232 A.D. 137 | N.Y. App. Div. | 1931
The order appealed from granted the motion of the defendant Berg for judgment upon the pleadings and dismissed the complaint for insufficiency. The motion was based upon the complaint, answer and plaintiffs’ bill of particulars.
The action is in equity and from the allegations of the complaint the following facts must be deemed true. The defendant CrockerWheeler Manufacturing Company, hereinafter designated CrockerWheeler, is a stock corporation, of which the defendant Berg is a stockholder. The plaintiffs are stockbrokers, and the defendant Feuerstein one of their customers.
On October 22, 1929, Feuerstein was indebted to the plaintiffs in his trading account in excess of $36,000. They called upon him for additional margin. As a result Feuerstein agreed to deposit with plaintiffs a certificate of forty shares of Crocker-Wheeler, owned by the defendant Berg. The certificate at the time was
Later Feuerstein represented to plaintiffs that Berg had agreed ' with him that without awaiting the issue of the new stock, the old certificate for forty shares should be immediately withdrawn from Crocker-Wheeler by Berg and forthwith delivered to plaintiffs as collateral security for Feuerstein’s account. Thereafter Berg himself represented to plaintiffs that he owned the stock; that he had placed the certificate with Crocker-Wheeler for reissue, had instructed the latter to deliver it to plaintiffs and agreed with them that the forty shares should be delivered to them as collateral security.
The complaint alleges that, pursuant to the foregoing facts, Crocker-Wheeler delivered the certificate to the plaintiffs who still have possession of it; that upon discovering the certificate was not indorsed by Berg, plaintiffs requested Feuerstein to cause Berg to execute and deliver to plaintiffs a proper instrument for the transfer of such certificate; that Feuerstein brought such instrument of transfer to the plaintiffs, duly executed by Berg, who authorized and directed Feuerstein to deliver it to the plaintiffs; that Feuerstein wrongfully refused to deliver it and thereafter returned it to Berg.
It is alleged that plaintiffs relied upon the representations of Feuerstein and the confirmatory representations of Berg and thereby extended further credit to Feuerstein in continuing to carry his account. Other allegations of the complaint are that after the certificate was delivered to the plaintiffs, Berg himself admitted to them that he had agreed to lend it to Feuerstein as a pledge with the plaintiffs and had authorized Crocker-Wheeler to make delivery for such purpose; but that Berg further asserted his right to withdraw from his agreement with, Feuerstein, and later denied that he had made any such agreement, or gave any authority to Crocker-WTteeler to deliver the certificate and that Berg also denied to Crocker-Wheeler that he had authorized it to deliver the stock to the plaintiffs and demanded of both plaintiffs and Crocker-Wfiieeler that the certificate be returned to him. It is further alleged that Crocker-Wheeler has refused to transfer the certificate to plaintiffs and that a judgment of the court is required to determine and enforce plaintiffs’ rights to and under the unindorsed certificate as collateral security for the unpaid balance of Feuerstein’s account.
The appellants contend that the facts alleged are sufficient to create in their favor a legal or equitable lien upon Berg’s certificate of stock, delivered as it was with his knowledge and consent as collateral security for Feuerstein’s debt, and that such lien is enforcible in equity under the allegations of the complaint.
The order of dismissal was predicated upon the view (1) that the agreement of the defendant Berg with plaintiffs was a special promise to answer for the debt, default or miscarriage of Feuerstein, and, therefore, within the Statute of Frauds and unenforcible, it appearing from the bill of particulars that Berg’s representations and promises were oral; and (2) that the delivery of the certificate was ineffectual to create a pledge because it was unindorsed and unaccompanied by any written instrument (136 Misc. 915).
In our view the first ground of the decision is based upon the erroneous view that the plaintiffs’ cause of action against Berg was predicated primarily upon Berg’s agreement with the plaintiffs. As we read the complaint, the plaintiffs’ chief reliance is upon their agreement with Feuerstein who, in the dilemma in which he found himself and for the purpose of procuring plaintiffs’ forbearance
We are unable to find from the complaint any promise on the part of Berg to answer for the debt of Feuerstein, as such. All that appears is that he parted with bis property rights in the certificate by permitting Feuerstein to hypothecate it as security. By so doing he in no way promised to pay Feuerstein’s debt to the plaintiffs and could not be held to them for any deficiency if the collateral proved to be inadequate security. The complaint seeks to hold him only for the difference, if any, between the value of the certificate on October 23, 1929, and the net proceeds realized on a sale.
Richardson v. Crandall (48 N. Y. 348), relied upon in support of the claim that the agreement here alleged is void under the Statute of Frauds, is neither decisive, nor in fact in point. The decision there was influenced and determined largely by other considerations, among which was the illegality of the transaction, and as one offending against public policy.
Moreover, if the Statute of Frauds might be deemed applicable, the principle of estoppel must be applied. Plaintiffs assert reliance upon the pledge and the extension of further credit to Feuerstein by virtue thereof. It must be remembered that the Statute of Frauds may not be used to perpetrate a fraud. (Thompson v. Simpson, 128 N. Y. 270, 287; M. H. Metal Products Corporation v. April, 251 id. 146, 150.) Such would be the effect if the defendant Berg were to be given its benefits here.
Our conclusion is that the complaint when iven every fair intendment to which it is entitled must be sustained. Whether the plaintiffs will be able to sustain its allegations is a matter with which we have no concern.
It follows that the order should be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs.
Merrell, McAvoy and Sherman, JJ., concur; Finch, P. J., concurs in result.
Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.