Roman v. Mali

Alvey, J., delivered the following opinion, which was concurred in by Judges Bowre and Brent: A careful examination of the record in this case cannot fail for a moment to convince any one that, in the transfer and concealment of the property of Mali, in the name and apparent ownership of Roman, a gross fraud was perpetrated upon the creditors of the former. But, in the view of a majority of this Court, Mali was not less guilty in the ⁵³² intent-and practice of that fraud than Roman; they were clearly, according to our apprehension, in pari delicto. And as this suit is in effect an application to a Court of conscience, hy one of the guilty parties, to have enforced the fraudulent and corrupt agreements, whereby he has succeeded in cheating and defrauding his creditors, we are decidedly of opinion that the Court should withhold its aid. We are not unmindful of the fact, that there are exceptions to the general rule, that Courts of Justice will not actively interpose for the relief of a party who has been particeps criminis in an illegal or fraudulent transaction ; and that one of the exceptions is, where the party suing, although paticeps criminis, is not in pari delido with the adverse party.

There may be different degrees of guilt as between the parties to the fraudulent or illegal transaction ; and if one party act under circumstances of oppres-. sion, imposition, undue influence, or at great disadvantage with the other party concerned, so that it appears that his guilt is subordinate to that of the defendant, the Court, in such case, will relieve. But we have examined the record in this case in vain to find any evidence whatever of those circumstances that should entitle Mali to the benefit of the exception to-the general rule. On the contrary, it is most fully and clearly shown that he was a man of intelligence, of large business habits and experience, and of considerable pretensions in the world, and by no means such a person as would be liable or likely to be inveigled, misled, or unduly influenced, by the fraudulent suggestions and advice of Roman. The whole transaction, from the beginning to the end, was the joint scheme of the two, the one co-operating with the other, and both being equally ■guilty, to withdraw and conceal Mali’s property from the pursuit of his creditors; and having accomplished that object, and gotten rid of his creditors hy a composition founded upon his fraud and deception, Mali now seeks to ⁵³³ have the property restored to him, through the instrumentality of a Court of Equity; and that too after the lapse of sixteen or seventeen years from, the time of the original perpetration of the fraud, and after the death of his confederate in the transaction.

Whether the relation of client and attorney, in its full and proper sense, existed between Mali and Roman at the time of the concoction of the fraud, admits of great doubt, whatever may have been their relation afterwards. Mali has sworn that no such relation did exist, and that Roman held no property in which he, Mali, was interested; and we think he should be forever estopped to deny the truth of his sworn testimony upon the subject. But oven conceding that the relation of client and attorney did exist, we think there is no well established rule of law that requires, under the facts disclosed in this case, that the Court should allow such effect to that relation as to form an exception to the general rule before stated. By so doing the attorneys would form a special class from which assignees would be sought in all cases where parties desired to cheat and defraud their creditors, by the assignment of their property.

The general rule, by which all relief is withheld, might deter a party from conveying his property to an unprofessional person, but under the exception to that general rule, sought to be established in this case, if an unprincipled and fraudulent attorney could be found, the party could deal with him with impunity, being secure in the full protection of all the remedies administered by the Courts, for the restoration of the property after the fraudulent object had been accomplished. The general rule to which wc have referred is most salutary and conservative, as a means of suppressing illegal and fraudulent contracts, and nothing should be done by the Courts to weaken its force and operation. The suppression of such illegal and fraudulent transactions is far more likely, in general, to be accomplished by leaving the ⁵³⁴ parties without remedy against each other, and thus introducing a preventive check, than by enforcing them at the instance of one of the parties to the fraud; and no where ..has this doctrine been more unqualifiedly adopted than in this State. Stewart vs. Iglehart, 7 Gill & John., 132; Freeman & Sedwick vs. Sedwick, 6 Gill, 28 .

Public morals, public justice, and the well established principles of judicial tribunals, alike forbid the interposition of the Court to aid in the enforcement of a transaction like the present. The law leaves the parties to such transactions as it found them -, and if either has sustained loss by the bad faith of a particeps crimihis, it is but a just infliction for premeditated and deeply practiced fraud, which, when detected, should deprive him of all anticipated benefit, or subject him to irrecoverable loss. Bartle vs. Coleman, 4 Pet., 187 . (Decided 8th June, 1875.) Whether, the confidential letter of Roman to his wife, exhibited in the record, contains such a declaration of trust in favor of Mali as may be enforced, we are not now called- upon to decide, and in regard to which we intimate no opinion whatever ; but the present bill will be dismissed without prejudice to any right that the appellee may have in that behalf.

Decree reversed, and hill dismissed. Stewart, J., filed the following concurring opinion : From the proof adduced in the cause, there would be no difficulty in the establishment of the trust asserted in the bill, if the complicity of the complainant in the fraud to elude his creditors, did not incapacitate him according.to the well settled rules of law, from maintaining his claims. Resulting trusts are expressly excepted, by the 8th section of the Statute of Frauds from its operation. ⁵³⁵ Both upon reason and authority, there is no doubt, i parol proof of facts and circumstances, may be adduced in a Court of Equity, to establish such trusts. Dryden vs. Hanway, 31 Md., 254 .

It is quite obvious, that there is abundant evidence in this case, to show that the property in question, was mainly, if not entirely purchased by means and'moneys advanced to Eoman by Mali. It is equally manifest that these parties, Eoman and Mali, were in fraudulent collusion to have the funds of the latter so invested in the property, as to evade the claims of his creditors. Under such circumstances, that is, where two or more persons have been engaged in a fraudulent transaction to injure another, it is the established rule, that neither law nor equity will interfere to relieve either as against the other, from the consequences of their misconduct. Freeman vs. Sedwick, 6 Gill, 28 .

This principle, in the administration of justice has its foundation in reasons of public policy. The Courts have uniformly considered it the better and more effectual way to discourage fraud, not to interpose and adjudicate between the participants therein, except where their action may be necessary, to counteract the fraud. The contract between such parties is enforced or avoided, as may best answer that purpose. To allow the complainant to succeed through the Courts, in the recovery of the property in question, would not have the effect to counteract the fraud, but to render it successful.

By permitting Eoman to hold it, it is true, he derives a benefit from the fraud, but that is through Mali’s agency, and the Court as between them, will not interfere for the reasons stated. As to the effect of the fraud upon the interest of both delinquents in such cases, if the Courts had the power, ⁵³⁶ probably the better disposition to make of property thus perverted, would be to condemn it .to public uses, after satisfying any just claims thereon; and thus deprive both of any right to hold it. That Mali was very much under the guidance and direction of Roman, as the leading and master spirit in the fraudulent conspiracy, would seem to admit of no doubt; but that he was influenced by him to such extent, as to excuse and relieve him from the operation of the rule, is a proposition not to be defended, except at the sacrifice of the rule. To relax the rule in cases where the relation of counsel ;and client existed, in favor of the latter, and make his .'case per se, an exception, would create a distinction without ‘adequate reason.

Whilst this has been done in some instances, in derogation of the general rule, its policy or justice may be well doubted. The uniform recognition of such exception might lead to pernicious results. If the inequality of capacity between counsel and client, were such as to render the latter excusable upon general ■ grounds applicable to all parties, there would be no reaIson to make the special exception. There might be cases when the converse of the proposition would he true, where the counsel might be under the superior influence of his more sagacious client.

It is not always the case, that the counsel has more intelligence, or can exert more influence than the client. Whilst an ignorant client, in the hands of more adroit counsel, might be entitled to some consideration ; if it happened that the client in another case was the equal, or superior of his counsel, his exemption from the effect of the rule, would be simply preposterous. Unable to apprehend the propriety of deviating from the general rule, where the relation of counsel and client exist, upon any principle of public policy or sound reason, I can discover no ground for distinguishing this case. ⁵³⁷ The position of counsel, as a minister of the law, may be a circumstance to be considered with other facts, in deciding in any case, upon appropriate grounds, whether the rule ought to be applied. Both parties here, according to the evidence are properly in delicto.

Where they are in pari delicto, the rule “potior est conditio defendentis,” strictly applies. If they are participes criminis, although in different degrees, the rule on that account is not to be evaded ; for no man can be permitted to set up his own iniquity, or its result, although less criminal than his confederate, as a ground of action, any more than his confederate, can plead his, as a defence. Where both parties are involved in the fraud, although the one, to some extent, under the influence of the other, and therefore, it may be, less guilty in the forum of absolute justice ; it is not the province of the Court, nor within their power, to exactly graduate their relative demerit or delictum ; and because one is not quite so bad as the other, to relieve him of his disability under the rule. That would impair the practical virtue of the rule, by metaphysical refinements, and the Court could reach no satisfactory conclusion.

The duty of adjudicating between the comparative faults of contestants, is not imposed upon the Court; and it is not their province to determine mere moral questions. Men are so differently constituted in their endowments and capacities, that there could hardly be a case where two or more parties were concerned in a fraud, but that one would be in some degree under the influence of another. To measure their precise relative criminality by the moral standard, where there are slight shades of difference, would be a difficult and speculative undertaking, not necessary to the attainment of practical justice. Where the disparity between confederates in fraud, virtually ⁵³⁸ amounts to the irresponsibility of the one, the reason of ■the rule would cease to operate, and he should not be denied the right to maintain his action against the other.

But, if both, are substantially, or without reasonable extenuation in delicto, they must be treated as in pari delicto, where there are no other sufficient reasons, entitling the one to he relieved from the application of the rule. The Court is not called upon to decide which was the worse man of the two, or which proved false to the other. See 2 Parsons on Contracts, 782. Were they both, grossly in fault, and is there any thing fairly entitling the one to sue the other, notwithstanding the rule applicable to confederates in crime, are the questions involved.

Applying that rule so firmly established, to the confederates in this fraud, considering all their relations and capacities, there would seem to be no other alternative, according to the facts in this case, but to leave the parties, where by their conduct they have placed themselves in relation to the property in question. For the purpose of eluding his creditors, Mali having entrusted his funds to the keeping of Roman, and confided the management of the enterprise to him ; if he has been deceived by his accomplice ; upon what principle can he expect the Courts to come to his aid and rescue him, in the absence of proof that such was the influence exerted over him professionally, or otherwise by Roman, that he had not the power to resist it ? This has not been attempted, but the evidence exhibits him, the surviving victim of his own fraudulent complicity, •asking to be relieved. It is beyond the power of the Court governed by its established rules, to give him the relief sought by the bill.

The decree of the Circuit Court must be reversed and the bill dismissedj without prejudice to any right he may be able to establish under the confidential letter of Roman to the respondent.' Robinson, J., filed the following dissenting opinion, in which Chief Judge Bartol and Judge Miller, concurred : The hill in this case was filed against the appellant as devisee of the late J. Philip Roman, to compel her to convey to the appellee certain property on Locust Point, in the City of Baltimore, the legal title to which was held by Roman at the time of his death. It substantially alleges that Roman acquired the title to the property in the capacity of agent and legal adviser of Mali, the complainant, that he paid for it with the money of Mali, and that from the time of its purchase until his death, in 1871, he held it as agent and trustee of Mali. The appellant, in her answer, denies all the material allegations in the bill touching the purchase of the property by Roman, as agent or legal adviser of Mali, relies upon the lapse of time and the entire absence of any written evidence of the title of Mali to this valuable property, and says if it should be established that Roman acquired the title to the property in pursuance of an agreement between him and Mali, for the purpose of concealing it from the creditors of Mali, the latter has no right to invoke the aid of a Court of Equity to restore to him the property thus fraudulently conveyed. The law in regard to presumptive or resulting trusts, as applicable to the case before us, is too well settled to admit of much contention.

It is sufficient to say, that in all cases where the conveyance of the legal estate is taken in the name of one person, while the consideration money is paid or furnished by another, the parties being strangers to each other, a resulting or presumptive trust arises by virtue of the transaction, and the person named in the conveyance will be held to be a trustee for the party from whom the consideration proceeds. And inasmuch as the Statute of Frauds extends to creations or declarations of trusts by parties only, and does not affect, indeed expressly excepts, trusts arising by operation or constructions of law, ⁵⁴⁰ it is competent for the real purchaser to prove his payment by parol evidence, even though it be otherwise expressed in the deed. In some of the earlier cases, it is true, a distinction was taken in regard to the nature and character of the proof, before and after the death of the nominal purchaser, and it was held in some of these cases, that after the death of the nominal purchaser, parol evidence alone was not sufficient to establish a trust against the express declarations in the deed. These cases, however, have been overruled, and it may now be considered settled law, that whatever effect the death of the nominal purchaser may have upon the weight of the testimony, it does not affect its admissibility.

In Leach vs. Leach, 10 Vesey, 517, where the plaintiff after the death of her husband endeavored to establish a claim to a trust in an estate, on the ground that it had been purchased by her husband with trust money, Sir William Grant held, “that the question as to whether the purchase was made with trust money, depended upon the proof of the fact, and whatever doubts may have been formerly entertained on the subject, it was now settled, that money may be followed into the land in which it was invested ; and that a claim of this kind may be established by parol evidence. It may be proper to say however, that the proof in such cases ought to be of the most certain and satisfactory character.” The first question then, to be determined, is whether the proof in this case, conclusively shows, that the property in question, was purchased by Roman for and on account of Mali, and paid for with Mali’s money? It would extend this opinion to an unreasonable length, to examine in detail the testimony to be found in the five hundred pages of this record, and we shall therefore refer only to some of the prominent facts bearing upon this question. In 1853, the Messrs.

Ellicotts sold the Locust Point property now in dispute, to Otis P. Jewett for the sum of ⁵⁴¹ $85,000. Jewett paid $15,000 cash, assumed to pay certain liens and incumbrances upon the property amounting to $37,071.02, and gave his several notes for $32,928.98, residue of the purchase money, the payment of which was secured by a mortgage of the property. In April, 1853, Mali, the complainant, purchased of Jewett a half interest in the property, in consideration of which he paid $7500, being one-half of the cash payment paid by Jewett, and agreed to pay one-half the purchase money due to the Ellicotts. In the spring of 1854, Mali being about to leave for Europe, seems to have requested Roman to send him a power of attorney, authorizing Roman to act for him in reference to his interest in this Locust Point property, during his absence.

Roman enclosed the power of attorney to be executed by Mali, and says: “ It is very broad, and therefore, I wish you to write me, giving particular instructions with regard to the property, if sold, as to price, &c. Be assured, 1 will look entirely to your interest, yet I hope Mr. Jewett will buy you out. If he finds you intend to divide, I think he will at once come into terms.” On the 3rd of June, the day on which Mali sailed, Roman told Jewett that Mali had placed all his business affairs in his. (Roman’s) hands, as his (Mali’s) counsel and trustee.

While Mali was in Europe, the Parker Yein Coal Company, of which he had been President, failed, -in consequence of which he returned home much sooner than he expected. On his return, he found himself threatened with suits by certain stockholders of the Company to recover damages on account of the over-issue of stock. At that time Mali lived in the city of New York, and was worth from one to two hundred thousand dollars. Roman lived in Allegany County, in this State, and was a director in and attorney for the Parker Yein Coal Com ⁵⁴² pany, which owned large and valuable coal mines in that county.

Mali, evidently alarmed on account of these suits, writes to Roman, his attorney, and in reply the latter says: “ Converse with no one before you take legal advice.” “ Don’t he frightened, they can’t hurt a hair of your head, and as to confiscation, that is all humbug I regret exceedingly you did not tell me of the difficulty when you were in Cumberland. I think if you had done so, my advice and counsel would have relieved you of all difficulty ; don’t he alarmed, take legal advice and be careful about your declarations. Let me know when you return ; telegraph at once.” This letter was dated July 11th, and on the 24th of the same month, we find Roman in New York making preliminary arrangements, hy which the Locust Point property ultimately came into his possession. Nothing was done in reference to this property during Mali’s absence in Europe, although it is evident from the correspondence and power of attorney referred to, that he expected to make a sale of it through Roman, as his agent.

On the 25th of July, the day after Roman arrived at New York, Mali sells his one-half interest in the property to Jewett, for $50,000, and sells also to him certain stock in the Parker Vein Steamship Company, for $25,000. .To secure the payment of these several sums, amounting to $75,000, Jewett mortgaged the whole property to Mali. In making this sale, the proof shows that Roman acted as Mali’s attorney and agent. The $75,000 note and mortgage were at the same time assigned hy Mali to Roman. In the latter part of 1854, suits were brought against Mali, and also against Jewett to recover damages from them on account of the over-issue of the Parker Yein Coal Company’s stock.

Roman was the counsel both of Mali and Jewett, and advised them that these claims were unfounded, and that the suits were only intended to levy black-mail. ⁵⁴³ In consequence of these suits, and for the purpose of placing it beyond the reach of judgments, should any be recovered, Jewett conveyed his interest in Locust Point, the same being a mere equity of redemption, to his brother Clarence Jewett. On the 1st of January, 1855, the notes and mortgage to the Ellicotts for the unpaid purchase money became due, and the Jewetts having failed to pay the same, an ex parte petition was filed on the 15th of the month by Roman, as assignee of said notes and mortgage, for a sale of the property. Upon this petition a decree was passed and George H. Williams, Esqr., appointed trustee. No sale, however, was made under this decree.

The next step by Roman was to get from Clarence Jewett a conveyance of the interest held by him under the deed from his brother, Otis. For this purpose, Roman had several interviews with Clarence, in which he represented himself as acting as the agent of Mali, and with a view of protecting Mali’s interest in the property. He told Clarence Jewett that the deed from his brother Otis was made without consideration, and would not stand the test of the law, and that it would not be safe for Mali, under the circumstances, to advance any more money on account of the property. He then proposed that Clarence should convey to him whatever interest he Clarence might have under the deed from his brother Otis, the same to be held by Roman for Mali’s benefit.

To this Clarence finally assented, with the understanding that the interests of his brother and himself should be protected. When the deeds were prepared, the name of J. Dixon Roman was inserted as grantee, J. Philip Roman saying, it was necessary that the conveyance should be made to a third party. These deeds were executed on the Ith of February, 1855, and on the 10th, Roman filed an original bill to foreclose, in which he refers to the former proceedings, and prays that the decree under them may be annulled for the following reasons. ⁵⁴⁴ 1st. That since he purchased the EllicOtt mortgage, he had discovered that part of the property is leasehold and that one-quarter’s rent is due. 2nd; That Mali held a mortgage from Jewett upon the property for $75,000, the condition of which was broken by Jewett’s failure to pay the Ellicott mortgage, and that Mali insists he has a right to proceed without delay under his mortgage. 3rd.

That Otis P. Jewett had assigned his interest to Clarence, and that the latter had assigned the same to J. Dixon Roman. The bill then avers that by reason of Jewett’s mortgage to Mali, and the conveyance to J. Dixon Roman, the title to the property may be clouded, &c. The bill of February 10th being filed, answers, admitting the averments of the bill and consenting to a decree as prayed, were filed at the same time by Jewett and wife, Mali and J. Dixon Roman ; and on the same day a decree for sale was passed, and Mr. Williams was again appointed trustee. On the 15th of March, 1855, the property was sold by the trustee for $46,000, subject to the same liens which were on it when Jewett purchased, in 1853, and J. Philip and J. Dixon Roman were returned as purchasers.

On the day of the sale J. Philip Roman writes to Mali: “ I bought the property to-day, in the name of J. Dixon Roman and J. Philip Roman, for $46,000 cash, subject to mortgages. No bi’d but mine.” After years of protracted litigation, judgments were finally recovered against Mali in the suits for damages on account of the over-issue of the Parker Vein Coal Company’s stock, amounting in the aggregate to over one hundred and fifty thousand dollars. At the instance of the judgment creditors, Mali was examined under oath, for the purpose of making him disclose what property he had, and what disposition, if any, he had made of the same. In this Examination Mali denied that Roman was his counsel, and also denied having any interest in the property now in dis ⁵⁴⁵ pute.

Subsequently a bill was filed by a receiver against Mali and Roman, in which it was alleged, among other things, that Mali had transferred to Roman large claims held by him against the Parker Yein Goal Company, and also large interests in real estate in Maryland, for the purpose of defrauding his creditors. To this bill, separate answers were filed by Mali and Roman under oath, in which the allegations of the bill were emphatically denied by them in every particular. Thus baffled in every effort to reap the fruits of their judgments, the creditors were finally induced to accept Roman’s offer of eleven cents in the dollar, and upon the payment of this sum the judgments were entered to the use of Roman. We have thus endeavored to trace, as briefly as possible, how and by what manner Mali acquired an interest in the property — the disposition he made of the same, the relations of Roman with him, and the connection of the latter with the Locust Point property.

In doing this we have seen that Mali, who prior to the institution of these suits, was a member of a large and prosperous mercantile firm in the city of'Rew York, and worth from one to two hundred thousand dollars, stripping himself of all his property, assigning at one time to Roman a mortgage of $75,000, and then at another, bonds of the value of thirty thousand dollars, until not a dollar’s worth of property could be found within the reach of the judgment creditors. On the other hand, Roman, who prior to this time was without any property, borrowing small sums of money to meet his daily necessities, suddenly becomes a man of fortune, with thousands of dollars at his command, buying property at a cash sale for $46,000, and, as the record shows, immediately thereafter expending as much more in its improvement. The inquiry then naturally suggests itself, are we dealing with truth or with fiction ? — were the assignments by Mali to Roman made for a valuable consideration ?— were the Romans, in fact, the purchasers of the Locust ⁵⁴⁶ Point property ? — did the answers filed by Mali and Roman 'under oath in the proceedings by the judgment creditors, speak the truth? — or were they'one and all but false and fraudulent devices, successive steps of a scheme deliberately •and corruptly planned by Roman, and through fraud and perjury successfully carried out, the purpose of which was to get possession of Mali’s property, and thereby defraud Mali’s creditors? ■ The facts already referred to are sufficient at least, we think, to excite a suspicion in regard to the good faith of these transactions, but when viewed in connection with the proof we are now about to consider,, there can be no difficulty in answering each and all of the inquiries above suggested. The Locust Point purchase amounted to $46,000, of ■which $16,574.42, was audited to the $75,000 note of 'Jewett to Mali, thus leaving but $29,425.58, to be paid •to the trustee.

Now if we turn to pages 20, 21, of Ledger J. P. Roman, we find the following entries under the .head of “Locust Point estate: ” 1855. D. To cash paid through Geo. H. Williams, trustee, under auditor’s report.. $29,518 58 B. Five houses built by Clarke and Smith; see account B, filed, with my papers.. . 2,377 65 A. Cost of repairs to warehouse, new roof, stone foundation, &c...................... 2,795 64 C. Cost of coal wharf; see account C........ 20,402 48 E. Amount paid through A. C. Hall; see account A..................................... 1,263 22 F. Cash paid out by J. Philip Roman in 1855; see account F and vouchers..... 3,086 59 .1856. G. Amount paid out per account G filed with my papers..................... 10,931 20 1857.

H. Cash paid out per account, and vouchers filed with my papers, marked H 20,853 45 1858. J. Paid out per account, and vouchers filed, marked J............................... 3,214 96 Thus making the sum of........................ $94,443 77 ⁵⁴⁷ paid by J. Philip Roman during these years on account of the property. How if we turn to page 28 of the same Ledger under the head “Hippolyte Mali,” we find the following debits charged against Mali: “1855-56-57-58, Cash at divers times, see accounts, $89,754.59. { $94,443.77.” It thus appears tiiat every dollar paid by Roman on account of the property, and every dollar paid for its improvement amounting in the aggregate to $94,443TV¥, was charged by him to Mali. These entries by Roman, in his own Ledger, prove beyond all controversy,