Case ID: how-pr_40/html/0353-01.html
Source: Caselaw Access Project
Author: {"author": "\n      By the court, Johnson, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

SUPREME COURT,
    Charles W. White, appellant, agt. James S. Whaley, respondent.
    Where an 'attorney-at-law applies to a plaintiff in and owner of a judgment (which was obtained by another attorney) for the purpose of purchasing the judgment, which application the owner declines, but finally consents to make him his attorney to collect it, the object being to bring about and create the confidential relation of attorney and client, and fix the measure of compensation of the attorneys the relation of the attorney and client, and the contract come into existence at the same instant.
    And where it is clear, from all the evidence that the attorney was at the time of making the contract, in possession of information on the subject of the value and collectability of the judgment which he did not disclose to the owner, hut con-. cealed it from him for the purpose of obtaining a more favorable bargain to himself, and obtaining a larger share of the debt for his trouble of collecting than he would be able to get otherwise, the attorney cannot enforce the contract.
    
      Fourth Judicial Department, General Term, November, 1870.
    Present, Mullin, P. J. and Johnson, and Talcottt Justices.
    
      Facts claimed to be established by respondent. On the 12th November, 1858, James S. Whaley recovered a judgment in supreme court, against Albert Babcock, Richard Skinner and Samuel P. Marsh, for the sum of $1,140 14, damages and costs.
    In 1867, the judgment was still outstanding, due and unpaid. Previous to 1867, Marsh had taken the benefit of the two-third act, Skinner had moved to Little Falls, in Herkimer county, and Babcock remained in Oneida county, but his property was so covered that Whaley had never attempted to collect the judgment of him.
    Dr. Whaley regarded Skinner as an honest man, and poof. He had paid to Dr. Whaley his individual indebtedness, and Dr. Whaley and he were friends, and the doctos.’ did not intend to press the judgment against Skinner.
    
    About the 1st of December, 1867, White (the plaintiff) 'who was an attorney of this court, knew of this judgment and was acquainted with Skinner. About that time White met Skinner, rode with him to Oriskany Falls, in Oneida county, and then learned that Skinner had removed from Little Falls to Oriskany Falls, and had a mill there, and had just bought a quantity of wheat and was engaged in business in his own name, as a miller, and that the judgment could all be collected of him.
    After he had acquired this knowledge, White called on Doctor Whaley and endeavored to buy the judgment. Doctor Whaley told White that he and Skinner were friends, that Skinner had paid his individual account, and he believed him to be honest and poor, and he did not want anything done against Skinner. That he had a family and could not earn more than enough to support them, that he believed Skinner would pay as fast as he could 5 and also told White that Skinner lived at Little Falls.
    White, who knew that Skinner had left Little Falls and moved to Oriskany Falls, in Oneida county, and was perfectly good for the judgment, concealed from defendant his knowledge of Skinner, and in order to induce the doctor to sell the judgment, he (White) told him that he wanted the judgment to use against Babcock only.
    He said he had filed a bill to reach a house and lot held by Babcock’s wife, but which was in fact the property of Babcock, and described to the doctor how he intended to get the house and lot, and averred that there was some doubt as to the judgment on which he had filed the bill, and he wanted the Whaley judgment to use against Babcock, as he knew that xyas all right. Doctor Whaley refused to sell the judgment and then White proposed to have Whaley make Mm (White) bis (Whaley’s) attorney to collect it
    
    
      Doctor Whaley, relying on the statement of White, arranged with him to take the judgment, as Ms attorney, and to divide what should be collected onit out of Babcock, and a power of attorney was made.
    Immediately on getting the authority, White went to Oriskany Falls, put an execution into the hands of the sheriff of Oneida county, against Skinner, and ordered a levy immediately on about $2,000 worth of flour, &c= Skinner paid White $175, and called on Dr. Whaley and informed him of the levy, &c„, which was the first intimation Whaley had of the attempt to enforce the judgment against Skinner, or that Skinner was a resident of Oneida county.
    Whaley having given to White the power of attorney did not know he could do anything himself and supposed, he could not, but as he was unwilling to have Skinner ruined, called on White, and claimed that White had obtained the power of attorney by ufalse representationsf and had told him u things that are not .true j” that he had said u he was going to collect it out of Babcock, out of the house and lot.” But offered Mm $150 to give up the power of attorney.
    Ho satisfaction was obtained of White, and upon the representation that Skinner would be ruined if the sale should go on, Dr. Whaley took counsel in regard to the matter, and if he could interfere, and was advised that if White had procured the power of attorney by fraud and was enforcing it as he had been informed he must not do, that he (Whaley) could disregard the power of attorney, and arrange with Skinner on equitable terms as he pleased. He did so.
    Afterwards White brought this action. It was defended by Dr. Whaley squarely on the ground that when the plaintiff first called on Whaley to purchase the judgment, he knew that Skinner was in Oneida county, and good, and that Whaley did not know it. That when he found that he could not buy the judgment, then he persuaded the doctor to make him his attorney to collect it, and procured himself to be so appointed, by persuading Whaley that he did not intend to use it against Skinner, or collect it of him, (which he knew Whaley would never consent to), but wanted it to use as against Babcock, when in truth he never intended to use it against Babcock, but did fraudulently design to use it against Skinner.
    At the conclusion of the proofs, the court ordered a verdict for the defendant, on the ground that “ White by omitting to tell Dr. Whaley what he knew of Skinner, makes void the agreement.” And “ upon the ground that he could not make a negotiation binding on Dr. Whaley, to conduct his business as an attorney, without disclosing all that was necessary for Dr. Whaley to understand before he concluded that negotiation.”
    The plaintiff now moves for a new trial on a case and exceptions.
    C. W. White, plaintiff in person.
    
    I. We say in the first place that the well established rule that an attorney has no right to deal or treat with his client without disclosing to him all he knows, which may be material in reference to the subject matter of the contract, has no application to this case; for the simple reason that no such relation existed at the time this contract was made. It appears that Dennison and Lynch were the attorneys of record in the judgment which was the subject of contract. It is very clear that this case was disposed of at the circuit under the erroneous idea that the relation of attorney and client did exist between the plaintiff and defendant at the time this contract was made.
    II. There being no evidence in this case that the relation of attorney and client existed at the time this contract was made, and that relation in fact having no existence, the case is to be decided without reference to that question and the parties treated as standing at "arm’s length” during the negotiation. In short, there was no legal relation of trust or confidence reposed, which made it obligatory upon the plaintiff to disclose to the defendant facts which he knew in reference to Skinner’s property, even if he had any such information, (2 Kent's Com., 482; Story's Eq., §§ 147, 148, 207; Laidlow agt. Oregon, 2 Wheat., 178 ; Fox agt. Markreth, 2 Bro. Ch. Rep., 420; Bench agt. Sheldon, 14 Barb., 66).
    III. Upon the trial the defendant objected to any evidence of the plaintiff’s concealment of any knowledge he had of Skinner’s situation, upon the ground that no such allegation was set forth in the answer. This objection was overruled, and the plaintiff excepted.
    This is claimed to be error there being" no allegation of fraudulent concealment of Skinner’s situation contained therein.
    IV. We say further if there, was any evidence of fraudulent representations given upon the trial by the defendant, it was contradicted by the plaintiff, and the question should have been presented to the jury.
    It is insisted, therefore, that a new trial should be granted.
    
      Johnson & Prescott, respondent's attorney.
    I. The first exception of plaintiff in the case is at folio 54. “ Question : On the occasion when you rode down with him in the stage, did you talk with him freely about Ms circumstances, and did he tell you what he was doing and what his property consisted off
    “ Objected to, as there is nothing of this kind set up in the answer, and as immaterial.
    
      u By the court.—I am inclined to think that an attorney is bound, in a contract of this kind, to disclose all the facts he has; otherwise it might be taking an undue advantage.’’
    
      It will be observed that this was a question to the plaintiff/ on cross-examination. Besides there is no objection to the form of the question.
    Mr. White was an attorney. He had in some way procured Dr. Whaley to appoint him his attorney to collect a judgment. That judgment was $1,140 14, and interest on it for nine years and thirteen days, and which on the 25th December, 1867, amounted to $1,841 41. Of this, White was to have one half, less ten per cent, on the face of the original judgment, i.e. $110 40, thus giving Mr. White $865 50, for issuing an execution against.a man perfectly responsible-, and under which a levy was made at once of personal property worth at least $2,000.
    This is so unusual, that of itself it would challenge inquiry and invite criticism.
    This defendant was defending on the ground that White had been guilty of a fraud, that, in his character of attorney, he had taken advantage of the confidence of Whaley." It was competent, relevant and proper.
    But the only objection is, “ there is nothing of this kind set up. in the answer, and as immaterial,”
    To that we say: (1.) It is fully set up in the answer, the averment is in these words, that White “ was well aware of the fact that Skinner was good, and that the judgment was Collectable of him.” And White had sworn, “ X did not know at that time, Skinner had property then.” We offered to show that he did know it, and it was finally drawn out of him that he did know all about it.
    
    Again, the defendant avers that the power of attorney “ was obtained of this defendant by false and fraudulent statements,” &c., and “that the said power of attorney was fraudulently procured by the said White, with intent to defraud this defendant and deceive him.” It is clear, therefore, that the first objection was untenable, we had a right to prove the fraud we had alleged by any evidence that would sustain the allegation.
    
      (2.) It was not immaterial, for, if true, it went to the foundation of the action. If it was trne, then it was conclusive evidence of the fraud, and the plaintiff could not recover. We had averred fraud generally and specifically, and offered to prove that before White approached Dr. Whaley in regard to this judgment, he had seen Skinner, rode in the stage from Clinton to Oriskany Falls, and talked freely with him about his business and circumstances, property, &c,, and lenew that Skinner was good.
    Again, the same facts were proyen by Skinner on bis examination without objection.
    II. The only other exception in the case is at folio 114-15. The court said: “I direct a verdict against you upon the ground that he could not make a negotiation binding upon Mr. Whaley, to conduct this business as an attorney^ without disclosing all that was necessary for Mr. Whaley to understand, before he concluded that negotiation. It is upon the ground of constructive fraud, not actual fraud.” There is no rule of law better settled than that laid down by Story in his Commentaries, § 218.
    
      " But by far the most comprehensive class of cases of undue concealment, arises from some peculiar relation, or fiduciary character between the parties. Among this class of cases are to be found those which arise from the relation of client and attorney. * * * * In these, and like cases, the law, in order to prevent undue advantage from the unlimited confidence, affection, or sense of duty, which the relation naturally creates, requires the utmost degree of good faith, (uberrima fidesj) in all transactions between the parties.
    
      a If there is any misrepresentation, or any concealment of a material fact, or any just suspicion of artifice or undue influence, courts of equity will interpose, and pronounce the transaction void, and as far as possible restore the parties to their original rights.” (Story's Eg. Juris., § 218).
    
      " If an attorney employed by the party should designedly conceal from his client a material fact, or principle of law, by which he should gain an interest, not intended by the client, it will be held a positive fraud. * * Attorneys must from the nature of the relation be held bound tp give all the information which they ought to give.” (Story’s Eg. Juris., § 219.)
    
      “ The law, with a wise prudence, not only watches over all the transactions of attorney or solicitors and clients, but it often interposes to declare transactions void, which between other persons would be held unobjectionable. * * * By establishing the principle that while the relation of client and attorney subsists, the latter shall derive no benefit to himselt from the contracts or bounty of the former, it supersedes the necessity of any inquiry into the particular means, extent and exertion of influence in a given case.’’ (Story’s Eg. Juris., § 310).
    In all contracts between an attorney and client, u it is the general policy of courts of justice, to protect the suitors, and not to suffer any advantage to be taken of them by their attorney.” (Story’s Eg. Juris., § 312 ; see also § 311, 313, 314, 315, and cases cited).
    
    In section 316 a. it is said: “ In all cases of purchases and bargains respecting property, directly and openly made between principals and agents, the utmost good faith is required. The agents must conceal no facts within his knowledge, which 'might influence the judgment of his principal as to the price or value, and if he does, the contract will be set aside.” (See also Farnum agt. Brooks, 9 Pick., 212)
    These are elementary principles, and the books are full of cases in all our courts enunciating the same doctrine.
    In Howell agt. Ransom, (11 Paige, 638), a case like this substantially, where thé attorney purchased a judgment. It appeared that the defendant in the judgment owned a farm, and the deed was on record, notice to all, the client as well as attorney. There was no proof of actual knowl
      edge or fraud, as against the attorney, and yet the court decreed that the attorney should pay over the full amount, exclusive of costs, and the $75 paid.
    In Starr et all agt. Vanderheyden, (9 J. R., 253), the court says: u The court from general principles of policy and equity, will always look into the dealings between attorney and client, and guard the latter from any undue consequences resulting from a situation in which he may be supposed to stand unequal. The court acknowledges the justness and application of the doctrine laid down by Lord Loughborough, in Newman agt. Payne, (2 Vesey, Jr., 190.” See also opinions of Spencer and Beardsley, in court for the correction of errors, in Evans agt. Ellis, 5 Denio, 640 ; Bergen agt. Udell, 31 Barb., 9 ; Merritt agt. Lambert, 10 Paige, 352; Hill on Trustees, 224, 285 ; Sears agt. Shaffer, 6 N. Y., 268).
    In a later case in the court of appeals, Ford agt. Harrington, (16 N. Y., 288), Bowen, J., says : 66 Courts scrutinize closely transactions between attorney and client, and transfers, and conveyances of property to the former by the latter, while that relation exists, are frequently set aside in cases where, but for that relation, they would be upheld. In such cases the law presumes that undue advantage has been taken of the confidential relation existing between attorney and client, and attorneys, in order to sustain such transfers .to them, have been required to show affirmatively either that they paid an adequate consideration, or that a gratuity was intended by the client, and that to obtain it, no advantage was taken of the confidential relation existing between them, and that everything was honest and fair on their part"
    
    The same judge reviews all the leading cases, indorses and adopts them.
    White was not only the attorney for Whaley in regard to this judgment. He had before tjiis acted as Whaley?s attorney in other suits. He had interposed defenses in two suits, then on the calendar, before he approached the defendant in regard to this judgment, and the relation of client and attorney clearly appears.
    The plaintiff not only concealed from Dr. Whaley the fact that Skinner had returned to Oneida county, and was then good, that the whole judgment could readily be collected, and was in all respects worth 100 cents on the dollar, principal and interest, but he informed him that he wanted it to use against Babcock, to collect it of him, when he never had the slightest idea of attempting to enforce it as against Babcock.
    Again, he not only never attenuated to enforce or collect it of Babcock, but on the very next day, after he had consummated his agreement with Dr. Whaley, he went to Oriskany Falls, and had a levy made on $2,000 worth of Skinner’s property.
    White says: “I never filed any bill on Whaley’s judgment, or used it for any such purpose”.
    Again, White took the power of attorney on the 25th December, 1867. He says he did not go down to Oriskany Falls the next day, but the execution which he made out in Waterville the day the levy was made, is dated the 26th, and he stayed there until the levy was made.
    White knew that Skinner was good before he approached Whaley as to the judgment.
    And yet he ventures to swear, u I did not know at that time Skinner had property.”
    Again, White admits in his testimony, “ I knew at that time Skinner resided at the Falls,” and yet he says, “I did not tell him in any of those conversations that Skinner resided in this county, or at Oriskany Falls. I did not tell him that Skinner was good for the judgment or any portion of it.”
    Was this disclosing to the client every material fact within the knowledge of this attorney, or was it a conmalment of facts which the doctor should have known!
    
      Is this acting in the utmost good faith—uberrma fides —or is it actual fraud Í It is submitted that when the court put it on the ground of constructive fraud, he a drew it mildly.”
    From all the evidence it is impossible to find otherwise, than that White, when he rode with Skinner to Oriskany Falls, learned that Skinner was good—that he knowing of this judgment, went to Dr. Whaley to buy it for SI00, failing in that, and learning as he did, that Whaley was unwilling to enforce the judgment against Skinner, and considered it doubtful as against Babcock, White concocted the story about filing a bill against Babcock, in order to get control of the judgment, and obtain an advantage indirectly.
    When he had the power of attorney, he supposed he had the entire control, and with a shameless haste, he hurried to Skinner’s mill, made his levy, and intended to push the collection to the bitter end, for Ms own benefit He told Skinner that the judgment was his, and he would control it.
    It is submitted that this conduct by an attorney of this court cannot be allowed, and this verdict should be upheld, and judgment ordered for the defendant.
   By the court, Johnson, J.

By the very terms of the contract which this action is brought to enforce, the plaintiff became the attorney of the defendant for the collection of the judgment. The relation of trust and confidence as to that judgment was then created. It is clear from all the evidence that the plaintiff was at that time in the possession of information on the subject of the value and collectability of that judgment which he did not disclose to the defendant, but concealed from hito for the purpose of obtaining a more favorable bargain to himself, and obtaining a larger share of the debt for his trouble of collecting than he would be able to get otherwise. This he does not deny in his test!mony„ If he denies it at all, it is only by a peradventure and guess. On the other side, the evidence is full and positive, not only as to the plaintiff’s knowledge, but to his silence and misleading pretences. It was, therefore, a mere question of law, whether the plaintiff could enforce a contract of that kind, made under such circumstances. In order to entitle the plaintiff to recover on such" a contract, the onus lay upon him of proving that he took" no advantage, but gave to his client, all the information he possessed or could obtain on the subject, and advised him as he would have done in relation to a third person, offering to become a purchaser.

This general rule applies alike to trustees, agents, attorneys, solicitors, and guardians.

In short, it applies to all persons who undertake to act for others in a fiduciary capacity. See White and Tudor, (Lead. Eq. Cas., 126 to 146), where most of the cases on the subject are collected

The plaintiff insists that the case does not fall within this rule, inasmuch as he was not the attorney of the defendant in the action in which the judgment was obtained, and only became such when the contract was executed and delivered; and that in the negotiations before that, they were dealing at arms length the same as any other parties. But this distinction is quite too fine to affect the application o£ the rule.

The plaintiff was an attorney and the very object of the negotiation was to bring about and create the confidential relation of attorney and client, and fix the measure of the compensation of the attorney.

The relation and the contract came into existence at the same instant.

The duty and the obligation were simultaneous and the latter is affected by the omission of the former. The reason of the rule applies as well to such a case as to one where the relation precedes the contract.

The defendant was at liberty to abandon the contract and refuse to be bound by it, whenever he discovered the suppression, of which his attorney had been guilty.

A new trial must, therefore, be denied, and judgment ordered for defendant on the verdict.