Summary
In Mining Co. v. (69) Fox, supra, this Court says, on page 70, that "The rule applies only to agents who are relied upon for counsel and direction, and whose employment is rather a trust than a service, and not to those who are merely employed as instruments in the performance of some appointed service."
Summary of this case from Lamb v. BaxterOpinion
(December Term, 1845.)
1. It is a well established principle in Equity, that an agent can not make himself an adverse party to his principal, while the agency continues; he can neither make himself a purchaser, when employed to sell, nor, if employed to purchase, can he make himself the seller. In both cases, he is but a trustee for his principal.
2. But the rule applies only to agents, who are relied upon for counsel and direction, and whose employment is rather a trust than a service; and not to those, who are merely employed as instruments, in the performance of some appointed service.
3. Courts of Equity should be very cautious in granting injunctions to stop mining operations, because such stoppage is alike opposed to public policy, and to the private justice due to the party, who might ultimately be found to be the owner. The better course is not to prevent the working of the mine, but to appoint a receiver.
This was an appeal, both by the plaintiffs and the defendant, from certain interlocutory orders made by the Court of Equity of GUILFORD, at Fall Term, 1845, his Honor, Judge Dick (62) presiding.
Badger for the plaintiffs.
Morehead for the defendant.
The bill charges, that the plaintiffs, by an Act of the General Assembly, passed in 1835, were incorporated by the name of the Deep River Gold Mining Company, and as such were organized and commenced business in 1835, and continued to carry it on until finally suspended. The officers of said company at the time the bill was filed, consisted of a president, Granville Sharp Patterson, and four directors, to wit: Roswell A. King, Lemuel Lamb, Joshua Phillips and Henry Ogden, all of whom were duly chosen, according to the act, and of whom, Roswell A. King alone lived in North Carolina, the others in New York and Philadelphia. That, by the provisions of the act of incorporation, all the property of the company is made liable to be sold for its debts, and that process, to subject it to such sale, may be served on the president or any director or stockholder. To carry on their operations, the bill charges that the company purchased, from Roswell A. King and others, several contiguous tracts of land, which were valued at the time at $200,000, and, at which price, they were taken as stock. When the company commenced operations, the defendant Fox was appointed the agent to manage and carry on the business at a salary of $1,500 per year, and one F. Wilkerson was appointed their clerk at a salary of $400. The lands were found, upon examination, to abound in copper and gold ore, each very rich. Large quantities were sent to England and sold at a high price. The purpose of sending the ore to England was to ascertain its value, and to enable the company, by a sale of stock, to carry on their operations more extensively and profitably. Sales were effectuated upon certain terms, and in consequence of a misunderstanding between the company and the English purchasers, the business of the company was suspended. The agent Fox was, by letter dated 1 January, 1839, informed of this fact, and directed to discharge all the hands except two or three to take care of the property, and by letter, dated in the April following, and addressed to (63) him, he was notified his services and Wilkerson's were no longer needed, and requiring him to forward a full statement of the situation of the firm, and the said Fox, subsequently agreed with the plaintiffs to continue to act as their agent, at a salary of $100 per annum. This new arrangement was finally closed or made at a meeting of the board, held in May, 1841, at which the defendant was present. The bill charges that, while Fox was so acting as their agent, he caused process to issue against the company, returnable to the August term, 1841, of the Court of Pleas and Quarter Sessions of Guilford County, and obtained a judgment at the November term following, for the sum of $1,166.36, which he claimed to be due for his said salaries as agent. Upon this judgment execution issued, returnable to February term, 1842, and was levied on all the property of the plaintiffs in the county of Guilford, including the several tracts of land, so purchased and held by the company; that a sale took place at May term, 1842, when the defendant purchased the whole of the lands at the price, in the whole, of $1,265 — the several tracts having been sold separately, and being worth the amount at which they were taken as stock. The bill further states, that, at the meeting of the board in May, 1842, the defendant presented his account against the company, and made a representation of their affairs, at the same time stating the quantity of ore that was raised and on the surface of the mine, and which he agreed to take at the price of $500, deducting which from his account, would leave a balance in his favor of about $1,000. He was fully informed of the causes which produced the suspension of the mining business, and of the embarrassed state of the plaintiffs' affairs, and in consequence thereof, promised not to press his claims, but that they might be paid at the convenience of the company. The bill charges, that the writ or process in the suit was not served on the president, but on Roswell A. King, one of the directors, who lived in North Carolina, (64) and while said Fox continued the agent of the company and was living on the land, and that no notice was given to the plaintiffs (except by the service) of the issuing of the writ or the obtaining of the judgment or the sale of the land, and that the judgment was taken by default, and without an appearance for them or defense. It charges, that it was the duty of the defendant to have taken care of the interest of the company, and to have notified the board of directors of the existence of the suit and its progress. The bill charges, that in the sale of the ore, lying on the ground as set forth, they were grossly deceived by the defendant, both as to the amount of the ore and its value, and that the defendant well know both the amount and value, being and experienced miner, and that it was worth more than what the company owed him, and that, from it and from ore subsequently raised by him from the mines, preceding the sale to him by the sheriff, he actually realized the sum of $6,000 deducting all expenses; and it calls for an account of the ore and its proceeds. The bill further charges, that if all just accounts were taken between the plaintiffs and the said Fox, it would appear, that, at the time he took his judgment and sold the land, they owed him nothing, and that, at the sale, the defendant announced that nothing would be taken at the sale in payment by the purchaser but gold and silver, whereby purchasers were prevented from bidding, and the property of the plaintiffs was sacrificed, through the negligence and fraud of the defendant, who was their agent. The bill then charges, that as early as May, 1841, the defendant had formed the design of defrauding the plaintiffs out of their property, and, with that view, in his conversations depreciated the mines and the ore; that the plaintiffs were ignorant of both, living at a great distance from North Carolina, and that they had implicit confidence in the mining skill and honesty of the defendant, (65) but that, since his purchase, the mines have turned out to be extremely valuable, as proved by letters written by the said defendant in 1845 to John Rutter. It then charges that the defendant has little or no property, except that obtained from the mines, and that he is still working them, and prays an injunction; and, accordingly, an injunction was granted.
The answer admits the incorporation of the company, their regular organization, and the acquisition by them of the land, as stated in the bill. It admits the employment of the defendant as their agent at the salary of $1,500, that the business of mining was suspended at the time specified and his dismissal from his agency in April, 1839, and denies, that, after that time, he acted as their agent, but that he did agree, for the sum of $100 a year and the use of the land, to take care of the property of the plaintiffs. It admits that he did sue the company for money that was justly his due, and did obtain a judgment and caused the execution to be levied on the land and became himself the purchaser, and that the defendant now holds the sheriff's deed for it and claims it as his own, and denies that his judgment was taken by default, but states that at the return term of the writ the plaintiffs were represented by counsel, who entered the pleas of the general issue, payment, and set-off, release, and accord and satisfaction.
The answer alleges, that, in compliance with the directions contained in the letter of April, 1839, he caused the clerk of the company, Mr. Wilkerson, to make out a full statement of the affairs of the company, from the commencement of operations to the time of suspension, which, together with an inventory of their effects in Guilford County, was by him laid before a board of the company, which was held in Philadelphia, in May, 1839, with which account and inventory they were well pleased. At this meeting he exhibited to the company his account and demanded what was due him for his services; it was admitted to be just, but he was informed by the (66) board, that they had no funds. It was then proposed to him, that he should take care of the land and property for the company, for which service they would allow him $100 a year and let him have the use of the land, pay him then $100 of his account, his traveling expenses, and remit him, in the course of two or three weeks, $800 more on his account. He returned to North Carolina, but never received the money promised, except the $100. The defendant denies he then promised not to press his claims, or that he would wait the convenience of the company. The defendant was again present, at a meeting of the board in New York in May, 1841, when he again demanded payment of his account and received the same answer as before, when he distinctly informed them, if he was not paid before the next County Court of Guilford, he would put his claim in suit against the company. The directors then promised in two weeks to send him $400, which they never did.
The answer admits that the company failing to remit the $400 as promised, a writ was taken out by him as returnable to August term, 1841, of Guilford County Court, and he had it served upon Roswell A. King, who was both a stockholder in and director of, the said company, and, at November term succeeding, recovered a judgment for what was justly due him and no more, and that he filed in the office a copy of his account. The defendant avers, that immediately upon commencing suit he informed the company by letter, that he had done so, and, upon obtaining judgment, he notified John Rutter, one of the directors, of the fact, and, that if funds were not forwarded to satisfy it, the lands would be sold at February term, 1842; That no sale took place at February term, in consequence of King's having prevailed on the sheriff not to make it, promising to pay his forfeiture for him, to wit, $100, which the defendant enforced. The answer further admits the purchase of (67) the land by defendant, at May term, 1842, and that, at the preceding term, he had said he would take nothing but gold and silver, being vexed with King and the sheriff, for the postponement of the sale at that term, but, when the land was offered, he informed the company he would take any current bank notes.
Defendant denies that in these transactions he was acting as the agent of the company. He avers that, after the sale, he had interviews and correspondence with some members of the company, when they were fully apprised of what had been done, and approved of the defendant's conduct, and that, in confirmation of this statement, he received from the President, Mr. Patterson, and Mr. Ogden, a letter bearing date 30 May, 1842, which is as follows: "NEW YORK, 30 May, 1842.
SIR: In answer to your inquiry, we can only say, that as the company would not pay you the money due by them to you, that, in purchasing the property when it was sold by the sheriff, no blame can attach to you. As agent of the company, you certainly, both by your attention and competency, gave entire satisfaction, nor is any blame to be attached to you.
GRANVILLE S. PATTERSON. HENRY OGDEN."
The answer denies the value set upon the land in the bill, and if they were of that value, Roswell A. King, one of the directors, lived within fifteen miles of them, and knew of the sale.
The defendant denies that he purchased the land and other property, with any view to a speculation, but simply to save his debt, as the whole that was sold fell short, by $200, of paying his claim, and, in confirmation of this allegation, states that, soon after making his purchase, he went on to New York, where Mr. Patterson, the president of the company, and Mr. Rutter, and Mr. Ogden, two of the directors, lived, and (68) took with him the several sheriffs' deeds, without having had them registered, and offered to surrender the deeds, both for the land and the personal property, if they would pay his debt and his traveling expenses. This they declined to do, saying the company had no funds; that the defendant must keep the property and save himself out of it if he could. With respect to the ore, the answer states that he valued it at $400, but Mr. King insisted upon his giving $500, and placing implicit confidence in the judgment and integrity of Mr. King, he agreed to take it at that price; and, in confirmation of this statement, refers to a letter from Mr. King to the company, under date of 29 December, 1839, to that effect; and also to two other letters, one from Mr. Rutter, one of the directors, and one from the President, Mr. Patterson, agreeing to let the ore go at the price of $500 — the two last letters of a date subsequent to the one from Mr. King. The answer further states, that after purchasing the ore, he considered it his, and that he kept no account of the proceeds, and is now unable to state them, as he had ore from other mines, which he worked with it, but denies that, in his belief, he realized from it more than he had before been receiving by way of salary at $1,500 a year.
The answer denies, that, upon a fair settlement, the defendant would be indebted to the plaintiffs; on the contrary, it avers that the sum, for which the defendant obtained judgment, was justly due to him, and as to the ore sold by the sheriff, that a true account of it was contained in the inventory exhibited by the defendant to the President and Henry Ogden, at the time he offered to surrender his purchase. The answer further alleges, that by two deeds, the one bearing date 30 May, 1842, and the other 20 January, 1843, he appointed the said Patterson and Ogden his attorneys to sell said tracts of land, and that they accepted the agency, and made efforts to execute it, as was shown by their letters addressed to the defendant — copies of which letters and powers of attorney (69) are appended to the answers, as parts thereof: And that in June, 1845, John Rutter came on to the defendant's residence in North Carolina, and was, by defendant, and at his own request, appointed a co-agent with Henry Ogden, to make sale of the lands and mines, on account of, and for the defendant. Upon the coming in of the answer, on motion, the injunction was dissolved, so far as to allow the defendant to remove and use 10,000 bushels of the ore, then on the surface of the mines; and as to the residue, the injunction was retained until the hearing of the cause. From this interlocutory decree, both parties appealed — the plaintiffs from the first branch of it, and the defendant from the latter.
We think his Honor erred, and that the injunction ought to have been dissolved in full.
The plaintiffs, by their bill, rest their claim to relief upon three grounds: First, that the defendant, when he made his purchase, was their agent, and in this Court will be held to be a trustee for their benefit. Second, that the judgment was fraudulently obtained, no process having been ever served upon the president of the company or any stockholder, and no defense having been made for them; and thirdly, that the defendant was guilty of a fraud in purchasing from them the ore as set forth in the bill, in representing to them that it was not worth more than $600, when he knew that it was worth a great deal more, and when in fact he realized from it and other ore, six thousand dollars, whereby their debt to him was more than paid.
It is a well established principle in equity, that an agent can not make himself an adverse party to his principal while the agency continues; he can neither make himself a (70) purchaser when employed to sell, nor, if employed to purchase, can he make himself the seller, and to this rule the exceptions are very limited. The justice and expediency of the rule are obvious and founded upon a plain reason. The principal does not get what he bargains for, in the employment, namely, the zeal and vigilance of the agent, for his own exclusive use. Paley Prin. and Agent, pp. 11, 33, 34. Equity therefore will consider an agent so acting as a trustee, in the case of a purchase, for his principal, and the purchase itself, but as a security for what may be found due him on a settlement of accounts between him and his principal. This case is not within the above principle. But the rule applies only to agents, who are relied upon for counsel and direction, and whose employment is rather a trust than a service, and not to those who are merely employed as instruments, in the performance of some appointed service. Paley Prin. and Ag., 12. If then the original employment of Fox, the defendant, was such an agency as forbade him to place himself, with respect to this property, in a position adverse to his principals, the plaintiffs, it is evident from the statement of the bill, that such agency had ceased before the commencement of his action against them. The bill charges, that the plaintiffs, through their president, on or about 6 April, 1839, addressed a letter to the defendant, notifying him that his services were no longer required and directing him to forward his accounts. From the reception of that letter, the defendant ceased to be their agent, as an officer in conducting their mining operations.
The suit, which Fox instituted against the corporation, was commenced in the summer of 1841. It is true, that, after he was thus dismissed from their service, he entered into a new agreement to take care of the land and other property for the use of the land and $100 a year. But we do not think, that, by this new agreement or agency, he stood in such a relation to the plaintiffs, as to forbid his resort to the ordinary (71) process of the law, to enforce the collection of a debt, which was justly due him.
The second ground upon which the defendant's purchase is assailed, is equally untenable. The bill charges, that the process was not served on the president or on any director, and that judgment was taken against them by default, and without any defense. The act of incorporation, as set forth in the bill, subjects all the property of the company to the payment of their debts, and authorizes service to be made on the president, or in his absence, on a director, or in the absence of both, on a stockholder — a provision usual in such acts, and, in this case, peculiarly proper, as all the officers and stockholders, but one, resided out of the State. In May, 1839, the defendant, in compliance with the directions contained in the letter from the president, and dated in the April preceding, met the board of directors in Philadelphia; where, as he stated in his answer, he presented a general statement of the affairs of the company, and his own account, and demanded payment of the latter, and that no objection was made to his claim as not being correct, but he was told the company had no funds. At this meeting, the agreement was made as to taking care of the mines and other property. He received $100 and the promise of $800 more in two or three weeks, which was never sent. Again, in May, 1841, he met the board in the city of New Yark [York], and urged the payment of his account. No complaint was then made as to its correctness, and he informed them, that, if not paid by the next Court in Guilford County, he would sue them; and, no payment being made, the suit was commenced, returnable to August court. The writ was served on Roswell King, who was both a director and a stockholder, and, at the return term, the usual pleas were entered on the record by an attorney of the court. And yet Mr. Patterson, the president, and one of the plaintiffs, swears that it was not served on any director of the company. The suit, then, was regularly (72) commenced, and, as stated in the answer, regularly conducted to a judgment. We see nothing unfair in all this. His claim against the company was admitted to be just; he had been informed by the president and some of the directors at the North, that the company was without funds, and had been informed by Mr. King, himself, a director and a stockholder and creditor of the company, that the individuals composing it were all bankrupt. There was no property to which he could look for his indemnity, but the lands and the property of a personal character connected with the mines. What was he to do? Did the law require him to stand by and see other creditors seize this very property, upon which his labor had been bestowed, and make no effort to save himself? We think not. But the defendant goes further. No sooner is his judgment obtained, than he informs the board of directors of the fact — informs them when the sale will take place, and assures them, unless paid, the land will be sold. The lands were sold publicly, at the court-house in Guilford County, on the sale day, as established by law, being the first day of the court, and do not bring, by $200, what the executions called for. Mr. Fox again went on to New York — took with him the sheriff's deeds, without having had them registered, and offered to surrender the deeds and give up all the property, if they would pay him what was justly due, and his traveling expenses. This proposition, on the part of the defendant, is evidence that he had no wish to speculate on his late employers. It will be recollected the case is before us, not for hearing, but upon a motion to dissolve the injunction. In confirmation, however, of the statement made by the answer, is the letter of 30 May, 1842, written to the defendant by the president, G.S. Patterson, and Henry Ogden, one of the directors of the company, in answer to one written to them by the defendant, informing them of the sale, in which they state that the company (73) would not pay him his claims, and that, in purchasing the property at the sheriff's sale, no blame could attach to him. With what propriety, then, can these plaintiffs allege, that the recovery by the defendant was a fraudulent one? As to the irregularity in the recovery, as alleged, but which is shown not to exist, this Court can take no notice of it, except so far as it may be evidence, with other things, of a fraud. Here, it is not alleged, upon this part of the case, that the plaintiff has recovered that by law, which in good conscience he ought not to retain; nor do the pleadings show, that although the judgment was recovered for a true debt, yet it was iniquitously used, in which case the Court would not hesitate to deprive the purchaser of the fruits of his iniquitous conduct, as was done in the case of Lord Cranston v. Johnston, 3 Ves. Jr., 170, and cited for the plaintiff. Here the plaintiffs, or a part of them, not only admit, in their letter of 30 May, that the defendant's claim was a just one, but that he had made a just and proper use of his judgment by purchasing at the sale. Bissell v. Bozman, 17 N.C. 160. In this case, the principles just stated are fully recognized and sustained. In addition to this, the plaintiffs, Patterson, Ogden and Rutter, constituting a majority of the board of directors, actually became the agents of the defendant to sell the mines thus purchased by him, and bargain for shares in the stock, and an interest in the mines. On this part of the case, it is urged by the plaintiffs' counsel that these acts of the plaintiffs can not be considered as confirming the title or acts of the defendant, because it is not shown that they knew their rights; and the authorities cited by him sustain the position. These letters, and contracts of the plaintiffs with the defendant, are not offered as confirming his title. His title needs no confirmation; it is at law full and complete, but simply acknowledging that it is so. It has been further urged in the argument before us, that the defendant and Roswell King fraudulently combined together to injure (74) and defraud the plaintiffs in the sale of the land. It is sufficient on this head to say, that it is not charged in the bill. Upon the third point made by the bill, the defendant's answer is full and satisfactory. It is charged, that, availing himself of the ignorance of the plaintiffs as to the quantity and value of the ore, which had been gotten out of the mine, he induced them to sell it to him at the price of $500, when he knew it was worth much more, and that, in truth and in fact, he had extracted from it a much larger sum — a sum much more than sufficient to pay his expenses and all that the company owed him, and that, therefore, at the time he obtained his judgment they owed him nothing. To this charge the defendant replies, that he is not skilled in gold ore, and that in giving $500 for it, he replied upon the judgment of Mr. King, both as to the quantity and value, and he produces the letter of Mr. King directed to the plaintiffs, to sustain his answer. Mr. King was a stockholder and a director, immediately interested in procuring from the defendant as high a price for the ore as it was worth. It is not to be supposed, he would be willing to take less than what he believed its real value. But it is said the defendant's answer to this charge, when called on to state how much gold he got from that ore, is unsatisfactory and evasive. It may be so, but we consider it entirely unimportant; the sale was a fair one, and whether he realized much or little, has nothing to do with the question before us. But the answer states facts, that show the price given was a fair one upon the whole. We see nothing in the conduct of the defendant, of which the plaintiffs have a right to complain. So far as they were concerned as proprietors, his conduct has been fair, honest and honorable, and, if in any part of it he has lost sight of rectitude, it has been only, when listening to the suggestions and allurements of the plaintiffs themselves, in endeavoring to give to the mines a false and meretricious value, with a view (75) to entice ignorant and unwary purchasers.
In closing this case we would call the attention of our professional brethren to what fell from this Court, in Falls v. McAfee, 24 N.C. 239. It was an action on a bond, given by defendant on obtaining an injunction, restraining the plaintiff in working a mine. The Court after remarking on the heavy loss the plaintiff had sustained by the operation of the process awarded against him, observe: "The case arose early after the business of mining began, and the writ was improvidently awarded, without recollecting at the time, that to stop the working of the mine, was alike opposed by the public policy and the private justice due to the party, that might be found ultimately to be the owner, and that it would rather promote all interests to appoint a receiver, or take some other method for having the profits fully accounted for. It is indeed remarkable that the present plaintiff had not at the first opportunity, moved to discharge the injunction, by submitting to have a receiver appointed." We intend to express no opinion, nor even to intimate one that this is a proper case for the appointment of a receiver, at the present stage of it.
The interlocutory order of the Court below is erroneous and should be reversed, and the injunction dissolved absolutely, with costs, and the plaintiffs must pay the costs of this Court.
PER CURIAM. ORDERED TO BE CERTIFIED ACCORDINGLY.
Cited: Gause v. Perkins, 56 N.C. 180; Parker v. Parker, 82 N.C. 168; Nesbitt v. Turrentine, 83 N.C. 538; R. R. v. R. R., 88 N.C. 82; Comrs. v. Lash, 89 N.C. 168; Lumber Co. v. Wallace, 93 N.C. 31; Stith v. Jones, 101 N.C. 365; Lamb v. Baxter, 130 N.C. 68; Swindell v. Latham, 145 N.C. 151.
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