King v. MacKellar

• Decision Date: 10 April 1888
• Citation: 16 N.E. 201,109 N.Y. 215
• Parties: KING v. MacKELLAR.
• Court: New York Court of Appeals Court of Appeals

109 N.Y. 215

16 N.E. 201

KING

v.MacKELLAR.¹

Court of Appeals of New York.

April 10, 1888.

Appeal from general term, supreme court, First department.

Assumpsit by Eleanor B. King against William MacKellar for conversion of money placed in the hands of defendant for investment. Judgment for plaintiff, and defendant appeals.

Herbert T. Ketcham, for appellant.

Frederick R. Coudert, for respondent.

GRAY, J.

When this case was before this court on a former occasion, the judgment in the plaintiff's favor was reversed, and a new trial grapted, on the ground that the action, being for a conversion by defendant of moneys intrusted to him by plaintiff, the exclusion of evidence tending to show honesty and good faith in defendant's disposition of the moneys was erroneous, 94 N. Y. 317. The plaintiff amended her complaint, and, as amended, the action proceeded upon the undertaking of the defendant to safely and escurely invest her moneys for her benefit upon good bond and mortgage. The trial judge found as a conclusion of law ‘that the defendant, in receiving the plaintiff's money upon an undertaking and promise to invest the same for her upon bond and mortgage, assumed a fiduciary relation and duty towards her; and that he violated such duty in retaining the plaintiff's money in his own possession, and causing the execution to his wife and the assignment by her of the $3,000 mortgage as stated in the fifth and eight findings of fact.’ The argument of appellant's counsel, on the appeal here, was confined to certain points, which we shall mention.

He insists that plaintiff, with knowledge of the facts, ratified the defendant's acts; that her dealings were not with the defendant; that an alleged investment of her moneys was a safe and prudent one; that she received and retained substantial fruits of the alleged investment; and that the statute of limitations in force before January 1, 1877, bars any cause of action she may have. We think none of these grounds to be tenable for a serious attack upon the plaintiff's judgment, and that the trial judge's conclusion as to defendant's liability was right. A brief statement of the occurrences makes this clear. The plaintiff, a woman of limited means, and a cousin of the defendant, in a prior transaction in the year 1868, had loaned through him $2,000 upon bond and mortgage. She had received and she held the papers evidencing this transaction until June, 1871, when the loan was paid, and she executed a satisfaction-piece. At that time, and upon the suggestion of another opportunity offering itself for a secure investment upon bond and mortgage of the sum of $3,000, she intrusted that amount to defendant's custody for that purpose. When defendant received from plaintiff these moneys, he was engaged in a transaction with one Thomas Sampson for an exchange of real properties. Certain premises in New York city, which had been purchased by defendant, but the title to which had been taken in his wife's name, were conveyed to Mary, wife of said Sampson; and she simultaneously conveyed to defendant's wife a farm on Staten Island, and executed to her a bond, secured by a second mortgage on the Second-avenue property conveyed to her, to represent $3,000 of the valuation or purchase moneys of that property agreed upon for the purposes of the trade. There were other details of adjustment of valuations as to the live-stock on the farm and the furniture on the city premises; but they are not material to the consideration here. This mortgage for $3,000 was subject to a prior mortgage to secure the sum of $6,000. After this exchange of properties had been consummated in its particulars, defendant caused his wife to execute an assignment of the mortgage for $3,000 to the plaintiff. The mortgage was recorded; but the assignment never was. Neither this assignment, nor the bond and mortgage, were ever exhibited or delivered to plaintiff, or information of the transactions mentioned given to or possessed by the plaintiff until some seven years afterwards. Defendant retained the assignment in his possession and, when an action was brought to foreclose the prior mortgage, and his wife was made a party defendant, as the recorded holder of the second mortgage, he still refrained from giving any information to plaintiff of the disposition of her moneys, and his wife appeared in the action by their son, a lawyer.

The sale under the decree in foreclosure occurred in 1877; resulted in a deficiency, and the lien of the second mortgage was extinguished, except as to about 20 feet of the rear of the lot. Early in the year 1878, when it had come to plaintiff's knowledge that defendant had pretended to have invested her moneys in a second mortgage upon the lot in Second avenue, he promised to protect her from loss. He obtained from Mrs. Sampson a deed, conveying the 20 feet not covered by the first mortgage, to a relative of plaintiff's, as for her (plaintiff's) security. This deed, with the bond and mortgage and the assignment thereof, were first handed over to plaintiff late in the year 1878; but shortly after their receipt were returned to defendant, with a demand for repayment of her moneys. From the time when he received the plaintiff's moneys, down to 1878, defendant would pay over to her the interest moneys which were paid by the mortgagee Sampson. The trial judge found as facts, and there is evidence warranting his doing so, that the plaintiff was a woman ignorant of the forms and methods of making such investments, who relied wholly upon her cousin's (the defendant's) knowledge and experience to make a secure investment of her money; that he knew she was poor and had little, if anything, beyond the moneys he had received from her, and that Mary Sampson, the obligor in the bond secured by the second mortgage, had no separate or other estate, except that conveyed to her in the trade. Thus, even if upon the facts we could assume the making of any investment at all by the defendant for plaintiff, he made it upon the bond of an irresponsible obligor, secured by a mortgage upon property already heavily incumbered and with knowledge that the plaintiff would not be able to protect such an intestment of her moneys in the event of the foreclosure of the prior mortgage. This would be an improper and insecure disposition of moneys by any one acting for another, either as agent, trustee, or in a fiduciary capacity. In Whitney v. Martine, 88 N. Y. 535-540, Judge MILLER, delivering the opinion of this court, in speaking of an investment of plaintiff's moneys by her agent and attorney, said: ‘As a general rule it may properly be laid down that it is not prudent or safe to advance moneys on second mortgage where there are large prior incumbrances, and especially where the personal security of the mortgagor is in any way precarious.’ This rule commends itself to our special approval in cases like the present, where the party whose moneys are so invested will brobably be unable to protect the investment by advancing enough to pay off the prior incumbrance. And where, as here, the agent makes such an investment, without authority, and without informing his principal of the character of the security, we think the act was without the scope of the agency, and could be treated as null. But we think the assumption that there was...