Davitt v. O'Connor (73 F.2d 43, 1934)

SWAN, Circuit Judge.

Jurisdiction of the District Court is grounded on diverse citizenship. The bill of complaint, filed in August, 1927, sought to hold the defendant accountable for the proceeds of real estate acquired by him in 1919 while acting as the plaintiff’s attorney. The answer denied that the defendant was acting as the plaintiff’s attorney in respect to the matters complained of, pleaded the statute of frauds, and set up a counterclaim for legal services rendered the plaintiff in other matters between 1911 and 1927. After entry in May, 1930, of an interlocutory decree adjudging the defendant liable to account, hear-5ngs were had before a special master, and a final decree was entered January 7, 1938, awarding the plaintiff $10,812.66 plus interest and costs, which made a total of $14,816.-.12. From ¡his decree both parties have appealed; the defendant challenging' the existence of any liability whatever, and the plaintiff asserting that the decree awarded too small a sum.

The defendant was required to account for the proceeds of two improved lots in the city of Troy, 27. Y., title to which he acquired under circumstances now to be stated. In April, 1917/ one Gleason, who then owned the lots, desired to mortgage them in order to obtain money for the business of the partnership of Gleason & Davitt, then in receivership, though, supposed to be solvent, under a bilL for dissolution filed by J. W. Davitt, one o£ the partners. J. W. Davitt was a son of the plaintiff, and his attorney in said suit was the defendant, O’Connor. He was also Mrs. Davitt’s attorney before, during, and after the transactions now to he mentioned. Gleason having failed to find any one to advance the money upon his proposed mortgage, it ivas decided to utilize the credit of Mrs. Davitt, the plaintiff, in raising the money. Gleason executed a bond and mortgage dated April 11,1917, to Mrs. Davitt for $12,-0001. J. W. Davitt executed, his promissory note for $10,000' to the order of Mrs. Davitt, and this note, indorsed by her and by the defendant, O’Connor, was negotiated at the National Bank of Cohoes, which delivered its check for $10',000 to J. W. Davitt. He in turn indorsed the cheek to the receiver of the partnership. Thus the receiver obtained $10,-000' from the bank upon paper bearing the signature of J. W. Davitt, his mother, and O’Connor, but Gleason was the person who would ultimately have to' hear the burden o£ this debt, because his mortgage to Mrs. Davitt was given to secure her against liability on her accommodation indorsement of the J. W. Davitt note. The bank had insisted upon having Mr. O’Connor’s name on the paper. To secure him against his accommodation indorsement, Mrs. Davitt assigned the Gleason bond and mortgage to him, and he gave her a letter agreeing to reassign them upon discharge of his liability as indorser. When the note matured on October 15/1917, it was renewed for six months with the same indorsers. In February, 1918, this renewal note was replaced by a note made by Mrs. Davitt to the order of O’Connor and by him indorsed to the bank; the purpose being lo eliminate J. W. Davitt from the transaction because ho and his firm were about to go into bankruptcy and the bank did not wish to appear as creditor of a bankrupt. When Mrs. Davitt’s note became due on April 15,1918', a renewal note was delivered to mature on October 35, 3918. ’This note went to protest. On October 17, 1918, the plaintiff signed another six months’ renewal note due April 15, X9191, and the de> fondant again indoised it. On October 30, 39.18, Gleason’s equity in the property was sold, subject to the mortgage, at public auction by order of the bankruptcy court. The purchaser was William O’Connor, brother of the defendant, who made the purchase at the defendant’s request for the nominal price of $1. The defendant immediately went into possession and thereafter collected the rents, amounting to about $200 per month, which amounts he paid to the bank in reduction of the note. In December, 1938, the defendant, as assignee of the Gleason mortgage, brought a foreclosure suit under which he bought in the property on March 10, 1919, in partial satisfaction of the mortgage debt. Mrs. Davitt and her son were joined as parties defendant in the suit. Having thus acquired title, O’Connor contracted on March 25, 1919/ to sell one o