
    James B. Healey, Plaintiff, v. C. Grayson Martin et al., Defendants.
    (Supreme Court, Kings Special Term,
    December, 1900.)
    Principal and agent — Former defrauded by latter’s false statement of the price of land to be purchased — Restoration.
    Where an agent induces his principal to convey certain parcels of land by falsely representing to him that they are necessary to the consummation of a purchase of other real estate which the agent is buying for the principal, the latter may recover the parcels of the agent, and of confederates in the transaction to whom one parcel has been transferred, without restoring anything where the defendants have never paid nor parted with anything in return for the parcels.
    Action to recover hack seven parcels of land upon the- theory that defendant Baxnaby and the defendants Martin had conspired to defraud him by inducing him to believe that said seven parcels of land were needed, used and transferred to- Mr. Heed in part payment for the Fifth -avenue property, when, in truth and in fact, it was not so needed, used or transferred.
    Henry Daily, Jr., and Benjamin F. Tracy, for plaintiff.
    M. A. Vosburgh and E. J. Meyers, for defendant Barnaby.
    G-. S. Hubbard and W. N. Dykman, fo-r defendants Martin.
   Mattice, J.

In the early .days of January, 1899, the plaintiff made the defendant Barnaby his agent for the purpose of buying certain real estate situated on Fifth avenue and nineteenth street, in the city of Hew York.

Barnaby had informed the plaintiff that one William G. Beed was the owner of this property, and that he had personally seen Mr. Beed, who wanted $350,000, but would take in payment therefor $250,000 in cash, and deeds of seven parcels of land belonging to the plaintiff, situated in the boroughs of Brooklyn and Hew York, which are described in the complaint in this action.

As a matter of fact, Barnaby had not personally seen or had any conversation or communication with Mr. Beed. The plaintiff personally examined the premises which he desired to purchase, and then, as before stated, instructed Barnaby to make the negotiations.

About the same time, and on the 9th day of January, 1899, the defendants Martin purchased the Fifth avenue property of Mr. Beed, through his brokers, for the sum of $250,000. The contract of purchase and sale was put in writing, in the name of John Gr. Schawe, as dummy for the Martins. At the time of the execution of the contract, the Martins paid to the owner, Mr. Beed, or his brokers, the sum of $10,000. The contract provided that the balance of the purchase price should be paid on the 10th day of March, 1899, at which time the deed should be delivered.

Before that time arrived, and on the 25th day of January, the plaintiff made and executed proper deeds of his said seven parcels of land, in which the defendant James W. Golden was named as grantee, and delivered the same to his agent, Barnaby — Barnaby having told the plaintiff that Golden was the private secretary of Mr. Beed and that it was Mr. Beed’s desire that the title should be taken in Golden’s name. Barnaby thereupon delivered to the plaintiff the deed of the Fifth avenue property, executed by Mr. Beed.

The plaintiff then executed two mortgages on the Fifth avenue property, one for $200,000 to the Lawyers’ Mortgage Insurance Company, and one for $50,000 to the wife of defendant Barnaby. Barnaby had told the plaintiff, before the titles were passed, that he would procure the necessary loan of $250,000.

It appears thát the defendant Golden was not the private secretary of Mr. Beed, but was the representative — or dummy, so-called — of the defendants Martin. ¡Reed did not know Golden, nor the plaintiff, nor Barnaby. In fact, he knew nothing whatever about the transactions with the plaintiff. All ¡Reed knew about it was, that he had sold his Eifth avenue property by contract of January ninth, for $250,000, had received $10,000 cash payment, and, about January twenty-fifth, received the balance and executed the deed which named the plaintiff as grantee.

After the titles were passed on the twenty-fifth day of January, plaintiff went into possession of the Fifth avenue property, and collected the rents, through his agent defendant Barnaby. Barnaby retained a certain amount of the rents in payment, or part payment, for his commissions in making the sale, or transfer, and continued to so collect until August of the same year, when plaintiff discovered that Mr. Reed did not receive the seven parcels of land which he, plaintiff, had supposed was a part of the purchase price.

Plaintiff then discharged Barnaby as his agent, and brought this action to recover back the seven parcels of land, upon the theory that defendant Barnaby, and the defendants Martin, had conspired to defraud him, by inducing him to believe that his said seven parcels of land were needed, used and transferred to ¡Mr. Reed in part payment for the Eifth avenue property, when, in truth and in fact, it was not so needed, used or transferred. In other words, that these defendants had practically robbed him of the seven parcels of land.

Hone of the defendants gave evidence upon the trial except Golden. He testified that he was the mere dummy of the defendants Martin — permitted his name to be used as grantee for their benefit, at their request, and that he had no interest whatever in the result of the action.

It appears from the evidence that the Eifth avenue property, which plaintiff received, was fairly worth between $285,000 and $300,000, and that plaintiff’s equity in the seven parcels of land, over and above certain incumbrances, was about $53,000.

A short time before the transaction in question, plaintiff entered into an executory contract with defendants Martin to exchange the seven parcels of land for what was termed the “ reservoir ” property. This contract was to have been performed January 15, 1899, but, before January first, the Martins declined to perform, or had put it out of their power to perform, by selling the “reservoir” property to another party, alleging as a reason that one of the parcels of plaintiff did not contain the amount of land stipulated in the contract. In any event, it is quite clear that, on the first of January, all the parties knew that the contract would not be performed.

The history of the transactions with which this suit is concerned commenced about January first. It seems that about January first, Mr. Reed, the owner of the Fifth avenue property, placed it in the hands of his broker for sale. This broker immediately sought out the defendants Martin, and offered it for sale for $300,000. About the same time, Bamaby, who did not know Reed, or his broker, sought the plaintiff and informed him that he knew of this property, and that it could be bought for $350,000. Barnaby had several interviews with the plaintiff, extending over several days, in which he falsely represented that he was dealing directly with the owner, Mr. Reed, and in which he falsely stated the asking price. Plaintiff inspected the property, and finally authorized Bamaby to make the exchange. During the same time, the defendants Martin continued their negotiations with Reed’s broker, endeavoring to secure the property for $250,000:

About the ninth of January, Reed’s broker agreed to sell for $250,000, and, accordingly, the contract of January ninth was made. This contract was made just about the time Bamaby had succeeded in getting the plaintiff to authorize him to buy the property for $250,000 in cash, and his seven parcels of land, the equity in which was fixed at $100,000.

Bamaby told plaintiff he would procure the loan of $250,000 for him. Unknown to the plaintiff, the Martins assisted in procuring the loan for him, and applied for an examination of the title for him, as appears by the testimony of the president of the Lawyers’ Title Company and Lawyers’ Mortgage Company.

Plaintiff never had any conversation with the Martins, and Barnaby never had any conversation with Reed, or his broker; therefore, it is clear that all the knowledge the Martins possessed as to the plaintiff’s willingness to become a purchaser, and the amount he would give, and that he desired a loan, was imparted to them by Barnaby. All the knowledge Barnaby possessed as to the willingness of Reed to sell, and what it could be obtained for, came from the Martins. The Martins were not present at the passing of title. It seems that Barnaby acted for the Martins at that time, produced the deed executed by Reed, and delivered it to the plaintiff:; took the deeds executed by the plaintiff, with Golden named as grantee. A representative of the Mortgage Company was present to take the mortgage and deliver the check for $200,000, which plaintiff indorsed and gave to Bamaby. Whether Bamaby ever actually delivered the deed of the Brooklyn parcels to Golden, or the Martins, does not appear, except that the deed was recorded the twenty-sixth of January, and was produced on the trial by counsel for the defendants.

The Martins went into possession of the parcel known as the Park avenue property, collected the rents and finally sold it. Barnaby commenced at once to collect the rent of the six Brooklyn parcels, and has continued to do so ever since. Mo attempt was made by the defendants to explain why Bamaby collects the rents of the Brooklyn parcels, and it is, therefore, safe to assume that it cannot be explained, except upon the theory that he does so as the equitable owner, the legal title being in Golden. This leads to the conclusion that Bamaby and the Martins divided the plaintiff’s property, Barnaby taking the Brooklyn parcels, and the Martins taking the Mew York or Park avenue parcel.

If Bamaby had not been the plaintiff’s agent, then it might be claimed that the Martins and Barnaby had the right to make all they could, so long as the plaintiff got all he bought, and paid no more than he agreed to, and was not in fact damaged, and that plaintiff would have no remedy except the one based upon the doctrine of rescission.

Mo such rule applies in this case. Bamaby was plaintiff’s tmsted agent, to negotiate for plaintiff’s benefit and not his own, and the Martins must have known of the existence of that relation. Barnaby acted for plaintiff in the former negotiations in reference to the “ reservoir ” property, at the time Schawe signed for the Martins. Schawe says he was their dummy in that contract, and Barnaby conducted those negotiations for plaintiff. Those negotiations ended about the time these began, and related to the same seven parcels of land. If the Martins did not know that Bamaby was plaintiff’s agent, but supposed he was their agent in this transaction, it was their duty to explain upon the trial.

I think the evidence justifies and requires the conclusion that the Martins knew that Bamaby was plaintiff’s agent, and that he was engaged in an attempt to defraud the plaintiff out of his equities in the seven parcels, by false representations. The Martins evidently did not close their negotiations with Beed, and enter into the contract of January ninth, until Barnaby had informed them’ what plaintiff had concluded to do.

It is claimed that the Martins had a perfect right to ascertain from the plaintiff’s agent, Bamaby, if plaintiff would give the $250,000 and deeds of the seven parcels, before they made the contract to purchase of Beed for $250,000, and thereby make a profit for themselves of the value of the equities in the seven parcels. That would be so if the Martins did not know of Bamaby’s fraud, and were acting in good faith, expecting to reap for themselves the benefit of the value of plaintiff’s equities in the seven parcels as profit. The circumstances, however, forbid that construction. In the first place, it is safe to assume that Bamaby made the fraudulent representation for the purpose of gain. If the Martins got the equities in all the parcels, Barnaby would not make anything by reason of the fraud. Barnaby collects the rent on six parcels from the very moment of the transaction to the time of the trial. The Martins collect the rent of the other parcel — the Park avenue property. The Martins knew that plaintiff parted with' all of the seven parcels. They paid their dummy — the defendant Golden — to become the grantee of all the parcels. My conclusion is that Barnaby and the Martins arranged that Barnaby should have the six Brooklyn parcels, and the Martins the Park avenue parcel.

This division of the property between the defendants Martins and Bamaby, whereby Bamaby the agent received the major part of it, characterizes the whole transaction. It may never appear just how much the Martins knew of, -or participated in, Bamaby’s fraud; nor is it necessary to inquire. The very fact of this division, whereby Bamaby gets property amounting to over $40,000, convinces me that the Martins knew that the agent was practicing a gigantic fraud upon his principal. They assisted him at the very outset by purchasing the property of Beed January ninth, immediately after Bamaby had obtained the plaintiff’s consent to purchase, then assisted in procuring the loans; requested one of the officers of the Lawyers’ Title Company to see that the “matter goes through smoothly and nicely; ” kept in the background at the passing of titles; permitted Bamaby to act for them, and concealed the identity of Golden. These and other circumstances convince me that the final division of what may properly be termed the “spoils” was the reward the Martins received for their active participation in Bamaby’s fraud, or for the assistance they rendered him in his successful effort to defraud the plaintiff.

Plaintiff’s equities in the Brooklyn parcels were worth as follows:

In the parcel described in the second paragraph of the complaint................................. $12,000

La the parcel described in the third paragraph...... 17,000

In the parcels described in the fourth, fifth, sixth and . seventh paragraphs ......................... 14,000

$43,000

Plaintiff’s equity in the Park avenue property, described in the first paragraph of the complaint, was worth....................................... $10,000

Bamaby was the chief actor and reaped the greater benefit. The Martins assisted him with knowledge of the fraudulent scheme.

The doctrine of rescission, so ably presented and elaborately discussed by counsel for defendants, has no application here. The familiar principle that the person defrauded must offer to restore what he has received before he can demand restoration of that which he has parted with, does not apply in this case. Neither Bamaby nor the Martins parted with anything, so there would be nothing to restore. The contract of purchase between the Martins and Reed, January ninths was made by the Martins, as we have seen, in furtherance of the scheme to defraud, and not in good faith, to obtain title for themselves.

It is simply like the case of an agent falsely representing to his principal that he has paid a greater sum for him than he actually has, and pockets the difference. Clearly, the principal can maintain an action to compel restoration or payment.

Plaintiff is entitled to judgment for the relief demanded in the complaint, with costs, and an extra allowance of $1,000.

Judgment for plaintiff, with costs.  