Selwyn & Co. v. Waller

Ingraham, P. J.: The action is brought to recover the amount due to the plaintiff under a contract, whereby the appellant Shubert agreed to pay to the defendant Waller thirty-three and one-third per cent of the profits realized from the production of a play known as “The Butterfly on the Wheel.” That contract recited that the defendant Waller had received by assignment all the right, license and privilege to produce and perform the said play in the United States of America and Dominion of Canada, and that the parties thereto, Waller and Shubert, agreed to produce said play in the United States of America and Dominion of Canada, “not as partners but with a sharing of the profits in the percentage of sixty-six and two-thirds (66%) to the party of the second part [Shubert] and thirty-three and one-third (33%) to the party of the first part [Waller], and with a sharing of the losses and expenses in the same percentage.” The contract also contained provisions as to the methods of producing the play and as to the contribu — 727 — tions by the parties to enable it to be produced. The contract further provided that Shubert assumed in his two-thirds pro-' portion such obligations as are imposed on Waller in his contract for the purchase of the production and the contract rights to produce the said piece from one Frohman, and contained further provisions as to disbursements and expenses incident to the production of the play. This contract was dated December 29, 1911. The complaint alleged that on or about October 4, 1912, for and in consideration of $4,000, paid to him by the plaintiff, the said defendant Waller bargained, sold, transferred, assigned, granted and conveyed to the plaintiff a twenty-two and one-half per cent interest in and to all the authors’ royalties, which authors’ royalties had been previously assigned to the defendant Waller, and that by said agreement Waller promised that he would personally see to it that the said twenty-two and one-half per cent of authors’ royalties were paid direct to the plaintiff by the managers or producers of the said- play, and a copy of the contract was thereto annexed. The complaint further alleged the said play had been produced by the said defendants under their agreement and was performed by several different companies in various cities and towns throughout the United States of America and Dominion of Canada, and still is being produced by them; that said play has earned large royalties from the productions, and. that the plaintiff’s share of such authors’ royalties earned by reason of the production has been received and is being held by the said defendants and both of them; and that the remaining seventy-five percent of authors’ royalties earned from all productions of said play has been paid over by the defendants to the authors; that the plaintiff has made due and repeated demands on both of the defendants to turn over and pay to it twenty-two and one-half per cent of the authors’ royalties out of the moneys earned by said play and properly chargeable to authors’ royalties, and the defendants have neglected and refused to pay over to the plaintiff the said twenty-two and one-half per cent of the authors’ royalties; and that the said twenty-two and one-half per cent of the authors’ royalties now amounts to the sum of $8,000, and the plaintiff has made due and repeated demands on the said — 728 — defendant Waller to see to it that the said twenty-two and one-half per cent of authors’ royalties were paid to the plaintiff direct by the manager or managers producing the said play, but that the said Waller had neglected and refused to do so; and that the plaintiff has duly performed the terms and conditions of the agreement made with the said defendant Waller, on its part to be performed; and that the plaintiff has been damaged in the sum of $8,000, for vriiich sum judgment is demanded. By the contracts between Waller and Shubert it was expressly provided that Waller and Shubert were to produce the play, not as partners, but with a mere sharing of the profits and the losses. While each of the parties to the agreement was to contribute a certain sum of money to the production of the play, as between themselves they could agree that they should not be partners and that each should be entitled to his share of the profits realized from the production of the play. There is nothing in this agreement that I can see that prevented the defendant Waller from assigning to the plaintiff a part of the share in the profits that he was to receive from Shubert, and he has assigned to the plaintiff the right to a portion of the profits to which he would be entitled under his contract with Shubert. There was no position of trust or confidence between the parties. The defendant Waller, being entitled to a percentage of the profits that would result from the production of the play, simply assigned such percentage of the profits to the plaintiff. I think it is entirely clear that before the assignment Waller and Shubert were not partners, so as to impose upon them any trust relation, and, by the assignment to the plaintiff, the plaintiff did not know of such a partnership or have such relation with Shubert as to impose upon it any trust relation. After denying certain allegations of the complaint, the defendant Shubert sets up two defenses. The first defense alleges that when, on or about December 29, 1911, the defendant made and entered into the agreement with the defendant Waller, alleged in the complaint and annexed thereto, he entered into such agreement and assumed the obligation therein contained believing Hemmerde & Neilson to be the sole owners of said authors’ royalties and without any knowl — 729 — edge or notice of any assignment of the whole or any portion thereof to the said defendant Waller or to any other person; that the said defendant Waller fraudulently suppressed and concealed from this defendant, before they entered into such agreement, the fact which the said defendant Waller well knew, that he had taken an assignment from the said Hemmerde & Neilson on or before December 1, 1911, of twenty-five per cent of the authors’ royalties earned or to be earned in the United States of America and Dominion of Canada; that between January 13, 1912, and October 26, 1912, he paid to the défendant Waller the sum of $11,621.47 upon the representation of the said Waller that said sum was the amount due to Hemmerde & Neilson for authors’ royalties and that the same would be paid to the said Hemmerde & Neilson by the said defendant Waller; and that the said defendant Waller did not pay over the whole of said sum of $11,621.47 to the said Hemmerde & Neilson, but did secretly retain the sum of $2,905.37, being a twenty-five per cent interest in said authors’ royalties. It seems to me clear that this is entirely insufficient as a defense. It is not expressly alleged that, if defendant Shubert had known that Waller was entitled to twenty-five per cent of the authors’ royalties, he would not have made the contract with him. Nothing is alleged to show that it made the slightest difference to Shubert to whom the authors’ royalties were paid. He undertook by the contract with the defendant Waller to pay the authors’ royalties. The amount was not changed by the assignment, the obligation of the defendant Shubert was in no way increased by reason of the fact that, by the agreement between the authors and Waller, Waller was to retain a portion of authors’ royalties that was to be paid to the authors. Nothing is alleged to show any breach of trust or any violation of any obligation of Waller to Shubert, or that it made the slightest bit of difference to whom the authors’ royalties were paid. Both Waller and Shubert knew that, under the agreement by which Shubert and Waller had procured the right to produce the play, the authors’ royalties had to be paid. Shubert assumed the obligation to pay his share of the authors’ royalties. Both Waller and Shubert understood that authors’ royalties were to be paid out — 730 — of the profits from the production of the play, and the play has been produced and profits have been realized therefrom. There was no suppression of a fact that was at all material or which could possibly have had any influence upon the making of the contract between Waller and Shubert. No fraud was committed. A mere suppression of information as to who would ultimately receive the authors’ royalties, which both parties understood should be paid and which Shubert agreed should be paid, could have no possible effect upon the making of the contract, or could have increased in the slightest degree Shubert’s obligation under it. The ultimate disposition of these authors’ royalties was a matter about which Shubert had no possible interest. I can see no duty of any kind that was imposed upon the defendant Waller to make any statement as to his relations with the authors or as to the ultimate disposition of the authors’ royalties. It is not alleged that the suppression of this information caused Shubert any damage, and he does not even allege that he would not have entered into the contract if he had known of defendant Waller’s contract with the authors for a share of the authors’ royalties. The second defense realleges the allegation in the first defense and further alleges that the assignment of the twenty-two and one-half per cent of the authors’ royalties by the defendant Waller to plaintiff was not made honestly or in good faith; and the plaintiff was cognizant of the facts and circumstances under which said assignment was made, and well knew that the defendant Waller was not the true owner of the percentage of authors’ royalties so assigned, and that the said Waller had fraudulently suppressed and concealed from this defendant, at the time of entering into the agreement of December 29, 1911, annexed to the complaint, the fact that prior thereto and on or about December 1, 1911, he had taken an assignment of twenty-five per cent of the authors’ royalties from any and all performances in the United States of America and Dominion of Ganada. ' But this adds nothing to the defense. The authors are not disputing the validity of the assignment of a percentage of their royalties to Waller, and it is none of Shubert’s business what disposition'the authors made of royalties which Shubert undertook to pay to them. I cannot — 731 — see that Shubert has any more right to this percentage of authors’ royalties, which the authors had assigned to Waller, than he has to the remaining percentage of authors’ royalties, which the authors retained for their own use. The fact that defendant characterized these assignments as fraudulent, and the suppression of this information as to Waller’s interest in the royalties as fraudulent and in bad faith, does not make them so; there is not a single fact alleged as to such charge, and not a single fact alleged that could entitle Shubert to any relief either against Waller or the plaintiff. I think, therefore, the Special Term was clearly right in sustaining the demurrer to the two defenses and that the'order appealed from should be affirmed, with ten dollars costs and disbursements. McLaughlin and Dowling, JJ., concurred; Laughlin and Hotchkiss, JJ., dissented.