Manning v. Heidelbach

Action to recover damages for the alleged conversion of 100 shares of stock of the American Tobacco Company. The defendants, on April 10, 1907, made two loans, aggregating $250,-000, to Millilcen Bros., Incorporated, upon its two notes, which were indorsed by the plaintiff, the vice president. As collateral security for the payment of the loans, the plaintiff delivered to the defendants certain stocks, including 100 shares of the American Tobacco Company, and bonds of the Millilcen corporation, amounting, par value, to ■ $475,000. The stocks and bonds thus delivered belonged to the plaintiff personally. Shortly thereafter, at the request of the defendants, he signed a collateral loan agreement, giving to the latter the right, in case the notes were not paid when due, to sell the collateral, without notice to him, either at public or private sale, and, if the sale were made at brokers’ board or public auction, the right to the defendants to become the purchasers. The notes became due on the 10th of October, 1907, were duly protested for nonpayment, and on the 30th of October following the defendants sold the 100 shares of American Tobacco stock upon the curb, and the same was purchased by the firm, or one of its members, for $18,000, for which credit was given.

The plaintiff contends that the sale was not authorized, was void-' able at his election, and for that reason the defendants thereafter con- • tinued to hold this stock upon the same terms as before. On January 6, 1910, more than two years and two months after the sale, plaintiff tendered to the defendants $18,000, the balance of the debt having in the meantime been paid, and demanded the return of the stock. The defendants refused to return it, and the plaintiff thereupon brought this action to recover the value of the same, as of the date the demand was made, viz., $42,500, together with the accrued dividends and interest, less the $18,000 which had been credited upon the debt, with interest. He had a verdict for the amount claimed, and from the judgment entered thereon, and orders denying motions for a new trial and granting an extra allowance of costs, defendants appeal.

At the conclusion of the trial two questions of fact were submitted to the jury: (1) Was the sale unauthorized? And, if so, (2) did the plaintiff ratify it? As evidenced by the finding, the jury resolved both in favor of the plaintiff.

As to the first question: The plaintiff testified that on the 19th of. September, 1909, the defendant Heidelbach orally promised that, notwithstanding the collateral agreement giving the defendants the right to sell without notice, they would, prior to the sale of the stock in question, give the plaintiff due notice of the time and place of the sale, and also afford him an opportunity to find a purchaser; that on the day the notes fell due Heidelbach repeated the promise in the presence of the defendant Ickelheimer; that on the 22d of October, another partner, the defendant Lichtenstein, told him, if the promise had been made, it would be kept. Both Ickelheimer and Lichtenstein contradicted the plaintiff. Heidelbach was not called as a witness, and

[1,2] I am of the opinion that the evidence was sufficient to sustain a finding that the oral promise not to sell without notice was made. But, irrespective of this question, I think the plaintiff, so far as the sale of the Tobacco stock was concerned, could treat it as though no sale had been made. The sale of this stock, as already said, was upon the curb. Defendants purchased it themselves; in other words, they, in effect, took it at a price named by themselves. The collateral agreement gave them the right to become purchasers only in case the sale were made “at brokers’ board or at public auction.” This sale was not at either. It was made in the street, at a place where street or curbstone brokers were accustomed to congregate and trade with each other on their own account or for others. Brokers dealing in this way do not constitute a brokers’ board. Bouvier’s Law Dictionary, vol. 1, page 268.

[3, 4] It may be that the defendants took the stock at a price as high as could have then been realized, had the sale been made either at brokers’ board or public auction; but they had agreed with the plaintiff, if they became the purchasers, the sale should be made in a certain way. This agreement they violated, and this gave the plaintiff the right to treat the sale as a nullity, and to get back his stock on paying the indebtedness. A failure to then redeliver the stock amounted to a conversion, and entitled him to recover the value of

[5,6] This brings us to a consideration of the second question, viz., whether there had been, prior to the demand, a ratification. After carefully considering all the evidence bearing upon this subject, I am clearly of the opinion that he did ratify the sale, and the finding of the jury to the contrary, if not unsupported by evidence, is clearly against it. Where the rights of third parties are not involved, a ratification of an unauthorized act is predicated upon an actual and existing purpose to approve the act that has been done. Hopkins v. Clark, 7 App. Div. 207 , 40 N. Y. Supp. 130 ; affirmed 158 N. Y. 299 , 53 N. E. 27 . It is a thing which rests with the intention, and depends upon the fact, and not upon appearances. Glenn v. Garth, 133 N. Y. 18 , 30 N. E. 649 , 31 N. E. 344 ; Burhorn v. Lockwood, 71 App. Div. 301 , 75 N. Y. Supp. 828 . Before one is called upon to ratify 'an unauthorized transaction, he is entitled to have all the facts put before him, and then to a reasonable time in which to act, before he can be compelled to take his position with reference to the transaction. 1 Am. & Eng. Enc. of Law (2d Ed.) 1205.

" [7] In the present case the plaintiff, immediately following the sale of the stock in question, was informed of all the facts relating thereto. He knew who had purchased the stock, the amount paid, and credited upon the loan. He did not then expressly repudiate the transaction. All that he did, according to his own testimony, was to tell Mr. Ickelheimer, the one who gave the information, “he had no right to sell * * * those stocks with the promise that had been made to him by the firm.” This is the only intimation that was ever given to the firm which could by any possibility be construed into a disaffirmance, and what thereafter occurred, if not as matter of law, certainly as matter of fact, shows that he did approve of the act and took advantage of it. The day following the sale he received the written statement, to which reference has already been made, which he retained without objection, and thereafter, until about the time this action was commenced, acted regarding the balance of the loan as though the amount received from the sale had been properly credited thereon. After crediting the amount received from the sale of the stocks on the 30th of October, there remained due to the defendants upwards of $119,000, as collateral security for the payment of which they still held the bonds of Millilcen Bros., Incorporated. On the 17th of March, 1908, defendants notified the plaintiff that these bonds, unless the balance of the loan were paid, would be sold at public auction on April 8th, and on the 23d of March following the notice was repeated, specifying the place and time of sale.

Mr. Cromwell was then acting as counsel for the plaintiff, and also as counsel for the receiver of Millilcen Bros., Incorporated. After receiving these notices the plaintiff endeavored to raise money for the purpose of paying off the loan and redeeming the bonds, and to that end he placed in Mr. Cromwell’s hands $33,000; but, being unable to raise the balance, he entered into an arrangement with Mr. Cromwell

It is perfectly apparent that in taking over the loan Mr. Cromwell was acting for the plaintiff and was his representative in the transaction. Otherwise, why was the statement as to the amount due asked for and given to Mr. Cromwell? Why was the $33,000 used and the additional collateral given? What was the plaintiff doing in Mr. Cromwell’s office while the final transaction was being carried out, and the collateral, as soon as returned, passed over to him to verify ? The court cannot shut its eyes to an obvious truth, even though á jury finds to the contrary. The plaintiff knew how much the defendants claimed was due. He asked for the statement. They sent it to him, or his representatives, which showed that the proceeds derived from the sale of the stocks in question had been credited and the loan correspondingly reduced. He in no way questioned the correctness of the statement; on the contrary, permitted the defendants to act upon the assumption that he accepted it as correct. If he were to treat the sale as unauthorized, he could not accept the credit of $63,000, and in that case the balance due was $182,000, instead of $119,000. The situation, as I view it, was precisely the same as if the plaintiff himself had paid the amount which the statement showed was due and thereby obtained the collateral. The defendants had a right to hold the collateral until the loan was fully paid, and it had not been fully paid if plaintiff were to treat the defendants as though they still held the Tobacco stock. The legal position of the parties was not changed in any respect because, instead of,paying the defendants personally, he caused, or permitted, them to be paid by Mr. Cromwell. The plaintiff furnished a part of the money, and put up collateral to induce Mr. Cromwell to furnish the balance. Honesty and fair dealing required the plaintiff, before defendants at his request transferred all of the

My conclusion, therefore, is that, notwithstanding the fact that the sale was unauthorized, the plaintiff ratified the same, and the finding of the jury to the contrary is against the evidence.

Other questions are raised by the appellants, but the conclusion thus reached renders it unnecessary to pass upon them.

The judgment and orders appealed from are reversed, and a new trial ordered, with costs to appellants to abide event. All concur.