Ward v. United States (81 U.S. 28)

IN error to the Circuit Court for the District of Michigan.

This was an action of assumpsit brought by the United States against one Ward to recover the sum of $45,000-so much money had and received by the defendant to the use of the plaintiffs.

The whole of the testimony was embraced in a bill of exceptions.

The facts out of which the implied promise was supposed by the United States to arise were thus: In the years 1856 and 1857 the Detroit and Milwaukee Railway Company were building their road, and were in an embarrassed condition, in which it became important to them to obtain the delivery of their iron rails by giving rewarehousing bonds with surety. To obtain acceptable sureties they offered to pay a large compensation for the use of the names of responsible persons, and in that way the defendant became surety on numerous bonds of the corporation, given to the plaintiffs at various times, amounting to over $90,000. This railway company, while these bonds were unpaid, was sold out, with all its property and franchises, and was purchased by a new organization under the laws of Michigan, which took the name of the Detroit and Milwaukee Railroad Company, and this latter company, in the process of transmutation, made or recognized a lien on the road and other property in favor of the United States for the whole or a part of the debt evidenced by these bonds, but denied any liability on the part of the corporation for those bonds; and it seemed probable that both the defendant and the agents of the United States were ignorant of the existence of this lien until after a compromise (hereafter to be mentioned) of the bonds. At this stage of the proceedings the defendant was the only solvent surety, and he insisted that he was discharged by the dealing of the plaintiffs with his principals. In this state of things the bonds were placed in the hands of the District Attorney of the United States for suit.

All this appeared from a stipulation entered into between the parties to the suit, and 'given in evidence on the trial by the counsel of the plaintiff to prove the issue on its part.' The paper so given in evidence thus began:

'It is stipulated by counsel for the defendant that the following statements are facts, and that the same may be admitted in evidence upon the trial of this cause on the part of the plaintiffs.'

Among these statements was this one:

'That in April, 1863, the board of directors of said railroad company was applied to by the defendant verbally to make a proposition of compromise of said bonds, which was put in writing by the president, on the 14th day of May, as follows:

DETROIT AND MILWAUKEE RAILROAD CO., DETROIT, May 14th, 1863.

CAPTAIN E. B. WARD.

MY DEAR SIR: Referring to the conversation we have had on the subject of the duty bonds due the United States, I am authorized to say that if you can precure the settlement and cancelling of them for a sum not exceeding $80,000 currency, that sum to include your services and any claim you may have against the company on account of those bonds, this company is ready to pay, and will pay that sum; one-half on your making the arrangement with the government, and the other half within thirty days thereafter. This offer, however, not to be considered as waiving any defence the company has to said bonds and claims.

Yours truly,

C. C. TROWBRIDGE, President.

'And that subsequently, in April, said board did verbally make the said defendant the said proposition.'

The plaintiffs also introduced as a witness, Trowbridge (the party signing the proposition above set out), and he testified that though he had not heard the first conversation between the board and defendant, he afterwards heard of it from Mr. Brydges, managing director, or from Mr. Emmons, counsel for the company, and that after this and upon reducing it to writing, in answer to the question of the defendant, as to what the board had decided as to his proposition, he repeated it orally to the defendant as he understood it, and as so stated, and as he understood it, it was fully expressed in the letter of May 14th. Trowbridge had become president of the company during these transactions.

After his interview, above mentioned, with the directors of the company, Ward had a conference with the District Attorney of the United States, in which, while denying his liability, he offered to pay $35,000 in full for the delivery of the bonds on his own account, whether the company did or did not furnish the money, as he hoped they would; saying, 'that the company was apt to be behind when money was to be paid out.' This offer was afterwards accepted, and the $35,000 was paid and the bonds delivered to Ward.

It was conceded as part of the case that the agents of the United States had no knowledge of the offer of the company to pay the $80,000 when Ward made his proposition, nor until after the bonds were delivered and the $35,000 paid and accepted as a compromise; and further conceded that Ward received the $80,000, and had part of it, or all, in his hands when the compromise was finally accepted.

The District Attorney of the United States becoming acquainted with what had passed between Ward and the company, and especially with the proposition about the $80,000, demanded the sum of $45,000 (the difference between this sum just named and the $35,000 paid), alleging that it had been paid to Ward for the purpose of being delivered to the government, on a compromise of their claim against him and the road. Ward, insisting that he was under no sort of obligation to pay any sum to the government, as the compromise had been fair, stated nevertheless, that since making the compromise he had learned of the making or recognition by the new company of the lien on the road and other property in favor of the United States for the debt evidenced by the bonds, and as that might have put the claim of the government on a better basis than it stood before, he was willing to pay over a check for $22,028. He did accordingly pay it over to the government agent, but before it was presented at bank, stopped the payment of it. At the time when the check was given, Ward said that in giving it he was doing better by the government than he was doing by himself; that the government were getting about 75 per cent. on their claim, while he was getting only some 55 per cent. on what he claimed.

It was upon this state of facts mainly that the United States asserted that the entire $80,000 was money had and received by Ward to their use, and sued for the $45,000 not paid over.

The defendant's counsel requested an instruction to the jury that there was no evidence from which they could infer any other contract between the defendant and the railroad company concerning this $80,000 than the one found in the written proposition. The learned judge refused, however, this request, and charged the jury that there was evidence tending to show that the written proposition of May 14th, 1863, did not fully evidence the terms made to the defendant by the railroad company in April, when he made the proposition of compromise to the district attorney, and added:

'I do not deem it necessary or expedient to say what the legal effect of that proposition is, as if, in your opinion, it is but a partial expression of the arrangement, or is different from the oral arrangement of April, a construction would only tend to complicate your inquiries.'

The jury were also told that it was for them to find what the arrangement or proposition was between the railroad company and the defendant in reference to a compromise of these bonds, and whether there was any other different proposition than that reduced to writing May 14th, 1863, or whether that evidenced the precise terms of the arrangement between the company and defendant when the latter opened negotiations with the district attorney. They were told also that upon their finding in that respect would depend their verdict.

There were several other prayers for instruction asked by the defendant's counsel and refused by the court, on which error was assigned; among them these:

'That the proposition of May 14th did not constitute the defendant the agent of the company to pay over to the plaintiff the sum of $80,000, or any given sum, but that under it he was at liberty to make any arrangement he saw fit with the plaintiffs for a settlement and cancellation of the bonds held by them.

'That if the jury find that said $80,000 was paid to the defendant by the railroad company under the said proposition, the plaintiffs are not entitled to recover any portion of the money thus paid to him, as in such case it was not paid to the defendant for the use of the plaintiffs, but to pay him in full for his own services and claims, and for procuring the settlement and cancelling of the bonds held by the plaintiffs, and for the delivery of the same to the railroad company.

'That even if the jury find that the defendant was guilty of either fraudulent disclosures or concealments in his negotiations with the plaintiff and thereby obtained the compromise in question, the plaintiff cannot recover in this action, unless they find under the charge of the court that the whole $80,000 was specifically paid to the defendant to pay the plaintiff.'

But the court refused to give any of these instructions. It charged, also,

'That the defendant Ward was in conscience and equity bound under the circumstances of the interview, when he offered $35,000 in the compromise to the attorney of the government to disclose whatever information he possessed, not accessible alike to both parties, which would materially affect or influence the decision of the government in coming to a conclusion upon the offer of $35,000, so that if he misrepresented or concealed any material fact which the government ought to have been informed of, and thereby obtained a surrender of the bonds for a less sum than would have been demanded had the government been fully advised, the government is not bound to abide by the settlement.'

Verdict and judgment having been given for the United States for the $45,000 claimed, with interest, the defendant brought the case here.

Messrs. C. J. Walker and G. F. Edmunds, for the plaintiff in error:

1. There was no evidence tending in the least degree to prove that the $80,000 was paid to defendant under any other proposition or arrangement than the written one of May 14th, 1863.

There is not a scintilla of evidence that tends to show that the original verbal proposition differed from the written one. It was the proposition of compromise of the bonds which was put in writing by Trowbridge, the president, on the 14th of May, for which the defendant verbally applied in April, and no other or different one, and it was the said proposition that was embodied in the written proposition, which the board verbally made to the defendant subsequently to his application for the proposition from the company.

Whether there was evidence tending to prove that the original verbal proposition was different from the written proposition was a question of vital importance. This, under the charge of the court, was the hinge upon which the controversy turned. And the refusal to charge as requested, and the charge as given, substituted conjecture for deduction, and could hardly fail to mislead and confuse the jury.

But whatever may have been the character of the verbal proposition made before the money was paid over, there was no evidence tending to show that it was actually paid over to defendant upon any other proposition than that of May 14th, or for any other purpose than that mentioned therein.

2. The court erred in refusing to give any construction to the written proposition or contract of May 14th.

According to the very theory of the charge of the court, the jury were at liberty to, and might well have found, that the proposition or arrangement under which the defendant received the $80,000, was the written one of May 14th. On that hypothesis it was clearly the duty of the court to give construction to this written instrument. There was vital error in refusing to give such construction. It left the jury to give any construction they saw fit to this most important instrument, upon which the rights of the parties turned.

3. The defendant was entitled to the instructions that he asked as to the meaning of the proposition of May 4th.

The instrument is to be read in the light of surrounding circumstances. A compromise was contemplated, not of one claim, but of two; the claims both of the defendant and of the United States. To effect this compromise the company were willing to pay $80,000, and they proposed to the defendant that if he would discharge his own claim and procure a settlement and cancellation of that of the plaintiffs, they would pay him $80,000. He was at liberty to make the best bargain with the plaintiffs that he could; to pay them in cash or to get time, or to pay in anything else that the plaintiffs would receive. All that the interests of the company required was the discharge of the two claims. The $80,000 was to be paid in one entire sum for the double purpose; not a part, proportionate or otherwise, to apply on the claim of each. They may have expected that it would have cost the defendant more than it did to take up the bonds held by the plaintiff, but that expectation, if proved, would have nothing to do with the construction of the paper. That left him at liberty to make the best bargain he could with the plaintiffs, and he was to have for himself all that remained, were it more or less.

Mr. G. H. Williams, Attorney-General, and Mr. B. H. Bristow, Solicitor-General, contra:

1. There was nothing which would have justified the court in instructing the jury, as requested, that the evidence tended to show that the money was paid by the company under the written proposition of May 14th. On the contrary, the evidence rather tended to show that the verbal proposition, made by the board of directors in April, was in reality the one under which it was paid. Trowbridge, who reduced the proposition to writing in the form of a letter addressed to the defendant, testified that he heard nothing of the defendant's application to the company until after it occurred, and that his first information respecting the proposition made to the defendant came from the managing director, or from the company's attorney; that after receiving this information, and before writing his letter, he, in response to an inquiry from defendant, repeated orally to the latter the proposition as he understood it, and that the proposition as he understood it was fully expressed in said letter. The verbal proposition was the one upon which the defendant acted in treating with the plaintiff's attorney for the compromise, and which the defendant must be presumed from his conduct to have relied upon, and there is no evidence that it was superseded by any other; for the written proposition of May 14th was not put forth as an independent proposition, designed to take the place of the previous verbal proposition, but merely as a memorial of the latter as it was understood by the writer.

The whole case indicates, indeed, that the written proposition was an afterthought; a contrivance to conceal an irregular transaction. The claim which really disturbed the company was not the defendant's but that of the government, and to settle it the $80,000 was given to Ward. Having by his fraudulent concealments got them to take less than half the sum, he adroitly gets the written letter in order that he may apply the balance to his own use.

2. If this was all so, there was no need of the court giving any construction to the letter of May 14th. But if there had been such need, the requests of the defendant, on this subject, should not have been granted; for the view taken by him of the meaning of the contract-on an assumption of which meaning as true, the requests for instruction were founded-was an erroneous view.

What the defendant undertook to bring about, and actually succeeded in bringing about, was a compromise-not as between himself and the company, nor as between himself and the plaintiff, but as between the company and the plaintiff. In this affair he was their common negotiator, the gobetween or mutual agent of both parties. There was, considering the nature of the undertaking, no incompatibility in the office thus assumed by him. There existed, then, such a fiduciary relation between the plaintiff and the defendant as to devolve upon the latter the obligation of making a frank and full disclosure of any fact which might influence the judgment of the former in making the compromise.

From this point of view, it appears that there was no error in rejecting the instructions requested, as to the construction of the proposition of May 14th.

Mr. Justice MILLER (having stated the case) delivered the opinion of the court.