Gause v. Commonwealth Trust Co. of New York

• Citation: 196 N.Y. 134,89 N.E. 476
• Parties: GAUSE v. COMMONWEALTH TRUST CO. OF NEW YORK.
• Decision Date: 19 October 1909
• Court: New York Court of Appeals

196 N.Y. 134

89 N.E. 476

GAUSE

v.COMMONWEALTH TRUST CO. OF NEW YORK.

Court of Appeals of New York.

Oct. 19, 1909.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Harry T. Gause against the Commonwealth Trust Company of New York. From a judgment of the Appellate Division (124 App. Div. 438,108 N. Y. Supp. 1080) affirming a judgment of dismissal (55 Misc. Rep. 110,106 N. Y. Supp. 288), plaintiff appeals. Affirmed.

On the 26th day of September, 1902, a written memorandum of agreement, dated August 28, 1902, was signed in the name of the defendant by one of its vice presidents. It was sealed with the corporate seal and attested by an assistant secretary of the defendant, and it was also signed and sealed by the plaintiff. Duplicates were retained by the plaintiff and said vice president. Said writing is as follows:

‘Memorandum of agreement made this 28th day of August, A. D. 1902, by and between the Trust Company of the Republic, a corporation organized under the laws of New York, party of the first part, and Harry T. Gause, of Wilmington, Delaware, partty of the second part.

‘Witnesseth: For and in consideration of the sum of one dollar in hand paid to him by the party of the first part the receipt whereof is hereby acknowledged by the party of the second part and for other good and valuable considerations, it is understood and agreed by and between the parties hereto as follows:

‘(1) Whereas it is the mutual desire of the parties hereto that the securities of the United States Shipbuilding Company shall be sold to the best advantage, both parties being interested in same, and

‘Whereas a selling syndicate of which Thomas C. Clarke is named as manager has been formed to arrange for such sales and for other purposes under an agreement providing for the deposit of all of said securities except those of the party hereto of the second part with the party hereto of the first part for such purposes, both parties hereto will in good faith co-operate with the said syndicate in furthering such object and this agreement is intended to be an aid to same.

‘(2) The party of the second part agrees that he will deposit with the party of the first part all of his bonds and shares of preferred and common stock of the United States Shipbuilding Company under the terms and conditions of this agreement as hereinafter set forth.

‘(3) The party of the first part will use and dispose of said securities of the party of the second part as in its judgment is necessary to further the purposes of said syndicate and in so doing will do whatever is necessary, to insure equal benefits to the party hereto of the second part pro rata to his holdings of said securities that are enjoyed at any time by the vendors who shall be or become parties to the agreement with said syndicate in connection with the sale and disposition of said securities or the proceeds of sale of same, and it hereby guarantees to the party of the second part the sale of all of his said securities on or before August 25th, 1903, whether through the efforts of said syndicate or otherwise and the party of the first part agrees to account to the party of the second part on or before the 25th day of August, 1903, and that the prices thereof shall be on the basis which will realize to the party of the second part not less than 95 per cent. of the par value of the bonds and 68 per cent. of the par value of the said preferred stock and 25 per cent. of the par value of the said common stock less brokerage expenses, as hereinafter stated and the party of the first part hereby agrees to pay to the party of the second part the interest on the bonds as and when received from the United States Shipbuilding Company during the period of this agreement; and in case of their sale or any of them during the period of this agreement and if under such circumstances it elects to retain the proceeds of the sale of the same under the provisions hereof until the final accounting hereunder the party of the first part agrees to pay to the party of the second part the accrued interest on such bonds as may be sold up to the dates of their sale, and also interest on the proceeds of the sale of same, at the same rate that the bonds would have earned if same had not been deposited under the terms of this agreement, said payments of interest to be made January 1st and July 1st, 1903, if this agreement is not sooner terminated, but at its termination at any time payment is to be made in full.

‘(4) The party of the first part is hereby accorded the exclusive right to sell the said securities of the party of the second part during the period of this agreement.

‘(5) The party of the first part shall have authority from time to time at any time to pay the usual brokerage and broker's expenses if any in connection with the sale of said securities of the party of the second part.

‘(6) Said party of the first part shall not be liable for any error of judgment or for any mistake of law or fact, nor shall it be liable for any act or omission while endeavoring in good faith to carry out the purposes hereof according to its judgment, but such exemption of liability shall not affect its liability named in clause 3 hereof. No obligation or liability in addition to those herein expressed shall be implied against the said party of the first part; it being the spirit and intent of this agreement that said securities are deposited as named under a guaranty of sale at not less than the minimum figures hereinbefore mentioned, and all proceeds of sale are to be accounted for at the figures at which such sales shall be made and the same with all incidental net profits in connection with the same.

‘(7) This agreement and all it contains shall become null and void on August 25, 1903, or at any time prior thereto coincident with the sale of and settlement for all of the said securities of the party of the second part or the termination of the said syndicate by the fulfillment of its agreement with the other vendors and underwriters of the said securities.’

The bonds and stocks mentioned therein were not sold on or prior to August 25, 1903, and thereafter the plaintiff brought this action alleging that the securities mentioned in said writing were on said August 25, 1903, substantially valueless, and he demanded judgment for $404,630, with interest from said August 25, 1903.

The defendant among other things in its answer alleged in substance: (1) That the contract in suit is ultra vires to the defendant corporation. (2) That the officers who assumed to execute the contract in suit had no authority to bind the defendant. (3) That at the time of the execution of the contract in suit an agreement was entered into between the plaintiff and the officer of the defendant who assumed to execute the contract in behalf of the defendant that such contract should not become effective or of binding force until a certain other contract or syndicate agreement had been signed and that in fact such syndicate agreement never was signed.

The trial took place before a justice of the Supreme Court and a jury, and, at the close of the trial, the trial justice submitted to the jury for answer two questions as follows: (1) Were the officers who signed or directed the signing of the alleged agreement-that is, the agreement in suit here-authorized by the defendant corporation to execute it as its corporate act and affix thereto its corporate seal? (2) Was the alleged agreement executed upon the condition that it was not to become effective until the socalled Clarke agreement for the pooling of the securities of the United States Shipbuilding Company shall have been executed by all the holders of said securities other than the plaintiff? The jury answered the first question in the affirmative and the second in the negative. A motion was then made to set aside the verdict, and subsequently the court disregarded the findings of the jury and dismissed the complaint. An opinion was written by the trial justice which is reported in 55 Misc. Rep. 110,106 N. Y. Supp. 288.

The plaintiff appealed from the judgment entered upon the dismissal of said complaint, and such judgment was subsequently affirmed in the Appellate Division. 124 App. Div. 438,108 N. Y. Supp. 1080. This appeal is taken from such judgment of affirmance. Further facts will be found in the opinion.Howard Taylor, for appellant.

D. Cady Herrick, for respondent.

CHASE, J. (after stating the facts as above).

We concur in the result reached by the majority of the Appellate Division. The importance of the decision in this case in its relation to the administration of justice seems to require a written statement of opinion by this court, although in doing so we, to some extent, substantially repeat what has been well said herein by Justice Laughlin. The defendant was organized in the name of ‘Trust Company of the Republic’ March 29, 1902, pursuant to article 4 of the banking law of this state as it then existed. Its name was changed October 12, 1903, to ‘Commonwealth Trust Company of New York.’ The statute as it existed at that time defines a trust company to mean a domestic corporation ‘formed for the purpose of taking, accepting, and executing such trusts as may be lawfully committed to it, and acting as trustee in the cases prescribed by law, and receiving deposits of moneys and other personal property, and issuing its obligations therefor, and of loaning money on real or personal securities.’Banking Law (chapter 689, p. 1843, Laws 1892) § 2. The powers of a trust company are expressly defined by statute, and, so far as applicable to this decision, they are: ‘(1) To act as the fiscal or transfer agent of any state, municipality, body politic or corporation; and in such capacity to receive and disburse money, and transfer, register and countersign certificates of stock, bonds or other evidences of indebtedness. (2) To receive deposits of trust moneys,...