Spaulding v. Drew

The opinion of the court was delivered by Royce, Ch. J. This bill is brought to compel an accounting for the money received for certain premises sold by the defendants Drew and Allen to Ira and William P. Russell and Asa JB. Witherell on the 28th of April, 1874. The premises were deeded to the oratrix, Fanny P. Spaulding, wife of Milton R. Spaulding, in 1864, and the title remained in her until it was conveyed by the joint deed of herself and husband to the defendants Drew and Allen, on the 10th day of April, 1872. On the 17th of December, 1868, the said Fanny P. and Milton R. executed a mortgage of said premises to Thomas C. Hill to secure the payment of notes amounting to 13000 executed bf Milton R. Spaulding. Hill obtained a decree of foreclosure of said mortgage at the April Term of Chittenden County Court, 1871, which was running at the time the title was conveyed to the defendants Drew and Allen; and it is agreed that the parties to the deed to Drew and Allen understood at the time it was executed and delivered, that Drew and Allen were to pay that decree, and when the premises were sold they were to reimburse themselves out of the proceeds. The orators claim that Drew and Allen should account for what they received upon the sale of the premises over and above what they [255] paid on said decree ; Drew and Allen claim that they have fully accounted for such surplus by the application of a part of it to the payment of a debt due from Milton R. Spaulding on account of the purchase of some livery property, and of the rest of it in payment of their claim for services in the care of the premises while the title remained in them, and for their trouble and the risk they took in the management and disposition of them, and of the balance, if anything remained after satisfying said claims, by applying it on an indebtedness from Spaulding to the defendant Drew. The evidence of Spaulding tends to show that he was never indebted for said livery property; that, there was an agreement between him and Drew that they would enter into the business of keeping a livery stable as partners, and that Drew purchased said-livery property upon his own credit and put the same into the business as a portion of the capital'to be furnished by him, and that they carried on said business after the ¡purchase as partners and not otherwise ; but upon a careful examination of the pleadings and proofs we find that there was not any agreement made between the defendant Drew and Spaulding to enter into the business of keeping a livery stable as partners, and that they were not partners in said business; that the business was carried on by Spaulding alone and for his sole benefit;- that Spaulding made the contract for the purchase of said livery property and for his sole benefit; that the payment of the purchase money for the same was secured by the note or endorsement- of Drew and a lien upon the property was reserved to secure him against loss ; that at the time of its purchase it was agreed between Drew and Spaulding that Spaulding should pay the note that was given for the property and save Drew harmless, and upon such payment the property should belong absolutely to Spaulding; that Spaulding took immediate possession of said property after its purchase and has ever since retained the possession and control of the same; and that the debt contracted for its purchase was the debt of Spaulding which it was his duty to pay. We further find that the agreement between Spaulding and the defendants Drew and Allen was that Spaulding and his wife were to deed the premises to said Drew and Allen, and they were to [256] sell the same whenever they thought best, and from the avails were to pay the Hill decree, the debt contracted for the purchase of the livery property, and whatever remained was to be applied in payment for the care, labor and risk of Drew and Allen in the management and disposition of the property and upon the indebtedness of Spaulding to the defendant Drew. . Drew and Allen realized from the sale of the premises, after the payment of taxes and a rebate for rent, $5,140.51. They paid the Hill decree, amounting to $3,774.84, and the note given for the livery property, amounting to $1,111.73, which left a balance in their hands at that time of $231.25. The arrangement to deed the premises to Drew and Allen, and the terms upon which they were to take the deed and dispose of the property and account for the same, were all made with Spaulding. The oratrix, Eanny P., did not know what arrangement or contract had been or was to be made with them except as she was informed by her husband. Spaulding procured the deed to be executed, and delivered it. Mrs-. Spaulding entrusted her husband with her title deed, and understood that whatever arrangement was to be made with Drew and Allen in relation to the property was to be made by him. They had no notice, except such as the deed and the record furnished, that either Mrs. Spaulding or her children had any interest in the property. They made the arrangement and took the title, believing that it really belonged to Spaulding, and that he had the right to make the arrangement and contract with them that was made. It is now claimed by the orators that inasmuch as the legal title to the premises was in the oratrix, Fanny P., and she had paid for the same in part out of her separate estate, and no express authority had been given by her to her husband to make any contract in relation to the disposition to be made of the proceeds of the premises, she is not bound by the contract made by him; and that the defendants Drew and Allen should account for all of said proceeds except what was required to pay the Hill decree. Spaulding had authority to negotiate for the transfer of the title of his wife and to provide for the payment of the Hill decree out of the proceeds of the premises conveyed. Was his authority [257] limited to the performance of those acts ? If Drew and Allen, at the time the deed was delivered, had paid Spaulding the full amount realized from the sale of the property, after deducting the amount required to pay the Hill decree, his wife would have been bound by such payment. If they could have made the payment at that time, it is clear that they might make it at any subsequent time, unless they had notice not to make it. The note given for the livery property was the debt of Spaulding, and he might have used the money so received to pay that note. Although that might have been a misappropriation of the money, as between him and his wife, she could not reclaim the money from the party to whom the payment was made unless he had notice that it belonged to her, or that she had some legal or equitable lien upon it. Here, as we have seen, it was agreed between Spaulding and the defendants Drew and Allen that that debt should be paid out of the proceeds of the premises, and Drew being liable upon the note, they paid it directly instead of paying the money to Spaulding with which he might have paid it; so, as far as the rights of the orators are concerned, it stands for consideration as it would if the defendants had paid the money to Spaulding and he had used it in payment of the livery property debt. In Hern v. Nichols, 1 Salk. 289, Lord Holt said that where one of two innocent parties must suffer by the fraud or misconduct of a third, he who has reposed a trust and confidence in the fraudulent agent ought to bear the loss. Spaulding had authority from his wife to negotiate with the defendants Drew and Allen in relation to the conveyance to them of the premises. That authority would include the right to contract with them as to the terms upon which the conveyance should be made, and how and in what manner payments should be made. The arrangement that was made constituted the consideration for their agreement to take the conveyance and upon which they did take it. Mrs. Spaulding reposed the trust and confidence in her husband that is spoken of by Lord Holt, to care for and protect her interest in the proceeds of the property, but instead of protecting her interest he made the agreement and arrangement that we have found he did make. From the authority confessedly conferred upon Spaulding, the de* [258] fendants Drew and Allen might well believe that he had authority to make the arrangement that he did make, and were legally justified in acting upon that belief. In deciding upon whom the loss must fall, the rule laid down by Lord Holt, and which has ever since been acknowledged law, settles it upon the party who reposed the trust and confidence in Spaulding. From our examination of the case, as developed by the pleadings and proofs, we have failed to find that the oratórs, or either of them, have any equity that is superior to the claim that is made by the defendants Drew and Alien. The payment of the Hill decree and the debt incurred for the purchase of the livery property by the defendants Drew and Allen was, to that extent, a legal 'accounting by them for the proceeds of the premises conveyed to them by Spaulding and his wife. Drew and Allen should account for the balance of $281.25 that remained in their hands after paying said debts. The amount they are reasonably entitled to receive for their care, trouble and expense in the management and disposition of the premises should be ascertained and paid out of said $231.25, and what shall remain of said sum, if anything, should be applied on the indebtedness of Spaulding to Drew, if any such indebetedness should be found ; and if said sum shall not be required for either or both of said purposes, a decree should be entered for the orators for the amount that may so be found in their hands not so accounted for. The proforma decree dismissing the bill is reversed, and cause remanded with mandate.