Post v. Thomas

• Decision Date: 14 July 1914
• Parties: POST et al. v. THOMAS et al.
• Court: New York Court of Appeals Court of Appeals

212 N.Y. 264

106 N.E. 69

POST et al.

v.THOMAS et al.

Court of Appeals of New York.

July 14, 1914.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Edwin M. Post and another against Edward R. Thomas and others. From a judgment of the Appellate Division, First Department (153 App. Div. 865,139 N. Y. Supp. 6), affirming a judgment against the defendant named in favor of the plaintiffs entered upon the report of a referee, the defendant named appeals. Reversed, and new trial granted.

See, also, 154 App. Div. 934,139 N. Y. Supp. 1140.Edward L. Blackman, of New York City, for appellant.

William G. Wilson, of New York City, for respondents Post et al.

Origen S. Seymour, of New York City, for respondent Hamilton.

CHASE, J.

[1] In September, 1901, the three defendants and one other person entered into a pool to buy, sell, and deal in the stock of the Keokuk & Des Moines Railroad Company for the purpose of acquiring all or a large portion of the 11,000 shares outstanding of the stock of said company other than that owned by the Rock Island Railroad Company, in the expectation that thereby the market price of said stock would be greatly advanced, or that the Rock Island Railroad Company, which held 14,000 shares of the stock of the said Keokuk & Des Moines Railroad Company, would sell a sufficient part of its said shares to give the pool control of a majority of the stock of said company. Each of the four men contributed $5,000 to the pool. Within a few days thereafter the fourth man, with the consent of the others, withdrew from the pool, and he was repaid the $5,000 that he had contributed. Subsequently an additional payment of $5,000 was put into the pool by each of the three defendants. It was mutually agreed that the defendant Edward R. Thomas and the defendant Orlando F. Thomas, or one of them, would manage the pool. By mutual agreement the money of the pool was first deposited with the firm of Thomas & Post, stockbrokers, in the name of the ‘K. & K. Syndicate.’ The stock of the company was purchased and sold through said stockbrokers, and they carried the stock purchased for the pool in the ‘K. & K . Syndicate’ account.

The account was subsequently transferred to Thomas & Thomas, stockbrokers, and thereafter and about April 1, 1903, to the plaintiffs, stockbrokers. When the account was transferred to the plaintiffs it was indebted, and the plaintiffs paid to Thomas & Thomas in taking over the account $169,994.16, and received as collateral to such balance 5,450 shares of the stock of the Keokuk & Des Moines Railroad Company which belonged to the pool. A detailed statement of the account was made and delivered each month prior to April 1, 1903, to the defendants and each of them, showing the condition of said account. On the 3d day of April, 1903, plaintiffs made a demand for the payment of $25,000 on account upon each of the members of the pool. Soon thereafter $50,000 was paid to the plaintiffs on account of Edward R. Thomas and Orlando F. Thomas, to be applied to the pool account. Hamilton never replied to the demand upon him for the payment of $25,000 to the credit of such account.

On the 13th day of April, 1903, Orlando F. Thomas sold and transferred his interest in the pool to Edward R. Thomas. On that day Edward R. Thomas wrote to the plaintiff a letter in which, among other things, he said:

‘I also wish to inform you that I have purchased from Mr. O. F . Thomas his one-third interest in the account on your books known as the ‘Keokuk & Des Moines pool,’ and that I hereby assume all his liability and credit in the same. I wish it clearly understood that my present interest in this pool is a two-thirds interest and that I am responsible for two-thirds of its losses and am entitled to two-thirds of its profits after I am credited with the $50,000 margin which I now have on my two-thirds share in excess of Mr. Hamilton's proportionate margin; the other one-third being owned by Mr. C. A. Hamilton and that this account is in no sense a joint account. In other words myself and Mr. Hamilton are each liable for our share and not for the share of the other.'

At that time it seems to be conceded that the stock held as collateral to the account was worth more than the indebtedness of the pool to the plaintiffs. On April 14th, the day following the letter from which we have quoted, plaintiffs wrote Edward R. Thomas and said:

‘We beg to acknowledge the receipt of your esteemed favor of the 13th inst. and have noted the sales, charges and credits as noted therein. * * * Concerning the Keokuk & Des Moines syndicate we now understand that you are sole owner and liable for two-thirds of the same and that Mr. O. F. Thomas has no further interest in said syndicate, the remaining one-third being the property of C. A. Hamilton.’

Orlando F. Thomas on April 13 wrote the plaintiffs, saying:

‘I have sold to Mr. E. R. Thomas my one-third interest in the Keokuk & Des Moines syndicate including whatever margin I may have against it and no further liability attaches to me.’

The collateral being then sufficient to pay the pool indebtedness, there is some basis for the claim, at least as between the plaintiffs and the defendant Edward R. Thomas, that the plaintiffs assented to carrying the K. & K. Syndicate account with the personal liability of Edward R. Thomas therefor, limited to two-thirds of the amount thereof subject to a division as between him and Hamilton, taking into account the payments that had theretofore been made by each on account of the pool. The account was continued, and the plaintiffs in June thereafter told Mr. Edward R. Thomas that it was impossible for them to use the Keokuk & Des Moines stock in their loans, and for that reason it was impossible for them to carry the account. One of the plaintiffs testified that on the 15th day of June he made such representations to Mr. Edward R. Thomas as caused him to take over the account in its entirety, which he did by having the debit balance in the account and the stock transferred to an account which he, Thomas, owned on the books of the plaintiffs, entitled the ‘International Silver Syndicate Account.’ This statement to Edward R. Thomas was apparently made by telephone, and on the same day, June 15th, the plaintiffs wrote Edward R. Thomas a letter, in which they say:

‘In accordance with your telephone conversation * * * we have charged the International Silver Syndicate account with the entire K. K. Syndicate account as per statement herewith.’

Some days after the transfer of this account Edward R. Thomas asked to have it transferred to its own name. Plaintiffs wrote him a letter, in which they say:

‘In regard to transferring the K. K. Syndicate account from the International Silver account back to its own name we find that while it is true the K. K. Syndicate has been benefited by the transfer to the International Silver Syndicate at the same time at the present moment while it stands in the latter account it is receiving the benefit of the value of approximately $12,000 worth of silver certificates which are in the Silver Syndicate account. The entire debit balance of the International Silver account is approximately $102,000 and if the K. K. Syndicate stock is removed from that account with the debit balance it will suffer somewhat by the removal. It would place it in a stronger position if you would strengthen the K. K . account to about the extent mentioned above which is now represented by silver securities.’

It will be seen by this letter that the plaintiffs were reluctant about retransferring the K. K. account for the reason stated that they wanted the benefit of about $12,000 worth of silver securities, which seemed to have been held to the credit of the account. It does not appear...