Grand Rapids Safety Deposit Co. v. Cincinnati Safe & Lock Co.

• Decision Date: 23 April 1891
• Citation: 45 F. 671
• Parties: GRAND RAPIDS SAFETY DEPOSIT CO. v. CINCINNATI SAFE & LOCK CO. et al.
• Court: U.S. District Court — Southern District of Ohio

45 F. 671

GRAND RAPIDS SAFETY DEPOSIT CO. v. CINCINNATI SAFE & LOCK CO. et al.

United States Circuit Court, S.D. Ohio, Western Division.

April 23, 1891

Wilby &amp Wald and Montgomery & Bundy, for complainants.

Follett & Kelly, for defendants.

ON MOTION FOR NEW TRIAL.

SAGE J.

The argument by counsel for the defendant upon motion for a new trial omits the consideration of the rules of law which control the case. Goodrich, the agent of the promoters who subsequently organized the plaintiff corporation, and became its sole original stockholders, made a contract with the defendant company for a safety vault for the uses of the corporation. The defendant agreed with him to furnish and put up the vault for the sum of $7,250, but upon his request the consideration expressed in the contract was $13,000, which was the amount paid by the plaintiff company, as follows $7,250 in cash, and the residue in capital stock, issued by the company at par, to Goodrich, in consideration of his supposed payment of the amount thereof on account of said contract. The contract shows upon its face that Goodrich was acting for the promoters on behalf of the corporation about to be formed. There can be no possible doubt, either in law or in fact, that the defendants were chargeable with notice that Goodrich was acting as an agent. Now, there is no proposition of law relating to agency better settled than that the agent must be loyal to his trust, and that he may not deal in the business of his agency for his own benefit. Whart. Ag. Sec. 231 et seq.; Mechem, A. Sec. 454 et seq. From this principle results the other rule that all profits made and advantages gained by the agent in the execution of his agency belong to the principal. Ringo v. Binns, 10 Pet. 269. Even if it be shown that the principal was not in fact injured by the intervention of the agent in his own behalf the result is the same. Gardner v. Ogden, 22 N.Y. 327. If the agent, dealing with the subject-matter of his agency acquires a profit for himself, the law will compel him to account for and transfer to his principal the profit thus acquired. Mechem, Ag. Sec. 469, and cases cited. This is by reason of a principle which applies as well to trustees, who may be held to account for all profits realized by their use of the trust funds for their own benefit. In this case the transaction was accomplished by fraud and deceit. It could not have been carried into effect without the connivance and active co-operation of the defendants. No only did they insert the false and fraudulent statement of consideration in the contract, but later the defendant company (for this particular incident is not shown to have been participated in by the defendant Halliday) furnished to Goodrich, to be by him exhibited to the plaintiff, a statement of account showing a false credit of $5,750 for a payment purporting to have been made by him.

It is elementary that all who participate in the perpetration of a fraud are to be regarded as principals. The defendants are therefore liable for the amount which was realized by Goodrich by reason of the fraud. This being so, and the facts not being in dispute, the court properly charged the jury to find a verdict in favor of the plaintiff for $5,750, being the amount realized by Goodrich for his own benefit out of the transaction.

To the argument of counsel for the defendant that, inasmuch as Goodrich became the holder of $8,000 of the...