Opinion
Argued February 28, 1905
Decided April 11, 1905
Thomas Thacher and Selden Bacon, Jr., for appellant. M.H. Merwin and Joseph Nellis for respondent.
Upon the facts found as above stated, the two principal questions that survive the judgment of affirmance in the Appellate Division are (1) whether there is any evidence to support the findings of fact, and (2) whether the conclusions of law are warranted by the facts as found. The first of these questions need not be discussed, since the most cursory examination of the record discloses evidence enough to sustain the referee's findings of fact; but the second question cannot be so easily disposed of. The theory upon which the judgment against the plaintiff is based is that the latter was guilty of converting the defendant's securities. That theory is quite consistent with the allegations of the defendant's answer, but it does not seem to be borne out by the facts as proved and found. If it were true, as alleged in the defendant's answer, that the plaintiff, of its own volition and option, without any request or direction from the defendant, instituted proceedings for the foreclosure of the Whitney mortgages, and bid in the lands therein described in its own name and for its own account, the conclusion would naturally and inevitably follow that the plaintiff must be deemed to have exercised such unauthorized dominion and control over the defendant's securities as to render itself liable to the defendant for the full value thereof. But these allegations are not supported by the facts as found by the referee. The findings in this behalf are that the defendant employed one Atwater, an attorney residing in the city of Minneapolis, to consult with the plaintiff as to the best manner in which to proceed in the foreclosure of the mortgages for the protection of the defendant's interests, and that Atwater instructed the plaintiff that "there was no other course to pursue except to proceed to foreclose the Sumbardo mortgages as soon as possible, bid in the property for somewhere near its present value and take a judgment against the makers of the notes for any deficiency there might be." Upon this state of the record we must assume that the plaintiff was authorized to foreclose the mortgages and to bid in the property for the defendant at a price not to exceed its then value. The referee has found that the value of the property was about $20,000, and that it was bid in for $24,434.35, which was the full face value of the Whitney notes and mortgages, with interest to the day of the sale. These uncontradicted facts fully justify the further finding "that the plaintiff was negligent in the collection of the said collateral notes and mortgages, in causing the mortgaged premises to be sold at the full amount due on the respective securities, and thus releasing the maker of said notes and the said Van Dyke, the grantee of said premises, who had assumed the payment of the same."
But we fail to perceive how this finding of negligence justifies the conclusion that the plaintiff was guilty of converting the defendant's securities. It is true that the plaintiff was the pledgee of these securities as well as the agent of the defendant. It is equally true that the defendant was not notified of the foreclosure and that the plaintiff bid in the mortgaged lands in its own name. There is, however, no finding that the plaintiff, in bidding in the property in its own name, was not acting for and on behalf of the defendant, and there is no significance in the failure to notify her of the foreclosure when the circumstances are considered. The mortgaged property was in the state of Minnesota. The plaintiff's place of business was there and it held an assignment of the mortgages. The defendant's attorney had instructed the plaintiff to proceed to a foreclosure and sale. The defendant lived in the state of New York and could act much more conveniently and economically through her pledgee and agent than she could in person. It was, therefore, quite natural and proper that the plaintiff should use its own name in acting for the defendant. All this was entirely consistent with the plaintiff's duty as the agent and pledgee of the defendant. It is obvious, however, that in departing from the defendant's instructions as to price the plaintiff was guilty of a breach of duty and rendered itself liable for any damages resulting from such breach. Since there is neither evidence nor finding as to the financial responsibility of either Whitney, the mortgagor, or Van Dyke, his grantee, who assumed payment of the mortgages, the most favorable view of the case to which the defendant can be entitled is that if the plaintiff had obeyed instructions by bidding in the property at its actual value a deficiency judgment might have been collected from Whitney or Van Dyke. It would seem to follow as a logical corollary that the defendant's right of recovery should be measured by what she may have lost through the plaintiff's misconduct; for the law of damages is the law of compensation. In the absence of some arbitrary legal rule this would naturally be the difference between the value of the land and the amount bid for the same at the sale. That would seem to be the rule applicable to this case unless the plaintiff's breach of duty amounted to a conversion. We think there was no conversion. The true rule is very succinctly stated in Mechem on Agency (sec. 476) where the learned author says: "In many cases it becomes difficult to determine whether the misconduct of the agent consists in a mere breach of instructions or amounts in law to a conversion; and the distinction is sometimes exceedingly technical. A distinction is nevertheless to be made. Thus it has been held that if property be delivered to an agent with instructions to sell it at a certain price, and he sells it for less than that price, he is not liable in trover as for conversion. ( Sarjeant v. Blunt, 16 Johns. 74; Dufresne v. Hutchinson, 3 Taunt. 117; Palmer v. Jarmain, 2 M. W. 282.) In such a case the agent had a right to sell and deliver, and in that respect he did no more than he was authorized to do. He disobeyed instructions as to price only, and was liable for misconduct, but not for conversion of the property. So where an agent was authorized to deliver goods on receiving sufficient security, but delivered them on inadequate security, it was held that trover would not lie." ( Cairnes v. Bleecker, 12 Johns. 300.) The principle thus enunciated seems to be precisely applicable to the case at bar. There can be no sound distinction between a case of agency to sell at a specified price and one to buy within a price or limit named.
We think the cases cited by the learned Appellate Division and the defendant are not in point. In Scott v. Rogers ( 31 N.Y. 676) the instructions were to sell wheat at a specified price on a particular day, and if not so sold to ship it to a designated consignee in the city of New York. In Laverty v. Snethen ( 68 N.Y. 522) the agent was instructed not to part with a note unless he got the money. In Comley v. Dazian ( 114 N.Y. 161) certain goods were not to be sold without the approval and consent of the owners. In Gilchrist v. Cunningham (8 Wend. 641) the assignee of a mortgage as collateral foreclosed the same without instructions and one of the defendants treated the property as his own. In all of these cases the breach of duty was held to be a conversion, because the act done was wholly unauthorized and in defiance of the owner's rights. That is the point of distinction between the two classes of cases above referred to.
It is undoubtedly the duty of an agent to obey all the lawful instructions of his principal, and the agent is clearly responsible for all losses occasioned by his disobedience thereof. ( Whitney v. Merchants' Union Express Co., 104 Mass. 152; Blot v. Boiceau, 3 N.Y. 78.) But it is equally clear that the rule of damages as for conversion is not applicable to all cases where a principal may sustain loss through the negligence or disobedience of his agent. ( Wamsley v. Atlas Steamship Co., 168 N.Y. 533; Industrial General Trust v. Tod, 170 id. 233.) The law upon this subject is well summed up by BRONSON, J., in McMorris v. Simpson (21 Wend. 610, 613) as follows: "The most usual remedies of a principal against his agent are the action of assumpsit and a special action on the case; but there can be no doubt that trover will sometimes be an appropriate remedy. The action may be maintained whenever the agent has wrongfully converted the property of his principal to his own use; and the fact of conversion may be made out by showing either a demand and refusal, or that the agent has, without necessity, sold or otherwise disposed of the property contrary to his instructions. When an agent wrongfully refuses to surrender the goods of his principal, or wholly departs from his authority in disposing of them, he makes the property his own, and may be treated as a tort-feasor. But there must be some act on the part of the agent — a mere omission of duty is not enough, although the property may be lost in consequence of his neglect. Nor will trover lie where the agent, though wanting in good faith, has acted within the general scope of his powers. There must, I think, be an entire departure from his authority before this action for a conversion of the goods can be maintained."
We think that it was error to hold the plaintiff as for a conversion, and as this view of the case will necessitate a new trial, it is unnecessary to discuss other exceptions treated at length in the brief of the appellant.
The judgment should be reversed and a new trial granted, with costs in all courts to abide the event.
CULLEN, Ch. J., GRAY, HAIGHT and VANN, JJ., concur; O'BRIEN and BARTLETT, JJ., not voting.
Judgment reversed, etc.