Case Name: Gavin J. Moffatt, Appellant, v. Robert Fulton, Impleaded., etc., Respondent
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1892-05-08
Citations: 132 N.Y. 507
Docket Number: 
Parties: Gavin J. Moffatt, Appellant, v. Robert Fulton, Impleaded., etc., Respondent.
Judges: 
Reporter: New York Reports
Volume: 132
Pages: 507–523

Head Matter:
Gavin J. Moffatt, Appellant, v. Robert Fulton, Impleaded., etc., Respondent.
An omission of the averment in the complaint required by the provision of the Code of Civil Procedure (§ 549) authorizing the arrest of a defendant in an action for money received, that the money was received in a fiduciary capacity and forbidding a recovery unless the allegation is. proved, may not be taken advantage of for the first time upon appeal; the question must be raised upon the trial.
An express averment that the money was received in a fiduciary capacity is not necessary; a statement of facts showing that it was so received: is sufficient, and is the proper pleading (Parker, J., dissenting).
Plaintiff’s complaint alleged in substance that he intrusted his two promissory notes to the defendants, as his agents, to return one with certain explanations and to procure the other to be discounted and remit the net proceeds to him; that they procured both to be discounted, received the proceeds in trust to pay the same to plaintiff, but refused to pay them over on demand and converted them to their own use. The facts-proved on the trial were substantially as alleged, with the exception that it appeared defendants were authorized to procure the discount of either of the notes and to return the other with the net proceeds of the-one discounted. Held (Parker and Bradley, JJ., dissenting), that theaverments in the complaint and the proof were sufficient to authorize a judgment enforceable against the person of the defendant, upon whom alone the summons in the action was served.
Moffat v. Fulton (56 Hun, 337), reversed in part.
(Argued March 18, 1892;
decided May 8, 1892.)
Appeal from judgment of the General Term of the Supreme-Court in the first judicial department, entered upon an order-made the first Monday of April, 1890, which modified and affirmed as modified, a judgment in favor of defendant, entered upon a verdict directed by the court.
This was an action to recover the proceeds of two promissory notes belonging to the plaintiff, claimed to have been received by the defendants in a fiduciary capacity and converted to their own use.
In the first count of the complaint it is alleged that on the 15th of November, 1886, the plaintiff, a manufacturer of New Haven, Conn., gave to the defendants, who were engaged in business in the city of New York, his promissory note for $908.75, payable three months thereafter, in consideration of goods sold and delivered. On the 15th of February, 1887, shortly before said note became due, the plaintiff made another note dated that day, but in all other respects a duplicate of the first, and sent it by his agent, one McDowell, to the defendants, with the request that they should indorse it “and have it discounted for cash and remit the funds, less any reasonable charges for commission and discount, to plaintiff immediately, so that he might pay the said note of November fifteenth about to become due and to use the proceeds of said note for no other purpose whatsoever. The defendants thereupon informed the said McDowell that they could not have the said note discounted, but if the plaintiff would send them in its place his note for a less amount, paying -a portion of the indebtedness represented by the said note of November 15, 1886, they would immediately have the same discounted and remit the proceeds for the purpose above described. Said defendants requested the said McDowell to leave with them said note dated February 15, 1887, and stated that they would enclose the same on that day to the plaintiff in a personal letter explaining the facts * * * and use said note for no other purpose. Trusting solely to the honesty and integrity of said defendants, said McDowell left said note with them for the purpose of having it returned immediately to the plaintiff and for no other purpose.” The defendants never returned the note, but procured the same to •be sold or discounted through a broker to an innocent holder, and on the 21st of February, 1887, received the proceeds of .said note, less $21.19 deducted for commission and discount, ■“ in trust to pay the same to the plaintiff forthwith.” They used said proceeds in their own business and refused to pay any part thereof to the plaintiff, to his damage, “ in the sum of $887.60, with interest thereon from the 21st day of February, 1887.”
The plaintiff alleged in the second count of his complaint that on the 17th of February, 1887, he made his promissory note, bearing the date of February 8, 1887, for $750.60, payable to the defendants, three months after date. “ That there upon the defendants requested the said plaintiff to deliver said note to the defendants to take the place of the note of February 15, 1887, referred to ” in the first count of the complaint, “ and for the purpose therein more fully set forth, agreeing to indorse said note, have the same discounted or sold, and return the proceeds thereof to the plaintiff forthwith, less the discount and a reasonable commission.” In accordance with said request and relying on said agreement, the plaintiff “thereupon * * delivered said note to the defendants * * * in trust, to indorse and discount or sell the same for cash, and forthwith to pay the proceeds thereof to the plaintiff, less the discount and commission as aforesaid, and for no other purpose whatever.” The defendants indorsed the note and procured a bank to discount it, and on the 4th of March, 1887, the proceeds, less $8.57 charged for discount and commission, were paid, to them and they used the saíne for their own purposes, refusing upon due demand to pay any part thereof to the plaintiff, to his damage in the sum of $742.09.
The summons and complaint were served only on the defendant Fulton, who appeared and answered, pleading, in substance, a general denial and also a counter-claim, which was successfully demurred to by the plaintiff on the ground that it alleged “ facts constituting a cause of action arising on contract, while the cause of action arising out of the facts alleged in the complaint is in tort and not on contract.”
Upon the trial the allegations of the complaint were substantially proved, and the plaintiff introduced no evidence. It appeared that the plaintiff paid all of said notes at maturity and that when McDowell left the first note with the defendants they said they would try to have it discounted, and if they succeeded would send the proceeds to the plaintiff, but otherwise they would return the not» to him that night, with a letter of explanation. When the plaintiff left the second note with them they said that there was some doubt whether they could get the other discounted, and hence they asked for the smaller one.
At the close of the evidence the defendant moved to dismiss the complaint “ on the ground that the facts proved do not ■constitute either a tort, an actionable conversion, or the fiduciary relation in respect to either cause of action.” The motion was denied, and he thereupon moved that a verdict be directed in his favor on the same grounds. That motion was also denied ■and a verdict was directed in favor of the plaintiff for $1,789.07, being the net proceeds of the two notes, with interest, upon the ground “ that the money was received in a fiduciary capacity.” The trial judge also held that the facts alleged were “sufficient' to maintain a cause of action for a conversion.” Judgment was entered accordingly, and at the end of the postea was this provision : “ But this judgment can be enforced only against the joint property of the defendants herein and the separate property of the said defendant Robert Fulton, who was served as aforesaid, and against the person of the said defendant Robert Fulton.” The defendant Fulton appealed from the entire judgment and the General Term modified it by striking cut the words “ and against the person of the said defendant, Robert Fulton,” but affirmed it in all other respects. The plaintiff appealed to this court from that part of the judgment ■of affirmance which modified the judgment of the trial court.
Henry W. Taft for appellant.
The averments of the complaint were sufficient under subdivision 2 of section 549 of the Code to sustain an action for money received in a fiduciary ■capacity, and the evident intent was to maintain that form of action. (Laws of 1886, chap. 672; King v. Mackellar, 109 N. Y. 215; Knapp v. Simon, 96 id. 284; Lounsbury v. Purdy, 18 id. 511; McBride v. Langan, 18 Civ. Pro. Rep. 201; Duguid v. Edwards, 50 Barb. 288; Murray v. Burling, 10 Johns. 175; Holbrook v. Homer, 6 How. Pr. 86; Burhans v. Casey, 4 Sandf. 707; Frost v. McCarger, 14 How. Pr. 131; Ostell v. Brough, 24 id. 274; Wallace v. Castle, 14 Hun, 106; C. Co. v. C. Co., 24 How. Pr. 274; Comstock v. Hier, 73 N. Y. 275; Clark v. Pinkney, 50 Barb. 226; Stoll v. King, 8 How. Pr. 298; Schudder v. Shields, 17 id. 420; Leon v. Bernheimer, 10 Wkly. Dig. 288; Malcolm, v. O'Reilly, 14 id. 316; 14 J. & S. 222; Bearns v. Gould, 77 N. Y. 455; Rector v. Clark, 78 id. 21; Thayer v. Marsh, 75 id. 340; A. B. H. M. Society v. Foote, 52 Hun, 307; Frets v. Frets, 1 Cow. 335; Allen v. Johnson, 16 Johns. 205; Bank of Lowville v. Edwards, 11 How. Pr. 216; Partridge v. Badger, 25 Barb. 146; v. Allen, 22 id. 388; Nelson v. Eaton, 15 How. Pr. 305; Harway v. Mayor, 1 Hun, 628; Conaughty v. Nichols, 42 N. Y. 83; C. N. Bank v. N. P. Bank, 32 Hun, 105, 110; Veeder v. Cooley, 2 id. 74; Byxbie v. Wood, 24 N. Y. 607; Graves v. Waite, 59 id. 156; Freer v. Denton, 61 id. 492; Ross v. Terry, 63 id. 614; Neftel v. Lightstone, 77 id. 96; Sparman v. Keim, 83 id. 245; Falkland v. S. N. N. Bank, 9 Wkly. Dig. 2; Bosworth v. Higgins, 26 N. Y. S. R. 474; Tuers v. Tuers, 100 N. Y. 196; Decker v. Matthews, 12 id. 313.) The facts proven upon the trial made out a cause of action as to .both notes for money received in a fiduciary capacity. (Frost v. McCarger, 14 How. Pr. 131; Beardsley v. 11 Johns. 464; Ainslie v. Wilson, 7 Cow. 662; Allen v. Brown, 44 N. Y. 233; Witherby v. Mann, 11 Johns. 518; Bonney v. Seely, 2 Wend. 481; Gilchrist v. Cunningham, 8 id. 641; Rodman v. Hidden, 10 id. 499; Clark v. Fairchild, 22 id. 582; Briggs v. C. N. Bank, 61 How. Pr. 250; 89 N. Y. 182; Pratt v. Foote, 9 id. 463; F. N. Bank v. Leach, 52 id. 350; Comstock v. Hier, 73 id. 276; Coddington v. Bay, 20 Johns. 637; Decker v. Matthews, 12 N. Y. 313; People v. Dennison, 84 id. 272; Lehmair v. Griswold, 8 J. & S. 100; Nash v. White's Bank, 13 Wkly. Dig. 141; Ad X. Bank v. Lee, 7 Abb. Pr. 372; Ashins v. Hearne, 3 id. 184; Pattison v. Richards, 22 Barb. 143; Gottler v. Babcock, 7 Abb. Pr. 392; Devlin v. Coleman, 50 N. Y. 537; Hynes v. Patterson, 95 id. 4; Piser v. Stearns, 1 Hill, 89; Astell v. Brough, 24 How. Pr. 274; Stoll v. King, 8 id. 298; Holbrook v. King, 6 id. 86; Rider v. Whitlock, 12 id. 209; Robbins v. Seithel, 20 id. 366.)
Arthur R. Robertson for respondent.
The allegations of the complaint are in tori, and must give character to the action. Recovery should not be permitted upon any other theory. (Walter v. Bennett, 16 N. Y. 250; Ross v. Mather, 51 id. 108; Code Civ. Pro. § 501; Segelken v. Meyer, 94 N. Y. 184; Hathaway v. Johnson, 55 id. 97; Morris v. Rexford, 18 id. 552; Greentree v. Rosenstock, 61 id. 589.) The complaint should have been dismissed at the close of the case, for the reason that the facts disclosed wholly negatived all idea of conversion of the note, and were entirely inconsistent with any claim that the defendants received any of the alleged proceeds in a fiduciary capacity. (94 N. Y. 484; Greentree v. Rosenstock, 61 id. 583, 590; Wood v. Henry, 40 id. 124; Walter v. Bennett, 16 id. 250; Stoll v. King, 8 How. Pr. 298; Bussing v. Thompson, 15 id. 97; Donovan v. Cornell, 9 Civ. Pro. Rep. 224; Wallace v. Castle, 14 Hun, 106; Duguid v. Edwards, 50 Barb. 300; Liddell v. Paton, 7 Hun, 196; Morange v. Waldron, 6 id. 529; McBurney v. Martin, 6 Robt. 502.) The judgment of the trial court as entered was unwarranted, for the reason, among others, that it provided for an execution against the person. (Madge v. Puig, 71 N. Y. 608; Miller v. Schneider, 2 id. 262; Brown v. Treat, 1 Hill, 225; Suydam v. Smith, 7 id. 182; Decatur v. Goodrich, 26 Wkly. Dig. 255.) Fío execution could be allowed against the person because (here was no express, specific allegation that the money referred to in either cause of action was received in a fiduciary capacity.) Hillis v. Belckert, 53 Hun, 499; Bartlett v. Sutorius, 25 N. Y. S. R. 629; Harland v. Howard, 32 id. 872.) Whatever questions may arise on the complaint, demurrer, judgment or other proceedings on plaintiff’s part, are to be construed strictly against him, and this notwithstanding the provisions of section 519 of the Code as to liberal construction. (Clarke v. Dillon, 97 N. Y. 360; Hathaway v. Johnson, 65 id. 93; Morris v. Talcott, 97 id. 100-107; S., etc., N. Co. v. Sherwin, 1 Civ. Pro. Rep. 46; Miller v. Schneider, 2 N. Y. 262.)

Opinion:
Vann, J.
The Code provides that a defendant may be arrested in certain actions and, among others, in an action brought to recover damages for " a personal injury; an injury to property, including tlie wrongful taking, detention or conversion of personal property; a breach of promise to marry ; misconduct or neglect in office or in professional employment; fraud or deceit; or to recover a chattel, where it is alleged in the complaint that the chattel has been concealed " in a certain manner and with a certain intent; " or to recover for money received, or to recover property, or damages for the conversion or misapplication of property, when it is alleged in the complaint that the money was received, or the property was embezzled, or fraudulently misapplied by a factor, agent, broker, or other person in a fiduciary capacity. Where such allegation is made, the plaintiff cannot recover unless he proves the same on the trial of the action." (Code Civ. Pro, § 549.)
The General Term based its judgment of reversal upon the ground that there was no express averment in the complaint that the money in question was received by the defendants in a fiduciary capacity, although one of the learned judges dissented from that conclusion. (Moffatt v. Fulton, 56 Hun, 337.) Ho such point, however, was taken at the Circuit. The sufficiency of the complaint was not questioned upon the trial, except by a motion to dismiss, made before any evidence Avas given upon the ground that the first count did " not contain facts sufficient to constitute a cause of action, and particularly, that it did not set forth facts constituting an action in tort; " that the second count did " not set forth facts constituting a cause of action either in tort or on contract; " and that the complaint united " an alleged cause of action proceeding upon the theory of tort, with one proceeding on the theory of contract." The motion at the close of the evidence was not based upon the facts alleged, but on " the facts proved." Even, therefore, if it was necessary to specifically allege that the money was received by the defendants, as agents, in a fiduciary capacity, advantage could not be taken of the omission for the first time upon appeal. (Lounsbury v. Purdy, 18 N. Y. 515; Cowing v. Altman, 79 id. 167; Knapp v. Simon, 96 id. 284.) If the point had been raised, a formal amendment might have been allowed.
But, assuming that the question was properly raised, we do not think that it called for a reversal of the judgment rendered by the trial court, because it is sufficient to set forth the facts showing that the money was received in a fiduciary capacity, without copying the words of the statute, which Would be ¡heading a mere conclusion of law. It was clearly the intention of the legislature by its last amendment of section 549, to require a plaintiff, intending to arrest the defendant, to predicate his action upon some ground of wrongdoing mentioned in the statute, as a substantive part of the cause of action, so that he could, defend himself before a jury and recover costs if such defense was successful. (L. 1886, cli. 6-72; Code Civ. Pro. § 549.)
The statute does not direct the plaintiff to state in his complaint that he claims the right to arrest the defendant. Such a- statement in order to be effective as a notice would have to appear in the summons rather than the complaint, as the former must, while the latter need not be, personally served. No change Avas made where the right to arrest depended on the nature of the action, as in the case of fraud, deceit, conversion and injuries to person or property. The right of arrest, however, as it had previously existed, in so far as it depended upon extrinsic facts, that is upon facts not appearing in the complaint, Avas changed, except as provided in section 550, which is a substitute for the old writ of ne exeat, not by abolishing the right of arrest, but by requiring the facts which theretofore had been stated in part outside of the complaint, to be stated in it, as a part of the cause of action. The practice aauis thus made uniform, so that the complaint must iioav set forth the facts upon Avhich the right to arrest depends in all cases, with the single exception aforesaid, just as formerly it Avas required in a majority of cases. The amendment as Ave construe it, introduced no new rule of pleading into the Code. It did not authorize the pleader to allege a conclusion of law instead of the " plain and concise statement of the facts," required by section 481. It changed the nature of certain causes of action somewhat, by requiring facts to be alleged and proved in addition to those previously required to be alleged or proved, in order to recover. If, therefore, the complaint under consideration sets forth facts showing that the defendant, as agent, received the proceeds of the two notes, in a fiduciary capacity, and converted them to his own use, it is sufficient, without characterizing those facts or repeating the language of the statute. The facts, as alleged, were, in substance, that the plaintiff entrusted his two notes to the defendants, as his agents, to return one with certain explanations and to procure the other to be discounted and forthwith remit the net proceeds to him. Exceeding their authority as to one note, they procured both to be discounted, received the proceeds, refused to pay them over on demand and converted them to their own use. The facts as proved were substantially the same, except that the defendants were authorized to procure the discount of either note and to return the other, with the net proceeds of the one discounted. The notes belonged to the plaintiff, and when they were discounted the proceeds belonged to him. The defendants had no right to either, except as the agents of the plaintiff. Agency is a fiduciary relation. It exists by virtue of the fiducia, or faith reposed, as where one man, confiding in another, entrusts his property to him for a particular purpose, and in the belief that he will in good faith use it for no other purpose. Property thus received is received in a fiduciary capacity, and when the property is'turned into money, that is also received in a fiduciary capacity. It does not belong to the agent, who can lawfully exercise no power or authority over it, except for the benefit of his principal, and only as authorized by him. If the agent uses it for his own purposes, or fails to pay it over upon a seasonable demand duly made, it is a conversion of that which does not belong to him. The capacity in which the defendants received the notes was fiduciary in character, because it depended upon trust and confidence reposed in them by the plaintiff, as lfis agents. (Goodrich v. Dunbar, 17 Barb. 644, 646; Republic of Mexico v. De Arangoiz, 5 Duer, 640; Wolfe v. Brouwer, 5 Robt. 601.)
He trusted them to handle his property as he directed, and they agreed. After they had received the money on the notes, they had no right to keep it, or even to pay it out on his account, but it was their duty to at once pay it over to him. They received it in trust for him, and the refusal to pay it over was not a refusal to pay a debt, but to deliver that which belonged to him. Under the circumstances this was not a mere " act of omission," hutiC an act of misfeasance." The transaction was isolated and independent of any custom or course of dealing.
The complaint alleges that the proceeds of the first note " were received by him in trust to pay the same to the plaintiff forthwith," and that the second note was delivered to him " in trust to indorse and discount or sell the same for cash, and forthwith to pay the proceeds thereof to the plaintiff." "When it is a necessary inference- from the facts alleged that the money Avas received in a fiduciary capacity, the statute does not require that they should be labeled with that name.
Since there was no agreement as to the method of transmitting the proceeds, the expectation of the plaintiff that the defendants would deposit them in their bank account and remit by check, is not important. They did not attempt to remit in any way.
While some parts of the judgment as rendered by the trial court may be subject to criticism, Ave have not alluded to them, because only the part that was stricken out on appeal is before us for review.
After examining the exceptions to which our attention has been called, we think that the judgment of the General Term, in so far as it modified the judgment of the Circuit, should be reversed, with costs.