Mayor of Auburn v. Draper , 1856 N.Y. App. Div. LEXIS 135 ( 1856 )

By the Court, Welles, J.

Assuming that the bonds of the city of Auburn were issued without authority of law, yet, if the defendant, as agent of the plaintiffs, sold and received the money for them, he is not at liberty to retain it to his own use. One of the principal questions at the trial was, whether the defendant was the purchaser of the bonds directly from the plaintiffs, or whether, in the transaction, he acted as the plaintiff’s broker or agent, and as such received the money in question. The judge at the circuit instructed the jury, that in the former case he was not liable, but in the latter he was. The jury could not have found for the plaintiff, under such instructions, without affirming the latter alternative. The verdict therefore settles the fact that the defendant received the money as agent of the plaintiffs, and, as such agent, holds it. . The evidence was sufficient to warrant such finding; at least, enough appeared to justify the judge in submitting the question to them, and to render it improper for the court to disturb their verdict on that ground. It is therefore to be assumed as a fact established, that the defendant is in possession, or has received the proceeds, of the sale of the bonds, which proceeds belong to and is the money of the plaintiffs. By what rule of law, then, can he be excused from paying it to them % It is contended by his counsel, among other things, that as the issue and sale of the bonds was unauthorized, and the defendant was in possession of the fruits of the unlawful transaction, he, as between him and the plaintiffs, is in the better condition of the two, and that the law will not lend its aid to compel him to pay it over, but will, in such case, leave the parties where it finds them ; and he invokes the advantage of the maxim, potior est conditio possidentis. The question may not be entirely free from difficulty. It is, as I think, the only serious one in the case. But we are of the opinion that the defendant’s obligation is one degree removed from the illegality alleged, which consisted, if at all, in the' unlawful issue and sale of the bonds; in that, the defendant did not act in his own name or behalf, but as the agent of the plaintiffs. He is not suing or setting up a claim for services in a business or transaction forbidden by law, or contra bonos mores, where the maxim ex turpi causa, non oritur actio, would apply; but he is found in possession of money belonging to the plaintiffs, which is the ultimate fruit of an illegal transaction, in which, however, he was not a party. When he, as the plaintiffs’ agent, negotiated the sale of the bonds and received the money for them, if he disclosed to the purchaser the character in which he acted, he incurred, in the absence of any fraud on his part, no liability to such purchaser to refund the money received. If he did not disclose his agency it was his own fault. The presumption is, that such disclosure was made, and it does not lie with him to deny it. To test the question, suppose the defendant, upon receiving the money, had committed it to a messenger or express company to carry to the plaintiffs; can it be be doubted that the messenger or express company would be liable to the plaintiffs, in case of refusal to pay over? It seems to me not; and yet it is difficult, if not impossible, upon principle, to distinguish the case supposed from the one before us. It is .not for the sake of the defendant, or the person in possession, that the maxim potior est, Spc. is applied; but it is where a party asks the assistance of the law to enforce an unlawful executory contract, that the law refuses its aid. Here, the sale of the bonds had become completely executed, and the money in the hands of the defendant as agent of the plaintiffs. The case of Hamilton v. Kane, (2 Hall’s Rep. 526,) is in point, in support of the defendant’s liability. The fact that in that case notes were taken from the defendant does not, in my judgment, vary the principle, or distinguish it from the present. It would not have strengthened this case for the plaintiffs, if the defendant Draper, upon receiving the money, had executed notes to the plaintiffs for it. The defense interposed, of an accord and satisfaction, entirely failed. The alleged negotiation and settlement by Russell was not binding upon the plaintiffs, it never having been ratified by them. Russell was only empowered to act in conjunction with How, who did not participate in any of the acts constituting the alleged settlement; and the plaintiffs, upon learning what the former had done, promptly repudiated his acts, and offered to return the securities which Russell had taken.

[Monroe General Term, December 1, 1856.

There were several subordinate questions raised and decided at the trial, which were also presented and discussed upon the argument, all of which, we think, were properly disposed of by the justice holding the circuit.

The motion for a new trial is denied, and judgment ordered for the plaintiffs upon the verdict.

T. R. Strong, Welles and Smith, Justices.]