Smith v. Craig

• Decision Date: 02 June 1914
• Citation: 105 N.E. 798,211 N.Y. 456
• Parties: SMITH v. CRAIG et al.
• Court: New York Court of Appeals Court of Appeals

211 N.Y. 456

105 N.E. 798

SMITH

v.CRAIG et al.

Court of Appeals of New York.

June 2, 1914.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Joseph J. Smith against William R. Craig and others, copartners doing business as Craig & Jenks, to recover damages for an alleged breach of contract. From an order of the Appellate Division of the Supreme Court, First Department (151 App. Div. 648,136 N. Y. Supp. 423) reversing on questions of law only-the facts having been examined and no error found therein-a judgment on a verdict for plaintiff, plaintiff appeals . Affirmed, and judgment absolute ordered against plaintiff.

Achilles H. Kohn, of New York City, for appellant.

Ernest E. Baldwin, of New York City, for respondents.

CHASE, J.

The defendants are cotton brokers in the city of New York. The plaintiff, who at the times hereinafter mentioned had no business, and no residence other than at the San Remo Hotel, in the city of New York, became a customer of the defendants in April, 1909. On April 13th the defendants, at plaintiff's request, purchased 100 bales of cotton on the Cotton Exchange for October delivery and for the plaintiff's account. Two days afterwards the contract was sold at a profit. Five other purchases of cotton for future delivery were made by the defendants for the plaintiff's account, and each in turn was sold for his account. The last of said six transactions was closed June 15, 1909. The plaintiff gave to the defendants a margin of $200 for each 100 bales of cotton purchased for him, and stated that his address was San Remo Hotel, New York City. On September 10, 1909, the plaintiff, being in Boston, telegraphed the defendants as follows:

‘Buy 500 January Check one thousand dollars on way.

Joseph J. Smith 12:25 p. m.'

At about the same time he wrote the defendants a letter as follows:

‘Confirming my wire of to-day to buy for my account five hundred (500) bales of January cotton at the market I enclose herewith draft for one thousand ($1,000) dollars, which please place to my credit, and oblige,

‘Yours very truly,

Jos. J. Smith.

‘Hotel San Remo, New York, N. Y.’

The defendants received the telegram, and, without waiting for the letter and the draft, entered into a contract with a fellow member of the Cotton Exchange to purchase 500 bales of cotton to be delivered in January, for which they promised to pay $30,950. September 10th was on Friday. On Saturday the market price of cotton declined, and on Monday (September 13th) further declined . The plaintiff's margin having been substantially overcome, the defendants sold the plaintiff's contract at a loss to him of $850, and sent to him at the San Remo Hotel a letter, of which the following is a copy:

‘We inclose herewith statement of 500 bales of January cotton closed out today at 12:07. We endeavored to reach you this morning at the hotel and also in Boston for instructions on your opens, but were unable to do so, and when January touched 12:05 the first time, the market looked extremely weak with every appearance of breaking badly, and we accordingly placed an order to sell, the execution being made at 12:07. Trusting our action is satisfactory.’

[1] It is a well-settled general rule, frequently repeated, that one holding collateral security for a debt which a pledgor owes him may sell the collateral and apply the proceeds upon the debt upon giving reasonable notice to the debtor. Markham v. Jaudon, 41 N. Y. 235;Content v. Banner, 184 N. Y. 121, 76 N. E. 913,6 Ann. Cas. 106;Small v. Housman, 208 N. Y. 115, 101 N. E. 700. The important question in this case is whether the defendants had the right to sell the cotton contract under the circumstances disclosed in the record. The respondents urge that the contract made in behalf of the plaintiff was executory, and that the relation of pledgor and pledgee did not exist between the parties to this action, and that therefore actual notice of sale of the contract was not required to be given to the plaintiff, and they cite as authority for such contention the case of Corbett v. Underwood, 83 Ill. 324, 25 Am. Rep. 392.

[2] We do not think that there is a sufficient basis for the claimed distinction between the contract in this case and one where certificates of stock are held by a pledgee as collateral. An assignment of a contract for the delivery of cotton on a future day as collateral operates in equity as a contract for a pledge, and the lien attaches to the cotton as soon as it comes into existence and possession under the contract. It should be treated before the day fixed for the delivery of the cotton as a contract for a pledge, and after such date as an actual transfer of the thing sold. It appears from the record in this case that such contracts are treated as evidence of title of the property therein described. The contract in this case for the delivery of 500 bares of cotton in January, although executory, was, among other things, for the express purpose of being transferred directly or indirectly by further contracts. It constituted the evidence of a right defined by the terms of the contract itself. It was assignable and transferable. It is not only shown that it was made to be assigned and transferred, but the defendants held it subject to sale and did sell it. The only question in dispute is whether the sale should have been made without notice to the plaintiff. It is the sale of such contract that constitutes the plaintiff's alleged cause of action.

The particular form of selling the contract does not appear by this record; neither is it of material consequence in the decision of this appeal. It may have been by a direct sale of the contract or by some other form of sale in the nature of a set-off pursuant to the rules and practice of the Cotton Exchange.

[3] In the agreed statement of facts the parties stipulate that the defendants closed out and disposed of said contract for said 500 bales of cotton upon the floor of the Cotton Exchange. The contract although executory, was an actual existing contract, enforceable as such. The general rule is that an executory contract, not necessarily personal in its character, which can, consistently with the rights and interests of the adverse party, be sufficiently executed by the assignee, is assignable in the absence of agreement in the contract. Quinn v . Whitney, 204 N. Y. 363, 97 N. E. 724;N. Y. Bank Note Co. v. Hamilton B. N. E. & P. Co., 180 N. Y. 280, 73 N. E. 48.

The plaintiff's interest in the contract for the delivery of cotton at a particular price and time was a clearly defined and enforceable right held by the defendants as...