73 Tenn. 1 | Tenn. | 1880
delivered the opinion of •the court.
It is apparent from a careful examination of the record that the parties have spared no labor or pains ■in the preparation of the case in the inferior court. They have furnished us with a large mass of proof, ■both oral and documentary, upon all the issues in the pleadings, as well as a large amount which lies outside • of any issue legitimately presented. The arguments • of learned counsel on both sides have displayed great ability and legal learning and research, and have bee*» full and exhaustive upon all the questions of law and fact. Nothing has been left undone by either the parties or their counsel which could aid the court in arriving at an accurate and satisfactory conclusion. We ■have given to the case as a whole and in detail the
The issues presented in the pleadings involve the dealings and transactions between a large mining company and its general superintendent and agent, extending over a period of some seventeen years, and consisting of a vast number and variety of items. A brief history of the company and of the agency will be useful, if not essentially necessary, to a clear and complete understanding of the matters in litigation. We are furnished with ample and most reliable materials and facts for this brief history in the minutes of the company’s board of directors and of the stockholders at their annual meetings, the correspondence between the superintendent and agent and the officers of the board, and the admissions and concessions of the parties.
It appears that defendant company was incorporated by an act of the Legislature of this State, passed on the 1st day of March, 1854, under the name of the “Union Consolidated Mining Company of Tennessee,” for the purpose, as expressed in the charter, “ of exploring and mining for copper and other ores and minerals, and for working, smelting, manufacturing and vending the same.” The capital stock was not to be less than five hundred thousand dollars and was not to exceed five millions of dollars, based alone upon money or mineral property. It was incorporated with a view of consolidating a number of other mining
A majority of the directors elect met on the 13th April, 1858, in the city of Hew York, and organized by the election of a president and other officers, and located the business office of the company and the place of its own meetings in that city, where it has continued to hold its meetings and transact the business of the company ever since. At the next meeting, the board directed the issuance and sale in the market of two hundred and fifty thousand dollars in shares of the capital stock, based on the mining properties already conveyed to the company, one half of the proceeds to be applied to the liquidation and ex-tinguishment of prior liens on the property, and the ■other half to be used as a working capital to carry on the business of the company; but it does not appear that anything was realized for the latter purpose from this source. It is quite clear the mines were thought to be very valuable in the beginning, and promised to be much more so when they should be fully explored and developed. The stockholders and
On the 30th of June, 1858, the board appointed Samuel Congdon general agent of the company, giving Mm “the general superintendence of the business at the mines and of the transportation and sale of the products of the same,” which position he held for something less than a year, and then left the mines, and settled permanently in the city of New York. About the time Congdon was made general agent, complainant Raht was employed as superintendent of' the mines, and upon Congdon’s retirement was made general agent and superintendent of the company’s mining and smelting operations, which position he continued to hold without, interruption down to the beginning of the present litigation. In the month of July,.
It is admitted that Raht made out and forwarded to the board of directors during the whole period of his superintendency and agency, excepting three years during the civil war, monthly statements of his accounts, showing with great minuteness of detail the expenditures for labor, materials, hauling, etc., for the preceding month. These statements gave every item of expenditure, the names of the employees and the amount paid to each, the number of bushels of charcoal bought and the price paid for it per bushel, the number of cords of wood bought, as well as the number of cords cut on the lands of the company, and the price per cord paid in each instance, and the amount and price paid per hundred pounds for hauling from the mines and works to Cleveland and from Cleveland back to the mines and works. No complaint was ever made before the commencement of this litigation that these statements were not sufficiently full and minute in their detail of items. On the 8th of July, 1872, the board appointed a committee from its own members to examine the books and securities of the company, and to suggest improvements, if any were needed, in the mode of keeping the accounts. This committee gave the subject of the mode and manner of keeping and reporting the accounts a care
It appears from the minutes of the board and from the admissions of the company in the pleadings, that numerous settlements were made with Eaht as superintendent and agent; based upon the admitted correctness of the’ monthly statements, and that balances were ascertained and settled in the most solemn and bind
The parties seem to have made after this- time annual settlements down to the beginning of this suit, in which balances were ascertained, agreed to and settled or secured by a lien on property. On the 15th May, 1867, the board of directors admitted an in
It is conceded that the parties made their last settlement on the 1st December, 1874, when it was ascertained and agreed that the company was on the 31st October, 1874, indebted to Raht in the sum of"
It is quite certain the persons holding the position of directors during the period of Raht’s agency, reposed great confidence and trust in his professional skill, business capacity, integrity and fidelity as a man, and gave most favorable consideration to his suggestions and recommendations about the management and improvement of the company’s business and property; but we do not find that this confidence and trust induced them to neglect the proper discharge of their
On the other side, the ’directors of the company appear to have been gentlemen of no ordinary business capacity and of considerable experience and training as merchants, bankers, brokers and large capitalists in the city of Hew York; and judging from their action as a board in managing the operations of a large mining company, they show no want of the necessary intelligence, capacity and good faith to discharge the important duties and responsibilities of their position. Many of them must have commanded ■ for a series of years the unbounded confidence of the stockholders. Charles B. Tatum, Samuel Congdon and James A. Alexander were members of the first board of directors and were continued in the position, the two former until the election in 1872 and the latter until the election in 1874. John Thomas was elected a director and made president of the company in the year 1866, and held both positions, with a short intermission as president, until his resignation after the institution of this suit, having been elected in 1875 a director for the
It seems to have been a uniform thing for the president of the company and committees, composed of members of the board, to visit the mines and works •at least once a year and some years oftener, for the purpose of looking carefully into the different departments of the company’s business and its management. Men of high reputation for scientific attainments were now and then sent out to examine into the quantity, and richness of the ores and the practical operations ■of the works for smelting and refining them. It is worthy of special notice that no officer or committee •or scientific visitor ever expressed any objection or dissatisfaction as to Kaht’s management until the visit and report of Secretary Duval in the summer of 1875. Indeed Mr. Duval does not allege any mismanagement of either the mines or works on the part of Kaht, but, in the main, complains of the board’s allowing him to carry on a store and receive all the profits, being very large every year for the capital invested. It is difficult to determine what influence, if any, this xeport had in the subsequent action of the board, for
On the 10th September, 1875, Baht filed an attachment bill against the company, alleging substantially the leading facts above detailed and the existence of an honest and just indebtedness from the company to him, amounting on the 31st August, 1875, to the sum ■of $108,789.34, and praying the attachment of the company’s property, personal and real, the appointment of a receiver to take charge of the mines, works and other property pending the litigation, the enforcement of the lien of the 1st December, 1874, by a sale of the personal property and effects, and the subjecting of a sufficient quantity for the purpose of the real estate to satisfy the balance of the indebtedness. It is not deemed necessary to notice more particularly the allegations of the original bill, or to detail the various steps taken in the chancery court as to the receivership or other matters preliminary to the hearing on the merits.
On the 12th October, 1875, the company filed its answer as an answer and cross-bill under the provisions of the Code, and on the 30th October, 1875, it filed an amended answer, exceptions to the original answer having been filed and sustained in the mean time. The company admits most, if not all the material allegations of the original bill, but alleges that
Complainant Raht put in separate answers to the original and amended cross-bills, in each of which he
Upon the hearing of the cause in the chancery court, Chancellor Cooper dismissed the cross-bills and gave Raht the relief prayed for in the original bill, but taxed him with all the cost in that court; and from this decree the company has brought the case by appeal into this court.
' It is not insisted in the argument of the learned counsel for the company, nor could it be with any hope of success, that the answer, outside of the matters alleged by way of Gross-bill, interposes any valid defense to the relief sought by the original bill. It is certainly true that the answer abounds in allegations of fraud and overreaching on the part of Raht, and makes a positive statement to the effect that the resolutions of the board, admitting the indebtedness of $84,711.71, and creating the lien relied upon in the original bill, were obtained by the fraudulent suppression and misrepresentation of important and material facts; but these allegations are too general and in
Great emphasis in the pleadings and argument is placed upon the facts that Baht accumulated a large estate during his agency while the condition of the company was not materially improved, and that he acquired the unbounded confidence of the directors and exercised a controlling influence over them in all the business matters of the company. If it were shown that his agency for the company and his management of its mines and works were his only sources of profit and gain, then the fact of his amassing a large estate
The real matters in litigation between the parties
It is certainly settled law that courts of equity attach to the mere relation of principal and agent such confidence and trust as precludes the latter from doing any act or making any contract for his own benefit in regard to the subject matter of the agency,, and gives to the former, if he desire it, the advantage of all that the agent does about the trust-property. 1 Lead. Cas. in Eq., 4 Am. ed., top page 62. As will be seen, the principle is confined to the matters falling within the scope and limit of the agency and to the property in the trust, and does not apply, except under peculiar circumstances, to acts,' contracts or property outside of the agency and trust. To the extent that the parties modify the relation by special agreement, to the same extent is the confidence and trust' which the law attaches to the relation, without limitation or restriction, enlarged or ■ diminished; the validity or invalidity of such agreements depending, not upon the existence of the relation or its duties
It will not do to say that “wherever such an advantage has been taken in the course of a contract by one party over another, as a man of delicacy would refuse to take, such a contract shall be set aside.” After laying down this principle, and supposing the •case of a purchase of an estate with a valuable mine on it, known to the purchaser and not to the owner, Lord Thurlow proceeds to say: “It is therefore not only necessary that great advantage should be taken in such a contract, and that such an advantage should arise from a superiority of skill or information, but it is also necessary to show some obligation binding the party to make such a disclosure. Therefore the question is not whether this transaction be such as a man ■of honor would disclaim and disdain, but it must fall within some settled definition of wrong recognized by this court; for, otherwise, the general transactions of mankind would be too much in hazard and uncertainty.” Fox v. Markreth, 2 Cox, 320; 1 Lead. Cas. Eq., 4 Am. ed., top p. 205. And these principles were laid down in the case of a trustee, for sale for payment of debts, purchasing the property by taking an undue advantage of the confidence reposed in him •as such trustee. It is certainly true that when this binding obligation to make a disclosure exists, as it generally does in the relation of principal and agent* it is not enough for the agent to put the principal •upon inquiry, but must disclose such material facts as
It is also well established that a stated and settled account cannot be opened to let in items omitted, or-to exclude items charged, except upon the grounds of fraud, mistake or manifest error; and where a bill is filed for such a purpose, it is not sufficient to allege the fraud or mistake' in general terms, but the particular acts of fraud or the specific mistakes or errors, should be stated and pointed out. Story’s Eq. Pl.,, sec. 251; Mebane v. Mebane, 1 Ired. Eq. Rep., 403; Staughton v. Lynck, 2 John. Ch. R., 217; Leycraft v. Dempsey, 15 Wend. P., 83; Drew v. Power, 1 Schoales & Lefroy, 192; Pratt v. Weyman, 1 McCord. Ch. R., 161; Weed v. Small, 7 Paige, 575; Philips v. Belden, 2 Edwards’ Ch. R., 13, 14. In Pratt v. Weyman the court says: “ When there is an error apparent on the face of the account, the court will not hesitate to relieve. The court, however, is not, generally speaking, inclined to unravel an old account, notwithstanding it may have been settled upon an erroneous principle. Nor will the court open a settlement where it has been signed, or a security taken on the footing of it,, unless for fraud or errors distinctly specified in the bill and proved as specified.” In Drew v. Power, Lord Pedtsdale, after premising that the court should look a great deal more at the consequences as they may affect other parties than the parties in the particular cause, and laying down the general principle that a settlement of account will not be set aside un
The policy of the law, however, is strongly against permitting certain transactions to stand which have been entered into, when confidential relationship exists between the parties, without allowing an inquiry; but this doctrine does not extend to a stated and settled account between principal and agent when there has been an actual accounting, although there may have been confidence and trust. Philips v. Belden, 2 Edwards’ Ch. R., 15. It has been held that the doctrine in question does not apply to the settlement of an executor upon the footing of which a release is given. Davis v. Spurling, 1 Tamlyn, 199. Nor does it apply to a settlement between guardian and ward. Caplinger v. Stokes, Meigs R., 180. Indeed the doctrine seems, from the adjudged cases, as will be shown in another part, of this opinion, to be confined alone to the relation of attorney and client, in which there exist peculiar elements of confidence and trust not to be found in that of principal and agent or any other confidential relation.
This statement of the general principles of law will enable us to consider the particular claims of the com
1. It was thought to be very important, owing to the large increase of the mining population, to secure the services of two skillful and competent physicians, who were to reside in Ducktown, which was in the midst of sundry mines and smelting and refining works, and to render such surgical and medical attention as the employees might need. In the fall of 1865 Raht,’ as agent for several mining companies and properties, entered into a contract with doctors Aubright and Kercherside, the employees of the different mines agreeing to pay one dollar per month out of their wages, and the Union Consolidated Mining Company and the Burra-Burra Mining Company agreeing to pay each a bonus of three hundred dollars and to furnish Dr. Aubright a house free of rent for one year. Raht was at the time agent for both of these companies, and perhaps for other companies in the neighborhood, and was managing and carrying on some mines and mining operations in his own name. The contract with the physicians was for one year only, and at the close of the first year the companies above named ceased to have any connection with the further em
Now the company insists, upon the footing of the ■confidential relationship of the parties, that the whole amount thus charged and received by Eaht belongs to it; that it has the right in equity and good conscience to recover the same with interest. We ha.vé not been able to find any principle of law upon which the claim can be allowed. It was no part of Eaht’s duty as agent of the company to collect and pay over these monthly dues from the employees to the physicians; nor did the money, when collected and in his honds, belong to the company in any conceivable sense; and, therefore, no trust attached to its management as between Eaht and the company. It is equally certain neither the company nor its employees sustained any loss or injury by the arrangement. It is not pretended that the company was entitled to the whole time and services of Eaht in the management of its
2. Complainant Kaht accepted, as already stated, the position of sales agent in May, 1867, and continued to hold it until the middle of September, 1872. He was to have full control and management of the shipment and sale of the entire production of refined copper, the company agreeing to pay all legitimate charges and expenses on the shipment of the same. The company had uniformly transported its copper, intended for the New York market, via Norfolk, and had insured or required it to be insured in transitu. After getting into market, it was sold through the agency of a copper broker. Complainant Kaht continued, after being made sales agent, to ship in the same way, and selected his brother Charles Kaht to be consignee and broker in New York. It appears that Chaides Kaht had the shipments of refined copper insured in the Atlantic Mutual Insurance Company, having an open policy in that company to cover all shipments to him as consignee, and that the com
It is insisted that defendant company is entitled to-the scrip-dividends represented by the premiums paid on the shipments of its copper, and that complainant Raht is liable and bound to account for the same. We are not prepared to say, if all other difficulties were out of the way, that the company is entitled at law or in equity to any part of these dividends; but we do not intend to express a positive opinion on the subject. There is certainly great plausibility, not to-say intrinsic justice, in the view of the New York Chamber of Commerce, to the effect that the scrip-dividends belong to the person effecting, and not to-the party for whose benefit the insurance is effected; and the long and general acquiescence and accord of
But there is another distinct and independent ground upon which we are constrained to deny the claim of the company. It appears most satisfactorily from the testimony of Samuel Congdon, the first general agent ■at the mines and a director during the whole period of Baht’s being sales agent, that the board were fully informed of the facts that Charles Baht insured the ■copper in the Atlantic Mutual Insurance Company and received and claimed the scrip-dividends issued for the premiums paid on account of that insurance. He further states that the directors discussed among themselves the subject of the ownership of these dividends, ■and arrived at the conclusion that the company was not entitled to them. With this knowledge of the facts the company made settlements with the sales agent without claiming the scrip-dividends, renewed from time to time the contract for the agency without mentioning the subject of insurance, and bought ■out the unexpired term of the agent at a pretty large price without intimating any error, mistake or omission in the previous settlements. It cannot be maintained that there was any fraud, or mistake, or manifest error in the omission to charge Baht in the settlements with the scrip-dividends. Apply the principles of law which define and regulate the effect of the plea of stated and ■settled account in courts of equity, and we must hold that the company is concluded by the settlements and -cannot be allowed to set up claim to the dividends.
3. It is claimed in the cross-bill and earnestly insisted in argument that the company is entitled to recover from Raht the compensation allowed him as-sales agent and the twelve thousand dollars paid him for the unexpired term of the last -contract. These two claims may be very properly classed under one general heading, but they deserve to be separately considered. We will consider, in the' first place, the question of compensation. Row the sales agency was-a separate and distinct business from that of the general agency and superintendency of the mines and works, and it seems to have been so regarded all the while by the company’s directors and officers; hence the company and Raht, holding the position of general agent and superintendent, must be regarded in their negotiations about the agency and its renewal from year to year as dealing with each other at arm’s length, the validity of these contracts depending upon the same considerations as affect contracts of like character between strangers.
The claim of the company in question rests upon the allegation that Raht falsely and fraudulently represented to the. board of directors that the means of the company were insufficient to carry on its mining and smelting operations and business, and thereby induced the directors to enter into the various contracts
We cannot assume, without strong and clear proof, that the directors were incapable, unfaithful, or even careless in the discharge of the duties and trusts imposed upon them. Looking to the minutes of their action as a board, the correspondence of their officers with the agent Raht and their frequent visits to the mines, we are justified in the conclusion that they fully understood the resources and necessities of the company and acted in the matter of the sales agency in good faith and with reasonable prudence and wisdom, considering the utter failure and persistent refusal ■of the stockholders to provide a permanent working capital. It appears that Jennison Eager, who was a director at the time, was the first sales agent, having been made such agent some time in the year 1866. He was allowed the same commissions, brokerage and rate of interest, and was required to do the same things which were subsequently allowed and required in the contracts with Raht. Although Eager did not hold the position of sales agent for a whole year, the 'company on final settlement was indebted to him some
Now these facts, without mentioning others equally significant, establish beyond dispute that the company did not have the means necessary to carry on its mining and smelting operations, but had to resort to the scheme of the sales agency in the first place and to continue it afterwards for the very purpose of raising the means. It follows necessarily that the allegations of false and fraudulent misrepresentation on the part of Raht in obtaining the original contract of the sales agency must fall to the ground, and as the financial condition of the company did not materially improve, or at least did not provide the necessary working capital until sometime after the last renewal of the agency, the same thing may be said of the charge’ of fraud in its application to the various renewals of the coutract. There being no ground upon which the original contract or its different renewals can be set aside or annulled, they must be held binding on the company according to the true meaning and import of their terms.
It is, however, further insisted that the compensation both for commissions and brokerage is exorbitantly large, looking to the responsibilities incurred and the services rendered; and quite a large body of proof is
In addition to all this, whether the compensation
The views above expressed about the question of compensation, apply with equal force and propriety to the other branch of the claim. It appears from the settlement, made in June, 1872, that- there was a small balance due from Eaht to the company. As the sales agency had been adopted and continued from year to year to provide a working capital, this change in the financial condition of the company seemed for a time to dispense with the positive necessity of the agency. The company appears to have done, Avell under the combined agency and management of Eaht, for it had, between the years 1867 and 1872, paid off a debt of
Now the draftsman of the cross-bill goes no further than simply to allege that the adjustment and settlement of the unexpired term of the agency was obtained by the “like fraudulent suppression and misrepresentation of facts” on the part of Raht, pointing back to the charge of fraud in obtaining the contract of the agency. "Without entering into a minute detail of the facts and circumstances, it is enough to say that the proof fails to establish any suppression or misrepresentation of important or material facts, or any circumstance of suspicion or unfairness in the conduct of Baht. An executive committee, composed of president Thomas and directors McCauley, Smith, Cammach and Kimber, and clothed with the full powers of the board to act in behalf of the company, visited the mines, examined carefully into all the departments of the company’s business, conducted the negotiations and concluded the trade, agreeing to pay Baht twelve thousand' dollars for the surrender and extinguishment of his interest and rights under the contract. It is quite certain that the confidential relationship of the parties had no influence one way or another in producing the result, for the negotiations show that the parties were
There is not only an utter failure to establish any suppression or misrepresentation of material facts, but the allegations of the cross-bill are too general, uncertain or indefinite to raise the question of fraud. They do not specify or point out, nor does the proof establish a single fact, material or important to the determination of the subject-matter of the negotiation, that was suppressed or misrepresented; and as a consequence, the transaction must be held free from the taint of fraud. Being aware of the conclusive force of these positions, the learned counsel for the company have pressed with great earnestness and ability what they are pleased to style the grossly unjust, inequitable and unconscionable character of the transaction. Courts cannot make new contracts for parties, nor can they relieve persons sui jwis from merely hard bargains. Lord Hardwicke lays down the principle, and Chancellor Kent adopts it as sound law, that if a person will enter into even a very hard and unconscionable
It clearly appears from the proof that the rates on down and up loading were not established or introduced under the general agency of Raht, but were in full force and operation before the consolidation of the old mining companies into the new one. These discriminating rates were recognized and acted upon during the general agency of Mr. Congdon, and Raht as his successor simply continued them, having after a time reduced the rate on the products of the mines and works from seventy to sixty cents on the hundred pounds. When the company had return or up loading it was charged the same price as other freighters, being fifty cents on the hundred pounds; and when there was no down loading for the wagons, all .owners of freight, including the company, had to pay seventy cents per hundred pounds. The rate per hun
If there had been no settlements between the parties and no acquiescence on the part of the company, we would hesitate long before holding a discrimination like the one complained of unreasonable and unjust. Common experience and observation teach us that such discriminations are not unusual under like circumstances, and many plausible reasons may be adduced to show them both reasonable and just in the present instance. The products of the mines and works had to be gotten into market, or then the mines and works themselves ceased to be of any value or profit, and to their operations the goods and supplies were not only contributory, but absolutely essential. The-former constituted the primary, leading and paramount business for the wagons, while the latter was merely secondary and dependent. It may also be doubted whether Raht and the other merchants, doing business-in so remote and isolated a place as Ducktown, and in the midst of a population so dependent upon their wages for the necessaries of life, had much concern about the price for up loading, for it would most probably be paid by the buyers and consumers of the
5. It appears that some twenty-five miles of the road leading from Ducktown to Cleveland lie on the banks of the Ocoee River, which is hemmed in by mountains on both sides. It is alleged that Raht, as agent of the company, expended annually for some ten or more years large sums of money in repairing and keeping this mountainous portion of the road in passable condition, and induced the company to buy the interest and title which the Ocoee Turnpike and Plank Road Company had in and to the road. But these transactions are substantially approved, or, at least, they are not made the grounds of' special complaint. It is, however, further charged that Raht, when these expenditures were made, was the owner of a valuable mill and two extensive and valuable farms situated on or near the road, and had more use for it in the prosecution of his own private business and carried over it a great deal more freight than the company, which facts were well known and fully understood by him, but were not known, understood and appreciated by the company. It is also charged that his relationship to the company imposed upon him the duty of
Learned counsel have not stated the particular principle of law or cited any adjudged case upon which they predicate the claim, but they rest it upon what they call “the plainest principles of justice.” They concede that the road was indispensable to the successful and profitable operations of the company’s mines and works, for the obvious reason that it constituted the only outlet to market for their productions. They also admit that the expenditures were barely sufficient to keep the road in passable condition for hauling, and were regularly and accurately reported in the monthly statements of the agent, and fully approved by the board of directors. We are wholly unable, in the face of these concessions, to perceive any principle of law or equity upon which Raht can be made liable for any portion of the expenditures. If any foundation whatever for the claim can be discovered from the pleadings and argument, it must consist in the failure of Raht to disclose the nature and exact extent of his private interest in the road’s being kept iu passable condition. What conceivable effect would either a failure to disclose, or a full and minute disclosure of this interest, have had upon the action of the company ? Whether the company knew or did not know Raht’s ownership of the mill and farms and his private interest in the road, would not have less
, It cannot, as matter of fact, be maintained that the '-board of directors were ignorant or uninformed of the nature and extent of Raht’s private interest in the -road’s being kept in passable^ condition. All the directors knew he owned two mines and was ■ interested in others in the immediate neighborhood of the company’s mines, the products of which had to pass over „ the road to market, and that he was carrying on the ■ business of merchandizing oit a very large scale, the . goods and supplies for his stoj:e having to be transported over the same road. - Indeed, they must have 'been informed of his ownership of the mill and farms in question. Some one or more of the directors and officers of the company passed over the full length of the road every few months in going to and returning from Ducktown. Such mills and farms, so profitable and extensive, located in a region so out of the way * of general travel, would attract the attention of mere passers-by, and very naturally, provoke inquiry after their owners. As large amounts for repairing were coming in monthly, we may reasonably conclude that the directors and officers visiting the mines examined the road the whole distance, and could not have failed
There is, moreover, an intrinsic, insurmountable difficulty in adjusting the proportions of the expenditures between the parties who would have to bear a pro rata share upon the theory of Raht’s liability. All the owners of mines and farms, and the wagoners, and all other persons who derived any Benefit or profit from the use of the road, would be equally bound with Raht to sustain a proportionate part of the expenditures, the amount in each instance depending upon the nature and extent of the benefit or profit derived from the use of the road. Thus the whole matter of the company’s equity resolves itself into a practical absurdity, which courts of equity cannot and will not make the basis of a decree for relief of any character. In addition to all this, the facts and circumstances place this supposed equity within the conclusive effect of the plea of stated and settled account.
6. It is, maintained in the cross-bill, but pretty much abandoned in argument, that the agent Raht kept employees on wages when the refining works were standing still and their services were not needed; and this course was pursued to increase his trade and to enable him to collect debts already created in his store. The cross-bill fails to mention the employees, or any one of them, who were kept on wages without doing work or rendering services for the company, but it may be inferred they were employed in the
We think the answer of Raht presents a full and complete defense for his course, and the proof does not controvert the truth of its statements in this particular. The business of producing refined copper, as it seems, requires workmen of skill and experience, and such workmen could not be obtained in the locality of the company’s works, but had to be engaged beforehand and brought from a distance, incurring thereby considerable trouble and expense and attended with more or less delay. The refining works were kept in active operation some nine months in the year, and stood idle generally the other three months, without the fault of the agent. . If these skilled and experienced workmen had done no work or rendered any service whatever during these three months, it would have . been a saving to the company to keep them near the works on their usual wages rather than to incur the expense and suffer the delay incident to bringing them back or engaging and transporting others from distant points. But they were not allowed' to
7. Serious complaint is made on account of the abandonment of monthly and the adoption of quarterly pay-days at the mines. It is said Raht recommended the change for some selfish, sinister purpose, and the board of directors adopted it out of blind confidence in his judgment and ready deference to his advice, the company being thereby injured and Raht benefitted; but in what way the one was injured and the other benefitted does not clearly appear in either the allegations of the cross-bill or the argument of counsel. Before Raht’s acceptance of the sales agency, pay-days had ceased to be held monthly, but liad become somewhat irregular, depending upon the fluctuating condition of the company’s finances. It was stipulated in terms in the first contract that settlements at the mines should not be made speedier or oftener than they had been before that time.
It thus appears that quarterly pay-days took the place of monthly ones about the date of Raht’s ac-cepmyee of the sales agency, and were continued from year to year by express stipulations in the different renewals of the contract as long as he remained sales
But we need not analyze or discuss the soundness or mnsoundness of these reasons for any purpose of the present inquiry. It is enough that there are no sufficient allegations, and, most certainly, no satisfactory proof of fraud, overreaching ór mistake in the matter of the change, and that the board of directors sanctioned and adhered to it without intimation of any doubt as to its propriety and wisdom for the period of -some nine years, embodying their approval of it in several solemn contracts and agreements. We cannot overlook or disregard this oft and repeated action of the board, ratifying the- change, nor can we under the established rules of law set aside the special stipulations in these contracts and agreements, establishing and continuing quarterly pay-days in the place of monthly ones.
We stated above that the injury to the company and the benefit to Eaht, alleged to arise out ofr the change, did not clearly appear. ■ Beyond doubt the employees ■ of the company were in the main poor la
8. It is charged that the company sustained, in 1875, a heavy loss in the estimated value of its ores, amounting to five hundred and" sixty thousand pounds of refined copper, worth not less than one hundred thousand dollars; and it claims that Kaht shall be held to account for the whole of this loss. It appears that some time in 1871 an arrangement was entered into by the terms of which the company was to usé as a flux in smelting its own ores, certain ores to be taken from the Burra-Burra mines and from some mines belonging to Kaht, and for ,the ores thus used as a flux, he was to receive in refined copper
It appears that the company had in its employment skilled and experienced assayists and chemists, who examined the ores as they were taken from the mines and estimated the percentage of refined copper in them, and who made monthly reports for the information of the general agent and superintendent and of the board of directors, giving the quantity and value of each month’s mining. These reports were prepared and signed by the assayists and' chemists and forwarded along with the monthly statements of the agent and superintendent to the board of directors. An account of stock of copper in the company’s ores and smelting products was taken on the 1st day of May, 1875, when the apparent loss was first discovered; but it does not appear when any previous account of stock was taken, perhaps not for many years prior to that time. In taking this account of stock the quantity and value of the ores were no doubt ascertained
We do not concur in the opinion which learned counsel for the company seem to entertain, that Raht shall be held to account for the apparent deficit, whether the company sustained an actual or merely a
It is, however, insisted that there are several hypotheses more plausible and reasonable than any Raht has offered to solve the mystery of the apparent loss. These hypotheses assume that he reported and was credited with larger expenditures for mining the company’s ores than were actually made, or that the ores from his own and the Burra-Burra mines were overestimated for his benefit, in quantity or quality, or that
Let us inquire if the facts and circumstances do not establish with reasonable certainty, that the apparent deficit of copper resulted from too low a percentage for losses in roasting, smelting and refining the company’s ores. It is no doubt true, as argued, that
It is also in proof that the ores taken from some of the company’s mines had been, for many years prior to the discovery of the loss in question, diminishing in richness, and that very low grades- of ore have been in pretty common use since the smelting and refining works were put in operation. It seems to be an established fact, that the mixing of low-grade ores with rich ores in the processes of roasting, smelting and refining, increases the percentage of losses •on the rich ores, without diminishing the usual per cent, of losses on the poor ores. Both Tonkin and Mueller, whose intelligence and truthfulness are not assailed, state that if two, instead of one, per centum for losses had been allowed on the company’s ores, the whole amount of the apparent deficit of copper, in the present instance, would have been fully explained and accounted for. And the decided weight of the proof establishes, that, considering the quality of the ores used during the last years of Raht’s agency, the mode of assaying, and the manner of producing ingot copper, at the works, a deduction of two per centum for losses in roasting, smelting and refining would be both reasonable and just.
But the deliberate action of the board of directors places this matter of fact beyond controversy, for it sanctions the correctness of the estimate of two per centum for the usual losses on the ores. It is substantially admitted, in the annual report of the board
In view of the foregoing considerations, it cannot, most certainly, work any hardship or injustice to the-company if this court shall give B.aht the benefit and advantage of the percentage for losses which its own directoi's and officers have declared to be reasonable and just. Applying, as we must do, from a conviction of its truthfulness and correctness, this principle of even-handed justice, the apparent loss of copper complained of is fully explained and satisfactorily accounted for, without impugning the character of K.aht or any other person for honesty and integrity, or inflicting any real injury or actual damage to the company.
9. We now proceed to consider the main ground for relief under the cross-bill. The company claims the whole net profits of the store, carried on at the
The company did not own the store, or have any money or means invested in its business; it did not incur any liability or run any risk on account of the purchase, ownership or sale of the goods and supplies; it did not pay any part of the expenses, or suffer any part of the losses for bad debts; it did no more than simply to grant the privilege of establishing and maintaining a store at its mines, with the use of some houses free of rent, and with iiberty to sell to its employees, and collect out of their wages. In a word, the business of the company’s mines and works and that of the store were separate and distinct, but in some sort dependent upon and mutually beneficial to each other. On the other hand, Raht acquired the store privilege as part of the compensation for his services as general agent and superintendent; had the privilege renewed and extended from year to year, furnished all the capital for running the store, incurred all the risk of losses, paid all the expenses of salesmen and clerks, and claimed all the profits as his
Now, to 'enable the company to recover these profits, it must allege and prove enough to justify a court of equity in setting aside that part of the contract which created and secured to Raht the store privilege, for if this part shall be held valid and binding, the profits belong to him and not to the company. Whatever may have been the perversions and abuses in the use and exercise of the privilege, they do not involve and cannot affect the question of the legal existence and binding force of the contract. There are two things alleged in the cross-bill which occupy this relation to the store privilege. It is said that Raht agreed, as a part of the contract, not to sell goods and supplies to employees at a larger profit than ten to fifteen per cent, on cost. Suppose such an agreement, and an indisputable breach of it were established by the proof, it would not constitute any valid ground for annulling or setting aside the contract, but would present a case for the recovery of such damages as the company could show it had sustained. The existence of any rach agreement, however, is positively denied in the answer of Raht, and there is not only no proof to sustain the allegation of the cross-bill, but, on the contrary, Thoma's ánd Congdon, having ample oppor
It is also said Raht promised to use the store privilege in such manner as not to enhance the price of labor or the cost of materials in the mines and works. The making of any special promise to this effect is positively denied in the answer, and if such promise were made, the breach of it is denied in equally positive terms. Suppose, however, both the promise and its breach were clearly proved, it might form a good ground for an action of damages; it would not, most certainly, avail anything upon the question of the validity or invalidity of the contract itself. Pending the agency and enjoyment of the privilege, the breach of- such an agreement might excuse and justify the company in terminating the agency, or -discoútinuing the privilege at once; but it would be very unjust and inequitable to hold, after the agency had ceased to exist and the privilege to be enjoyed, that such a breach relates back to the creation of the privilege, and operates to cancel the contract, and to turn over to the other party all the profits derived from its exercise and enjoyment. We dismiss this matter for the present, but will return to it in another connection.
What are the precise grounds upon which the company predicates its claim to the profits of the store? They may be stated in a few words. They consist in general charges of suppression and misrepresentation
There are several difficulties which seem to lie in the way of granting the relief, and they deserve to be stated and considered with some degree of care and fullness. Conceding, for the present, Eaht’s duty to be as alleged, must not the company aver, specifically and positively, want of the necessary information and knowledge on its part? There is no such allegation in the cross-bill. It may, perhaps, arise, by implication, from the statements, that Eaht did not make a full disclosure, but intended to deceive and mislead the directors into the belief that the privilege was of but little value.
It is wholly immaterial from what source, or in what manner, full information and knowledge are acquired. Did the principal have such information and knowledge — presents the only material inquiry. The
It also admits of very great doubt whether or not the doctrine of full disclosure has any application to a transaction like the one in question. It is true, as a general rule of law, that an agent cannot, upon his own volition and choice, assume a position, or enter into ’ a contract, that may bring him into antagonism with the interest of his principal; but the rule-does not apply where the principal consents to his taking the position or making the; contract. When the principal consents that his agent shall act, in some matters, as agent for an opposing interest, this double employment may be accepted by the agent, and he must consider himself as bound to discharge his duty fairly to both of the parties. Wharton’s Agency and Agents, secs. 56, 244. As stated above, the store privilege entered into and formed part of the consideration for the making and accepting of the original
Beyond question, the parties were competent to enter into the original contract, and thereby determine the character and amount of compensation, without •either one being compelled to disclose anything as to the real or relative value of the agent’s services, for it was the creation, and not the continuation of an existing relation of principal and agent. Wharton’s Agency and Agents, sec. 323. The parties, in defining the nature and scope of the agency, and fixing the character and amount of the compensation, must be regarded as dealing with each other as strangers, and at arm’s length. The original contract of agency was only for the period of one year, and it was renewed, from year to year, upon the same terms, and with the same privileges, as in the original contract. Now, when the parties came ' together, each year, to renew the agency, and to continue the compensation, it seems, from the very nature of the transaction and the indisputable rights of each one, that they must be regarded, in law, as standing upon an equal footing, and as contracting at arm’s length. They are not bound together any longer than for the existing term; •either one, in negotiating for another term, may de
Further, it can be hardly maintained, in any just sense of the doctrine, that the matter of the store privilege falls within the scope, or belongs to the subject-matter. of the agency. Most certainly, neither the store itself, nor the profits thereof, constituted any portion of the company’s property, nor did any trust attach to the same for its benefit, for the obvious reason that Raht might have given the goods and profits to a relative or friend, or wasted them in luxurious living, or made any other disposition of them to suit his pleasure, and the company would have had no sufficient ground to invoke the aid of any court to prevent it. It is equally certain that the carrying on of the store, and the receiving and investing the profits, did not fall within or constitute any part of the duties and responsibilities belonging to the general agency and superintendency of the company’s mines and works.
True, an agent is not at liberty to act or contract, for his own benefit, in regard to the subject-matter of the agency, and the advantage of all that he does
Suppose, however, we are mistaken in the views above expressed — and we are not so well satisfied of their soundness as to place our decision solely upon them — we next inquire, did not the company have full information and knowledge as to the value of the
A brief review of the facts, which are not and cannot be controverted, will fully and satisfactorily answer the questions above propounded. During the whole period of the agency and the exercise of the store privilege, the company was unable to furnish at any time the necessary means to carry on the mining, smelting and refining operations, but was compelled in order to raise even a working capital to resort to various plans and schemes of effecting loans and advances, submitting in every instance to pretty hard and onerous terms and conditions. The subject of its undertaking to run the store was frequently discussed
The directors were, as already stated, gentlemen of considerable intelligence and large business capacity and experience, having been at some periods of their life merchants, brokers, bankers and capitalists, engaged in active avocations and pursuits in the city of New York. They made frequent visits to the mines, examined with care into all the departments of the company’s affairs, looked into the working of the store privilege and its connection with employees and their wages, and had before them ample data from which
Now, giving due weight to these facts and circumstances, it is impossible to resist the conclusion that the directors had all the time ample information and knowledge as to the value and profits of the store privilege to enable them to discharge faithfully and fully all their duties and trusts to the company. Their information and knowledge went far beyond
There is still another view which deserves a short notice. To this claim 'of the company, Raht also interposes the defense of stated and settled account. The company failing to establish fraud or mistake, or manifest error in leaving the profits of. the store out of the various settlements, the plea of stated and settled aecomrt must be held to be conclusive on the ■parties, unless the confidential relation of principal and agent forms an exception to the doctrine of courts of equity upon the subject of that plea. There is a marked distinction as to the effect of the plea, between cases involving the relation of client and attorney, and cases involving the relation of principal and •agent. In the former class it seems that no settlement, however carefully and solemnly made, interposes ■ any difficulty to re-openiug the account and making the settlement anew; but no case has gone so far in the' other class of cases. In the well-considered case ■of Lewes v. Morgan, Chief Baron Macdonald states what may be regarded as the reasons for the distinction in these words: “ An attorney has often been ■described to be an officer of the court, and in that
10. As closely connected with, and in some sort arising out of the exercise of the store privilege, the company claims that Raht made contracts for labor, transportation and materials, to be paid for in part in goods, provisions and other property, at exhorbitant profits and prices, and thereby increased the wages of labor, and the prices of hauling and materials, inflicting on it great damage and loss. This claim rests upon the allegations that an immense amount of labor, hauling and materials was required to carry on the
The parties have taken a large mass of proof, bearing more or less directly upon the points in dispute,, and we have gone far enough into it to be convinced that both sides have succeeded admirably well in proving their qwn views of the case. The matters, bearing upon the issues, are just of such a character that men of known intelligence and integrity, residing in the same community, may honestly entertain and express different and conflicting opinions. If the decision of the court depended alone upon the questions, of fact, we would be compelled to undergo the labor of a critical analysis, and careful weighing of the proof, for it seems, from a general view of it, to produce a kind of equipoise between the probable injuries and probable benefits resulting to the company from Kaht’s plans and his practical execution of them. It is certainly proved that he made numerous sales of’ goods, wagons, teams and other property, to be partly paid for in labor, hauling and materials; but it does not appear, in a single instance, that higher wages or larger prices were, in fact, paid, or agreed to be paid in consequence of such sales and purchases. It is no doubt true that he realized on the advances of money and sales of property remunerative interest and profits; but the danger of damage and loss from the wear and tear and destruction of the property, and from the bad faith and insolvency of the purchasers, was
It seems to be conceded that these sales of wagons, teams and other property, and the advances of money, enabled Raht to break up .strong and threatening combinations to enhance wages and prices, to bring into competition a larger number of employees and contractors, and to prevent any increase for the time, and, in the end, to produce a gradual decrease in the prices for hauling and materials. Now, the wisdom and necessity of his plans are not questioned in the argument of the company’s counsel, but complaint is alone made against the manner and mode of his carrying the plans into execution. If we correctly understand the argument, it assumes that the company furnished him with ample funds to carry on its whole mining operations, and that if these funds had been invested
There are several conclusive answers to this position. As matter of fact, the company did not furnish him with ample funds for this or any other purpose connected with its business operations. The very necessity for his making sales of wagons, teams and other property, to be in part paid for in labor, hauling and materials, arose, as will clearly be shown in another part of this opinion, from the failure of the company to pay him a large debt, according to its express and positive agreement. Adopt, however, the broadest and most liberal construction of the terms of the general agency, and no such investment of the company’s money can be implied from the authority vested in the agent. It is, in truth, wholly improbable that any board of directors could have been induced to sanction afterwards, much less direct in the first instance, any such investments, with the hope of making or saving anything' in the transaction.
There is no doubt but that Kaht declined, in many instances, to give contracts to persons who proposed to do hauling or furnish supplies at something less than the usual ruling price, if they were paid all in money and at short intervals. It is conceded, and the weight of proof establishes the fact, that the regular prices paid, and uniformly approved by the board
We are very much inclined to the opinion that the company was not injured, but positively benefitted in the end, by the transactions now complained of. It, however, satisfactorily appears that these transactions, outside of the sales in the store, occurred chiefly, if not entirely, after the making of the new contract for
We cannot, for these reasons, decline to place on the clanse its true and proper meaning, or refuse to give full force and effect to it as a valid, binding contract.. We have seen that if parties will enter even into hard and unconscionable bargains with their eyes open, courts of equity cannot and will not relieve them, unless they show fraud or some undue means used. Nothing like fraud or undue means, in the sense of the principle, are alleged or proved. We cannot very well see how intelligent business men,
11. There are several other matters of more or less importance which deserve at least a brief consideration. As a means of attacking the accuracy of the monthly statements, but not as a distinct ground of relief, it is urged in argument that Raht adopted and used in the measurement of charcoal the “struck” instead of the “heaped” bushel, the former containing ■only 2150, while the latter contains 2700 cubic inches, making a difference of near one-fifth in the bushel. It is also said that the directors, thinking the heaped bushel was used and referred to in the monthly statements, made no objection to the price reported as paid per bushel for coal. If they were deceived and misled, as argued, the company would not be entitled to any relief in the present suit, for want of proper allegations in the pleadings; but they were not deceived or misled in the matter. The proof shows that the “struck” bushel was exclusively and solely used in the measurement of charcoal by the old companies before the formation of the new one, was adopted and used under the general agency of Mr. Congdon, and was simply continued in use after Raht became general agent. We think from these facts and others equally as pointed, that the directors, or some of them at least, must have known the kind of bushel used and referred to in the monthly statements, and were not deceived and misled in approving the agent’s accounts and making settlements with him in this respect.
Strong accusations of fraud, - overreaching and un-
It is alleged in the cross-bill with great particularity, but seems to be ignored altogether in the argument, that Raht converted a large quantity of wood-ashes by hauling them upon and enriching his own lands instead of selling or having them scattered on the lands of the company. The proof makes it quite clear that the ashes could not be sold at any price and were not worth more, if really so much, as the cost of removing them, and it follows that the company was benefitted by having them taken out of the way without incurring any expense for their removal.
Serious complaints are also made in the cross-bill, upon the grounds that Raht invested large amounts of the company’s money in lands during the civil war, and at its close paid back the same in worthless Confederate notes and Southern bank notes of but little value, and that he claimed and collected at the same time from the company a false and fraudulent
We think, upon a careful and deliberate review and consideration of the whole case, that the decree of the chancery court, dismissing the cross-bill of the company and granting the relief prayed for in the original bill, is correct, but we do not concur in opinion with the learned chancellor on the subject of costs. The general rule on the subject of costs, adopted in the court of chancery, is .the same as in a court of law, that the costs follow the result of the suit; but the former court may under certain circumstances excuse the unsuccessful party from the payment of costs to his opponent, and even in exceptional cases actually throw his own costs upon the party succeeding. Cases of the latter class, however, are very limited, and seem to be confined to cases where the unsuccessful party is in no fault whatever. 2 Daniehs Ch. Pl. and Pr., 4 Am. ed., top page 1381, and notes. We are unable to see any sufficient reason or circumstance to take the present case out of the general rule. It may be true that a demurrer to the cross-bill would have dispensed with the necessity of taking proof upon many of the issues imperfectly and insufficiently stated, but the intrinsic difficulty of making a demurrer, standing alone or combined with an answer, á full, satisfactory and complete defense,
In view of the charges in the cross-bill and the failure of the company to make out a case for relief under any one of these charges, we think it is highly reasonable, just and proper to adhere to the general rule in the disposition of costs. A decree will be entered in conformity with this opinion, dismissing the cross-bill of the company and giving the relief sought in the original bill, with a reference to the clerk of this court to ascertain the amount due to complainant Paht, and in taking this account, the company will be charged and credited as directed by the decree in the chancery court. Upon the ascertainment of the amount due, complainant Paht will be entitled to a decree for the same against the company and the sureties on the replevy-bond, and to enforce the lien created by the resolutions of the board of directors, of the 1st December, 1874, upon the personal property of the company. The company will pay the costs in the chancery court and the costs in this’ court.