Court Opinion

ID: 5199341
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:49:05.263349+00
Date Added: 2024-06-11T08:27:10.416660
License: Public Domain

Laughlin, J. (dissenting) :
This action was brought to recover the possession of five wooden., launches which were pledged to the plaintiff as security for work performed and to be performed for the Eiotti Company, the' claim for which was in litigation. The plaintiff received the launches-from one McCrea,. but claims that they were owned by said Eiotti Company,' and that McCrea, m delivering the same to the plaintiff as security, was acting as the agent of the owner. On the other hand, it is claimed by defendant that McCrea owned the launches jointly with another; and that he pledged them both with the consent of .his co-owner and in his own right, thereby becoming a surety to the extent of the property or his interest therein. It appears that subsequently to the commencement of, this action the plaintiff entered into an agreement in writing with the Eiotti Conn pan-y on the 11th day of October, 1904, compromising the action or the claim, to secure which the property was pledged, and agreeing that, its claim, against the Eiotti Company should be deemed $5,00.0'. The terms of the compromise, so far as material, were in substance., that the plaintiff would .apply the property, including the launches in question which it held as security; in payment of the $5,000, and-if there ■ should be a surplus, would account, therefor to the Eiotti Company, and if there should be a deficiency, that it would cancel its claim for the deficiency, after which- the parties agreed to execute “ each tó the other general releases.”
- The defendant has recovered upon the theory that McCrea was a surety and that the mere execution of tins, agreement, without the. terms being carried out, released the surety and entitled him to a return of the pledged property. . Neither the issue of suretyship nor the discharge of the surety was presented by the pleadings, and it is,.therefore, contended that the defendant was.not entitled to. *879defeat the plaintiff upon that theory. It is true that the complaint was framed upon the theory that McCrea was the agent for the Eiotti Company, and not its surety, and that the defense of surety-ship and the change in the contract discharging the surety was not pleaded. The defendant, however, set up ownership and right to possession of the launches in him; and the plaintiff, after first offering the contract and its being excluded under defendant’s objection, and after defendant then showed by parol the substance of the contract on the cross-examination of one of plaintiff’s witnesses, introduced the contract" in evidence. It is contended in behalf of the appellant that the contract was introduced for the purpose of showing that the plaintiff had a substantial claim and cause of action against the Eiotti Company. The defendant subsequently assumed to take advantage of this evidence, and claimed in his motion for a nonsuit that it showed the discharge of the surety, and moved to amend the answer by setting up that defense. This" theory was opposed by counsel for the plaintiff on the ground, in substance, that the contract was made after the commencement of the action, and that its effect was not in issue. The motion was denied, with leave to renew. The motion was renewed at the close of the evidence and again denied.
I am of the opinion that the plaintiff, by introducing, the contract under these circumstances, did not subject itself to this new defense without an amendment of the answer, presenting it as an issue. There was some evidence tending to show that McCrea claimed to own the launches, and .that he was acting for himself and not as trustee or agent for the Eiotti Company in pledging the launches ; but I am of the opinion that that theory of the case is against the preponderance of the evidence, and should not be permitted to prevail. The Eiotti . Company was engaged in manufacturing and selling launches. During the summer of 1899 it became financially embarrassed, and a meeting of its directors and stockholders was held on the twenty-seventh day of July of that year, at which McCrea, whose only relationship to the company was that of a stockholder, was present. As a result of the discussion of ways and means of meeting the demand of the creditors, it was determined to give a bill of sale of all the property of the company to Street, an officer and director of the company, and McCrea, for the *880■ purpose of securing them for- advances made by them in refunding money to purchasers who had made advance payments on contracts for launches, and in further advances necessary to- render the " uncompleted boats marketable. Accordingly a bill of sale absolute in form was given to them of all the property of -the company, including the launches- in question, "which then belonged to it, and subject to certain liens or claims of the manufacturers, and they ■ gave each a receipt reciting that they were to take the property “ as ■ Security for moneys advanced by us and W. H._ Peck to. the company to pay pressing indebtedness, and -that upon the repayment to us of such moneys, a reconveyance to the company will be made of the property then in otir hands.”
The evidence tends to show .that McCrea and - Peck and Street each advanced certain moneys under-this trust arrangement; that the funds were handled by McCrea;. who also received and took charge of the property of the company; that in the course of his management of its affairs he represented to the plaintiff that- he had a bill of isale from the Riotti Company of the launches in question, and offered to turn- them over to it as a security for. the . claim it had against the Riotti Company which was in litigation, and to execute a bill, of sale thereof 'to it; that-, he delivered the launches to it, but, although requested, refused to execute a bill of sale; that at about the same time he purchased all other claims the plaintiff had against the Riotti Company, and in the agreement by - which it assigned them to him he agreed to turn over to it as security for its claim inTitigation “ whatever interest lie has in the.propT ■ erty of the Riotti Company.” It appears that thereafter and shortly before the commencement of this action, McCrea, without the knowledge or consent of the plaintiff,, removed the launches from its possession an desoíd and delivered them to the defendant to apply • on an antecedent indebtedness upon which he was given credit" for $1,000, the agreed value of the launches.- The evidence, however, indicates that tlié defendant held other security ample to indemnify him upon McCrea’s indebtedness, and that he took the launches ■ merely as. further security. . .
It does not satisfactorily appear that at the time that McCrea pledged the launches to the plaintiff he. had paid out in the execution of.the trust more than he had -received; and, if not, he had no *881individual interest that he could, without the cooperation of his cotrustees, either sell or pledge. But, however that may be, I think that the fair inference is that in this matter he was acting, not for himself individually, but for the Biotti Company with the implied consent of his cotrustee, and dealing with the property of the company for which they were both required to account; and that he left the plaintiff to so understand his position. His agreement to assign any interest he had to the plaintiff is not inconsistent with this view. He and Street held the legal title, and the plaintiff knew that,, but understood and was justified in understanding $iat they held it as trustees. Moreover, assuming that he had individually advanced under the trust more than he had received, and that upon that theory he had a special interest in the propertyiwhich he could sell or pledge so that he could be said.to be a surety, still I am of the opinion that the compromise agreement did not affect his rights or remedies. against the Biotti Company, and that, therefore, the property was not released. It is manifest that the plaintiff did not intend to release the property, for the agreement expressly provides that it was to be sold and applied upon the indebtedness. Mor was the indebtedness nor even the liability of the principal discharged or canceled. The contract merely contained an agreement for a cancellation of the deficiency, in which McCrea was not interested, after the application of the property pledged and for a release to be executed subsequently. The release might never have been executed, and the obligation to execute it would be deemed subject to McCrea’s.right to proceed against the.Biotti Company for reimbursement to the extent of his special interest, if any, in the property in case the pledged property were sold and the proceeds applied in payment of the claim as contemplated. (Hubbell v. Carpenter, 5 N. Y. 171 ; Morgan v. Smith, 70 id. 537 ; Calvo v. Davies, 73 id. 211 ; National Bank of Newburgh v. Bigler, 83 id. 51.) I am of the opinion, therefore, that the plaintiff was entitled to recover the possession of the property.
It follows that the judgment should be reversed and a new trial ordered, with costs to appellant to abide the event.
O’Brien, P. J., concurred.
Judgment affirmed, with costs. Order filed.