Case ID: ny-super-ct_2/html/0579-01.html
Source: Caselaw Access Project
Author: {"author": "Oakley, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Henry Kneeland versus Nehemiah Rogers, Samuel Rogers and Edwin N. Rogers.
    A contract, made as an indemnity against the consequences of an illegal or immoral act, to be done at a future period, is - void, on principles of public policy: but a person may indemnify himself by contract, against the consequences of an unlawful act, already done.
    The declaration, in this case, contained seven special counts, the second of which set forth, that an action had been commenced against the plaintiff, relative to a sale of cotton, made by him as the agent and factor of certain persons residing in Alabama, who were liable to indemnify the plaintiff against the consequences of such sale: and that the defendants, in consideration of a sum of money paid to them by the plaintiff, at the request of his principals in Alabama, promised to indemnify him against said action. It then averred that a judgment had been recovered against the plaintiff the amount of which he had been compelled to pay, and that the defendants had never indemnified him, &c.
    The defendants pleaded the general issue to the whole declaration, and four special pleas to the first seven counts, alleging, in substance, that the judgment complained of, was obtained upon the ground, that in the sale of the cotton, the plaintiff had been guilty of fraud. Upon demurrer to these pleas, it was held, that there was nothing unlawful in the contract set forth in the declaration, and that the pleas were no answer to the second count.
    This was a special action on the case, in assumpsit. The declaration contained eight counts; seven of which were special, and set forth the plaintiff’s cause of action in various ways ; the last was general, for money paid, money lent and advanced, money had and received, &c.
    The first count alleged,- that the defendants were merchants and co-partners in trade, transacting their business at the city of New-York, under the name of N. Rogers & Sons. That the plaintiff, on the 20th day of Sept., 1821, had in his hands 124 bales of cotton, belonging to certain persons carrying on trade and commerce at Huntsville, in Alabama, under the name of L. Morgan & Sons, to be sold by the plaintiff as their agent and factor, and for their account and benefit. That the plaintiff, on the day and year aforesaid, as the agent and factor of Morgan & Sons, sold and delivered said cotton to one James Andrews, of Boston, for the consideration of $4993 and 92 cents, paid to the plaintiff. That Andrews, in the month of Oct., 1821, commenced an action against the plaintiff, in the Supreme Court of the State of New-York, to recover damages in the sale of said cotton, upon the ground that the bulk of it did not correspond with its samples Thatin the month of August, 1822, while said suit was pending, Morgan & Sons, being desirous of withdrawing from the hands of the plaintiff the sum of 463 dollars and 31 cents, part of the proceeds of said cotton, (which the plaintiff held to indemnify himself against said suit,) and of paying over the same to the defendants, to be retained by them as the consideration for their promise and undertaking hereinafter specified, for the purpose of inducing the plaintiff to deliver up said last mentioned sum, that it might be so paid over to the defendants, addressed a letter to them of the tenor following, viz:
    “New-York, August the 5th, 1822.
    “ Messrs. N. Rogers & Sons,
    “ Gentlemen,—A suit has lately been commenced in the Supreme Court ©f this State, by James Andrews, of Boston, “ against Henry Kneeland, of this city', relative to a sale hereto- “ fore made by Mr. Kneeland to Mr. Andrews, of a parcel of “ cotton, then belonging to us ; in which suit the plaintiff has laid “ his damages at $2500. The sale having been made for our “ account, we are of course liable for any damages that may be « recovered in the suit; and being desirous of providing a full " indemnity in this respect, to Mr. Kneeland, we hereby autho- “ rize and request you to pay to him all such sums of money as he may be required to pay, as well for any damages that shall “ happen to be recovered against him in-the suit abovemention- “ ed, or otherwise, in relation to the sale of said cotton, as also “ all costs and charges to which he may necessarily be put in “ that behalf; including reasonable counsel fees to the counsel “ to be by him employed in relation to the said business. Your “ advances to Mr. Kneeland for the above, to be made from “ time to time, as the occasion may require ; or otherwise at his « election. By complying with this request, and charging your “ advances to our account, you will oblige your obedient servants, L. Morgan Sons.”
    
    That the defendants, upon the' presentment of said letter to them, endorsed a memorandum on the back thereof, in the words following, viz : “ We will promptly comply with the requests of Messrs. L. Morgan & Sons, as contained in the within order. “ New-York, August 5th, 1822. N. Rogers & Son.”
    
    The plaintiff then averred, that the said order and endorsement were delivered to him on the day and year aforesaid, and that thereupon he paid over to L. Morgan & Sons the said sum of 463 dollars and 31 cents, which they, on the same day, paid over to the defendants, who received the same as the consideration of their said promise .and undertaking. That afterwards, at the May Term of the said Supreme Court, in the year 1827, the said James Andrews recovered judgment against the plaintiff in the aforesaid suit, for the sum of 1648 dollars and 98 cents as damages; which said sum, together with 131 dollars and 49 cents, for costs, and 350 dollars for counsel fees in said suit, the plaintiff had been compelled to pay: of all which the defendants had notice. By reason of which premises, and by force and effect of the said memorandum, signed by the defendants, they became liable to pay to the plaintiff the said several sums of money ; and in consideration thereof, undertook and promised to pay the same to the plaintiff, &c.
    
      The second count set forth, the pendancy of the suit by Andrews against Kneeland, the liability of Morgan & Sons to save the plaintiff harmless from all its consequences, and their desire to provide a full indemnity for him. That the defendants, on the same 5th day of August, 1822, in consideration of the sum of $463 31 cents, paid to them, by the plaintiff at the special instance and request of Morgan & Sons, undertook and faithfully promised the plaintiff, that they would pay to him all such sums of money as might be required to satisfy the damages which might be recovered against him in said suit, and all costs and charges to which he might necessarily be put in that behalf: and that such advances should be made, from time to time, as occasion might require. It then set forth the recovery of the judgment by Andrews; the satisfaction thereof by the plaintiff; his costs and charges; notice to the defendants; and concluded by averring that the defendants, not regarding their promise and undertaking last aforesaid, had deceived and defrauded the plaintiff in this; that though often requested to refund to the plaintiff the said sums of money, they had wholly neglected and refused to do so, &c.
    The other five special counts, set forth the contract, founded upon the same facts, in various ways ; but as the opinion of the court in reference to the pleadings involved in the cause is con-' fined to the second count, it is not deemed necessary to describe the other counts more particularly.
    The defendants pleaded the general issue to the whole declaration, and four special pleas to the first seven counts.
    The first special plea alleged that the plaintiff ought not to maintain his action, because in the sale of the said cotton to Andrews, the parcels exhibited as samples, were superior in quality to the bulk thereof.
    
    The second set forth,- that the plaintiff conducted the sale of said cotton so negligently and improperly, that thereby the action of Andrews against the plaintiff accrued, and judgment was obtained against him.
    The third plea alleged that the sale of said cotton was con
      ducted fraudulently by the plaintiff, and that thereby the cause of action accrued to Andrews, and judgment was obtained against him, &c.
    
      The fourth plea alleged, that the plaintiff ought not to recover, because, by the record of the judgment in said action, it appears that judgment was awarded to Andrews against the plaintiff, for the cause that, in the sale of said cotton, the plaintiff deceived and defrauded Andrews, &c.
    To each of these pleas, there was a separate, general demurrer ; and the cause was argued by Mr. George Griffin for the plaintiff and by Mr. George Sullivan for the defendants.
    
      Mr. Griffen. I. Where parties are competent to contract, and the contract is not rendered void or voidable by statute, and is not per se against public policy or good morals, the non-performance of it can never be excused.
    An act, already done, however improper in itself, if it involve no moral turpitude, may be the subject of a valid indemnity to the party during the wrong. The qualification voluntarily conceded, is unnecessary, the rule of law being', that “ it is a good “ condition to save me harmless, from all the ill things I have “ done, for that is no encouragement for me to do any more ill “actions ; but you are not to save me harmless, from all the ill “ actions that I shall do, for that is an encouragement to do evil, “ which is against the law.”—[Hackett v. Tilley, 11 Mod. R. 93. Same case 5th Vin. Abridg. 96, in margin. Doty v. Wilson, 14 John. 378. Given v. Driggs, 1 Caine’s, 450. Farmer v. Russell, 1 Bos. & Pul. 296.]
    II. The nature and extent of the misconduct and fraud of the plaintiff, in effecting the sale to Andrews, as referred to in the last three special pleas are not disclosed. The breach of every declaration in assumpsit, when fully expressed, alleges both fraud and misconduct; viz., that the defendant contrived and fraudulently intended, craftily and subtly to deceive and defraud the plaintiff. This allegation is abundantly sufficient to satisfy the averment in those pleas, and would, upon the principle which they assert, defeat a recovery on the guaranty in every possible case.
    III. The defendants by their guaranty, assume the place of Morgan & Sons, and the latter, in express terms, admit their liability to indemnify the plaintiff. (See the letter addressed by them to the defendants, set forth in hcec verba, in the first count of the declaration.) The pleas, therefore, should avoid the liability of L. Morgan & Sons, and make that the ground of exonerating the defendants.
    IV. At the time the guaranty was given, the sale to Andrews had been made, and his suit against Kneeland was then pending. Admitting, for the sake of the argument, that the guaranty may be avoided, yet it must be by matter either accruing, or at least discovered after the giving of the guaranty; yet none of the pleas advance any such pretensions, but rely exclusively upon matters existing antecedently to the giving of the guarranty; nor is it pretended that these matters were subsequently discovered.
    
      Mr. Sullivan for the defendants.
    From the letter of Morgan & Sons, to the defendants, which is spread upon the first count of the declaration, it appears, that they, supposing themselves to be liable for the consequences of Kneeland’s acts, relative to the sale of the cotton, requested the defendants to indemnify him for whatever sums he might be compelled to pay to Andrews. Upon the back of this letter the defendants endorsed a promise to comply with the request of Morgan & Sons. Upon this state of facts the defendants are not liable, for the promise contained in the letter, was not an absolute undertaking, but an overture of guaranty; and the plaintiff should have notified the defendants, that he relied upon the letter, if he intended thereby to bind them. This, he has never done, and the defendants are not responsible upon the memorandum.
    But suppose the writing to be a guaranty; the liability of the defendants, cannot be extended beyond that of their principals, 
      and they may avail themselves of every defence which might be set up by them, if they were defendants. Morgan Sc Sons, could not be liable to the plaintiff, for the consequences of his own fraud, for they were wholly ignorant of his acts. They could not, in any event be made liable to him, unless upon the ground of an express promise, made with a full knowledge of all the facts.
    II. There was no consideration for the defendant’s promise. The supposed responsibility of Morgan & Sons, is no consideration, for they were not liable to the plaintiff. Their mere request, directed to the defendants, was not a consideration sufficient to support the promise, unless the plaintiff thereby sustained some loss, or suffered some injury. [Leonard v. Vredenburgh, 8 John. 39, the second class of cases as there discriminated by C. J. Kent.] It cannot be pretended here, that the plaintiff was injured by this request, or the promise of the defendants to comply with it; for, at most, he merely surrendered up, in consequence of the promise, the sum of #463 31 cents, which he could not lawfully withhold.
    If the defendants are liable to the plaintiff, Morgan & Sons are also liable, for the former are the mere agents of the latter. But Morgan & Sons are not liable, both because of the plaintiff’s fraud, and from the retention of their money by him. The consideration arising from the #463 31 cents, may be thrown entirely out of the question, for that was money belonging to Morgan & Sons, which the plaintiff had no right to retain. The only consideration in the case, therefore, is that contained in the letter. But, upon the face of the letter, no consideration appears, as moving between the plaintiff and defendants; and as the defendants’ contract was reduced to writing, no consideration, inconsistent with that contained in the writing, can be set up. There was no privity between the defendants and the plaintiff, in the transactions out of which this action arose; and no consideration of benefit to the defendants, or of injury incurred by the plaintiff, at the request of the defendants, ever passed between the parties.
    
      But the declaration is bad: I. Because there is no averment of a delivery of the supposed written agreement to the plaintiff, or to any person for him.
    II. Because the contract of the defendants, as stated in the declaration being clearly a promise to pay the debt of Morgan & Sons, is within the statute of frauds, and there is no allegation that the promise was in writing. This is a fatal defect, and the case of Fish v. Hutchinson, [2 Wils. 94,] is directly in point. [See also Leonard v. Vredenburgh, 8 John. 39.] The defendants might have demurred for this cause, and judgment must have passed in their favor.
    
      Mr.- Griffen, in reply. It is stated as an objection to the plaintiff’s right of recovery, that it does not appear that the money received by the plaintiff, for the sale of the cotton, has ever been paid over to Messrs. Morgan & Sons. There is no averment, it is said, of that fact in the declaration, and therefore the legal presumption is, that the plaintiff still retains the money. In an action against third persons, it is not necessary to allege that fact; and it would be surplusage if it were averred.
    But it appears from the letter of Morgan & Sons, which is spread upon the first count of the declaration, that the balance due them, has actually been paid over by the plaintiff, and the. court therefore can take judicial notice of that fact.
    The counsel for the defendants is mistaken, in supposing that there is no averment of the delivery of the letter and memorandum to the plaintiff, for it is directly alleged in the first count of the declaration. It need not have been averred, however, nor is it necessary at the trial to prove the delivery.
    The defendants’ agreement is not within the statute of frauds: it is an original undertaking for a new and distinct consideration, passing between the newly contracting parties. Morgan & Sons are not. liable upon this contract, however they may stand as to any other distinct liability. The law upon this subject is well settled; [4 Cowen's R. 432 ;] and it is also established, as an acknowledged rule of pleading, that in declaring upon a collateral undertaking, you need not aver that the promise was in writing. If the undertaking be collateral, and the defendant pleads that the promise was not in writing, then the plaintiff must reply, setting forth the writing.
   Oakley, J.

This is a special action on the case. The declaration contains eight counts, the last of which is general. The defendants plead the general issue to the whole declaration, and to the seven first counts, interpose four special pleas: to these pleas there is a general and separate demurrer.

The second count in the declaration substantially sets forth, that an action had been commenced against the plaintiff by one Andrews, in the Supreme Court of the State of New-York, relative to a sale of cotton made to him by the plaintiff, as agent and factor of Morgan & Sons, merchants, residing in Alabama. That Morgan & Sons were liable to indemnify the plaintiff against said action, and that the defendants, in consideration of a sum of money paid by the plaintiff to them, at the request of Morgan & Sons, promised to indemnify him against the action of Andrews. The count then avers that Andrews obtained a judgment against the plaintiff, and that he had been obliged to pay, &c.; and that the defendants had not indemnified him. The statement of the plaintiff’s cause of action is varied in the other special counts, but for the purpose of disposing of the present question, it is not deemed material to notice them more particularly.

The fourth and fifth pleas of the defendants are in substance, that the judgment of Andrews against the plaintiff was obtained on the ground, that in the sale of the cotton the plaintiff had been guilty of fraud.

The question intended to be raised by these pleas is, whether a party, who has been guilty of a fraudulent act in the sale of property as the agent of another, can make a valid contract with a stranger for an indemnity against the consequences of such fraudulent act.

It is well settled, that any contract made for the purpose of indemnifying. a man against an illegal or immoral act, to be done at a future period, is void on principles of public popcy_ pjm js also settled, that a party may indemnify himsejf against the consequences of any unlawful act already done. [Haskett v. Tilley, 11 Mod. 93. 1 Com. on Con. 30.] Thus it has been held, that a bond given to a sheriff, to indemnify him against a voluntary escape, which has already happened, is valid, [1 Caines, 450. 14 J. 378,] although such bond would be clearly void, if given to save the sheriff harmless against an escape thereafter to be permitted.

The present case seems to me, to fall within this principle. The plaintiff had already been prosecuted for the alleged fraud in the sale of the cotton. I see no reason why the defendants might not stipulate for a valid consideration, to indemnify him against that action. Such a contract has no tendency to encourage the commission of illegal or fraudulent acts, and does not seem to conflict with any principle of public policy.

It was contended, on the argument, that though the pleas might be bad, yet that the declaration was defective, inasmuch as it set forth a contract within the statute of frauds, but did not show that such contract was in writing. This objection has clearly no application to the second count, as that is founded on an original contract between the plaintiff" and defendants, for a consideration moving directly between them. And if it seem otherwise, it is settled, that when the plaintiff counts on a contract, which is clearly collateral and within the statute, he need not aver it to be in writing. ' It is sufficient if that fact appears in evidence. [4 John. R. 237.]

The fourth and fifth pleas are, according to this view of the case, no answer to the second count in the declaration.

The second and third pleas are clearly bad. They charge the plaintiff with no fraud. The third plea avers that in the sale of the cotton he was guilty of negligence, and the second does not amount even to that. It cannot be questioned, that a party may make a valid contract for indemnity against any past negligence.

The special pleas of the defendants being pleaded to the seven first counts of the declaration, and being no answer to one of them, must be entirely overruled; and there must be generally for the plaintiff, on the demurrers.

Judgment for the plaintiff, with leave, &c.

[G. W. Strong, Att'y for the plff. A. G. Rogers, Att’y for the defts.]