Tobin v. Kirk — 56 N.Y. St. Rep. 77

Majority

p. 77

Thomas F. Tobin, as executor of, etc., Mary J. Cocke, Deceased, App’lt, v. Edward C. Kirk et al., Resp’ts.

(Supreme Court, General Term, First Department,

Filed November 17, 1893.)

Headnote

1. Conversion—Custodian.

The negotiations of a draft to an innocent holder for value by a party, in whose custody it was placed to hold and return at a certain time, and the appropriation of the proceeds to his own u*e, amount to a conversion of the draft.

&. Principal and surety—Subrogation.

A surety, on payment of his principal’s obligation, becomes subrogated to the rights of the principal in respect thereto.

Appeal by plaintiff from a judgment sustaining defendant’s demurrer to the complaint.

A. Walker Otis (T. B. Turley, of counsel), for app’lt; Knevals Perry {J. W. Perry, of counsel), for resp’ts.

The complaint alleges that in June, 1872, one Thomas H. Cocke and one John S. Hatcher were copartners in business at Memphis, Tenn., under the firm name of J. S. Hatcher & Co.; that in July the Life Association of America agreed to loan to said Cocke $10,000 on a note for that sum made by him and his testatrix was compelled to pay as surety, but be has refused to pay the same. And judgment was thereupon demanded declaring that said life association had a right of action against the defendants Kirk and Tobey for the amount so paid, and that the plaintiff, as executor of said Mary J. Cocke, is entitled to be substituted and subrogated to such rights and reme

p. 78

dies; and that the defendants Kirk and Tobey account for the money received by them to the extent that the plaintiff, as executor of Mary J. Cocke, has been compelled to pay by reason of the suretyship of his testatrix as aforesaid, with interest and expenses. To this complaint the defendants demurred, upon the ground that it did not state any cause of action.

There is no doubt upon this state of facts that the action of Tobey and Kirk in disposing, of this draft was a conversion of the same, and they became liable for the damages arising from such conversion. The result of this transaction is that they have stolen the money realized upon the draft in question, and appropriated it to their own use, without the slightest right of authority. Whatever may be-said in regard to the forms which were used to attain the end, it is clear that the whole intention of this transaction was to place it upon such a footing that the association, on the 15th of October, 1872, could be compelled to pay to Thomas H. Cocke the sum which they had agreed to loan him upon his and his wife’s note, taking as security therefor a mortgage upon the real estate of plaintiff’s testatrix. Now, by the illegal and fraudulent acts of Tobey and Kirk, the Life Association of America has been compelled to pay this money to other persons. They have not kept their contract with Cocke, and paid him the money which they agreed to pay him, and the object and inducement which caused the wife of Cocke to become his surety has been entirely defeated; and yet the respondents claim' that there is no remedy for such a wrong. It seems only necessary to state the proposition in order that the answer may come that thieves have no title to stolen property. The plaintiff’s testatrix has been compelled to pay out of her estate the amount of this mortgage, without a dollar of consideration ever having been received in violation of their agreement, and converted to their own use. It seems to be apparent that her estate is entitled to be reimbursed, and that the party who is immediately injured, no matter how many intervening rights might have been called into play to enforce this result. By reason of the fraudulent action of the defendants, the consideration to the plaintiff’s testatrix for the mortgage which she gave to the life association entirely failed, and yet she has been compelled to pay the mortgage. We say “ entirely failed,” because it appears upon the face of the complaint that the consideration for the execution of that mortgage was a loan to be made by the life association to her husband, evidenced by the draft which the life association has been compelled to pay to an innocent holder; and, although the wife’s estate has been compelled to pay the mortgage, the hus: band has received nothing, and the defendants, without a shadow of right, now hold, use, and enjoy the money, the payment of which this mortgage was given to secure. The plaintiff’s testatrix was a surety in this transaction, and whatever rights the life association or her husband might have had to recover the proceeds of the draft in question from the defendants, upon the payment of the mortgage she became in law subrogated thereto. It is too familiar a principle to require the citation of

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authorities that a surety, upon the payment of the principal’s obligation, becomes subrogated to all the rights of the principal in respect thereto. We think, therefore, that the demurrer • should have been overruled, and that the judgment must be reversed, with costs of the appeal and of the court below, the defendants to have leave to answer upon payment of such costs within twenty days from the entry and notice of the order upon this decision.

All concur.