Wells v. McGeoch

The following opinion was filed January 10, 1888: Lyon, J. Most, if not all, of the material facts stated in the findings and opinion of the county judge are well sustained by the testimony, and will not be disturbed. The learned judge found that the wheat deal of 1882 and the lard deal of 1883 were illegal transactions, and held that no recovery can be had in this action, because the claim qf the plaintiff grows out of such illegal transaction. Upon that — 221 — ■theory, the findings of fact seem to be sufficiently full and comprehensive. Much testimony, however, was given on the trial, directed to questions of fact upon which the findings are silent. During the term at which the decision was rendered and the findings filed, counsel for Mr. Wells, the plaintiff, asked the court to make additional findings upon a large number of questions thus omitted therefrom. “Whereupon [as stated in the bill of exceptions] the court ruled that the request should have been made before the findings had been made and filed by the court; and the court refused.to pass upon the questions, and dismissed the application, and refused to look into or examine the requests submitted.” The ground upon which such refusal is rested is untenable. A party to an action in which it is the duty of the court to file findings of fact cannot know in advance of such filing what they will be. He may rely upon the presumption that the court will discharge its duty by finding upon all disputed questions of fact involved in the case, and he cannot be put in default because he has failed to indicate to the court in advance the specific facts upon which he desires findings. It is sufficient to secure a review by this court on appeal, if due exception be taken that the findings fail to cover and include certain specified material questions of fact litigated on the trial. In the view we have taken of this case (which is hereinafter expressed), some of the omitted propositions of fact are material to a correct determination thereof. At the risk of some repetition of what appears in the decision and findings of the county court, a statement of the case, including such omitted facts as the same appear in the pleadings, findings, and evidence, will now be made, after which the law of the case will be considered. I. From January 1,1881, to June 16,1883, the defendant, Peter MeGeoeh, was engaged in the city of Milwaukee in the business of a broker and commission merchant, dealing — 222 — in grain and other produce, under the name and style of P. McGeoch & Go. During the same time, he was a partner in the firm of McGeoch, Everingham & Co., which was engaged in a like business in Chicago, operating on the board of trade in that city. There were four partners in the firm, but McGeoch owned a one-half interest in its business and profits, and was the leading partner therein. During the whole time aforesaid, the parties —• Wells and McGeoch — were jointly interested as partners in very extensive transactions in grain, lard, pork, and other commodities. These transactions were mostly in futures, that is, purchases and sales for future delivery, and were conducted by McGeoch alone, through his said firm in Chicago and his Milwaukee house. There were many hundreds of such transactions, and they amounted in the aggregate to many millions of dollars. In February, .1882, the parties settled and adjusted their previous dealings on joint account, and the profits of each were found to be over $300,000. This sum includes the profits of each, amounting to over $218,000, in an extensive deal in pork and ribs. The parties then engaged in a wheat deal in Chicago in connection with others. This speculation is known as the “April (1882) corner in wheat.” It was prosecuted with energy, sagacity, and courage, and resulted in a successful corner of the market, and in a net profit to Wells and McGeoch of $218,705.51, or $139,352.18 each. The final result of,this deal was reported by McGeoch, Ever-ingham & Co., at Chicago, to the house of P. McGeoch & Co., at Milwaukee, and the aggregate profit of the two par-1 ties was credited in the books of the latter house to XI account. It was not entered up to the credit of the respective parties, because a suit was then pending which might result (but never did) in changing the figures somewhat. The fact that the amount so entered had not been divided between the parties on the books of P. McGeoch & Co. — 223 — seems to have been overlooked or forgotten, and so it remained therein as originally entered. Wells’ share of the profit on the wheat deal of 1882 was left in the hands of MeGeoeh for future operations, and the credit of $278,705.57 to XX account was transferred to the credit of MeGeoeh alone on the books of the Chicago house. The joint adventures of the parties, under the direction and management of MeGeoeh, were continued until the failure of the Chicago house, June 16, 1883. There was a large number of transactions during that time,— some of which resulted in profits to the parties; others, in loss. These were reported to the Milwaukee house, and Wells’ share of such profits and loss were entered in the books of that house to his account, but stood to the credit of MeGeoeh on the books of McGeoch, Everingham & Co. On June 16, 1883, the aggregate of profits over losses in those transactions belonging to Wells (excluding the lard deal hereafter mentioned) amounted to $100,455.39. Early in 1883 the parties inaugurated in Chicago what is called a “lard deal;” or perhaps, rather, MeGeoeh inaugurated it, and Wells soon thereafter took a joint interest therein with him. This- was a deal in April, May, June, and July lard. Through the Chicago house they purchased cash lard and lard for future delivery in enormous quantities. Their transactions amounted to over $12,000,000. Of course, vast sums of money were required to carry on the deal. Wells authorized MeGeoeh to use in the deal all his funds in the hands of MeGeoeh, and the same were so used. They raised on their individual notes, from various banks, $950,000, and, by hypothecation of cash lard which they held, they raised nearly $4,000,000 more. To the above sums should be added any sums which MeGeoeh furnished and put into the deal. All these contracts for lard were made by the firm of McGeoch, Everingham & Co. as principal. No account with Wells was kept on the books of that firm, — 224 — but the lard-deal account therein was designated as “ 41.” Transactions relating to that deal were frequently, perhaps daily, transmitted to P. McGeoch & Co., at Milwaukee. To carry the deal to a successful termination, Wells and MeGeooh were forced to buy all the lard in the market. The quantity thrown upon the market was unexpectedly large, and additional large sums of money were required for such purchases, as well as for margins on purchases for future delivery. The financial ability of the operators was not equal to the emergency. The crisis came June 16,1883. The parties were unable to furnish any more money to their brokers, and the latter could not put up certain large margins regularly required of them under the rules of the board of trade, to which they were subject; so the firm of McGeoch, Everingham & Go. failed and the lard deal collapsed, entailing an enormous loss upon its operators. Many actions were at once brought against the parties, and against McGeoch, Everingham & Co., by the creditors of that firm, both in Illinois and Wisconsin. Both parties resided in Milwaukee. In one of the suits against the firm of McGeoch, Everingham & Co., a receiver, a Mr. Bensley, was appointed. The appointment was a most fortunate one for the parties interested. The receiver at once qualified and entered upon the duties of his office. He gathered in the scattered assets of the firm, and set himself to ascertain the extent of the disaster and the means of repairing it as far as possible. Before the end of June, he informed the parties that the debts of the firm, estimated at about $1,300,000 (over $1,000,000 of which was on account of the lard deal), could, in his opinion, be compromised at fifty cents on the dollar, if the money could be furnished soon; and that with $450,000 in cash, and the assets of the firm in his hands, estimated at something over $200,000, he could pay all the liabilities, and thus relieve not only the firm, but Wells and McGeoch, from the enormous indebtedness resulting — 225 — from the failure of the lard deal. Thereupon negotiations were had between the parties, resulting in the contract of July 17, 1883, which is set out in full in the foregoing statement of facts. Each party paid to the receiver $225,000, as therein agreed; and with that money, and the proceeds of the assets of the firm which came to his hands (such proceeds amounting to nearly $340,000), the receiver procured the discharge of all the indebtedness of the firm, paid all costs in pending suits, and all expenses of his receivership, and paid a surplus of nearly $28,000 to the partners in that firm, other than MoGeooh. Thus far the transactions between the parties are narrated in the findings of the county court substantially as here stated, and perhaps more fully. "We now proceed to state certain facts proved on the trial to which little or no reference is made in the findings. Each party had invested a large sum of money in the lard deal, which was irretrievably lost. They jointly owed other .large sums, „ for the payment of which both were legally liable. Utter financial ruin of both was imminent, and, naturally, both were anxious to avert it if possible. The receiver was pressing a compromise upon the creditors of McGeoch, Everingham & Co., and had expressed the opinion to the parties that with the assets in his hands, and $450,000 in cash additional, he could pay off the liabilities of the firm; most of which were incurred on account of the parties in the lard deal. Under these circumstances, the parties, aided by legal advisers, met, negotiated, and entered into the contract of July 17, 1883. Pending such negotiations, and as part thereof, MoGeooh represented to Wells that the latter had a credit with him of a little over $100,000, being his share of the profits of their joint operations, and that he had invested it in the lard deal, pursuant to the authority which Wells gave him to do so. He also stated to Wells that he (McGeoch) had — 226 — invested $700,000 in the deal, including a note to a bank of $250,000. The parties then owed to banks, on their individual notes, $950,000, including the $250,000 just mentioned. Each was a party to all these notes, either as maker or indorser. MoGeooh thereupon proposed to Wells that he (Wells) should assume payment of the remaining $700,000; MoGeooh assuming payment of the $250,000 note. As MoGeooh represented the matter, this would make Wells' payment on account of the deal, in round numbers, $800,000, and MoGeooKs, $700,000. To equalize these payments, it was agreed, after some negotiation, that MoGeooh should pay $25,000 on one of the bank notes assumed bj^ Wells, and should give the indemnity contained in the contract of July 17, 1883. It may be observed here that on the above basis, to have made the payments of these parties equal in amount, MoGeooh should have paid $50,000 to Wells or on his account, whereas he paid $25,000. Thus, Wells allowed MoGeooh $25,000 for the indemnity just mentioned. It is perfectly obvious that the result of this agreement was that Wells assumed to pay $25,000 more, and MoGeooh the same sum less, than one half the losses of the deal. The sums theretofore put' in the deal by each party and the sums assumed by each on account of existing indebtedness to banks having thus been adjusted and equalized on the basis of MoGeooKs representations, each party agreed to raise, and did raise and pay to the receiver, his agreed proportion of the amount estimated to be necessary to discharge the liabilities above mentioned. Such negotiations were had, and the contract of July 17, 1883, was entered into, with the express understanding between the parties that the money of Wells in the hands of MoGeooh, the $675,000 of bank indebtedness assumed by Wells, and the $225,000 paid by him to the receiver, equaled one half the losses by the lard deal, plus $25,000,' including costs and expenses of closing out — 227 — tbe deal; and that tbe $275,000 assumed by McGeoch, the $225,000 paid by him to tbe receiver, and the sums put into the deal by him before the failure, would equal one half of such net loss, minus $25,000. The evidence leaves no room for doubt that McGeoch represented to Wells that he had put into the lard deal $700,000, including the bank debt of $250,000 assumed by him, or $450,000 without it; and that the balance in his hands to the credit of Wells was but $100,455.59. His attorneys, to his knowledge, were notified in writing by the attorneys of Wells, before the contract of July 17th was executed, that Wells would execute it on the faith of these representations; and neither McGeoch, nor his attorneys for him, denied that he made such representations. Further, one of McGeoch’s attorneys drew and delivered to the at-tornej’s of Wells a memorandum in which, after referring to certain indebtedness, it is said that the same “ is exclusive of $1,500,000 which the two parties, Wells and McGeoch, severally owe at the banks, or have raised,” etc. The amount owing-at the banks was $950,000; leaving $550,000 as the sum raised and put in the deal by both parties. Of this last sum it was stated by McGeoch that Wells had put in only a little over $100,000; thus leaving his (McGeoch?'sJ investment in the deal nearly $450,000, exclusive of the $250,000 raised by him at the bank. This memorandum was so delivered before the contract was signed, and McGeoch saw it and made no objection to it. It has the force of a direct statement to Wells that he (McGeoch) had thus actually invested in the deal $700,000, including the bank debt of $250,000. Resides, the oral testimony alone, on the same subject, is quite sufficient to prove that such representations were repeatedly made by McGeoch to Wells during the negotiations. ■ II. The conclusions we have reached as to the law of this case render it necessary to determine the following ques — 228 — tions: First. Were such representations true or false? If false, second, were they fraudulently made by McGeoch? And, third, did Wells rely upon them, and make and perform tbe contract of July 17, 1883, on the faith of them, believing them true? 1. Were the above representations true or false? It is admitted by all the counsel that McGeoch retained in his hands the share of Wells in the profits of the wheat deal of 1882, being $139,352.78, and that he invested the same by authority of Wells in the lard deal. Hence the representation by McGeoch that the amount of the money of Wells in his hands which he so invested was but $100,455.59, was not true; the actual amount was $239,808.17. As-to the representation by McGeoch that he had put into the lard deal $700,000, his counsel claim that it was substantially true. A large amount of testimony is directed to this point; and much argument has been employed, and many ingenious theories advanced, by both sides, to demonstrate the truth or falsity of this representation. To one not an expert accountant, the combination of figures and accounts involved in these theories, and pressed upon (us in the argument, are quite bewildering, and it must be added that none of them are satisfactory. Fortunately, the record furnishes us the means of solving the question. It is an admitted fact in the case that the losses in the lard deal amounted to $2,352,036.52. The proofs are very satisfactory that, by the compromise with the creditors of McGeoch, Everingham & Co., there was released on account of the .indebtedness incurred in the lard deal $513,537.76. This appears in the testimony of Stoltz, the book-keeper of that firm, and by an account furnished by him, showing the entries made in the books of that firm, after its debts and the expenses of the receiver had been paid, to balance and close the accounts of the firm. It is undisputed. Moreover;- it is just about the sum we- should expect to find; for — 229 — such indebtedness amounted to something over $1,000,000, and the amount released by the compromise was fifty per cent, thereof. Deducting the amount released by the compromise from the total loss, we have $1,838,498.16, which is the amount paid by both parties on account of losses,, including the costs and expenses above mentioned. Of this last sum it is conceded that Wells paid $1,139,808.17. As a matter of course, the difference between the two sums last mentioned, which is $698,690.59, is the total sum paid by McGeoch. Deduct therefrom the sum. afterwards paid by him to the receiver, and we have $473,690.59; which is the amount he had put into the lard deal when he repre-resented to Wells that he had thus put in $700,000. He therefore overstated his investment $226,309.41, in addition to the understatement of Wells’ investment above mentioned. The following table will show the above computation in a more condensed form: Total loss . $2,350,036 52 Beleased by the compromise . 513,537 76 Paid by both parties. ... $1,838,498 76 Wells paid — To banks . $675,000 00 In MeOeoeh’s hands, admitted by him . 100,455 39 One half profit of wheat deal of 1882, in McGeoch’s hands, not accounted for by him . 139;352 78 Paid to receiver. 225,000 00 - 1,139,808 17 'McGeoch invested in lard deal . $698,690 59 Deduct his payment to receiver. 225,000 00 Paid by McGeoch before July 17, 1883 . $473,690 59 McGeoch represented his investment to be. 700,000 00 He actually had invested only. 473,690 59 McGeoch overstated his payments.,. $226,309 41 He understated the amount of Wells’ money in his hands 139,352 78 Total $365,662 19 — 230 — This method of ascertaining the amount paid into the lard deal by McGeoch renders it quite unnecessary to ascertain the sources from whence the money came. The amount may, probably does, include the capital of McGeooh invested in the firm of McGeoch, Everingham & Co., and his share of the commissions theretofore earned by that firm. It is maintained by counsel for Wells that, by the terms of the settlement between the parties, these items were not to be allowed to McGeoch. We do not so understand the proofs. The testimony on that subject was given by Mr. Winfield Smith, one of Wells’ attorneys, who took a leading part for Wells in the negotiations which resulted in the contract of July 17, 1883. He testified that, during the negotiations (probably near the close thereof), he had a conversation with McGeoch and Mr. Finch (one of his counsel), in which McGeoch assented to the proposition that the capital stock of the firm “ was not to be considered one of the debts due from the firm which McGeoch and Wells would have to assume or endeavor to pay, in whole or in part.” This proposition seems to have been carried out. The representations made by McGeoch as to the amount he had invested in the lard deal were made before the above conversation took place; and, in order to determine whether such representations were fraudulent or not, all the money he so invested, no matter from what source derived, should be allowed him. Moreover, aside from the question of fraud, in an accounting between the parties of their investments in the lard deal, we do not think the above understanding or agreement as to capital is sufficiently broad to exclude the allowance to McGeoch of the proceeds of his share of capital and commissions which he had theretofore drawn out and invested in such deal. The allowance of these items to him does not seem to conflict with the agreement that the capital stock of the firm was not to be considered a debt of the firm which the parties were to assume — 231 — or endeavor to pay. The agreement was satisfied when, by the failure of. the firm, the partners therein, other than McGeoch, lost a large portion of the capital they had invested in the business. McGeoch's capital and his share of the commissions had already been drawn out and invested in the deal, and the amount thereof thereby ceased to be a liability of the firm. The agreement affects only such capital as remained a liability of the firm. 2. Having determined that McGeoch, in his own interest, overstated to Wells his investment in the lard deal, and understated the amount of Wells’ money in his hands which he (McGeoch) invested in the same deal, and having determined, also, the aggregate amount thus overstated and understated, we will now proceed to consider whether such misrepresentations wmre fraudulently made by McGeoch. This question requires but little discussion. If McGeoch knew that he was overstating his own investment or understating the amount of Wells' money in his hands which he invested in the lard deal, his representations were fraudulent. If such representations were made in ignorance of the real facts, they were equally fraudulent; the fraud in the latter case consisting in his assuming to know facts adverse to the interests of Wells, which he knew nothing about and which had no existence. Miner v. Medbury, 6 Wis. 295. It would be unreasonable to hold McGeoch to the duty of exact knowledge of the amount of his investments, but it is not unreasonable to hold him to the duty of knowing approximately such amounts. The books of his two houses, at Chicago and Milwaukee, would have shown those facts with reasonable accuracy, had he consulted them; and it would not have been a difficult matter for him to obtain the information at very short notice. The county court found that he was no book-keeper, but this finding must be taken with some qualification; it probably means that he — 232 — was not an expert book-keeper. It certainly cannot be truthfully said of a man who had capacity to conduct, and did conduct, commercial transactions amounting to millions of dollars in each year, usually with great success, and who can claim rank with the ablest business men in the country, that he has no knowledge of book-keeping. But, if he was •unable to ascertain the amount of his investments by a personal examination of his own books, he had in his employment capable, expert book-keepers, who kept such books and knew all about their contents, who, if desired, would ■readily have given him the required information. In the circumstances' of this case, there is no admissible theory upon which it can be truly said that such misrepresentations are consistent with honesty of purpose. He either knew that the representations were grossly false, or he made them reckless^, without stopping to inquire whether they .were true or false. In either case, as before observed, the misrepresentations were fraudulent. 3. We are now to inquire whether Wells relied upon such false and fraudulent misrepresentations made by McGeoch, and made and performed the contract of July 17, 1883, on the faith of them, believing them to be true. The proofs tend to show that accounts of the transactions in Chicago in the lard deal were frequently transmitted to P. McGeoch & Co., at Milwaukee, and that Walls had free access to them. From this it is argued that he might have known, had he taken the trouble to investigate, the true condition of the deal at any given time, and that his failure to do so was negligence which is fatal to his right to recover in this action. It may be true that Wells had access to the means of thus ascertaining the condition of the deal and the amount invested therein by McGeoch; but it is certain that he did not do so. When we consider the extent and magnitude of the transactions of the deal, the length of time which they cover, and that none of them occurred — 233 — under the personal supervision of Wells; and the further facts, which clearly appear in the evidence, that Wells had most unbounded confidence in the ability and integrity of McGeoch, and in none of their numerous transactions had he given any personal attention thereto, but trusted entirely to McGeoch,— we cannot say that he was guilty of negligence in failing to keep himself personally advised of the condition of the deal. In other words, we think he had a right to rely upon the representations of McGeoch in respect to the amount of money invested by him in the deal, both of his own money and that of Wells. As to the §139,000 of Wells’ money in his hands, being the profit of the wheat deal of 1882, it is sufficient to say that Wells had not forgotten that he had that sum in the hands of McGeoch, but he supposed the dealings on their joint account, after the wheat deal, had reduced that amount to a little over $100,000. The representation of McGeoch in that behalf was, in effect (though not in words), that it had been so reduced. Wells had kept no account of those dealings; trusting, as he had a right to do, to .the integrity of McGeoch to properly account for all sums in his hands. He was justifiably ignorant of the fact that their joint dealings, after the wheat deal, had resulted in a profit to him of over $100,000, which McGeoch had in his hands, leaving the $139,000 intact. McGeoch cannot now be heard to say, after Wells had trusted him so implicitly, that, although he grossly and fraudulently misrepresented the amount of their respective investments, still Wells had no right to believe his statements. We do not care to discuss this question further. The testimony convinces us that Wells had the right to rely upon the statement of McGeoch in the premises, that he did rely upon them implicitly, and that on the faith of them, and believing them to be true, he paid a very large sum of money to discharge their joint liabilities over and above what he ought to have paid on the — 234 — basis upon which the transactions were settled, and what he would have paid had McQe&ch truly stated his investments. ■ III. We are now to consider the law of the case applicable to the foregoing facts. The judgment of the county court is rested upon the propositions that the wheat deal of 1882 and the lard deal of 1883 contravened a statute of Illinois, and were, illegal transactions; that Wells was obliged to trace his alleged right to recover in this action through such illegal transactions; and hence that he cannot recover therein. In addition to pleading the illegality of those deals as defenses to the action, McGeoch, through his counsel, has expressed to us, in strong and earnest language, the wrong and injustice and the enormity of the evils which necessarily result from such illegal transactions, and has also denounced them as crimes against the public. Also, counsel cited several cases in which, in most impressive language, the immorality and illegality of such transactions are asserted. We cordially indorse all that was said to'us on that subject in the arguments, as well as the language of the courts to which our attention has been called. When we said in Melchoir v. McCarty, 31 Wis. 252, that “ all contracts which are repugnant to justice, or founded upon an immoral consideration, or which are against the general policy of the common law, or contrary to the provisions of any statute, are void; and that if a party claiming a right to recover a debt is obliged to trace his title or right to the debt through any such illegal contract, he cannot recover, because he cannot be allowed to prove the illegal contract as the foundation for his right of recovery,” — we stated the rule as strongly as any court has stated it. To that rule this court has rigorously adhered. The rule is elementary, and wTe are not aware of any adjudication which has denied or shaken it. Numerous cases sustaining it will be — 235 — found in the brief of the learned counsel for MoGeoch. It is unnecessary to cite them here, but reference to them will be made in the report of the case. Thus far, we are in entire accord with MoGeoch, his counsel, and the learned county judge. We have no doubt the county court ruled correctly that the wheat deal of 1882 and the lard deal of 1883 were illegal transactions, under the statutes of the state of Illinois. They Avere also illegal at the common law, as against public policy. However, the nature of the wheat deal of 1882 seems to be of little importance in the case. Wells’ share in the profits of that deal vras left in the hands of McGeoch, and by him invested in the lard deal by consent and direction of Wells. Had MoGeoch paid the $139,000 to Wells, and had Wells subsequently returned it, or a like amount, to MoGeoch, to be invested in the lard deal, it would not be claimed, we think, by any one, that the illegality of the wheat deal would alone protect McGeoch from accounting to Wells for the mon'ey. We think the transaction which actually took place is, in legal effect, the exact equivalent of the one supposed. 2. If it be true, as the county court held, that, in order to establish his demand against MoGeooh, Wells was obliged to trace his claim through such illegal transactions, the county court was right in dismissing the complaint. We are clearly of the opinion, however, that the ruling of the county court in this behalf is erroneous. The gravamen of this action is the fraud of MoGeoch in misrepresenting to Wells the amount of their respective investments in the lard deal. Although, in form, the demand of the complaint is that the account of the transactions in that deal should be ’surcharged and corrected, yet, in substance and effect, the action is to recover damages suffered by Wells by reason of the fraud of McGeoch. The lard transaction is only involved incidentally in the case. It is resorted to only for — 236 — the- purpose of ascertaining whether the representations made by McGeoch were true or false. There is no rule of law which prohibits a resort to an illegal contract for a purpose so purely incidental. The case is within the principle laid down in Kiewert v. Rindskopf, 46 Wis. 481. In the opinion by Mr. Justice Obtom, it is there said: “The gravamen of this action is the fraud practiced by the defendant in obtaining the two thousand dollars from the plaintiff by falsely representing that this sum was within and a part of the contract with Wight, and that the sum agreed to be paid to Wight was three thousand dollars, W'hen in fact it was only one thousand dollars. Where money is so charged to have been obtained by fraudulent representations, the only material questions to be considered are: First. Were such representations intentional, material, and false ? Second. Did they produce a false impression on the mind? Third. Were they the inducement of the payment? Fourth. Were they relied upon as being true ? If these elements are present, they constitute a positive fraud without exception; and the matters to which such fraudulent representations relate, whether legal or illegal, will not lessen the fraud, or affect the liability of the guilty party. Kerr, Fraud & M. 73; Smith v. Mariner, 5 Wis. 551; Kelley v. Sheldon, 8 Wis. 258; Reynell v. Sprye, 21 Law J. Ch. 633.” There is no serious conflict of authority on this subject. Nearly all the cases involving the question are in harmony with Kiewert v. Rindskopf. Many of these cases are cited in the brief of counsel for Wells, and will be preserved in the statement of their argument in the report of the case. All the conditions of a recovery required in Kiewert v. Rindskopf are established in this action; hence Wells is entitled to recover. 3. It is scarcely necessary to add that the full release of McOeoch by Wells from all claims and demands on — 237 — account of the lard deal, contained in the contract of July 17,1883, is no obstacle to a recovery in this action; the contract having been obtained by the fraud of MeGeoeh. Such release may have excluded Wells from any share of the money remaining in the receiver’s hands after his trust was executed,, but it is not perceived how it can conclude Wells -m this action, which is founded upon the fraud of MeGeoeh. IV. The only remaining question is that of damages. The gravamen of the action being the fraud alleged, .it is plain that Wells should recover all that he paid, by reason of such fraud, in excess of what he would have been required to pay on the agreed basis had MeGeoeh represented the investments truthfully. That is to say he may recover what he lost by reason of the fraud. But he cannot recover a sum which will reduce his payments on account of the lard.deal below what he would have been required to pay on an accounting between the parties, for it cannot be correctly said that he has lost anything beyond that limit.' The amount of such loss is easily ascertained. It is measured by the extent of the misrepresentations by MeGeoeh in his own favor, subject to the limitation just mentioned. We have already seen that these amount to $365,662.19 against Wells. Hence, in order to indemnify Wells for the consequences of MeGeoeh’s fraud, the latter should pay Wells one half the amount last above stated, to wit, $182,831.10, less any sum necessary to be deducted in order to make Wells’ payments equal the amount he ought to pay, as that amount would be ascertained were an account of the lard deal stated between the parties. This will place Wells in the samó position that he would have been in had MeGeoeh represented their respective investments truly, and had the amount that each, upon the agreed basis, ought to have paid, been adjusted accordingly. — 238 — In order to find whether one half the aggregate of McGeocKs misrepresentations of the investments made by him in the lard deal for himself and for Wells exceeds the sum which Wells ought to recover, we will see how an account stated would stand: Both parties paid. $1,838,498 76 One half is. $919,249 38 Wells agreed to pay, in addition. 25,000 00 Wells ought to pay. $944,249 38 He paid. 1,139,808 17 Wells overpaid. $195,558 79 McGeoch ought to pay. $894,249 38 He paid only. 698,690 59 McGeocKs deficiency. $195,558 79 But there remained in the hands of the receiver after the business was closed and all demands paid, the sum of $27,836.32. In the absence of a special agreement to the contrary, this money belonged to the parties in equal shares. Hence, in the accounting, $13,918.16 should be deducted from Wells’ overpayment, as above stated, to find the maximum limit of his recovery. Had there been no surplus, Wells would recover $182,831.10, and would be compelled to lose the difference between that sum aiid the amount he overpaid ($195,558.79), because of the illegality of the lard deal, which bars a recovery on an account stated. But, inasmuch as there was a surplus, we state the account in the interest of McGeoch, and find that the recovery should be reduced to $195,558.79 — $13,918.16= $181,640.63. By the Court.— The judgment of the county court is reversed, and the cause will be remanded with directions to its successor, the superior court, to render judgment for the plaintiff for $181,640.63, and interest thereon at seven per — 239 — cent, per annum from July 11, 1883, to the date of the judgment. A motion by the respondent for a rehearing was denied March 21, 1888.