Opinion
June Term, 1896.
David McClure and Eugene L. Bushe, for the appellant.
W.J. Curtis, for the respondents.
Prior to the 4th of March, 1893, the defendant had been doing business for one Brodie L. Duke, a resident of Durham, N.C., in raising moneys for said Duke, and obtaining extensions and renewals of existing loans. On said day Duke executed and delivered to the defendant his power of attorney, whereby he made the defendant his attorney and agent, intrusting to him certain stocks as collateral security for intended loans, and a number of notes signed, but with the dates and amounts not filled in, to be used by him in raising and renewing loans. At the time when the defendant entered upon his duties as such attorney, he had a large amount of the common and preferred stock of the American Tobacco Company belonging to Duke, which stock was thereafter used by the defendant as collateral, for various loans and renewals of loans which he negotiated on Duke's behalf under the power. Upon the same day, to wit, March 4, 1893, Duke executed a similar power of attorney to Theodore H. Price, of the firm of Hubbard, Price Co., a firm of brokers through whom Duke had for some time previously carried on speculations in stock and grain. The powers to the defendant and Price authorized them respectively to co-operate with each other in Duke's business. In the transaction of this business, the defendant and Hubbard, Price Co. had dealings together in respect to the loans of Duke and the stock pledged as collateral therefor.
On or about the 22d of March, 1893, Price sailed for Europe and did not return until the tenth of May, following. And on the twentieth of May Price, representing Duke, asked the defendant for a statement of the account of his dealings on behalf of Duke. He made several demands, and on the final demand was informed that an account had been mailed to Duke. This was on the 10th of June, 1893. This account showed, among other things, the delivery by the defendant to Hubbard, Price Co. of certain shares of the stock of the American Tobacco Company, and that the defendant had on hand 1,000 shares of the common stock of the company; 200 of these shares he remitted to Duke, with a check for a cash balance of $3,076.68, and 800 shares he retained as an equivalent for compensation charged in said account, to the amount of $25,839.03. Upon the receipt of this amount, Mr. Duke, on the 12th of June, 1893, wrote to the defendant Beveridge as follows:
"DEAR SIR. — I have your favor of 10th inst., with enclosures as stated. I notice from your statement that you have in hand 800 shares of my American Tobacco Stock; I notice also that you have me charged on account, $25,839.03 for services, and you enclose your check for $3,076.68 to balance account. I understand you to mean by this that it is in settlement. I notice that upon most of these loans the brokerage was deducted when they were made, and I, therefore, do not understand where your claim of $25,839.03 comes in. I herewith return your check, and refuse to accept your statement as a settlement, and inasmuch as I cannot come to New York to arrange the matter, I have forwarded your statement to Mr. Theo. H. Price, with instructions to adjust the matter with you, as I absolutely refuse to accept any such settlement, and I demand that you turn over to Mr. Price the 800 shares of stock at once."
Mr. Price received the account and at once opened negotiations with the defendant for a settlement of the dispute between himself and Mr. Duke. Mr. Price claims not to have examined this account of the defendant. In the negotiations for the settlement, Price employed Mr. Cromwell, of the firm of Sullivan Cromwell, as the attorney of Mr. Duke, to conduct the negotiations. The defendant Beveridge claimed that he was entitled as compensation (in addition to the commissions for brokerage) to commissions as trustee — he acting as the agent and trustee of Duke in the conduct of his business under the power of attorney. Negotiations for settlement were had between the defendant and his attorney and Mr. Cromwell. Mr. Cromwell states that at the time of the settlement which took place on the tenth of July he did not recollect that the account which the defendant rendered to Duke was before them. He, however, stated that he would not regard it as fair, so many details having transpired, to fairly contradict Mr. Bushe or Mr. Beveridge if they should say the account was there. In Beveridge's testimony he distinctly states that the account was before them at the time of the making of the settlement.
The principal subject of contest upon the settlement was the amount of compensation which should be allowed to the defendant for the transaction of this business in addition to his brokerage commissions. Finally a settlement was agreed upon by which the defendant gave up certain undated notes which he held, and also certificates of stock of the American Tobacco Company to the amount of 800 shares, all in the name of the defendant Beveridge and indorsed by him in blank, and also a check for $3,076.68 to the order of Duke. These securities were receipted for by Sullivan Cromwell, as attorneys for Duke, in full settlement and release of all claims whatever. At the same time Mr. Cromwell gave his check to the defendant for the sum of $5,500, the amount of extra compensation which it was finally determined that the defendant should receive from Duke. Beveridge executed a general release to Duke and delivered the same to Mr. Cromwell, who gave the following receipt: "All differences between Brodie L. Duke and Alven Beveridge having been this day adjusted, each having received the amount of money agreed upon in settlement, and Beveridge having delivered to me a general release to Duke, I undertake to procure and deliver within ten days from date to Beveridge a general release from Duke to Beveridge. I am to hold Beveridge's release to Duke in escrow until delivery of Duke's release to Beveridge."
Duke never executed this general release and the general release of Beveridge to Duke was never delivered.
About one week after this settlement Hubbard, Price Co. rendered their account to Duke. Upon an examination of the accounts of both Beveridge and Hubbard, Price Co. by Duke he ascertained that there was a charge in Beveridge's account of 400 shares of stock as delivered to Hubbard, Price Co., which were not credited in the account of that firm. Duke could not determine which of these parties was chargeable with this stock and considered it as a dispute between Beveridge and Price and referred the matter to Mr. Price for settlement. The defendant and Price had certain negotiations, the defendant insisting that the stock had been delivered to Hubbard, Price Co. as charged in the account, and Price insisting that it had not been received and no adjustment was arrived at.
On the 12th of December, 1893, Duke made a general assignment for the benefit of creditors to the plaintiffs, and in March, 1895, this action was brought against Beveridge for the conversion of the 400 shares of stock, Mr. Price verifying the complaint as the attorney in fact of the plaintiffs.
The defendant denied the conversion, set up the accounting and the delivery of the securities by him to Duke, and the payment of the moneys by Duke to him in full settlement of all claims upon either side.
Upon the trial of the action it was claimed, upon the part of the defendant Beveridge, that this action could not be maintained without a rescission of the accounting between Duke and himself. This objection was overruled, and this seems to be the only question which it is necessary to consider in the disposition of this appeal.
It is urged upon the part of the respondents that, as the item of 400 shares of stock was not the particular subject-matter of the difference between Mr. Duke and the defendant, such accounting is not a bar to the action in question; and our attention is called to the cases of Carpenter v. Kent ( 101 N.Y. 591) and Conville v. Shook (144 id. 686). In these cases it was held that, upon the discovery of an erroneous item in an accounting, it is not necessary that the whole account should be opened and readjusted, but the mistake can be corrected and the rights of the parties adjusted as to such mistake.
But it is to be observed that in the cases cited the mistake was admitted, and the accuracy of the claim was conceded by the party proceeded against. There was no dispute but that there had been a mistake. In the case at bar, however, the claim upon the part of the defendant is that there was no mistake; that this account had been rendered containing this stock which he actually delivered to Hubbard, Price Co., and that the account containing this item was in the hands of Hubbard, Price Co., charging them with this amount of stock for days prior to the settlement; that it was in the hands of Mr. Cromwell at the time of the settlement, and that it was considered in relation to the settlement. It is true that in the settlement the only items which formed the subject-matter of the dispute were the 800 shares of stock and the $25,839.03 of compensation, and that these items were adjusted; and then the parties agreed that there was a full accord and satisfaction, Mr. Cromwell paying a balance of $5,500 to the defendant.
In consideration of this settlement the defendant gave up his claim, a considerable amount of which was conceded to have been well founded; and it is now sought to charge him in conversion as though no settlement whatever had been had between the parties. We do not understand that such an action can be maintained without a rescission. The authorities cited to support this action are cases in which there was a confessed mistake, and the claim was conceded upon the part of the defendant. In the case at bar no such concession is made. The defendant claims, as already stated, that the stock was delivered to Hubbard, Price Co., and Price had the account containing this charge for some time prior to the time of the settlement, although he says he did not examine it.
Under this condition of affairs it is difficult to see how the defendant could be deprived of his claim for the $25,839.03 and his lien upon the 800 shares of stock, and be no better off in respect to the other items of the account than if they had not been mentioned therein.
The case of Gould v. Cayuga National Bank ( 99 N.Y. 333) indicates clearly what is the remedy under such circumstances. The party may maintain his action to recover damages for the fraud if there has been fraud in the settlement; or he may maintain his action in equity for a rescission offering to return that which it would be equitable to return. If this were a case of mutual mistake, that mistake might possibly be corrected under the rule laid down in the authorities cited by the respondents. But it is sought to charge the defendant as for a fraud, to sue him as though no such settlement had never been had. This does not seem to be authorized by any of the authorities to which our attention has been called. It is suing upon an original transaction irrespective of the settlement; and the court, in the case of Gould v. Cayuga National Bank ( supra), held that this cannot be done; whereas, if an action had been brought for a fraud in the subject-matter of the compromise agreement, it might have been maintained.
Under all these circumstances it would seem that the right of the plaintiffs to recover in this form of action cannot be maintained. Either there must be a rescission, or an action in equity for rescission, or relief must be obtained in an action for damages for the fraud in the settlement.
For these reasons we think that the judgment was erroneous, and that the judgment and order appealed from should be reversed and a new trial ordered, with costs to the appellant to abide the event.
WILLIAMS, PATTERSON, O'BRIEN and INGRAHAM, JJ., concurred.
Judgment and order reversed and a new trial ordered, with costs to appellant to abide event.