Case Name: Robert H. McCutcheon, Respondent and Appellant, v. Charles Dittman, Appellant, Impleaded with Others. Solomon Isaacs et al., Respondents
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1900-10-09
Citations: 164 N.Y. 355
Docket Number: 
Parties: Robert H. McCutcheon, Respondent and Appellant, v. Charles Dittman, Appellant, Impleaded with Others. Solomon Isaacs et al., Respondents.
Judges: 
Reporter: New York Reports
Volume: 164
Pages: 355–364

Head Matter:
Robert H. McCutcheon, Respondent and Appellant, v. Charles Dittman, Appellant, Impleaded with Others. Solomon Isaacs et al., Respondents.
Attorney and Client—When Client Chargeable with Knowledge Acquired by Attorney. Where the attorney of an attaching creditor who has levied upon the interest of his debtor in stock pledged as collateral security for a loan by a third person, subsequently acts as attorney for the lender in making a sale of the stock at public auction to pay the loan, at which sale the attaching creditor bids in the stock for an amount sufficient to pay the loan and expenses of sale, the attorney must be considered as the agent for both creditors in making the sale, and the creditor so purchasing is bound by any invalidity of the sale in respect of demand or notice of which the attorney had knowledge.
McCutcheon v. Dittman, 23 App. Div. 285, modified,
(Argued June 15, 1900;
decided October 9, 1900.)
Cross-appeals from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered January 28,.1898, modifying and affirming, as modified, a judgment in favor of plaintiff entered upon the report of a referee.
This action was brought to recover certain shares of stock, or the value thereof, which had been pledged by plaintiff with the defendant Dittman as security for the payment of a jiromissory note for $1,000.
The facts, so far as material, are stated in the opinions.
• J. E. Ludden for plaintiff, respondent and appellant.
The referee was right in holding that the defendants S. Isaacs & Co. were chargeable through their attorney with the knowledge of the circumstances under which the sale was made, and, therefore, were not purchasers and are not now holders of the stock in good faith. (Bennett v. Buchan, 76 N. Y. 386; Constant v. University of Rochester, 111 N. Y. 611; Slattery v. Schwannecke, 118 N. Y. 543; Hyatt v. Clark, 118 N. Y. 569; Denton v. O. C. Nat. Bank, 150 N. Y. 126.)
David B. Hill and Leo C. Rosenblatt for defendants, appellants and respondents.
S. Isaacs & Co, as purchasers, were not chargeable with constructive notice of irregularity in the notice of sale, although the person who, as Dittman’s counsel, mailed the notice, happened at the same time to be the attorney of record for respondents in their collateral attachment suit (Benedict v. Arnoux, 154 N. Y. 715; Denton v. O. C. Bank, 150 N. Y. 126; Slattery v. Schwannecke, 118 N. Y. 543; Constant v. University of Rochester, 111 N. Y. 604; U. U. Bank v. G. I. Co., 71 Fed. Rep. 473.)

Opinion:
Bartlett, J.
The judgment should be reversed as to the defendants 8. Isaacs & Company.
We agree with the referee that, under all the circumstances, 8. Isaacs & Company are chargeable with the knowledge of their attorney in regard to the stock in question and cannot be deemed bona fide purchasers thereof at the sale. It is undoubtedly the settled rule that a principal is only chargeable with notice communicated to, or knowledge acquired by his agent in another transaction at another time and when he was acting for another principal when clear proof is made that the knowledge or notice was present in the mind of the agent at the time of the transaction in question. (Constant et at., Executors, etc., v. University of Rochester, 111 N. Y. 604, 611.) S. Isaacs & Company are not only brought within the rule above stated, but the facts show essentially one transaction in the interest of S. Isaacs & Company which renders the rule inapplicable.
In ISTovember, 1895, the defendant Dittman loaned plaintiff $1,000.00, secured by fifty-three shares of the United States Printing Company's stock.
In December, 1895, S. Isaacs & Company began an action against plaintiff and others and attached the interest of plaintiff in the stock held by Dittman. In this action David Caiman appeared as attorney for S. Isaacs & Company, and thus became advised a year before the public sale of the stock by Dittman that plaintiff had a large interest in the stock above the amount for which it was pledged. It will not be disputed that S. Isaacs & Company are chargeable with this knowledge.
The par value of the stock was $5,300.00, and it was alleged in the complaint that it was actually worth $4,240.00.
A year later, in December, 1896, the same attorney, acting for defendant Dittman as alleged, had in charge the public sale of this stock, which is found by the referee to have been irregular, wrongful and a conversion thereof by reason of no previous demand of payment of the plaintiff's indebtedness, and no legal notice of sale.
At this sale S. Isaacs & Company bid in the stock for $1,083.78, enough to pay Dittman's loan to plaintiff. It is evident that the precise knowledge of this situation was in the mind of the attorney at the time of the sale, within the rule referred to above, so that it is of no importance whether he was acting for Dittman or S. Isaacs & Company.
It is equally apparent that these facts show one transaction in regard to the stock. In the first transaction the attorney attaches the interest of plaintiff in the stock subject to the pledge, and in the second proceeding, by means of a sale without demand or notice, sought to extinguish plaintiff's interest in the stock without payment of its full value and vest it in his clients, S. Isaacs & Company.
The latter now seek to retain the fruits of this transaction, notwithstanding they have been tendered their bid and interest, by invoking the rule that their attorney only represented Dittman at the sale and consequently they are bona fide purchasers.
We agree to the affirmance of the judgment of the Appellate Division as to defendant Dittman, but are of opinion it should be reversed as to S. Isaacs & Company.
The judgment of the Appellate Division as to defendant Dittman should be affirmed, with costs; judgment as to defendants S. Isaacs & Company should be reversed and a new trial ordered, with costs to abide the event.