namely, whether he knew or had reason to believe that Bushnell could not have honestly acquired the margin which he was using.

This was a very important element in the case, for the reason that the defendant swore positively that his transactions were all profitable and that the money which he had received was his interest in the profits actually made. As the joint transactions were prosperous, there would seem to have been no claim upon him for anything more than tile sum which was paid to Mm out of the property of the plaintiff, namely $6,818.48, with interest; because the balance claimed by the plaintiff was the result of ■ individual operations by Bushnell for his benefit alone, having no connection with the joint transaction. It is very clear that, assuming the copartnership to have existed in all respects, the defendant was not liable for the individual acts, or debts, or frauds of Bushnell, perpetrated or incurred for his own benefit. The rule in that resjject is too well settled to require any citation of authorities. "While the interest of a partner in the assets of a firm may be reached by a process against Mm to recover debts contracted by Mm individually, the members of the copartnership are not responsible unless they have in some way ratified Ms act, or assumed the indebtedness which he has incurred. Assuming, therefore, that the bonds of the plaintiff were stolen; that they were used for the joint benefit of Bushnell and the defendant, and the individual benefit of Bushnell, and that the joint transactions were not only-not attended with loss, but in the aggregate were decidedly successful, it is impossible to understand, on any sustainable theory that tliis case presents, why the defendant should be called upon to pay the loss resulting to the. plaintiff from the abstraction of the bonds. If the statement of the defendant was true, and it was right to have that considered by the jury, then his connection with Bushnell, and their joint relations to the bonds, was of no prejudice whatever to the plaintiff, for the reason that his operations on joint account were successful and resulted in a large profit.

It is impossible for us to conjecture what testimony would be given upon a new trial. But we do not entertain any doubt that, under the circumstances disclosed, the defendant would be bound to restore to the plaintiff the money received by him, and which was paid out of the property of the plaintiff. That it was paid out of that property, there does not seem to exist any doubt, inasmuch as it is quite clear that Bushnell, by Ms individual, operations, had exhausted the funds in the hands of the broker by a very great extent.

All the circumstances being considered, and the relations of the parties to each other kept in view., we do. not see how it is possible to avoid a new trial in this case. .

The judgment must be reversed, and a bow trial ordered, with costs to abide the event. . -