Williams v. Reed

29 F. Cas. 1386, 3 Mason C.C. 405

Opinion

STORY, Circuit Justice,

after referring to the bill, answer, and state of the controversy, proceeded as follows:

This is a case of a very unusual nature, at least in this circuit. The charge in the bill is of fraudulent misconduct on the part of an attorney and counsellor at law, in the management of a suit confided to his care by the plaintiff against one James 'W. Head, his debtor, and in the levy of the execution, which issued upon the judgment in that suit in his .favour for a large amount, whereby the real estate of the debtor has been set off to the plaintiff at a gross overvaluation, and his interests unfairly sacrificed. The charge is of a very grave and important nature; and is doubtless to be listened to by the court with all that watchfulness and attention, which become those, who are called upon to secure an upright administration of public justice. Nor ought it for a moment to be doubted, that as it is the solemn duty of the court to supervise the conduct of its- officers, and to discountenance every malpractice and abuse, that duty, however painful, will be performed with all due fidelity to the public. The conduct of attornies. when brought before the court for inquiry and consideration, ought to be scrutinized with the same exactness and rigid impartiality, as if the question were between mere strangers to the bar. And indeed there may naturally be supposed to exist some solicitude, that every act should be more scrupulously weighed, lest the slightest suspicion should arise, that any person might successfully shelter himself from responsibility for injuries behind the protections of his office. On the other hand, the same indulgence must be allowed here, as in all other cases, to inadvertence, mistake, and honest, though misguided, exercise of discretion.

The bill proceeds mainly upon the charge of fraud; and, if that is not made out in the evidence, it must fall; for it is that alone which comes within the cognizance of this court, sitting as a court of equity. There is. indeed, an allegation in the amended bill, of unskilfulness and negligence in the management of the suit by the defendant in certain particulars. But if this allegation is to be taken, as contradistinguished from fraud, it is not a fit subject of inquiry here. A suit at law will lie for such unskilfulness and negligence. -find the remedy is plain, complete, and adequate; for there is no pretence to say, that any discovery is wanted to establish these facts. It is to establish the fraud, that a discovery is now sought; and the particulars alluded to are examinable here only so far as they contain indications of fraud. In that view they will require comment.

Taking, then, the case to be one of asserted fraud. I have diligently examined and compared the whole evidence, and the result of my judgment is. that the case is not made out. I acquit the defendant of any meditated or intentional misconduct. I do not say, that there are not circumstances upon which one might pause; or, if they stood alone and unexplained, which might draw after them heavy suspicions; but they appear to me overcome by the general current of the evidence, taken in connection with the denials of the answer, in such a manner as to leave no sufficient ground for any imputation of ill faith.

I shall now proceed to state the reasons which have led me to this conclusion, commenting principally upon those points upon which most stress was laid at the argument.

The first point made at the bar is, that the defendant, at the time of his retainer by the plaintiff, fraudulently concealed from the plaintiff the fact, that he was the attorney of one Joshua Head, and that he had previously made an attachment in his favour upon the real estate of the debtor, then under mortgage to the plaintiff; whereby the plaintiff was led injuriously to place his confidence in the defendant, and to submit his interests, in the suit about to be commenced, to the management of the defendant.

The facts are, that on the 8th of March, 1820, James W. Head was indebted to the plaintiff in the several sums of $7000, $3000, $1000, and' $3338.76, for which the plaintiff held four notes of the debtor. At this time the plaintiff held a mortgage given him in September, 1813, as security for the note of $7000, on the debtor’s house and 21 acres of land in the town of Warren, and a landing on George’s river; another mortgage given him in June, 1819, as security for the notes of $3000 and $1000, on a farm of 160 acres in the town of Union, and a tract of land in Warren, called the Limekiln and Landing. Feeling insecure, he applied to the defendant to procure additional security for him, and, in the meantime, to make a secret attachment upon the real estate of the debtor. On the 9th of March, the defendant, accordingly, made an attachment on the real estate of the debtor, and. within a few days after-wards, he obtained some additional security, by mortgages for the debts, but failing to obtain what was deemed adequate, he attached the personal property of the debtor, and the suit was prosecuted to judgment at April term, 1820, of the court of common pleas at Wiscasset, and a recovery had for $14,431.44, debt and costs. It is admitted, that previous to these transactions, to wit, on the 6th of March, 1820, the defendant, as attorney of Joshua Head, had made an attachment of the real estate of the debtor, and among others, of the equity of redemption of the real estates in Warren and Union, which were mortgaged to the plaintiff; that judgment was obtained in this suit at the April term, 1821, of the same court for $2060.07, debt and costs, upon which execution duly issued, and the same equity was sold to one James Head (the son of the debtor,) for $2101. to satisfy the execution. It is also admitted, that the existence of this suit was not made known to the plaintiff at the time of his retainer, nor does it appear to have been made known to the plaintiff throughout its whole progress, though it was pending during the whole year after the plaintiff recovered- his judgment, however material it might have been to guide the plaintiff in his own levy on -the real estate of the debtor. The plaintiff’s execution was, in May, 1820, satisfied in part by a levy on sundry small parcels of land of the debt- or, set off by appraisement at the sum of $S7S5.27, and by an additional levy on his personal estate to the amount of $1145.5S, leaving an unsatisfied balance of about $4500 due to the plaintiff. The argument is that to the extent of the levy under James Head’s execution on the equity of redemption, this concealment has operated injuriously, and that it was a breach of good faith.

I agree to the doctrine urged at the bar, as to the delicacy of the relation of client and attorney, and the duty of a full, frank, and free disclosure by the latter of every circumstance, which may be presumed to be material, not merely to the interests, but to the fair exercise of the judgment, of the client.An attorney is bound to disclose to his client every adverse retainer, and even every prior retainer, which may affect the discretion of the latter. No man can be supposed to be indifferent to the knowledge of facts, which work directly on his interests, or bear on the freedom of his choice of counsel. When a client employs an attorney, he has a right to presume, if the latter be silent on the point, that he has no engagements, which interfere, in any degree, with his exclusive devotion to the cause confided to him; that he has no interest, which may betray his judgment, or endanger his fidelity. In this very case, it is by no means clear, that if the prior retainer had been known' to the plaintiff, he would have entrusted the defendant with the collection of so large a debt, under circumstances calling for the exercise of so much caution and zeal in the execution of his duty. And it is very certain, that the equity of redemption of the mortgaged estates in Warren and Union (which the plaintiff now esteems the most valuable), might have been placed beyond the reach of Joshua Head’s execution by the simple arrangement of continuing the suit, and ultimately leaving the plaintiff’s judgment unsatisfied for the sum of $7000, instead of $5000. The plaintiff might have elected this course, if all the facts had been laid before -him; and, at all events, the right of election ought to have been submitted to his free and independent judgment. It is matter of regret, that no communication to this effect was made to the plaintiff, since it is obvious, that if it had been made, the whole of this heavy charge against the defendant’s honour would have been avoided.

The pressure of this concealment has been made to bear with more severity upon the defendant, by the circumstance of the origin of the debt, and of the defendant’s peculiar relation to the parties. The debt of Joshua Head had its origin in a note payable to him, as guardian of the children of a Mr. Smouse, whose widow the defendant married, and who is, not unnaturally, supposed to take a lively concern in the welfare of these children. The argument is, that this connexion must have operated as a strong motive for the concealment, and that it casts a shade of mala ñdes over the whole transaction. It appears to me. however, that this circumstance has not as much weight as has been attributed to it at the bar. Joshua Head and his surety on his probate bond of guardianship were at the time, and still continue solvent; and as the attachment was already made out at the time of the plaintiff’s retainer, the danger of loss to the children was past, and no stronger motive could operate upon the defendant, if he knew of the attachment, than might operate in case of an attachment by any other client The most, that could be said, is, that the levy on the equity of redemption might have been prevented; but as the attachment covered many other parcels of estate, it might well have been satisfied out of the latter. Still. I cannot but agree, that the delicacy of the defendant's relation to the parties furnished a new motive for the disclosure; for, however well the plaintiff might have known, that the defendant was the general retained counsel of Joshua Head, his ignorance of this particular debt and attachment repels any notion, that he acted with the knowledge of every important fact.

It is said, however, that, in point of fact, the defendant did not, on the Sth of March know, what attachment had been made on Head’s writ, the latter having personally conducted that business with the sheriff. But if the defendant did not know, he might well presume, that an attachment had been made; and it was clearly his duty to have put the plaintiff in possession of all the facts within his knowledge, and thus put him upon inquiry for more definite information. At all events, at the return term of the writ he did know the nature and extent of the attachment, and the knowledge at that time would have been quite as material and important to the plaintiff, as at any antecedent period. Yet an entire silence was preserved, a silence, which it must be admitted, if the other circumstances justified strong suspicions of ill faith, would not be without some significance.

Then, again, it has been said, that the plaintiff afterwards ratified all the proceedings of the defendant, and expressed his satisfaction in the most unequivocal manner. If this were with a full knowledge of all the transactions, the ratification would have a most important bearing. But a ratification, made in ignorance of material facts, cannot give validity to the acts of an attorney in the conduct of a suit, or repel the imputation of fraud. To give any effect, therefore, to any expressions of this nature, ■ the previous foundation must be laid, that there has been a full disclosure of facts on the part of the attorney, and that the ratification is the result of a judgment acting upon knowledge, and not upon a blind personal confidence in the general integrity of the agent. The evidence on this point is not so direct and satisfactory, as might be wished. But taking the testimony of Ludwig, the deputy sheriff, in July, 1821, in connexion with that of Demuth, as to a conversation with the plaintiff in the June preceding, there is much reason to believe, that the plaintiff’s declarations of satisfaction with the defendant’s conduct in July, 1821, was with a knowledge of all the material facts.

But, independently of any such ratification, evidencing a consciousness on the part of the plaintiff, that the defendant acted with entire good faith, and for the substantial interest of his client, there are other circumstances in the case, which go very far to establish, that the concealment of Head’s attachment, however imprudent or incorrect in a legal view, was not the result of meditated fraud, or an intentional abandonment of official duty. Indeed, such a concealment cannot, per se, be deemed evidence of fraud; but it must derive its force and bearing from the other accompaniments of the transaction. If no interest of the client has been betrayed or injured; if no real loss has been sustained; if there has been displayed throughout a proper zeal and devotion in all other respects to the client’s suit, and no motive can be discerned in the concealment, but a misapprehension of duty, the act itself ought not to draw, and cannot draw after it, any imputation of fraud. Men do not perpetrate frauds without some important motive, or sacrifice their professional honour, not only without, but against an apparent interest. The defendant, too, has established some facts in excuse of his silence, which cannot but mitigate in some degree any severity of judgment. He has shown, that the debtor promised him from time to time to pay the debt to Head, and thus to relieve the attachment, and that he gave his own implicit confidence to these assurances. And it is proved beyond controversy, that Head originally required secrecy, as to the existence of his suit, and that the defendant’s subsequent conduct was wholly without any concert with Head, or with the judgment debtor, or with any other party having an adverse interest. If, in addition to these considerations, it shall turn out upon a full examination of the case, that the levy of the plaintiff's execution was conducted with a strict regard to his interest, and that he has sustained no loss, and that Head has gained no advantage by the course adopted by the defendant (a topic, to which I shall hereafter advert), then the conclusion would seem to be irresistible, that the point of fraud cannot be maintained. At present, tben. we may dismiss the question of concealment, as it bears on. the bill only in so far as it corroborates the main ingredients of fraud, arising aliunde.

Another circumstance relied on to establish fraud is the joinder in one writ of all the notes, so that a single judgment was taken upon all, and thereby the debts secured by mortgage were confounded with the other debt, and the plaintiff injured by impairing his mortgage security. The argument is, that •it is now impossible to separate the different items composing the judgment; that the part satisfaction must be applied to the diminution of the mortgage debts, as well as the other; and that thus the mortgage debts will abate pro tanto, and leave much less than the balance due on the judgment covered by that security. And even if this were not the necessary result, still, that it is difficult, if not impracticable, to apply subsequent payments exclusively to the discharge of the unsecured debt. So far as this charge imports unskil-fulness in the management of the suit, .it has already been answered. Whatever may be the remedy at law, there is none for it in equity. Unskilfulness is not fraud, and may be, and often is, connected with the most scrupulous honesty.

That some inconvenience may arise from the consolidation of all the debts of the plaintiff in a single writ cannot be disguised. It has been suggested at the bar, that it was occasioned by a desire to save costs to the plaintiff, the statute of Maine (St. 1821, p. 260, c. 59) having provided, that “where a plaintiff shall at the same court bring divers actions upon demands, which might have been joined in one, he shall recover no more costs than in one action only.” 'There is much probability in this suggestion; but that in a ease, like the present, it ought to have overcome the other important considerations for keeping the secured and unsecured debts distinct from each other is in point of sound discretion more questionable. It however repels in a great measure the imputation of f-raud; and, indeed, it is very difficult to perceive, how the joinder of the debts could have aided any contrivance of fraud to benefit Head's attachment, or to defeat the plaintiff’s rights, unless the conduct of the levy of the plaintiff’s execution was itself collusive. I cannot consider the mere joinder of the debts as gross negligence, presumptive of fraud, or as justly influencing any suspicion derivable from other sources.

Nor am I prepared to admit, that the consequences. assumed at the argument, would legally flow from the joinder of the debts. The mortgage debts were in no just sense extinguished by the judgment; and whenever the mortgages should be enforced in a suit for a foreclosure, upon the hearing in equity to ascertain the amount due every consideration, as to the application of payments and partial satisfaction, would arise, which could be entertained in the ordinary course of a bill in equity. The law is not disputed, that in voluntary payments the debtor may direct the application of them; if he omits it, the creditor may make the application; if neither makes it, the court will marshal the payments according to its own sense of the intention of the parties, and a just administration of equities between them. ² But the present is not the ease of a voluntary payment; but of a satisfaction pro tanto in invitum; and the plaintiff may well be presumed in such a case to make the application in the manner most beneficial to himself. I have no doubt, that it is the duty of a court of equity in such a case to apply the satisfaction primarily to such parts of the judgment, as were not secured by mortgage, leaving the whole balance to rest on the latter.

After all, the case must mainly rest upon the general fairness of .the defendant in conducting the suit and the levy of the execution on the judgment in favour of the plaintiff. The charges are, that the execution was improperly levied on fifteen different parcels of real estate of no income or little value, which were then subject to Joshua Head’s attachment; that the agency of the levy was improperly confided to Ludwig, the deputy -sheriff, instead of the defendant’s giving his own personal cooperation and presence; that the appraisement was a gross overvaluation, nearly one half beyond the real value of the property; that the plaintiff’s debt was reduced to about $5000, when the value of the mortgaged property was nearly double; and that thus the plaintiff lost the benefit of nearly one half of his mortgages, and an equity of redemption was fraudulently created, at his expense, for the benefit of Joshua Head to the full amount of his debt.

These charges require a separate examination. In the first place, as to the charge of improper agency devolved on the deputy sheriff, who conducted the levy. I am not aware of any authority, which has established, that an attorney is bound to give his personal presence at the time of the levy of an execution of his client on real estate. Our laws authorise real estate to be set off in satisfaction of executions at an appraisement to be made by three disinterested freeholders, one chosen by the creditor, one by the debtor, and one by the officer, who executes the process. If the debtor fails to choose, the officer selects for him also. The appraisers are under oath for the faithful performance of their duty; and the property being once pointed out,, or known, there would seem to remain nothing more than the discharge of a ministerial duty. The officer is bound to superintend the whole transaction; the appraisers are presumed to be intelligent and impartial; and it would, therefore, seem to be a case, where the law would not presume the presence of any attorney for either party desirable, much less indispensable. I slionld be sorry to see a different doctrine established. At all events, I will not be the first judge to establish it. There is no pretence, that the officer was not intelligent and faithful, competent to his duty, and zealous for the interest of the plaintiff. Nor is it denied, and if it were, the proofs are clear, that the officer possesses the public confidence. and is worthy of it.

In the next place, as to the value of the parcels of real estate set off on the execution. No imputation has been cast upon the appraisers either in the proofs, or at the argument. On the contrary, it is admitted, that their conduct was pure; and their intelligence and capacity and respectability have not been brought into question. Under such circumstances, it is somewhat difficult to impeach the bona tides of their valuation, or to presume a very gross failure in judgment. How can a presumption of fraudulent overvaluation arise against the defendant, when three discreet and impartial men, under their oaths, sanction the appraisement? From the nature of the case, the actual value of real estate must be a matter of opinion, upon which men of equal skill and honesty may differ in their estimates. To establish such differences is not to impeach their judgment, much less to lay a positive foundation for intentional error. Taking the whole testimony together, I am by no means satisfied, that the weight of it does not substantially support the valuation of the appraisers. At all events, the differences are not more than may be fairly imputed to the ordinary operations of different minds on matters of this nature. Some allowance should also be made for the general habit of estimating real estate on levies by appraisements of its full value, and most favorably to the debtor. If, then, there has been any error, it is attributable, not to the misconduct of the defendant, but to the misguided judgment of the appraisers. It may be the misfortune of the client, but it results from the infirmity of the system of appraisement, and not from the fault of the attorney. My opinion, however, is, that the evidence does not furnish any sufficient ground for just imputation upon any party.

Then, as to the value of the mortgaged property, upon which mainly rests the charge of misconduct in the levy. If that property lias not been greatly undervalued by the defendant, but the balance of $5,000 now due on the execution covers its fair value, then the most pressing allegation of fraud made by the bill is effectually removed. It is certain, that the defendant gave directions to the officer not to reduce the execution below $5.000, upon the avowed opinion, that this sum was the full worth of the mortgaged property. A strong circumstance, relied on to establish a higher value of this property, is the fact, that the equity of redemption was sold' under Joshua Head’s execution for $2,101 to the son of the debtor. This is certainly prima facie evidence of the purchaser’s opinion; and, as the sale was at public auction, it is not unreasonable to presume, that it was a fair bidding. It has been said, that as Joshua Head’s debt was deemed by the debtor himself a privileged debt, which he meant at all events to discharge, this purchase ought to be considered as the mere price of affection, and an offering of filial kindness, unaffected by any real consideration of value. The purchase may have turned upon such a consideration; but tne court cannot assume the fact, and there is no sufficient evidence to support it. The fact, therefore, would have a strong bearing as proof of actual value, if it stood alone; but would not be decisive of fraud, for an honest opinion might be entertained, that the property was greatly overvalued. There is a great deal of testimony in the case on both sides, as to the value of the mortgaged property. The result of the testimony of the witnesses for the plaintiff gives the average value of about $7,000, conforming very nearly to the price for which the equity sold. That of the witnesses for the defendant (who are more than double in number, and equally respectable) gives a little over $4,000. After weighing the whole circumstances, the conclusion, to which my mind has arrived is. that there is a decided preponderance of opinion. that the value did not much, if at all, exceed $5,000. The property in Warren was open to very opposite calculations from the hopes or fears, which the parties might indulge. as to the future. The village had been flourishing; it was now on the decline. The chance of its revival would naturally give rise to opposite conjectures; and these again would materially influence every opinion as to the value of real estate. The factory in Union had an additional element of uncertainty, for manufacturing establishments had experienced, within a few years, great vicissitudes of alternate prosperity and depression. But what is most material is. that $5.000 is the very estimate (if the Testimony is to be believed) which the plaintiff himsolf put upon the mortgaged property with a full knowledge of its situation. That testimony stands confirmed by his conduct upon various occasions; by the additional security of $8.000 required by him at the time of his attachment; and by liis subsequent offer to sacrifice $5,000 of his debt, if the debtor or his friends would secure an absolute payment of the residue. This conduct could not but produce some impression upon the mind of his attorney; and it is surely no proof of fraud, that 1ns estimate, however low, is supported by that of very numerous respectable witnesses, and has commended itself to the plaintiff’s own judgment. Nor should it be forgotten, in tins view'of the case, that if Joshua Head’s execution had not been satisfied by the sale of the equity of redemption. it might have been satisfied by a levy on the other real estate, of which the plaintiff lias now had the entire benefit. It is not true, therefore, that the equity of redemption has been created or sold at the plaintiff’s expense. And yet the whole fabric of fraud, which the bill so studiously constructs, rests on this as its principal foundation.

There are other circumstances in the case, which have been relied upon by the parties, either to fix or to repel fraud; but I forbear to comment on them. The merits of the case stand on those which have been already discussed; and if those fail, there is an end of the controversy.

I feel entire confidence, that it is my duty to dismiss the bill, and I shall pronounce and decree accordingly. Bill dismissed.

2 See Heyward v. Lomax, 1 Vern. 24, and Raithby’s note 1; Wilkinson v. Sterne, 9 Mod. 427; Perris v. Roberts, 1 Vern. 34; 2 Pow. Mortg. 1120, 1121; Clayton’s Case, 1 Mer. 604; Manning v. Westerne, 2 Vern. 606; see Poth. Oblig. pt. 3, art. 7, c. 1; Id. arts. 528-530 et seq.