Case ID: ad_134/html/0647-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Miller, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

A. N. Ridgely, Respondent, v. James R. Keene and Foxhall P. Keene, Defendants, Impleaded with Talbot J. Taylor & Company, a Firm Composed of Talbot J. Taylor and James B. Taylor, Appellants.
    Second Department,
    November 19, 1909.
    Contract—agreement to influence stock buyers—illegality of contract — when contract entire.
    A contract whereby one engaged in issuing to clients circular letters of unprejudiced advice as to the soundness of securities sold on the stock market, agrees to influence his clients to purchase a certain stock, is illegal and immoral. The court will not aid in its enforcement.
    A recovery cannot be had for the expense of issuing newspaper advertisements and circulars in connection with the confidential letters to clients as they were part of an entire and indivisible contract. No recovery canbe hadforanypart of the work done pursuant to such illegal contract.
    Hirschbers, P. J., dissented.
    Appeal by the defendants, Talbot J. Taylor and another, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Kings on the 27th day of May, 1906, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 26th day of June, 1908, denying the said defendants’ motion for a new trial made upon the minutes.
    
      Robert W. Candler Russell S. Landale with him on the brief], for the appellants.
    
      I. R. Oeland, for the respondent.
   Miller, J.:

Courts should refuse to aid the enforcement of contracts like that in suit.

The plaintiff alleges in his complaint that for some years prior to the transaction in suit he had “been engaged in the business of writing circular letters, known as 1 Ridgely’s Financial Forecasts,’ in which he gives (sic) advice and information to his clients as to the value of securities dealt in on the New York Stock Exchange, * * *; that by furnishing accurate and reliable information and advice, and by protecting the interests of his clients and customers he had on the 5th day of August, 1902, a clientele of about one thousand of such customers; ” that on or about the oth day of August, 1902, he entered into an agreement with the defendants whereby lie was to influence the purchase of Southern Pacific stock by his customers, and the defendants were to pay him therefor a reasonable compensation ; and that in accordance with said agreement, “ he influenced the purchase by his clients and others of said stock to an amount estimated at far in excess of one hundred thousand shares.” The plaintiff’s testimony tends to establish the agreement and the performance of it by him substantially as alleged. He testified to what he agreed to do in the following language: “I told him [meaning one of the defendants] that I would bull it through my letter, influence my subscribers to buy; ” and he sought to show by letters received by him from his subscribers that he did influence the purchase of over one hundred thousand shares. For that service a jury has awarded him a verdict of $3,000, and the defendants appeal from the judgment entered thereon.

The plaintiff by newspaper advertisements and circular letters sought to influence people to subscribe for his daily market letter, wherein he undertook to furnish them exact and detailed information and to give them impartial and unbiased advice respecting stock market matters, of which he assumed to possess superior knowledge and means of information. His daily letters to subscribers contained the following statement: “No ‘Discretionary Account ’ business done. And no connection whatever with any brokerage office.” The defendants were stockbrokers. They were interested in a pool in Southern Pacific stock, and, according to the plaintiff’s testimony, they wished to create a rising market for that stock, to “ bull it,” as the expression is, and the plaintiff has recovered a judgment on a contract to assist them in doing that by inducing the purchase of stock by subscribers to whom he pretended to give unbiased advice.

One’s sense of right and wrong is a safe guide as to what constitutes decent, honorable conduct, and it hardly seems necessary to analyze the transaction in suit or to quote precedent to show that the plaintiff is seeking to recover the fruits of an illegal and immoral contract. The relation between the plaintiff and his subscribers was one of confidence and trust. He calls them his i£ clients,” his “ clientele,” his “ following.” He expected them to act upon his advice in the purchase and sale of stock, and, even had there been no express representations made by him, there would have been an implied obligation on his part not to receive pay from third parties for advising them in a particular way. He seeks to excuse his conduct by asserting that the defendants represented, and that he honestly believed, that his subscribers would profit by his advice; but his belief in the soundness of his advice is wholly immaterial. The law takes into account human frailty, and absolutely forbids the assumption of conflicting obligations and duties and refuses to inquire whether the persons assuming inconsistent relations really supposed he was faithful to both. The wisdom of that is well illustrated in this case. It appears that the speculation in which the plaintiff engaged his subscribers was unfortunate. The plaintiff admits that, after he had begun to entertain doubt, he advised his customers to hold their Southern Pacific stock, for the reason that he wished to keep faith with the defendants. He says: “ That was good faith to these defendants Taylor & Company, and Keene in particular. I think it was good faith, or I could keep good faith with them, and good faith with my subscribers at the same time.” The law does not suffer one to undertake thus to keep good faith or to assume duties with which selfish interest may conflict.

In a nutshell, the plaintiff has recovered upon a contract to perpetrate a fraud upon his subscribers, for there can be no doubt that what the agreement contemplated and what the plaintiff actually did was a palpable fraud upon them. It was a violation of his implied obligations as well as of express representations made to them. The contract was illegal and contrary to good morals, and hence the court refuses him its aid. While it is unnecessary to support maxims of the law by citation of authority, I call attention to the following cases on the subject: Davenport v. Hulme (11 Misc. Rep. 521); Goodell v. Hurlbut (5 App. Div. 77); Woodworth v. Bennett (43 N. Y. 273); Dutton v. Willner (52 id. 312); Knowlton v. Gongress & Empire Spring Co. (57 id. 518); Unckles v. Colgate (148 id. 529); Holcomb v. Weaver (136 Mass. 265); Forsyth v. Woods (11 Wall. 484); Higgins v. McCrea (116 U. S. 671).

The respondent relies upon cases which hold that a broker having no discretion, but employed solely to bring the parties together, may accept commissions from both. It is unnecessary to analyze those cases in detail, for manifestly they have no application) and indeed, upon examination, it will be found that the reasoning of them makes against, not for, the plaintiff’s position. It is immaterial that the defendants may have understood that they were contracting for the plaintiff to perpetrate a fraud upon his customers because the court does not withhold its aid on their account.

The court did not permit a recovery for services in sending out the daily letters, but only for services and expenses incurred in connection with the newspaper advertisements and the circulars; but the newspaper advertisements, circular letters and daily confidential letters were parts of a single plan. The advertisements and circulars were designed merely to arouse interest in the confidential letters. The contract was entire and indivisible. It was an agree-' ment to influence the plaintiff’s subscribers to purchase stock, and being tainted with illegality, no recovery whatever can be permitted for any part of the work done pursuant to it. (Foley v. Speir, 100 N. Y. 552.)

The judgment and order should be reversed and a new trial granted, costs to abide the event.

Jenks and Rich, JJ., concurred; Hirsohberg, P. J., dissented.

Judgment and order reversed- and new trial granted, costs to abide the event.