Opinion
10-16-1888
RAYMOND et al. v. Cox et al.
Theodore Ryerson and Gilbert Collins, for complainants. Wm. M. Dougherty, for Peter F. & John A. Cox. James B. Vredenburgh, for Terence Cox.
(Syllabus by the Court.)
On final hearing on bill and answer.
Theodore Ryerson and Gilbert Collins, for complainants. Wm. M. Dougherty, for Peter F. & John A. Cox. James B. Vredenburgh, for Terence Cox.
VAN FLEET, V. C. The complainants are judgment creditors of Owen T.W. McDonald. They have exhausted their remedy at law and now seek the aid of this court to reach certain property which they charge represents money which two of McDonald's clerks embezzled from him while they were in his employ. For several years prior to 1883 McDonald was engaged in business in Jersey City, as a wholesale and retail grocer. He failed in 1883. At the time of his failure he represented to his creditors that his available assets amounted to about $14,000, and that his liabilities were over $50,000. He also stated that, in addition to his other assets, there was due him on book account about $26,000, $4,000 of which was doubtful, and the balance ($22,000) desperate. The defendants Peter F. Cox and John A. Cox are brothers, and sons of the defendants Terence and Ellen Cox. They were both in the employ of McDonald for four or five years prior to that event. Peter occupied the position of bookkeeper and cashier in the retail department. They were both minors when they entered the service of McDonald, and John was still a minor when this suit was brought. The wages paid to each were small, commencing at $2.50 or $3 a week, and being gradually increased, as their period of service extended, until Peter received $8 a week and John $6. Between December 15, 1879, and November 1, 1882, Peter deposited in the Provident Institution for Savings of Jersey City, to the joint credit of John and himself, nearly $1,700, and between April, 1882, and December of the same year he deposited to his own credit, in the Fifth Ward Savings Bank of Jersey City, $700, making a total of nearly $2,400. In October, 1881, Peter purchased a lot of land in Jersey City for $1,890. He procured the title to be made to his father, Terence Cox; $1,090 was paid on the delivery of the deed, $822 of which was drawn from the deposit standing to the credit of Peter and John in the Provident Institution for Savings. The other $268 was paid with money on hand, and which, so far as appears, the defendants had never had in bank. The payment of the other $800 of the purchase money was secured by a mortgage on the property conveyed, payable January 1, 1884. This mortgage waspaid in April, 1882, by withdrawing a further sum of $434.60 from the Provident Institution for Savings, and $365.40 in cash. When this suit was brought there still remained on deposit in the Provident Institution for Savings, $417.32, and in the Fifth Ward Savings Bank, $630. The object of this suit is to procure a decree declaring that the moneys in bank, as well as those used to pay for the land, represent moneys embezzled from McDonald by Peter and John, or one of them, and directing that the land be sold and that the proceeds of sale, together with the money in bank, be applied in payment of the complainants' judgment. The complainants, to entitle themselves to the decree they ask, are bound to prove that Peter and John Cox, or one of them, fraudulently abstracted McDonald's money. They are not required to show the exact amount wrongfully taken, but to prevail they must establish the fact of embezzlement by one or both of the persons charged. That is the fundamental fact of the complainants' case, and, unless they have proved it, they have no right to relief. There is, however, no such proof in the case. Even McDonald does not pretend that he knows that his money was wrongfully taken. He merely supposes, and his supposition seems to be a mere idle fancy. When asked by the complainants' counsel this question: "How do you arrive at the fact that your money was taken—I do not mean any particular amount—but how can you prove to the court that your money was taken? how do you know it yourself?" he answered: "I do not know it myself, except that I suppose he (Peter) turned to and took this money out of my business in my absence." Counsel then said: "That is your supposition; but what have you got to show that your money was taken? how can you show that any of your money was taken?" To which he replied: "From the fact that in prior years I always made large sums of money in that business, and for the last two years I did not. I lost money." It will be observed that this amounts to absolutely nothing at all as proof of embezzlement, and yet it is substantially all there is. The paucity of the proofs in this respect, or rather the total want of proof, considered in connection with the fact that at the time when McDonald first discovered that Peter and John Cox were in the possession of a large sum of money he had in his possession the means by which it could be determined with entire certainty whether they had been guilty of wrong-doing or not, and that it appears that he not only made no use of such means, but soon thereafter disposed of them in such manner as to prevent their use either as proof of guilt or innocence, goes far to induce a conviction that his discovery did not arouse his suspicions, or, if he had suspicions, they were not strong enough to provoke him to make an investigation to see whether they were well founded or not. The method by which McDonald transacted his business made it quite impossible for his employes to embezzle his money without being detected, unless two or more of them acted in conceit. His clerks or salesmen were not allowed to receive payment for the goods they sold. He conducted his business in this wise: A clerk on making a sale put down, on a slip of paper, first the number of the sale, that is, whether it was the first, second, or third sale made by him that day, and then the amount of the sale, adding his name or initials, and this slip was handed to the purchaser, who took it to the cashier and paid him the amount of his purchase. The cashier placed the slip on a file and entered on his book the amount paid, the number of the sale, and by whom it was made. At the close of the day's business the cashier calculated the total amount of each clerk's sales appearing on his book, and then added the totals together, thus ascertaining the total of the sales for that day appearing on his books. Each clerk, in addition to making the slip, was required to enter on a book which he kept the number and amount of each sale made by him, and, when the day's business closed, to add up the total of his sales appearing on his book and hand the cashier a slip showing the amount as he calculated it. The totals furnished by the clerks were added together by the cashier, and, if the amount thus ascertained agreed with the total appearingon the cashier's book, the amount was put on a paper and the paper put in the money drawer, to show McDonald, when he came to count the money, the amount that should be there.
It will be seen at a glance, that it would be scarcely possible to devise a system for conducting such a business which, if properly observed, would be more efficient both in preventing embezzlement and also in detecting it, speedily and surely, if it were committed. In the absence of collusion between the cashier and one or more of the salesmen, the books kept by the salesmen would show, with entire certainty, just how much money the cashier had received each day. And the book kept by McDonald, as also that kept by the cashier, showed just how much money the cashier accounted for each day. It is not pretended that there was collusion between any of McDonald's employes, except between the cashier and his brother, John. No suspicion has been uttered against any other person. John was examined as a witness. Peter did not appear at the hearing. John testified fully and frankly. His demeanor, while under examination, was that of an honest witness, and I am convinced that his evidence, in the main, is truthful. He denied that he ever wrongfully took a penny of McDonald's money. His testimony satisfies me that, if moneys were fraudulently abstracted from McDonald, John neither did it, nor knew of it. If moneys were embezzled, and Peter did it, it must, in the present condition of the proofs, be believed that he did it alone. There is no evidence which will justify even a faint suspicion against anybody else. Now, when McDonald first discovered the facts which led to the institution of this suit, all the books, or nearly all of them, which had been kept by the salesmen, and by Peter and by McDonald, and which, it is manifest, would have furnished very decisive, if not conclusive, evidence, either of Peter's guilt or innocence, were still in McDonald's possession. If innocent, the books were Peter's shield, and their destruction has made it possible for the complainants to make an accusation against him which, with the books still in existence, they would never have allowed to be made. So vitally important are the entries in these books to a safe and just determination of the truth of the charges made against the defendants that it is impossible for me to imagine a condition of proofs which would justify the court, in the absence of the books—such absence not being the result of the fault or wrong of the defendants—in pronouncing a judgment which would in substance declare that Peter was guilty of embezzlement. If the books show that Peter is innocent, I think it would be almost impossible to show by other evidence that he is guilty. Notwithstanding the great importance of these books as evidence, McDonald admits that he sold them, after his failure, as waste paper. His act resulted in the destruction of evidence which, it is clear, would have shown with almost absolute certainty whether the charge now made against Peter is true or false. It would, perhaps, be too much to say that McDonald sold the books with the deliberate purpose of depriving Peter of evidence which he knew would show that Peter had done no wrong; but, if we say his act was simply careless, and not wrongful, still, its consequences to Peter are precisely the same. It deprived Peter of the means of showing by written evidence, made from day to day, not only by Peter himself, but by his fellow employes, and also by his accuser, that the charge now made against him is without the slightest foundation in fact. "While it might not be proper in such case to declare that the case should be decided by the application of the maxim, in odium spoliatoris omnia prœsumuntur, yet I think nothing can be more clearly right, as a rule of judicial action, than that where a defendant is accused of fraud, involving a serious crime, and has, by the act of his adversary, even if the act appears to have been done innocently, been deprived of the opportunity of having recourse in making his defense to written evidence which might have shown that the accusation made against him was groundless, nothing short of the most complete and convincing proof should induce the court to declare thatthe fraud charged is proved. To justify a decree in favor of the complainant in such a case, the proof should, in my judgment, be so complete and convincing as to satisfy the court that even if the destroyed evidence made a prima facie case of innocence, still, assuming that to be so, the proof in demonstration of guilt being so much greater and so much more convincing than that in favor of innocence produced a clear and decided conviction of the defendant's guilt. There is no such evidence in this case. The complainants rest their right to a decree on three facts—First, that McDonald's failure shows that he must have lost money; second, that Peter stated, while negotiating for the purchase of the land which was subsequently conveyed to his father, that he did not want McDonald to know that he intended to buy; and, third, that the attempt of the defendants to account for the money and property found in their possession is so manifestly a fabrication and so improbable as at once to convince any discriminating mind that a part of them, at least, was obtained by fraudulent means. If it be conceded that all these facts are satisfactorily proved, still it must be admitted, as it seems to me, that the fact constituting the very foundation of the complainants' right to relief remains unproved, namely, that the money and property in the defendants' possession represent moneys embezzled by Peter or John Cox, or both, from McDonald. The proofs utterly fail to show that McDonald ever lost a penny by embezzlement. McDonald does not pretend that he knows such to be the fact. He surmises that it may be so, but his conjecture in this regard rests entirely on the fact that he was unable to pay his debts. But how his inability to pay his debts was brought about—whether by selling his goods on credit to persons who could not be compelled to pay, or by engaging in a ruinous competition with his competitors in business, or by embarking in disastrous ventures, or by some other like cause—neither he, nor anybody else, from the evidence now before the court, can form anything like a trustworthy guess. Prior to his failure he was engaged in many different ventures, but he conducted them so negligently, and knew so little about them, that he frankly confesses that he does not know whether they resulted in a gain or a loss. From the evidence before the court I think it is extremely doubtful whether, at any time during the last three or four years McDonald was engaged in business, he knew enough about his business to be able to form a correct judgment as to his pecuniary condition. The fatal defect of the complainants' case is that there is no proof of embezzlement by either of the persons charged. They may have money for the possession of which they have not satisfactorily accounted, and this condition of the proofs may justify a belief that they obtained it by fraudulent means, but this does not go far enough to show that the complainants are entitled to a decree. They must go further, and show that the money was obtained of McDonald. There is no such proof. A wrong may have been committed, but, until it is shown that it was committed against McDonald, neither he nor those standing in his right can successfully ask for redress. The complainants' proofs fail in a vital point, and for that reason their bill must be dismissed, with costs.