Opinion
May 10, 1907.
W. Wickham Smith, for the appellant.
J. Stewart Ross, for the respondent.
The plaintiff was a customs broker and Simon Auerbach Co., importers of tobacco, were his clients, who claimed that they had been compelled to pay an excess of duty on certain importations of tobacco which the government was under obligation to refund to them.
Amongst the duties of a customs broker to his clients, as detailed by the plaintiff, are those of looking out for his clients in a general way and finding if any excess of import duties had been exacted.
Simon Auerbach Co. were still the clients of the plaintiff, and he was acting for them in this manner when he entered into negotiations with the defendant, an attorney at law, to procure for him a contract of employment from them to obtain the return of such excess. For the procurement of this contract and the doing of such detail work as might be necessary concerning the claim, the plaintiff proved that the defendant agreed to give him the same share of his fee that he gave to other brokers, which was testified to be one-half the fee, less one-sixteenth of the whole recovery to be deducted for general expenses.
The contract which plaintiff obtained from his clients was that defendant should have one-half of the sum which was recovered. After protracted litigation the government paid back $88,063.38 and defendant retained his half, amounting to $44,031.69. The defendant paid to the plaintiff $10,007.92, and by his consent also paid to one Schmidt $1,000, and this action is brought to recover the balance claimed to be due of $4,503.96, and has resulted in a judgment for that amount with interest.
The complaint alleges that the contract between plaintiff and defendant was made with the knowledge and consent of the clients of plaintiff. On the trial the plaintiff proved his contract with defendant, but failed to prove that it was made with the knowledge and consent of Simon Auerbach Co. At the close of the plaintiff's case the defendant moved to dismiss the complaint on the ground of the failure of this proof, because without it the contract was against good morals and public policy and could not be enforced. We think this motion should have been granted.
The plaintiff was the agent of Simon Auerbach Co., and it was a part of his obligation toward his principals to prevent, if he could, the payment by them of excess duties on their imports. If he assumed to employ an attorney for them, or to procure a contract from them for such employment to recover the duties improperly paid, he could not in fairness to Simon Auerbach Co. and in good morals, without their knowledge and consent, act as agent for the attorney also in procuring a contract from them to him and make an agreement with the attorney, who knew he was so acting, for the payment to himself of a part of the fee to be charged. It was his duty to obtain the services of such attorney at as reasonable a price as he might be able without any profit to himself. Any secret agreement which he might make for the sharing of the attorney's fee was not only a breach of trust against his principals, but against good morals and public policy and a contract which the law will not enforce. ( Abel v. Disbrow, 15 App. Div. 536; Murray v. Beard, 102 N.Y. 505; Utica Ins. Co. v. Toledo Ins. Co., 17 Barb. 132; Bell v. McConnell, 37 Ohio St. 396; 41 Am. Rep. 528; City of Findlay v. Pertz, 66 Fed. Rep. 427, 434.)
In Bell v. McConnell ( supra), in discussing the duty of an agent to his principal and the forfeiture of his agreed compensation if he attempts to make a profit to himself or makes a contract contrary to his duty, or acts secretly for two principals, the court says: "And if the second employer has knowledge of the first engagement, then both he and the agent are guilty of the wrong committed against the first employer, and the law will not enforce an executory contract entered into in fraud of the rights of the first employer. It is no answer to say that the second employer, having knowledge of the first employment, should be held liable on his promise because he could not be defrauded in the transaction. The contract itself is void as against public policy and good morals, and both parties thereto being in pari delicto the law will leave them as it finds them."
The defendant's answer does not set up the invalidity of the contract. The complaint by alleging knowledge and consent of the principals, set forth a good cause of action. ( Irwin v. Curie, 171 N.Y. 409.) The plaintiff, however, stopped short of proving a good cause of action by failing to prove the knowledge and consent of his principals, which was a substantive part thereof. A plaintiff must, to support his action, where the answer contains a general denial, prove a valid, binding contract; and if he fails to do so his complaint may be dismissed although the invalidity of the contract is not affirmatively pleaded as a defense. ( Drake v. Siebold, 81 Hun, 178; Cary v. Western Union Telegraph Co., 47 id. 610; Russell v. Burton, 66 Barb. 539.) Even where the rule is that certain defenses of illegality of contract must be affirmatively pleaded to entitle the defendant to attack the contract as illegal, such rule does not apply where the plaintiff on his own showing discloses its invalidity. ( Honegger v. Wettstein, 94 N.Y. 252. )
It is urged that the bare fact that plaintiff obtained the contract of employment from his customers, shows that he disclosed to them his alleged arrangement with the defendant respecting fees. We think no such fact can be inferred, and on the contrary the presumption is that if Simon Auerbach Co. knew that the defendant was willing to perform the services for one-quarter of the recovery instead of one-half, they would have insisted upon the balance coming to them.
The plaintiff also by his own testimony came very near, if not completely, proving a settlement and accord and satisfaction of his claim when the $11,000 was paid over to him. Inasmuch as we have concluded that there must be a new trial, however, it is unnecessary to discuss this question.
The receipts signed by plaintiff were properly rejected. The defendant could not introduce them as evidencing payment and settlement as an affirmative defense, without incorporating such a plea in his answer, which he failed to do. They were not part of the res gestæ but independent written instruments, and were material on no other issue than payment and settlement, and this issue not having been raised by proper plea, the ruling of the court was correct.
For the reason pointed out, however, the judgment must be reversed and a new trial granted, with costs to the appellant to abide the event.
McLAUGHLIN and SCOTT, JJ., concurred; PATTERSON, P.J., and LAMBERT, J., dissented.
Judgment reversed, new trial ordered, costs to appellant to abide event.