Morganstern v. Davis — 37 N.Y. St. Rep. 819

Majority

p. 819

Caroline E. Morganstern, App’lt, v. Jacob H. Davis et al., Resp’ts.

(Supreme Court, General Term, Fifth Department,

Filed April 16, 1891.)

Headnote

1. Contbact—When assignment of stock a sale and not a pledge

Defendants endorsed a note of plaintiff given to raise money to pay an assessment on certain stock, which note they were afterward compelled to pay. At the time of such endorsement plaintiff executed an agreement by which she sold said stock to defendants, the agreement reciting the endorsement of the note and providing that if she did not pay the note at maturity, and defendants did so, they should own the stock absolutely. In an action to redeem the stock, there was no proof of deception or mistake except evidence of a previous conversation between plaintiff’s agent and one of the defendants that they would receive the stock as collateral security, and it appeared that the agreement was read to plaintiff before she signed it. Held, that plaintiff was bound by the contract, and that it constituted a sale and not a pledge of the stock.

2. Same—Consideration.

Although the endorsers did not agree to pay the note, yet as they did, in fact, do so, a good consideration was furnished for the agreement.

Appeal from a judgment entered May 10,1889, in Erie county clerk’s office, on the decision of the special term, dismissing the plaintiff’s complaint upon the merits.

Giles E. Stilwell, for app’lt; Warren F. Miller, for resp’ts.

This action was brought to obtain an accounting and to recover 200 shares of the capital stock of the Main Street & Humboldt Parkway Land Company, or the value of such shares, after deducting the purchase price and subsequent payments of assessments and interest thereon made by the defendants.

The plaintiff and the defendants had been stockholders of this , company for some time. On the 3d day of April, 1886, an assessment of §1,000 was made on the shares of the stock held by the plaintiff, and she, being unable to pay such assessment, was assisted

p. 820

thereto by the defendants, who loaned to her their endorsement upon her promissory note at sixty days, which was discounted and the proceeds turned over to the plaintiff and applied to the payment of the assessment against her upon such stock. The note matured on the 5th day of June, 1886. It was not paid by the maker, the plaintiff.

It was protested for non-payment, and the defendants properly charged upon their contract of endorsement by notice of such non-payment, and they in fact paid the note on the 17th day of June, Í886. At the time of the execution of the note the following agreement was made by the plaintiff, under seal, and duly acknowledged by her before a notary public: “ For value received, I hereby sell, assign, transfer and set over unto F. 0. Longnecker, Jacob Davis and August Baetzhold, all my right, title and interest in the annexed certificates of stock in the Main Street & Humboldt Parkway Land Company, being certificates Ros. 30, 33, 34 and 35, representing two hundred shares of said stock. The said parties above named have this day endorsed my note for $1,000, payable in sixty days from this date, for the purpose of enabling me to pay an assessment for that amount on said stock. Row, I agree, that in case I do not pay said note at maturity, and said Longnecker, Davis and Baetzhold do pay said note, that they shall absolutely own all my right, title and interest in said shares of stock. Said shares of stock have heretofore been assigned to Peter Morgenhagen and the Herman-American Bank, who have-been paid in full, and said certificates now belong to me, free from all liens and claims.”

At the time that this agreement was made and at the time of the loaning of their endorsement by the defendants, there was no-market value for the stock in question, and its value was purely speculative. Upon these facts the learned judge at the special term held, as conclusions of law, that the transaction amounted to a sale of the stock, upon certain conditions, and that the title to it vested in the defendants on the failure of the plaintiff to pay the note and on payment thereof by the defendants, and that by reason of such failure of the plaintiff to pay and by the complete performance by the defendants, the latter became absolute owners, of the stock under the contract.

The learned counsel for the appellant urges upon us the argument that the transaction was but a pledge of the stock as collateral security to indemnify the defendants against their endorsement of the paper, and that consequently the plaintiff is entitled to reclaim the stock on reimbursing the defendants the amount of money which they have expended in the payment of the note and assessment made upon the stock.

The negotiations were conducted in behalf of the plaintiff by her father, who was acting as her agent. This agent was permitted to give testimony from which it is argued that it was the intention of the parties that the one should turn out and the others should receive the stock as collateral security only, and not under a conditional sale thereof. This evidence, however, fails to show the existence of any matter that would change the plain

p. 821

reading of this contract to something which the plaintiff now finds it convenient to import into it. There is no evidence of a mistake in the preparation of the contract. There is no evidence, or even a charge, of fraud against the defendants. The plaintiff has proceeded, through the testimony of her agent, as she has in her complaint, upon the assumption that there was no agreement between the parties of the character set forth above. It is alleged in the complaint that the defendants agreed to receive the stock as collateral security. But there is no evidence in the case to support this allegation, unless, perchance, a loose conversation between the plaintiff’s agent and one of the defendants, had sometime prior to the execution of the agreement, bears that construction. Moreover, when the plaintiff, who was required by the defendants personally to sign the agreement, although her father claimed to possess full power to act for her in the premises, appeared for the purpose of executing the instrument, her contract was read over to her, she fully understood it, and she signed, sealed and acknowledged it before a notary public. Ho word was said to her which would go to show that the transaction was in any way different from what this written paper imports.

In the absence, therefore, of deception or of mistake in reducing the real agreement of the parties to writing, this contract cannot be changed from its plain reading into something different; and the plaintiff must accordingly be deemed to be bound thereby. Marsh v. McNair, 99 N. Y., 174 ; Long v. Millerton Iron Co., 101 id., 638; 1 N. Y. State Rep., 38, and cases there cited.

Mor can the contention be upheld, that inasmuch as the endorsers did not agree to pay the note, there was no mutuality of contract, and therefore the agreement is not binding. Even though there was no contract outside the endorsement on the part of the endorsers to pay the notes and even though there was no mutuality in the contract, yet, inasmuch as the endorsers did in fact pay the note according to the terms of the endorsement, a good consideration was furnished for the plaintiff’s agreement and the defendants may enforce it L'Amoreaux v. Gould, 7 N. Y., 349 .

The judgment appealed from should be affirmed, with costs.

Dwight, P. J., concurs; Corlett, J., not sitting.