Stein v. George B. Spearin, Inc.

• Decision Date: 25 April 1936
• Parties: STEIN v. GEORGE B. SPEARIN, Inc., et al. SAME v. F. H. McGRAW CO. et al.
• Court: New Jersey Court of Chancery

184 A. 436

STEIN

v. GEORGE B. SPEARIN, Inc., et al.

SAME

v. F. H. McGRAW CO. et al.

Court of Chancery of New Jersey.

April 25, 1936.

Syllabus by the Court.

1. The relationship of joint adventurers need not necessarily be express, but may be implied from the agreements of the parties, which, aside from usual requisites as to form and validity applicable to contracts in general, need assume no particular form of expression or formality of execution.

2. The relationship, as well as the rights and duties, of parties to a common adventure, is governed, not by the contract constituting the subject of their venture, but by the arrangements and agreement made between themselves with respect thereto.

3. Where parties arranged to procure a contract jointly, but, at the request of the company awarding it, selected one of their number in whose name it was taken, each, however, to perform and finance such items thereof as was to be apportioned and allocated to it, and each of whom, in addition to being reimbursed for their respective expenditures, was to receive one-third of the entire profit netted by their common enterprise, their relationship, rights, and duties, inter sese, were those of coadventurers rather than creditors.

4. Within the scope of their common enterprise, coadventurers stand in a fiduciary relation each to the other, bound to the utmost good faith in dealing with and strictly accounting for the subject-matter of their joint venture.

5. The respective rights or interests of each of the joint adventurers in the subject of their common enterprise are in no wise impaired or diminished by the fact that it is undertaken or acquired in the name of only one and not all of them; nor does that fact confer upon the one so selected any rights which he otherwise would not have enjoyed, nor does it subject the subject-matter of the joint venture to any greater claim of his individual creditors than his own interest therein can satisfy.

6. Where two of three joint adventurers by means of assignments executed by the third received merely their respective shares of. a fund payable to said assignor for the benefit of all, said assignments cannot be said to operate as effecting a transfer of any of said assignor's property available to its creditors, and hence, even if executed while said assignor was insolvent or contemplating insolvency, will not be held to be invalid under the provisions of the General Corporation Act, § 64 Comp.St. 1910, p. 1638, § 64).

7. Turp v. Dickinson, 100 N.J.Eq. 41, 134 A. 888, and Gill v. State Garage, 138 A. 193, 5 N.J.Misc. 759, considered, and held not applicable where the challenged acts of the officers or directors did not result in an appropriation or distribution of any part of the insolvent company's assets amongst some of its creditors to the exclusion of the others.

Separate suits by Alfred A. Stein, receiver of the Terminal Warehouses, Incorporated, against George B. Spearin, Incorporated, and others, and against the F. H. McGraw Company and others.

Decree dismissing bill in each case.

Mark A. Sullivan, of Jersey City, for complainant.

John Milton (by Thomas McNulty), of Jersey City, for defendants George B. Spearin, Inc., F. H. McGraw Co., William J. MacMillan, and George Fink.

Wall, Haight, Carey & Hartpence (by John A. Hartpence), of Jersey City, for defendant Pennsylvania R. Co.

LEWIS, Vice Chancellor.

By consent of counsel, two separate actions brought by complainant, one against George B. Spearin, Inc., et al., and the other against F. H. McGraw Company et al. (hereinafter referred to as Spearin and McGraw, respectively), involving similar facts, were heard and tried together; the relief sought in each being a decree setting aside the assignment therein challenged and adjudging the monies paid and/or received thereunder to be due and owing to complainant as receiver of Terminal Warehouses, Inc. (hereinafter referred to as Terminal).

Without dispute, the testimony discloses these essential facts and circumstances: On February 6, 1930, under circumstances hereinafter adverted to, a so-called fixed fee construction contract was entered into between Terminal (formerly Terminal Development Company) and the Pennsylvania Railroad Company (hereinafter referred to as railroad company) for the demolition of the latter's "Pier D" at Jersey City, the construction of a new one in its place, the removal of the piles in the then existing dock, and the performance of the dredging and engineering work necessary in connection therewith.

Pursuant to a prior arrangement between them, Terminal shortly thereafter apportioned and assigned this work as follows: To defendant Spearin, the removal of the old decks and old piles, the sinking of the new piles, the construction of the new dock, the installation of the hardware, and the performance of the excavating, concrete, and steel reinforcement work; to defendant McGraw, the superintending, accounting, field clerk, field engineering, communications, masonry, concrete, finish, carpentry, finish hardware, finish cement, and finish plaster work. Each of said defendants, in turn, undertook and agreed to perform the work thus allocated and assigned to it.

Although all of the work required by its said contract was completed in September, 1931, the railroad company refused to honor the requisition for final payment of $28,971.21 which Terminal shortly thereafter made upon it. Its position undoubtedly was actuated merely by its desire to withhold from Terminal, of which William J. MacMillan was president, any money which in turn might directly or indirectly be used by him in financing the controversy then existing between it (the railroad company) and Penn Dock & Warehouse Company, of which he also was president. By reason thereof McGraw and Spearin were unable to receive the sums of $10,137.57, $13,613.35, and $1,567.62 due them as their respective shares of that payment. Upon their assuring it that neither of them, the Pier D contract excepted, was in any wise connected with Terminal, the railroad company paid said sums to them respectively, but only after each had first procured and delivered to it a separate assignment from Terminal for each of said amounts.

It is these assignments, dated February 15 and March 1, 1932, respectively, that complainant—based upon a decree of this court dated March 8, 1932, adjudicating Terminal insolvent and appointing his predecessor as its receiver—argues (a) were made by Terminal while insolvent or in contemplation of insolvency, (b) affected an unlawful preference in favor of McGraw and Spearin over Terminal's other creditors, and (c) are, under section 64 of the General Corporation Act (2 Comp.St. 1910, p. 1638, § 64), utterly null and void as against those creditors, citing Hoagland v. United States Trust Co., 110 N.J.Eq. 489, 160 A. 662; Nugent v. Lindsley, 97 NJ.Law, 268, 116 A. 790; First National Bank of Lyndhurst v. Bianchi & Smith, 106 N.J.Eq. 333, 150 A. 774. That contention, however, presupposes and assumes the existence of all the essential facts upon which it is based.

Aside from the file in the case of Henry Janssen Securities Corporation v. Terminal Warehouses, Inc. (Docket 88-614) and the abovementioned decree of insolvency therein entered, complainant produced no relevant or competent evidence tending to establish the insolvency of Terminal on the dates of those assignments. Tested by the principle that insolvency once established is presumed to continue forward, but not backward, from the date of its establishment (Glauberman v. Bergeline Trust Company, 108 N.J.Eq. 531, 155 A. 766; Martin v. Gwynn, 90 Ark. 44, 117 S.W. 754; Nevers v. Hack, 138 Ind. 260, 37 N.E. 791, 46 Am.St.Rep. 380; Dinius v. Lahr, 36 Ind.App. 425, 74 N.E. 1033; Oklahoma National Bank v. Cobb, 52 Okl. 654, 153 P. 134), it may be well questioned whether that file and decree constitute sufficient competent proof of Terminal's insolvency on the dates of the assignments in question. Be that as it may, it is unnecessary to pass upon that question, since the conclusions hereinafter reached are based upon other grounds.

Complainant asserts that McGraw and Spearin are mere creditors of Terminal. In support of this assertion, he points to no evidence other than the contract between the railroad company and Terminal. He lays particular stress upon that provision thereof whereby all payments thereunder are to be made by the railroad company to Terminal. From this alone be proceeds to intriguingly spell out and deduce a relationship of debtor and creditor as between Terminal on the one side, and McGraw and Spearin on the other. That reasoning, however, overlooks and completely ignores the very arrangements and agreements made between Terminal, McGraw, and Spearin themselves, pursuant to which that contract was made and executed in its present form.

It is entirely uncontroverted that as early as January, 1929, Terminal, McGraw, and Spearin, by their respective presidents, discussed the possibility of their jointly procuring the contract from the railroad company for its then contemplated Pier D construction project. Subsequently, at a conference on December 16, 1929, Terminal's president apprised the others of the railroad company's willingness to award a contract for that work and inquired of each whether their respective companies would join with his in undertaking and performing it; each of them to finance such part thereof as would be apportioned and allocated to it and for which each was to be reimbursed out of the contract proceeds in addition to receiving one-third of the entire contract fee. With that arrangement all were in accord. In January, 1930, they were informed by the railroad company's engineer and representative that, for matters of convenience to itself, it couldn't enter into a contract with the three of them jointly, but would do so with whichever one of them they selected, who then, in turn, could...