| NY | Dec 12, 1876
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *450 The allegations upon which this action is based are, in substance, that John Arnot, the testator of the defendants, in July, 1873, sold and delivered to the plaintiff what purported to be twenty-one bonds of $1,000 each, of the Buffalo, New York and Erie Railroad Company. That they were so sold and delivered by Arnot to the plaintiff, as and for genuine bonds, and the plaintiff believing them to be such, paid Arnot therefor the sum of $19,320, but they were in fact forged, and, therefore, of no value; that on the discovery *452 of this fact the plaintiff tendered them back to Arnot and demanded the return of the purchase-money, which was refused, to the damage of the plaintiff, etc.
The defense was, that the bonds were received by Arnot from one Roberts, as security for a loan to him of the sum of $17,500. That afterward Roberts sold the bonds to the plaintiff, and directed Arnot's agent, with whom they were deposited, to deliver them to the plaintiff in pursuance of such sale. That Arnot's agent thereupon went with Roberts to the office of the plaintiff, and delivered the bonds to him, and received the price, and after deducting the amount due on the loan, paid over to Roberts the residue of the purchase-money. That Arnot had no other title to the bonds than above stated, and did not make the sale to the plaintiff.
There can be no doubt of the sufficiency of this defence if established by the evidence. If Arnot was merely pledgee of the bonds he was bound to deliver them to whomsoever Roberts might direct, on receiving payment of the loan, and was entitled, upon such delivery, to receive the proceeds, or at least so much of them as might be necessary to pay the loan. The fact that the whole proceeds were paid to him and that he paid them over to Roberts, after deducting the amount due on the loan, can make no difference. If the bonds were delivered by direction of Roberts and in pursuance of a sale made by him, such a delivery did not constitute any affirmation by Arnot of title in himself, or of the genuineness of the bonds. Were authority needed for this proposition the case of Ketchum v. Bank of Commerce
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The plaintiff called as a witness Roberts, who testified that he applied to Mr. Cole, of the firm of Elisha Cole Co., who were agents of Arnot, for a loan upon the bonds. That on the next day Mr. Cole introduced him to John Arnot, Jr., also an agent of John Arnot, deceased, who then agreed to make the loan, and the transaction was completed. Roberts further testified, on plaintiff's examination, that the transaction *453 was, that he borrowed of Arnot $17,500, for sixty days, on the bonds, agreeing to pay him $350, making $17,850, but that Arnot, after agreeing to make the loan, and upon the terms, said he would not like the trouble, in case witness did not take up the loan, of looking him up and bothering with it, and proposed that witness should sell the bonds to him direct, and he, Arnot, would give a contract to sell them back at any time within sixty days, and thereupon Arnot delivered to him a contract, in the following words: "I hereby agree to sell to P.B. Roberts twenty-one first mortgage bonds of the Buffalo, New York and Erie Railroad company, of one thousand dollars each, for the sum of seventeen thousand eight hundred and fifty dollars, sixty days from date." That Roberts thereupon delivered the bonds to Arnot, who advanced the $17,500. That witness understood it to be a loan. This transaction occurred on the 1st day of July, 1873. On his cross-examination the witness further testified that it was also agreed at the time, that if he paid off the loan before the end of the sixty days Arnot was to allow him seven per cent.
Mr. Cole, another witness, called by the plaintiff, also testified to the effect that the transaction was a loan.
The plaintiff further gave in evidence a conversation with John Arnot, Jr., on the occasion of a demand made upon him for the money which plaintiff had paid for the bonds, in which conversation Arnot, Jr., said that he hadn't any thing to do with the bonds but had loaned some money on them, and on witness calling his attention to the fact that he had bought them he said, further, "well, that is true, perhaps, but that was done for the purpose of avoiding usury."
The foregoing is the substance of all the evidence given on the part of the plaintiff, with respect to the title of Arnot to the bonds. The defendants called Mr. Wood, of the firm of Elisha Cole Co., who corroborated the statements of Roberts as to the agreement for the loan. They also called John Arnot, Jr., who testified that he agreed to lend Roberts eighty-five per cent on the bonds for sixty days, at one and a *454 half per cent. per month, with seven per cent rebate, in case he took up the loan before, Roberts having the privilege of taking it up at any time. That no price was fixed on the bonds with reference to purchasing, and that the reason he stated to Mr. Roberts for making the agreement in evidence, was, so that in case the loan was not paid off he might sell the bonds without giving notice; that it was a mere form resorted to, and there was no idea of purchasing. The evidence in the case showed that the bonds were, at the time, worth about ninety-two in the market.
Upon this uncontroverted state of facts we are of opinion that it is clearly established that Arnot had no title to the bonds, except as pledgee, and that the title remained in Roberts and he had the right to sell them, and to require Arnot to deliver them at any time, on being paid the amount of the loan, and that, had the loan remained unpaid after the sixty days, Roberts would still have had the right to redeem them, without regard to the question of usury.
But the plaintiff claims that the loan being usurious, and the form of a sale having been resorted to for the purpose of evading the usury law, the defendants are estopped from setting up the real transaction, for the purpose of showing that Arnot was not the absolute owner. We do not regard this proposition as sound. If it had been necessary to the defendants' case to establish the usury, for the purpose of showing a want of title in Arnot, there might be some force in the position of the plaintiff's counsel. But in this case it is immaterial to the defense whether the loan was usurious or not; the question was whether the transaction between Arnot and Roberts was a pledge or a sale. If Arnot would not have acquired a title to the bonds, had the loan been free from usury, he certainly acquired no stronger one from the fact of the loan being usurious.
Nor did that circumstance diminish his obligation to deliver the bonds to any person whom Roberts might designate. The usury was a matter between Arnot and Roberts, which in no manner affected the rights of the plaintiff. *455
It being established that Arnot had no title to the bonds, except as pledgee, the next question is whether the sale to the plaintiff was made by Arnot or by Roberts. The uncontroverted evidence shows that on the second of July, the day after the loan, Roberts requested Cole Co., and Arnot, Jr., to sell the bonds, and they emphatically refused to do so, Arnot, Jr., saying that he was satisfied with the loan as it was, and did not wish to pay the rebate. Roberts then said he would sell them himself. He applied to Haskin Braine, brokers, to make the sale, and they employed one Schuzer, informing him that the delivery would be made by Elisha Cole Co. Schuzer negotiated the sale of the bonds to the plaintiff at ninety-two per cent, and informed him that they would be delivered by Cole Co. The plaintiff drew his check for the whole purchase-price, $19,320, to the order of his cashier, who indorsed it to Elisha Cole Co. Roberts notified Cole Co. that he had sold the bonds, and requested them to make the delivery to the plaintiff. Mr. Wood, of the firm of Elisha Cole Co., thereupon took the bonds and went with them, in company with Roberts, to the office of the plaintiff, and there delivered them to him, receiving the check for $19,320. The plaintiff, on that occasion, made some inquiry of Wood about the bonds and he referred him to Roberts. There are some slight discrepancies in the testimony as to what was then said, but they are not material. It is perfectly clear that Wood did not assume that he or Elisha Cole Co. were the owners or sellers of the bonds. On the contrary, the plaintiff himself testifies that on this occasion, and while the bonds were being examined, he said to Mr. Wood, "I suppose, you know these bonds to be all right." He said, "I have no interest in them, but, Mr. Roberts here knows all about them." Then plaintiff said, as he turned away, "Of course I should hold you if there is any thing wrong about them." What, if any thing, Wood said in reply, does not appear.
After receiving the check for $19,320 Wood delivered it to *456 Arnot, who gave his check to Roberts for $1,671.07, being the surplus after paying the loan.
These facts show clearly that Arnot was not the seller of the bonds. He was not bound to intrust them to Roberts for delivery, but was entitled to retain control of them till his loan was paid. The delivery by him was not, therefore, inconsistent with his position as pledgee. The proceeds being all in one check Cole Co. were justified in taking it, for the purpose of retaining out of it the amount due their principal. If the plaintiff desired to know on whose behalf the sale was made he could readily have done so by inquiry. Not having made the inquiry and nothing having been done to mislead him, he must abide by the facts actually existing, and upon these facts he could not hold Arnot responsible, as warrantor of the genuineness of the bonds.
The judge, at the trial, was, therefore, right in nonsuiting the plaintiff, and the judgment must be affirmed.
All concur.
Judgment affirmed.