Case Name: Clarence L. Barber, Appellant, Respondent, v. Charles H. Ellingwood and H. Townsend Davis, Respondents, Appellants. (Action No. 2.)
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1910-04-08
Citations: 137 A.D. 704
Docket Number: 
Parties: Clarence L. Barber, Appellant, Respondent, v. Charles H. Ellingwood and H. Townsend Davis, Respondents, Appellants. (Action No. 2.)
Judges: 
Reporter: Appellate Division Reports
Volume: 137
Pages: 704–716

Head Matter:
Clarence L. Barber, Appellant, Respondent, v. Charles H. Ellingwood and H. Townsend Davis, Respondents, Appellants. (Action No. 2.)
First Department,
April 8, 1910.
Practice—waiver—appeal—increasing verdict —judgment—res adjudicata—burden of proof—question for court—presumption — pleading — set-off — waiver of defect — complaint — contract — conversion — principal and agent—stockbroker—unauthorized sale —damages— counterclaim.
Although a customer, suing a stockholder, to recover margins and profits, offers at trial to waive the profits and asks the direction of a verdict for the amount, of the margins and interest only, he may, after a denial of his motion, demand the profits. ' . -
Where.a verdict is given for the amount of the margins only, the Special Term cannot correct the verdict by increasing it, nor can the Appellate Division do .' so on appeal.
Where a cause of action, matter in defense or counterclaim, is once litigated on the merits in a. court of competent jurisdiction, whether decided properly or not, the judgment is a bar.
Whether or no a matter is res adjudicate/, is to be decided from the pleadings and judgment. If it cannot be so determined, it must be determined from the record of proceedings at trial or by parol evidence.
Where a defendant pleads a prior judgment on another account as a bar, because the matters involved in the present action were therein set up as a counterclaim and the question as to whether the counterclaim was litigated must be determined dehors the record, the burden is on the defendant to show that it was litigated.
No presumption that the counterclaim in the former action was litigated arises from the fact that it was pleaded.
It is error to allow the .jury to say whether a question was adjudicated on a former trial, for that is a question of law.
A set-off may be pleaded only in á counterclaim.
Where defendants alleged certain facts as a separate defense with a prayer for affirmative judgment and later amended so as to strike out the demand for judgment on the counterclaim, but the plaintiff did not question the sufficiency of the counterclaim as amended as an offset, the defendant should have the benefit of it as such.
Where the plaintiff by a supplemental reply sets up the judgment in the former action as a bar to'the defendant’s counterclaim, he must show that the matters were litigated in that action, and, on his failure to do so, the defendants are presumed to be entitled to offset., .
A complaint which alleges that defendants were carrying certain stock for plaintiff, some “long” and some “short,” and that, without plaintiff’s authority, they closed out the account, whereby the plaintiff was damaged in a certain sum, which defendants refused to pay on demand, but does not charge a conversion, should be taken as one on contract.
A complaint in conversion should charge that the acts were wrongful or unlawful and, if the allegations are ambiguous or it is uncertain whether the action is in tort or on contract, it will be construed as one for breach of contract.
Where a broker without authority sells stock which he is carrying on margin the plaintiff may recover the difference between the price received and the highest price of the stock within a reasonable time after he received notice of the sale.
If the price recei red for the stock is insufficient to reimburse the broker for advances, interest and commissions, he may interposé a counterclaim for the balance whether the action be in tort or on contract, and the balance will be offset against any recovery by the plaintiff.
In an action for conversion the counterclaim may be limited to a balance owing the broker on the particular securities in question; but in an action on contract any Other balance owing the broker or any cause of action against the customer on contract owned by the broker may be counterclaimed.
Where the plaintiff desires anew trial unless the judgment can be increased and defendants also wish a new trial, it will.be granted.
Appeal by the plaintiff, Clarence L. Barber, from so much of a judgment of the Supreme Court in favor of the plaintiff, entered in the offic.e of the clerk of the county of New York on the 17th day of September, 1909, upon the verdict of a jury as awards to him the sum of $1,100 only, instead of the sum of $1-,144.85 and the interest thereon from November 14,1906, with notice of an intention to bring up for review an order entered in said clerk’s office on the 15th day of September, 1909, denying the plaintiff’s motion to correct the verdict by adding interest thereon.
Also an appeal by the defendants, Charles H. Ellingwood and another, frqm the said- judgment in favor of the plaintiff, and also from an order entered in the office of the clerk of the county of New York on the 22d day of July, 1909, denying the defendants’ motion for a new trial made upon the minutes.
James A. Deering, for the plaintiff.
Duncan Edwards, for the defendants.

Opinion:
Laughlin, J.:
Thése appeals were brought on and argued separately but, on the suggestion of counsel, we deemed it proper to withhold decision in the one argued first And. to decide them- together. The defendants were brokers arid the plaintiff was one of their customers. ' Prior .to the 20th day of September, 1906, the plaintiff's business relations with the defendants were represented by two accounts on their books, known as Hos. 1 and 2, and on that day lie opened, a third account known as Ho. 3. Account Ho. 2 was closed to the mutual satisfaction pf the parties and it is not involved in the appeal. On or about the 14th day of Hovember, 1906, the defendants refused to purchase or sell any more stocks'- for the plaintiff. The respective accounts correctly represented the transactions which were actually had by the defendants with respect to' each.' This and another litigation involve questions- concerning the authority of the defendants to make some of the transactions. After the last purchase and sale of securities'by defetidamts there stood to plaintiff's, credit in. account Ho. 3, on said fourteenth day of Hovember, §1,144.85, and account Ho. 1 showed him to be indebted to the defendants in' the sum of $1,345.22. The defendants closed account Ho. 3 by applying the-balance therein to. plaintiff's credit on his indebtedness to them shown in account Ho. 1, "which, "if. all of the' transactions shown by the accounts were authorized,, would leave plaintiff indebted- to them in the sum Of $200.37.' This action is brought to recover the amount standing to the plaintiff's credit on account Ho. 3 on said fourteenth day o,f Hovember before it was closed, by applying •such balance to "the plaintiff's credit on account Ho. 1. The plaintiff has recovered the amount of the margin, $1,100, originally deposited on this account, but not the $44.85, which represented profits, nor has he recovered' interest His appeal presents the question as to whether lie was entitled, to recover the profits arid the interest. On the trial he offered to waive.the profits, realizing that liis right to recover the same depended on confiictirig testimony, for.he requested-a direction' of a verdict, for $1,100 and- interest-; but since his request was not granted he is still at liberty to demand profits, The order which he seeks to review was made at Trial Term on an application to Amend the verdict so as to include interest from the time the account was closed. -.
We are of. opinion that if" the plaintiff was entitled- to recover at all —and if this appeal be considered separately it'would have to be assumed that he was—he was entitled to recover both profits and interest, as well as the margin deposited. We cannot, however, on the appeal from the judgment,-correct the verdict by increasing it, nor could the court at Trial Term so correct it. The questions presented by the defendants' appeal, however, render it exceedingly doubtful whether plaintiff was entitled to recover anything in this action. The defendants closed five transactions represented by account No. 1 by selling stock and bonds which they were carrying for the plaintiff, and by buying stock to replace stock which they had sold short for him. The plaintiff claimed that the action of the brokers in thus closing these five transactions represented by .account No. 1 was unauthorized, and he brought a separate action, known as action No. 1, with respect thereto. When action No. 1 was brought the cause of action presented by the complaint herein had accrued, and the failure to embrace both causes of action' in one • complaint, or to'try action No. 1 so that the record would clearly show what issues were determined by the jury and to show on the trial of this action what questions were litigated in action No. 1, has given rise to considerable confusion and difficulty in attempting to administer justice between the parties. In action No. 1 the defendants interposed a counterclaim for the balance which they claimed to be due to them on both of these accounts, after giving the plaintiff credit for the amount standing to his credit on account No. 3, to recover for which this action is brought. Their accounts, were made and prepared on the theory that all of their purchases and sales were duly authorized. The plaintiff, on the other. hand, proceeded in action No. 1 upon the theory that the five transactions, three sales and two purchases of stock and bonds shown in account No. 1 and on which said' balance was struck were unauthorized, and that defendants, made a special contract with him by' which they were not to be entitled to demand or receive more margins. Action No. 1 was tried first and plaintiff recovered a verdict for $4,025.83. The defendants interposed a supplemental answer herein, pleading the judgment in action No. l"in bar and alleged that in their counterclaim in that action the plaintiff was given credit for the balance to his credit in account No. 3 ; that it was alleged as a basis for 'the counterclaim that both by custom and agreement the brokers were to have the right to hold any securities ' as security for any indebtedness owing to them; that the counter claim was litigated and ¡allowed by the. jury, and that thereby the plaintiff received credit for the balance in account No. 3, for which he seeks to recover here1. The defendants introduced in evidence . the judgment roll in action No. 1, but they did not follow it up by evidence clehors the record to show, as pleaded by them, that the counterclaim was litigated or what questions were submitted to the jury, and presumably must conclusively be deemed determined by their verdict: The judgment in favor of the plaintiff, in that action
does not show that the counterclaim ivas litigated, because such judgment might have been recovered regardless of whether or not the counterclann was litigated. Nor was there any presumption that the counterclaim was litigated, arising on the mere, fact that it-was pleaded. The defendants were not obliged to plead it, arid by failing to do so they would not have waived it. They Could have omitted to plead .it and have maintained a separate action on it; and-after pleading it they were at liberty to abandon it without waiving it. (Honsinger v. Union Carriage & Gear Co., 175 N. Y. 229.) Where a cause of action, matter in defense or-counterclaim is once litigated on the merits iri a court of competent jurisdiction, whether decided properly ór otherwise, the judgment is a bar, .and whether the judgment be res ád/jndicata is to be decided on the record,' which, in the limited sense in which that term is here used, means the judgment roll-only showing the pleadings and judgment, provided ; the judgment be such, in the light of the pleadings, that it necessarily.shows whether or not the cause of action, defense or counterclaim over which the question, arises was litigated; but.- if not, then it is incumbent on the party interposing the judgment asa bar to show the essential facts by the record of the proceedings on the trial or other parol evidence. (23 Cyc. 1132, 1136, 1215; Herman Estop. & Res. Adj. [2d ed.] § 267, 277-280; Smith v. Smith, 79 N. Y. 634; Carleton v. Lombard, Ayres & Co., 149 id. 137, 152; Patrick v. Shaffer, 94 id. 423 ; Adams v. Conover, 87 id. 422; McGuinty v.Herrick, 5 Wend. 240; Baker v. Stinchfield, 57 Maine, 363.) There were two appeals to this court in action No. 1; On the first appeal the opinion was expressed by the present presiding justice that the. action was on contract, but the question was not decided, by the court. (130 App. Div. 555.)' On the second appeal the judgment in favor of the plaintiff was reversed on the ground' that the verdict of the jury sustaining the special contract of an extraordinary nature, as claimed by the plaintiff, by which the defendants were to carry his transactions without exacting further margins, was against the weight of the evidence (Barber v. Ellingwood, No. 1, 135 App. Div. 549), and attention was drawn by the minority opinion, which also favored reversal, to the fact that, in so far as the action related to " short " transactions, it was necessarily on contract, for there would be no property of the customer to convert; and the view was therein expressed that it probably should be regarded as an action to recover the plaintiff's damages, or, in other words, the amount owing to him by the brokers on a full adjustment of their transactions with respect to the account. If in action No. 1 the defendants recovered on the counterclaim, in which, in arriving at the balance claimed by them, they credited the plaintiff with the balance to his credit in account No. 3, it is manifest that, having had the benefit of that'credit-plaintiff cannot maintain an action to recover on account thereof, for the former judgment would be a bar. The fact that the plaintiff recovered a verdict in action No. 1 does not necessarily show that the counterclaim was not allowed. The case may have been so submitted to the jury that it was the duty of the jury to deduct the amount of the counterclaim from the amount that would otherwise be due to the plaintiff. It is evident, therefore, that the question as to whether or not the counterclaim was litigated in action No. 1, so that the judgment therein is a bar to this action, can only be determined by evidence dehors the record showing what questions were submitted' to the jury. On this point, under their plea of the judgment in action No. 1 as a bar, the burden was on the defendants. During the discussion at the close of the evidence counsel for defendants stated to the court that on further consideration it appeared to defendants that the judgment in action No. 1 was not res adjudícala, and at the close of the charge he requested the court to instruct the jury in effect that the right of the plaintiff to recover the balance of account No. 3, arid of the defendants to credit that amount in account No. 1, was not " litigated or determined in action No. 1, and is not res adjudícala in this action." The defendants originally undertook to plead the same counterclaim in this action that they pleaded in action No. 1, and they demanded an affirmative judgment against- the plaintiff for the same amount. The facts are not expressly- alleged as a counterclaim, but merely as a separate defense.' At the commencement- of the trial the answer was amended on motion of counsel for defendants " by striking out so much of the demand as demands judgment for a counterclaim." The theory of counsel for defendants appears, to be. that, notwithstanding the amendment, to .which reference has been made, the answer remained good as a plea of setoff of the balance owing by- the plaintiff. in- account No. 1 before it was so reduced.. We have recently held that, the only manner in which-.a setoff -may be pleaded now is in a counterclaim. (Rando v. National Park Bank, 137 App. Div. 190.) With the. demand for affirmative relief stricken from the separate defense, there is nothing left to indicates that it was ever intended as a counterclaim ; but it might have been sustained as-a good plea of payment,-for it is alleged in effect that the-agreement between the parties was that the defendants should be at liberty to-apply any balance to the plaintiff's credit in one account on any indebtedness owing.by him in any other. That, however, is not the theory on which the .case was tried, and there,was conflicting evidence on-the question as to whether such was the agreement between the parties, . and that question of fact was not determined on the trial nor was any request that it be determined made. The plaintiff evidently - considered that the answer contained á counterclaim, for he served a reply and a supplemental reply. Had it not been, therefore,, for the amendment' of the answer striking out the demand for affirmative judgment, the plaintiff would be conclusively deemed to hav.eacquiesced in the pleading as a good counterclaim in' form. It is evident that counsel for the defendants acted upon the theó.ry that • the pleading was sufficient to authorize an offset of a balance, owing .' to the defendants in account-No. 1 sufficient to extinguish the plain--' tiff's claim. Inasmuch, therefore, as plaintiff did not question the • sufficiency of. the counterclaim as. an. offset, the defendants - should have the benefit of it as such a pleading. After the -recovery in. action No.-'l .plaintiff- served a supplemental reply pleading that judgment -as a bar to the defendants' counterclaim. .This was: before the defendants amended their counterclaim by striking out their demand for affirmative judgment, and if thé facts-pleaded in- the answer as a separate defense are to be regarded as a counterclaim to the extent of authorizing an offset, the burden was on the plaintiff to show that account No. 1 was litigated in action No. 1 and that the judgment therein was a bar to the right of the defend^ ants to offset the balance shown on account No. 1 to be owing by the plaintiff before he was credited thereon with the balance .shown on account No. 3. This he did not do, and, therefore, presumptively defendants were entitled to the offset, for it appears by the complaintin action No. 1 that plaintiff made the credits and charges in account No. 1 the basis from which he figured his damages, for he only sought to recover the damages over and above the credits and charges in said account.. The plaintiff at the close of the evidence moved for the direction of a verdict, and the defendants moved for a dismissal of the complaint. Both motions were denied. The court then submitted the case to the jury and in so doing drew attention to the questions involved in action No. 1 and instructed the jury that if it appeared to them that the jury in action No. 1 took into account all of the relations of the parties " balancing their affairs" there could be no recovery, but otherwise the plaintiff would be entitled to recover "'eleven hundred and some odd dollars." There was, as has been seen, no basis on which this could be determined, and if here had been, the question of res adjudioata was one of law for the court to. decide. . .
Counsel for the defendants made various requests to the court to instruct the jury, based on the theory that they were entitled to offset the indebtedness owing by the plaintiff to them in account No. 1, before it was reduced as already stated, against his claim in this action, all of which were refused, and exceptions were duly taken. Sufficient facts not having been presented to show that the counterclaim as an offset was barred, by the former judgment these rulings, were erroneous.
A new trial is pending in action No. 1, and inasmuch as there must be a new trial in this action, it is proper that we should now express an opinion for the aid and guidance of the trial court with respect to whether action No. 1, the pleadings in which are in this record, is to be regarded, as an action on contract or in tort and witli respect to the bearing of the judgment in that action on the issues herein.
Tlie allegations, of the complaint in action No. 1 material to a decision of this question aré, that a special contract was made between the plaintiff and the defendants- for speculating in stocks and other securities on margin; that plaintiff deposited with' the defendants as margin on said account the sum of $9,000; that defendants were carrying certain stocks and bonds in said account " long " and certain stocks " shortthat defendants "sold" certain stocks and bonds and "bought in and covered " certain stocks " without notice to and without authority from plaintiff," and that
on learning of said unauthorized sales and purchases, plaintiff dis-affirmed the. same and notified defendants that he did not acquiesce therein; " that " on account of ¿aid unauthorized purchases and sales, plaintiff sustained a loss of $10,880.25 [it appeared on the appeal in action No. 1 that these figures were- reduced by an amendment on the trial] " ; that defendants' commissions for buying and selling the stock and bonds would have been $137.5.0, and they would have been entitled to charge plaintiff about $275 interest, making in all ,$412.50 (it also appeared on the appeal inaction No. 1 that these figures were increased by an amendment on the trial); that-deducting said credit from said loss, " there remains due to plaintiff from defendants " the sum of $10,467.75, " with interest thereon from May 5, 1906, which defendants have refused to pay on demand made and for which he demands judgment with costs."
It will be seen that these allegations entirely omit the phrase- ology customarily employed in an action for'conversion and contain no apt words to show that it was intended as an action for conversion, but appear to have been drafted to charge merely a breach of the special contract pleaded and resulting damages, and although the facts show a conversion, conversion is not charged.
If it were intended to charge conversion there .was no necessity for alleging a demand for the amount dué. It is not charged that the acts of the defendants were either wrongful or unlawful. Since an order of arrest may be-obtained in an action for conversion and a body execution will issue on the judgment, a complaint to be construed as in' conversion should, by appropriate language, charge that the acts were wrongful or unlawful'.as distinguished from a mere violation of contract rights, which is all that is charged here. The rule in such cases is that if the allegations be ambiguous on this point or it be doubtful whether the action is brought in tort or on Contract, every intendment is in favor of construing the coin-plaint as setting forth a cause of action on contract, on" the theory tiiat the tort has been waived. (Goodwin v. Griffis, 88 N. Y. 629; People v Wood, 121 id. 522 ; Neftel v. Lightstone, 77 id. 96 ; Catlin v. Adirondack Co., 81 id. 639 ; reported in full in 11 Abb. N. C. 377.)
I think it is not very material, however, whether action No. 1 be deemed in tort or on contract, for in either view the counterclaim was properly interposed. Where a broker sells securities which he is carrying for a customer on a speculative account, the customer may either sue in conversion or waive the tort and sue for damages for a breach of contract (Stearns v. Marsh, 4 Den. 227; Baker v. Drake, 53 N. Y. 211, 213), and in either form of action the rule of damages is the same and the broker is entitled to the benefit of the highest price of the stock within a reasonable time after he receives notice or acquires knowledge of the sale. (Baker v. Drake, supra ; Wright v. Bank of Metropolis, 110 N. Y. 237, 246; Minor v. Beveridge, 141 id. 399,403; Burhorn v. Lockwood, 71 App. Div. 301, 303, and cases cited.) The broker could not question the right of the customer to the benefit of the price at which the securities are sold, whether with or without authority, and consequently it is assumed that the customer is entitled to the benefit of that price at least; but owing to the object of such a contract and to the fluctuating value of the securities the courts have deemed such ¡mee inadequate, and to fully compensate the customer have made an exception to the general rule that the recovery is limited to the actual market value of the property at the time of the conversion by holding that the customer is entitled to the benefit of the price at which he could have repurchased the stock within a reasonable time thereafter, and have visually stated that the measure of the customer's damages for the wrongful conversion or breach of duty is the difference.Between the price at which the securities were sold and the market price within a reasonable time thereafter. (Baker v. Drake, 53 N. Y. 211; Colt v. Owens, 90 id. 368.) This statement of the rule manifestly is made on the assumption' that the broker has fully accounted to the customer for the price received or has credited him therewith, and that the customer has acquiesced therein and sues only for his loss or damages over and above the amount which he has received or with which he has been credited; for it is evident that such difference in price would not in all. cases be the full- measure of the recovery. If the customer had paid for the securities and owed the broker nothing for commissions or for carrying them, then clearly he would be entitled to recover their full value to be ascertained by such highest price, and the amount which the broker sold them for would be of no importance unless, it has been' paid over to the customer, in which case a recovéry could only be had for the balance for which the broker had not accounted. (See Wright v. Bank of Metropolis, 110 N. Y. 237, 246.) So, too, if the'broker .was carrying the securities on margins, the price received on theunauthorized sale might not be sufficient to reimburse him for' advances, interest and commissions, in which case, whether the action be brought for Conversion or on contract* he would be entitled to interpose a counterclaim for the balance which would be offset against any difference, between the price at which the securities were sold and said highest price, for the rule -at' common law was that a pledgee who was sued in conversion or on contract for. property could recoup the amount of his lien notwithstanding the fact, that his act in withholding or disposing of the property was wrongful and that the amount recoverable was the difference between the value of the property converted and the amount of such lien (2 Sedg. Dam. [7th ed.) 391 and cases cited; Briggs v. Boston & Lowell R. R. Co., 6 Allen, 246. See, also, Dams v. Bliss, 187 N. Y. 77,84; Parish v. Wheeler, 22 id. 494, 511), and under the Code of Procedure and Code. of Civil, Procedure, either on the theory that the subject, of the-action was the property'upon which, the pledgee had. a lien, or that both-the cause of action and the counterclaim arose out of the same transaction,; the amount of the lien could be counterclaimed. (Code Proc.. § 149,150 ; Code Civ. Proc. § 500, 501; Dos Passos Stock-B. & Stock-Exch. [2d ed.] 230-233 ; Stewart v. Drake, 46 N. Y. 449; Minor v. Beveridge, supra; Wicks v. Hatch, 62 N. Y. 535 ; Toplitz v. Bauer, 161 id. 325, 336.) Of course in conversion an order of arrest might be allowed and a body execution would issue, but the only difference with respect to the amount of .the recovery would be that m conversion the coim terclaini might be limited to a balance owing to the broker on account of the particular securities in question, while if the action be on contract, any other balance owing to the broker arising on contract or any other cause of action against the customer on contract owned by the broker at the commencement of the action could be counterclaimed. (Code Civ. Proc. § 501, 502.) The question as to whether in the absence of a special agreement, a broker, like a banker, has a general lien on all securities of his customer in his hands for any balance owing to the customer, which is the law in England (Matter of London & Globe Finance Corporation, L. R. [1902] 2 Ch. Div. 416), has not been authoritatively decided here (Dos Passos Stock-B. & Stock-Exch. [2d ed.] 804 et seq., 809), but on principle it would seem that such lien should exist in favor of stockbrokers particularly when that broker advances part or all of the purchase price of the securities. It is not necessary to decide the point, however, for it is alleged iii the counterclaim in action No. 1 that both-by virtue of the custom and by special agreement, the brokers were given the right to hold any of plaintiff's securities as security for any balance of account at any time owing to them. I have assumed in this discussion that the alleged special agreement by which it is claimed that the brokers were not to call upon plaintiff for further margins while they were carrying the stock, does not, if established, deprive them of the right ultimately, on the account being closed, to collect from the plaintiff any balance of the account in their favor, for it is not alleged that they were to bear losses, and it would seem, therefore, that since they do not in the ordinary ease forfeit by a wrongful sale the right to recover the balance of the account as thus made up, they would not for a breach of this special contract; but since that question has not been argued, we leave it open for furtlier consideration if necessary.
Thus it appears on the plaintiff's appeal that if he be entitled to recover at all he was entitled to recover the items of profits and interest, and, on the other hand, the appeal of the defendants shows error to their prejudice. The plaintiff asks for a reversal and for a new trial unless we can amend the judgment by increasing the verdict by the items to which.reference has been made, which manifestly we cannot do, and the defendants also desire and apparently are entitled to a new trial. If the attorneys are desirous of having
the rights of their clients determined in accordance with law, there should be no difficulty in so conducting the next trial of action No. 1 that the claims .involved in both'actions will be adjusted therein or, at least, that the record of the trial will show whether or not and to what extent, if any, the issues in this action have been litigated in that action.
We are of opinion, therefore, that a new trial should be granted,
. with costs of the appeal to the party who shall ultimately succeed in the action.
Ingraham, P. J.,-Clarke and Scott, JJ;, concurred; Miller, J., ' in result. . _ - .
Order-of September 15, 1909, affirmed; judgment and- Order denying motion for new trial reversed and. new trial ordered, with costs of appeal to- the party who ultimately succeeds in the action-.