Ward v. Work

The appellant contends that James Henry Work could not, as against the creditors of Grant & Ward generally represented by Julien T. Davies as receiver, retain the moneys which had come to him from them; that these belonged to the creditors of Grant & Ward, and while in the possession of that firm could be recovered in the ordinary way and the firm could not put such moneys beyond the reach of its creditors by turning them over to James Henry Work without valid consideration received therefor; that passing the question whether Grant & Ward or their assignee could recover these moneys, it is manifest that they could not put them beyond the reach of their creditors by what was tantamount to a gift to James Henry Work; and if the latter be treated as an agent, he was dealing as principal, his agency not being disclosed, and under these circumstances, whatever liability resulted rested upon him ; that equally there can be no question of the liability of James Henry Work by reason of the fact that he and his father were jointly concerned in the transactions; that the money paid by James Henry Work to John 0. Work is recoverable upon the general doctrine applicable to a payment made in a case where there has been a mutual mistake of fact (Kingston Bank v. Eltinge, 40 N. Y. 391), and also recoverable for the reason, if it be assumed that the relation between him and John 0. Work was that of principal and agent, that in the discharge of the business of his agency he incurred, while acting in good faith and within his authority, a liability for which he had the right to be protected by his principal; that as his action realized to his principal the $65,800 in question, his protection requires that such amount should be returned to him.

These same contentions were urged upon the attention of the learned referee and were disposed of adversely to the appellant; and concurring as we do in his conclusion it would be unnecessary again to consider them were it not for the force and ability with *90which they have been argued on this appeal, the importance of the questions, the large amount involved, and the suggestion that with respect to some of the evidence, the referee fell into error. Thus it is claimed that the referee erroneously assumed that, exclusive of the $65,800, which went to John C. Work, the father, James Henry Work had received individually the further sum of $250,000. We do not think that this claim is borne out by a reading of the entire opinion which shows with reasonable clearness that the $250,000 which James Henry Work received as profits included the amount which he paid to his father. However this may be, we will assume in our discussion what appears from the evidence, that such was the fact, and that in the settlement made the total amount expended by James Henry Work in the way of expenses and payments to preferred creditors and to the receivers, exceeded, inclusive of the sums paid to his father, all that he had received in the shape of profits from the-firm of Grant & Ward.

It still remains true,, however, that in such settlement no specific reference was made to the moneys paid the father, although the effect may have been to relieve him and his estate from liability therefor; and there is no proof that they were, as matter of fact, taken into account. Recognizing that these sums were received through James Henry Work, and assuming that in some way they may have formed a part of the liability charged against him (of which, however, as we have said, there is no proof), it would seem as a matter of first impression that there was some equitable basis upon which the moneys received by the father, and for wliioh the son may in some way have been held to account, should be returned to the latter. ' The difficulty, however, is that upon this record there is no legal principle which will sustain such a recovery. Had it been shown (1) that the son was himself liable for the restoration of some or all of the money which he had paid to his father, or (2) that by his settlement a valid claim against the father or his estate was satisfied, there might be some proper basis for a recovery, but a brief consideration of these grounds shows that there is nothing in the testimony to support either of them.

It is not contended that any proof was adduced of authority on the part of James Henry Work to act for or incur expenses in behalf of his father in any of the matters referred to, nor of any *91authority from the executors to do so; and we do not understand that a recovery is sought upon any such theory, the basis of the claim, as we take it, being that upon the discovery of the fact that the firm of Grant & Ward made no profits, had no contracts and practically did no business, James Henry Work was entitled to recover back from his father the payments made to him. Such recovery, however, as already suggested, could only be upon the grounds either that the son could recover against the father or that the son was under legal liability himself to restore these sums to the funds of that firm, and this latter, as we understand it, is recognized by the appellant, the contention being that, regarding James Henry Work as an agent, he was an agent whose principal was not disclosed and who it is urged was individually liable. (Citing Newall v. Tomlinson, L. R. [6 C. P.] 405; United States v. Pinover, 3 Fed. Rep. 309.)

In this argument the appellant concedes that the general rule is, that an agent known and treated as such, cannot be compelled to pay back moneys received by him under mutual mistake of fact and paid over to his principal. The distinction thus sought to be made, and which is no doubt sound, is between a disclosed and an undisclosed agent; and although it might be interesting to review the cases in which this subject is discussed, that is unnecessary here, for, again, there is absence of the proof requisite to support the assumption that James Henry Work was treated in the transaction as a principal and not as an agent.

As shown by the evidence, the system followed was for Grant & Ward, on each investment, to issue several vouchers for varying amounts, all payable to bearer; but the deduction does not follow from this that the vouchers which James Henry Work received were all intended for him individually, and there is no sufficient evidence that Grant & Ward were ignorant of his agency. This firm, moreover, did not as a rule deal directly with Work, but with his brother-in-law, Warner, who gave certain of the vouchers to Work, and there is nothing in the record which would justify passing Warner as principal and placing such liability on James Henry Work. If, therefore, the case were to turn upon the want of knowledge on the part of Grant & Ward of the agency, the answer is that there is no proof that the firm was ignorant of such agency. *92Furthermore, we doubt if the distinction sought to he made, in view of the other facts here appearing, would apply.

It is conceded that James Henry Work in good faith and in ignorance of the fraudulent conduct of Grant & Ward, received the money, part of which, to the extent stated, he gave to his father and we have been referred to no case which goes to the extent of holding that in the absence of fraud or bad faith, one who, while acting on behalf of another, pays over money he has received, is obliged to return the same because the person from whom lie received it did not know that he was merely an agent. It is certain that Grant & Ward could not recover the money from James Henry Work, because they paid it under no mistake of fact; and it would only be upon the ground that the money had been taken from creditors and to that amount their chances of payment had been lessened, that it could be recovered.

With respect to creditors, however, the money could only be recovered to the extent that they had been injured; and here again proof is wanting, for although there is evidence that Grant & Ward were insolvent, the amount of such insolvency is not shown, nor does it appear how much James Henry Work should contribute to-make up the sum required for the creditors. And assuming it were necessary that these profits should be restored, there is no evidence as to how many persons or how large a fund, if any, could be drawn upon to pay creditors. And apart from all this, as we have shown, had an attempt been made by the creditors or those representing them — such as the receivers — to enforce liability against James Henry Work, he could escape such liability by showing that he was merely an agent who had, in good faith, in the line of his duties, paid over the moneys to his principal.

When we come to the question of whether by the settlement a valid claim against the estate of John C. Work was satisfied, or to an inquiry into the considerations or reasons that actuated the settlement by James Henry Work, we have no evidence that anything was paid on account of the money he had given to his father; but it does appear that the payment was made in order to settle a judgment of $140,000 against Warner, to prevent both Warner and himself from being prosecuted criminally and to compromise any and all. claims which the firm of Grant & Ward or its creditors. *93might have against them. There is nothing to show what, if anything, was paid on account of moneys given to the father. The result may have been to free the father’s estate from liability; but •even this does not appear except by inference so slight that no finding of fact or conclusion of law could be based upon it.

Although, therefore, the questions suggested on this appeal are important and interesting, we do not think it necessary to extend this discussion further than to show that many of those urged upon our attention are, owing to lack of proof, not sustainable; the failure, as urged, of the referee to state clearly every fact which led the appellant to think that he had inadvertently fallen into error, in no way militates against his able summary of the facts involved or his sound legal conclusions; and as in these we concur, it necessarily follows that the judgment should be affirmed, with costs.

Van Brunt, P. J., Ingraham, McLaughlin and Hatch, JJ., concurred.

Judgment affirmed, with costs.