#### William Bracken, Plaintiff, *v.*The Atlantic Trust Co. et al., Defendants.

(Supreme Court, New York Trial Term,

May, 1898.)

Action against a trustee corporation — Conversion — Former adjudication.

In April, 1892, the United E. T. Co. guaranteed to the Mercantile Trust Co., as trustee by mortgage for certain bondholders of the Julien E. T. Co., payment of these bonds and also deposited with the Atlantic Trust Co. 30,000 shares of the stock of the Consolidated E. S. Co. as security for the guaranty. The Mercantile Trust Co., for a default in the payment of the Julien E. T. Co. bonds, subsequently foreclosed and sold under its trust mortgage and, realizing - very little by the isale, demanded of the United E. T. Co. performance of its guaranty; but this was refused. In November, 1892, the Mercantile Trust Co. demanded of the Atlantic Trust Co. the shares deposited with it as security and the demand being refused, brought an action against the Atlantic Trust Co. simply to compel it to deliver the stock. The Mercantile Trust Co. succeeded in its action but, during the four years of its pendency, the stock fell in value from $4 per share to almost nothing, all of it having been sold in March, 1896, after judgment, for $2,100. Subsequently the assignee of 102 bonds of the Julien E. T. Co. brought the present action, the Mercantile Trust Co. refusing to sue against the Atlantic Trust Co. to recover damages for its alleged wrongful detention of the stock during four years and for its refusal to perform its duty as a trustee for the bondholders. The Atlantic Trust Co. pleaded in bar the former action brought against it by the Mercantile Trust Go.

Held, that as the former action was merely one to compel a delivery of the stock and one in which no damages were claimed and that as the present cause of action was not perfected until the breach of duty upon the part of the Atlantic Trust Co. had ceased by its return, whether voluntary or compulsory, of the stock, and as it was *580not possible until after such return to determine definitely the extent of the injury, the former action was not a bar to the present one and could not be allowed to prevent the plaintiff- from now litigating an independent phase-of the subject-matter which had not been hereto- - fore presented to the court.

That the measure of damages was the difference between the value of the deposited shares at the time of their conversion in November, 1892, and that value upon their -return in March,' 1896, together with ■ accrued interest for the wrongful detention.

Motion by Atlantic Trust Co., one of the defendants, to set -aside verdict in favor of plaintiff for $151,142.82,-and for a new trial, on alleged errors of law.

Ward, Hayden *&*Satterlee, for motion.

Hornblower, Byrne, Taylor *&*Miller, opposed.

McAdam, J.

Plaintiff sued to recover $180,000 damages . ■ claimed to have been sustained by him and his assignors, holders of 102. bonds of the Julien Electric Traction Company, by reason of the wrongful refusal of the defendant Atlantic-Trust Company to deliver up 30,000 shares of stock of the Consolidated Electric Storage Company, deposited with it as security for the fulfillment of a guarantee of payment of said bonds, under the following circumstances: In April, 1892, a corporation known as the United Electric Traction Company, by an instrument in writing, guaranteed to the Mercantile Trust Company, as trustee for the holders and owners of said 10-2 Julien bonds, the payment thereof, and as security for the performance of the guaranty deposited with the defendant Atlantic Trust Company, the 30,000 shares .of the capital stock of the Consolidated Electric Company aforesaid. Default was subsequently made in the payment of interest on the 1.02 Julien bonds, by reason whereof the principal amount thereof became due, and the mortgage securing the bonds was foreclosed by the trustee, the Mercantile Trust Company. The mortgaged property when sold realized for the bondholders $1,488.56. The Mercantile Trust Company thereupon demanded of the United Electric Company the payment-of the bonds pursuant to its agreement of guarantee, which was refused. In November, 1892, the Mercantile Trust Company, acting in behalf of the holders and owners of the 10-2 Julien bonds-, *581demanded of the Atlantic Trust Company, for the use of the Julien bondholders, the 30,000 shares of. the Consolidated Electric Company stock, deposited with it as security for said guarantee. The Atlantic Trust Company refused to comply with the demand, -and the Mercantile Trust Company was obliged to bring suit in equity to enforce a delivery of - the stock, which was finally delivered over in March, 1896, by force of a decree made in said suit requiring such delivery. The stock was thereafter, to-wit, in April, 1896, duly sold under the order of the court, at auction for $2,100. Excepting this sum, nothing has been paid on the 102 Julien bonds. The Julien Company and the United Electric Company became insolvent, and had no assets whatever. The theory of the plaintiff’s action was that if the Atlantic Trust Company had performed its duty as trustee, and complied with the demands made upon it in November, 1892, the 30,000 shares of Consolidated Electric stock eould then have been sold for $4 a share or $120,000, that being the market price at that time, .that in consequence of the detention of the stock until March, 1896, its value had depreciated 'to $2,100, the sum it brought :at the auction sale held in the month following, and that the expense of obtaining possession of the stock, an element of damage (Bennett v. Lockwood, 20 Wend. 223; McDonald v. North, 47 Barb. 530; Davis Sewing M. Co. v. Best, 50 Hun, at p. 80), exceeded .what the stock sold for. The court charged the jury that the plaintiff had a cause of action, and that the measure of damages was "the difference between the value of the bonds at the time of conversion in November, 1892, and their return in March, 1896, with the accrued interest for the wrongful detention, and the jury awarded the plaintiff as damages $151,142.82. The evidence fully sustains the award made, and as the plaintiff’s property in the 102 Julien bonds fully equals that amount, even after crediting the $1,488.56 realized on the sale, it cannot be said that the judgment is excessive. The action was brought in the name of the plaintiff because the Mercantile Trust .Company, the trustee, declined to bring it, and that company was in consequence made a party defend-^ ant. (Code, § 448.) No objection is made on-this account to the form of the action or the plaintiff’s right to maintain it. The real defense strenuously urged was that the judgment in the equity suit brought by the Mercantile Trust Company, for the possession of the 30,000 shares of stock, is a bar to this action, because, as it is claimed, the relief demanded here could have been had there, that the defendant should not be vexed twice for substantially "the same cause, and *582that there could he ¡but one recovery in respect to said stock. The judgment of a court of competent jurisdiction directly oh the point is, as a plea in bar and as evidence in certain cases, conclusive between the same parties, or their privies, upon- the same matter directly in question in another suit. The proposition is whether this principle can be applied to the present controversy. The. rule is that an estoppel requires strict proof. A fact cannot be held to have been adjudicated in a former suit unless it so expressly appears by the record, or, at least, is clearly Shown by evidence *aliunde*that it was determined. In other words, a judgment is conclusive upon the parties thereto ¡only in respect to the grounds, covered by it, and the law .and facts necessary to uphold it. (See cases collated in note to 23 Abb. N. O. 283, et seq.) “ It is only the material, relevant and necessary facts which are decided in án action that are conclusively determined thereby. * * * It is final as to such facts as are litigated and 'decided therein, which have such a relation to the issue, that their determination was necessary to the determination of the issue.”' (Lance v. Shaughnessy, 86 Hun, at p.p. 414, 415; House v. Lockwood, 131 N. Y., at p. 268; and see Fairchild v. Edson, 154 id. 199.) Whether the plaintiff could have had the same relief under the pléadings in the first action as was demanded' in the second,, is one of the tests of a former adjudication. (Stannard v. Hubbell, 123 N. Y., at p. 531.) “In pleading a former adjudication, it is necessary that the plea contain an averment, in some form, that the matter now in controversy was actually determined in the former suit, or else that it might have been litigated under the issues then joined.” (9 Enc. of PL & Pr. 622.) The rule allowing the plea in bar was intended to prevent vexatious litigation and is rigidly enforced in common-law actions, but not in equity cases-where thb courts having ample power so to mold the relief grantéd as to prevent injustice, will not enforce it unless equity in the particular case requires it. (O’Dougherty v. Remington P. Co., 81 N. Y., at pp. 499, 500.) Ho damages were claimed in the suit by. the Mercantile Trust Company, so that the subject of the right thereto was neither litigated nor determined there and could not be, for it was not one of the issues to be tried. The object of that suit was to take the subject of the trust out of the hands of the Atlantic Trust Company and place it under ¡the control of the court for execution. It was practically a proceeding to remove from office a trustee for breach of duty, and culminated in that end. Such a proceeding can hardly operate as a bar to an action against the trustees for malfea*583sauce while in office, and such is in effect the legal position ¡of the parties here. The defendant relies upon Commerce Ex. Nat. Bank v. Blye, 123 N. Y. 132, wherein it appears that the plaintiff brought an action of replevin to recover the possession of forty-six coupon bonds of the West Point Manufacturing ,C'o., with damages for the detention thereof, in which the plaintiff succeeded in obtaining judgment for possession, with substantial damages to the time of trial. The defendant gave an undertaking by means of which he retained possession of the property, not only up till the time of judgment, but thereafter by stays upon ¡appeal. The plaintiff having ultimately succeeded, brought a new action to recover the depreciation of the property between the time of trial and the final return of the property, and the court held that such an action was not maintainable, that there could be but one recovery of damages, which was already had, and that the law did not authorize a new action to recover for depreciation after judgment while the property was virtually in the custody of the law pending the appeal taken by the defendant. It is impossible to apply the principle decided in that case to this one. McCarthy v. Hiller, 26 App. Div. 588, presents the question involved more distinctly. There it appeared that the plaintiff had exchanged some real estate with the defendant, and thereafter brought suit to set aside the exchange on the ground of fraud, and recovered judgment restoring to him the property which he had previously conveyed. After securing that judgment, the plaintiff brought another action to recover rentals collected by the defendant while in possession of the property. The question was whether the former judgment was a bar. The Court said: “It is not sufficient that the action should be between the same parties and in respect to the same property; it must be shown that the particular cause of action has been before the court, and that it was passed upon in arriving at the judgment of the court. Suppose, for instance, that the defendant, while in the fraudulent possession of the property, had maliciously destroyed the plumbing or had removed the mantels or had materially deteriorated the value of the premises, which facts were unknown at the time of the pendency of the original action, would it be maintained that a previous adjudication of a controversy, in respect to the title, had disposed of an ac-. tion for damages? Obviously the mere fact that an action has been determined between the parties which involved the same premises, is not a bar to an action to recover money which came into the possession of the defendant by reason of his presumed ownership of the *584property. * * * all collateral questions necessarily arising in the litigation are deemed to be merged in and determined by the judgment of the court; but this does not apply to questions which were not before the court, and which are in themselves sufficient to. sustain a separate cause of action.” One of the first doctrines in the law of merger is that the precise matter in controversy in the second suit could'in the nature of things have been the subject of controversy in the first suit. The cause of action in the second suit was not • perfected until the breach of duty by the Atlantic Trust Company had ceased through the return of the stock, and whether it came back pursuant to judgment or by the voluntary act of the defendant makes no legal difference. . The rule applicable to trpver, trespass and replevin is, that “ Where, however, the injured party accepts reparation, it' operates as a reduction of damages. . Thus where goods wrongfully' taken from the owner are returned to ' him and accepted, damages are reduced by the. valúe of the goods when accepted” (Sedgwick on Dam. [8th ed.], §§ 55, 494; 3 Sutherland on Dam. 528; Hibbard v. Stewart, 1 Hilt. 207; Bates v. Clark, 95 U. S. 204; 4 Am. *&*Eng. Enc. of L., 125, 126; Brewster v. Silliman, 38 N. Y. 423, 428; 6 Wait’s Act. & Def. 220) or, as stated in the syllabus to Bowman v. Teall, 23 Wend. 306, *“*Where common carriers have been guilty of negligence whereby the owner of goods has sustained injury, the subsequent acceptance of the goods by the owner is no bar to an action; but may be given in evidence in mitigation of damages.” See also Sedgwick on Dam. (8th ed.), § 536. When the stock was returned by the Atlantic Trust Company, in March, 1896, the extent of the injury became for the first time definitely known, and the right of action now being prosecúted, then became complete. - The ■ principle of estoppel by record, that no one shall be vexed twice for the same cause', is inapplicable here. The Atlantic Trust Company held the 30,000 shares of stock as trustee for the Julien bondholders, with the active duty, upon default of the guarantor, of so disposing of or dealing with the stock as in the best manner to afford security to the bondholders. The duties were more than those of a bailee and amounted to those of a, trustee. Trusteeships' was the business of the institution. The certificate of ■ Stock was made out in its name “ as trustee.” Use of the certificate in any way. could only be effective upon the indorsement of the Atlantic Trust Company as trustee, upon'the back of the certificate. One of two courses was open to the defendant, either personally to dispose of the stock for the benefit of the bondholders,, or 'else to deliver over .the certificate *585therefor, duly indorsed to the Mercantile Trust Company, which was another trustee for the bondholders, stated to be such in a mortgage securing the bonds as well as in the guaranty, the performance of which the bond was given to secure. The Atlantic Trust Company declined to adopt either course, whereupon the Mercantile Trust Company, as trustee, at the request and for the benefit of the holders of the Julien bonds, filed its bill in equity, praying for a decree that the stock be disposed of pursuant to the direction of the court. Judgment followed accordingly, the Atlantic Trust Company being directed to deliver the stock to the Mercantile Trust Company, *“*for the purposes aforesaid,” which was a sale under the direction of the court for the benefit of the bondholders who obtained no other benefit from that adjudication. The detention of the stock by the Atlantic Trust Company from 1892 to 1896, and the refusal of that company to perform its duty as trustee, caused .great loss to the bondholders of the Julien Company,, who have no means of redressing the wrong, except by this action. The technical doctrine of merger is, therefore, invoked by the defendants to preclude the plaintiff from litigating an independent phase of the subject-matter not before presented to the court, and neither litigated nor decided in the former action, which is carrying the rule further than any principle of substantial justice requires. Eor these reasons the motion for a new trial must be denied.

Motion denied.