Opinion
Argued April 15, 1891
Decided June 2, 1891
Edward C. James for appellants. A.W. Gleason for respondent.
The trial court found, as a fact, that after the settlement in the fall of 1883, and the execution and delivery of the release by the parties thereto, there remained no unsettled matters in connection with the publication of the stories mentioned in the complaint. In order to maintain the action, therefore, it became necessary for the plaintiffs to obtain an adjudication that the settlement was fraudulently procured and should, therefore, be set aside.
The trial court, however, upon the whole testimony found, as a fact, that the defendant did not practice any fraud or deceit, or make any false representations in procuring such settlement.
And the conclusion of law that the settlements were valid transactions and binding upon the parties thereto, necessarily followed the finding of fact made.
The General Term having affirmed the findings of the trial court, they are necessarily controlling here. It is asserted, however, that the plaintiffs are entitled to a reversal of the judgment, because of an alleged error, in refusing to hold that the burden of proof was on the defendant, to show affirmatively that in the settlements evidenced by the receipts of September 22 and December 7, 1883, no deception was practiced or undue influence used.
On the trial plaintiffs' counsel, after offering in evidence a transfer by the executors of Francis S. Smith and by Ormond G. Smith, survivor of Francis S. Smith, to Street Smith (the new firm), of all the right, title and interest which the said Francis S. Smith had in the copartnership of Street Smith, asked the court to "rule that the burden of proof is now on the defendant." The court denied plaintiffs' request. This question was again presented by the plaintiffs in the form of a request to the court to hold, as a matter of law, that the burden of proof rested upon the defendant to show that the settlements were procured without fraud.
The court refused to so find, and the exceptions taken to such refusals present the only question requiring consideration. It is asserted that, notwithstanding the finding made by the court that the defendant did not practice any fraud or deceit, or make false representations in connection with the accounts as presented, or in the course of the negotiation resulting in a settlement between the parties, that the result might have been quite otherwise had the defendant been required on the trial to assume the burden of proving, that in the making of the settlements, the entire transaction was fair, open and well understood.
The appellants conceding the general rule that the burden of proving fraud rests on him who asserts it, urge that this case constitutes an exception, because of the relations existing between the plaintiffs and defendant, which bring it within the rule cited in Pomeroy's Equity Jurisprudence (§ 951): "Where an antecedent fiduciary relation exists a court of equity will presume confidence placed and influence exerted; where there is no such fiduciary relation, the confidence and influence must be proved by satisfactory extrinsic evidence."
Following this rule, it has been frequently held in this state that when such relation is shown to exist, it imposes the burden of proof upon the person taking securities or making contracts or procuring settlements inuring to his benefit, to show that the transaction was just and fair and no undue advantage obtained because of such fiduciary relation. ( Mason v. Ring, 2 Abb. Pr. [N.S.] 322; Brock v. Barnes, 40 Barb. 521; Fisher v. Bishop, 108 N.Y. 25.) We are thus conducted to the inquiry whether the contract on its face suggests a fiduciary relation, and if not, whether the fact that Street was a member of both firms, in view of the situation presented in other respects requires a determination that such was the relation at the time of the settlement? A general definition of the word fiduciary cannot well be given, which is sufficiently comprehensive to embrace all cases.
Bouvier defines it as follows: "A contract by which we sell a thing to some one, on condition he will sell back to us. This term is derived from the civil law; may be defined in trust, in confidence; fiduciary contract, an agreement by which a person delivers a thing to another on condition he will return it to him." It embraces trust, confidence and refers to the integrity, the fidelity of the party trusted rather than his credit or ability, and contemplates good faith rather than legal obligation. ( Stoll v. King, 8 How. Pr. 298.) It includes all moneys received under one of the express trusts known to the law, such as that of an executor, trustee, etc. ( Smith v. Edmonds, 1 Code R. 86); money received under an understanding that it is to be invested in a specified manner ( Noble v. Prescott, 4 E.D. Smith, 139); moneys received by an agent for his principal which he has no authority to disburse, but is bound to pay over. ( Republic of Mexico v. Arangoiz, 5 Duer, 634.) The test in cases of agency is whether the specific moneys ought to have been kept and paid over or whether the agent had a right to use the money. ( Stoll v. King, supra.) Partners occupy towards each other as to the partnership business a fiduciary relation, and in cases of quasi partnership the like relation has been held to exist. ( Marston v. Gould, 69 N.Y. 225.)
Now upon the face of the agreement it appears that Street Smith and J.S. Ogilvie Co. agreed that Ogilvie Co. might have the exclusive right of publication of certain stories belonging to Street Smith in book form, in consideration of their promise to pay twenty cents per volume for all copies sold, the retail price of which should be $1.50 and a proportionate amount for books retailing at more or less than $1.50 provided Street Smith paid for making the electrotype plates.
Whether they should pay for the plates being made optional with Street Smith. In the event that they should not, it was provided that they should receive a royalty of ten per cent on the retail price, payment of royalties to be made quarterly unless mutually agreed otherwise.
It will be observed that the agreement did not provide that a certain portion of the money received from the sale of the books should be paid over to Street Smith. It fails to suggest in any manner that such moneys or any portion of them were to be deemed the moneys of Street Smith, which the other party was bound to turn over, having no right to retain the specific moneys received. There was in such respect, therefore, no fiduciary relation. Neither were the parties to the contract partners in the publication and sale of the books.
Street Smith furnished stories to be published in book form but exercised no other or further control over their publication and sale. For that they received a specified sum for each book sold, but they did not share in the profits as such nor bear any part of the losses, if any there were. All of the risks of the business rested on J.S. Ogilvie Co. If the publication of a book resulted in a loss, Street Smith were, nevertheless, entitled to a fixed sum for each book sold. If it eventuated in a profit they could not share therein, but were entitled only to the sum agreed upon for each volume disposed of.
There is no feature of the agreement, as we think, which establishes the relations of the parties thereto towards each other as fiduciary in character, and it need not be examined further. So far we have considered whether the situation of the parties each to the other as indicated on the face of the agreement was one of trust and confidence, but appellant's counsel on the argument having attached some importance to the fact that Street was a member of both firms, we shall consider briefly whether the situation is altered by reason of it.
It cannot be doubted that Street's and Ogilvie's connection with the firm of J.S. Ogilvie Co. stamped their relations towards each other in the business of that firm as fiduciary, and in an action brought by Street, as a member thereof, against his partner relating to his conduct in the business of the firm, he would have been entitled to all the benefits derivable by reason thereof. Indeed it appears from the record before us, that Street's executors instituted a suit against the defendant as surviving partner, in which he recovered a large sum of money which was adjudged to be the share and interest which Street had in the firm assets at his death.
In that action, therefore, the rights of the deceased partner were ascertained and secured. His representatives, or successors have no other or further interest in, or claim against the firm of J.S. Ogilvie Co., except through his membership of the firm of Street Smith on account of transactions growing out of the royalty contract, which constitutes the basis of this controversy.
This suit is not brought to set aside that contract. It is not founded on a claim that in bringing about its making, and execution, Street did any thing that he ought not to have done, as a partner of Smith. No misconduct is alleged against him.
On the contrary, the validity and binding force of the contract is recognized, and asserted by the plaintiffs. The acts of which they complain being that, after the death of Street, the defendant by means of misrepresentations, fraudulently procured the settlement, which the plaintiffs seek to set aside. The death of Street put an end to the partnership of both Street Smith and J.S. Ogilvie Co., and clearly the dead man's former connection with both firms cannot be said to have caused the survivors in making the settlement, to deal towards each other on the basis of trust and confidence.
There was, therefore, nothing in the relation of the parties at the time of the settlement, which justified them in dealing with each other, otherwise than at arms length, and the burden rested on the plaintiffs, to affirmatively establish that the settlement was fraudulently procured. This they failed to do.
The judgment should be affirmed.
All concur.
Judgment affirmed.