Pomeroy v. Benton

77 Mo. 64 | Mo. | 1882

Lead Opinion

Sherwood, J.

When this cause was in this court on a former occasion, (57 Mo. 531,) we examined the record with the most patient and laborious attention. The result of that examination was, that the defendant was declared a fraudulent trustee, the judgment reversed, and the cause remanded with directions to have an accounting on that basis. The defendant did not move for a rehearing in this court either on matter of fact or matter of law. The cause on its return to the circuit court was committed to a referee, with instructions “ to hear all competent testimony that may be offered by the parties, and state the account between said parties in accordance with the opinion of the Supreme Court herein, and make report,” etc. The sole duty of the referee, as seen from those instructions, was simply to take an account of the amount due by defendant, treating him as a fraudulent trustee, for this was “ in accordance with the opinion of the Supreme Court herein.” But the learned referee could not, as seen by his report, confine himself within the narrow limits assigned him; he must needs investigate other things and look into other matters, de hors his duties and instructions. He must needs see whether the opinion of this court was correct, and wherein he deemed it incorrect, he must needs proceed to correct it.

The record now.before us does not substantially differ from that- presented on a former occasion. There was an array of evidence showing the defendant’s fraud, which we regarded as conclusive, and so found and declared when we reversed the judgment and remanded the cause.. We have ruled that where we have remanded a cause with directions as to the further proceeding of the trial court, that there the case does not present the same phase as if there had been a simple reversal and remanding; that when special directions have been given as aforesaid, it is out of the power of the lower court to open the cause and have a new trial. Chouteau v. Allen, 74 Mo. 56. Under this ruling even the circuit court would have been powerless to have done otherwise than as in our mandate directed, and of consequence so would the referee. But the referee was not content to yield obedience either to our mandate or the instructions of the circuit court. We found in the record abundant indicia of fraud. The referee took it upon himself to say that there was no fraud, although upon every hand, in this, as in the former record, fraud and fraudulent practices on the part of the defendant in appropriating the funds, credits and assets of the partnership to his own use; in deceiving his partner by a false balance sheet, and false representations concerning the same; in the destruction and fabrication of evidence; in evading at the hearing direct questions as to matters with which he must have been familiar, and with which a court of equity-will hold he was familiar; in answering that he did not know, could not remember, etc., respecting amounts, dates and other things touching the transactions in which 'he had been engaged, which even the most ordinary memory could not fail to recall — are patent to even the most cursory observation. The referee, however, notwithstanding that, in the face of the finding and judgment of this court, and it may be added in the face of the most convincing testimony to the contrary, he acquitted the defendant of the charge of fraud, yet nevertheless, he found the defendant indebted to the plaintiff in a comparatively small sum, $15,350.60-|, with simple interest thereon from date of suit brought January 13th, 1868, at six per cent.

This finding and ruling of the learned referee was erroneous upon the facts in evidence as it was illogical in law. If there was no fraud on the part of the defendant in any of the ways charged in the petition, then the plaintiff’s case fails, and that is the end of the matter. In the absence of fraud or improper concealment, its equitable equivalent, the agreement, the bill of sale of January 1st, 1865, being sufficiently comprehensive in its terms, passed to defendant every right and interest in the partnership affairs which the plaintiff possessed, and operated, on its execution, as an absolute discharge of further liabilities of defendant to the plaintiff respecting the same. This view of the point was very properly taken by the court of appeals, His Honor, Judge Bakewell,very pertinently observing, (in an opinion which does not appear in print): “But if that deed was obtained in good faith it was clearly a complete discharge. To hold that the settlement with, and deed of Pomeroy, was not a discharge, is plainly to hold that they were obtained by misrepresentation; that the balance sheet exhibited to plaintiff" by defendant, upon the faith of which plaintiff" sold his interest in the concern to defendant for $275,000, was accompanied with concealment concerning the business of the firm and the value of plaintiff’s interest in it.”

This is what the Supreme Court finds. The referee finds the contrary. The two findings cannot stand together. If Benton was guilty of no unfairness, he should not have been charged at all; the settlement should not be opened. If he is to be considered in all respects as a fraudulent trustee, he should have been treated and charged in all respects as a fraudulent trustee. Interest should not have been computed without rests, merely as simple interest at six per cent, and presumptions should have been indulged against him, which on his theory of the case the referee did not and could not indulge. To say, as the Supreme Court does, that Benton is to be treated in all respects as a trustee, is to find that he obtained an unfair advantage, or the words have no meaning at all.” But the learned judge speaks apologetically for the referee, by saying, “ He felt himself hampered, no doubt, by the opinion of the Supreme Court, and having arrived upon the same evidence at an opposite conclusion on the question of fraud.” Had the learned judge been at the pains to read the evidence as well as the ruling made by the referee, which he confesses he did not, he would not have thought that the latter “ felt himself hampered ” either by the opinion of this court, or indeed by that of any other court or by the text writers.

Eor instance, among the rulings of the learned referee (which' were for the most part in favor of the defendant), the plaintiff offered as evidence in chief the deposition of defendant taken in this cause June 8th, 1868. To this deposition defendant’s counsel took two novel objections: 1st, That it could not be read as a deposition because the. defendant was present. 2nd, Nor as an admission because it was a deposition. These objections were held well taken and the deposition rejected. Nor was it admitted at all, except as impeaching evidence. It is scarcely necessary to say that this ruling of the learned referee has no support either in reason or authority. If defendant had made an admission verbally on the street respecting the subject matter of the suit, it would have been original evidence against him and a fortiori would it, when contained in a deposition taken under the solemn forms of the law. Weeks on Dep., § 464; Kritzer v. Smith, 21 Mo. 296; Charleson v. Hunt, 27 Mo. 34.

The deposition, however, is preserved in the record, and we shall treat it as though admitted in chief. The learned referee did not see fit in his voluminous report to make allusion to this important ruling, which so far as concerned his action, deprived the plaintiff of most important and original evidence. Not less peculiar was another ruling made by the learned referee; he refused to permit plaintiff to testify that he had never used a dollar of the money of the firm at New York, and yet in his report, he found and adjudged that plaintiff made overdrafts and was tainted with all the moral and legal wrong which could attach to the defendant for such uses of the firm money. Properly enough the learned referee refused permission to plaintiff to testify as above stated; for there was no such issue raised by the pleadings; but for the selfsame reason, also, he should have refrained from passing upon what was not before him; thereby reducing, if possible, plaintiff, whose testimony and conduct were characterized by the utmost straightforwardness, ingenuousness and candor, to the level of that of the defendant, whose testimony and conduct were a mere tissue and series of evasions, subterfuges and fraudulent devices.

But we pass from the action of the referee to that •of the circuit court and that of the court of appeals. The latter court entertained the view that it could not consider the cause on its merits, and, therefore, remanded it, because the circuit court did not approve the report of the referee. This view was not a sound one. The circuit court did approve the report of the referee. This was the necessary consequence of overruling the exceptions of the plaintiff', whose exceptions, twenty-three in number, covering every part of the report, were considered and all overruled but two, and those only partially. No proposition in law is better established than that the report of a referee is confirmed when exceptions thereto are held for naught. 2 Barb. Ch. Pr. 555; 2 Smith Ch. Pr. 878; Huston v. Cassidy, 14 N. J. Eq. 320; Davis v. Roberts, 1 Sm. & M. Ch. 543; O’Neill v. Capelle, 62 Mo. 202; Taylor v. Read, 4 Paige 561.

For this reason, the court of appeals should have proceeded to examine the cause on its merits and entered a final judgment adjusting the matter at issue between the parties litigant. We shall proceed to such adjustment now, and doing so, we shall not in this opinion, examine the evidence in detail; we shall not make minute calculations as to the misappropriation by defendant of this amount in the purchase of high-wines; or that amount in the purchase of vouchers, or the defendant’s profit arising therefrom. Any complication or uncertainty pertaining to these matters it belonged ,to the defendant as a trustee charged with a breach of trust to explain and make clear; to distinctly draw the line which separated his honest gains from those which were grossly otherwise. Failing in this, as he did,. all doubts must be resolved against him. So say all the authorities. Kerr Fraud and Mistake, pp. 151, 182; Pomeroy v. Benton, supra; Heath v. Waters, 40 Mich. 457; 1 Glf. Ev., § 34.

It is impossible to tell what was the amount which the defendant realized by reason of his fraudulent practices. The self-same evasive manner which characterized the defendant’s testimony on a former occasion, characterizes it still. Therefore, our remarks heretofore made respecting it are still applicable, and we repeat them. The statement is indeed made by the learned referee that the defendant made full explanation of his whisky, voucher and other transactions. This statement finds no support in the facts disclosed by this record. There is abundant testimony contained therein showing that defendant was engaged in whisky transactions other than those which resulted in the purchase and sale of 1,813 barrels of whisky; and we are warranted in presuming against the defendant as a fraudulent trustee who forgets, who cannot remember when asked the plainest and most direct questions about the simplest matters, that it was his duty to remember, that the magnitude of his transactions in vouchers have been but partly ascertained. How often the money defendant invested, in vouchers or in whisky either, was turned over, was re-invested, never will be known.

We have mentioned heretofore the fabrication of evidence. There is much in this record to induce us to believe that the cheek for $5,421.16 was fabricated for the-occasion in order to show that the sum of $47,715.60 was paid for the purchase of 565 barrels of whisky. Unfortunately, however, for the success of the scheme, the check was never handed to Bowen & Co. to be indorsed by them, so that this check, as the matter stands, shows that Bowen & Co. had received on the big check for $47,715.60, $5,-421.16 more than was due them, and in order to pay this back to Benton the cheek for the latter sum was drawn by Pomeroy & Benton on their cashier, and by him indorsed to Benton. It is clear that if that check had ever been collected by Bowen & Co., it would have borne their indorsement. The books abound with instances as to the unfavorable presumptions to be indulged against those who manufacture evidence. 3 Glf. Ev., § 34; Winchellv. Edwards, 57 Ill. 41; 1 Phil. Ev., 639.

We come now to the destruction of evidence by the defendant; of the destruction of the book in which the accounts of his whisky transactions were kept. We passed upon this point when this cause was here before. We see no reason now to change, but every reason to support and confirm the conclusion then reached, that defendant destroyed that book after suit brought, for the deliberate and sole purpose of cutting off investigation into the magnitude of his operations in whisky. As, then, the defendant has done these things, as he has endeavored by all these means to baffle inquiry and shut out investigation; as in consequence thereof, it has become impossible to ascertain the amount out of which he has defrauded his partner, to whom, as he says in one of his letters, he was bound by tbe ties of gratitude, for giving him his start in life, nothing remains to us but to apply to the defendant, the stern rule recognized alike in equity and at law embodied in the maxim omnia praesumuntur in odium spoliatoris. No-fitter case than the one in hand could ever be presented for the application of this rigid maxim.

The learned referee appears to have thought, for so he reported to the circuit court, that before the rule can be applied “ secondary evidence ” as to the contents or character of the evidence destroyed must first be introduced; must be laid as a basis before the presumption can be invoked. Nothing can be further from the law. It would seem too plain for argument, that if secondary evidence were at hand, all need for the application of the rule would cease, and that if the rule could not be applied unless upon the production of secondary evidence, then the spoiler could assure his success, by cutting off every source of information and every supply óf evidence; could become •successful in proportion to the destruction he had wrongfully wrought. The authorities give no countenance to such an idea. It is because of the very fact that the evidence of the plaintiff, the proofs of his claim or the muniments of his title, have been, destroyed, that the law, in hatred of the spoiler, baffles the destroyer, and thwarts his iniquitous purpose, by indulging a presumption which supplies the lost proof, and thus defeats the wrong-doer by the very means he had so confidently employed to perpetrate, the wrong. One of the familiar illustrations given of invoking and applying the presumption, was where the plaintiff “ a chimney-sweeper’s boy found a jewel and carried it to the defendant’s shop (who was a goldsmith) to know what it was, and delivered it into the hands of the apprentice, who, under pretense of weighing it, took out the stones, and calling to the master to let him know it came to three half-pence, the master offered the boy the money, who refused to take it, and insisted to have the thing again, whereupon the apprentice delivered him back the socket without the stones,” and on trover brought, “ several of the trade were examined to prove what a jewel of the finest water that would fit the socket would be worth, and the chief justice directed the jury, that unless the defendant did produce the jewel, and show it not to be of the finest water, they should presume the strongest against him,' and make the value of the best jewels the measure of their damages, which they accordingly did.” Armory v. Lelamirie, 1 Stra. 505. It is easy to see that the chimney-sweep’s boy would have been in but sad case, if he had been required to show by “ secondary evidence,” what the contents of the empty socket were; something which he knew not; something which the spoliating defendant alone knew.

Numerous instances are given in the books of the like application of the rule, where it is held that spoliation of documentary evidence being proved against a defendant, that thereby he is held to admit the truth of the plaintiff’s allegations; and this upon the ground that the law, in consequence of the fraud practiced, in consequence of the spoliation, will presume that the evidence destroyed would establish the plaintiff’s demand to be just. 1 Glf. Ev., § 37; Barker v. Ray, 2 Russ. Ch. 73; 1 Taylor Ev., p. 130, § 116; Dalston v. Coatsworth, 1 P.Wms. 731, and cases cited; Broom’s Leg. Max., 938, and cases cited; 1 Phil. Ev., 602, and cases cited; Anon., 1 Ld. Raym., 731; Attorney Gen’l v. Windsor, 24 Beav. 679; Heath v. Waters, 40 Mich. 457; Annesley v. Anglesea, 17 How. St. Tr. 1139 ; Ld. Melville’s case, 29 How. St. Tr. 550; Blade v. Noland, 12 Wend. 173; Harwood v. Goodright, Cowp. 86.

As a sufficiently full statement of the evidence will be made, we deem it unnecessary to encumber this opinion by going into the evidence in detail. But upon perusal of that statement, it will be found that a sufficient basis has been laid in that evidence, from which the presumption may be properly invoked, whether we adhere to the extreme application of the rule as announced by Lord Eldon in Barker v. May, supra, or whether we apply the presumption in a more limited way as indicated by some of the authorities.

Applying, then, the rule mentioned, to the case before us, we shall hold the defendant is indebted to the plaintiff, as charged in the petition, which alleges that defendant dealt in whisky, thereby realizing a net profit to the amount of $200,000. One-half of this sum would, of course, belong to plaintiff, and treating the defendant as a trustee guilty of a flagrant breach of his trust, we, therefore, order, adjudge and decree, that interest at the highest legal rate, (where there is no contract,) six per cent, be computed with annual rests on the sum of $100,000, from the 1st day of January, 1865; that the judgment as well of the circuit court as of the court of appeals be reversed and judgment entered for said sum last named, and interest, either here or else in the lower court, leaving it optional with the plaintiff in respect to the court where judgment shall be entered.

In relation to the voucher transactions of defendant, we are by no means satisfied with the findings of the learned referee. He fails, as we think, to charge the defendant with such an amount as the evidence in our opinion shows the defendant should be charged, and the learned referee fails to draw the proper inference respecting one important item of $58,592.48, being a certificate of indebtedness of the United States. Concerning this certificate the defendant was silent, and the referee erred in supposing the voucher represented by this certificate to be a part of those in exhibit W 2. If the plaintiff' desire, we shall direct another accounting in the lower court, to be taken on the evidence now in this record, of those voucher transactions ; in which accounting such unfavorable presumptions as the law authorizes will be indulged against the defendant, treating him as a fraudulent trustee. But we leave it optional with plaintiff, whether he will have such fresh accounting, or whether he will enter a waiver thereof in this or the lower court.

Norton and Ray, JJ., concur; Hough, C. J., and Henry, J., dissent.

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Rehearing

On Behearing.

Norton, J.

It is insisted by the counsel in their motion for rehearing that the judgment rendered is excessive, first, because Egbert, a clerk in the mercantile house of Pomeroy & Benton was to receive as compensation for his services one-eighth of the profits, no account of which was ever taken into consideration, and secondly, because the rule in odium spoliatoris was improperly applied, in this, that the sum of $200,000, alleged to be the profits arising out of speculations in whisky and other articles of merchandise, was improperly taken as the measure of defendant’s liability; for the reason that the amount of profits made from the purchase of whisky and high-wines could only be ascertained and distinguished from the profits made m speculations in other merchandise, such as cotton, tobacco, bacon, lard, etc., by a resort to the evidence. Both these positions seem to be well taken. While the mere fact that Egbert was to receive as compensation a certain portion of the profits of the capital invested in the concern, did not create the partnership relation between Egbert, Pomeroy and Benton, he was clearly entitled under it to the portion of the profits stipulated for. While it may not have given him a right to have sued as a partner for an adjustment and settlement of partnership accounts, he was, nevertheless, entitled, when such adjustment was made and the profits ascertained, to his proportion.

While we are of the opinion that because of the destruction, by Mr. Benton, of the book containing an entry of all his transactions in whisky or high-wines, he became a spoliator, and subjected himself in this court to the application of the rule of law governing and applied in such cases, and while we are of the opinion that the rule in its utmost stringency would justify us in taking the amount of profit made out of high-wines and whisky, as. claimed in the petition, when supported by the slightest evidence, as the measure of his liability, we think that error was committed in taking $200,000 as that amount, because the petition did not allege that $200,000 were the profits made in speculations in whisky, but that said amount of profits was not out of whisky and high-wine operations alon,e, but out of speculations m other articles of merchandise as well. It is impossible to tell, from the mere allegations of the petition, what proportion of the $200,000 was made in operating in whisky and high-wines, and what proportion in other merchandise, and the problem can only be solved by looking at the evidence and giving force and effect to the rule in odium spoliatoris in considering it.

The evidence shows, beyond question, that Benton speculated in whisky and high-wines with the means of the firm in 1864, and prior years, and that during that year he made large profits in these operations; one or more witnesses testifying to the fact that they understood from Mr. Benton, that his profits on the whisky on hand would be $100,000, and there is other testimony in the record, tending to show the same fact. How much of said profit would be made out of whisky purchased with the money of the firm in excess of the amount he had a right to draw from the firm does not clearly appear. But from this and other evidence showing that he had used money of the firm in whisky transactions, the inference may well be drawn, under the rule above referred to, that the said profit was the result of speculations made with firm money, and we, therefore, take that, as the amount, with one-half of which, after deducting Egbert’s interest of one-eighth, which it appears Benton had purchased, with which he should be charged. Said one-eighth interest being deducted from said sum would leave $87,500, one-half of which Benton should account to plaintiff for, with interest thereon at six per cent with annual rests, from the 1st day of January, 1865: and proceeding on this basis, the plaintiff is entitled to a judgment of $123,255. If, therefore, plaintiff will enter a remittitur of so much of the judgment heretofore Rendered as is in excess of said sum, on or before the first day of the next term of this court, the motion for rehearing will be overruled, and if not, the motion will be sustained.

Hough and Henry, JJ.

Being of the opinion that the rule in odium spoliatoris has not been correctly stated or applied in the opinion of the majority, and being further of the opinion that an account should be stated between the parties as directed by this court when the ease was first here, (57 Mo. 549,) and that the judgment of this court should be based upon such an account, we are in favor of sustaining the motion for a rehearing.