Hoffman House v. Foote
| Decision Date | 11 November 1902 |
| Citation | 65 N.E. 169,172 N.Y. 348 |
| Parties | HOFFMAN HOUSE v. FOOTE. |
| Court | New York Court of Appeals Court of Appeals |
Appeal from supreme court, appellate division, First department.
Action by the Hoffman House against Elizur V. Foote, executor of Edward S. Stokes. From a judgment of the appellate division (63 N. Y. Supp. 784) affirming a judgment for defendant rendered on a dismissal of the complaint, plaintiff appeals. Reversed.
David McClure, for appellant.
Charles E. Hughes, for respondent.
The plaintiff's complaint was dismissed at the trial, and this appeal is from the affirmance of that judgment. It seems to us that the judgment rests upon grounds so narrow and technical that the appeal should be sustained, and the parties remitted to a trial of the case in the regular and ordinary way. The issues in the case, if any, were triable by jury; but, after the plaintiff's counsel had opened the case to the jury, the learned trial judge granted a motion made by the defense for the dismissal of the complaint, and so the complaint was dismissed from what appears upon the face of the pleadings, or was stated by counsel in opening the case to the jury. The record contains the pleadings, the opening address of plaintiff's counsel, the motion to dismiss, with much argument thereon by counsel on both sides, and concludes with the statement that the complaint was dismissed at the close of the opening, to which decision the plaintiff's counsel excepted. In substance, this exception raises the question whether the court could properly nonsuit the plaintiff upon the pleadings and opening, without further investigation of the facts bearing upon the merits of the controversy. When a defendant demands and procures such a ruling at the trial, he must be prepared to defend it in this court upon the assumption that every material fact in issue is to be resolved or found in favor of the plaintiff.
The judgment in this case cannot be sustained without adopting some one of three possible theories incumbent upon the defendant to clearly establish. If it can be demonstrated either (1) that the complaint does not state a cause of action, or (2) that a cause of action well stated is conclusively defeated by something interposed by way of defense, and clearly admitted as a fact, or (3) that the learned counsel for the plaintiff, in his opening address, by some admission or statement of facts so completely ruined his case that the court was justified in granting a nonsuit, then this judgment ought to be sustained, but not otherwise. The practice of disposing of cases upon the mere opening of counsel is generally a very unsafe method of deciding controversies, where there is or ever was anything to decide. It cannot be resorted to in many cases with justice to the parties, unless the counsel stating the case to the jury deliberately and intentionally states or admits some fact that in any view of the case is fatal to the action. I am unable to find anything of that kind in the opening address contained in this record. It might very well be held that the learned counsel in the opening enlarged or amplified the complaint, but it cannot be said that his claim was not at least as broad as his complaint, or that his case verbally stated to the jury was not as strong as presented by pleading. If the plaintiff's counsel had a case upon the pleadings, it cannot be said that he stated himself out of court in his opening to the jury. The real question is whether he had any case upon the pleadings. The nonsuit rests upon the proposition that the plaintiff sued as trustee, and had not stated any facts to justify a recovery in that capacity. The basis of the complaint is a written instrument, which is set out in full, whereby the defendants assigned to the plaintiff and three other parties a judgment which he then held against Mackey of nearly $100,000. The purpose of the assignment was declared by the instrument to be for the purpose of securing the payment of a loan made to the defendant by one of the assignees, and of indemnifying the assignees from all loss or liability by reason of certain bonds or obligations which they had executed for the defendant and at his request, in litigations to which the defendant was a party, to enable him to appeal in one case, and to get the benefit of a judgment and sale upon foreclosure in another case. The judgment was assigned as a pledge to secure the loan, and to indemnify the defendant's sureties upon these bonds; and the money, when collected, was to be retained and applied by the plaintiff upon any of these obligations in case of default in payment, or in case the sureties or any or them were made liable thereon, or in case any of the contingencies happened against which the sureties were to be indemnified by the terms of the instrument declaring the purposes of the pledge. Although the assignment ran to the plaintiff and the two other parties severally as security or indemnity against the several and separate obligations which they had severally assumed for the defendant, and for the loan by one of them, yet the judgment was to be collected and received by the plaintiff alone, and held or used by it for the purposes described; and the surplus, if any, was then to be paid over to the defendant. The judgment was collected by the plaintiff, and, having received the money, it was entered as a special account upon its books. Subsequently the defendant, having control of the plaintiff's corporate action, withdrew the fund from the special account, and applied the same to his individual and private uses. It is obvious that the money collected on this judgment was not received or held by the plaintiff in its own right or in its simple private corporate capacity, but for a special and particular purpose, namely, the protection of the sureties on the bonds and the payment of the loan. That was the sole purpose for which the fund was created, and, if a natural person should receive money under like circumstances and for a similar purpose, it would not, I think, be an error of law to hold that he was a trustee, and was liable to respond for the fund in a fiduciary or representative capacity. In the character of a trustee he could protect the fund from spolication by any wrongdoer.
The plaintiff brought this action to reclaim and restore the fund, not only for its own benefit as one of the sureties, but for the benefit of others who were co-sureties with it, and interested in the protection of the fund. A party, though a corporation, may prosecute an action for the benefit of others; and when it does it is a trustee of an express trust, within the provisions of the Code. Code Civ. Proc. § 449. The plaintiff received and held the fund as trustee for its own protection as surety for the defendant, and also for the protection of the other sureties on the bonds, and to pay a certain loan, and so to the surplus it was a trustee for the defendant.
But it is said that this situation has been changed by events that transpired after the assignment of the judgment, and after the collection and receipt of the money thereon by the plaintiff. It is conceded that two of the obligations, to secure which the fund was created by the assignment from the defendant, have ceased to exist, since one of the bonds has been discharged by a direction of the court for a new trial of the action, and the loan has been paid in full. The third obligation, however, still remains in full force; and the question is whether the plaintiff may not assert its right to the possession of the fund in the same character or capacity in which it was originally received, so long as any of the obligations for the security and benefit of which it was created remain undischarged. The outstanding obligation is somewhat peculiar. It is executed by the plaintiff corporation as principal and two individual sureties. It may be conceded that the latter are not liable on it until after default of the former, though that is by no means clear, since all were sureties as to the plaintiff in the bond; but the fact still remains that the pledge of the judgment, according to the fair scope and meaning of the instrument creating the pledge, was intended to indemnify the parties to that bond from all loss, and it is still an existing, valid obligation, upon which the sureties may be made liable. It may very well be that the individual sureties executed the bond with the plaintiff upon the faith and credit of this fund, and they have the right to object to its waste and depletion by the trustee or any one else, and may call upon the trustee to protect it from diversion to the private use of the defendant. So that, whatever relation the plaintiff held to this fund when it received it, that relation has not been changed, but still exists.
One of the defenses set up in the answer was that the defendant has been released and discharged from all liability to account for the fund abstracted from the plaintiff's custody. That, of course, must mean that the defendant has a release and discharge from the plaintiff in the same character and capacity in which it sues; and it is said that this defense is admitted upon the record, since it is not put in issue by the reply. If the plaintiff's counsel, after stating a good cause of action in his complaint, has admitted upon the record that the defendant has been released and discharged, of course he was properly nonsuited; but that does not seem to me to be the situation. If the defendant, by his control of the corporate action of the plaintiff, was enabled to procure a resolution to be passed, or a release to be executed, surrendering the pledge, or discharging him from liability for the converson of the money, that would not affect the parties for whose benefit the trust was created, unless they consented to it. The special defense state nothing with respect to the release...
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