Comley v. Dazian — 22 N.Y. St. Rep. 813

Majority

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William J. Comley et al., Resp’ts, v. Henry Dazian, App’lt.^[1]

(Court of Appeals, Second Division,

Filed April 16, 1889.)

Headnote

1. Subety—Title—Right of surety who pabts with his sbcubity.

Where one takes title simply to secure himself against loss as surety upon a bond, he has no interest that he can sell until after a breach in the condition of the bond; his title is both personal and contingent, and by an assignment before the contingency named has happened, he parts with his security without transferring any right to his assignee.

2. Principal and agent—When agent liable for conversion.

Where an agent is entrusted with property to sell at a price to be approved by his principal, he is liable for conversion if he sells without such approval.

3. Same—When trust not created.

In an action, for the conversion of certain goods entrusted to the defendant to sell with the consent and approval of the plaintiffs, the defendant contended that as it was a part of the agreement that he was to divide the proceeds of sale among certain specified creditors, that a trust was created for their benefit, or that the arrangement was a direction as to distribution which could not be revoked without the consent of the creditors. It appeared that although it was arranged that the plaintiffs should assign the property to the defendant, it was incidental to the principal object of the agreement, and was not in fact done. Held, that no trust was created on the goods, as the title did not pass to the defendant.

4. Same—Beneficial interest of creditors.

'That while the creditors were interested in the performance of the contract, they had no beneficial interest in the contract itself, as they were not parties to it, and it was not made for their benefit.

5. Same—Legal interest of creditors.

In the absence of any evidence of any acceptance or adoption of the

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arrangement by the creditors, Held, that they had no legal interest in the promise oí the defendant as to distribution.

6. Same—When distribution revoked by principad.

That at any time before the creditors had changed their position, the-direction as to distribution could be revoked by the plaintiffs.

7. Same—What sueeicient notice to revoke distribution.

And a demand made before the commencement of the action was a sufficient notice of tire intention of the plaintiffs to revoke that part of the arrangement which related to the distribution among creditors.

8. Same—Power oe creditors to compel sale.

Nor could the creditors, simply as contract-creditors in the absence of any authority to the defendant to sell, have compelled one.

Appeal from the judgment of the general term of the superior court of the city of New York, entered upon an order made March 1, 1886, which affirmed a judgment in favor of the plaintiffs entered upon a verdict and, also, affirmed an order denying a motion for a new trial. This was an action for conversion.

On the 16th of March, 1882, the plaintiffs assigned certain costumes and other theatrical property, then owned by them, to one Thomas M. Flemming, by a bill of sale, absolute in form. On the same day said Flemming gave them a receipt stating that said bill of sale was not an absolute transfer, but was designed to secure him from loss as surety upon a bond signed by him for the plaintiffs in a suit then pending.

After the settlement of said suit and on November 21, 1882, Flemming, at the request of the plaintiffs and pursuant to an arrangement between them and the defendant Dazian, transferred said property, which was still in the possession of the plaintiffs, to said Dazian and one D’Oyley Carte, who was originally joined as a defendant in this-action, by executing to them a bill of sale thereof. The defendant Dazian sold the goods in violation of the agreement with the plaintiffs, who after demand made, commenced this action. They allege in their complaint that they caused the property in question to be assigned and delivered to the defendants upon the agreement that said Dazian should solicit purchasers therefor, and with the con- . sent and approval of the plaintiffs, should sell the same and account to them for the proceeds; that all offers to purchase and the prices and terms of any proposed purchase should be submitted to them for their approval and that no sales should be made without their consent.

They further allege that the defendants sold and disposed of said property without the consent of the plaintiffs, and received therefor the sum of $5,000; that the goods were worth more than that amount, and that the defendants, upon demand made, refused to deliver the costumes, or to-deliver or account for the moneys received on the sale thereof.

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The defendant Dazian, "by his answer, denied that the goods were received under the arrangement claimed by the plaintiffs, and alleged that the agreement was that the defendant should sell the costumes at such prices as they deemed proper, and apply the proceeds towards the payment of two debts owing by the plaintiffs, one to the defendants for $2,500, and one to Dazian alone for $1,850; that they, according, sold the property for the sum of $2,000, a price that seemed to them proper, and applied the proceeds upon said indebtedness.

The jury found that the goods were worth $4,000, and the complaint having been dismissed as to the defendant ■Carte, rendered a verdict for the plaintiffs against the defendant Dazian for $2,000, that being the difference between the amount of his debt against the plaintiffs and the value of the goods.

Further facts appear in the opinion.

Matthew Hale, for app’lt; F. K. Pendleton, for resp’ts.

—When Flemming gave a bill of sale to the defendants covering the property in question, he had never been in the possession thereof, and he had nó title thereto that he could transfer to another. Where one takes title simply to secure himself against loss as surety upon a bond, he has no interest that he can sell until after a breach in the condition of the bond. His title is both personal and contingent, and by an assignment before the contingency named has happened, he parts with his security without transferring any right to his assignee.

Under the circumstances of this case, Flemming’s transfer was simply a formal waiver of his security, and left the plaintiffs at liberty to dispose of the property as they saw fit.

The rights of Mr. Dazian, therefore, depend upon the verbal arrangement between himself and the plaintiffs. That agreement, as the jury is presumed to have found upon a conflict of evidence, was that the costumes were to be placed in the possession of Dazian, who was to sell them on commission, but no sale was to be made until the price was submitted to and approved by the plaintiffs.

The sale was to be made for the benefit óf the plaintiffs, but the proceeds were to be applied upon certain debts which they were owing to the defendants and others. It was also a part of the arrangement that the goods were to be assigned to the defendants in order to avoid trouble from creditors, but this was not done otherwise than as has been stated.

As Mr. Dazian sold without the knowledge or approval of the plaintiffs, the question arises whether an agent, en

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trusted with property to sell at a price to be.approved by his principal, is liable for conversion if he sells without such approval.

In Syeds v. Hay (4 Term Rep. 260), where the owner of' goods on a vessel, moored at a certain wharf, directed the captain not to land them on that wharf, but'he did so supposing that the wharfinger had a lien upon them for wharf-age, it was held that the captain was liable in trover, upon the principle that it is a conversion for one who is entrusted with the goods of another to put them into the hands of a third person contrary to orders.

In Sarjeant v. Blunt (16 J. R. 74), it was held that an agent who sold for $300, a chronometer deposited with him for sale at not less than $500, was guilty of a breach of trust, but not of conversion.

These leading, authorities and the apparent conflict in principle that they represent, were with many other cases, reviewed by this court in Laverty v. Snethen ( 68 N. Y., 523 ). The facts in that case were that an agent with authority to negotiate a note, but not to let it go out of his reach without receiving the money, entrusted it to a third person, who promised to get it discounted and return the money, but who after procuring the discount kept the avails. It was held that the act of the agent in permitting the note to go out of his possession was an unlawful interference therewith and constituted a conversion. . The difference between that class of cases where certain acts were held to constitute-a conversion and that class where certain other acts were-held to constitute simply a breach of duty, was noticed and the distinction pointed out that in the latter the agent did nothing but what he was authorized to do.

The court through Church, Oh. J., said “he had a right to sell and deliver the property. He disobeyed instructions as to price only and was liable for misconduct, but not for conversion of the property, a distinction which, in a practical sense, may seem technical, but it is founded probably upon the distinction between an unauthorized interference with the property itself, and the avails or terms of sale. At all events the distinction is fully recognized and settled by authority” * * *• “The result of the authorities is that if an agent parts with the property, in a way or for a purpose not authorized, he is hable for a conversion, but if he parts with it in accordance with his authority, although at a less price, or if he misapplies the avails or takes inadequate for sufficient security, he is not liable for a conversion of the property, but only in an action on the case for misconduct.”

"We think this case is decisive of the point under consideration. Mr. Dazian did not simply depart from his in

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structions as to the manner of making the sale, but he had no right to sell at all until his principals had consented. His power to sell depended upon their consent which he never received. His authority was limited to negotiating a sale, subject to their approval as to price, and until that approval was obtained he had no right to complete the sale or deliver the property. Unauthorized sale of personal property, with delivery of possession, is a conversion.

The appellant contends that as it was a part of the agreement that he was to divide the proceeds of the sale among certain specified creditors, either a trust was created for their benefit or the arrangement was a direction as to distribution, which could not be revoked without the consent of said creditors.

Ho trust was created as to the goods themselves, because the title did not pass to the defendants. Although it was arranged that the plaintiffs should assign the costumes to them,' it was incidental to the principal object of the agreement and was designed to facilitate performance by preventing annoyance from creditors. It was not in fact done, for Flemming’s transfer, as has been held, was no more than a waiver of his right to hold the goods to secure himself against loss as surety.

The plaintiffs did not execute any written instrument in reference to the property, nor did they by verbal agreement assign any interest therein to the defendants.

Ho sale was made to them, in trust or otherwise, but only a limited authority given to one of them to make a sale, subject to the approval of the plaintiffs as to the price. While the creditors may have been interested in the performance of the contract, they had no beneficial interest in the contract itself, because they were not parties to it and the sale was to be made, not for their benefit, but for the benefit of the plaintiffs. Simson v. Brown, 68 N. Y., 355 ; Vrooman v. Turner, 69 id., 280. There is no evidence of any acceptance or adoption of the arrangement by the creditors, and hence they had no legal interest ip the promise of Dazian as to distribution. Wheat v. Rice, 97 N. Y., 296 .

The direction as to distribution was not, therefore, irrevocable, but at any time before the creditors had changed their position, it could be revoked by the plaintiffs. Id., and Kelly v. Roberts, 40 N. Y., 432 .

The demand made before the commencement of the action was sufficient notice of the intention of the plaintiffs to revoke that part of the arrangement that related^ to the distribution among creditors. Moreover, as Dazian was not authorized to sell without the plaintiff’s consent,,

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the creditors, simply as contract creditors, at least, could not have compelled a sale.

This shows that it was not the intention of the plaintiffs to give a cause of action to the creditors, but to keep control of the matter themselves. As the sale was made without authority,_ it was not made under the contract, but in violation of it. Even if the creditors would have been interested in the proceeds of a sale, when regularly made, with the approval of the plaintiffs, what interest could they have in a sale made in violation of the terms of the arrangement? Not having an interest in the property, nor any power to compel a sale thereof, they could not maintain an action for its conversion, and what the defendant Dazian should have done with the proceeds if he had sold in a lawful manner, it is not now important to consider.

If the appellant’s theory were correct that the creditors are necessary parties to the action, he should have specially alleged it in his answer.

If he desired to raise the question that the agreement was designed to give a cause of action to the creditors and not to the plaintiffs, he should have asked that the jury be instructed to pass upon it.

We find no error that worked prejudice to the defendant, and the judgment should, therefore, be affirmed.

All concur.