Mitler v. Friedeberg

• Decision Date: 30 November 1961
• Parties: Bernhardt E. MITLER, Plaintiff, v. Adolf FRIEDEBERG and Scrap Iron & Steel Import Co., Inc., Defendants.
• Court: New York Supreme Court

Page 480

222 N.Y.S.2d 480

32 Misc.2d 78

Bernhardt E. MITLER, Plaintiff, v. Adolf FRIEDEBERG and Scrap Iron & Steel Import Co., Inc., Defendants.

Supreme Court, Special and Trial Term, New York County, Part VIII.

Nov. 30, 1961.

Morris Gottlieb, New York City, for plaintiff.

Sol Charles Levine, New York City (Sol Charles Levine, Milton H. Reuben and Sheldon S. Ornstein, New York City, of counsel), for defendants.

MATTHEW M. LEVY, Justice.

In the state of the pleadings remaining after motions at Special Term, this is an action at law to recover damages for breach of contract. The case was tried before the court without a jury. Many days were occupied in the presentation of the conflicting evidence. Numerous exhibits were offered and many were received. After the close of the trial, there were submitted to me for individual disposition 194 separately numbered proposed findings of fact and conclusions of law--many including in essence, although unnumbered, subdivisions of factual facets and legal logistics. A number of briefs on the facts and on the law were filed to aid me in arriving at a determination. I think it appropriate to say that I have carefully considered all of the proof (verbal and documentary) and all of the arguments (oral and written). I have passed upon all of the proposed findings and conclusions. In the circumstances, I shall refrain at this point from doing more than expressing my views on some of the principal issues of fact and law presented.

The basis of the action is a letter dated January 28, 1948, addressed to the defendant Friedeberg, signed by the plaintiff, and subscribed by Friedeberg to the effect that it 'correctly states our agreement'. It reads as follows:

'You have exhibited to me a certain scrap purchase agreement between yourself, as seller, and Carnegie-Illinois Steel Corporation, a New Jersey Corporation, of 434 Fifth Avenue, Pittsburgh 30, Pennsylvania, a subsidiary of the United States Steel Corporation, as buyer, which agreement is dated January 19th, 1948.

'This letter is to confirm our agreement in respect thereto, as follows:

'1. You are to organize a corporation for the purpose of performing said agreement on the part of the seller, and you are to assign said agreement, and any other business you do on this, or other European trips to such corporation.

'2. You are to loan to the corporation the sum of $5,000.00 upon such terms as to interest and date of repayment as you may decide.

'3. I will loan the corporation the sum of $5,000.00, upon the same terms and conditions as your loan as to date of repayment. The interest on my loan shall be the same as yours, plus 10% of the profits of said corporation on said agreement of January 19th, 1948.

'4. If said corporation requires any further financing, permanent or temporary, I am to have the option of arranging the same. Such option is to be exercised by me within ten (10) business days after receipt by me of such documents as may reasonably be required to determine whether the financing can be arranged. If I exercise such option, and arrange for such financing, I am to receive 33 1/3rd% of the profits of the corporation, inclusive of the 10% mentioned in paragraph '3' of this letter. Said 33 1/3rd% shall include all interest, bonus and expenses, and all other financing charges of every kind and description, in connection with said agreement of January 19th, 1948, as well as compensation for my services performed in arranging for such additional financing.

'5. In computing said profits, only ordinary and necessary expenses are to be taken into account, and there is not to be deducted any salary or compensation for your time or services, or any executive salaries or compensation not agreed upon by me.

'6. I herewith acknowledge that I know there is a prohibition against publicity in the Carnegie-Illinois Steel Corporation contract and herewith agree to be bound by same and make no disclosures concerning same as therein prohibited.

'7. It is understood that I shall share in the profits of any other business which is the outcome of this or other European trips in the same percentages and terms as above mentioned in paragraphs '3' and '4'.'

The crux of the action is that Friedeberg, either directly or through the defendant Scrap Iron and Steel Import Corporation (the company organized by Friedeberg in pursuance of the aforesaid agreement between him and the plaintiff), made large profits and that the plaintiff was not paid his share thereof as provided in the agreement.

The initial issue to be resolved is the expiration date of the contract sued upon. It is quite plain that the document (above set forth in full) does not in express terms specify a time limitation. The Carnegie contract with Friedeberg, referred to in the Friedeberg agreement with the plaintiff, was cancelled by Carnegie on June 1, 1949, due to unsafe and prohibited materials imbedded in the scrap delivered by the defendant Scrap Iron to Carnegie, to wit: bombs, firing breaches, guns, sealed containers, shrapnel and gunpowder--causing explosions while the scrap was in transportation and at the mills. On the one hand, the defendants vigorously contend that the cancellation of the Carnegie agreement ipso facto terminated the plaintiff's agreement. I do not agree. On the other hand, the plaintiff asserts that the agreement between the parties created a joint venture in which he had a participating interest and that, by virtue of the contract, the defendants had assumed a fiduciary responsibility vis-a-vis the plaintiff which would affect the matter of termination (and other issues in dispute) . I do not so consider the obligations of the parties as expressed in their agreement or in their conduct thereafter.

Let me consider, first, the arguments urged by the plaintiff. The principles of law applicable here are well recognized. In order to create a joint venture, it is not enough that two parties have agreed together to act in concert to achieve some stated economic objective. Nor does an agreement to distribute the proceeds of an enterprise upon a percentage basis have the effect claimed by the plaintiff if the enterprise does not represent a joinder of property, skills and risks (Harry R. Gordon Co., Inc. v . Garcia Sugars Corp., 241 App.Div. 155, 271 N.Y.S. 303). An indispensable essential of a contract of partnership or joint venture, both under common law and statutory law, 'is a mutual promise or undertaking of the parties to share in the profits of the business, and submit to the burden of making good the losses' (Reynolds v. Searle, 186 App.Div. 202, 203, 174 N.Y.S. 137, 138). 'The ultimate inquiry is whether the parties have so joined their property, interests, skills and risks that for the purpose of the particular adventure their respective contributions have become as one and the commingled property and interests of the parties have thereby been made subject to each of the associates on the trust and inducement that each would act for their joint benefit * * *' (Rabin, J., in Hasday v. Barocas, 10 Misc.2d 22, 28, 115 N.Y.S.2d 209, 215).

The case at bar does not, in my opinion, reveal such an amalgam of funds, of property, of skills, of risks or of interests as would create a joint venture. The plaintiff's sole enforceable obligation was to lend $5,000, for which he was to receive a specified return--interest at the same rate Friedeberg was to receive on any loans Friedeberg would make, plus 10% of the profits of the corporation on the Carnegie agreement and any other business resulting from European trips. The plaintiff reserved to himself the option of further financing of an unspecified amount--for which he was to receive 33 1/3% of the profits, inclusive of the 10% previously referred to. In my view, the provision made as to the profits was merely a mode of providing a compensation to the plaintiff for the use of the money he agreed to advance (Richardson v. Hughitt, 76 N.Y. 55). He was to have no proprietary share in the assets of the corporation or voice in its affairs or management. He was to perform no functions other than that of a lender. He was to assume no risks except for a possible loss of his advances. He was not obligated to suffer any losses. In short, in my opinion, the true construction of the agreement is that it was a contract between lender and borrower.

And this view is buttressed by what has previously been judicially determined in the intermediate stages of this litigation. Initially, the plaintiff set forth in his complaint causes of action at law for damages and causes of action in equity for an accounting--all based upon the agreement hereinbefore set forth. The counts seeking an accounting were dismissed at Special Term for insufficiency, and that determination was affirmed on appeal (283 App.Div. 918, 130 N.Y.S.2d 866). The conclusion is inescapable that there was here no joint venture between the parties.

I shall consider, next, the argument of the defendants. I am prepared to find as a fact that the deal entered into by the parties on January 28, 1948, was sparked by the contract, dated January 19, 1948, between Carnegie and the defendant Friedeberg. And I recognize, of course, that, as a matter of law, 'it is now well settled that when performance depends on the continued existence of a given person or thing, and such continued existence was assumed as the basis of the agreement, the death of the person or the destruction of the thing puts an end to the obligation' (Lorillard v . Clyde, 142 N.Y. 456, 462, 37 N.E. 489, 491, 24 L.R.A. 113). But it does not follow that the transaction here involved, as finally formulated, did not in fact extend beyond its original motivating circumstances. In my reading of the document sued upon, I do not see that the Carnegie contract was so much the warp and woof of the agreement between the instant parties that, without Carnegie, there was no need for the...