184 A.D. 181 | N.Y. App. Div. | 1918
Lead Opinion
The amended complaint is framed on the theory of the conversion by the defendant of the sum of $2,000, a part of the eighth payment upon a contract between the Midtown Contracting Company, of which the defendant was president and treasurer, and the city of New York, for the erection of a school building. The said corporation assigned to the plaintiff the sum of $4,500 out of the eighth payment to become due under said contract, by a written assignment, a copy of which is annexed to and made a part of the complaint. This assignment was not filed in the office of the board of education or of the comptroller of the city of New York by reason of the request of the defendant and relying upon his promise that he would see that the amount so assigned would be paid to plaintiff as soon as said corporation received the said eighth payment. The corporation received the said eighth payment, amounting to more than $33,000. The warrant for such payment was received by the defendant personally and indorsed and deposited to the credit of the corporation in the Colonial Bank, and $2,500 only was paid to the plaintiff, and the remainder thereof was paid out by checks of the corporation signed by the defendant and applied to the use of the corporation and the defendant. The bankruptcy of the corporation is alleged, and that by the act of the defendant and of the said corporation in drawing and signing the said checks did wrongfully, fraudulently and unlawfully appropriate for their own use and benefit $2,000 of the said eighth payment, which in law and equity belonged to the plaintiff. Demand and failure to pay is alleged.
The complaint has been sustained as stating facts sufficient to constitute a cause of action in conversion.
Conversion at law is defined to be an unauthorized assumption and exercise of the right of ownership over goods, or personal chattels, belonging to another, to the alteration of their condition, or the exclusion of the owner’s rights. (Industrial & General Trust v. Tod, 170 N. Y. 233, 245.) There was no conversion in the receiving of the warrant for the eighth payment and depositing the same in the bank to the credit of the Midtown Contracting Company, for under the facts alleged in the complaint the warrant was not the property
The order should be reversed, with ten dollars costs and disbursements, and the motion granted, with ten dollars costs, with leave to the plaintiff to pay the said costs and serve an amended complaint if he is so advised, within ten days after service of a copy of the order herein with notice of entry thereof, and in default thereof judgment may be entered for the defendant dismissing the complaint, with costs.
Clarke, P. J., Laughlin and Shearn, JJ., concurred; Smith, J., dissented.
Dissenting Opinion
This is an appeal from an order of the Special Term which denied the defendant’s motion upon the ground that the complaint stated a cause of action. The Midtown Contracting Company had a contract with the city. The plaintiff furnished some material for the performance of that contract and took an assignment of $4,500 from the eighth payment to become due from the city to the Midtown Contracting Company. That assignment was not recorded at the request of the defendant, who was the president of the Midtown Contracting Company and who, with his wife, owned 99 out of 100 shares of the stock of that company. The defendant, however, agreed that when the eighth payment was received $4,500 should be taken therefrom and paid to the plaintiff. The moneys were received by the defendant in behalf of the Midtown Contracting Company and $2,500 was thereafter paid to the plaintiff, leaving $2,000 remaining due. The defendant then misappropriated the other $2,000 and applied the same to the debts of the Midtown Contracting Company, which afterwards went into bankruptcy. This action is brought against the defendant upon the ground that he received this $4,000 of this eighth payment as trustee for the plaintiff, and when he diverted the funds to the debts of
That this agreement vested the title of $4,500 of that eighth payment in the plaintiff would seem to be undoubted. The test seems to be whether the debtor would have been authorized to pay that money to the assignee. In this case there is no question that the payment to the assignee of $4,500 by the city would be a payment pro tanto of the city’s debt to the Midtown Contracting Company. In fact, if the plaintiff had filed this assignment, the city would have been compelled to pay the moneys to the plaintiff. At the request, however, of this defendant and to relieve the Midtown Contracting Company of embarrassment from possible demands of other creditors for like security, this assignment was not filed and the plaintiff consented that the defendant might collect the full amount of the payment, holding the $4,500 for the plaintiff upon promise to deliver the same to the plaintiff when received. In Britton v. Ferrin (171 N. Y. 235) it is held that the relation between a commission agent or factor for the sale of goods and his principal is fiduciary, and that the funds received by the commission agent for the sale of goods belong to the principal, subject only to the lien of the agent for commissions and other advances and charges, and that for misappropriation of the same, or for failure to deliver the same upon demand, the principal might bring an action in tort against the agent. In the opinion it is said: “ Where one intrusts his property to another for a particular purpose, it is recéived in a fiduciary capacity, and when turned into money that is also received in the same capacity. It does not belong to the agent, and he can lawfully exercise no power or authority over it except for the benefit of his principal, and only as authorized by him. If the agent uses it for his own purposes, or fails to pay it over upon a seasonable demand, it is a conversion of that which does not belong to him.” (Baker v. New York National Ex. Bank, 100 N. Y. 31; Commercial Nat. Bank of Penn. v. Heilbronner, 108 id. 439, 444; Moffatt v. Fulton, 132 id. 507, 515.)
The agent was there held liable for conversion, notwithstanding he had a lien upon the goods and might deduct from the amount received such an amount as represented his
These authorities are, I think, conclusive upon this question. There can be no doubt that these moneys were received by the defendant in trust for the plaintiff. Misappropriation of the funds by the trustee renders him liable in conversion. There can be no question about the identification of the fund, as in the case of Jackson v. Moore the fund was received by the attorney for three clients and one of the clients was allowed to recover in conversion for misappropriation of her third. There is no rule of law or reason which would
I recommend that the order be affirmed, with ten dollars costs and disbursements, with leave to the defendant to withdraw the demurrer and to answer the amended complaint on payment of costs in this court and at Special Term.
Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs, with leave to plaintiff to amend complaint on payment of said costs.