Bates v. Cobb — 18 N.Y. Super. Ct. 29

Majority

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Henry W. Bates, Plaintiff and Respondent, v. Nathaniel R. Cobb and James H. Stebbins, Defendants and Appellants.

Headnote

1. A complaint which states that the defendants, as agents for the plaintiff, purchased stock, and- on a settlement of the contract of purchase the vendor was found indebted in a sum specified, for which the vendor gave notes to the defendants as such agents, which they received for the plaintiffs, and which have since been paid to them, and that they refuse to pay over the same to the plaintiff, states facts sufficient to constitute a cause of action, although it does not state how the vendor of the stock did or could become indebted to the vendee.

2. It would, it seems, have been sufficient if it had stated that the defendants, as agents of the plaintiff, on settlement with a third person received a note for the plaintiff which was paid to them at maturity and they refuse to pay over the money.

3. Where a party who claims a balance of account against another, and holds two notes as collateral security, assigns his account to a third person who brings an action thereon and the defendant therein claims to set off one of such notes which had been paid to the assignor, after the assignment but before the suit was brought, and afterwards the suit is settled by the payment of ten per cent of the sum sued for and costs, such settlement is no bar to an action by the defendant therein to recover from the said assignor the amount of the other note, although it was paid pending the former action and before the settlement.

4. A settlement “in full of an account and demand sued upon in this action ” does not embrace any matter not embraced in the controversy as disclosed by the pleadings therein.

(Before Bosworth, Oh. J., and Woodruff, J.)

Heard, November 9th, 1858;

decided, May 28th, 1859.

This action was tried before William 0. Barrett, Esq., Referee, who reported in favor of the plaintiff the sum of $78.72 with interest from the 25th day of December, 1851, besides his costs, and from the judgment entered upon the report the defendants appealed.

The complaint herein alleged three distinct causes of action, stating them separately.

The defendants introduced their answer by insisting that the complaint did 'not, particularly in the first and second sub-divisions thereof, state facts sufficient to constitute a cause of action, and, reserving the right to move for a dismissal of the complaint

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on the trial of the cause, they proceed to answer each cause of action, denying the plaintiff’s allegations and also alleging matter in bar.

The Referee reported in the plaintiff’s favor for a part only of his first alleged cause of action, and he found for the defendants upon all the other matters in issue.

The first cause of action alleged by the plaintiff (which alone is material to the case on the appeal) is, that the defendants were stock brokers and co-partners; that they were employed by the plaintiff, and under such employment they purchased certain stock; that upon a settlement of the contract of purchase the ivendor was found indebted to the defendants as agents for the plaintiff, in the sum of $314.19, and in payment and settlement of that indebtedness • delivered to the defendants, as such agents and brokers for the plaintiff, four promissory notes made by Jacob Little & Co., dated October 23d, 1851, for $78.72 each, and payable respectively in six, twelve, eighteen and twenty-four months, which notes were received by the defendants in payment of the amount due to the plaintiff on such contract.; that such notes were paid to the defendants and they have refused to pay over the money so received to the plaintiff.

The special matter in the answer relating to the cause of action so alleged is, that before the maturity of the said notes, in the complaint mentioned, the plaintiff became indebted to the defendants, and as collateral security for such indebtedness the plaintiff left the notes in their hands, and when the two notes, due respectively at six and twelve months, became due they were paid and credited in account, and that on the 13th of May, 1853, before the other two notes became due, the defendants assigned their account to'one Teackle with the collateral securities; that there was then due to the defendants from the plaintiff $2,582.78; that on the 18th of May, 1853, Teackle brought suit against the plaintiff, which suit was, after issue joined, compromised and settled for a sum about equal to ten per cent on the amount claimed to be due; that Teackle, by virtue of the assignment, became entitled to the notes and that they were paid to the defendants as his agents before such settlement, and were credited on such account against the plaintiff, and that the compromise and settlement was made by the plaintiff with knowledge of

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such payment, and that the amount had been credited and applied as aforesaid, and therefore that by means of such receipt and application of the money and the settlement of the said claim, after such receipt and application, the defendants became and are discharged from all liability to account for or pay over the moneys to the plaintiff.

It was shown on the trial that the defendants received the four notes mentioned in the complaint as the plaintiff’s agents or brokers in settlement of a balance due to him; that when the first two became due they were paid and it is conceded that they were duly accounted for; that on the 13th of May, 1853, the defendants claiming that the plaintiff owed them a balance of $2,582.78 in account, on their transactions for him, assigned their account of such transactions to Elisha W. Teackle, who brought an action against the said plaintiff to recover such balance. The plaintiff defended that action upon various grounds not material to the present case, but he also set up in his answer a counterclaim averring that on or about the 23d of April, 1853, the present defendants had also received to the use of the plaintiff (then defendant) the sum of $78.72, that being the principal sum mentioned in the third of the said four promissory notes, which sum, with interest, he claimed to set off against the claim of the said Teackle as assignee; that action was pending until February 8th, 1855, when it was settled by the payment of ten per cent of the claim of the said Teackle and $125 on account of the costs of suit, and a receipt was given on behalf of Teackle expressing that the amount was paid and received in full of “ the account and demand sued upon ” in that action.

During the pendency of that suit the fourth of the above mentioned notes, being also for $78.72, was on or about the 23d or 26th of October, 1853, paid to the defendants.

The facts found by the Referee, so far as material to the present appeal, are, “ That the defendants received the certain promissory note of Jacob Little & Go., mentioned and set forth in the first cause of action, set forth in the complaint in this action as due and payable in twenty-four months after date, for account of the said plaintiff; and that the said note was paid at maturity, and the proceeds thereof were received by said defendants, and that they have never paid or accounted for the same to

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plaintiff; that the said last mentioned note was not embraced in the settlement between plaintiff and said Elisha W. Teackle; that said note was not held by defendants as collateral security, as alleged in the answer; and as conclusions of law from the facts found, the said Referee found that the said plaintiff was not entitled to recover against the said defendants for any part of the amount claimed in the second and third causes of action set forth in the said complaint, or any part of the aforesaid note payable at eighteen months after date; and that said plaintiff was entitled to recover the full amount of the promissory note therein referred to as payable twenty-four months after date, being $78.72, with interest from the date of the maturity of said note.”

To which finding and decision of the Referee the defendants’ counsel duly excepted.

Judgment for the plaintiff having been entered upon this decision of the referee, the defendants appealed to the General Term.

J. B. Yates ■Sommers, for the defendants, (appellants.)

I. The complaint does not state facts sufficient to constitute a cause of action, and, therefore, the Referee erred in denying defendants’ motion to dismiss the complaint.

The first count is defective, in not showing how the plaintiff acquired title to the notes, or that he, in fact, had any title. He claims title upon an alleged indebtedness from a vendor to a vendee, when none of the facts stated by him show how such an indebtedness could exist. It might have been sufficient to have averred the existence of the indebtedness without setting forth the facts which gave rise to it; but having set forth the facts, the plaintiff’s case must fail, unless those facts justify the conclusion of indebtedness.

II. The defendants were not simply the brokers or agents of the plaintiff. They acted for him not only in that capacity, but also in the capacity of factors—buying and selling and making advances for him, and thus having possession of his property. They transacted his business in their own names, and thus acquired rights beyond those of mere brokers. One of these rights gave them a lien on the property of the plaintiff which came into their hands, for the amount of their commissions,

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advances and expenses. (1 Parsons on Contracts, 84; 2 Kent’s Com., 640; Story on Agency, §§ 33, 34, 386; Bryce v. Brooks, 26 Wend., 368 .)

III. The evidence clearly shows that the plaintiff, at the time the defendants received the notes from Little & Co., was indebted to them in an amount far exceeding the amount of his claim in this action, for advances, commissions and expenses. They therefore had a right to collect the notes and apply the amount received towards liquidation of that indebtedness.

1. Such right was incident to the lien which the defendants had upon the property.

2. The complaint virtually admits that the defendants were authorized to collect the notes.

3. The plaintiff himself conceded such right, for he admits that the amount of the two notes which matured before the assignment to Teackle was credited to him in his account with the defendants.

IY. The Referee, therefore, erred in finding as a matter of fact that the defendants had no lien .on the notes, and did not hold them as collateral security for payment of the indebtedness of the plaintiff to them.

Y. The assignment by the defendants to Teackle of their account against the plaintiff, carried with it the collateral securities in the hands of the defendants, whether they were mentioned in the assignment or not, and therefore all moneys which were collected on the notes after the assignment belonged to Teackle to the extent of the amount due upon the account.

1. Although a lien is in some respects dependent upon possession, it is well settled that a lien may follow goods in the hands of a third person to whom they have been transferred by the party having the lien. It will always follow the property where there is a transfer or assignment of the rights of the party who acquires the lien, for in such cases the transfer operates as a continuance of the possession of the bailee. (Urquhart v. McIver, 4 J. R., 115; Nash v. Mosher, 19 Wend., 432 ; Story on Bailments, 216, n. 2; Edwards on Bailments, 210, 211.)

2. The lien of the defendants was a mere incident to the debt, and the assignment of the debt necessarily carried with it all the rights and securities possessed by the assignor. (Kane v. Blood

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good, 7 Johns. Ch., 108 ; Green v. Hart, 1 J. R., 590; Jackson v. Blodget, 5 Cow., 206 ; Langdon v. Buel, 9 Wend., 80 ; Pattison v. Hull, 9 Cow., 747 ; Curtis v. Tyler, 9 Paige, 482; Bowdoin v. Coleman, 3 Abb., 431 ; Parmelee v. Dann, 23 Barb. S. C. R., 461.)

YI. The settlement of the suit brought by Teackle was a settlement of all the claims of the plaintiff sued for in this action. The referee so finds in reference to all of the demands, except that arising out of the note payable twenty-four months after date. He should have so found in reference to that note for the following reasons:

1. The defendants had, as we have already shown, alien upon the notes, and held them as collateral security for the balance of account due from the plaintiff.

2. By the assignment of Teackle he became vested with all the rights of the defendants, in reference to the notes, and held them as collateral security for the payment of plaintiff’s debt, and had a right to collect them and apply the amount towards its liquidation.

3. The note upon which the plaintiff has recovered judgment matured, and was paid before the settlement, and the amount had been applied by Teackle towards the payment of the debt.

4. In the settlement, the plaintiff expressly reserved certain bank stock which he admitted was held by Cobb & Bates as collateral security, but did not claim the return of any other col-laterals.

5. The plaintiff knew when the notes matured, and was aware of the fact that they had been paid before the settlement.

The judgment should be reversed.

Wm. Allen Butler, for the plaintiff, (respondent.)

I. The Referee has found as a fact that the note (No. 4) was not held by defendants as collateral security, as alleged in the answer. This finding, upon the conflicting testimony of the parties, should be conclusive.

The finding of the referee is supported by the weight of evidence.

II. The note in question was not included in the assignment by defendants to Teackle of their account; and, not being, in fact, held as collateral to that account, Teackle acquired no pro

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perty in it, by virtue of the assignment. It was not embraced in the settlement; and the rights of plaintiff against the defendants in respect to the note remained unaffected by bis settlement with Teackle. The Illinois Bank stock referred to in the settlement was an item in the account.

III. The fact that defendants afterwards included the note in their general settlement with Teackle is immaterial, and does not in any manner affect plaintiff’s rights.

The judgment should be affirmed, with costs.

1. We are not able to perceive that the first count in the present complaint (upon which alone the plaintiff has recovered judgment) is defective in any substantial particular.

It alleges that the defendants were employed by the plaintiff as his agents to purchase stock for him; that they made such purchase for the plaintiff and on his account; that afterwards, an account of such purchase was stated, and a settlement thereof was made between the vendor and the defendants as such agents, by which the vendor was found indebted to them as such agents in a sum named, which indebtedness such vendor paid by delivering to the defendants, as such agents, four promissory notes of Jacob Little & Co., which notes the defendants received for the plaintiff and held as his agents, and which have been" paid to them at their maturity, and that they have not paid over the money received thereon, but refuse so to do.

This is a sufficient statement of facts, showing that the defendants have received money to the use of the plaintiff, which they are bound to pay over to him.

The criticism which the counsel for the appellants applies to this count, is in substance that it does not appear by the allegations how the vendor of stock could or did become indebted to the vendee, and therefore it does not appear that the plaintiff was, at the time of the settlement with the vendor, entitled to receive any notes or money from him, and if not, he could not be entitled to receive any from his agents in the transaction.

Several answers may be given to this objection: First. It is averred that the vendor was found indebted and actually paid the notes to the defendants, as his agents, and they received the

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notes for him. If so, they are liable to account for them, and for their proceeds; and the particular circumstances which formed the consideration of such vendor’s indebtedness, w'hether his refusal to deliver, or an over-payment of purchase money, or other fact, are quite immaterial. The indebtedness was conceded by such vendor, and the amount was paid to the defendants for the plaintiff’s use, and they clearly, upon these facts, have no right to retain it. Second. Under our former system of pleading, averments that the parties accounted together of and concerning dealings which they had had together, and on such accounting the defendant was found indebted to the plaintiff in a sum named, which he promised to pay, and yet neglected and refused, &c., were a good statement of a cause of action, without giving the particulars of the dealings or stating how the indebtedness arose. We incline to think such averments would constitute a sufficient complaint now, and much more are averments of such a settlement by the plaintiff’s agent with a third person, upon which such agent received money for the plaintiff, good in an action to recover the money from the agent. Third. We' apprehend that averments that a third person paid money to the defendant as the plaintiff’s agent, (or notes upon which the money was paid,) for and on account of the plaintiff, and that such defendant received it for him, but refuses to pay it over, would constitute a sufficient complaint without stating at all the consideration which moved such third person to pay over the money. If it was a mere gratuity, the defendant could not, on that ground, refuse to pay it to the plaintiff.

And finally, if any particulars were desired by the defendant, for the purpose of identifying the transaction and apprising him of the precise nature and ground of the claim, (which, however, does not appear necessary in this case,) he should have sought those particulars by motion for an order to make the complaint more definite and certain, under section 160 of the Code.

2. We do not think it necessary to consider whether the referee erred or not in finding that the defendants had no lien upon the notes in controversy as collateral security; nor whether the assignment made by them to Teackle of their account against the plaintiff, gave Teackle an equitable right to the note which at that time remained in the defendants’ hands unpaid. For in

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the view we take of the effect of that transaction and the settlement of the action which he brought, no determination of those questions can affect the result of this suit.

The claim of the defendants is that by the settlement with Teackle the plaintiff lost all title to the proceeds of the note now in question.

This claim is clearly no stronger than it would be if there had been no assignment of the defendants’ account to Teackle, but the defendants had themselves brought their own action to recover the balance alleged to be due, and he made the same settlement which he made. The case would stand thus:

On the 18th of May, 1853, the defendants sue the plaintiff to recover an alleged balance of account amounting to $2,582.78. The plaintiff defends on various grounds the entire claim, and alleges that on the previous 23d of April these defendants received the proceeds of the third note, and claims to set off the amount. At this time, although these defendants held in their possession another (and fourth) note belonging to the plaintiff, yet it was not due and it could not be the subject of set-off against the account sued upon. The action so brought aud defended is afterwards settled by a payment of a portion of the amount claimed which is received, not in full of all claims and demands, &c., between the parties, but “ in full of the account and demand sued upon.”

It seems to us hardly possible gravely to insist that this settlement embraced for any purpose anything except the matters alleged in the pleadings .in that action, even if its effect can be extended beyond the mere “account ” of the defendants.

The settlement of that action, under the circumstances stated, operated upon the other relations between the parties just as the payment of the claim in full would have done, by the very terms of the settlement the account and demand sued upon were satisfied. And to that satisfaction nothing was applied except the matters then in controversy and the further payment then made.

It follows necessarily that so soon as the account of the defendants was paid, and in like manner so soon as it was satisfied by the accounting and settlement and the payment made thereon, the present plaintiff was entitled to receive from the defendants whatever property they held belonging to him, (not included in

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the said account nor referred to in that action,) whether the defendants had theretofore had a lien thereon or not. And therefore if the fourth note had not been paid the plaintiff might have demanded the delivery to him of the note itself and might have maintained an action to recover it, for the plain reason that the defendants’ lien (if any they once had) was satisfied and extinguished.

The money having been received pending the former suit, and not having been taken into view or embraced in the settlement, was the money of the plaintiff held by the defendants in place of the note itself.

As above suggested, the fact that the former action was prosecuted by the defendants’ assignee does not affect this view of the plaintiff’s rights. Even if Teackle would have been entitled (had no settlement been made) to require the defendants to pay over to him the proceeds of the note by reason of a supposed lien thereon to cover the balance of the assigned account, still the note never in fact went into his possession. The money was never paid to him. By the settlement all his title to the note and to the money was extinguished if he had any. And the money remained in the defendants’ hands to the use of the plaintiff, which the defendants had no right to retain, and upon which Teackle had no claim nor any lien.

The judgment should be affirmed.

Judgment affirmed, with costs.