Brackett v. Griswold — 35 N.Y. St. Rep. 875

Majority

p. 875

Edgar T. Brackett, Adm’r, Resp’t, v. Chester Griswold, Impl’d, App’lt.

(Supreme Court, General Term, Third Department,

Filed February 4, 1891.)

Headnote

1. Conspiracy—Evidence.

The existence of a conspiracy and defendant’s connection with it must be shown before acts done in furtherance of it become admissible; at least a prima facie case must be established.

p. 876

2. Same.

Records oí meetings of trustees, of whom defendant was one, at which, as claimed, improper action was taken to further a conspiracy, are not evidence against defendant of a fraudulent intent unless it be shown by aiBrmative evidence that such records were brought to his knowledge.

Appeal from a judgment in favor of the plaintiff for $14,-958.20, entered upon a verdict of the jury upon the trial at the Essex circuit, and also from an order denying defendant’s motion made lipón tire minutes to set aside the verdict.

The case is reported before : 1 Hun, 882 ; 68 M. Y, 294; 80 id., 128; 89 id., 122 ; 103 id., 425 ; 4 M. Y. State Rep., 219; 112 M. Y., 454; 21 M. Y. State Rep., 791. Owing to deaths and discontinuances the action now is by plaintiff as administrator of Bonnell, the original plaintiff, against Chester Griswold, as sole defendant.' In its present state, the action is one for fraud and deceit; through fraud upon the part of defendant and others in pursuance of a conspiracy originated before August 6, 1869, at which time the “Iron Mountain Co. of Lake Champlain ” was incorporated under chap. 40, of 1848. The plaintiff’s testator took, in 1870, for value, certain notes of the last named corporation, of which defendant was a trustee, from the Birmingham Iron Co., before maturity. The Birzbingham Co. had received the notes in payment for a furnace sold to the makers of the notes. Before plaintiff took the notes he, having little knowledge of the Iron Mountain Co., inquired about that corporation of Ellis, its treasurer, and the latter assured him that the notes would be paid promptly. They never were paid. Ellis was not a trustee or stockholder, and had only a salary as treasurer of $1,000 per year. The plaintiff alleged in his complaint, in brief, that the Iron Mountain Co. was gotten up by the original defendants, who conspii’ed to defraud the public by giving, by various methods described, a fictitious value to certain mineral lands of little value, and that he relied upon their representations, and upon the general reputation of the company, etc. The company went into bankruptcy in 1871. ’

Wm. C. Holbrook, for appl’t; R. L. Hand, for resp’t.

At the close of the plaintiff’s testimony it was conceded by plaintiff’s counsel that all of the evidence offered on this trial was read from the printed case on the last appeal. The opinion of the court of appeals upon that case is found in 112 M. Y., 454. As no additional testimony was given by the plaintiff the question is presented whether within that opinion the plaintiff made out a case for the consideration of the jury. The court of appeals, speaking by Andrews, J., said: “The question in this case turns upon the point “ whether the evidence proved or tended to prove a cause of action against the defendant for false and fraudulent representations within the rules governing the common-law action for fraud and deceit.”

After stating the essential elements of such an action to be “representation, falsity, scienter, deception and injury,” and commenting thei’eon, the court declares: “In view of the settled principles governing the action for fraud and deceit by means of false pretences, there is upon the evidence presented in this case an insuper

p. 877

.able difficulty in maintaining the present judgment. There is no evidence that Bonnell in purchasing the notes relied upon any representations made by the defendant” Now upon the present trial, without any additional evidence, the jury were permitted to surmount this “ insuperable difficulty" and to find that Bonnell in purchasing the notes did rely upon representations made by the defendant

Upon the last, as upon the previous trial, the plaintiff undertook to show that the defendant and others entered into a conspiracy to form and did form the corporation upon the fictitious and fraudulent basis of large capital resources, and flattering prospects of ■abundant profits, and in furtherance thereof issued a false prospectus giving a glowing account of these pretended facts and advantages, and issued a false annual report, with the intent to cheat and defraud whoever should take its obligations. The jury upon the former trial and upon this have in substance found that this conspiracy was made. The notes in question, for the amount of which recovery is sought, were given by the Iron Mountain Company of Lake Champlain to the Birmingham Iron Company upon payment for a furnace, and were before maturity transferred by the Birmingham Iron Company to Bonnell, plaintiff’s intestate, in payment for coal which Bonnell sold to the Birmingham Iron Company. Before Bonnell consented to take the notes he inquired of his customer! the Birmingham Iron Company, whether the notes were good. The Birmingham Iron Company said they were, but referred him to George Ellis the treasurer of the maker, the Iron Mountain Company of lake Champlain. Bonnell sent his clerk to Ellis, and Ellis said that “ the company was fully responsible, that the notes were good and would be promptly paid at maturity.”

Bonnell relying upon this representation took the notes. The •court of appeals in response to the defendant’s contention that the •evidence was insufficient to support the finding against the defendant of a conspiracyv or defendant’s participation in it, said: “We deem it unnecessary to consider this contention. But this •does not relieve the case of the difficulty that, assuming the facts to be as found, the plaintiff’s case as proved fails upon the ground that Bonnell, when he took the notes, did not know of the illegal •conspiracy or false ’ representations, and consequently was not influenced thereby in making the purchase.” We fail to see how the conspiracy and the acts done in furtherance of it can relieve the case now of the same difficulty. The plaintiff’s case “ as proved ” failed to overcome that difficulty, and the case “ as proved ” is unchanged.

The court of appeals said “the case was submitted to the jury upon a false theory.” We understand this to mean that it was false because as proved there were insuperable difficulties to a recovery, which the trial court did not recognize, and which possibly might be obviated upon a new trial upon further evidence. -But the trial court evidently construed this to mean that upon the case “ as proved ” there might be a recovery upon a true theory. We can discover no ground for supposing that the court of appeals meant that the same facts would support any recovery upon any theory.

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The theory adopted by the learned trial judge was that if Ellis was a eo-conspirator with the defendant in the fraudulent conspiracy, then his declaration to Bonnell that the company was fully responsible and that the notes were good and would be paid at maturity, was the declaration of the defendant. This question was not directly presented to the court of appeals, but that court remarks: “ Ellis is not charged ” (in the complaint meaning) “ to have been a co-conspirator, and it does not appear that he had any interest as stockholder or otherwise in the Iron Mountain Company.” We have examined the whole testimony with the view to discover upon what evidence the claim that Ellis was a co-conspirator rests, and we find only this : That after the corporation was organized the board of trustees, neither Ellis nor defendant being present, appointed Ellis treasurer ; that he was the cashier of a bank in Hew York city; that at a subsequent meeting of the executive committee, of which defendant was not a member,. Ellis’ salary was fixed at $1,000 per year ; that his name as treasurer was printed in the prospectus; that pursuant to the resolution of the board he subscribed his name as treasurer to certain obligations of the company.

Thus his only interest in the company was as its servant or officer on the promise of $1,000 salary for his services. There ÍS’ no evidence whatever of his knowledge of any scheme to defraud, or of his participation in any way in such a scheme other than can be derived from the fact that he accepted the office of treasurer, and discharged the duties incident to that office. The complaint names the alleged conspirators, but does not name Ellis as one ; he is not a party to the action; his representations to Bonnell were not made in any business transaction between the Iron Mountain Company and Bonnell; the complaint states, as the court of appeals take pains to point out, and assume as true, “ that Bonnell took the notes confiding in the general reputation of the company produced by the representations,” etc., made to the public at large, thus negativing by implication the recent suggestion that Ellis made any representations in furtherance of a conspiracy. The evidence does not tend to show that Ellis was a co-conspirator, and a verdict resting upon that hypothesis cannot be upheld. The evidence of the acts of the trustees, in which Ellis in no way participated, cannot implicate him in their conspiracy, if such there was, in the absence of all evidence tending to show that he ever participated in their acts or acquiesced in any conspiracy. There is no evidence that he had any knowledge whatever of any conspiracy. The theory of the trial court was that a conspiracy between defendant and Ellis, if established, would, notwithstanding the' ruling of the court of appeals, make the statement of Ellis to Bonnell’s clerk admissible. There is no evidence to support' that, theory, and hence the ground upon which the court of appeals based the ruling is unchanged. Ellis’ statement to Bonnell’s clerk was inadmissible. As the judgment rests upon that statement, the case fails. The court should have granted the motion for a nonsuit.

Again, the finding by the jury that the defendant entered into»

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a conspiracy is not supported by the evidence legitimately admissible to prove it. The acts of defendant’s co-trustees, in which defendant did not participate, or subsequently acquiesce in with knowledge of their purpose, are not admissible to prove against him the formation of a conspiracy, and his connection with it. They were res inter alios.

It may be admitted that the formation of a conspiracy, and defendant’s connection with it, may be proved by circumstantial evidence; and hence that in the attempt to prove the existence of a conspiracy a wide Tange of circumstances may properly be shown, and that in determining their relevancy much must be left to the discretion of the trial court The existence of the conspiracy, and the defendant’s connection with it, must be shown before the acts done in furtherance of it become admissible. This is a rule of stringency, but sometimes the exigencies of the case justify a departure from it McCarney v. People, 83 N. Y., 408 ; Place v. Minster, 65 id., 105; N. Y. Guar. & Ind. Co. v. Gleason, 78 id., 503; Cuyler v. McCartney, 40 id., 221. It is to be observed that -the court of appeals has held in this case that the conspiracy is not the gravamen of the action, and that it was unnecessary to plead it. It follows that the only proper purpose of proving it was to lay the foundation for the admission of the statement of .Ellis to Bonnell’s clerk, to the end that that statement should bind the defendant as his act, because made, as alleged, by one conspirator in furtherance of the objects of the conspiracy. It is .a general rule in civil cases that the court must submit to the jury the issues of fact upon which the plaintiff’s right to recover depends, but that the court must itself decide the questions of fact upon which only the admissibility of evidence depends. Therefore, before the court could receive the evidence of the statement of Ellis, it was its duty to decide whether a conspiracy had been proved against defendant and Ellis. At least a prima facie case should have been established. People v. Davis, 56 N. Y., 95 ,103; Newlin v. Lyon, 49 id., 661.

If such a: prima facie case was made out, then although the conspiracy was not the gravamen of the- action, and it was the duty ■of the court to decide as to the fact in the first instance, it is plain that the defendant, if the ■ question were subsequently submitted to the jury, would have no ground of complaint, since he might possibly secure from the jury a different finding from that made by the court. But unless a prima facie case was made out then, it is clear that none of the evidence touching the conspiracy ought to have been submitted to the jury. The acts and declarations of the other trustees may have tended to show a conspiracy between them, but nothing could tend to show defendant’s connection with it except his own conduct. Viewing his conduct, that is, his acts, declarations and omissions, in the light of the conduct of his .co-trustees, and we think a prima facie case of conspiracy against him was not established. The evidence tends, as we think, irresistibly to show that he was a boy, nominally associated with his father and the other trustees, not to participate in their counsels, but to swell their numbers and give his-father two votes.

p. 880

As remarked in the opinion of the court of appeals : “ At the-time of these transactions he was a young man twenty-four years of age, employed by the firm of John A. Griswold & Co., at Troy, and had little if any knowledge of mining or mining property, and was made a trustee of the Iron Mountain Company without-his knowledge at the time and signed the report of January, 1870, at the request of his father, who was largely interested in mining property and in the manufacture and sale of iron.” We may add that the articles of association of the “Iron Mountain Company of Lake Champlain ” was filed in August, 1869 ; that the. defendant did not sign them that the first meeting of the board of trustees was held August 12, 1869, and defendant was not present ; that an executive committee was then appointed of which he was not then a member; that defendant’s first act in connection with the company was to attend a meeting of the board of trustees, December 15, 1869. Prior to that date the organization of the company, the purchase of its mining property for its entire-capital stock, the plan for the return and disposition of a portion of this stock, the issue of mortgage bonds, the employment of Ellis as treasurer, the plans for the operation of the business of the company, the making of the contract with the Birmingham Iron Company upon which the notes held by plaintiff were subsequently issued, were completed. At the meeting in question measures were taken to secure upon mortgage of real estate and a pledge of stock and bonds a loan of $35,000. Ho further act of the defendant is shown except to sign the annual reports prepared by counsel. These the defendant signed relying upon the representations of his father and Remington, a co-trustee and the active promoter of the enterprise. It is true that he had previously visited the property. He was adjudged to be liable for knowingly making a false report in violation of § 15 of chap. 40, Laws-1848, upon the evidence which is reproduced in this case. Blake- v. Griswold, 103 N. Y., 429 ; 4 N. Y. State Rep., 221. This adjudication was based upon the finding that he knew the mining property was not worth $2,000,000, and since all the capital stock of the company was issued for it, he knew the capital stock was not. fully paid in. This is very different from the proposition that in his absence and without consultation with him, and before he-knew that he was a trustee, the other trustees had with the intent to cheat the public formed a conspiracy, into which he subsequently entered with knowledge.

The records of the corporation are evidence of corporate acts, and so far as a legal liability devolves personally upon a trustee-because of corporate acts the records are competent evidence against him. But a conspiracy is the result of intentional wrong, and in the nature of things the wrong intent of a party can only be shown by his own acts or omissions indicating his actual purpose. Hence, these records of meetings in which the defendant-did not pai’ticipate cannot show his intent, unless it is shown by some affirmative evidence that they were at least brought to his-knowledge. Hence, also, the inference of a conspiracy which they are relied upon to justify, is no inference against the defendant.

p. 881

It was the duty of the court not only thus to decide but to give the proper effect to the decision. To submit the whole mass of evidence to the jury for them first to determine as to its competency, and next as to the effect of such as they should deem competent, was to relegate to them the decisions of questions both of the law and the fact, questions which in this case tax the ability of the judicial mind to keep properly separated ; of course the jury would confound both, and the more readily if they thought that the plaintiff had been injured.

The judgment must be reversed, with costs. It is apparent that a new trial cannot result in a more favorable presentation of the plaintiff’s case; we, therefore, do not grant a new trial, but dismiss the complaint on the merits, with costs.

Learned, P. J., and Mayham, J., concur.