10 N.J. Misc. 675 | New York Court of Chancery | 1932
The relief sought is three-fold: For an accounting of moneys received upon trust; for a partnership accounting, and for a restoration of the title to land.
The suit is by Williams A. Hunt, dull and, to all appearances, subnormal, against his brother, Frederick M. Hunt. The limit of Williams’ capacity is that of a hostler; he knows horses, and little else. Business experience he has none. Although possessed of an inheritance, he has never made a bank deposit or drawn a check; others did it for him, and had to. Fred is shrewd and unscrupulous. By inclination be is a horse trader; by occupation he was a broker on the produce exchange. ' The brothers lived with their mother
In 1904, Williams and Fred formed Hunt Brothers, a partnership, to conduct a livery- stable business in Newark, which lasted until 1924, shortly before this bill was filed’. The partnership prospered; in later years it dwindled into insignificance, when the automobile came. Williams was the stableman. Fred conducted the business end, kept the books and handled the finances. He kept three Hunt Brothers’ accounts in as many banks in New York, against which he alone could draw, and did; and he was not always careful to confine the withdrawals to the firm’s transactions. With these accounts and the business affairs generally, Williams had no concern; he hadn’t the wit. In all the years he withdrew but $700, mostly in small lots, from the firm. In June, 1911, Fred gave him a check for $5,500, half the cash in bank, he taking the rest. It is a fair surmise that about this time Fred conceived the idea of concealing his assets in Williams’ name to cheat his creditors.
In December of 1911, Fred induced Williams to purchase a plot of land on Washington street, Newark, for a livery stable and garage. Williams paid the purchase price, some $11,500, out of his inheritance and assumed two mortgages, one for $15,000, and a second for $6,500. Fred engineered the deal. The holder of the $6,500 mortgage started foreclosure and Fred paid him off without consulting Williams, afterwards taking his note for the amount; that was the first hiding in the scheme of concealment.
Fred, then, in Williams’ name, contracted with William A. Blanchard Company, a builder, to erect the stable and garage. He negotiated the contract and supervised the construction. The total cost was approximately $38,000. Williams advanced some of the cost, about $8,000, and the rest was furnished by Fred out of his own and partnership funds. To cover up, Fred took Williams’ note for $9,000, for money supposedly advanced to him up to that time towards paying for the structure; his second step in the concealment.
Cornered, Fred capitulated and make overtures for settlement. His first proposition, prepared by Williams’ then recently retained lawyer, addressed to Fred’s New York lawyer for transmission to the trustee, was that Williams would pay all the debts and costs, over a period of years, and secure the payment by a mortgage on the garage. Mrs. Jaques held
In deciding what should be done, we are ever mindful that we are dealing with the testimony of confessed perjurers and consequently consider nothing proved unless by their statements against interest or by supporting documents, independent evidence or by circumstances well established; their conflicting testimony standing alone is rejected as unworthy.
The certificate was unquestionably false and a fraud upon the statute. The document was the hands of Williams, but its inspiration was the voice of Fred to cheat his creditors, and Williams in his stupid way knew and reluctantly aided. It does not lie in Fred’s mouth to raise a conventional estoppel nor to interpose the moral issue as a defense, but the court may and always does spurn a tainted complaint. Equity’s contempt is not of the sinning supplicant, but only of his sinful complaint. Williams can have nothing of his contract of co-partnership that occurred after he falsely certified that he alone owned the business, for to grant him relief as to that would countenance his fraud, but he is not to be denied his rights up to that time; they are not infected by his later
The proofs disclose a number of transactions involving, the handling of Williams’ funds by Fred, apparently distinct from the partnership but, in reality, they will be found to be partnership funds or so intermingled with them that most of them may be taken into the reckoning in the partnership accounting.
Fred, for a time, collected Williams’ income from the Samuel I. Hunt estate and, of a total of $30,000, has accounted for all but' one installment of $70.40. That this one, like the rest, was not deposited to Williams’ credit is not satisfactorily established.
Fred bought the homestead on Washington street in 1905. There can be little doubt that it was a family affair, for at that time Williams and Mrs. Jaques each advanced to Fred $3,000; the purchase price was $6,500. For the earnest money of $350, Fred drew a partnership check, which was not used. Williams’ cheek for $3,000 is in evidence and the endorsements seem to link it to the transaction, but whether it was a loan or a contribution towards the purchase price is not clear. Fred maintains it was a loan and Williams says it was given in the general line of business. We agree with counsel for Fred, without deciding, that “it was given to Fred M. Hunt in the usual course of the business of Hunt Brothers, for use in that business.” It will stand as an item in the partnership accounting.
The brothers purchased a home in Bahway, before moving to Newark, each contributing half the purchase price. After they moved to Newark in 1904 they sold it for $5,000, taking back a mortgage from Wheller, the purchaser, for $4,850. The mortgage was purchased by Mrs. Jaques shortly after Fred went into bankruptcy, and the proceeds found their way either into the partnership account then being carried on by Fred in Williams’ name in the Newark Trust Companjq or it was laid out in paying for the garage then in the course of construction. The item forms a part of the partnership accounting, as do the rents of the property col
There were two mortgages of $4,500 each taken in the names of Fred and Williams; Hunt, known as the Kandolph mortgages. These were investments, in part, of Hunt Brothers’ funds. When the mortgages were paid off, the proceeds went into Hunt Brothers’ account and formed part of the balance in bank of $11,000, which Fred split with Williams in June, 1911. The contention of Fred that this was a final accounting and a termination of the partnership, already adversely disposed of, finds rebuke in the fact that Williams gave Fred, out of his private fund, a check for $2,250, his one-half of the second $4,500 Kandolph mortgage, the other half being taken from the partnership. A proper apportionment required that Williams be repaid his individual advance and the balance divided. Fred must also account for the interest on these mortgages.
The Kandolph-Wright mortgage appears to have been a personal investment of Fred. It was assigned by him to the builder of the garage and was later purchased by Mrs. Jaques.
Fred admits making an investment of $1,250 out of Williams’ funds in a mortgage of Jettie Auerback, and that he later cashed it. He accounted for only $999. He is responsible for the difference and the interest.
The second Auerback mortgage of $4,000 made to Fred was his property, paid for by his funds.
An accounting of the rents of the Belmont avenue house will be eliminated. One Jeffrey executed to Williams a mortgage for $2,750 on the property. He owed the firm, Williams says, $1,250, and that $1,443.83 was drawn from his account in a Newark bank to make up the difference. Fred says that Jeffrey owed the firm but $300 and that the difference was made up by two checks, one for $1,000, the other for $1,443.83 drawn on Williams’ account for which he (Fred) had first deposited the cash. The firm’s books show that the mortgage debt was made up of $1,250 notes and the balance in cash. The mortgage was taken in Williams’ name and later, upon foreclosure of a prior mortgage, the title was taken in Wil
The Churchman mortgage of $2,300, in the names of Williams and Fred, was an investment by each of 81,000, and of $300 due to the partnership. Fred fraudulently assigned his half interest to Williams before the bankruptcy. Fred caused the mortgage to be foreclosed and bought the property at sheriff's sale in Williams’ name, afterwards selling it at a profit., taking back a $2,000 mortgage. Williams claims Fred has not accounted for the interest or for Williams’ share of the profit. The proofs show that Williams’ received the entire proceeds of the $2,000 mortgage. The excess payment, Fred says, with the one-half interest in the Belmont avenue house just mentioned, was in settlement of moneys Williams spent on the garage. This is regarded as an explanation but nor a fact. Though Fred’s interest in the mortgage was assigned in fraud, and the title in the foreclosure suit was taken in Williams’ name to- defraud creditors, Williams should account for the excess in the general accounting he seeks from Fred. Fred is not a supplicant; he is not to be penalized.
Williams’ claim to the ownership of the Washington street garage property by way of a resulting trust arising out of his payment of the purchase price of the land must be denied. A resulting trust would ordinarily arise in Williams’ favor from the payment of the purchase money (Phillips v. Phillips, 81 N. J. Eq. 459; 86 Atl. Rep. 949; 83 N. J. Eq. 345; 91 Atl. Rep. 1070), but circumstances may countervail the equitable doctrine of resulting trusts. It is not entertained when to maintain it results in harm. Like all other measures in equity, exact justice must flow from its exercise. To award it to Williams would be a greater injustice than to allow it to remain in Fred. He paid towards it approximately $20,000, while Fred’s contribution was $30,000 and more. Williams did not buy this property for himself. Fred directed the purchase and Williams understood that it was to be used for a costly stable and garage for which he knew he hadn’t the capital; he had exhausted his bank account in the payment of the purchase price. It is our opinion that the purchase was made for the partnership, that the stable and garage were to be used in carrying on the partnership business, and that the moneys laid out for the buildings were partnership contributions. Fred’s attitude is that he alone is the owner of the garage property, he having the title from the trustee in bankruptcy; and we may add with propriety, by again over-reaching his weakling brother. The stand is not unassailable. Under our decree in the Battery Park National Bank suit, title was declared to be held in trust for him by Williams and by force of the statute it vested in the trustee, but only to the extent that it was needed for creditors; anything over remained in Williams, the joint fraud-doer, and it is questionable whether the trustee had the power to reconvey the property to anyone but Williams. Williams’ authority to the trustee, in the settlement agreement, to convey it to Fred was special and limited, and obviously it was not exercised according to the strict letter of the power. Further, there is not much question that Wil
Both counsel advance interesting arguments and cite a mass of authorities on the question of Williams’ right to recover, he having given perjured testimony in the bankruptcy hearings and before this court that the garage property and the structure were paid for by him out of cash he kept in a box in a trunk at his home. The perjury was Fred’s cunning idea, taught, and spoken parrot-like, to Williams. Williams’ perjury impeaches his veracity as a witness in this cause, but relief is not to be withheld if his rights are otherwise established and are not infected by his iniquity. The sinner, however corrupt, is not denied relief in equity unless the right he seeks to vindicate is tainted with sin. “The inequity which deprives a suitor of a right to justice in a court of equity is not general iniquitous conduct unconnected with the act of the defendant which the complaining party states as his ground or cause of action; but it must be evil practice or wrong conduct in the particular matter or transaction in respect to which judicial protection or redress is sought.” The unclean hands’ doctrine is applicable only to cases where the particular claim is tied up to the inequitable conduct as an element of its creation. Neubeck v. Neubeck, 94 N. J. Eq. 167; 119 Atl. Rep. 26. “It [the maxim of unclean hands] must be understood to refer to willful misconduct in regard to the matter in litigation, and not to misconduct, however gross, which is unconnected therewith and with which the opposite party in the cause has no concern.” Shotwell v. Stickle, 83 N. J. Eq. 188; 90 Atl. Rep. 246. “The maxim * * * is confined to misconduct in regard to, or at all events connected with, the matter in litigation, so that it has in some measure affected the equitable relations subsisting between the two parties, and arising out of the transaction.” Weidman Silk Dyeing Co. v. East Jersey Water Co., 88 N. J.
Fred also claims immunity from accounting because, as he contends, Williams is guilty of perjury in the giving of testimony in the pending cause, relying upon the doctrine of unclean hands as applied in Clickner v. Clickner, 95 N. J. Eq. 479; 123 Atl. Rep. 373; Gluck v. Rynda Development Co., 99 N. J. Eq. 788; 134 Atl. Rep. 363, and Pfender v. Pfender, 104 N. J. Eq. 107; 144 Atl. Rep. 333, and a long line of cases from other jurisdictions, wherein it is laid down that a suitor’s complaint will not be rejected for impropriety of
It is contended that the decree in the Battery Park National Bank suit is res adjudicata and bars recovery of the garage and of a partnership accounting. The decree recites that Williams holds the property upon a resulting trust in favor of Pred, upon a finding of fact, upon the false testimony, that Pred paid the purchase price. It has already been held that Williams is not entitled to the property and his prayer in that respect having been denied, the question of res adjudicata is academic; but if it were involved, we fail to see that it would be an estoppel. The decree was entered on the issue charging that the property was held in trust for Pred in fraud of his creditors, and the recital that Pred furnished the purchase money was in demonstration of the fraud. While the finding of fact was essential to the conclusion of fraud, the recitals, however couched, permit of no broader construction than the issues raised and decided, and was not an adjudication of the rights and liabilities of the defendants inter sese, then not in issue, litigated or determined. The decree does not establish a resulting trust in favor of Pred, but, finding that it existed, condemned it as fraudulent as to creditors. It was not a ruling as between Williams and Pred, to the advantage of the latter. Upon satisfying creditors the decree would be spent and upon motion would be vacated, leaving the title in Williams. At all events, the decree does not work an estoppel upon the partnership accounting and an accounting of Williams’ private funds handled by Pred, to which the relief sought is confined.
Pred also seeks to estop Williams on the ground of laches. The continuity of the confidential relation between the two brothers, in which Pred dominated, and of the partnership,
The elapse of time, as a factor in laches, is that which expires after the trust ceases and up to the bringing of the suit. That Williams is barred from an accounting of the partnership transactions after 1912, because of his false certificate, does not mark an interruption of the fiduciary relationship at that time.
There will be a reference to a master to state an account in accordance with the views herein expressed.