Hathaway v. Clendening Co.

Houghton, J.: The plaintiff alleges that the defendant employed him as general manager of a hotel apartment house and- agreed to pay him for his services a fixed salary of $1,200 per year, and in addition thereto a sum equal to ten per cent of the net profits, and, that such net profits amounted to $16,000, and that the defendant neglected and refused to account to the- plaintiff therefor or to pay him his percentage thereof, and judgment is demanded that the defendant account for such profits and pay him such sum as might be due him thereon. The defendant plead that the plaintiff had an adequate remedy at law and notwithstanding such plea and against the objection of the defendant, the learned Special Term granted an interlocutory judgment directing the defendant to account for the profits of the hotel during the period of the plaintiff’s employment and appointed a referee to take and. state such account. The defendant appeals [408] from such judgment on -the ground that an equitable action does not lie for an accounting where compensation for services is agreed to be made through sharing in the net profits of a business, because no partnership exists and no trust or fiduciary relation is created by such á contract. We think the defendant is correct in its contention and that the - judgment must be reversed. . An agreement made by an employer that his servant shall share in the profits of his business, as entire or partial compensa- . tion for his .services, does not make the servant a partner of ■ liis. employer. ,(Richardson v. Hughitt, 76 N. Y. 55; Merchant's National Bank v. Barnes, 32 App. Div. 92.) - - Such a contract is one of mere hiring and providing for compensation in a particular' manner supposedly, tending to - induce greater energy and faithfulness on the part of the employee, but no trust, or fiduciary relation is created. Where a partnership exists each partner is the agent of the other, and where persons are engaged in a joint venture such an .enterprise partakes of the relation of partnership and equitable actions for an accounting are proper because of the fiduciary relation existing. It is well settled that an equitable action for an accounting does not lie unless some trust or fiduciary relation, exists between the parties. (Moore v. Coyne, 113 App. Div. 52; Yuengling v. Betz, 120 id. 709; Harle v. Brennig, 131 id. 742.) Where compensation dépends upon the amount of profits an accounting, of . course, is necessary to ascertain what the profits have been, but such . an accounting can be had' in an action at law¿ (Smith v. Bodine, 74 N. Y. 30.) In Parks v. Gates (84 App. Div. 534) and Boice v. Jones (106 id. 547), upon which respondent relies, there was a- joint venture which partook of a partnership to such an extent that an equitable . action for an accounting was held proper. In Parker v. Pullman & Co. (36 App. Div. 208) the question arose upon demurrer to tlie complaint, and while the demurrer may have been properly over- ■ ruled, the reasoning which led to such conclusion was not a.-part of' the decision itself. • ■ • . The plaintiff can obtain all the i-elief to which he is entitled, and ■ such accounting as is necessary to; determine what his share of the profits, if any, may be in an action at law. His. action in equity was [409] not well brought, and the interlocutory judgment must be reversed, ■with costs, and a new trial granted, with costs.to the appellant to abide the event. .Ingraham, McLaughlin, Laughlin and Scott, JJ., concurred. Judgment reversed, new trial ordered, costs to appellant to abide event.