Opinion
March, 1905.
Edmonds Putney, for the appellant.
Gerrit Smith, for the respondent.
The finding that "the defendant did not exercise a reasonable diligence or such care or skill as is ordinarily possessed by persons of common capacity engaged in the same business," required as a legal conclusion that the defendant should be charged with the amount of the loss on the Bartlett loans. The learned referee concluded, however, that the instrument signed by the plaintiff was a ratification of the defendant's acts in connection with this loan, and consequently released him from the effect of his negligence in that transaction. The proof is abundant to show that the plaintiff relied entirely upon the judgment and fidelity of the defendant in intrusting to him her money for purposes of investment. He assumed to know the values of the respective properties in which he invested her money, and he also knew that she relied thereon. At the time the instrument of ratification was signed, it does not appear that she had full knowledge upon the subject of the Bartlett loan. It is true that the defendant testified that he told her generally concerning the transaction. He does not, however, say that he informed her that he had loaned the money to Bartlett upon insufficient security for its safe protection. In respect to the conversation, his statement is, in general terms, that he explained all of the transactions to her and that she expressed satisfaction therewith. The defendant says: "I then asked her to give me something to show her satisfaction with what I had done during her absence, especially as the holders." At this point he was interrupted by the presentation of a paper and made no further statement concerning it, aside from the fact that he dictated a statement to the stenographer who took it down on the machine. An examination of the paper itself shows that it was something more than a satisfaction and an approval of his transactions, as among its provisions is the following: "And I agree to save yourself and said Thomas and Foraker harmless of any and all claims, cost or damage growing out of any proceedings connected with any of the several aforesaid matters." It is quite evident from the language of this document that the defendant was anxious not only to procure an expression of satisfaction, but the execution of such a paper as would hold him harmless from all his acts.
The rule governing dealings in such relation has been announced in the law in no uncertain terms. Thus it was said in Nesbit v. Lockman ( 34 N.Y. 167): "Where persons standing in a confidential relation, make bargains with or receive benefits from the persons for whom they are counsel, attorney, agent or trustee, the transaction is scrutinized with the extremest vigilance and regarded with the utmost jealousy. The clearest evidence is required that there was no fraud, influence or mistake; that the transaction was perfectly understood by the weaker party; and, usually, evidence is required that a third and disinterested person advised such party of all his rights. The presumption is against the propriety of the transaction, and the onus of establishing the gift or bargain to have been fair, voluntary and well understood, rests upon the party claiming, and this, in addition to the evidence to be derived from the execution of the instrument conveying or assigning the property." This case was approved and the same rule reiterated in Barnard v. Gantz ( 140 N.Y. 249). In New York Life Ins. Trust Co. v. Kane ( 17 App. Div. 542) this court said: "The principles applicable to ratification and acquiescence are well stated in Adair v. Brimmer ( 74 N.Y. 539). And in Cumberland Coal Iron Co. v. Sherman (30 Barb. 575) it is said: `* * * The confirmation must be a solemn and deliberate act — not, for instance, fished out from some expressions in a letter' — that the court will watch it with the utmost strictness and will not allow it to stand but on the very clearest evidence; that the cestui que trust must be honestly made acquainted with the material circumstances of the case — `The confirming party must not be ignorant of the law; that is, he must be aware that the transaction is of such a character that he could impeach it in a court of equity.'" A similar rule is announced in Whitney v. Martine ( 88 N.Y. 535).
Applying these rules to this case and considering the finding of the referee in connection with the evidence in the case, we are of opinion that this transaction did not operate as a ratification of the defendant's acts and as a release from his liability to her for his negligent acts. It must be made to appear that she knew and fully understood the entire transaction, and what her legal rights were in the premises, before force will be given to the ratification and release.
These views lead us to the conclusion that the judgment should be reversed and a new trial ordered before another referee, with costs to the appellant to abide the event.
VAN BRUNT, P.J., INGRAHAM and LAUGHLIN, JJ., concurred; O'BRIEN, J., dissented.
Judgment reversed, new trial ordered before another referee, costs to appellant to abide event.