| NY | Jan 28, 1919
This case is here upon re-argument. We need not rehearse the facts. They are concisely stated in Judge CUDDEBACK'S opinion (
The defendants argue that the two contracts are inseparably united in scheme and execution. They say, therefore, that misconduct in respect of one defeats recovery under the other. But we think there is no such union as the argument assumes. The two transactions are clearly severable. The plaintiff had an interest with Perry in claims "89 to 104 below discovery at Bonanza Creek." Those claims were the subject of the Perry-Treadgold contract. The plaintiff had another interest in compensation paid to Perry for services in the Yukon district. That compensation was the subject *384 of the Perry-Guggenheim contract. Perry had done work, and was entitled to pay. The plaintiff persuaded him to ask for more pay than would otherwise have satisfied him, in order that plaintiff might get a share of it. We held that this was a breach of the plaintiff's duty to his employer. The payment, thus unlawfully swollen, was subject to a constructive trust. Our decision went no farther. But the payment for Perry's services is quite distinct from the payment of Perry's profits in the sale of Treadgold's claims. The amount due under each head is stated in the findings. Increase of the one had no tendency to swell the measure of the other. Subsequent misconduct in another and distinct transaction does not work a forfeiture of rights already lawfully accrued.
There remains, however, a question at once more important and more difficult. It is whether the plaintiff ever lawfully acquired a share in the profits of the Perry-Treadgold contract, considered by itself. He had agreed with his employer that he would not become directly or indirectly interested in, or connected with, any person, partnership or corporation engaged in any similar business. He had also agreed that none of the covenants or conditions of the contract should be "waived, modified, altered, or annulled" except by writing subscribed by the parties, who further covenanted that they would not "urge or claim any such waiver, alteration, modification or amendment unless the same be evidenced by such writing." The finding is that the president and the general manager of the employer knew that plaintiff was interested in the Perry-Treadgold contract and consented thereto, but no written consent was found or proved. The question, therefore, subdivides itself into two branches. One is whether the plaintiff, if he had purchased an interest in the claims without the consent of his employer, would be chargeable as a trustee. *385 The other is whether consent not evidenced by a writing has varied the employer's rights.
(1) We think the situation is one where an employer, not consenting to the investment, would have the right, if he so elected, to hold the plaintiff as trustee.
The plaintiff was sent to the Yukon to investigate mining claims which were the subject of an option. He found certain other claims which were not included in the option, but which he believed to be essential to the successful operation of those that were included. In conjunction with Perry, he purchased rights in the new claims. The two were partners in the venture. Later his employer, appreciating the importance of the claims, determined to buy them for itself. We think it had the right to say to the agent that he must renounce the profits of the transaction and transfer the claims at cost. A different situation would be presented if the claims had no relation to those which the plaintiff was under a duty to investigate. But they had an intimate relation. One could not profitably be operated without the other. Let us suppose that the plaintiff, instead of buying the claims as a partner with Perry, had bought them alone. No one, we think, would say that he could have retained them against his employer, and held out for an extravagant price, as, of course, he could have done if the purchase was not affected by a trust. It is not an answer to say that he was not bound to risk his money as he did, or to go into the enterprise at all (Rose v. Hayden,
We think, therefore, that aside from the special provisions of this contract, the agent became a trustee at the election of the principal. But the contract reinforces that conclusion. It is true that an agent or a partner who breaks a covenant not to engage in some other business does not, as a matter of course, become chargeable as a trustee for the profits of the forbidden venture (Dean v. MacDowell, L.R. 8 Ch. Div. 345; Trimble v.Goldberg, 1906, A.C. 494, 500; Aas v. Benham, 1891, 2 Ch. Div. 244; Latta v. Kilbourn,
(2) We conclude, therefore, that the plaintiff was chargeable as a trustee if the employer so elected. But the Appellate Division has found upon sufficient evidence that the employer consented to the investment. The plaintiff, when he associated himself with Perry, reserved the privilege of withdrawal. The contract was that if the president or the general manager disapproved of his investment, then the payment which he had made, instead of being a purchase of a share in a joint enterprise, should be a loan to Perry personally. This is found by the trial judge as well as by the Appellate Division. The testimony is that, in that event, the loan was to be repaid in a reasonable time. The president and the general manager, with knowledge that the plaintiff had reserved this privilege of withdrawal, consented that the investment be retained. The question is whether the employer may now have the aid of a court of equity to impress upon the investment the quality of a constructive trust.
The question would answer itself if it were not for the covenant that there shall be no waiver or amendment not evidenced by a writing. The employer sets up this covenant to nullify its oral consent. The employee asserts that the covenant is nugatory. Those who make a contract, may unmake it. The clause which forbids a change, may be changed like any other. The prohibition of oral waiver, may itself be waived. "Every such agreement is ended by the new one which contradicts *388
it" (Westchester F. Ins. Co. v. Earle,
We hold, therefore, that the consent, though oral, gives protection to the agent, and acquits him of a breach of contract. But if this were doubtful, another path would bring us to the same result. The question here is not whether a contract has been broken. There has been no attempt to discharge the agent, to terminate his contract, or to hold him liable for damages. The question is whether the breach, if it be assumed, demands the implication of a trust. The oral consent is at least sufficient to preclude that implication. It is at least equivalent to an election that the agent, however delinquent, shall not be charged as a trustee. To use it for that purpose is not to waive or change a provision of *389
the contract, and so the covenant does not apply, even if it could ever be effective. Much of the trouble comes from the use of the misleading word "waiver" (Ewart Law of Waiver, p. 3). It is made to stand for many things — sometimes for estoppel, sometimes for contract, sometimes for election (Ewart, supra). The oral consent may not have created an estoppel, nor modified a contract, and yet it may have established an election. Admit for the purpose of the argument that the plaintiff broke his contract when he took an interest in a mine. Even then, the employer was not bound to charge him as a trustee. At the utmost, it had a right of election (Hammond v. Hopkins,
Our conclusion, therefore, is that the judgment of the Appellate Division should be modified so that the award made to the plaintiff shall be limited to his share of the profits under the so-called Perry-Treadgold contract, to wit: $27,300 in cash with interest from April 1, 1908, *390 and 5,460 shares of the capital stock of the Yukon Gold Company of the par value of $27,300 with any dividends declared thereon since April 1, 1908; that in the event of any dispute between the parties as to the correctness of the aforesaid computation of profits either party shall be at liberty to apply to the Special Term of the Supreme Court at the foot of the judgment herein for further directions with reference thereto; that they may also make like application for further directions in respect of the enforcement of the judgment if such directions become necessary; and that as so modified, the judgment of the Appellate Division be affirmed, without costs to either party in any court.
HISCOCK, Ch. J., CHASE, COLLIN and CRANE, JJ., concur; CUDDEBACK and HOGAN, JJ., dissent and vote for a new trial.
Judgment accordingly.