Court Opinion

ID: 3577812
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:29:36.518174+00
Date Added: 2024-06-11T13:43:20.825452
License: Public Domain

I agree entirely with the reasoning and conclusion of the Chief Judge and I should not add anything thereto, were it not for what I cannot but think is an oversight on the part of my brother HAIGHT, with regard to the pleadings and the real issues which were presented to the court below. Judge HAIGHT writes for affirmance upon the specific ground that the defendant failed to show that the bonds in question were delivered to the plaintiff as collateral security for the payment of the four notes in suitand for no other purpose; in other words that he failed to prove a negative. It might be sufficient to point out the latter objection and to say that, where a party avers that bonds were deposited with his creditor as collateral security for a debt, he need only aver and prove the tender of the debt to entitle him to the return of his bonds; and that the burden is on the creditor who claims still to retain them, to aver and prove that they were held by him as security for something besides the debt. An averment of the debtor that he deposited the bonds with his creditor as security for the debt and for no other purpose is, in legal effect, simply an averment that he deposited them as security for the debt. The words italicized merely emphasize the real facts averred. They are unnecessary and are, as matter of pleading, surplusage. The debtor is only called upon to prove the fact and not the irrelevant negative. If the securities are held for any other purpose, it is surely for the creditor to aver and prove the facts tending to establish that other purpose. The doctrine suggested here reverses the ordinary rules of pleading and the effect thereof upon the trial of the true issues. *Page 607 
But, passing that view, which, however, seems reasonably clear, I find, upon examining the pleadings, that the defendant tendered no such negative issue as my brother HAIGHT suggests; and it is for this reason that I think it proper to analyze the pleadings and to point out what I deem to be an inadvertance on that head.
Judge HAIGHT premises by saying that it is alleged in the counterclaim that "at the time of the execution of the notes inquestion, the defendant deposited with the plaintiff, as security therefor" the bonds in dispute; "that such bonds were accepted and held by the plaintiff as collateral security for the payment of the notes and for no other purpose * * * that the plaintiff replied by denying that the bonds were deposited with him solely as collateral security for the payment of thepromissory notes described in the complaint and alleged that the one hundred and twenty-five Hoffman House bonds had come into his possession prior to August 24, 1891," when the agreement, dated August 18, 1891, was executed. Upon this statement of the issues, Judge HAIGHT bases his conclusion, that thus, "the burden rested upon the defendant of showing that the bonds were held as collateral security for the payment of the notes in suit and for no other purpose."
In other words, he argues that the defendant tendered the negative issue; that the plaintiff in his reply joined issue with the defendant thereon, and that the defendant failed because he did not establish the negative averred.
Now, let us carefully examine the counterclaim and reply, and see whether any such issue was really tendered. In the first place, there is no allegation that, at the time of the execution of the four notes in suit, the defendant deposited with the plaintiff as security therefor the bonds in question; nor is there any allegation that they were accepted and held by the plaintiff as collateral security for the payment of the four notes in suit, and for no other purpose. The allegation is that at the time of the execution of the first three promissory notes, dated May 1, 1891, the defendant deposited with the plaintiff as collateral security therefor one hundred Hoffman *Page 608 
House bonds and thirty United Lines Telegraph bonds. Thisallegation is undenied in the reply. The next allegation is that afterwards and as a further security for the payment of thesethree notes, the defendant deposited with the plaintiff twenty-five other Hoffman House bonds, making a total of 125 Hoffman House bonds and 30 United Lines Telegraph bonds, "all of which" — to quote the counterclaim — "were accepted and held by the said plaintiff as collateral security to the said threenotes and for no other purpose." This is the only place in the counterclaim where the words "and for no other purpose" are to be found. Consequently, this is the only negative allegation on the subject. If that allegation tendered an issue as to the negative words, it was an issue as to whether, at that point inthe transaction, the plaintiff held the bonds as security forthe three notes and none other. But even as to that issue, there is no joinder in the reply. The allegation on that head is in fact undenied. What we find is a denial of something which is not averred. The denial in the reply, and it is the sole denial, is in these words: "Plaintiff denies that the collateral securities described in the answer * * * were deposited with and accepted and are held by plaintiff solely as collateral security for the promissory notes described in said complaint and in said answer and for no other purpose."
It will be observed that the defendant nowhere alleges in his counterclaim that these securities were accepted by the plaintiff, or were ever held by him, as collateral for the promissory notes in suit, and for no other purpose. He expressly alleged that at one time, namely between May 1st, 1891, and August 14, 1891, the plaintiff accepted and held these bonds as collateral security to the first three notes described in the complaint and for no other purpose. That is, he then held them
for the three notes and for none other. The plaintiff admits this by not denying it. What he pretends to deny is that he holds the securities for the four notes described in the complaint and for no other purpose. He thus creates an imaginative allegation for the purpose of a fictitious denial. It is apparent that he did this deliberately, and could not have been misled, *Page 609 
or mistaken, about it. In proof of this we need only look at the allegation of the counterclaim, which immediately follows the words "and for no other purpose."
That allegation is that "afterwards," namely, after the acceptance of the bonds as security for the three notes and forno other purpose and upon the execution of the fourth note for $4,000, which was dated August 14, 1891, "it was agreed between the plaintiff and defendant that the plaintiff should hold the said 155 bonds as collateral security, also for the payment of the said $4,000 note."
Now this latter averment is entirely undenied in the reply. What then does it come to but this; that the defendant alleged and the plaintiff admitted that prior to the execution of this fourth note the latter held the securities for the payment of the three preceding notes and for no other purpose; but that, upon the execution of the fourth note, that note was also embraced within the preceding purpose, and, when so embraced, came within the cover of the original security. It will be observed that the defendant no longer avers, at the foot of this allegation, that the bonds are held for the payment of the four notes and for noother purpose.
It amounts to this, that there was, so defendant alleges, no other purpose until the fourth note was executed; and then there was that one other purpose. The sequence here is clear and distinct. The bonds were held from May to August 14th for the three notes and for no other purpose; but, on August 14th, they were held also for the fourth note. The defendant consequently tendered no issue as to any other purpose apart from and outside of the four notes. I may add that he tendered no such issue even as to the three notes; for the obvious reason that he avers this other and later purpose, which immediately follows the words — "and for no other purpose;" as these words are used in their proper relation to the intermediate period.
Thus there would seem, upon the pleadings, to have been no question with regard to the Read notes, save such as was *Page 610 
presented by the August agreement. As to that, the subject has been fully considered by the chief judge and as Judge HAIGHT expresses no difference of opinion on that head, I assume that he too concurs in the general views there presented as to the effect of that agreement. Certainly, there is nothing in the sixth clause of that agreement, which permits us to vary the admitted status as it was prior to its execution.
It was suggested that the sixth clause might be treated as a recital of a past agreement and not as a present covenant. But this is far fetched and unworthy of special consideration. The sixth clause is among the numbered covenants and bears directly upon them. It could not well recite a deposit which did not exist. The only truthful recital which could have been made would have been a recital of the deposit of $125,000 of Hoffman House bonds, as collateral to the $32,000 of Edward's notes. All else is, necessarily, a covenant to make an additional deposit and to permit both the old (actual) and the new (promised) deposits to operate in due course as security for the additional features, which are specified, as well as for the $32,000 of Edward's notes. To talk of this as a recital, rather than a covenant, is simply to juggle with words. It is impossible thus to get awayfrom the facts and to twist them into a legal fiction.
We thus have an admitted possession of these 155 bonds, down to the August agreement, for an admitted purpose; namely, as security for the four notes in suit. We then have the August agreement for the first time extending these admitted purposes upon a new consideration then moving from the plaintiff; which consideration has failed.
It would seem to be a demonstration that the defendant, even if he had not gone upon the stand, was entitled to a verdict for the value of his securities. Certainly, he lost nothing by testifying as he did, in precise harmony with the actual facts. It is said that he should have testified, not merely that he allowed the bonds to remain in the plaintiff's possession under the August agreement, but that they had never previously been in the plaintiff's possession as security for the *Page 611 
Read notes. What was there to call for such testimony? There was nothing in the pleadings. There was something in the agreement; but the agreement was dead. The defendant narrated the precise facts, as he had pleaded them in his counterclaim. It seems puerile to contend that his counterclaim was properly dismissed, because he did not say that the plaintiff had never, prior to the August agreement, held the bonds as security for his contingent liability on the Read notes. No one had asserted, or hinted, that the plaintiff had ever held them for this contingent liability, except the assertion founded in, and upon, the August agreement. But, if that August agreement called for testimony on the defendant's part that, though it was dead, yet the plaintiff never, (apart from, or outside of it), held these bonds for the guarantees specified in the sixth clause, did not the defendant, substantially, say as much when he told the story in its correct and natural order, and concluded by saying that he allowed the bonds to remain in the plaintiff's possession for the four notes in suit and for whatever was stated in the August agreement and for no other purpose. Is he to be deprived of his right at least to have his case considered by a jury, because his words are to be taken literally and technically, rather than reasonably and fairly? It will be observed that his counterclaim was dismissed by the trial judge. It was dismissed without any specification of the grounds, by either counsel or court. There was not an intimation that what the defendant (witness) plainly intended to convey was not adequately expressed. The verdict was clearly directed upon other grounds, relating to the effect of the August agreement and of the previous judgment. There was certainly enough to go to the jury, upon the testimony as given and upon the inference which might legitimately have been drawn therefrom, in connection with the pleadings and the record in the prior action.
I shall add a few words as to the effect of that record. It was argued that Justice LAWRENCE in that case, found as a fact that the bonds were held by William as security for the *Page 612 Read notes and that that finding is contrary to Edward'sotherwise uncontradicted testimony upon the present trial.
This is certainly an entire misconception of what appears in that record. Both sides submitted findings to that learned judge. Edward, in his proposed second request, asked him to find that he (Edward) was, prior to August 18, 1891, indebted to William in about $32,000 on his four notes, and was also indirectly liableupon the Read notes as guarantor.
At the same time William, in his proposed second request, asked the judge to find that Edward was indebted to him in a little more than $32,000; namely, in a balance of $34,300, on these same four notes. But William did not add, as Edward had added, in his proposed second request, that he (Edward) was also indirectly liable upon the Read notes as guarantor. In fact, Williamrequested nothing and asked no finding at all as to these Readnotes.
Then observe what followed. The learned judge allowed Edward's proposed second finding and disallowed William's, giving as a reason that he (the judge) had already found William's secondrequest in finding as he did Edward's second.
Now this was an inaccuracy. The judge had not already found as William requested; for Edward's second finding said that the notes aggregated about $32,000, while William's said that they then aggregated a balance of $34,300. But the only reason why the judge refused to find William's second proposed request was simply because he mistakenly thought it was repetitious. He said he had found it and therefore refused to find it overagain. Now comes the strangest misconception. Edward followed his second request with a third, asking the learned judge to find that the Hoffman House bonds (of $125,000) had been deposited to secure the $32,000 of his, Edward's, notes; and that William held no security to protect the Read notes. The judge substituted for this proposed finding William's third proposed request, afinding which immediately followed his, William's, secondrequest and related exclusively thereto. The third finding of *Page 613 
William's was absolutely accurate in its relation to his ownsecond finding. It stated that Edward had given William as security for "the aforesaid indebtedness," (namely, the indebtedness of $34,300 specified in William's preceding second finding), the $125,000 of Hoffman House bonds, and the $30,000of the bonds of the United Lines Telegraph Co. Edward's thirdfinding was inaccurate, or rather less complete than William's, in omitting these $30,000 of U.L. Telegraph Co. bonds. So the learned judge very properly allowed William's third finding, and substituted it for Edward's less complete finding. This, however, had not the slightest relation to the Read notes, which were not the subject of controversy before the learned judge.
Now what was the result of this transposition of findings? It was that the "aforesaid indebtedness" referred to by William, in his third request, is no longer the $34,300 of Edward's notes,but is the indebtedness specified in Edward's second finding, namely, his (Edward's) "notes aggregating about $32,000." And yet William now contends that it was Judge LAWRENCE'S intention by this double substitution, that is, by the substitution of Edward's second proposed finding for William's second, and the substitution of William's third finding for Edward's third, to find as a fact that William then held both the Hoffman House bonds, and the $30,000 of the United Lines Telegraph Company bonds, as security for the contingent liability on the Read notes, as well as the actual indebtedness on Edward's own notes.
William has acknowledged throughout, in his reply, when the tender was made and at the trial of the present action, that he never held the $30,000 of U.L. Telegraph Co. bonds as collateral for anything save Edward's notes. He was in fact willing, and offered, to give them up to Edward on payment of the latter's notes. Yet, he would now under the stress of a hopeless case (hopeless, in view of the previous judgment), have us believe that Judge LAWRENCE found that he, (William), did actually hold the $30,000 of U.L. Telegraph Co.'s bonds, as well as the $125,000 of Hoffman House *Page 614 
bonds, as security for the Read notes. The transposition of the findings clearly shows the reverse. What the learned judge found is perfectly plain. Edward had asked him to find that William held the $125,000 of Hoffman House bonds, to secure the $32,000 of Edward's notes. The judge in effect said "No. This is not a complete statement. William so holds these notes, it is true, and he so holds them for your $32,000 of notes; but he also holds$30,000 of the U.L. Telegraph Co. bonds, to secure this same indebtedness of yours, and I will find it in that precise and accurate way and not in your partial and incomplete way." William had himself specified Edward's four notes, aggregating $34,300, as "the aforesaid indebtedness." Again, the judge in substance said "No. That too is inaccurate. Edward is right in saying that the indebtedness aggregated but `about $32,000' and it is thataforesaid indebtedness which William holds the two block of bonds for." Thus it is entirely clear that Read's notes were never included in the "aforesaid indebtedness," as contemplated by the proposed findings of either party, or by the judge. Those Read notes were not, in fact, an indebtedness of Edward's at all, but a contingent liability. Neither party in their proposed findings even hinted that the bonds were held as collateral tothat contingent liability. The findings cannot be strained, or tortured, into meaning what was never intended, and what, in view of the testimony on the one side and the admissions on the other, would have been wholly without support and in fact absurd.
Thus it is absolutely clear that there was no finding that these securities were held as collateral to the Read notes; and that in fact, upon the admission in the pleading and the uncontradicted testimony, they were not so held.
Nevertheless, it is now gravely argued that even if the agreement is dead, even if Edward's covenant to increase the security and to permit it when so increased to be held for all the purposes specified in the sixth clause, cannot be enforced, yet the plaintiff was entitled under this very agreement to hold the original securities for these Read notes. Why? Because, as *Page 615 
the plaintiff contends, the agreement, though dead, recited his right to so hold these securities, and that recital lives, though the rest of the agreement is dead; and because Judge LAWRENCE, in substituting Edward's second request for William's and William's third request for Edward's, has found that William held the notes as collateral for the indebtedness specified in Edward's second request, and that a contingent liability is notwithstanding the surrounding and contemporaneous facts, to be construed as an indebtedness.
Both propositions are clearly erroneous.
The more this case is examined, the less defensible seems to be the refusal of the court below to permit the trial upon the counterclaim to proceed. The ruling was equivalent to a nonsuit in an action upon the facts alleged in the counterclaim and was directed without even a motion therefor, specifying the grounds. It would be a gross injustice to affirm such a judicial action upon any narrow, or technical, view of the pleadings and the proofs if it were possible; which I do not at all concede. Every inference that can reasonably be drawn from the facts, should be drawn in favor of the defendant's right to have his case properly submitted to a jury.
He was either entitled to a direction, or to such a submission. In any view of the case, there should be a new trial.
BARTLETT and VANN, JJ., concur with HAIGHT and MARTIN, JJ., for affirmance, and MARTIN, J., concurs with HAIGHT, J.; O'BRIEN, J., concurs with PARKER, Ch. J., and GRAY, J., for reversal.
Judgment affirmed.