Court Opinion

ID: 3577811
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:29:36.510696+00
Date Added: 2024-06-11T13:43:20.840406
License: Public Domain

The defendant, about May 1st, 1891, gave to the plaintiff bonds of the Hoffman House Association of the par value of $125,000, and of the United Lines Telegraph Company of the par value of $30,000, as security for the payment of the notes in suit. Thereafter the parties entered into a written agreement which provided that the plaintiff should hold the first-mentioned bonds as security for the payment of such notes and of two other notes, upon which the defendant was an indorser, and as an assurance of the performance of certain guaranties by the defendant. This latter contract is dated August 18th, 1891, and was considered by this court in Stokes v. Stokes (148 N.Y. 708), it being decided that William E.D. Stokes was not entitled to specific performance thereof, because of a failure of performance on his part. This action was brought to enforce collection of the notes, for which the bonds were first pledged, and the defendant, shortly after its commencement, tendered to the plaintiff $37,500, being the amount due on said notes with interest and costs to that date, upon condition that the plaintiff should surrender to the defendant such bonds. The plaintiff refused to accept the tender. Thereupon the defendant answered, alleging the tender as a defense and also alleging, by way of counterclaim, that the refusal of *Page 596 
the plaintiff to accept the tender constituted a conversion of the bonds to his own use. The plaintiff, in his reply, denied that the securities described in the answer were deposited with, accepted and held by the plaintiff solely as collateral security for the promissory notes described in the complaint and answer, and further averred as follows: "Plaintiff alleges as to the $125,000 of the Hoffman House bonds, that after the same had come into the possession of plaintiff and on or about August 24, 1891, a certain contract or agreement in writing and under seal bearing date August 18, 1891, was made, executed and delivered by and between the plaintiff and defendant, the original whereof plaintiff offers to produce and prove upon the trial of this action. That in part performance of said contract, dated August 18, 1891, and for the purposes therein recited, and as set forth in that paragraph thereof marked "Sixthly," which provides: "Sixthly. And as security for these guaranties, for a loan of about $32,000, and for any obligation of said Edward S. Stokes to said William E.D. Stokes, connected with said Read, and against any foreclosure of the said mortgage, said Edward S. Stokes has deposited with William E.D. Stokes bonds of said Hoffman House to the par value of $150,000." The said $125,000 of Hoffman House bonds, and no more and none other thereof, were deposited with and are still held by plaintiff.
There is no mistaking the issue made by the pleadings. The plaintiff asserted the right to hold the bonds, under the agreement of August 18th, as security for all of the purposes described in paragraph "Sixthly," while the defendant denied the existence of any such right. But the learned counsel for the respondent has on this review discovered a new issue, one not suggested by the pleadings, but born of the emergency created by the recent decision of this court holding that this defendant could not be compelled to deposit the $25,000 of Hoffman House bonds, which was necessary to bring the total amount of the deposit up to $150,000, as provided in the paragraph of the agreement marked "Sixthly." Apparently appreciating the difficulty of persuading the court that a contract without *Page 597 
sufficient consideration to support William E.D. Stokes' claim that he was entitled to have put in his possession the $25,000 of Hoffman House bonds not yet delivered, nevertheless had sufficient consideration to support William E.D. Stokes' claim of right to hold the bonds actually in his possession under the very same agreement, and for all the purposes recited therein, counsel urges that the decision of the trial court may be upheld, because of what he asserts to be the failure of the defendant to prove that the bonds were not in the first instance pledged for other purposes than the notes of the defendant. Nothing of the kind was suggested by the pleadings. The defendant offered no testimony tending in that direction. No inquiry was made of the defendant on cross-examination that even suggested that counsel entertained such an idea. There is not a hint of it anywhere in the record, and, with the issue well defined, it would be strange indeed if the defendant's rights could be cut off by a failure to negative every other possible purpose for which the bonds could have been made use of as collateral. But assuming that it was incumbent upon the defendant to establish that, aside from the written agreement of August 18th, the bonds were deposited with the plaintiff as collateral security for the notes of which the defendant was the maker, and of those notes only, he has met that burden fully, as will presently be made to appear.
The defendant was the only witness sworn, and he testified that the $30,000 of United Lines Telegraph bonds and $100,000 of Hoffman House bonds were deposited with the plaintiff on or about May 1st, when three notes aggregating $32,300 in all were made by the defendant and delivered to the plaintiff, and that subsequently between the first of May and the first of August, the defendant, expecting to borrow $4,000 more of the plaintiff, made a further deposit of $25,000 of Hoffman House bonds as collateral, so that plaintiff then held $125,000 of Hoffman House bonds. The defendant further testified as follows: "I mean the plaintiff had $125,000 of the Hoffman House bonds and $30,000 of United Lines Telegraph bonds as against these loans." Not "as *Page 598 
against" failure to perform guaranties nor "as against" the loans of other people, but "as against these loans," referring to those already fully described. But defendant's counsel did not stop there. The agreement of August 18th, 1891, was then shown witness, who was asked this question: "Q. Were these $125,000 worth of bonds deposited by you with the plaintiff as collateral for any other debt or for any other purpose than for those notes and whatever is stated in this agreement? A. I would like to premise my answer somewhat by explaining. These bonds were deposited, as I previously stated, previous to the agreement of August 18th, 1891. Q. Were these $125,000 worth of bonds deposited by you with the plaintiff as collateral for any other debt or for any other purpose than for these four notes, and whatever is stated in this agreement? A. I allowed them to remain with the plaintiff for that purpose and for no other purpose."
There can be no mistake about this testimony nor the object of it. Its purpose was to negative any possible claim that there was any other agreement of pledge than the one which he had described and the written agreement of August 18th, to which his attention was called. The judgment roll in the action of Edward S. Stokes
v. William E.D. Stokes was offered in evidence, and a perusal of the judgment only served to support the assertion of the plaintiff that the first and only agreement prior to the written agreement of August 18th, by which the Hoffman House bonds and the United Lines Telegraph bonds were deposited with this plaintiff as collateral, was the agreement of May 1st, when the notes were made. There was apparently no more dispute about this question on that trial than on this. The plaintiff in that suit asked the court to find: "Third, to secure the notes for $32,000 the plaintiff had with other securities deposited with the defendant in pledge $125,000 of bonds of the Hoffman House Corporation secured by a mortgage on the property of the said corporation. Defendant held no collateral security from the plaintiff to protect the $10,000 or the $15,000 notes made by said Read and indorsed and guaranteed by the defendant as *Page 599 
aforesaid." The defendant requested the court to find on that subject as follows: "Second, on and prior to the 9th day of July, 1891, plaintiff was indebted to defendant in the sum of $36,300, which indebtedness was represented by four promissory notes made by the plaintiff, payable to the order of defendant on the dates and in the amounts as follows: A note in the sum of $12,300, dated May 1st, 1891, payable four months thereafter; a note in the sum of $10,000, dated May 1st, 1891, payable four months thereafter; a note in the sum of $10,000, dated May 1st, 1891, payable four months thereafter; a note in the sum of $4,000, dated the 14th day of August, 1891, payable three months thereafter. On or about the 10th day of July, 1891, there was paid on account of the indebtedness represented by said notes the sum of $2,000, leaving a balance of $34,300, with interest still due and owing the plaintiff. Third, as collateral security for the payment of the aforesaid indebtedness plaintiff delivered to the defendant 125 six per cent first mortgage bonds of a corporation, organized under the laws of the state of New Jersey, known as the Hoffman House, of the par value of $125,000, and 30 bonds of the corporation, The United Lines Telegraph Company, of the par value of $30,000, all of which securities are still in the possession of the defendant." Thus it appears that the counsel for the plaintiff and the counsel for the defendant each requested the court to find that the original deposit of these bonds was for the security of the defendant's notes and for no other purpose.
An examination of both the majority and minority opinions of this court, when the case was on review (148 N.Y. 708), shows that there was no mistake in the minds of this court about the situation and that it was then understood here, as counsel for both parties and the court had understood it below, that these bonds were put up as collateral for the promissory notes made by this defendant, and for no other purpose, in the first instance, and that there was no other modification of the terms of the original pledge, except such as was made by the written agreement of August 18th. *Page 600 
It is needless to pursue this subject further, for it is apparent that only one finding on this evidence was possible, viz.: That the plaintiff never acquired the right to hold these bonds as collateral security for the payment of any other indebtedness than the defendant's notes, nor for any other purpose, except as provided by the written agreement of August 18th.
I have so far omitted reference to the contention that the sixth paragraph of the agreement, quoted above, is evidence of a prior agreement; that the form of it is not one of present agreement, but a recital of a past agreement, because it states that, "as security for these guaranties, for a loan of about $32,000, and for any obligations of said Edward S. Stokes with said William E.D. Stokes, connected with said Read, and against any foreclosure of the said mortgage, said Edward S. Stokes hasdeposited with William E.D. Stokes bonds of said Hoffman House to the par value of $150,000."
When we read this clause in connection with the rest of the agreement, having in mind the fact that $125,000 of the $150,000 bonds referred to had been deposited some months prior as collateral security for this defendant's notes, we necessarily reach the conclusion that it forms a part of a present agreement, and that the contention that it should be treated as a recital of a prior transaction is without foundation. Indeed, that question was passed upon necessarily in this court in Stokes v.Stokes, (supra), when the court held that, by reason of the failure of William E.D. Stokes to perform his part of the agreement, Edward S. Stokes could not be compelled to deposit the $25,000 in bonds required to make the amount $150,000, as provided in the agreement. It could not, of course, have been so held were it the fact that paragraph "sixthly" was but the recital of a prior agreement. But we need not stop to discuss this proposition seriously, for the plaintiff, in his reply, alleges that the said $125,000 of Hoffman House bonds were deposited with and are still held by plaintiff in part performance of the contract of August 18, 1891, and for the purposes therein recited and as set forth in paragraph "sixthly," and further alleges that the defendant *Page 601 
has neglected and refused to deposit with the plaintiff $25,000 additional Hoffman House bonds as required by said agreement.
We are thus brought to the real question of the case, or rather to what was a substantial question prior to the decision of this court holding the agreement was without consideration, and that is, whether the plaintiff has the right to hold these bonds, under the written agreement of August 18th, as collateral for the Read notes and as collateral for the guaranties of Stokes against all claims against the Hoffman House by C H. Read  Company, or John W. Mackey, or any other person, as the creditors of the said C.H. Read  Company, as well as against any foreclosure of the Hoffman House mortgage; for it is very plain that, if the plaintiff is entitled to hold the bonds under this agreement for any purpose, he is entitled to hold them for all the purposes I have mentioned; to hold them until the plaintiff has made good every guaranty contained in that agreement.
Unquestionably the agreement covered these bonds, and if plaintiff had performed the agreement on his part he would be entitled to hold them to assure performance on the part of the defendant.
But it was the defendant's contention that plaintiff failed to carry out his part of the agreement, and by reason thereof there was a failure of consideration, so that the agreement ceased to be binding upon this defendant long prior to the commencement of this action. The evidence relied upon to support this contention consists of the judgment roll in the action of Edward S. Stokes
v. William E.D. Stokes, which was put in evidence on the trial. This judgment was not pleaded in bar, as indeed it could not have been, for it is not a bar to an action on the notes; but it is insisted that it contains an adjudication between these parties that the plaintiff failed to perform the consideration of the agreement which he now invokes for his protection, and that such adjudication is conclusive evidence of the fact adjudged. The general rule on this subject is well known to be that a former judgment of the same court, or of a court of competent jurisdiction, *Page 602 
directly upon the point in issue, is, as a plea, a bar, or as evidence, conclusive between the same parties or those claiming under them, upon the same matter, directly in question, in a subsequent action or proceeding. This has been the rule certainly since the Duchess of Kingston's Case (11 State Trials, 261). (See Gardner v. Buckbee, 3 Cowen, 120; Clemens v.Clemens, 37 N.Y. 73; Embury v. Conner, 3 N.Y. 511; Gall
v. Gall, 17 App. Div. 312; Harris v. Harris, 36 Barb. 88;White v. Coatsworth, 6 N.Y. 137; Stowell v. Chamberlain,60 N.Y. 276.)
The judgment roll was in an action between the same parties. It was about the same matter, for it involved the right of W.E.D. Stokes to compel the delivery to him of $25,000 of the $150,000 of bonds provided for by the agreement. It was directly in question; indeed there was no other question, for the defendant in his answer, as a counterclaim, pleaded that E.S. Stokes had failed to deposit $25,000 of the $150,000 of the Hoffman House bonds as security, pursuant to the provisions of the said agreement, and demanded judgment for the deposit of such additional bonds, or the payment of their equivalent in value. To this counterclaim the plaintiff, E.S. Stokes, made reply denying that the defendant was entitled to hold the $150,000 of bonds under the said agreement, and alleging that he had failed to carry out his part of the contract. The case coming on for trial, the plaintiff consented that the complaint should be dismissed, but the defendant insisted upon his right to establish his counterclaim, and thereupon was litigated the question relating to the consideration of the agreement and the right of Wm. E.D. Stokes to enforce its performance. Not only does it appear from the requests to find by counsel for both parties, but also by the findings actually made by the court, that the matter in controversy related to the consideration of the agreement and the right of Wm. E.D. Stokes to insist upon performance thereunder by Edward S. Stokes. The conclusion of law, as found by the court, was to the effect that it was the intent of the parties that Wm. E.D. Stokes should purchase of Read the *Page 603 
whole of the 1,963 shares, or such portion thereof as the plaintiff should not buy; and as the defendant had failed to make such purchase, within a reasonable time, and on account of the refusal of Read to sell could not make it, he was not entitled to enforce the contract. Upon this decision judgment was entered, from which we extract the following: "Adjudged that the cause of action, set forth in the defendant's counterclaim, be dismissed upon the merits, without costs. * * * It is further adjudged that the construction of the contract of August 18, 1891, is that the understanding of the parties was that the defendant should purchase of Read the whole of his 1,963 shares of stock, or such portion thereof as should be sufficient to make the parties to said contract the sole owners of the whole of the stock of the Hoffman House. In other words, the defendant was to buy the whole of the stock or such portion thereof as the plaintiff should not buy. It is further adjudged that the defendant, not having purchased the said stock of Read within a reasonable time from such contract, and the proof being that he has been unable to purchase, by reason of the refusal of Read to sell, the contractcannot be enforced against the plaintiff."
Surely it is unnecessary to argue that the question there passed upon by the court was the precise question involved in this case. The only difference between the two cases is that in that case we had $25,000 of the $150,000 involved, while in this one $125,000 of the amount agreed upon is involved. One amount of bonds was larger than the other, but each formed a part of the agreed deposit of $150,000 of bonds. The consideration was not susceptible of apportionment. The contemplated purchase of the Read stock was as much the consideration for the defendant's consent that the $125,000, already deposited, should be held as security under the agreement, as was his promise to deposit the additional $25,000 of bonds. If Edward S. Stokes had not deposited any portion of the $150,000 of bonds, the court would have refused to compel their delivery because of the failure of Wm. E.D. Stokes to perform his part of the contract. The fact that *Page 604 
Wm. E.D. Stokes had possession of a portion of the consideration, under a prior contract, does not at all affect the situation. So far as this agreement is concerned, all of the bonds were in like condition. The agreement was indivisible, and Wm. E.D. Stokes was as much entitled under it to the $25,000 in bonds as to the $125,000. But all the court could do, in the first case, was to adjudge that there was a failure of consideration, and deny to Wm. E.D. Stokes his claim of right to a specific performance of the contract as to the $25,000 of bonds which had not been delivered. It could not adjudge that the plaintiff was entitled to have delivered to him the $125,000 of bonds for Wm. E.D. Stokes held them, as we have observed, under another agreement, and as collateral security for the notes which are involved in this litigation. All that it could do was to adjudge, in effect, that by reason of the failure of Wm. E.D. Stokes to perform his part of the agreement, there was a failure of the consideration, and, hence, he was not entitled to require Edward S. Stokes to make deposit of such of the bonds as had not been deposited under the agreement. But, in so doing, the court necessarily and conclusively determined that Wm. E.D. Stokes was not entitled to retain, under that agreement, any part of the bonds called for by it, for, as we have observed, the agreement was not divisible, neither was the consideration divided and apportioned to the different provisions of the agreement. In due course the judgment reached this court, and, while the court was not unanimous in affirming the judgment, yet the affirmance, under our procedure, put at rest all controversy relating to the claim of right on the part of Wm. E.D. Stokes to enforce the agreement. The prevailing opinion of the court, after a careful consideration of the agreement and the subsequent conduct of the parties under it, said:
"Ought specific performance under the circumstances be now decreed? We think not. The liability of the plaintiff to the defendant has not been increased. The defendant, through the refusal of Read to sell, has not been able to carry out the understanding of the parties, which formed the real *Page 605 
consideration for the deposit with him of the additional collateral. A contract must possess certain elements in order that a court of equity may exercise jurisdiction to compel its performance. `It must be upon a valuable consideration. It must be reasonably certain as to its subject-matter, its stipulations, its purposes, its parties, and the circumstances under which it was made. It must be, in general, mutual in its obligations and its remedy.' (3 Pomeroy's Eq. Jur. § 1405.) The reversal of the judgment by the General Term appears to have been based upon a misconception of the facts. In the opinion it is stated that the pledge of the bonds was in consideration of the loan of about $32,000. The fact that the loan was pre-existing evidently had been overlooked."
The matter having been passed upon by the court, it would be a work of supererogation to attempt a further discussion of the agreement and the conduct of the parties thereunder for the purpose of giving further assurance that the decision made was demanded by the facts and the law. The judgment which that decision of the court affirmed has become finally conclusive as evidence as to the questions actually passed upon by the court, and, as evidence, it conclusively determines in this case that the plaintiff is not entitled to hold the bonds under the agreement of August 18th. His only right to the bonds, therefore, at the time defendant made the tender, was under the agreement of the May preceding, in pursuance of which the bonds were delivered to him as collateral security for the payment of defendant's notes, to enforce collection of which this suit is brought. But as we have seen the defendant made tender to the plaintiff of the entire sum due on these notes, together with interest and costs, and thereupon he became entitled to their possession. But this possession was refused; the plaintiff claimed the right to hold them under the agreement of August 18th, which claim we have seen was not well founded. It matters not that the plaintiff was of the opinion that he had a right to hold the bonds under that agreement. The test by which it is to be decided whether he converted the bonds or not, must be answered as the question of right is *Page 606 
determined, and it being held that the plaintiff was without right to retain the bonds after the tender was made to him by the defendant, it follows that his refusal to make delivery of the bonds, in compliance with the defendant's tender and demand, constituted a conversion of them.
The judgment should be reversed and a new trial granted, with costs to abide the event.