Court Opinion

ID: 8656573
Source: CourtListenerOpinion
Date Created: 2022-11-24 21:16:33.695732+00
Date Added: 2024-06-11T14:25:25.929289
License: Public Domain

GIDEON, J.
I concur in the conclusions reached by the CHIEF JUSTICE and Mr. Justice THUBMAN.
McCABTY, J.
This case was before this court on a former appeal. 46 Utah, 26, 148 Pac. 452. The members of the court did not agree as to the propositions of law on which the case should be ruled and determined. Two of the members were of the opinion that the case should be reversed with directions. The dissenting member was of the opinion that the judgment of the trial court should be affirmed. The present Chief Justice wrote the prevailing opinion, which was agreed to by Mr. Justice Straup, then Chief Justice, in a concurring opinion. The dissenting member of the court took the position that the contract in question was terminable at will by either party, and that the allegations of the complaint charging fraud and fraudulent representations should be treated as matter of *167inducement only, and the prayer that “the contract should be canceled” as redundant, as “neither the proof of the one nor the granting of the other is a prerequisite to plaintiff’s right to recover.” See dissenting opinion, 46 Utah, 44, 148 Pac. 452. Neither of the other two members of the court at that time agreed with the dissenting member as to either of these propositions. The present Chief Justice, in a somewhat elaborate opinion reversing the ease, said:
‘ ‘ In this connection it should be remembered that the plaintiff: in his complaint shows that he continued for a period of more than four years to enjoy all the benefits of the contract he now seeks to repudiate. Let it be conceded, therefore, that the contract is unenforceable, yet it does not follow from that alone that either of the parties, after receiving the fruits thereof, may not in equity be required in some form to account to the other party.”
The then Chief Justice, in an opinion concurring with Mr. Justice Frick, said:
"And then to entitle him (Hancock) to recover on his alleged theory of repudiation and rescission, and on his alleged grounds of fraud and misrepresentations, and to be restored to what he in pursuance of the contract paid out, he must himself do equity, and account vfor or offer to restore what, if any, benefits he himself received on part performance and in pursuance of the contract. * * * It may be that what he received by way of salary is balanced by services rendered by him, that by way of dividends by interest on the money paid out by him, and hence, on a rescission of the contract, equity would not require restoration on his part, further than contained in his offer, a surrender of the certificate. But it is better to adjudicate than to assume that. ”
The concluding part of the opinion written by the present Chief Justice, in so far as material here, is as follows:
“The judgment is * * * reversed, and the cause remanded to the district court, * * * with directions to set aside the judgment and to proceed with the case as herein suggested, * * * and to make such disposition thereof as in his judgment the law and the facts require, and in accordance with the views herein expressed.”
The law as thus declared in the two prevailing opinions on the former appeal, whether sound or unsound doctrine, became and is the law of the ease, and this court, as well as the trial court, is bound thereby.
*168The ease, on being remanded, was tried by the trial court in accordance with the views, expressed in the two prevailing opinions. The court, however, did not make any finding respecting the value of the services rendered by Hancock while he was in the employ of respondents, but found against him on the other issues, and entered judgment dismissing the action.
I am clearly of the opinion that the court erred in not finding on all of the issues in favor of Hancock.
The substance of the contract over which the controversy arose is set out in the dissenting opinion (46 Utah, 43-44, 148 Pac. 459), and is copied in full in the opinion of Mr. Justice CORFMAN filed herewith; hence it is unnecessary to incorporate it in this opinion. .
The record shows that preliminary to making the contract considerable correspondence, which extended over a period of more than two months, was carried on between Hancock and the defendant Francis Gr. Luke in relation to the subject-matter of the contract. Hancock, at that time, resided in Panguiteh, a small town in the southern part of this state, where he was, and for about a year had been engaged in the practice of law. Luke proposed to Hancock that if he would come to Salt Lake City, and purchase a certain number of shares of the capital stock of the Merchants’ Protective Association, hereinafter called association, at $500 per share, they (the Lukes) would employ him on a monthly salary to take charge of and transact their legal business. Luke, in a letter to Hancock bearing date of September 29, 1908, said:
“We are paying out perhaps three to five hundred dollars every month for legal work, and there is an opening in this office for an attorney who likes work and who has ability. * * * We guarantee 12% on the investment, and we will increase his salary in proportion to the increase of business year by year to a salary not exceeding $250 per month. * * * We will collect this year about $200,000. We are doing business for 12,000 clients.”
Regarding the financial condition of the association and the value per share of its capital stock he stated in his letter:
*169“The stock of the association is sold at $500 per share. There are only 100 shares altogether. The business is worth $100,000, but, in selling to a party who comes in with us, we sell on the basis of $50,000 valuation. The guarantee of 12% per annum on the investment is made by myself and my brother James A. Luke, who own all of the corporation with the exception of about ten shares. The corporation does not pay dividends. The 12% is a guarantee in lieu of dividends.”
Hancock came to Salt Lake City, and on December 9, 1908, met and conversed with Francis G. Luke in relation to the business mentioned in the correspondence referred to. He testified that Luke, on that occasion, said that the capital stock of the association was worth $500 per share; “that the Merchants’ Protective Association owned judgments amounting to a million dollars, which could and would be collected; that the Merchants’ Protective Association * * * had a reserve fund in McCornick’s Bank amounting to $10,000”; and that he (Hancock) believed these representations to be true.
Mark E. Waddoups, a director of the association, was called as a witness by Hancock, and testified that he became connected with the association in a business way about the same time that Hancock became identified with it; that he became a stockholder, and commenced working for the association in January, 1909, and became a director December 18, 1911; that at the time he purchased his stock Francis G. Luke stated to him that the capital stock of the association “was worth on a basis of $50,000,” and that it was “in excellent standing, with McCornick Banking Company, and the [it] had amounts of money on deposit of large sums”; that he (Wad-doups) “had charge of the cash deposited and drew checks” for the association. The evidence of Waddoups is not disputed in any particular.
Luke testified that “when the contract with Hancock was made, and on that same day, there was on overdraft which was more than $600”; that he stated to Hancock that “the stock was of small or no market value.” He stated on cross-examination that “the property and assets of said corporation have always been of small value.”
*170The evidence referred to is all but conclusive that Luke, as an inducement to Hancock to purchase the stock, represented to him that the intrinsic value of it was more than $500 per share, and that he intended to, and did, lead Hancock to believe that the market value of the stock was at least $500 per share. In his letter to Hancock, bearing date of September 29, 1908, he stated, as I have pointed out, that “the stock of the association is sold at $500 per share. * * * The business (stock) is worth $100,000, but in selling to a party who comes in with us we sell on a basis of $50,000 valuation.” We think the only reasonable inference or conclusion deducible from this language, if true, is that the value of the capital stock of the association was $500 or more per share: The record shows, as we have pointed out, that Luke make substantially the same representations to Waddoups that he made to Hancock respecting the assets of the association and the value of the stock per share, and thereby induced Waddoups to purchase a block of the stock at $500 per share. The evidence is undisputed that Lube stated to Waddoups that the association was in excellent shape financially, and that it had large sums of money on deposit in MeCornick & Co.’s bank about the time Hancock claims Luke made substantially the same statements to him respecting the amount of the association’s bank deposits. Luke, on cross-examination, admitted that the association, instead of having money on deposit in the bank, at that time had overdrawn its account at the bank and was indebted to its clients in the aggregate of $3,000. This was also, in effect, an admission that his representations regarding the assets and general financial condition of the association, at the time the transactions referred to were had were false. The claim made by Luke that he (after having devoted much time, which extended over a period of more than two months, in inducing Hancock, by false and fraudulent representations, to enter into the contract in question) informed him, just before the contract was signed, the stock therein mentioned, which he (Luke) represented to Hancock to be of great value, was practically worthless, and that Hancock, notwithstanding this confession of fraud and chicanery *171on the part of Luke, signed the contract, has the insignia and all the earmarks of a silly falsehood. In fact, no intelligent person can read his testimony in this case, as the same appears in the hill of exceptions, without becoming convinced that in business transactions Luke is both shrewd and unscrupulous, and that he can utter a falsehood and play the role of crook with the same equanimity and peace of mind that he can speak the truth and act honestly in his business dealings. It would seem from the record that he regards all business transactions as games of chance, and that his motto is “heads I win, tails you lose, ’ ’ and that in this, to him, game of chance the ‘ ‘ end justifies the means.” I think the record clearly shows that he obtained Hancock’s money ($2,500) by false and fraudulent representations, and by the flimsiest of falsehoods in trying to perpetually retain it.
The trial court, in the face of the direct and positive statements of Luke contained in his letter to Hancock of September 29, 1908, that “the stock of the association is sold at $500 per share,” etc., and Waddoups’ undisputed evidence that Luke stated to him that “the stock was worth on a basis of $50,000,” found “that neither of the defendants at any time represented or stated to plaintiff that the stock of said corporation had an actual value of $500 per share, or any actual value whatever.” It is needless to remark that this finding of fact cannot be upheld, as it is contrary to all the evidence in the record that has any bearing whatever on that particular point. The court also erred in its decision wherein it held “that neither of said defendants made any representations or statements whatever to plaintiff that were false or untrue, and that plaintiff was not misled or deceived in any way by any statement or representations, at any time, made by defendants, or either of them, to plaintiff.”
Hancock has received practically no consideration whatever for the $2,500, except the interest paid him on the so-called “investment.” As pointed out, the evidence conclusively shows that the stock “was (and is) of small or no market value. ’ ’ Luke testified on this point in part as follows:
“What I mean to say is that it (the stock) does not have *172any market value. * # * Q. You could not sell it on an open market at all? A. No. Q. It does not have any value? A. No.”
The record shows that forty-six shares of the stock were sold at sheriff’s sale on the 21st day of March, 1904, for $350, which was a little in excess of $7.60 per share.
The respondents, if we correctly understand their position, seek to justify their retention of the money ($2,500), and to bolster up their defense to the action, on the ground that the salary they paid Hancock in the aggregate exceeded the value of the services rendered by him, during the time he was in their employ, in a sum equal to, if not greater than, the amount he is seeking to recover by this action. The evidence, without conflict, shows that during the forty-nine months that Hancock was in the employ of the respondents under the contract, the total amount paid him as salary was $7,318.27, an average of approximately $149 per month. It will thus be observed that Hancock rendered services for $149 per month that Luke, in his letter to Hancock of September 29, 1908, stated were then costing the association from $300 to $500 per month. The evidence, without conflict, shows that Hancock, during the time he was with the Lukes, “did practically all the law business for the association,” and that he “appeared in three thousand cases in the city courts, and (appeared) many times in the district courts and other courts.” Wad-doups, who, as stated, was a director of the association, and whose business was to receive claims and make a record of them, testified, and his testimony is not disputed, that Hancock “was in court a great deal of the time and that there was no complaint about his services while employed.” J. J. Whitaker, formerly a judge of the city court of Salt Lake City for eight years, testified that from 1908 until he left the bench he “saw Mr. Hancock in court nearly every day, and observed his conduct as a lawyer. My judgment is that he handled the eases as well as any other lawyer could have done. Hancock’s services were reasonably worth from $75 to $100 per week.” Three other attorneys of integrity and recognized ability were called as witnesses. One testified:
*173■“I know tbe parties, and have observed George B. Hancock in his legal work while he was employed by the Merchants’ Protective Asociation. A salary of $149 per month for forty-nine months would not be unreasonable.”
Another testified:
‘11 know the parties, plaintiff and defendant. * * * Assuming that Mr. Hancock worked as attorney for the defendants for forty-nine months, and during that time took care of about three thousand cases in the city court and a number of other courts, and attended to all trials, motions, legal questions, and supplementary proceedings, and received therefor as compensation $149 per month, in my judgment he would have been underpaid.”
The other attorney testified:
“I am acquainted with the plaintiff and defendants. Have observed the legal work done by Mr. Hancock while in the employ of the defendants. Assuming that Mr. Hancock was employed for forty-nine months, and during that time took .care of and handled for defendants about three thousand cases, involving all motions, trials, and supplementary proceedings, his services would be reasonably worth $300 per month. ’ ’
To refute this evidence, which is of the most reliable and convincing character, Francis G. Luke testified that Hancock’s services were worth from $20 to $100 per month, and at no time during his employment did they exceed in value of $100 per month. The great preponderance — the overwhelming weight ' — of the evidence shows that Hancock was not paid what his services were reasonably worth. The defendants, therefore, have wholly failed to establish their claim to a recoupment or set-off on the ground that the sum they paid Hancock as salary was more than his services were reasonably worth.
The evidence shows that at the time the contract in question was executed Francis G. Luke was, and for several years had been, entitled, under a written contract which he had with the association, to all the earnings, income, and profits of the association. The contract is to exist and continue during the pleasure of Luke. On cross-examination Luke testified:
*174“Q. The association served the purpose of a mere conduit or drain, to so speak, by which the money flows through to you? A. That is right. Q. But the ultimate source was your pocket or your private banking account, wasn’t it? A. 'Yes, sir.’’
He further testified that he did not know who the directors are; some of whom failed to qualify as such. It is therefore clearly made to appear that the association is a corporation in name only. The directors, if any there are, have nothing whatever to do with the business transacted in the name of the association. The record shows that when accounts are sent to or left at the office for collection they are received and a record made of them in the name of the association. Actions to recover on the accounts were ostensibly brought and prosecuted to judgment by the association under the direction and supervision of Francis G. Luke as president and business manager. It is manifest that the name of the association is used by the respondent to solicit business, and as a buffer or shield to protect them from personal liability for any alleged dereliction or delinquency on their part amounting to a legal wrong in transacting business with or for their numerous clients. This method of soliciting and transacting business for themselves as individuals in the name of the association is a fraud against the public. People are led to believe that they are intrusting their business to, and transacting business with, the corporation, when in truth and in fact they are dealing with Francis G. Luke as an individual, and with him only. Hancock testified that he was not advised of Luke’s contract A?ith the association, and that the concern had thereby become a mere dummy only, the name of which was being used by Luke to solicit and transact business .for his own individual benefit, until June, 1912. The record shows that at that time a check drawn in Hancock’s favor by, or in the name of, the association in payment of his services was dishonored and payment refused by the bank on which it was issued. He inquired of Waddoups, who made out the check, why it was not paid. "Waddoups informed him that the account carried in the name of the association at the bank was overdrawn. Han*175cock then inquired of Waddoups about the reserve fund of $10,000, which he claims Luke stated to him, at the time the contract in question was executed, the association had on deposit in the bank, and was informed there was no such fund. On further investigation he discovered that the association was indebted to numerous clients for money which it had collected for them. He testified, and his evidence is not disputed, that he “learned this from seeing forty or fifty checks made out to clients that were held for over a year.” Wad-doups testified, and his evidence is not disputed, that the records kept by him in the name of the association show that in June, 1912, the association was indebted to clients for money collected for them from $8,000 to $10,000, and that its account at the bank was overdrawn $6,700, which overdraft was then covered by Luke’s note to the bank. Under these circumstances, I submit that Hancock was morally and legally justified in rescinding the contract and terminating his contractual relations with respondents.
The question of whether Hancock was guilty of laches, and waived any right he may have had to rescind the contract on the ground of the false and fraudulent representations referred to, by continuing in the employment of the defendants for approximately six months after he discovered the fraud, was not an issue in the case. The trial court, however, in its findings of fact, made it an issue, and found against Hancock on the question of waiver. Respondents, in their printed brief, say:
“But assuming that the respondents practiced fraud, the appellant waived it by receiving benefits under the contract for a period of more than seven months after he confessedly discovered the fraud.”
Ordinarily the taking of benefits under a contract, and silence and inaction on the part of the defrauded party for a period of six or seven months after he has knowledge of the fraud, is deemed a waiver of the fraud and a ratification and affirmance of the contract. Hancock, however, was confronted by an unusual and extraordinary combination of circumstances when he discovered the fraud. He was, and had been *176for more than three years, in charge of the legal business of the association; and it may be fairly inferred from the record that the association, at that time, had much business, with which Hancock was familiar, undisposed of and pending before the courts. The association was indebted to clients for money collected in sums aggregating from $8,000 to $10,000, and was indebted to its bank in the sum of $6,700. The respondents had $2,500 of his money. The record shows, and Hancock knew, that the assets of the concern consisted entirely of the good will of the business and the accounts turned over to it for collection by its numerous clients. Under these circumstances, Hancock was justified in proceeding with caution and deliberation before severing his relations with the respondents.
"Waiver is a voluntary act. What one does in a dilemma forced upon Mm by the default of another cannot be counted upon as a waiver. ’ ’ 40 Cyc. 259.
Furthermore, the record shows that the respondents, instead of being injured by the delay, were benefited thereby. Francis G. Luke testified:
“Q. I understand, from your answer and from your general attitude in this case, that you are displeased because he (Hancock) quit? A. Yes, sir. Q. * * * You feel that you suffered some injury? A. Well, I should say so.”
I am clearly of the opinion that Hancock, under the circumstances, did not, by the delay, waive any right he may have had to rescind the contract on the ground of fraud. Moreover, the defalcations herein referred to on the part of the Lukes, and the association in their dealings with their clients, were, as a legal proposition, alone sufficient to justify Hancock in terminating the contract and severing his relations with these parties, regardless of the time that may have elapsed after he became advised of their defalcations.
On January 12, 1913, Hancock gave respondents written notice of his intention to terminate the contract of employment. Respondents introduced the letter in evidence. They insist that this “evidence sufficiently discloses that appellant did not quit the service of the association, nor repudiate the *177contract, because of the alleged fraud. ’J The letter, so far as material here, reads:
‘ ‘ The matter which I sprung in the meeting the other night was not done because I wanted to be too assuming and I do not think the firm can afford to pay me what I ask. # # # I do not want to cause any bad feelings any place and would like to make a peaceable change so that no one will be injured. I know that we have had a hard pull the last year, and I have hated to ask for my salary because the firm was so hard pressed.
“I would like to carry out my plans and form a partnership with Mr. Barnes and open an office in this building and go on taking care of the business of the firm on a fee basis, with the right, of course, to have our own clients and business. My hope is to make such arrangements so that we will all be satisfied. I believe it would be more satisfactory. The firm could have Mathison or some other attorney in the office and give me the work by piece, and pay me for what I do, and I would still retain my interest in the business and would give you good work. If this does not appeal to you, maybe you can suggest something that suits us all.
“I have a kind feeling toward you — absolute confidence and respect — but I am determined to place myself on a more independent basis, even if it is necessary for me to leave the institution altogether. Talk with me about it.”
The letter is in the nature of an offer or compromise, and, under the circumstances, is in no sense a ratification of the fraud practiced on him by respondents when the contract in question was executed. The letter shows a desire on the part of Hancock to effect an amicable settlement with respondents of their business relations and affairs in such a way as to prevent, if possible, loss or injury to either party. In considering the letter we should take into account the circumstances and conditions with which Hancock was confronted respecting his business relations with respondents as well as the object he had in writing it. When Hancock, in June, 1912, discovered the fraud complained of, the association, as I have pointed out, was indebted in sums aggregating about $20,000, *178and it had no means or money on hand with which to liquidate any part of it. Seven months later, when the letter was written, much of the indebtedness had been paid, but the association was still quite heavily involved. The letter indicates that the association was, and for a year had been, somewhat financially embarrased. Hancock no doubt felt, judging from the tone of the letter, that it would be better for all parties interested if some satisfactory arrangements were made so that it would not be necessary for him to further embarrass respondents and the association by demanding immediate payment of the money respondents were owing him. We think the record clearly shows that. When the check drawn in favor of Hancock by the association was refused payment by the bank on which it was drawn, and he discovered that respondents had used for their own purposes from $8,000 to $10,000 that had been collected by or in the name of the association for its clients, there were three ways open to him to meet the situation: (a) The course he has taken in the matter, (b) He might have closed his eyes and remained silent as to the condition of the business affairs of the association and continued in the service interminably or during the pleasure of the respondents, (c) He could have had respondents charged with and prosecuted for embezzlement, and thereby have sacrificed — lost—the entire $2,500 in question, and probably have so upset or disarranged the business affairs of the association that it would have been impossible for it to have liquidated any part of its indebtedness.
We think the only theory upon which it could be held that Hancock is not entitled to equitable relief is that he compounded a felony by not having respondents prosecuted for embezzlement, and to that extent came into a court of equity with unclean hands. This, however, is an angle or feature of the case that was not, and is not, made an issue.
The contract contains no promise or agreement on the part of Hancock that he will remain in the employ of the association any definite period of time. Nor does it contain a promise on the part of the Lukes that the association will employ Hancock for any specific length of time. And even if it did con*179tain a covenant to that effect, the contract would he unenforceable against the association. The association was not a party to the contract, nor was the contract made and executed on behalf of the association. The provisions of the contract relating to the question of employment are, so far as material here, as follows:
“The parties of the first part hereby guarantee to the party of the second part 12 per cent, per annum upon the amount paid for stock, * * '* so long as the said party shall remain in the employ of the Merchants’ Protective Association, and in addition guarantee the party of the second part salary during said employment. * * * And the party of the second part hereby agrees during the existence of said employment to work for and under the direction of the first parties as attorney at law and render his best services for the corporation above named.”
Assuming, for the sake of argument, that respondents made and executed the contract on their part for the benefit of the association, as well as for their own benefit, no action was ever taken by the association by resolution or otherwise, to ratify what the respondents had done in that regard. The association, therefore, is, in a legal sense, a stranger to the contract. Respondents could have dispensed with Hancock’s services at any time after he entered their employment without breaching the contract or incurring any liability whatever. And, as the contract does not provide that Hancock shall remain in the service of the association for any specified period of time, it necessarily follows that he could sever his relations with the respondents at any time without violating any, of its provisions. In other words, the contract was terminable at will by either party. Assuming, for the sake of argument only, that it may be implied from the contract that Hancock was to continue in the service of respondents for the term of ten years, the contract is, nevertheless, unenforceable, because the respondents were not bound to continue Hancock in their employ for any definite period of time. As stated, they could have terminated the contract and dispensed with Hancock’s services at any time after the contract was executed *180without breaching it. The contract, therefore, lacked mutuality. The case, we think, falls clearly within the rule announced in Price v. Western L. & T. Co., 35 Utah, 379, 100 Pac. 677, 19 Ann. Cas. 592. Respondents, in their “Second amended answer” — the answer upon which the case went to trial — alleged “that the said contract so made and entered into between plaintiff and defendants is a contract against public policy and is unlawful and void.” This answer Francis 0. Luke verified under oath, and he admitted while testifying as a witness in the case that his attention was directed to the foregoing allegation of the answer before he made the verification. It being thus conceded that the contract is “unlawful and void,” ought to settle the question of Hancock’s right to terminate it without being penalized therefor. Furthermore, it being a contract that was terminable at will by either party at any time, the question of whether Hancock was induced to enter it through the fraudulent representations alleged in his complaint, and the question of whether he waived his right to rescind it because of such representations, are not decisive of the case; the evidence relating to these questions is in fact of no importance whatever except as it tends to reflect the history of the case, and tends to show that the equities are not, as the trial court seemed to hold, all with the respondents.
That the stock received by Hancock in the transaction under consideration was and is of no appreciable value is too plain to admit of serious discussion. In respondent’s original answer filed in the case, which was admitted in evidence, it is alleged—
“that before and at the time of the execution of said agreement the defendant informed the plaintiff that such stock was of small or no intrinsic value, and informed him that their purpose in requiring the purchase of the same was not in any sense to make Mm a partner in the business, but a pledge in guarantee that he would not, after a comparatively brief period in their employ, * * * quit the service of the defendant. That the plaintiff understood that he was not and would not be directly interested in the business of said cor*181poration, or in the profits of the same, ivhether as dividends or interest, or hy whatever name they might he called, * * * and (plaintiff) accepted the personal covenants of the defendants to pay him the monthly salary stipulated for in said agreement, and to pay the interest on the $2,500 so invested hy the plaintiff.” (Italics ours.) That the defendants “required of the plaintiff, as a condition of such employment, and particularly as an earnest, that he purchase five shares of the capital stock of the * * * association, at the price of $500 per share, and the said defendants agreed to pay interest on said purchase price during the continuance of the agreement.” It is further alleged that “the capital, property and assets of said corporation have always been of small value.”
This answer was verified hy Francis G. Luke under oath. And he testified that he helped draft — prepare—it. He therefore was advised as to the matter therein contained. In his second amended answer, which he also verified, it is alleged that “said corporation was largely engaged in the business of practicing law.” He admitted while testifying that the brief filed in this court by himself, and codefendant on the former appeal of this case (Hancock v. Luke, 46 Utah, 26, 148 Pac. 452) contained the statement that “the $2,500 was paid under the guise of the purchase of five shares of stock.” And that he (Hancock) accordingly bought his way into the practice of the law, not hy paying a lump sum outright, but by turning in on halves what business he had on hand, and “hy the payment of $2,500 in the nature of a loan, on which he received twelve per cent, interest.” (Italics ours.) He also testified that he authorized the printing of the briefs, hut stated that he now repudiates the statement last quoted.
Ordinarily, a litigant — party—to an action will not he held accountable for, nor he hound hy, statements of fact respecting the merits of the controversy made hy his attorneys in their behalf. Respondents, however, 'are in a situation somewhat different than in which litigants are usually placed. They alleged in their answer, and Luke testified, that in connection with the collection business the “corporation was largely engaged in the business of practicing law.” The *182record shows that the business of the association, including that of the legal department, was under the personal supervision of Francis Gr. Luke. The evidence also shows that he (Luke) has been personally engaged somewhat extensively in the trial of cases for the association before the inferior courts of this state. In this case Luke, who is personally sued for $2,500 and interest thereon, having assisted in preparing the answer filed in the action, and having authorized the printing of the brief, we think the conclusion is irresistible that he must have known and approved the matters contained therein before it was filed. While the quotations from the brief are not of controlling importance, they, nevertheless, tend to show that respondents regarded the $2,500 in the nature of a loan, and not as proceeds of the sale of the five shares of stock to Hancock. The quotations from the original answer herein set forth show that respondents did not intend that the transfer of the five shares of stock to Hancock should carry with it any property rights or interest in the association. It is therefore plain that the transfer of the stock was on the part of respondents, for some reason, a mere subterfuge. Suppose, for illustration, Hancock had parted with the stock by transferring it to a third party for a valuable consideration, it is manifest that the transfer would not have carried with it the indebtedness represented by the $2,500. Paragraph 2 of the contract provides that “should said employment cease through incapacity of the second party, or be terminated by his death, in lieu of the guarantee above given the party of the first part guarantees to the second party, his heirs, executors, or administrators, eight per cent, per annum upon the amount paid for said stock.” It will be observed that no provision is made for the surrender of the stock in case such a contingency should arise as a condition for the payment of the interest as provided in the contract. It is therefore plain that respondents regarded and treated the stock and the obligation or indebtedness based on the $2,500 as two separate property-rights. If the receiving of the $2,500 from Hancock by the respondents did not create an indebtedness on their part, the question naturally arises, why have they been paying Han*183cock interest on the money at the rate of 12 per cent, per an-num for four years ? If, as respondents now claim, the $2,500 was neither in the nature of a loan nor a pledge to them by Hancock, but was money belonging to themselves as proceeds of the sale of the stock to Hancock, the further question arises, why have they been paying Hancock interest on their own money ? The contract makes the obligation a loan on the part of respondents because, as stated, it provides for the payment of interest thereon, and respondents, by paying the interest, have so recognized and treated it.
"Interest is the compensation which is paid by the borrower of money to the lender for its use, and generally by a debtor to his creditor in recompense for his detention of the debt." 4 Words and Phrases, 3706; vol. 2, Second Series, 1145.
In Black’s Law Dictionary “interest” is defined as “the compensation allowed by law or fixed by the parties for the use or forbearance or detention of money. ’ ’
Suppose for illustration, respondents, after Hancock had been in their employ for one month under the contract, had terminated the contract and dispensed with his services which they could have done without breaching it, and, on being sued by Hancock, on the $2,500, they had, as they are endeavoring to do now, tried to defeat the action on the ground that the $2,500 was proceeds of the sale of the worthless stock to Hancock, would it be seriously contended that there is any principle of law or equity that would have prevented a recovery by Hancock? I think not. And especially if, as here, one of the defenses interposed had been that “the contract is against public policy and is unlawful and void.” On the other hand, suppose Hancock, after he had been in respondent’s employ for one year, had terminated the contract, which he could do without violating any legal duty he owed the respondents, and respondents on being sued for the $2,500 had set up the defenses suggested, or had claimed a forfeiture of the money because Hancock had terminated .the contract, under what rule of law or equity, may I ask, could respondents successfully maintain their defense? If Hancock could have terminated the contract at any time within one year *184without breaching it, and recovered the $2,500, it necessarily follows that he is entitled to recover in this case.
According to the greater — the overwhelming — weight of evidence the value of the services rendered by Hancock to respondents, during the time he was in their employ, was about $7,000 in excess of the salary he received. Therefore, under the law of the case as declared by the two prevailing opinions rendered on the former appeal, Hancock is legally entitled to judgment for this amount in addition to the $2,500 and interest. In any event, respondents ought not to be allowed the benefits of the value of his services in excess of the salary paid him, and at the same time receive credit in the adjustment of the equities between them for the money they paid Hancock as interest on the $2,500. It being established by evidence beyond any question of a doubt that the value of Hancock’s services was greatly in excess of the salary paid him, under what rule of law or of equity can it be held that he should refund to respondents the interest they paid him on the $2,500 in question, and thereby in effect giving them the use of this amount of money for nothing for a period of four years. If the salary paid Hancock exceeded the value of his services, there would be some basis for holding that respondents are entitled to recoup in a sum equal to such excess, and that Hancock have judgment for the balance due him, if any, on the $2,500. Such, however, is not the case. The evidence, as stated, is all but conclusive that the value of Hancock’s services to respondents was substantially twice the amount that was paid him as salary.
By ignoring and brushing aside the law of the case for the purpose of this appeal, and disregarding the evidence showing the value of the services rendered by Hancock while he was in respondents’ employ, and looking to the contract only for a basis upon which to scale down his demand, he is, under any reasonable or even strained construction of its provisions, entitled to a judgment for $2,000 and interest thereon at the rate of 8 per cent, from January 12, 1913, when he terminated the contract. And this result can only be arrived at by holding that Hancock, under the following provision of the- contract *185was to continue in respondents’, employment for a period of ten years, to wit :
‘ ‘ The parties of the first part agree that at the expiration of ten years, should the party of the second part want to sell out, that the parties of the first part will purchase hack from him the stock which he originally bought and pay him one-half of what he paid for it (i. e., $1,250).”
In other words, the amount that respondents’ obligation for the $2,500 would be diminished in ten years’ time would be equal to $125 per year. Having terminated the contract at the end of the four years, he ought not in equity be required to do more than probate the $1,250 on that basis, and to reduce his claim in the sum of more than $500. An adjustment of the equities of the parties on this basis (and I submit that it is the only basis that the law, or the contract, or the facts furnished for a reduction of his claim) would entitle Hancock to judgment for $2,000, with interest at the rate of 8 per cent, from January 12, 1913.