Opinion
12-18-1894
HENNINGER v. HEALD.
Theodore Little, for complainant. R. Wayne Parker, for defendant.
(Syllabus by the Court.)
Bill by William R. Henninger against Charles E. Heald for an accounting for moneys received upon the sale of lands, such accounting being required under a former decree.
Theodore Little, for complainant.
R. Wayne Parker, for defendant.
BIRD, V. C. It having been decreed in this case (see 29 Atl. 190) that Heald must account to Henninger for the moneys which he received upon the sale of the lands which were conveyed from Henninger in exchange, upon such accounting it Is Insisted in behalf of Heald that he is entitled to retain, out of the money so received by him, all reasonable expenses and disbursements, such as counsel fees, witness fees, traveling expenses, and the like, incurred in any suit or suits which were instituted for the purpose of maintaining and protecting his interest in the property, and in perfecting a sale and conveyance thereof. In determining this question it must not be overlooked that Heald has been charged with entering into an arrangement with Taylor, who was the agent of Henninger, in and by which the exchange of properties was affected, and that that arrangement was fraudulent, and that, becoming possessed of the premises in question in this manner, he is held liable as agent or trustee for Henninger. Is Heald entitled to anything by way of lien, set-off, or recoupment on account of services rendered or money expended in prosecuting his claim to the title to the lands in question against the Jardines? This question can only arise upon contracts express or implied, or where the defendant has a just demand that he is entitled to enforce against the complainant. In such case, in order to avoid a multiplicity of suits or circuity of action, the court will take into consideration the rights of all the parties, and determine the balance actually due to the one or the other in a single suit Has Heald any just claim against Henninger, or lien on the fund in his possession, for any costs or expenses of any character incurred by him, with respect to the premises in question? Heald did nothing for or on account of Henninger. He never was employed by Henninger, in the remotest sense. It cannot be said that he was so much as a volunteer. Whatever he did in the premises was in hostility to Henninger's Interests; as much so as the conduct of a trespasser, who should reap and carry off my grain, and, upon demand being made therefor, refuse to deliver it unless he was paid for the reaping and converting it into flour. I have adjudged his conduct in this respect to be fraudulent in every particular. If there be any such claim whatever, it must be of a nature which Heald could enforce by direct action or suit against Henninger. Therefore, taking it for granted that Heald's conduct was fraudulent, as I have concluded, upon what rule of law or principle of equity could the court allow to him any compensation for services rendered or money expended by way of counsel fees or court charges, or otherwise, for his misfeasance or mala fides? Manifestly, the establishment of a rule in favor of the claim of Heald would be nothing more nor less than the encouragement of wrongdoing and bad faith upon the part of all persons who, by contrivance or fraud of any kind, could secure the possession of the property of others. It would only be necessary for them to take Into consideration such a rule in order to be prompted to commit any acts of violence or Injustice, trusting to such rule to be protected against all costs Incurred in their undertaking. Such questions must be determined upon principle, rather than by the amount of profit which may ultimately accrue through the skill, ingenuity, or good fortune of the trespasser or fraud-doer. The principal is entitled to the property If it be not beyond his reach; if it be, then to whatever the wrongdoer has received therefor, since that represents the property. The lawbreaker takes the risk of losing everything, including his own labor and disbursements. If the law should Indemnify him against risk or loss, he would be emboldened to the utmost daring. It would therefore seem to be impossible for the court to find any basis upon which it could sustain any claim by Heald against Henninger. This is in accordance with the authorities. Story, Ag. § 353, says that a man who has the lawful possession of a thing, and has expended his money or labor upon it at the request of the owner, has the right to retain it until his demand is satisfied. In stating the manner and circumstances under which a lien may be acquired, the same author says that it is essential that a party by whom or through whom it is acquired should himself either have the true and just ownership of the property, or, at least, a right to vest it If, therefore, he is not the true owner of the property, or if he has no rightful power to dispose of the same or to create a lien, or if he exceeds his authority, or if he is a mere wrongdoer, or if his possession is tortious, in these and like cases it is obvious that he cannot ordinarily create a Hen, or transfer it to others. He further says that there must be an actual or constructive possession of the thing by the party asserting it, with the express or implied assent of the party against whom it is asserted; for a lien is the right to retain a thing, which presupposes a lawful possession, which can arise only from a just possession under the owner or other party against whom the claim exists. Id. § 361; McCrombie v. Davies, 7 East, 5; Lempriere v. Pasley, 2 Term R. 485; Lanyon v. Blanchard, 2 Camp. 597; Madden v. Kempster,1 Gamp. 12; Hiscox v. Greenwood, 4 Esp. 174. It will be perceived that these cases were heard in courts of law. Surely, if the law deals thus vigorously in such matters, it would create great surprise if courts of equity should in any sense attempt to modify the rule so as to cast its shield about the wrongdoer.
Counsel for defendant calls attention to and relies upon the cases of Jacobus v. Munn, 37 N. J. Eq. 48; s. c, court of errors and appeals, 38 N. J. Eq. 622; Johns v. Norris, 27 N. J. Eq. 485; and the same case again in this court, 28 N. J. Eq. 147; and Gilmore v. Tuttle, 40 N. J. Eq. 385, 3 Atl. 267. Of these cases the only one that appears to approach a likeness to the one under consideration is that of Johns v. Norris. In that case it will be seen (28 N. J. Eq. 147) that the chancellor allowed a subsequent grantee, who took with notice, the cost of permanent improvements, and also the cost of rebuilding a barn which was burned, there having been no insurance. But the cases are easily distinguishable. The case of Johns v. Norris is in accordance with a very long line of decisions which give to trustees compensation for all actual expenses incurred by them in making valuable improvements to real estate, whether they purchase it to hold for the benefit of the estate, or for the benefit of any person interested, or for themselves, whenever they are compelled, at the instance of a cestui que trust, to make conveyance to such cestui que trust. But it must always appear in such cases that the alleged improvements are of a permanent character. I apprehend no case can be found where such trustee, after having taken title to himself, and having become involved in litigation respecting such title, was ever reimbursed for his expenses, of whatever character, in conducting such litigation. And it is of the utmost importance to remember that in all these cases the property dealt with was originally held in trust, in the strictest sense of the word, and that the person making the sale was clothed with authority to sell and to pass title, although not for the purpose or with the intent which actually controlled. The title was not acquired originally by fraud. In the case before us the title was acquired by Heald tortiously, or in violation of every well-settled principle of law. It never was trust property. Strictly speaking, he was not a trustee, any more than a trespasser or other wrongdoer. As Mr. Perry says (see his work on Trusts, § 166): The wrongdoer who becomes possessed of property under such circumstances has been styled a "trustee"; but this is for want of a better term, and because he has no title to property, and really holds it for the true owner. It might as well be said that, where two persons conspire to possess themselves of the personal property of another when he brings trover for its recovery, they should be styled "trustees," instead of "tort feasors," and should be permitted to claim the benefit of a lien for care or for provender.
The authorities all appear to be so unequivocally opposed to the claim of Heald to reimbursement, and to be founded upon such sound public policy, that I cannot hesitate to pronounce against his claim. It only remains to ascertain the amount he received. In his testimony in the original case there was no Intimation upon his part that he had not received the entire consideration, which his interest in the property represented. The amount of that consideration was between $9,000 and $10,000. I have not the testimony before me, but, as I recollect it, there was no qualification whatever as to the statements made by him that he had received the whole amount. But now, upon the accounting, under the order of the court, he says that some time in June, 1890, which was soon after the title was perfected in himself, and after the property was advertised for sale upon the foreclosure of the Jardine mortgage, he entered into an agreement with Edward S. Savage, in and by which the latter was to protect his interests in the property, secure the title thereto, and make sale thereof for one-half of the amount which Mr. Savage might realize upon a sale of the same; and that, in carrying out that agreement, Mr. Savage realized $9,060.20, the one-half of which, being $4,530.10, he paid to Heald by his checks, dated April 28, 1892. This statement of Heald is supported by Mr. Savage. The latter was also the solicitor and counsel of Heald, and, if not present in court when Heald stated the amount which he had received, he must have known of Heald's statement before the case closed. I can find no ground for hesitating to charge Heald with the $4,530.10. But it is insisted that he should be charged with the whole amount of $9,060.20. I think this claim could be maintained if the testimony satisfied the court that Mr. Savage was only the counsel or agent of Heald. If he were only the counsel or agent of Heald, then, clearly, he received this money for Heald, and Heald's responsibility would not be diminished by the fact that his agent still retained possession of any part of the consideration money. If they occupied the relation of principal and agent, the principle which has been laid down above would necessarily control, and Heald could not set off or recoup allowance to an agent any more than compensation to counsel; but, if Mr. Savage's statement with respect to the agreement between him and Heald be accepted as true, then the relation between them with respect to this consideration money was not that of principal and agent in the sense contemplated. Mr. Savage must be regarded as acting entirely in his own behalf, or on his own account, in this arrangement with Heald. But, again, I understand the brief of counsel for the complainant to go so far as to charge Mr. Savage with being equally liable with Heald, because of hisknowledge of tie fraud with which Heald is charged. The sale of this property to the railroad company and to the Canda Company was not perfected until after the first bill which was filed by Henninger was dismissed, and whatever opportunities Mr. Savage may have had prior thereto to acquire a knowledge of the situation and relation of these parties is not for me to determine in this suit, since Mr. Savage is not a party thereto, and had no opportunity of being heard. If he holds these moneys in the sense in which it is claimed he does by the counsel of the complainant, his liability to answer therefor will not be diminished by these proceedings. I do not pretend to adjudge the questions raised any further than to hold that Mr. Savage was not the agent of Heald, leaving the question of the former's liability, because of any knowledge which he may have acquired of the relations between Henninger and Heald, to be settled when he shall have an opportunity of being heard. Mr. Heald must therefore account for $4,530.10, with interest from the 28th day of April, 1892, up to the time of entering the decree hereafter to be made; and Mr. Henninger must account for the sum of $3,000, with interest from the 25th day of December, 1890. being about the time that he received that amount of money from his father for the Blanchard place.
I will advise a decree in accordance with these views.