Case ID: ny_55/html/0041-01.html
Source: Caselaw Access Project
Author: {"author": "Grover, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Levi Moore, Appellant, v. The Metropolitan National Bank, impleaded, etc., Respondent.
    (Argued October 3, 1873;
    decided November 11, 1873.)
    Upon the trial before a jury, of issues settled in an equity action, the complaint cannot be dismissed as to one or all of the defendants. A verdict upon all the issues as to all the parties must be rendered, and the cause afterward heard by the court.
    A bona fide purchaser for value of a non-negotiable chose in action from one upon whom the owner has, by assignment, conferred the apparent absolute ownership, where the purchase is made upon the faith of such apparent ownership, obtains a valid title as against the real owner, who is estopped from asserting a title in hostility thereto. (Allen, J., dissenting.) Bush v. Lathrop (33 N. Y., 535) overruled.
    A recital in an assignment from the apparent owner is not evidence, however, against the real owner that it was for value; and this is so, although the assignment is introduced in evidence by the latter.
    Appeal from judgment of the General Term of the Supreme Court in the third judicial department, affirming a judgment in favor of defendant, The Metropolitan Bank, entered upon an order dismissing the complaint as to it, upon trial of issues of fact settled herein to be tried by a jury.
    This action was brought to restrain defendants from disposing of and to recover possession of a certificate of indebtedness of the State of New York for $10,000, issued by the new capítol commissioners under chapter 830 of the Laws of 1868. Issues were settled and directed to be tried by a jury.
    It appeared, upon the trial, that the certificate in question was delivered by plaintiff to defendant Miller with an assignment thereon, as follows:
    “'$10,000.
    “ For value received, I hereby transfer, assign and set over to Isaac Miller the within described amount, say ten thousand dollars.
    “LEVI MOOEE.”
    This assignment and delivery was induced by false representations upon the part of Miller as to his responsibility. Miller applied to plaintiff for a loan of $7,000, and relying upon such representations the latter delivered to him the certificate so assigned, receiving therefor two notes amounting .to $7,000 and Miller’s check for $3,000, and under the agreement that Miller should get the certificate cashed in New York, paying the $3,000 out of the proceeds. In case it was not cashed in three weeks, the certificate was to be returned and the check and notes taken up. The certificate was not cashed in the three weeks. Upon the trial before the jury, plaintiff introduced in evidence the certificate with said assignment thereon, and also a similar assignment from Miller to defendant, The Metropolitan National Bank, dated November 22, 1868. At the close of the evidence the counsel for the bank moved for a dismissal of the complaint as to it upon the ground, among others, that upon the plaintiff’s proofs the bank wasprima, fade, a bona fide purchaser for value of the certificate from Miller, and so was entitled to hold the certificate; which motion was granted and plaintiff excepted.
    
      Lyman Tremcmiiov the appellant.
    The common-law rule, that choses in action are not assignable, has not been changed by statute except as to commercial paper. (2 Bl. Com., 442; Co. Litt., 214; Story on P. N., § 41.) Courts of equity always refuse to protect the assignee of a chose in action to the exclusion of any equitable defence of the original debtor, or the rights of the owner of the legal title to the debt. (22 N. Y., 535; Story’s Eq. Jur., §§ 1039-1057; Willard’s Eq. Jur., 460; Blydenburgh v. Thayer, 3 Keyes, 295.) The Code has not changed the rights of the parties. (Code, §§ 111, 112; 5 Seld., 211; Bechwith v. Union Bk, 29 Barb., 383; 22 N. Y., 548; 1 Barb., 115; 2 id., 258; 22 id., 110; 15 Barb., 506; 7 How., 493.) The assignee of a chose in action, in the absence of fraud, stands in the same position as the assignor. (Langley v. Dixon, 3 H. of L. Cas., 702; 18 E. L. & E. R., 82; Bush v. Lathrop, 22 N. Y., 535, 548 ; Shafer v. Reilly, 50 id., 67; 27 How. Pr., 475 ; 22 id., 420; 27 id., 157; 34 id., 90; 31 N. Y., 425 ; 35 id., 283; 40 id., 311, 487; 41 Barb., 84; Covill v. Tradesman’s Bk, 1 Paige, 131; McNeil v. Tenth Nat. Bk, 46 N. Y., 337-339 ; Ingraham v. Disbrough, 47 id., 421; Andrews v. Gillespie, id., 487; Willis v. Twombley, 13 Mass., 204; Cochell v. Taylor, 15 Beav., 103; 21 L. J., Chan., 545.) The principle of estoppel does not apply to this case. (Hill & Denio Supp., 70; Davis v. Bradley, 24 Vt., 55; Reeves v. Kimbal, 40 N. Y., 311; Mayenborg v. Haynes, 50 id., 675; Coke Lit. [a], 227; Viner’s Ab., “ Estoppel; ” Com. Dig., “ Estoppel; ” Pickard v. Sears, 6 A. & E., 469; Plumer v. Lord, 9 Al., 455; Andrews v. Lyons, 11 id., 349; Hawes v. Marchant, 1 Curtis, C. C., 144; Andenried v. Bakeley, 5 Al., 382.) If defendant, Miller, was agent at all, his agency ceased at the end of three weeks. (Dunlop Paley’s Agency, 184.) The assignor, Miller, having no title or authority at the time of his assignment, the bank acquired no better title than he had. (Ballard v. Burgett, 40 N. Y., 314; Harvey v. Hoppock, 15 id., 409; Marvin v. Ingliss, 39 How., 329.) The money received by the bank equitably belonged to plaintiff, and an action for money had and received will lie. (Mansell v. Lewis, 2 Den., 224.) The bank could not hold- this chose in action against plaintiff, because it was given to its assignor for a special purpose, and negotiated by him contrary to the agreement. (Marsden v. Allen, 8 Mees. & Welsb., 494; Seymour v. Cowing, 1 Keyes, 532.) On a trial by a jury of issues settled in an equity action, the court cannot nonsuit the plaintiff. (Birdsall et al. v. Patterson, 51 N. Y., 43.)
    
      Wm, G. Choate for the respondent.
    The owner of a chose in action is estopped by his own act from asserting title against the bona fide purchaser from another, whom he has clothed with the apparent ownership. (Raymond v. Squire, 11 J. R., 49; Pickard v. Sears, 6 Ad. & Ell., 475 ; Plumb v. Catt. Co. M. Ins. Co., 18 N. Y., 394; Dezéll v. Odell, 3 Hill, 225 ; N. Y. & N. H. R. R. Co. v. Schuyler, 34 N. Y., 60.) The burden of proof is on plaintiff to show that defendant’s possession is wrongful. (Ross v. Bedell, 5 Duer, 467; Catlin v. Hansen, 1 id., 309; Bailey v. Bidwell, 13 M. & W., 76; Harvey v. Towers, 6 Exch., 662; Hall v. Feather-stone, 3 H. & N., 287.) The nonsuit was right, because the evidence was sufficient prima facie that the bank was a bona fide purchaser for value. (Lewis v. Palmer, H. & D., 68; Shearer v. Barrett, id., 70 ; Wood v. Chapin, 13 N. Y., 509, 518.)
   Grover, J.

The judge erred in ordering a dismissal of the complaint against the bank. Such an order could not be properly made upon the trial of issues settled in an equity action before a jury. Upon that trial, a verdict upon all the issues as to all the parties should have been rendered, and the cause afterward heard by the court upon the verdict and other competent evidence produced by the parties, and the judgment should then be given by the court. (Birdsall v. Patterson, Com. of App., 51 N. Y., 43.) But a reversal of the judgment in favor of the bank upon this ground merely, will leave the real and only question litigated between the plaintiff and the bank undisposed of. This should be avoided, if it is presented by the case in a manner enabling the court to determine it. That question is, whether the bank, having in good faith taken a transfer of the certificate from Miller as security for his note, given to it at the time for money then loaned by the bank to him, acquired a title to the certificate, valid as against the plaintiff, as security for the money so loaned. It is clear that it acquired nothing more, as against the plaintiff or Miller. Upon repayment of the money loaned, and interest, the bank would be bound to retransfer the certificate to the party entitled, which the judgment given in the action between the plaintiff and Miller shows to be the plaintiff. The bank cannot make title to the certificate upon the ground that Miller had authority from the plaintiff to sell it, as his agent in New York, for the reason that the case shows that,- unless he effected a sale there within three weeks from the time he received the certificate from the plaintiff, he was to return the same to him, and receive back from him the notes and his check given by him to the plaintiff therefor, and that the bank did not obtain the certificate from Miller until after the expiration of the three weeks. Had the plaintiff authorized Miller to sell the check, as his agent, this would not confer authority to pledge it as security for a loan of money from the bank. Besides, the case fails to show that Miller was to sell the certificate, as agent for the plaintiff, but it does show that he purchased the same from him, giving notes and his check therefor, coupled with an agreement that, if he failed to get it cashed in New York in three weeks, he should return it to the plaintiff, and receive back the notes and check. This did not constitute Miller the agent of the plaintiff. If he got the certificate cashed, it was for himself, and the money received therefor would have been his, and not that of the plaintiff. The case further shows that the plaintiff executed an absolute transfer of the certificate written thereon to Miller, and delivered the same to him. It further shows that Miller, in making the purchase, practiced such a fraud upon the plaintiff as would authorize him to rescind the contract, as to him, and that he did, upon the discovery of such fraud, elect to rescind the same. The question is thus presented whether a Iona fide purchaser of a chose in action, not negotiable, from one to whom the owner has transferred the apparent absolute ownership, upon the faith of such ownership obtains a valid title as against such owner, although his vendor had not such title. The counsel for the plaintiff insists that this precise question was decided against the title acquired by such purchaser, by this court, in Bush v. Lathrop (22 N. Y., 535), where it was held that equities existing between the assignor and assignee of a chose in action, not negotiable, attend the title transferred to a subsequent assignee for value, without notice,— that the latter takes the exact position of his vendor. The counsel for the bank, to sustain its title, cites McNiel v. The Tenth National Bank (46 N. Y., 325). In this it was held that, where the owner of corporate stocks conferred upon another an apparent title to or power of disposition over it, he is estopped from asserting his title as against an innocent third party who has acquired title in good faith from such apparent owner. It is obvious that both these cases cannot be upheld, unless there shall be found to be a distinction between the acquisition of title to stocks in a corporation and choses in action not negotiable. The Commercial Bank of Buffalo v. Kortwright (22 Wend., 348) involved the same question as the latter, which was decided the same way‘by the Court for the Correction Errors. Further discussion of the principle upon which the decisions in these cases were based, or citation of the authorities sustaining it, is unnecessary. That work has been well done by the able judges who delivered the opinions therein. The counsel for the plaintiff concedes that the rule is the same in regard to goods and chattels. A citation of the numerous authorities sustaining this position is, therefore, unnecessary. Yet it is beyond question that the general rule is that a purchaser of corporate shares, or of goods and chattels acquires only such title as the vendor had thereto. Ballard v. Burgett (40 N. Y., 314) was decided upon this ground. One reason why an owner of corporate shares or of goods and chattels, who has conferred upon another the apparent ownership, without transferring to him a valid title, was held precluded from asserting his title, against a bona fide purchaser from such apparent owner, is that such purchase was made upon the faith of the title which he had apparently given, and that it would be contrary to justice and good conscience to permit him to assert his real title against an innocent purchaser from one clothed by him with all the indicia of ownership and power of disposition. Another reason was, that were the rule otherwise, it would afford opportunities for the perpetration óf frauds upon the purchasers from such apparent owners. Where one, known to be the owner of shares or chattels, delivers to another the scrip or possession of the chattels, together with an absolute written transfer of all his title thereto, he thereby enables him to hold himself out as owner, and, as such, obtain credit upon and make sales of the property; and if, after he had so done, the owner was permitted to come in and assert his title against those dealing upon the faith of these appearances, the dishonest might combine and practice the grossest frauds. Another reason is that it presents a proper case for the application of the legal maxim thitt, where one of two innocent parties must sustain a loss from the fraud of a third, such loss shall fall upon the one, if either, whose act has enabled such fraud to be committed. All these reasons, it is obvious, apply with all their force to choses in action. Why should the owner of a horse or of bank shares, who has given to another an absolute written transfer of all his right thereto for some purpose other than that of passing the title, be precluded, as against a bona fide purchaser from such person, from asserting his title, while, under the same state of facts, he may reclaim from' bdch purchaser a bond and mortgage or a certificate of indebtedness like the one in question ? As to the former he is estopped, while as to the latter the same state of facts, it is insisted, will work no such result. The counsel for the plaintiff insists that such distinction should be made, for the reason that the purchaser of corporate shares and chattels from the apparent owner obtains a legal title which is valid and may be asserted in a court of law, while the assignee of a chose in action, not negotiable at common law, obtained an equitable title only; and that the equity of the former owner, being prior in time to that acquired by the purchaser, is superior thereto, the rule in equity being that, where the equities are equal, the first in time shall prevail; but upon what ground the same state of facts that will estop a party from the assertion of a legal title will not also estop him from the assertion of an equitable one the counsel fails to show, for the very good reason that no such ground exists. It is so obvious that the estoppel should, upon principle, apply to the latter equally with the former, that a distinction can only be justified upon authority.

The counsel further insists that to apply the same rule to non-negotiable choses in action will, in effect, make them negotiable. Not at all. No one .pretends but that the purchaser will take the former subject to all defences, valid as to the original parties, nor that the mere possession is any more evidence of title in the possessor than is that of a horse. In both respects, the difference between these and negotiable instruments is vital and not at all affected by the application of the same rule as to chattels. In Bush v. Lathrop (supra), the learned judge commences his examination of the authorities by citing the remark of Lord Thur-low, in Davies v. Austen (1 Vesey, 247), that “a purchaser of a chose in action must always abide by the case of the person from whom he buys.” When applied to the facts of that case it was entirely correct. It was a case where the assignee of a legacy sought to enforce rights against the executor not possessed by his assignor. He then proceeds to examine the authorities pro and con., which he thought somewhat conflicting, and arrived at the conclusion that there was a decided preponderance in favor of the right of the owner to reclaim from the bona fide purchaser. Sandford v. Van Rensselaer (Hopkins R., 569; S. C. in error, 7 Cowen, 316) was much relied upon by the learned judge. That was a contest between assignees, from the same assignor, of two mortgages as to their respective priority, and had nothing to do with the point under consideration. Covell v. The Tradesman's Bank (1 Paige, 131), also relied on, was placed upon the ground that the plaintiff had the legal title to the sealed note in question and the power to sue upon it, and that in such a case was entitled to the money due thereon, his equity being equal to that of the other claimant. This is now changed by the Code, by which the power to sue is placed in the assignee of choses not negotiable, and therefore the reason for the judgment no longer exists. Muir v. Schenck (3 Hill, 398) was a contest between the assignees claiming from the same assignor, which was an entirely different case from the assignor who has made an absolute assignment claiming in opposition thereto from a bona fids purchaser from his assignee. The same remark is applicable to Pailón v. Martin (1 Sand. Ch., 569) and Sweet v. Van, Wyck (3 Barb. Ch., 647). I think the conclusion of the learned judge, that the owner can assert title to a chose in action from a bona fids purchaser from one to whom he has given the apparent ownership, is unsound in principle and not sustained by authority. Ho allusion whatever is made by him to the rule as to corporate shares or chattels, or to the reasons upon which it is founded; no distinction is made between this kind of property and non-negotiable choses in this respect, and I think that none is warranted by reason or well-considered authority. Bush v. Lathrop was decided by a majority of the court, three of the judges-dissenting Some of the majority may have concurred upon the ground of notice to the purchaser; but whether so or not, I think McNeil v. The Tenth National Bank (supra) identical in principle with the present, much better considered, and that its principle should control. It follows that the bank, if it made the loan in good faith to Miller, upon the credit of the certificate, acquired a title thereto valid against the plaintiff to the extent of the loan. From the papers it appears that the certificate, at the time, amounted to something more than the loan to Miller by the bank. This excess belongs to the plaintiff. Oases where Bush v. Lathrop was referred to, in the opinions delivered in this court, with apparent- approbation were cited by the counsel; but in none of them was the question in the present involved In that several legal propositions were stated with perfect accuracy. It was in reference to these that the case has been so referred to, without at all considering the present question. I think the recital in the assignment from Miller to the bank, that it was for value received, was not evidence in favor of the bank against the plaintiff of the payment or loan of the money to him; that the introduction of the asssignment by the plaintiff, for the purpose of showing what claim the bank made, or for any other purpose, did. not make it so.

The judgment in favor of the bank must be reversed and new trial ordered, costs of the appeal to abide the final judgment for costs in the cause.

All concur, except Allen and Folger, JJ., who concur in the result, on the ground of the mistrial; but Allen, J., dissents from opinion, as to rights of a bona fide purchaser, and Folger, J., does not vote thereon.

Judgment reversed