Appeal from Trial Term, Delaware County.
Action by Emily Johnson against the First National Bank of Franklin, N.Y. From a judgment for plaintiff, and from an order denying a motion for new trial, defendant appeals. Reversed, and new trial granted.
[117 N.Y.S. 40] L. F.
Raymond (Charles L. Andrews, of counsel), for appellant.
W. F. White, for respondent.
Argued before SMITH, P. J., and CHESTER, KELLOGG, COCHRANE, and SEWELL, JJ.
SMITH, P. J.
This action is brought to recover the value of five shares of stock of the Delaware National Bank of Delhi claimed to have been converted by the defendant. This stock was held by the defendant as collateral to a note signed by Robert T. Johnson, the plaintiff's father, and dated July 30, 1902. In 1891 the said Johnson had borrowed from the defendant bank a sum of $550, and had given as collateral to a note made to secure the loan 10 shares of the stock of the Delaware National Bank. Thereafter the Delaware National Bank failed, and an assessment was made of 50 per cent. on the stockholders, and the stock reduced one-half. Johnson failed to pay his assessment, but upon the sale of the stock, in default of the payment of the assessment, he purchased the same for $500, and took the title in his own name. The 10 shares of stock which was held as collateral to the note in 1891 was originally the property of the wife of Robert T. Johnson and the mother of the plaintiff, who died intestate in 1890. Robert T. Johnson as administrator of her estate had the stock transferred to his own name. At the time of her death, the wife of said Johnson left some real estate in Franklin, the title to which by the laws of intestacy went to his daughter, who was her sole heir, subject to the right of Robert T. Johnson to his tenancy by the curtesy. The $500 which was used by said Johnson to purchase the stock after default in the payment of his assessment was procured by a mortgage upon the said property, signed both by himself and by his daughter. There is evidence to the effect that Johnson agreed to take this money and buy this stock for this plaintiff, and the jury has found that the plaintiff was the rightful owner of the stock. This finding cannot be disturbed because it rests upon sufficient evidence. The defendant's contention upon this appeal is that, notwithstanding the fact of the plaintiff's ownership of the stock, nevertheless, the defendant was entitled to hold the same and to the benefit thereof, because the stock stood in the name of Robert T. Johnson and was transferred to the bank for value and without notice of the equitable rights of the plaintiff. The claim of the plaintiff is, first, that the defendant could not acquire any superior right by reason of a purchase without notice and for value; and, second, that the defendant's purchase was not for value.
Upon the first question, the plaintiff relies upon the authority of Edwards v. Dooley, 120 N.Y. 540, 24 N.E. 827.In that case the plaintiff's agent, having been furnished money with which to buy hides purchased them, and while they were in his possession, sold [117 N.Y.S. 41] them to a party claiming to be an innocent purchaser for value. It was held that upon the purchase the title to the hides vested in the principal, and the sale even to a bona fide purchaser for value did not vest the title in such a purchaser. But it was there held that the pretended purchaser from the agent was not a bona fide purchaser, and the principal was given damages for the conversion of the hides. The opinion in part reads:
" Mere possession of the property by the agent after such purchase does not confer a power of sale, and, it seems, an unauthorized sale by him, although for a valuable consideration, and to one having no notice that another is the true owner, vests no title in the vendee."
In the case at bar, however, the legal title never vested in plaintiff.
In Weaver v. Barden, 49 N.Y. 286, the plaintiff furnished the consideration for the purchase of stock. The stock was transferred by Finch, the original owner, to the name of the son of the plaintiff, who was also son-in-law of the defendant, without the knowledge or consent of the plaintiff, who had no knowledge that the transfer had been made in that form until some time in 1864, long after the transfer by the son to the defendant. The son at the time of the transfer by Finch, the original owner of the stock, was, in the language of the report of the referee, " to some extent the agent of the plaintiff in New York." It was there held that the purchaser from the son to the extent that he was a bona fide purchaser for value was entitled to protection. The two opinions written in the case differ only as to whether the purchaser was a purchaser for value. They both recognize the rule that, if the equities be equal, he who holds the legal title has the superior right. Judge Grover in writing says:
" The counsel for the respondent claims that the equitable title of the plaintiff was available against this title of the defendant, although acquired upon a bona fide purchase, for the reason that L. J. Weaver (the agent) took the title without the knowledge and consent of the plaintiff. But the plaintiff never had the legal title to this stock. That was transferred to L. J. Weaver by the former owner, and his transfer of the same to a bona fide purchaser gave the latter his title and a right in equity equal to that of the plaintiff, and thus the case comes within the familiar principle that, where the equity of the parties is equal the legal title will prevail."
In the case at bar the plaintiff never had title to this stock. The legal title was given without fault by the corporation to Robert T. Johnson. If the defendant be a purchaser for value, it has equal equity with the plaintiff, and with equal equity the legal title of the defendant must prevail.
We reach, then, the question whether the defendant is a holder of this stock for value. There is no question of its bona fides. Upon the question of value we have only the evidence of the president of the bank. From that evidence it appears that on May 6, 1898, Robert T. Johnson had given a note to the bank for $825. This note was for three months, and continued overdue until August 15, 1900, when a renewal note was taken. Meantime, however, and in 1899 some time, this five shares of stock in question was delivered by Robert T. Johnson to the bank as collateral to this overdue note. It was held by the bank as collateral to this note until August 15, 1900, when a new note [117 N.Y.S. 42] was given for three months, to which this stock was attached as collateral. This note was afterwards renewed until July 30, 1902, and to each renewal this stock was attached as collateral. Robert T. Johnson died 17th of August, 1902, insolvent. This stock was thereafter sold upon due notice against the prohibition of the plaintiff. The evidence of the bank president, which is uncontradicted, is to the effect that, while this note remained overdue after 1898, Johnson sought to have it renewed, but that the bank refused to renew it without additional security, and it was not agreed to be renewed until after this security was furnished. Before the renewal of August 15, 1900, this stock was unquestionably held as security for a precedent debt. Upon the renewal at that time, the old note was surrendered, the renewal made, the extension of time given, and the collateral attached to the renewed note. Under such circumstances we think it is presumed that the renewal was made, the extension of time given upon the faith of this collateral. That an extension of time for the payment of a debt is such value as to give one the rights of a holder for value is now settled law in this state. Cary v. White, 52 N.Y. 138; O'Brien v. Fleckenstein, 180 N.Y. 353, 73 N.E. 30,105 Am.St.Rep. 768; Breed v. National Bank, 57 A.D. 473,68 N.Y.Supp. 68.This question was raised by the request of the defendant's ...