Emery v. Parrott

By the Cotjbt. The questions in this case chiefly relate to matters of fact; and in causes of this description the court ordinarily regard it as sufficient simply to state the conclusions at which they have arrived. From a careful study of the voluminous testimony, we are satisfied that the defendant Parrott was engaged in a common enterprise with the plaintiffs, and likewise acted as an agent on behalf of all the associates to purchase the Glace Bay coal mine. While acting in this capacity he secretly stipulated for certain private advantages to himself, in the shape of commissions from the vendor of the mine. And he obtained these commissions while his associates had a right to expect that he would effect and was effecting the best bargain he could for them and himself jointly and on terms of equality. Benefits and advantages thus obtained the principles of equity will not allow him to retain for himself. He must account for them and share them with his associates, the plaintiffs. The case of the defendant Head stands somewhat differently, but is governed by the same general principles. He did not stand in any fiduciary relation to the plaintiffs. But he knew the position of Parrott, and became the partner of Parrott, uniting with him to effect a sale of the property to Parrott and the plaintiffs, for the sake of dividing with Parrott the secret commission which the owner of the property had agreed to pay for effecting the sale. He was thus fully cognizant of the illegal conduct of Parrott, and cooperated with him in inducing the plaintiffs to make the purchase. He participated in the profits of the transaction ; and the court are of opinion that he as well as Parrott must disgorge the secret gain which they thus jointly obtained and divided with each other. [101] The result is, that the plaintiffs are entitled to a decree that the shares of stock which Parrott and Head received as commissions must be shared by them with the plaintiffs, and all dividends which have accrued upon the shares must also be accounted for. We arrive at this conclusion without considering the evidence objected to by the defendants. The case is to be referred to a master to state the account and report the form of a decree proper to be entered. Ordered accordingly. That order was made on ¡November 24, 1869; and the master was appointed on January 22,1870. At the first hearing before him, on September 8,1870, it was admitted that Head had died at Baltimore in Maryland, on February 18, 1870, and the guardian ad litem appointed for him in 1868 stated that he had no authority to represent him or his personal representatives ; and no person appeared to represent him or his estate at any of the hearings before the master. Before further proceedings, after the suggestion of Head’s death, Parrott’s executor protested against any such proceedings, for the following reasons: . “ For that the record of the cause discloses that the defendant Head, at the time of service of process therein, was a citizen of the state of Maine, and also that he became insane before the testimony had been completely taken, that a guardian was appointed for him by the probate court of Kennebeck County in Maine, who was a citizen of Maine, and afterwards, without citing the said guardian, this court appointed a guardian ad litem, who was a citizen of Massachusetts, on the motion of the plaintiffs, and proceeded to hear the cause ; and that now the record of proceedings before the master discloses that Head died insane at Baltimore in Maryland, before any proceedings under this order of reference were had by the master, and after the order of reference was made; and this defendant executor excepts, for that, the Constitution of the United States having declared that the judicial power of the United States shall extend to controversies between citizens of different states, and the statutes of the United States having extended the jurisdiction of the courts of the United States to [102] include at the option of the citizen of another state' all such controversies, in manner as in said statutes described, this court had no authority to appoint for the insane defendant Head a guardian ad litem who was a citizen of this state, and that Head was not lawfully represented at said hearing before the court, and that the said decree and opinion of the court were improvidently made and had, and are void for want of jurisdiction over said Head.” * “ On the facts as above set out, the said defendant executor further excepts, that there is now no representative of Head a party in this cause, and that.the master cannot lawfully under the said order of reference, made before the death of Head, take any account in or do any of the acts referred to him, and should so report for the further order of the court in the premises.” The plaintiffs contended that the hearing should proceed notwithstanding this protest; and the master so ruled, and proceeded ■with the hearing, and found that the number of shares received by Head and Parrott from Archbold were respectively, as alleged in the bill, 113 shares and 112 shares, and that they received them in September 1862; that “ at the beginning of this suit Head held and owned 290 shares, the whole of which were either the original commission shares received by him as aforesaid, or shares accruing as dividends or by way of profits or rights” thereon; that “ at the beginning of this suit, and at the time of his death, Parrott held and owned 678 shares, of which 480 shares were received from other sources than as aforesaid; ” and that, both at the beginning of this suit, and on November 24, 1869, the date of the interlocutory order therein, Parrott and Head were jointly and severally liable to the plaintiffs for four fifths of 900 shares of the stock, that is to say, for 720 shares, 'l being four fifths of the whole amount of said commission shares with the accruing dividends and profits as received in stock.” He also found what additional amounts in money the defendants were liable for, on account of cash dividends received upon the 720 shares, at the beginning of the suit and on November 24, 1869, respectively. Woodbury, for Parrott’s executor. Bartlett, for the plaintiffs. After stating these proceedings and findings, the master reported “that, on account of the death of the defendant Head, and the present condition of his estate with reference to this suit, the master has thought it proper to await the further order of the court before presenting the draft of a final decree; ” and he an nexed to the report exceptions alleged thereto by Parrott’s executor, part of which related to questions of fact, and the points of those relating to questions of law were substantially as follows : First. That all the proceedings after the suggestion of Head’s insanity were void for want of jurisdiction over him. Second. That Head and Parrott are not liable jointly, but severally, if at all. Third. That if any final decree for the plaintiffs can be made, it can only compel the specific transfer to the plaintiffs of such shares received by the defendants as commissions, as they possessed at the date of the filing of the bill. The case was heard by the chief justice on the report and exceptions, and reserved for the determination of the full court. By the Court. 1. The appointment of Mr. Woodbury, who had previously acted as counsel for Head in the cause, to be his guardian ad litem, upon its being suggested that he had become insane pending the suit, was according to the usual chancery practice, and justified proceeding with the suit against Head, without notice to the guardian appointed in another state. The former decree was therefore binding upon Head as well as Parrott at the time it was entered. 2. By that decree it was determined that Parrott, while holding the relation of agent to the plaintiffs, and Head, knowing of that relation, united as partners in obtaining shares of stock in the Glace Bay Mining Company, to which the plaintiffs were in equity entitled. Parrott and Head were therefore jointly and severally liable to account to the plaintiffs for all such shares obtained by them as the profits of that fraud, and for the dividends subsequently accruing upon those shares. 1 Bindley on Part. (2d ed.) 376, 377. Story on Part. §§ 108, 166. [104] 8. The shares thus fraudulently obtained by the defendants, and belonging in equity to the plaintiffs, should be replaced to the extent of the other shares held by Parrott and Head at the time of the filing of the bill. 2 Story Eq. §§ 1263,1264. 4. Head having died since the case was fully argued and an interlocutory decree made upon the merits and the case referred to a master to state the account, and Parrott, his surviving partner, having been fully heard before the master and before the court on exceptions to his report, a final decree for the plaintiffs should be entered nunc pro tune as of the date of that interlocutory decree. Campbell v. Mesier, 4 Johns. Ch. "334, 342 note. Bank of United States v. Weisiger, 2 Pet. 331, 481. All the exceptions to the master’s report are therefore overruled, and the case recommitted to him .to report the form of a Final decree for the plaintiffs accordingly.