In Donemar, Inc. v. Molloy, 252 N.Y. 360, 169 N.E. 610, it was held that where a seller of merchandise entered into a corrupt bargain with employee of purchaser for the payment of secret commissions in effecting a settlement, the purchaser was entitled to recover amount of secret commissions, regardless of whether there was disparity between value of goods received and consideration paid in settlement of claim.Summary of this case from State v. Brewer
Argued November 25, 1929
Decided January 7, 1930
Appeal from the Supreme Court, Appellate Division, First Department.
Charles H. Kelby, Thomas E. O'Brien, John B. Doyle and Robert A. Huddleston for appellant. Denis O'L. Cohalan and John H. Waters for James Molloy, respondent.
Charles Chambers for Hugh Cafferky, respondent.
Briefly stated, the claim of the plaintiff is that defendant Molloy corrupted defendant Cafferky, an employee of plaintiff, when acting for his employer in the adjustment of a disputed claim for merchandise sold which Molloy had against plaintiff, with the result that plaintiff was induced to pay $57,500 in settlement of the claim, of which $4,555.05 went to Cafferky as a gratuity or compensation for Cafferky's efforts to obtain a settlement favorable to Molloy. Judgment is demanded against defendants for this sum. The complaint contains the following allegation:
" Eighth. Pursuant to said secret, corrupt, unlawful and fraudulent promises and agreements by and between the defendants they represented to the plaintiff on and prior to January 23, 1923 at the City, County and State of New York that the aforesaid sum of $57,500 was the minimum net amount which the defendant Molloy would accept from the plaintiff in full settlement and discharge of the aforesaid claims, and believing and acting upon said representation the plaintiff, induced thereby and relying thereon, agreed to said amount and made said cash payment and executed and delivered said notes to the amount of $57,500; but in truth and in fact the defendant Molloy was willing to and did accept in full settlement said sum of $57,500 less the said sum * * * which he corruptly, unlawfully and fraudulently promised and agreed to pay the defendant Cafferky, as aforesaid."
This claim was denied by defendants. In particular, it is denied that Cafferky had anything to do with making the settlement. ( Merchants' Line v. B. O.R.R. Co., 222 N.Y. 344. ) The jury found a verdict in favor of plaintiff against both defendants for the sum of six cents. The appellant claims that this was a verdict in favor of plaintiff on the question of the corrupt agreement and Cafferky's part in the settlement; that upon the facts found the plaintiff was entitled to recover from both defendants the sum of $4,555.05, with interest from November 20, 1923, and that the verdict was due to erroneous instructions, properly excepted to, on the subject of nominal damages.
The instructions of the court were to the effect that, even if they found that the corrupt bargain was entered into between Molloy and Cafferky, and that Cafferky was instrumental in bringing about the settlement, unless the plaintiff established some disparity between the value of the goods received by it from Molloy and the consideration paid by plaintiff in settlement of Molloy's claim against it, nominal damages only could be awarded. In other words, if Molloy's merchandise was paid for at fair prices the plaintiff has had a just return for every dollar it parted with and defendants can keep the money paid in settlement with a good conscience. The principle relied on is stated in Schank v. Schuchman ( 212 N.Y. 352, 359) as follows: "The law may at times refuse to aid a wrongdoer in getting that which good conscience permits him to receive; it will not for that reason aid another in taking away from him that which good conscience entitles him to retain." It is, therefore, argued by respondents that as the jury has found that plaintiff has received full value for its money, it has also found that plaintiff was not damaged by the payment of a gratuity and that the verdict of the jury is in effect a verdict for the defendants.
The question of law is: What is the position of the vendor of property who pays a secret commission to a person whom he knows to be an agent of the vendee in effecting a settlement?
The English rule is to the effect that the court will assume as against the briber that the true price of the goods as between him and the purchaser must be taken to be less than the price paid to, or charged by, the vendor, by, at any rate, the amount or value of the bribe. ( Grant v. Gold Exploration Development Syndicate, Ltd., 1 Q.B. 233, 244.)
This rule is not in conflict with Schank v. Schuchman ( supra). There the action was to recover as money had and received all moneys which the defendant had received from plaintiff for wares and services because of secret commissions paid by the vendor to the agent of the vendee. Here the action is to recover the amount of the secret commissions only. The law does not go so far as to nullify the entire transaction where the vendor has received and used the merchandise. If, however, a vendor bribes a purchaser's agent it must be assumed that the purchase money is loaded by the amount of the bribe. The vendor has had and received money which belongs to the purchaser to the extent of the bribe which neither the vendor nor the unfaithful agent may in conscience and good morals retain.
Penal Law, section 439, makes it a misdemeanor to give or receive money for the corrupt influencing of agents, employees or servants. It would be a strange miscarriage of justice if the corrupting vendor and the corrupted agent of the vendee could retain the fruits of their crime and say that because the settlement was a fair one, the vendee sustained only nominal damages or no damages.
The fact that the jury found a verdict in favor of the plaintiff implies a finding that the corrupt agreement was entered into between Molloy and Cafferky ( Brockport-Holly Water Co. v. Village of Brockport, 203 N.Y. 399, 403), but we are not bound in our review by such determination. Questions of fact still remain in the case for the determination of a jury under proper instructions.
The judgment of the Appellate Division and that of the Trial Term should be reversed and a new trial granted, with costs to abide the event.
CRANE, LEHMAN, KELLOGG, O'BRIEN and HUBBS, JJ., concur; CARDOZO, Ch. J., not sitting.
Judgments reversed, etc.