180 A.D. 778 | N.Y. App. Div. | 1917
This application to discipline an attorney results from “ a get-rich scheme gone wrong.” The charge is that in
It appears that in an action brought by the attorney against the petitioners and others, their associates in the scheme, each party had an opportunity to prove the facts relied upon. This court required the production of the judgment roll, the minutes and the papers used upon that trial, and any further documents and briefs they might wish to present, and is to determine whether the facts can be reasonably gathered from them or whether it will appoint a referee to take further testimony in the premises. After a careful examination, it seems that very little can be added to the record in that case and the facts now before the court, and that a reference to take proof is, therefore, unnecessary. The conduct and the rights of the parties so fully appear from the record that the court may now determine whether the attorney is guilty of such intentional wrong as to justify it in punishing him.
In August, 1907, one Pratt, a mining promoter, was at Elmira selling Canadian mining stocks. He succeeded in interesting the attorney, the petitioner, Mr. Jones, Mr. McLeod and Mr. Wait in Nevada mining, with the result that they sent Pratt to Nevada to find a mine and obtain an option, and furnished him about $500 to cover the expenses of his trip. Upon his return he brought a contract or option upon certain alleged mines, from one McClelland, on which he claimed to have paid $1,000, and he required an additional $200 to cover his expenses. The money was raised by the parties and paid him. The parties, other than Pratt, met and organized as a managing committee, and made a promotion agreement by which they were to be interested in the scheme in proportion to the amount severally contributed by them, it being agreed that the share of the attorney was $125 for services rendered, including the preparation of the underwriting agreement. He contributed no cash.
“ Thirteenth. The conveyances hereinbefore referred to having been made subject to examination and approval by counsel retained by said Managing Committee, it is understood that unless the said conveyances or such others as may be substituted shall be found to be good and sufficient conveyances of all the mining and mineral rights referred to, and said contracts or such others as may be substituted, to be in accordance with the mining practices and the Laws of the State of Nevada, subscriptions hereto shall be promptly returned in full.”
It is important to remember that Batterson, McLeod, Wait and Jones and others were the managing committee for the promoters, and that Batterson, McLeod, Wait and
It was agreed by the managing committee of the promoters that Marvin should go to Nevada, inspect the deeds left in escrow there, make such an investigation and examination of the property and matters connected therewith as to him seemed best in the interest of the promoters, and if the title was satisfactory to approve of it. The committee was to pay his expenses and the reasonable value of his services. Five hundred dollars was raised by the members of the committee, other than himself, for his expenses, each paying $100. It was arranged by Pratt and Batterson that Wenzel, a mining engineer, was to meet Marvin at Winnemucca, the" county seat of the county where the mines were, and render him assistance. After meeting Wenzel, examining the mines and the title, Marvin discovered that Wenzel was the agent of McClelland, the owner who had made the contract or given the option to Batterson, and he very properly watched Wenzel’s movements with suspicion. Marvin discovered that the posting of the mines was not properly made, and required a change in that respect. He found certain defects in the title which were to be made good; he inquired into mining properties and their value in the vicinity and became satisfied that the title was about to be made good but that it would take some days to bring it about. The alleged owner, McClelland, did not in fact own all of the mines but had an option on some of them which was about to expire with Burtelt, who was unwilling to continue the option unless he became satisfied that there was some prospect of a sale and that Marvin and his clients had real money, and he required that $400 be deposited in the local bank in escrow as a condition of continuing the option, to which Marvin assented. The deposit agreement was carefully drawn, apparently by Marvin, and was to the effect that the money was subject to Marvin’s order all the while and could only be used upon his order thereafter given to pay a part of the pinchase price of one of the contract mines if the purchase was made by his clients.
Before Marvin left Elmira one Mulford subscribed the syndicate agreement and actually paid $1,000 in cash. He
Pratt had been employed by the committee to obtain the underwriting in the vicinity of Elmira, and the life of the scheme it was felt depended upon his ability to effect such underwriting.
Marvin, after examining the mines, refused to approve of the title unless the price was reduced from $20,000 to $10,000, and the owner required time to consult the others interested before he could enter into that agreement, but after much delay gave a new contract for $10,000 and some stock, which was made upon condition that Marvin arrange with Burtelt to keep his option to McClelland alive until the committee acted upon the option. Knowing that McClelland’s title was, or was about to be made good, and in order to keep alive the Burtelt option, Marvin deposited $400 of the Mulford money in the bank under the agreement before mentioned. This was not a misappropriation of that money so far as the promoters were concerned, for they gave it to Marvin to apply upon the purchase price of the mines if it became necessary in order to continue the contract. And furthermore, in effect, it did not change his right to the money.
Marvin was in Nevada as a member of, and as counsel for, the promoters’ managing committee, and received money as such, and used the $400 fairly within the direction of his clients and associates, and is guilty of no misconduct with reference to it so far as they are concerned.
As matter of fact Pratt had not paid $1,000 on the option, and the contract price from McClelland was $10,000 and
Wenzel claimed that he had performed certain servicés for Pratt of the value of $700, and that Pratt had told him that this would be paid when Marvin arrived, and also claimed reimbursement for two or three days’ expenses while he was waiting for Marvin. Marvin paid about $90 expenses on account of the Burtelt option, and agreed to bring the other matters to the attention of the committee when he arrived home. Wenzel had no just claim against the committee or Marvin; whatever he had done was for McClelland, or for Pratt, in their joint effort to victimize the committee.
Marvin became satisfied that the World-Breaker mines, a part of the same property, were essential to the success of the contract mines, and obtained a separate option upon them for $5,000. He reported the negotiations to the committee and it seemed to meet their approval. But whether he exceeded his authority in that respect is not very material because he carried on the negotiations while waiting for the decision of McClelland and expended only a few dollars.
Upon returning to Elmira Marvin first learned that Pratt had run away. The promoters were then in despair and abandoned the scheme. He thereupon demanded the return of the $400 from the bank, but it neglected to pay him for a while, and Wenzel thereafter attached it, claiming to hold it for what Pratt owed him and his expenses while waiting for Marvin. The committee took some steps to contest the Wenzel claim and incurred an expense of $175 in so doing, which is a proper charge upon the managing committee of the promoters. Wenzel and his attorney succeeded in obtaining all of the money from the bank, except $65, which remains there.
After the scheme collapsed Marvin rendered a bill to big
The committee questioned various items in -Marvin’s expense account, and claimed that much of the service rendered by him was beyond his authority. It contends that his sole duty in Nevada was to examine the papers at the bank and the clerk’s office and determine whether the title was satisfactory. This is improbable in itself, for if the action of the committee was to rest solely upon the regularity of the papers, it would not have sent a lawyer to Nevada, but for a few dollars would have obtained certified copies of them and an abstract of the title. It contends that he had no right to ferret out the fraud on the part of Wenzel, McClelland and Pratt — that he had no right to investigate the mine and to buy it for $10,000 instead of $20,000. That contention answers itself. It is evident that his version as to his duties is the correct one; that he was not only to examine the title, but, when there, to ascertain the facts relating to the mine, its title, its value and the mining business in that locality and to represent the committee in the matters in which it was interested. The evidence of Batterson and of McLeod, of the committee, upon that subject, is improbable, and in addition we find that after they had settled with Mulford and paid his estate $1,000, and taken a receipt for the settlement and a pretended assignment of that claim, they verified an answer denying, in substance, that the Mulford claim had been assigned or was held in their interest. They, therefore, stand before the court as discredited, and wherever Marvin’s evidence
It is unnecessary to take up the various items of expense or services questioned. Those matters were quite fully investigated in the action and should have been settled there, and would have been so settled except for the position taken by the petitioner and his associates.
Mulford, by signing the syndicate agreement and paying $1,000 to the managing committee, did not become a syndicate, and the committee had no right to turn his money over to Marvin for use for any purpose until the syndicate was formed and sufficient money raised to pay for the mine and obtain the property for which the moneys under the syndicate agreement were first applicable. Marvin, as the attorney, should have informed the committee of its duties with reference to those moneys; but he and the committee misconstrued the syndicate agreement and understood that if the title was approved Mulford’s money could be used to apply upon the purchase price. This was a mistake, but they acted in good faith.
Batterson, McLeod, Jones and Wait have settled with the Mulford estate for the wrong done it, and have taken in their interest a pretended assignment of his claim. Marvin’s bill for services and expenses and the claim of Batterson and his associates for moneys paid to Mulford’s estate are now simply questions of adjustments between the members of the man aging committee; no one else is interested in them and the uncontradicted evidence shows that Marvin is able to respond for any balance found due from him.
Some of the members of the committee brought an action against Marvin for conversion of the $1,000, which in some
Marvin stands here as the attorney for the committee and a member of the committee and a participant in the joint enterprise. Any gain or loss from the scheme comes to him and to each associate according to his proportionate share. It is manifest that the expenses and the value of Marvin’s services on the western trip are not all to be paid by the other
A judgment dismissing the plaintiff’s complaint upon the ground that he could not have equitable relief is binding upon the parties until reversed. That is not very material here on an inquiry based upon the allegation that Marvin has. acted dishonestly and in bad faith and defrauded his clients. Those questions are to be settled by considering the acts done by him and the intent with which they were done. They do not rest upon the technical question whether or not an equitable or a legal action is the proper remedy in a certain case, or whether certain acts may or may not constitute a technical conversion of money without regard to intent. Marvin can be convicted here only for an intentional fraud, an intentional and wicked violation of his professional duties, and in determining that question we must consider his acts and motives with reference to the situation as it existed and the injury his clients are suffering from his wrongful acts. He was apparently always willing to meet his just obligations with his associates, but they insisted he alone must repay the Mulford money. They intended to make him stand the loss on account of the Wenzel attachment although they wished Wenzel upon him. It is evident that if Marvin had repaid Mulford, his associates would have avoided all liability to him as far as they were able. The evidence indicates that they were attempting to shirk their
We conclude that Marvin performed very valuable services for the committee in Nevada; that he acted in entire good faith and well within his authority and in their best interests, and that he is entitled to reasonable compensation for his services, considering the time spent and the value of the services performed. There is no satisfactory proof of any fact showing any bad faith or wrong upon his part. The committee authorized the use of the Mulford money when the title was approved by him; he approved the title, but he and the committee were wrong in assuming that the Mulford money could be used at that time. There is no satisfactory evidence that his accounts were fraudulent or unfair; his explanation of them is reasonable.
A fair statement of the account between Marvin and his associates and clients may be made as follows: His original bill, rendered in October, 1917, is substantially correct, except that it overlooks the fact that certain liabilities existed against the managing committee, a part of which he must pay, namely, the indebtedness, of $1,000 to Mulford and the expenditure by the committee of $175 in the Wenzel attachment case. Sometime in 1911 certain members of the committee settled with Mulford’s estate for $1,000 which, with interest at five per cent, now amounts to about $1,350. Adding interest at five per cent to the $175 paid by the committee makes the amount of that item about $282.50. There are assets belonging to the committee of $65 in the Nevada bank and the $7.50 tendered by Marvin. This leaves an indebtedness against the committee of about $1,560, which
The petition is, therefore, dismissed, unless within twenty days the judgment against Marvin in the action referred to is discharged and the pending litigations against him discontinued. If those acts are done, then within twenty days thereafter Marvin is ordered to cancel the judgment he has obtained against Batterson and others; to give to Batterson, as chairman, an order for the moneys in the Nevada bank and in the Elmira bank on tender, and pay to the other promoters a sum equal to his pro rata share of said $1,560, and if he fails or neglects to do those acts within twenty days, application may be made to the court for its further order.
All concurred, except Sewell, J., not voting.
Petition dismissed, unless within twenty days the judgment against Marvin in the action referred to is discharged and the pending litigations against him discontinued. If those acts are done, then within twenty days thereafter Marvin is ordered to cancel the judgment he has obtained against Batterson and others; to give to Batterson, as chairman, an order for the moneys in the Nevada bank and in the Elmira bank on tender, and pay to the other promoters a sum equal to his pro rata share of said $1,560, and if he fails or neglects to do those acts within twenty days, application may be made to the court for its further order.