Chittenden v. Morris — 27 N.Y. St. Rep. 838

Majority

p. 838

Horace H. Chittenden, Assignee, App’lt, v. Charles O. Morris et al., Resp’ts.^[1]

(Court of Appeals,

Filed December 17, 1889.)

Headnote

Brokers—Security for performance of contract.

One Maas agreed to sell to White, Morris & Co. certain bonds at seventy-five per cent, of their face amount, the latter depositing $5,000 with a trust

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company as security for performance of the agreement. Thereafter Hatch & Oo. assumed Maas’ contract, and White, Morris & Co. agreed to take of them instead of from Maas, and in consideration of extensions granted Hatch &. Co. deposited $5,000 with the trust company subject to the joint orders of both. Hatch & Co. made an assignment for the benefit of creditors, and on demand of the assignee White, Morris & Co. refused to join in an order to withdraw the money deposited by Hatch & Co. Held, that the refusal was justified; that there was a consideration for the deposit, there was no fraud, illegality or unfairness in the arrangement, and that the agreement had not yet been performed.

Appeal from judgment of supreme court, general term, first -department, affirming judgment dismissing plaintiff’s complaint on trial at special term.

James M. Townsend, Jr., for app’lt; G. B. Wellington, for resp’ts.

On the 29th of December, 1886, the firm of A. S. Hatch & Go., brokers, deposited with the Farmers’ Loan & Trust Company five thousand dollars and took from that company a receipt signed by its officers in these words:

“New York, December 29, 1886.

“ This is to certify that A. S. Hatch & Co. has deposited with this company five thousand dollars, payable in current funds on one day’s notice to them and White, Morris & Co., jointly upon the surrender of this certificate, which is assignable upon the books of the company, with interest at the rate of two per cent per annum, provided the deposit is not disturbed until after the expiration of three days. $5,000.”

On the 14th of November, 1887, Hatch & Co. assigned this sum of $5,000 and all claims therefor to the plaintiff for the benefit of the creditors of A. S. Hatch & Co., and after demand made upon the trust company, and a refusal on the part of White, Morris & Co., the joint payees, to join in the demand, the assignee brought this action asking that White, Morris & Co. be required to join with plaintiff in an order upon The Farmers’ Loan k Trust Company for the payment to him of the sum of $5,000 so deposited by his assignors, and that the defendant, The Farmers’ Loan k Trust Company, be decreed to pay to him that sum of .$5,000, with accrued interest.

It is of course obvious that by the terms of their agreement, the trust company was bound to the two payees, and not separately to each,- and liable only upon their joint demand, and as one of them refused to co-operate with the other it was necessary to show that the refusal was wrongful. The court at special term found that the refusal was justified, and the general term have approved of that decision. We are unable to find in the record any reason against it. The complaint goes upon the ground that fraud practiced by White, Morris k Co. upon Hatch k Co. induced deposit.

The allegations to that effect were put in issue, and were not ■only in the estimation of the trial judge unproven, but the learned counsel for the appellant upon this hearing asks nothing upon that theory, nor does he find fault with the refusal of the court to find that the representations stated by the plaintiff as the basis of

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Ms action were in fact made. The allegation in respect to them may, therefore, be laid one side. The appellant’s claim is that there was no consideration for the deposit. As to that both courts thought otherwise. The trial judge refused the plaintiff’s request SO' to find, and at the summing up of the whole case did find that on the 24th of December, 1886, one G. Maas sold to White, Morris & Co. $50,000 Troy & Boston Railroad Company bonds, known as seconds, at seventy-five per cent of their face amount; and a written memorandum of the sale was made and signed by Maas, and delivered to White, Morris & Company.

On December 29, 1886, A. S. Hatch & Company, the plaintiff’s assignors, called upon White, Morris & Company, and assumed Maas’ said sale, and took his place therein, and agreed in his stead to deliver said bonds to White, Morris & Company, and White,. Morris & Company assented thereto, and agreed to pay A. S. Hatch & Company accordingly on such delivery instead of Maas. Thereupon a member of each firm being a member of the New York Stock Exchange, and each firm being therefore, by reason of its regulations, entitled to demand a ten per cent deposit, each firm deposited $5,000 with the Farmers’ Loan & Trust Company on account of such sale and transaction, and subject to the joint orders of both firms; and such deposits are yet continued, one in the deposit mentioned in the certificate. Thereupon, White, Morris & Company, at the request of A. S. Hatch & Company, gave them an extension of time for delivering the bonds, and later another extension; but the bohds have not been delivered, or any thereof. From the time of such arrangement between the two firms, A. S. Hatch & Company have dealt with White, Morris & Company as principals in place of Maas in his said sale, and White, Morris & Company have looked to them as such, and not to Maas, and have done so with the concurrence of A. S. Hatch & Company, and upon these facts found as conclusion of law that “by the arrangement between A. S. Hatch & Company and White, Morris & Company, A. S. Hatch & Company became principals in place of Maas in his sale to White, Morris & Company ; that such arrangement was not a new sale, or within the statute of frauds, but was and is valid ; that the plaintiff is not entitled to the deposit made by A. S. Hatch & Company, but that the same is security to White, Morris & Company for the execution of Maas’ sale to them.”

The facts found by the trial judge have sufficient evidence in their favor, indeed it is all one way, and they establish (1) a legal contract between Maas and Morris & Co. for the sale, purchase and delivery of the bonds in question ; (2) the substitution of Hatch & Co. in the place of Maas at their own request; (8) and in consideration of an extension of time for the delivery of the bonds, a deposit of $5,000 to secure the performance by them of the agreement they had assumed; and (4) that the agreement has not yet been performed.

It is quite needless for a court of equity to inquire into contracts, real or pretended, before that time entered into between ¿latch & Co. and other. persons relative to the bonds, and on

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which Hatch & Co. might, or might not, have relied; but by those agreements the bonds, in the first instance, were to be supplied by Hatch & Co., and they had been informed that when delivered the delivery was to be made to Morris & Co. These circumstances, no doubt, moved Hatch & Co. to make the application to them for forbearance in exacting immediate delivery; but the agreement then made, and which resulted in the deposit now in question, was an independent agreement between Hatch & Co. and Morris & Co., to the full benefit of which, so far as the facts are displayed in this record, the defendants are entitled.

The plaintiff’s case is simply this: Morris & Co. had a valid contract under which Maas was bound to sell and deliver to them certain bonds. Hatch & Co. admit that they were to deliver the bonds to Maas, and in his presence, and in the presence of Morris & Co., assume to stand in his place and apply to Morris & Co. for an extension of time in which to make delivery to them. Morris & Co. had already deposited $5,000 in the trust company as security for performance of the agreement to purchase on their part, payable by the trust company upon the joint order of A. S. Hatch & Co. and themselves, and in consideration of this, and the extension of time given in pursuance of their request, Hatch & Co. made the deposit in question. There was no fraud, nor does there seem to be either illegality or unfairness in the arrangement. The plaintiff stands as a volunteer in the place of Hatch & Co. There appears to be no ground on which a court should interfere in his favor.

The judgment appealed from should be affirmed, with costs.

All concur.