Montrose v. Baggott

Plaintiff was a client of the defendants, who were lawyers. By the judgment from which the appeal is taken he has recovered damages against them. The cause of action alleged was negligence of the lawyers in the discharge of professional employment, causing pecuniary injury to the client. If the cause of1 action was proved, it is certain liability follows. Byrnes v. Palmer, 18 App. Div. 1 , 45 N. Y. Supp. 479 , affirmed 160 N. Y. 699 , 55 N. E. 1093 . The facts from which the jury were permitted to find negligence are:

In May, 1906, the plaintiff, a manufacturer of cloaks and suits, being unable to collect a claim of between $1,300 and $1,400 against one Solomon Rothschild, gave it for collection to the defendants, a firm of lawyers, having large and long experience in commercial practice and litigation, and who had been his attorneys. Unable to collect by the dunning process, the defendant split the claim and brought two actions, one in the Municipal Court for goods sold and delivered, for $432, evidently to obtain quick judgment, and one in the City Court of the City of New York for work, labor, and services, for $898.20 and interest from March 24, 1896. Summonses were served at the same time in both actions. Rothschild appeared by an attorney, Meyer J. Stein, who, however, disappeared shortly after the litigation was started. He obtained an order to show cause why both suits should not be consolidated and tried in the City Court. On the application of plaintiff’s attorneys, the order was vacated ex parte. The defendant Rothschild being in default in the City Court, plaintiff’s attorneys entered judgment. The judgment was vacated and the order to show cause reinstated on ex parte motion. The motion to consolidate was argued and denied. In the Municipal Court action a verified answer was filed. The defendant Rothschild appeared by Wales F. Severance as counsel. He applied for a long adjournment—to August—on account of the absence of the plaintiff, who had gone to Europe on May 19th, five days after the actions were started, claiming that plaintiff was a material witness for Rothschild. The application was denied and the case set down for trial for a particular day. On that day Mr. Severance moved on affidavit for adjournment. Defendant Ryall prepared three affidavits in opposition. The motion was denied and plaintiff took an inquest; the judgment, including costs, amounting to $457.31. The defendants subsequently moved to open the default, which was denied. From the judgment and order the defendants took appeals. An undertaking on the appeal was given, with Michael Levinson and Nettie Eisenberg as sureties. Plaintiff’s attorneys served

An involuntary petition in bankruptcy was filed against Rothschild on August 1, 1906, and he was adjudged bankrupt August 30, 1906. The appeals from the Municipal Court judgment and order were dismissed November 9, 1906, in the Appellate Term, after plaintiff’s attorneys had a stay granted in the United States court vacated, and execution was thereupon issued.

The City Court action was commenced about May 12, 1906. The defendants procured an order to show cause to consolidate that and the Municipal Court action, with a stay of proceedings of both actions. That order was vacated and judgment entered on defendants’ default. The motion to consolidate was heard and denied. The judgment by default was opened by order. A verified answer was interposed. Defendant Rothschild demanded a bill of particulars, which was furnished. This was followed by an amended answer. Plaintiff’s attorneys served notice of trial and filed a note of issue for the earliest possible date, the first Monday in June, and also moved to place the case on the short cause calendar, which was opposed by Mr. Steuer for the defendant Rothschild. The motion was granted. It appeared on the day calendar on June 13th. The defendant Rothschild applied for adjournment on account of Mr. Steuer’s engagement, and the application was opposed and denied. Plaintiff took an inquest. A motion was made by Mr. Steuer, on an affidavit of merits made by defendant Rothschild, and on other affidavits, to open the inquest. The motion was granted and an order entered restoring the case to the calendar. The defendant Rothschild, in compliance with the order, gave an undertaking, with Michael Levenson and Leo Rosengarten as sureties, that the defendant Rothschild would pay any judgment that the plaintiff might recover, not exceeding $1,000. The sureties justified. The case appeared on the calendar on June 19th. A settlement having been practically agreed upon, it was marked settled; but, the arrangement not having been carried out by the defendant Rothschild, the plaintiff’s attorneys had the case restored to the 'calendar for June 25th. It was the twelfth case on the calendar. It was marked ready in the morning, but, not being reached, was set down for 2 o’clock. Before that hour arrived, Mr. Steuer represented to Mr. Ryall that plaintiff had a good bond; that to attempt to force the case to trial as a short cause at that time, the last week in June, was folly; that he did not believe thé plaintiff and defendant Rothschild ought to litigate; that he was satisfied that if plaintiff would waive the requirement of going to trial in

Mr. Ryall had not heard from the plaintiff from the time the plaintiff left for Europe until after the arrangement in the City Court was ■completed. Then, learning that the plaintiff had returned on the previous Saturday evening, or some time thereafter, he went to plaintiff’s ■office and explained to him everything that had taken place in both actions, and plaintiff expressed satisfaction with what Mr. Ryall had •done. After that, during the progress of the Municipal Court action, he reported fully to the plaintiff. From the time he received the claim until he obtained judgment in the City Court, he gave almost half of his personal time to these actions, and during, the two weeks preceding June 25th, his whole time.

After the dismissal of the appeals from the Municipal Court judgment and order, he brought suit in the City Court against the sureties on the Municipal Court undertaking. It was tried before Justice Conlan without a jury. Briefs were submitted. The judge held the matter under advisement for two or three weeks and then directed judgment for plaintiff against the sureties. An appeal was taken by the sureties and the judgment was reversed and the complaint dismissed on the merits (sic). Montrose v. Levenson, 130 App. Div. 904 , 114 N. Y. Supp. 1136 . Before suing on the'undertaking, and throughout the litigation, Mr. Ryall reported fully to the plaintiff. Mr. Ryall moved at the Appellate Term and at the Appellate Division for leave to appeal to the Appellate Division. The motions were denied, as was also a motion for reargument at the Appellate Division.. Judgment was entered on the stipulation in the City Court action in favor of plaintiff, Montrose, against Rothschild, for $1,058.97, October 3, 1906, and ex•ecution was issued on that day and returned unsatisfied. Mr. Ryall’s

The aggregate amount of plaintiff’s cláim and costs paid by him in the actions' against the sureties was $2,452.39. The-verdict was for $2,625.44.

Upon the facts presented, the foundation of the charge of1 negligence is that the defendants did not apply to the conduct of the litigation discussed, principles of law which are elementary or conclusively settled by authority; because for errors of judgment they are not liable; and no other dereliction of professional duty was proved. Byrnes v. Palmer, ut supra.

[1] The case at bar was tried and submitted to the jury upon the •theory that the determinations against the plaintiff here, in the two suits brought by him .to establish the liability of the sureties in the two undertakings to which we have adverted, were so far binding upon the defendants here that from that circumstance, standing alone, the jury could infer negligence on their part. We do not agree with the plaintiff that the defendants are bound under the doctrine of res adjudicata, and we do not understand that the court below gave effect to such a contention. Persons neither partieá nor privies to 'an action—and these defendants bore neither relation to the other actions—are not estopped by a judgment. Moore v. City of Albany, 98 N. Y. 396 , 410 ; Remington Paper Co. v. O’Dougherty, 81 N. Y. 474 , 490.

[2,3] The plaintiff’s further contention is that under the rule of stare decisis the law as decided in the two former actions became the law of the case. This contention was adopted by the trial court in submitting the case to the jury. If the law was correctly applied in the former cases, no harm was done. The defendants here assert it was not. The rule of stare decisis is controlling when the court of last resort has laid down a principle of law applicable to a certain state of facts, or an intermediate court has made such a decision in harmony with established law or not at variance with conclusive authority. Matter of Laudy, 161 N. Y. 429 , 435, 55 N. E. 914 ; Moore v. City of Albany, ut supra. At this point it is pertinent to say that the defendants here are to be judged by the settled law at the time of the acts or omissions which are asserted to be negligent. The dereliction charged is that they were negligent in not knowing the settled law, or, knowing it, were careless in not applying it. There is no other basis for the judgment against them. No proof of any' other negligent or

[4, 5] We think the law is settled tho,t upon appeal to the appellate tribunal from a judgment of the Municipal Court of the City of New York, if an undertaking be given to stay execution upon the judgment, the sureties are bound if no exception to the sufficiency of the sureties is taken. If exception be taken and the sureties justify, they are also bound. If' exception be taken and there be no justification of the sureties, they are thereby discharged from liability. Manning v. Gould, 90 N. Y. 476 ; Zwecker v. Levine, 135 App. Div. 432 , 433, 120 N. Y. Supp. 425 ; sections 314, 315, Municipal Court Act of New York City (chapter 580, Laws of 1902), compared with sections 1335, 1352, Code of Civil Procedure. If the exceptions taken be withdrawn by written or oral stipulation before the time for justification, fixed either by original notice or by stipulation for adjournment thereof, expired, the undertaking stands as though no exceptions to the sureties, requiring them to justify, had been taken. Goodwin v. Bunzl, 50 N. Y. Super. Ct. 441 , affirmed 102 N. Y. 224 , 6 N. E. 399 ; Zwecker v. Levine, ut supra.

[0] It is clear therefore that if the defendants had entered into a stipulation, oral or written, with the appellant Rothschild or his attorney, upon whom it was required by law that the notice of exception to the sufficiency of the sureties be served withdrawing the notice (section 315, Municipal Court Act of New York City), the sureties would not have been discharged. Now could an oral agreement, entered into between them and the counsel representing the defendant Rothschild, have any different effect? We are of the opinion that counsel in charge of a proceeding in an action has the authority of the attorney appearing for the same party to make any stipulation or do any other act in relation to procedure which in his judgment would benefit the cause of his client. We have been referred to no authority, nor have we found any, which would incline us to relinquish that opinion.

[7, 8] The defendant Ryall and the witness Steuer gave testimony which would have authorized the jury to find that an oral stipulation had been made between Mr. Ryall and Mr. Steuer as counsel for defendant Rothschild, withdrawing the exception to the sufficiency of the sureties while the proceeding for justification was pending. The court was requested to charge as follows:

“That if the notice of exception to the sureties on the Municipal Court undertaking was withdrawn on oral stipulation, the sureties were not discharged, though they did not justify, and the defendants are not liable for the loss of the claim sued upon in said court.” '

The court declined the request and exception was taken. The court charged the jury that the oral stipulation referred to was not efficient to hold the sureties, and exception was taken. These exceptions present reversible errors.

[8] The plaintiff recovered in this action the amount of the City Court judgment and the costs adjudged against him in an action brought by him to recover the amount of that judgment against the sureties on an undertaking given as a condition of vacating a default

“An inquest having been taken herein on behalf of the plaintiff upon the defendant’s default, and an application having been made on behalf of the defendant to open his default and vacate the inquest, and such application having been granted on condition that the defendant herein execute an undertaking in the sum of one thousand ($1,000) dollars for the payment of any judgment herein:

“Now, therefore, we, Michael Levenson, residing at 139 East Seventy-Sec- and street, New York City, and Leo Rosengarten, residing at 71 East Ninety-Sixth street, New York City, do hereby jointly and severally undertake and agree that the defendant herein will pay the amount of any judgment which the plaintiff may recover in this action not exceeding the sum of one thousand ($1,000) dollars.

“Dated, New York, June 14th, 1906.

“Michael Levenson [L. S.]

“Leo Rosengarten [L. S.]”

The theory of the recovery of the last-named amount was that the defendants were negligent in disregarding legal principles conclusively established by authority, in entering into the following stipulations in contemplation of all the facts recited at the opening of this opinion:

“It is hereby stipulated as follows: That the plaintiff may have judgment against the defendant for the full amount claimed in the complaint herein, together with interest. That the plaintiff may tax a full bill of costs, including two trial fees. That the defendant hereby withdraws the appeal heretofore taken from the order of Mr. Justice Green, entered in the office of the clerk of this court on the 25th day of May, 1906, and consents that the plaintiff may tax costs as if the order had been affirmed by the Appellate Term of the Supreme Court after argument.

“Dated, this 25th day of June, .1906.

“Baggott & Ryall, Plaintiff’s Attorneys.

“Steuer & Hoffman, Defendant’s Attorneys.”

“In consideration of the consent of the entry of judgment herein, and the taxation of certain costs, it is hereby stipulated and agreed on the part of the plaintiff that judgment shall not be entered in this action before the 1st day of October, 1906.

“Dated, this 25th day of June, 1906.

“Baggott & Ryall, Plaintiff’s Attorneys.”

The plaintiff here was defeated in his action to enforce the obligation of the sureties in the above undertaking. Montrose v. Levenson & Rosengarten, 130 App. Div. 904 , 114 N. Y. Supp. 1136 , affirmed without opinion 132 App. Div. 928 , 118 N. Y. Supp. 1125 (First Department). The plaintiff advances the same argument in support of the binding effect of this adjudication on this branch of the case as he did in regard to the other branch. There is no need to repeat our views. We cannot hold that there was any elementary principle of Jaw, or- one established by conclusive authority, upon which the sureties upon the undertaking quoted should have been exonerated from liability. That undertaking was not to pay the plaintiff’s claim; it was to “pay the amount of any judgment which the plaintiff may recover in this action not exceeding the sum of one thousand ($1,000) dollars.” The rule which liberates a surety from his obligation and the reason for it are well settled. It has been recently restated in National Park Bank v. Koehler, 204 N. Y. 174 , 179, 97 N.

“It is a rule, long recognized, that an accommodation indorser, or surety, is entitled to have the engagement of the principal debtor preserved, without variation in its terms, and that his assent to any change therein is essential to the continuance of his obligation. The reason of the rule is that his right must not be affected, upon the maturity of the indebtedness, to make payment and, by subrogation to the creditor’s place, to, at once, proceed against the principal debtor to enforce repayment. Therefore it is that any agreement of the creditor, which operates to extend the time of payment of the original "debt and suspends the right to immediate action, is held to discharge the nonassenting indorser, or surety; as the law will presume injury to him thereby. The creditor may arrange with his debtor in any way, which does not result in effecting either of these results.”

The undertaking we are considering was not to pay the claim in suit, but the judgment that might be recovered. The sureties’ obligation did not arise until the judgment was recovered. The indebtedness for which they were sureties had not matured. A judgment might never have been recovered. Until its recovery the sureties would be in no position to pursue the principal debtor. They could not control the creditor’s litigation. He could conduct it in accord with his best judgment to accomplish his own purposes. The rule of exoneration did not apply because the reason for it did not exist.

The learned trial court was requested to charge:

“That, if the defendants, in good faith and in the exercise of reasonable judgment, were in doubt as to whether they could, by forcing or attempting to force the City Court case to trial, obtain judgment in June, they were not negligent in consenting to accept a stipulation for judgment and agreeing in consideration thereof, to postpone the entry of judgment to October 1st.”

It declined so to charge and exception was taken. The court had charged that the giving of the stipulation had discharged the sureties, to which charge an exception was taken. These exceptions present reversible error.

There is no evidence that the defendants were negligent in their employment in the City Court action.

The defendants were entitled to have submitted to the jury the question whether an oral stipulation withdrawing the exceptions to the sufficiency of the sureties in the Municipal Court action was made between Ryall and Steuer, and, if the jury found it was, the defendants were entitled to a charge that no negligence could be found against them on that branch of the case.

The judgment and order should be reversed, and a new trial granted; costs to abide the event. All concur.