Rapuzzi v. Stetson

On the 8th day of September, 1906, Orestus U. Bean and Albert H. Flint entered into an agreement whereby Bean agreed to sell and deliver to Flint on that day 43 shares of stock of the International Smokeless Furnace Company, for the sum of $30,000, payable in installments, and Flint agreed to accept the stock and pay for the same as in said contract provided. At that "time Bean indorsed upon a certificate of stock for the 43 shares an assignment thereof to Flint, who was the president of the company, and the cretificate was left in the stock book which was kept at the office of Flint, which was also the office of the company. Later Flint paid Bean $5,000 of the purchase price of the stock; but having made default in further payments, Bean, in April, 1907, brought an action against Flint in the Supreme Court of this state to recover the remaining $25,000 with interest, alleging the making of said agreement, the delivery of the stock to Flint, the acceptance thereof by Flint, the demand for payment of the remaining $25,000, and the failure of Flint to pay the same. Flint thereupon employed a firm of attorneys and interposed an answer, verified by him in July, 1907, in which he denied that the said 43 shares of

At the hearing had before said referee, said agreement of September 8th, and said certificate of stock were offered in evidence by Bean and received under the objection that the certificate had not the seal of the corporation upon it and did not appear to have been transferred upon the corporation books. At the hearing had June 30, 1908, Bean, on examination by defendants, testified that no transfer tax stamps were attached to said agreement of September 8th, or to said certificate of stock, or to the transfer upon the stock book, or to any memorandum, whereupon defendants moved to strike out the testimony of Bean and to dismiss the complaint, upon the ground that, under the statute requiring the affixing of stamps," Bean had no cause of action, and that there was no curative provision in the statute. The referee denied the motion to which defendants took exception. The referee then allowed Bean, under the objction of defendants, to affix and cancel stamps aggregating 86 cents, the amount of the statutory tax.

Of the many hearings held by said referee, Flint attended only three or four, although he testifies that he was always notified when hearings would take place.

On the 1st day of June, 1909, the referee rendered his decision holding that the stock certificate was duly delivered by Bean to Flint; that the failure of Bean to affix the transfer stamps to the stock certificate,

From the judgment entered upon the report of the referee, Flint appealed to the Appellate Division; the appeal being conducted by other attorneys substituted at the request of the defendants herein. Upon said appeal the court, holding that the nonpayment of the transfer tax was a defense to be pleaded in order to be available, affirmed the judgment. Bean v. Flint, 138 App. Div. 846 , 123 N. Y. Supp. 385 . Flint thereupon appealed to the Court of Appeals, the Title Guaranty & Surety Company executing the undertaking upon appeal. That court affirmed the decision of the Appellate Division, 204 N. Y. 153 , 97 N. E. 490 .

Executions having been issued against the property of Flint upon the judgments entered against him in said action, said surety company was compelled to pay the same, and in May, 1912, obtained by default a judgment against Flint for the sums so paid, aggregating with interest' and costs $35,191.95. An execution was issued and returned unsatisfied, and it is conceded that no part of the judgment has been paid.

In February, 1911, Flint assigned all claims, demands, and causes of action against the defendants herein to the plaintiff, who is a stenographer in the office of plaintiff’s attorneys, and on the same day plaintiff and Flint executed an agreement whereby practically the one-half of any recovery which was to go to Flint was to be held by plaintiff for his use and to his order; he agreeing to save her harmless from any cost or expense on account of an endeavor to collect the claim.

In March, 1912, this action was brought, the complaint alleging upon, information and belief the employment by Flint of the defendants as his attorneys in the action of Bean v. Flint; the preparation and service by them of the second amended answer; the failure by them to plead the nonaffixing of stock transfer tax stamps; that Flint had paid the judgments entered against him upon the decision by the referee, by the Appellate Division and by the Court of Appeals; and that he had sustained damages thereby, but alleging no special damage, in the sum of $37,771.04, for which she demanded judgment.

[1, 2] The answer herein alleges that, although requested to state to defendants the facts of the case, Flint neglected to disclose to any of the defendants that the transfer tax upon said stock had not been paid; that such fact did not become known to any of the defendants until it was developed by them on their cross-examination of Bean,

Upon the trial of this action the court granted the motion for a non-suit, to which the plaintiff excepted, as well as to the denial of the motion for a new trial upon the minutes on all the grounds specified in section 999 of the Code of Civil Procedure. In reliance upon the validity of exceptions, this appeal has been taken. There is no allegation in the complaints charging defendants with lack of zeal or ability in conducting the defense of the action, or complaining of the manner in which they discharged their duty to Flint as his attorneys, other than of their alleged neglect to plead the nonpayment of the stock transfer tax, and their failure to object upon that ground to the admission in evidence of the stock certificate. It is therefore to the consideration of these two subjects that our attention must be directed.

As to the failure of defendants’ attorneys to make such objection to the admission in evidence of the stock certificate, it appears that at that time they had no knowledge that the transfer tax had not been paid, but, upon the other hand, had been informed by the oaths of Flint to the several answers interposed by him in the action that no delivery of the certificate of stock had been had, and hence that the payment of a transfer tax had not been necessary.

Neither was the inspection of the agreements of September 8th and of the stock certificate not bearing the seal of the company, and still undetached from the stub and bound in the stock book, although both were unstamped, sufficient to charge defendants with liability for failure to surmise that the transfer tax had not been paid.

The statute did not restrict affixing the tax stamps to the agreement and certificate.

“It is difficult to determine whether in such a case as this the statute requires the stamps in payment of the tax to be affixed to the agreement to sell, to a memorandum or bill to be made and delivered at the time of the trans

fer, or to the stock certificates themselves" when actually transferred.” Bean v. Flint, 204 N. Y. 153 -157, 97 N. E. 490 , 491.

It is also to be noticed that Flint does not claim to have stated at any time to defendants that the transfer tax had not been paid, alhough he says he delivered to them the two verified answers and stated to them the facts, upon which he relied for his defense. The testimony of one of the defendants that Flint never stated to them that the transfer tax had not been paid is entirely uncontradicted. Flint testified that his occupation was that of a broker and selling bonds and building railroads, and that he had practically followed no other pursuits, and that his office was in the Mills building, 15 Broad street, New York City.

In view of his business and associations, the doubtless frequent comments in the public press, and the litigation which followed the passage of the statutes, relative to the payment of a transfer tax as to their constitutionality and otherwise, Flint, in 1908, must necessarily have been familiar with the fact that since 1905 the law had required the affixing of stamps upon the transfer of stocks and bonds. Flint testified that at the time he verified the answers he read them over and understood that he denied the delivery of the stock to him and his acceptance of it, and that he did not then know whether there were any stamps on it or not. Flint assumed the duty of stating to defendants the facts constituting his defense, and the defendants had the right to rely upon his having fully and fairly done so as to the matters in which he had taken part. Ignorance of the fact that the transfer tax had not been paid, and hence his failure to state that fact to the defendants and of defendants to raise that objection to the reception of the stock certificate in evidence, whs attributable to the ignorance and negligence of Flint rather than to the negligence of his attorneys.

[3] Furthermore, when it appeared upon the examination of Bean that no stamps had been affixed upon making the transfer of the certificate of stock, defendants promptly moved to strike out the testimony of Bean, and to dismiss the complaint upon the ground that under the statute Bean had no cause of action, and that there was no curative provision in the statute. Defendants thereby raised the question as to the admissibility of the certificate in evidence. Whitman v. Foley, 125 N. Y. 651 -659, 26 N. E. 725 ; Bean v. Flint, 204 N. Y. 153 , 155, 97 N. E. 490 .

[4] As to the claim of liability upon the part of defendants by reason of their failure to plead the nonpayment of the transfer tax, it is not necessary to again recur to the facts just stated as exempting the defendants from responsibility for not having interposed an objection to the admission of the stock certificate in evidence. They apply with equal force to the failure of the defendants, to plead the nonpayment of the transfer tax. As to the fact that no application was made for permission to serve a third amended answer which should allege the nonpayment of such tax, it may be observed that the weight of evidence is strongly with the defendants, that Flint did not consent to such an application being made. Regardless, however, of that fact, such an application would have been absolutely futile. No court would have

[5] As to the liability of an attorney, he is not held to the rule of infallibility, but is responsible to his client only for those mistakes as a pleader which indicate a lack on his part of the attainments and diligence commonly possessed and exercised by legal practitioners. Courts often differ as to the sufficiency of a pleading without subjecting the judges to the reproach of ignorance or incompetency on account of conflicting views. Kissam v. Bremerman, 44 App. Div. 588 , 591, 61 N. Y. Supp. 75 .

“It is undoubtedly true that an attorney is only bound to exercise the ordinary, reasonable skill and knowledge of his profession, and is not liable for every error of judgment, or opinion as to the law.” Cullen, J., in Byrnes v. Palmer. 18 App. Div. 1 , 45 N. Y. Supp. 479 , affirmed 160 N. Y. 699 , 55 N. E. 1093 .

“The conduct of a lawsuit involves questions of judgment and discretion as to which even the most distinguished members of the profession may differ. They often present subtle and doubtful questions of law. If in such cases a lawyer errs on a question not elementary or conclusively settled by authority, that error is one of judgment for which he is not liable.” Byrnes v. Palmer, 18 App. Div. 1 , 4, 45 N. Y. Supp. 479 , 481, affirmed 160 N. Y. 699 , 55 N. E. 1093 .

The question as to whether pleading the payment of the transfer tax was a condition precedent and hence required to be alleged in the complaint, or was a condition subsequent and hence required to be set up in the answer in order to be available as a defense, was decided by the Court of Appeals by a vote of four to three; Judge Vann writing the dissenting opinion in which Judges Cullen and Collin concurred. Prior to the decisions in Bean v. Flint, no court seems to have passed upon that question.

It is clear, in view of this division of opinion in the Court of Appeals and of the facts before referred to, that the defendants cannot be held to any liability by reason of having believed as the testimony shows, and acted upon the belief, that it was incumbent upon the plaintiff to allege and prove the payment of the transfer tax, nor because of not having applied for permission to amend the answer by pleading the nonpayment of such tax.

A careful examination of the record convinces us that the facts fall far short of establishing liability upon the part of the defendants, judged by even a much more stringent rule than that above stated.

The decision of the trial court dismissing the complaint was therefore correct and should be affirmed, with costs. All concur.