46 N.Y.S. 557 | N.Y. App. Div. | 1897
It appeared before the surrogate' that Henry R. Pierson died January 1, 1890. At the time of his death, and for some years prior thereto, he was the senior member of the firm of Henry R. Pierson & Son, doing business in the city of Albany as bankers and stockbrokers. The firm was insolvent at the time of his death, and his individual estate was also insolvent. His son, Henry R. Pierson, Jr., was the sole surviving member of the firm, and is the executor of his last will and testament. As the surviving member of the firm, on January 16, 1890, he executed an assignment of all the firm property and assets, and of his individual property, to Robert C. Pruyn, for the benefit of the firm and of his individual creditors. He was also insolvent — made so by his. connection with the firm. Mr. Pruyn assumed the trust and undertook the settlement of the firm estate. The respondents were customers of the firm of Henry R. Pierson & Son, and they presented claims to the assignee. The appellant, Thomas F. Mason, is the receiver of the Guardian Mutual Life Insurance Company, having been appointed such receiver in place of the senior Pierson, who was appointed as the receiver in 1877. Pierson, as the receiver, misappropriated $24,042.95 of the funds of said company, and between June 17, 1888, and the day of his death, transferred them to the possession and use of his firm. Many other persons presented claims to the assignee. With respect to some of tliese claims, the assignee was embarrassed in determin
Loomis L. White & Co., of New York, were the correspondents of •the firm of Pierson & Son. The respondents had been customers of Pierson & Son, having contracted with the firm to have it buy stocks or securities for them. When the firm received an order from any one ■of these respondents to buy any security, it gave an order in its own ■name to White & Co. to buy it, and the latter bought it for Pierson & Son. Pierson & Son kept with White & Co. a margin of about ■ten jier cent upon all its purchases and sales of stock and securities •with that company. Pierson & Son had received from each customer a much larger margin, either in money or bonds or stocks. White & Col reported each purchase to Pierson & Son, and the latter opened and kept an account with each of the.respondents as to the stock iba the same manner as if the firm had it in its own possession ; but, except in the cases of Matthew W. Bender, Jared P. Smith and Charles Bridge, in respect to his second claim, so called, Pierson & Son never had the custody of any of the stock or securities in question in this proceeding, except such as their customers •furnished as margin.
Pursuant to the stipulation and judgment in Pruyn v. White, all the' respondents were adjudged to be firm creditors, and each a*eceived a dividend of seventy-eight and one-half per cent upon the
The respondents participating in such dividend severally presented to the executor their claims for the balance not satisfied by such dividend, claiming that the act of Pierson & Son in pledging their stocks with White & Go. in an amount in excess of the sums they respectively owed Pierson & Son thereon, was a conversion by the firm and by each individual member thereof. Durant, Bender, Bridge as to his second claim, and Smith presented their respective claims, alleging that the acts of the firm were a conversion,-and, therefore, that each had a claim against the individual assets.
Mason, as receiver, also presented his claim to the executor. The executor was silent in respect to any of these claims until the hearr ing before the surrogate, but there insisted upon the same order of preference as did the appellant Mason. They both claimed before the surrogate as they now claim upon this appeal, that the respondents, by force of the stipulation and judgment in the action of Pruyn v. White, were precluded from participating in the distribution of the individual assets of the estate, until after Mason and all the other individual creditors should be paid. They also claimed that there was no competent evidence before the surrogate of the fact that any of the respondents who were parties to the action of Pruyn v. White, except Bender and Smith, ever had purchased any stock or securities; that there was no evidence of the fact, except the entries in the books of Pierson & Son and the memorandum they gave each customer; that while it was true that each respondent gave his order to Pierson & Son to purchase stock for him, the statements in the books of Pierson & Son to the effect that it had been done were mere hearsay, and, in fact, not true. Pierson & Son, in fact, did not receive the stock of any respondent, except that of Bender and Smith, and such as its customers pledged with them as margin, but probably 'expected to furnish any one of them with the stock ordered by him if he should pay for it in full and demand it. The appellants urge that whoever did not pay. for it in full and demand it never became entitled to the possession of it,
But we think that inasmuch as Pierson & Son rendered a statement to each customer, and also, made entries in their books, such entries being evidence against the firm and each member thereof, and, therefore, against the executor of the deceased member (.Matter of Saltus, 3 Keyes, 500), stating in effect that they had bought and were holding for him the number of shares of stock ordered by him, giving the name, price and how the account stood between them and the respondent, the latter believing such statement and acting upon it, could treat it as true, and that thus the executor is estopped from denying it. Moreover, the position taken by the executor upon the hearing before the surrogate was that the firm made the-contracts, as alleged, but the executor denied the tort charged.
Pierson & Son, by pledging the stock with White & Co. in an amount greater than their own lien thereon, and thereafter becoming insolvent, so that the customer could not obtain his stock upon payment of the amount of Pierson & Son’s lien thereon, thereby converted the stock. (Chester v. Dickerson, 54 N. Y. 1,11,) That is to say, the firm was estopped to deny such pledge. The event — that is, Pierson & Son’s insolvency — disabled the firm from- complying with their contract, and thus completed the. conversion. ' No demand of. the money or stock was necessary, as such demand would only be cumulative evidence of the conversion. (Ganley v. Troy City National Bank, 98 N. Y. 487, 494.) As between the customer and Pierson & Son, the customer was the owner of the stock; Pierson & Son, the pledgee thereof, with a lien, for the amount unpaid thereon by "the customer. Pierson & Son had' no right to so sub-pledge the stock as to deprive the purchaser of the right to redeem it by paying the balance due upon. it. (Chapman v. Brooks, 31 N. Y. 75; Lawrence v. Maxwell, 53 id. 23.) The firm’s pledge of the stock with White & Co. to secure its indebtedness to the latter company did result in depriving the customer of that right of redemption, and, therefore, was a conversion. (Le Marchant v. Moore, 150 N. Y. 209; Wilson v. Little, 2 id. 443; Gruman v. Smith, 81 id. 25.)
The respondents, claimants, may be .divided into two classes :
First class. Those who, as parties to the action of Pruyn v.
Second class. The respondents who, although parties to the action of Pruyn v. White, received no dividend because White & Co. did not hold their stocks at Pierson’s death. ' These are Edward A. Durant, whose stock was fully paid for as between him and Pierson & Son, but lawfully sold November 17, 1889, by White & Co. as between' White & Co. and Pierson & Son, but wrongfully as between Pierson & Son and Durant; Charles Bridge, in respect to his second claim, so called. As between him and Pierson & Son his negotiable bonds were fully paid for, and Pierson & Son had the custody of them, but they pledged them as collateral security upon their own notes to the Commercial Bank, which took them without notice of Bridge’s title, and the bank being thus a bona fide pledgee, lawfully applied them or their whole proceeds in satisfaction of such notes. Matthew W. Bender, whose case is like Bridge’s.
Durant sued the survivor of the firm for damages, setting forth the facts, but without characterizing them either as a conversion or as a breach of implied contract, and recovered judgment.
Bender also sued the survivor, setting forth the facts and alleging an indebtedness.
We will first consider the claim of Thomas F. Mason, as receiver of the Guardian Mutual Life Insurance Company. His claim for preference rests upon the stipulation and judgment in Pruyn v. White. All the respondents united with him in the stipulation, as follows:
*486 “ Eleventh. That the claim of Thomas F. Mason, as receiver of the Guardian Mutual Life Insurance Company, constituted ■ * * * also an individual obligation on the part of Henry R. Pierson, Sr., now deceased, and is entitled to payment from the executor of Henry R. Pierson, Sr., now deceased, out of the assets of the individual estate of Henry R. Pierson, Sr., now deceased, in preference to the claims which existed against him as a member of the late firm of H. R. Pierson & Son, arising or contracted in the business of said firm.”
The judgment entered in said action contained the like provision.
The respondents first above named, who received in Pruyn v. White their dividends out of the firm-assets, cannot, with . the firm proceeds in their pockets, deny that their claims “ existed against him (the senior Pierson) as a member of the late firm of H. R. Pier-son & Son, arising or contracted, in the business of said firm.” They have been largely paid because their claims so arose and existed. The fact that the senior Pierson converted to his own use the funds of the life insurance company and afterwards transferred them to his firm, gave his successor, Mason, at least a disputable claim which he might fairly urge for participation in the firm .assets. By entering into the stipulation with the respondents he secured to such of them as participated in such distribution a greater dividend.
But the case of the respondents' who did not participate in such dividend is different. Their respective claims are either firm claims, as for breach of the .implied contract between them arid the firm, or as for the conversion of their property, as they may elect. For what signifies the election of remedies, if it may not, while the. choice is yet open, be exercised as a shield against total defeat ? The claims of the respondents Durant and Bender, and Bridge, as to his second claim, were not in issue in Pruyn v. White, and nothing was therein adjudged as to their character as firm or individual claims, except what may be inferred from the fact that they were excluded from participation in the firm assets; and, therefore, they could elect .to treat them as claims against the estate arising because of the tort of the testator. It is true that Bender brought his separate action against the survivor as upon an indebtedness for a breach of the implied contract with the firm, and the judgment he obtained therein bound the firm assets and the survivor,, but not the
The respondents Durant, Bender,, and Bridge, as to his second claim, are not obliged to give Mason a preference in the distribution of the assets of the testator.
. But the stipulation of the first class of respondents gives to Mason a preference over them, but it does not give it to any other creditor. We, think the first class of respondents, subject to the preference given to Mason, have a right to participate ratably with all the other creditors in the distribution.
By participating in the distribution in Pruyn v. White, the first class of respondents made no election of remedies. As to them, White & Co. were not wrongdoers, but lawfrd pledgees; They pursued White & Co. because that firm’s liability to Pierson & Son was, as between the two firms, upon contract. White & Co. com
This result is not affected by the 20th finding of. fact in Pruyn v. White, which is as follows:
“ Twentieth. That the business between the firm of Loomis L. White ■& Co. and the Piersons at Albany was entirely a business between the firm of Loomis L. White & Co. and the firm of H. R.*489 Pierson & Son; and there was no business between the firm of Loomis L. White & Co. and Henry R. Pierson, Sr., as an individual.”
■ The several liability of the senior Pierson inhered in the wrong which he did for his firm.
The claims of Jared P. Smith and the first claim of Charles Bridge are withdrawn, because, being' contested by the executor and Mason, they were not supported by evidence necessary to establish them. The claim of William Barnes, Jr., must be rejected for the same reason. The silence of the executor as to it after its presentation to him, until the hearing before the surrogate, did not preclude the executor from contesting it there. (Matter of Callahan, 152 N. Y. 320.) He contested Barnes’ right to participate in the distribution of the testa'tor’s assets, except as a firm creditor, after all the individual debts should be paid. This right as firm creditors, if desired, should be reserved also to Jared P. Smith and to Charles Bridge as to his first claim.
Several other questions are presented upon this appeal which we do • not think it necessary to discuss. Our purpose has been to see whether substantial justice has been done. • Whether any evidence was improperly received is of no consequence, since from that which was competent all the material facts in the case are clearly, perceived. (Code Civ. Proc. § 2545.)
We think that it was within the discretion of the surrogate to open the proceedings and admit claimants to a hearing who had not presented their claims until after the surrogate had announced the principle of his decision. If that principle was right, justice required that those claims which came within it should be admitted upon equitable terms.
The claims of Jared P. Smith, William Barnes, Jr., and the first claim of Charles Bridge should be excluded from participation in the distribution as individual creditors; that is, the decree in these respects is reversed.
The claim of Thomas F. Mason should be preferred in the distribution over the claims of the first class of respondents herein so called. Of course, to the extent that this preference increases Mason’s dividend, it decreases that of the first class of respondents, but not that of the second class or of the other individual creditors.
Say fund.."............................„......• $30,000
Mason’s claim....................................... $30,000,
First class of respondents...............■;............ 30,000
Second class and all others........................... 30,000
$90,000
Second class of respondents and others get one-third. Mason ■ gets the rest.
All concurred, except Herrioic, J., not sitting.
Decree of the surrogate modified by excluding Jared P. Smith, William Barnes, Jr., and Charles Bridge, as to his first claim, from, participation in the assets, and by giving to Mason preference in the distribution over such respondents as received' a dividend in the action of Pruyn v. White, but not over other individual creditors. Decree to be settled" by Landon, J., and as thus settled, affirmed, with costs to Mason and the executor, and one bill of costs out of the fund, to the class of respondents who did receive a dividend in Pruyn v. White.