IRVING L. ERNST and Others, as Trustees in Bankruptcy of JOSIAH M. FISKE and Others, Individually and Composing the Firm of J. M. FISKE AND COMPANY, and the Firm of J. M. FISKE AND COMPANY, Plaintiffs,
JUSTUS G. DETTMER, Defendant.
MOTION by the defendant, Justus G. Dettmer, for a new trial upon a case containing exceptions, ordered to be heard at the Appellate Division in the first instance, upon the verdict of a jury in favor of the plaintiff, rendered by direction of the court after a trial at the New York Trial Term in April, 1911.
Daniel P. Hays, for the plaintiffs.
John Thomas Smith, for the defendant.
INGRAHAM, P. J.:
This action was by the trustees in bankruptcy of J. M. Fiske & Co. to recover upon two causes of action. The first was upon a promissory note made by the defendant to his own order, dated December 2, 1909, whereby three months after date he promised to pay to his own order $2,500, and which said note was indorsed in blank and delivered to the bankrupt; and the second was to recover the sum of $19,566.10, the purchase price of certain stocks, bonds and securities purchased by the bankrupt for the account of the defendant, and which sum of money was advanced by the bankrupt in connection with the purchase thereof. The answer of the defendant admits the making and execution of the note, and apparently admits the allegations in relation to the second cause of action, except that there was due and unpaid the sum of money sought to be recovered. For an affirmative defense to the first cause of action it is alleged that Wood & Sons, customers of the defendant, ordered the defendant, through Fiske & Co., to purchase for their account 100 shares of the capital stock of the Northern Pacific Railway Company on the 14th of January, 1910; that thereafter Fiske & Co. informed Wood & Sons that they had purchased the same; that thereupon said Wood & Sons paid to Fiske & Co. $13,762.50, the purchase price thereof, and instructed Fiske & Co. to have said stock transferred upon the books of the said company to the name of J. R. Wood & Sons; that thereafter, on the seventeenth of January, Wood & Sons ordered Fiske & Co. to purchase for their account a second 100 shares of the capital stock of the Northern Pacific Railway Company, and the latter informed Wood & Sons that they had so purchased the same, and that thereafter Wood & Sons on the same day paid Fiske & Co. $13,512.50, the purchase price thereof, and instructed Fiske & Co. to have said stock transferred to J. R. Wood & Sons on the books of the said railroad company; that in violation of their said agreement and instructions Fiske & Co. did not transfer, or cause said capital stock to be transferred to Wood & Sons, and have refused and still
refuse and neglect to deliver the same to the defendant or to J. R. Wood & Sons, or to pay the defendant or J. R. Wood & Sons the value thereof, to the damage of the defendant in the sum of $27,275. The answer realleges the facts set forth in this defense to the first cause of action as a separate and distinct defense to the second cause of action and by way of counterclaim; and also as a second defense to the second cause of action alleges that the defendant paid to Fiske & Co. on the 19th of January, 1910, the sum of $20,000, being in full payment of and in full accord and satisfaction of the amount alleged in the second cause of action to be due from the defendant to Fiske & Co. For a third defense to the second cause of action the defendant alleges that on the 19th of January, 1910, the firm of Fiske & Co. were indebted to Wood & Sons in an amount exceeding $20,000; that on the 19th of January, 1910, and prior to the appointment of trustees herein, or of any receiver of said Fiske & Co., this defendant, at the request of Fiske & Co., assumed said obligation of Fiske & Co. to Wood & Sons to the extent of $20,000 and agreed to pay the same in discharge of the indebtedness set forth in the second cause of action, and to the extent of $433.90, on account of the claim of indebtedness set forth in the first alleged cause of action; and the defendant demands judgment dismissing the complaint and an affirmative judgment against the plaintiffs for the sum of $27,275. The plaintiffs served a reply to the counterclaim and the case came on for trial at Trial Term. The defendant assumed the affirmative and called Mr. Fiske, one of the bankrupt firm, as a witness, who testified that under the arrangement existing between the bankrupt and the defendant the bankrupt executed orders at the defendant's request prior to the nineteenth day of January and the bankrupt was to keep the books; that the firm of Wood & Sons were defendant's customers; that on or about January 17, 1910, the bankrupt received a telephone order from Wood & Sons to purchase 100 shares of the Northern Pacific Railway stock. Subsequently the bankrupt purchased the stock, and on January 17, 1910, received a check from Wood & Sons for $13,762.50, the purchase price. Subsequently the bankrupt received another order to purchase an additional 100 shares of the said Northern
Pacific stock which the bankrupt purchased for Wood & Sons, and on January eighteenth received a check for the purchase price, including commissions, of $13,512.50. This apparently closed the transaction and all that remained was to have the stock transferred to Wood & Sons. On this transaction as it stood it was quite evident that the bankrupt owed Wood & Sons no money, but Wood & Sons were entitled to receive on demand from the bankrupt 200 shares of the Northern Pacific Railway stock; and, so far as appears, this transaction was correctly entered in the books of the bankrupt firm. This 200 shares of stock was not delivered to Wood & Sons, but, so far as appears, no demand was made upon the bankrupt for the stock, and it does not appear what, if anything, had been done with it prior to the 19th of January, 1910. On the 19th of January, 1910, the defendant was indebted to the bankrupt in the amount of this note and on an open account aggregating $22,066.10. The note, however, was not payable until March 2, 1910. About noon of January 19, 1910, Mr. Fiske, one of the bankrupt firm, made a demand on the defendant for the repayment of the money due from the defendant, when the defendant instructed Mr. Fiske 'to transfer $20,000 from his account known as the J. R. Wood & Sons account' to his (defendant's) personal account. To that Mr. Fiske said that it would require an authorization from Wood & Sons, which the defendant said he would obtain. At that time the books of the bankrupt showed a credit of 200 shares of Northern Pacific stock, worth approximately $27,000, but there was no money due by the bankrupt to Wood & Sons. What Wood & Sons were entitled to were the 200 shares of stock. The defendant came back to the bankrupt's office later and produced a letter from St. John Wood, one of the members of the firm of Wood & Sons, directing the transfer from his account to the defendant of $20,000. Between the time of the first interview with the defendant and his return with this letter from Wood & Sons the firm of Fiske & Co. had become involved financially and had notified the Stock Exchange, of which they were members, that they were unable to comply with their contracts on the exchange. So, when the defendant presented this letter of Wood & Sons to Mr. Fiske, he said that so far as he was
concerned the transfer had been made; that he did not know whether he could make it on the books, as they had been turned over to the receiver. He then returned this authorization from Wood & Sons to the defendant, who accepted it, and that was the end of the transaction as between Fiske & Co. and the defendant. Mr. Fiske further testified that at about twelve-thirty he had notified the Stock Exchange that Fiske & Co. was unable to meet its obligations, and from that time on the firm made no entry upon its books, and about four o'clock that afternoon a receiver came and took possession of the firm's property and assets; and his testimony was corroborated by Mr. Sherwood, one of the bankrupt firm, who was called on behalf of the defendant. The defendant was then called as a witness and testified that he never gave any directions to the bankrupt firm in relation to the purchase of this Northern Pacific stock; that those orders came directly to the bankrupt from Wood & Sons; that after the demand by Fiske & Co. on the defendant for the payment of the $20,000 the defendant went to Mr. Wood who gave him a certain ...