Case Name: Alice G. Rycroft, Respondent, v. Henry Clay Pierce, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1912-10-25
Citations: 152 A.D. 792
Docket Number: 
Parties: Alice G. Rycroft, Respondent, v. Henry Clay Pierce, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 152
Pages: 792–805

Head Matter:
Alice G. Rycroft, Respondent, v. Henry Clay Pierce, Appellant.
First Department,
October 25, 1912.
Judgment by default—motion to vacate judgment granted.
Motion by a defendant to open bis default and to vacate a judgment entered upon an inquest. The complaint in substance charged the defendant with converting securities intrusted to him by the plaintiff while the moving papers on the motion to open the default showed that in placing the plaintiff’s account with stockbrokers he kept it entirely separate-and distinct from his own and that the sale of the securities, etc., was made with the plaintiff’s knowledge and at her request. Affidavits examined, and held, to raise a strong presumption against the validity of plaintiff’s claim at least in its entirety, and that the interests of justice required that the judgment be vacated and a new trial ordered, terms being imposed upon the defendant.
Scott, J., dissented, with opinion.
Appeal by the defendant, Henry Clay Pierce, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of tie county of New York on the 15th day of July, 1912, denying, the defendant’s ■ motion to open a default and vacate a judgment.
Alton B. Parker of counsel [Underwood, Van Vorst & Hoyt, attorneys], for the appellant.
Robert Stewart of counsel [Ralph G. Barclay and Gordon S. D. Kleeberg with him on the brief], for the respondent.

Opinion:
Clarke, J.:
The plaintiff obtained a judgment upon an inquest for $171,149.66 on March 6, 1912. On April 22, 1912, an order of the Special Term was entered vacating said judgment upon terms. Upon appeal to this court said order was reversed, the opinion thereon being reported" in 150 Appellate Division, 521. The order of this court provided, however, as follows: 1 'Without prejudice to an application at Special Term for leave to renew the motion to open the default upon satisfactory proof that the defendant was unable to come to New York to be present at the trial of the case and that he has a defense on the merits. " Thereafter the motion was renewed at the Special Term upon additional papers and, having there been denied, this appeal is taken.
The former record on appeal contained no affidavit of the defendant. That deficiency is supplied in the present record, and the facts now shown present a materially different case upon the merits.
The complaint alleges that on the 26th of May, 1903, plaintiff had a stock account with the firm of Arthur S. Leland & Co., bankers and brokers, composed of 100 shares of the common stock' of the Hocking Valley Railroad .Company, 500 shares of' the common stock of the Atchison, Topeka and Santa Fe Railroad Company, 400 shares of the common stock of the Union Pacific Railroad Company, and 200 shares of the preferred stock of the Missouri, Kansas and Texas Railroad Company, of the reasonable value on that day of $92,700; that on or about the 25th day of May, 1903, defendant promised and agreed with this plaintiff that if she would transfer her account as it then existed with Arthur S. Leland & Co. to the firm of Post & Flagg, with whom defendant then had an account, defendant would attend to, care for and provide for said account of plaintiff and keep her fully informed as to its needs, requirements and condition; that relying upon defendant's statements, demands and promises, and believing same, she directed and authorized in writing Leland & Co. to deliver to Post & Flagg the stocks and margin belonging to plaintiff; that pursuant to the written authority of plaintiff dated May 25, 1903, Leland & Co. on the twenty-sixth of May delivered to Post & Flagg, bankers and brokers, for and on account of Mrs. Alice GL Rycroft, said stocks, and received from said Post & Flagg on account of payment thereof $85,644.82; that Post & Flagg, pursuant to and in conformity with directions given them by defendant, placed all said securities in the account of and to the credit of said defendant as the account then existed upon their books, and without the knowledge, authority or consent of plaintiff, and without her subsequent ratification of same, and' they never advised nor informed her of what had been done, nor gave her any knowledge that her securities had been appropriated and placed to the credit of said defendant until July, 1909, nor did defendant make known to her in any way what he had done; that on said 26th day of. May, 1903, said defendant, by directing and authorizing said Post & Flagg to place the said securities to his credit and account, and they having done so, became possessed of said securities, thereby unlawfully and illegally converting same to his own use; that at some time unknown to this plaintiff, without her knowledge,' consent or authority or subsequent ratification, said defendant Sold or authorized and directed said Post & Flagg to sell the said securities and account for the same to him; that pursuant thereto said Post & Flagg did sell said securities and duly accounted therefor solely to said defendant, and never informed, advised or made known to plaintiff what they had done with her securities until the month of July, 1909; that from. May 26, 19.03, said plaintiff from time to time asked and made inquiry of said defendant about her said account, and was always informed that the same was in existence; that she never authorized, ratified nor confirmed any of the acts of said defendant complained of, and she was not advised nor informed as to defendant's having illegally and improperly, and without any authority, converted and appropriated unto himself her said securities and proceeds arising therefrom until June 28, 1909, when defendant first so informed her by letter.
Upon the inquest she testified as follows: "Q. What did he say about this account with Leland & Co. ? A. He said if I would have the account transferred to his brokers in my name it would put him in a better position. He said he would also guarantee the account. "x" His brokers were Post & Flagg. "x" As a result of that conversation I authorized their transfer. Q. When was the first time that you learned that your account had not appeared upon Post & Flagg's books, if ever? A. That was in June, 1909. Q: In June, 1909, you learned about the account from whom ? A. From Hr. Pierce. "x" Q. From the time in May, 1903, when you had authorized and directed the transfer of your account in the name of A. G-. Bycroft from Leland & Co. to Post & Flagg until these communications which are in evidence' here of July 30, 1909, and October 26, 1909, had you ever heard from Post & Flagg in regard to that account so transferred ? A. Ho. Q. Had you at any time from the 26th day of May, 1903, down to the time when you learned of these' facts in regard to this account, ever authorized or directed any person to transfer those securities from that account in any other name or to any other account than your own ? A. Why, no. * "x" * Q. Had you had any knowledge or intimation that the account for these securities had ever been transferred to any other account than your own ? A. Ho. Q. During [this] interval had you at any time made any inquiries from Mr. Pierce in regard to the account which you had transferred at his request to Post & Flagg ? A. Oh, yes. Q. What assurances, if any, had you received from him in answer to those inquiries regarding that account? A. That everything was all right, I had nothing to worry about."
Mr. Post testified: " Q. Will you kindly state to the jury what was done with those securities and that account when they were taken over by yoúr firm? A. They were placed in the account standing on our books of H. Clay Pierce, Special. Q. By whose direction did you put them in that account ? A. By Mr, Pierce's direction. Q.. Subsequently were those stocks disposed of by your firm ? A. They were, sir. Q. By whose order or by whose authority or ratification thereafter ? A. They were sold on orders of Mr. Pierce, except the 400 shares of Union Pacific. Q. Did he ratify the sale of them after they were sold? A. He accepted it later, yes. Q. And the proceeds of those stocks were credited to whose account, if any ? A. They were credited to the account of H. Clay Pierce, Special. Q. And subsequently transferred ? A. I might state that at the time this account was closed out there was a deficiency of $12,000. The deficiency was transferred to Mr. Pierce's regular account. Q. Did you or your firm at any time ever receive any authority from Mrs. Rycroft to transfer that account and those securities to the account of H. Clay Pierce ? A. We never heard of Mrs. Rycroft; I never heard that there was such a person existing until we received her first letter on August 30, 1909. Q. You never accounted to Mrs, Rycroft for these stocks or anything connected with them? A. No, sir, we never heard of Mrs. Rycroft in any way."
In the affidavit filed by Pierce, as required by the order of this court, showing that he had a defense, he says: " I did not, nor did the said firm of Post & Flagg, place the securities mentioned in the complaint to my credit and account, but on the contrary, the said securities were placed in an account entirely separate and, distinct from my own personal account, the said separate and distinct account being designated by my directions on the books of Messrs. Post & Flagg as 1H. Olay Pierce, Esq., Special.' No securities belonging to me or to any one else except the plaintiff were ever carried in this account, nor were her securities ever mingled with my own; as a matter of accommodation to the plaintiff I guaranteed the said Post & Flagg against any loss on this special account, and I actually sustained a personal loss in connection with the account amounting to $22,984.15. In the year 1902, and prior thereto, plaintiff was engaged in a series of stock speculations on margin with various brokerage firms, among whom were the firms of Arthur S. Leland & Co. and Sharp & Bryan. Likewise, on or about November 14th, 1902, I purchased at the request of the plaintiff and for her account, through the said Post & Flagg, 700 shares of the common stock of the Southern Pacific Railroad Company at the price of $64% per share, the total cost of such purchase, including the brokers' commissions, being $45,237.50, and I paid on account of such purchase the sum of $10,000, which had been previously furnished to me by the plaintiff; the balance of the purchase price, or $35,237.50, was advanced by the said Post & Flagg, who held the said 700 shares as security for such advance. The said stock was placed by the said Post & Flagg, by my directions and with the consent of the plaintiff, in an account entitled 'H. Clay Pierce, Esq., Special.' I guaranteed the said Post & Flagg against loss in connection with the said advances and the said account was carried by me without any change therein until on or about the 26th day of May, 1903. No other stocks than the aforesaid 700 shares of Southern Pacific Railroad Company stock, carried for plaintiff, were at any' time prior thereto carried in such account. Immediately prior to the 26th day of May, 1903, the plaintiff requested me to take up and carry for her in the said special account at the office of Post & Flagg the securities mentioned in her complaint, at that time being carried by the plaintiff at the office of the said Arthur S. Leland & Co. The plaintiff had on said date an equity or margin in said account of only $5,392.68, upon which she was carrying 1,200 shares of speculative securities. On May 26th, 1903, the market price of Southern Pacific Railroad. Company stock was approximately $50 per share, so that the market price of the plaintiff's 700 shares of Southern Pacific stock in the special account at the office of said Post & Flagg was only $35,000, against which she owed the sum of $36,312.30; in other words, there was a deficit in her said account at the market price of Southern Pacific stock on May 26th, 1903, of $1,312.30. On said date I consented to direct the said Post & Flagg to take up the plaintiff's said securities at the office of the said Arthur S. Leland & Co., and to pay off the debit balance of the plaintiff thereon, the plaintiff on her part agreeing to contribute the sum of $5,000 as additional margin. I received on that day the plaintiff's check for $5,000 and endorsed the same over to the said Post & Flagg, and the said Post & Flagg paid off the plaintiff's debit balance at the office of said Arthur S, Leland & Co., to wit., the said sum of $85,644.82. The said payment was charged against said special account and added to the debit balance due thereon. The said securities were placed in the said special account, which up to that time had contained only the said 700 shares of Southern Pacific stock, and I guaranteed the said Post & Flagg against loss with respect to the said account, as I had previously done when the same only contained the said 700 shares of Southern Pacific stock. On May 29th, 1903, I was called upon by the said Post & Flagg to pay them as additional margin the sum of $10,000, which I paid on said date out of my personal funds; before paying said sum out of my personal funds I notified the plaintiff of said demand for margin and asked her for the money. She told me that she had no more money, and at her request X made said payment; as per the statement of the said Post & Flagg of May '31st, 1903, the plaintiff's debit balance was $107,156.21 against which the said Post & Flagg held as security, in addition to my guarantee, the following securities: 700 shares of Southern Pacific Railroad Company, 100 shares of Hocking Valley Railroad Company, 500 shares of Atchison, Topeka & Santa Fe Railroad Company, 400 shares of Union Pacific Railroad Company, and 200 shares of Missouri, Kansas & Texas Railroad Compay, preferred stock. Ho change was made in said account until August 1, 1903, when a change was made in said account by direction of the plaintiff, On the evening of July 30th, 1903, I received by messenger a note from-the plaintiff written in her handwriting, which reads as follows: '(Monogram) FAYTHE-—hath—no — fear 245 West End Avenue, Thursday, 5 p. m. .Dear Clay: I have held on to Va. Chemical just as long'as I can-— and I must let it go tomorrow unless we can arrange in this way—you sell my S. P. M. K. T. and Hocking Valley — and take over my Chemical — it will mean a great less (sic) in value, and on Chemical I will be getting 5% interest, while on these other stock—nothing.. 1300 shares of Chemical will mean about $3,000 less than we are now carrying—and besides getting good interest. Do you think it wise to do this ? When my Father estate is settled I shall be able to take the stock back— Clay dear do not think I want to you to do any more only to make a in what you are carrying I am going to give the house into the Beal Estate peoples hands I will not be able to keep it—and they can get a good price furnished — Please call me up Clay I must know the first thing in the morning — Sincerely, Alice Bycroft ' Upon receipt of this letter I directed my financial secretary to prepare for me a statement of the account as of July 30th, 1903, which I was carrying for the plaintiff at the office of said Post & Flagg, in order that I might be informed as to. the exact condition of said account and, so informed, come to a conclusion as to whether or not I would accede to the plaintiff's request contained in her said letter; a statement of the said account was prepared by my said financial secretary and submitted to me on July 31st, 1903, or August 1, 1903, the said statement of account being in words and figures as follows:
".'Statement'of Mr. H. 0.'Pierce's Special Account with Post & Flagg, for account of Mrs. Alice Gr. Bycroft. (?)
" ' June 30, 1903 (the debit balance this account was as per statement rendered. $107,591.54
" ' The securities mentioned in said statement were as follows:
As per P. & F's As per market at Stock. statement of close of business July 27th, '03. July 30th, 1903. •¡Southern Pacific, o o at $41.. $28,700.00 $44 $30,800.00 •¡Hocking Valley, 100, 75.. 7,500.00 80 8,000.00# ? Atchison, 500, 62.. 31,000.00 62% 31,250.00 Union Pacific 400, 73.. 29,200.00 75 30,000.00 fM. K. & T. Pfd. 200, 38.. 7,600.00 40% 8,025.00#
Totals.......... $104,000.00 $108,075.00
1.300 shares Va. Ohem, at 32... 41,600.00 }
1.300 shares Va. Ohem, at 34 (?) 44,200.00 f
Total.........15,100.00 and $16,025.00
Satdy. 8/1
f New York 1 " \ Jul 31 1903 ¡-Instructed P. & F. to sell at today's market. 1C. B. O. j
700 Southern Pacific 100 Hocking Valley 500 Atchison Com 200 M. K. & T.
& take up at Sharp & Bryan 800. Vir. Chem. Co. at $26,750.'
Upon receipt of said statement of account I examined it, and marked in lead pencil with cross marks the names of the stocks directed to he sold by the plaintiff in her said letter. Upon consideration of the figures I came to the conclusion that I would he unwilling to make the additional commitment involved in taking up the stock of the Virginia-Carolina Chemical Company mentioned in the plaintiff's said letter, unless she also gave me authority to sell her Atchison, Topeka & Santa Fe stock in addition to the stocks mentioned in her said letter. I therefore placed opposite the word ' Atchison ' in lead pencil a ' V, and thereafter conferred with the plaintiff as requested by her in her said letter. At such conference I undertook to take over the stock of the Virginia-Carolina Chemical Company on condition that the plaintiff would give me authority to sell her said Atchison stock in addition to the other stocks mentioned in her said letter, and directions to do so were given me by plaintiff. Thereupon on August 1, 1903, I directed the said Post & Flagg to sell at the ruling market prices for that day the 700 shares of stock of the Southern Pacific Railroad Company, the 100 shares of stock of the Hocking Valley Railroad Company, the 500 shares of stock of the Atchison, Topeka & Santa Fe Railroad Company and the 200 shares of the preferred stock of the Missouri, Kansas and Texas Railroad Company and to take up at the brokerage firm of Sharp & Bryan 800 shares of stock of the Virginia-Carolina Chemical Company and to pay to the said Sharp & Bryan the plaintiff's debit balance against said stock amounting to $26,750. The statement in the plaintiff's said letter, that there- were 1,300 shares of stock of the . Virginia-Carolina Chemical Company turned out to be incor rect; the plaintiff only owned 800 shares of said stock. Finally, I directed the said Post & Flagg, upon receipt of the said 800 shares of stock of the Virginia-Carolina Chemical Company to place the same in the said special account ". The total sum realized on August 3d, 1903, from the sale of securities made on that date, was $69,312. SO. There remained for the benefit of the plaintiff in the said ' H. Clay Pierce, Esq., Special' account, 400 shares of Union Pacific stock and 800 shares of Virginia-Carolina Chemical Company stock and the aforesaid 100 shares of Hocking Valley stock, and against these there was a net indebtedness on said date of $65,482.09. In the week commencing August 3d, 1903, the brokerage house of Sharp & Bryan failed; said brokerage house had been dealing extensively in the stock of the Virginia-Carolina Chemical Company, and upon their failure the price of said stock broke from approximately $32 a share to approximately $21 a share. I was absent from the city during the week commencing August 3d, 1903. During that week the said Post & Flagg for their protection sold the aforesaid 400 shares of common stock of the Union Pacific Railroad Company on August 5th, 1903, [for] $28,950, and on August 6th, 1903, the 800 shares of Virginia-Carolina Chemical Company stock [for] $16,725, leaving in said account, after said last-mentioned sale, only 100 shares of the stock of the Hocking Valley Railroad Company, as against which there was a debit balance of $19,807.09. The said 100 shares of stock of Hocking Valley Railroad Company were subsequently sold on August 19th, 1903, for the net sum of $7,187.50, leaving a debit balance in said account of $12,662.63, which I was, because of my guarantee of the account, subsequently obliged to pay, together with the accrued interest thereon, the total payment made by me on account of principal and interest being $12,984.15. Upon my return to the city in August, 1903, 1 learned that because of the decline in the prices of the stocks still contained (sic), on August 3d, 1903, in the account kept by me for the plaintiff with Messrs. Post & Flagg, designated 'H. Clay Pierce, Esq., Special,' said remaining securities had been sold. out by Post & Flagg, leaving the debit balance above referred to. From the facts, stated above and the records attached hereto, neither the 700 shares of Southern Pacific stock nor the stock mentioned in the complaint, nor the stock taken over at plaintiff's request from Sharp & Bryan, was at any time placed to my personal account at the brokerage house of Post & Flagg; they were always kept'together in a separate account for the plaintiff's benefit, and the plaintiff's loss was in no way due to any act of mine. I in fact mitigated what would otherwise have been her loss by'paying her debit balance at the office of Post & Flagg."
Mrs. Bycroft and her two counsel admit in their affidavits that before the taking of the inquest they knew of the letter from her of July 30, 1903, quoted supra, and had a copy of it. ' It is true she denies that she ever had any conference with defendant or gave him any directions after the writing of such letter. In this she is flatly contradicted by the defendant and he is corroborated to a considerable extent by documentary evidence.
She is proceeding as upon a conversion' on May 26,1903, and she denies that she requested the defendant to. take up and carry for her in the said special account the securities mentioned in the complaint, and reiterates the testimony which she gave upon the inquest, where she said that the first time that she learned that her account had not appeared in her name upon Post & Flagg's books was in June, 1909, and that she had never authorized or directed any person to transfer those securities in any other name or to any other account than hei own.
In view of the fact that this lady was an experienced operator, who knew that brokers were in the habit of sending regular statements in regard to all open accounts in their offices, and the fact that She never received any from Post & Flagg; the fact that the Southern Pacific stock which opened the H. Olay Pierce special account in 1902 was ordered to be sold by her in her letter of July thirtieth and is not included in her cause of action; the fact that the 800 shares of Virginia Chemical held in her name in the office of Sharp & Bryan were, as matter of fact, transferred from said office to Post & Flagg in accordance with' her letter, which could not have been done without her written authorization to Sharp & Bryan, and are not included in her cause of action, though transferred to the same account and treated in the same way as the items of which she does complain, are matters strongly corroborating the defendant's story, and' throw grave doubt upon her testimony that she had no -conference with him after the sending of said letter. It will be recalled that in said letter she wrote: " I have held on to Va Chemical just as long as I can — and I must let it go tomorrow unless we can arrange in this way — you sell my S. P. M. K. T. and Hocking Valley — and take over my Chemical " — precisely what was done.
It is not necessary for us at this time to hold that the defendant has made out a complete defense to the whole cause of action; enough has been established to raise a strong presumption against the validity of the plaintiff's claim, at least in its entirety. Under such circumstances, in the interests of justice, we are imwilling to permit this judgment to stand. We think that a real trial should be had in open court, where the conflicting stories may be tested according to the course of the common law. The plaintiff does not meet the attack upon the integrity of her testimony and of the judgment obtained thereon, made by the production of this letter, while she and her counsel admit that they were aware of it and had a copy of it at the time of the inquest.
The averment is made by one of the counsel in his affidavit that there is evidence which deponent, in justice to his client, cannot at this time, without prejudice to her other case now pending, disclose here, which, in deponent's judgment, answers in an entirely satisfactory manner the claims of the defendant based upon this alleged letter as made by him. If plaintiff is not willing to disclose such alleged evidence in order to maintain her judgment a trial ought, to be had upon which both parties will have the opportunity to disclose all the facts and the whole truth touching their mutual relations.
The order appealed from should, therefore, be reversed, the motion granted, the default opened and a néw trial ordered, upon the following terms: That the judgment is to stand as security; that the defendant stipulate that in the event of his death before the trial of- this action the action shall not abate, but shall continue against his estate, and that all the provisions of section 829 of the Code of Civil Procedure are and will be waived by him in respect to the testimony of- the plaintiff upon any future trial of this action; that the full costs and disbursements of the action to the present time, together with $500 counsel fee, be paid by the defendant;-and that-the case be placed upon the .day calendar for speedy trial.
Ingraham, McLaughlin and Laughlin, JJ., concurred; Scott, J., dissented.