Spencer v. Mali

Mr. Justice Windes delivered the opinion of the court. The principal and controlling question presented by this record is whether a single woman, who has no knowledge of business affairs, may employ an agent who is skilled, capable and experienced, to conduct her business, and leave to him its sole management and control, without the risk, in case it yields large profits, of having it taken from her by the creditors of her agent. We are of opinion that no rule of law or equity requires that any one should be subjected to any such risk, in the absence of a showing of fraud on his part. As we have seen, the business turned over to Mrs. Spencer by her husband was small, and, as the decree finds, was substantially an insolvent one, though its assets amounted to at least $3,000 if not $3,700. To this business she added the $4,000 in cash which she received from her husband, and there is no evidence whatever that any money of Powell ever went into the business. It was very profitable under the conduct and management of Powell, though he gave very little of his time to it. He was paid a salary, so far as appears from this record, which was entirely reasonable considering the time he gave to the business. He received salaries from the other two corporations by which he was employed amounting to $5,000 per year. The fact that he failed to make any other than verbal reports to Mrs. Spencer as to the conduct of the business, does not of itself prove fraud, and in our opinion is entirely consistent with honesty of purpose on his part as well as hers, when the circumstances are considered. She knew nothing of business and knew that Powell was experienced in that line of business, and her capital being small, she might well have trusted to Powell, who was her sister’s husband, he furnishing her, as he did, from time to time, from the profits of the business, with money to pay her current expenses and bills, and besides,the money to buy her a residence and subsequently a factory for the conduct of the business. Under such circumstances most any woman not familiar with business or business methods, would most naturally give her agent free rein and full power to do as to him seemed best, and would not be disposed to trouble him with critical or detailed inquiries or written reports with regard to her affairs, which, from visible results by way of money that came when wanted for her own personal needs and was ready to meet the demands of her business as required, appeared all the while to be prospering. After the most careful reading of the evidence, both in the original and additional abstracts, guided by the able arguments of counsel, we are unable to perceive, in the light of such evidence and the findings of fact by the master and the chancellor, upon what basis they reach the conclusion that in equity and good conscience the property which was the result of the profits arising from che business of Mrs. Spencer, carried on by Powell, should be held to be the property of Powell and subjected to the payment of his debts. It is argued by defendants in error, in support of the decree, that inasmuch as Mrs. Spencer placed her property and money in the hands of Powell and allowed him to carry on her business, the original capital will in equity be considered as a loan to him, and that its increase, caused by the labor and skill of Powell, should be subjected to the payment of his debts. In support of this contention they cite and especially rely upon the cases of Wortman v. Price, 47 Ill. 22; Wilson v. Loomis, 55 Ill. 352; Robinson v. Brems, 90 Ill. 351; Lachman v. Martin, 139 Ill. 450; and Pease v. Barkowsky, 67 Ill. App. 276. These cases are all cases of husband and wife, and the decisions are made with express reference to the statute in that regard, and its effect on the common law, which, prior to the statute, gave the husband, upon marriage, title to the personal estate of the wife which came to his possession. After a careful consideration of these cases, we think their doctrine should not be applied to the case at bar, as the relation of husband and wife does not here exist. If the doctrine of these cases should be extended to persons not occupying the marital relation toward each other, there could never be any safety in any one employing an agent to carry on a mercantile or manufacturing business and leave to such agent the full and untrammeled control and management thereof. In the Lachman case, supra, it was held that a wife may avail herself of the services and agency of her husband in the conduct of her business, without subjecting the profits arising from his management to the claims of his creditors, but that an insolvent debtor can not use his wife’s name as a mere device to cover up and keep from his creditors the assets and profits of a business which is in fapt his own, and the court says: “ It must clearly appear that the wife is the bona fide owner of the capital invested in the business, and that the accumulations which result from the conduct of the business are the legitimate outcome of the investment of her property.” In the case of Murphy v. Nilles, 166 Ill. 107, which is also a case of husband and wife, the above language from the Lachman case is quoted with approval by the court, but it was held in the case there considered that the husband used the wife’s moneys in “ shrewd speculations on his own account,” and for that reason they were subject to the payment of his debts. In this case the proof is clear that Mrs. Spencer was the bona fide owner of the capital invested in the Princess Knitting Works, which was her own business, conducted in her own name, on her own account, and that the profits arising from the conduct of that business were the legitimate outcome of the investment of her property and money, through the services of her agent, who was paid an adequate compensation by her for his work. The fact that the business was remarkably successful should not militate against her, especially so when it fails to appear that she knew anything in regard to Powell’s indebtedness, or that either she or Powell resorted to any concealment or subterfuge calculated to deceive or mislead any one. The case Tripp v. Childs, 14 Barb. 85, is also specially relied upon by counsel for defendants in error. It appears in that case that the very purpose of the contract under consideration, being that of a father, a physician, with his son, to do a medical practice for and in the name of the latter, was to protect the father from the claims of his creditors, of which the son was well aware, and there was no pretense that the father, who professed to be acting as agent for the son, ever paid over any proceeds of the business, and, moreover, the court say of the business done by the father for his son, “ The service was foreign to the son’s business; he had no need or occasion to do business in that capacity.” We do not regard the case as at all applicable here. Mrs. Spencer came into a business of which she knew nothing, and was in immediate need of some competent and experienced person to conduct it for her, and had a perfect right to, and it was the most natural thing imaginable that she would seek the services of such a person as Powell to conduct her business. It is also claimed that the findings of the master, having been concurred in by the chancellor, will not be disturbed unless they are manifestly against the weight of the evidence. We think the rule invoked, even if it may be said to go to the extent claimed, is not applicable here. This is not a case of conflicting evidence, but rather of conclusions to be deducted from the evidence, which is not conflicting. It is elementary that when fraud is charged as a basis for relief, it must be proved. From the evidence in this record and the facts found by the master and the chancellor, we do not think that there can be deduced that clear inference of fraud which is necessary to justify the decree rendered. It is also claimed that the record is not complete, and therefore that this court, by reason thereof, will not consider the merits. The transcript of the record is certified to be according to prcecipe filed. The prcscipe shows that the clerk was directed to include in the transcript all items of the record (specifying the same) necessary to make a complete record. We regard it as sufficient to justify us in passing upon the merits of the case. The decree of the Circuit Court is reversed, but inasmuch as the bill prays for an accounting between Powell and Mrs. Spencer to ascertain what, if anything, was due to the former from the latter, the cause is remanded for the purpose of taking such accounting, if the defendants in error should so be advised. This disposition of the case makes it unnecessary to consider other points made by defendants in error. Eeversed and remanded.