Goodenough v. Spencer

By the Court.*—Daniels, J. Although the character of the transaction which resulted in the execution and delivery of the bill of sale from the defendant to his attorney and counsel was in dispute upon the trial, the evidence was sufficient to justify the referee in the conclusion he adopted concerning it. And for that reason that conclusion must now be accepted as exhibiting the transaction in its true light. It was in brief a transfer made by an embarrassed client to his attorney and counsel under the advice and suggestion of the latter, without any actual consideration, but for the purpose of having the property held by him, for the sole use and enjoyment of the defendant, so long as it was in danger of being seized by his creditors for the payment of their debts, and after that danger had been successfully avoided, restoring the formal title again to the defendant. And that intention appears to. — 252 — have been observed until the vendee undertook to transfer the property to the plaintiff for the consideration he received for doing so, on the assurance that the bill of sale was regular and proper. By the statutes of the State a transfer of property made by a debtor for the purpose of withholding it from the satisfaction of the lawful demands of his creditors is prohibited. And the person who receives, as well as the one who transfers the title, for the promotion of such a design, are both rendered so far criminal as to be guilty of a misdemeanor (2 Rev. Stat., 690, § 3). In the consummation of this transaction both parties to it involved themselves in the guilt of this offense. And the vendee cannot shield himself from its consequences by reason of the circumstance that its commission arose out of the advice sought for his protection by an embarrassed and insolvent client. Ho attorney or counsel has the right, in the discharge of professional duties, to involve his client by his advice in a violation of the laws of the State. And if he does so, he becomes implicated in the client’s guilt, when by following the advice, a crime against the laws of the State is committed. The fact that he acts in the capacity and under the privileges of counsel, does not exonerate him from the well founded legal principle which renders all persons who advise or direct the commission of crime, guilty of the crime committed by compliance with the advice or in conformity with the direction which may be given. But while both the attorney and his client may be rendered criminally guilty in such a transaction, the law does not allow the attorney to profit by it, when it results in an apparent advantage to him from compliance with the advice given by him. The relation existing between attorney .and counsel and client is one of trust and confidence, placing the interests and rights of the client very much under the guardianship — 253 — and control of the counsel, and liable to abuses resulting in serious and lasting injury to the client. The law regards the client as very much under the influence and control of the attorney and counsel, while the ordinary professional relation exists between them, and for that reason the conduct and acts of the latter are closely watched and scrutinized. If he bargains with the client, while the relation exists to his own advantage and the detriment or prejudice of the client, the law attributes the result to the use made of his undue influence over the conduct of the client, and in the absence of satisfactory evidence of good faith on the one part, and entirely voluntary action on the other, sets aside and annuls the transaction. So decided are courts of justice in the observance and enforcement of this principle, that the attorney and counsel will not be permitted to retain the fruits of even an unlawful contract, where under ordinary circumstances no relief would, on account of the illegality of the enterprise, be awarded to either party. Where one party through the means of an unlawful agreement acquires the property of another, the law regards them as equally in fault, and will do nothing for the redress or protection of either side. But when that advantage is secured by an attorney ur counsel from his client, the parties are not considered as being equally in the wrong. The law then regards the client as being drawn into the violation of its provisions, through the controling influence of his attorney and counsel over him, and for that reason intervenes for his protection. Hence in a transfer like that made by the defendant to his attorney and counsel by the bill of sale, which was executed and delivered in this instance, although both parties to it violated the law, the defendant was not equally in the wrong, and the transfer will be annulled, for the purpose of relieving him, if that can be done without injury to an — 254 — innocent purchaser (Ford v. Harrington, 16 N. Y., 285; Freelove v. Cole, 41 Barb., 318; Evans v. Ellis, 5 Denio, 640 ; Howell v. Ransom, 11 Paige, 538). But that relief will not be carried so far as to disturb the rights of an innocent third party who in good faith may have been induced to part with Bis money or his property, relying upon the title the attorney and counsel had the apparent right and power of transferring ; the rule in that case being that where one of two innocent persons must suffer by the fraud or misconduct of a third, the loss shall be borne by him who conferred upon the wrongdoer the means of deceiving persons honestly dealing with him (Rawls v. Deshler, 4 Abb. Ct. App. Dec., 12; S. C., 3 Keyes, 572; affirming 28 How. Pr., 66 ; Whitlock v. Kane, 1 Paige, 202, 208). Under this principle, even though the transfer of the defendant’s property to his attorney and counsel would be at once set aside, as between them, the rules could not be so far extended as to annul the plaintiff’s title, if he had been entirely justified in his conclusion that the defendant had parted with all his rights and interest in the property sold. But he was not, for he omitted one important indication of the continued existence of those rights, arising out of the circumstance that the property still remained in the defendant’s possession. And in addition to that he was required •to stipulate to allow continuance in that condition for the period of sixty days after the assignment of the bill of sale to him. These circumstances were not consistent with the existence of an indefeasible title in the person the plaintiff dealt with. They unmistakably pointed to the fact, that the defendant had or claimed to have some interest in or right to control the property his vendee proposed to sell, notwithstanding the recitals in the bill of sale, the assurances the plaintiff received, and the evidence the. defendant had pre — 255 — viously given. And the plaintiff should have applied to the defendant for the information which these circumstances admonished him might be given, if he had designed to follow the dictates of reasonable prudence, and in that manner to guard himself against loss arising out of the purchase of another person’s property. The fact that he failed to make the inquiry the defendant’s possession suggested the propriety of, is sufficient to render him responsible for all the information which such an inquiry would have secured. And that affects the title he acquired with all the infirmities it had in the hands of the man from whom he obtained it (Williamson v. Brown, 15 N. Y., 354 ; Grimstone v. Carter, 3 Paige, 421; Reed v. Gannon, 50 N. Y., 345 ; Baker v. Bliss, 39 Id., 70). Under this defect in the plaintiff’s title he stood precisely where his assignee did before the assignment; holding it in subordination to the defendant’s right to annul the sale as the result of the undue influence his attorney and counsel exercised over him in procuring it. The learned counsel for the plaintiff is entirely right in his position that the admissions and declarations of Stevens in contravention of his title were not admissible as evidence on the trial of this action. And if any of the oral or written statements made by him and received during the trial had the least bearing on the conclusion arrived at by the referee, the judgment would necessarily be reversed. But they did not, for they were mostly on immaterial inquiries having no influence by the way of proof on any of the material facts in the case. The most important of all was the direction or suggestion to the defendant himself that he should return to Geneseo, and instruct his counsel the e to have the assignment set aside at once as it was of no value whatever, as he had never taken possession of it. The only fact this statement had any tendency to prove was the circumstance — 256 — that Stevens or the plaintiff never took possession of the property sold. And that was in no way disputed in the case. It was not pretended by any one that either Stevens or the plaintiff ever had possession of the property. On the contrary, the fact was beyond dispute the the other way. There was no impropriety in excluding what was said about not putting the bill of sale -upon record, because it was in no sense a security while it stood in the hands of Stevens. If it was valid in his hands at all, it was an absolute title. As it cannot be maintained in that form, there could be no materiality in any reason suggested for not putting it upon record. ■ The' referee has negatived the idea that it might have been designed as a security, for that reason it was not such an instrument as the law required or allowed to be placed upon record. The case presents no ground on which the judgment can be properly disturbed. It should therefore be- affirmed,' with costs. Footnotes [*] Present Davis, P. J., and. Daniels and Donohue, JJ.