Summary
In Russell v. McCall (141 N.Y. 437), relied on by plaintiffs' counsel in support of his contention that payment to plaintiffs will protect defendants, the recovery was by the personal representative of a deceased partner against one who had wrongfully received firm assets from the surviving partner.
Summary of this case from Hart v. GoadbyOpinion
Argued February 7, 1894
Decided February 27, 1894
Peter A. Hendrick for appellant.
George Hoadly, Barclay E.V. McCarty and Henry L. Scheuerman for respondent.
The judgment which the plaintiff obtained in this action at Special Term is here assailed by the counsel for the defendant, Mrs. McCall, upon several grounds that will be alluded to in their order.
First. The defendant claims that the executrix of Miss Russell, by commencing her action against the surviving partner to recover the decedent's share of the partnership assets and in prosecuting the same to judgment, is barred from suing the surviving partner again, and joining with him Mrs. McCall upon the same cause of action. It is now asserted by counsel for defendant McCall that when the other action was commenced the executrix knew all the facts connecting McCall with the misuse or misappropriation of the assets of the partnership. The Special Term did not find that she was ignorant, and on the other hand it refused the defendant's request to find that she had at that time full knowledge of these facts. The General Term said that it could not be found, in view of the plaintiff's allegations in the suit against the surviving partner, that she was ignorant of his misappropriation of the assets when she commenced her suit against him and yet (the court says) in the face of such allegations in her complaint the plaintiff took a personal judgment against the survivor for the value of her share therein, the result of which the court holds was to bar the plaintiff from impeaching the title of any one who came into possession of the assets through the surviving partner. Whichever way the fact might be determined we think it is immaterial in this case, and for the further discussion of this point we will assume full knowledge on the part of the executrix of all the facts at the time she commenced her action against the survivor. In that case we think there was no election of inconsistent remedies such as should bar this action.
Upon the death of Miss Russell, the surviving partner, Moschcowitz, had certain powers, rights and obligations granted to and placed upon him by reason of such death. He had the legal title to the assets and he held them as the legal owner, and not as trustee, in the strict sense of that term. In equity, however, he was to be regarded to some extent as a trustee, and his duty was to pay the debts and dispose of the assets of the partnership for the benefit of himself and the estate of the deceased partner. ( Case v. Abeel, 1 Pai. 393; Williams v. Whedon, 109 N.Y. 333; Preston v. Fitch, 137 id. 41, 56.) The position is somewhat anomalous, not exactly and wholly a trustee, and yet not a full owner of the assets which he takes or retains possession of by reason of survivorship. The duties spoken of he owes the estate of the deceased partner, and when, instead of gathering in the assets, paying the debts, winding up the business and distributing the surplus, he misappropriates the same and converts them to his own use and that of others with him, he is so far guilty of a breach of trust that a court of equity will, when called upon, intervene and give appropriate relief.
This was the object of the first action. The court was asked to decree an accounting, and as a ground for the request it was alleged that the defendant was violating his duty, converting the assets to his own use in his own business and failing to apply them to the payment of the debts of the partnership. Judgment was asked for the amount which might be found due upon such accounting. In all this there was nothing inconsistent with the cause of action set forth in the complaint now under review. Even in equitable actions of account, it frequently, if not generally, results that a pure and simple money judgment will be entered against the defendant. The inquiry by means of an account is proceeded with and the result being determined, if it show an amount due the plaintiff, a judgment therefor may properly be entered. (1 Pom. Eq. Jur., third clause, § 110; Id. § 140; 3 Id. § 1421.) But this kind of a judgment is not in the least inconsistent with the the right to pursue other wrongdoers who, by intermeddling with the property and assets of the estate, have rendered themselves liable as trustees de son tort for the wrong done. (1 Perry on Trusts, § 245; Flockton v. Bunning, cited in note to Vyse v. Foster, L.R. [8 Ch. App.] 309 at 323; Lindley on Part. 531.)
The survivor of the partnership did not become the full and absolute owner of its assets upon the entry of the personal judgment against him, nor was there any election on the part of the plaintiff by reason of that fact to look only to the one wrongdoer when there were others equally liable. If the personal judgment were paid, then indeed the plaintiff's rights and equities in the property would be changed and he would be precluded from any further claim upon it. Until satisfaction of that judgment, however, the plaintiff could not be barred from further efforts to obtain relief against other wrongdoers. Even in an action of trover for the conversion of a chattel, a judgment unsatisfied does not change the title to the property and is no bar to an action against any one of the other wrongdoers. ( Osterhout v. Roberts, 8 Cow. 43; Sessions v. Johnson, 95 U.S. 347, 349.) And by subsequently suing other wrongdoers who had wrongfully interfered with the property, it is not a following of trust funds into other property in which they have been invested, within the rule on that subject as claimed by defendant's counsel and of which Ferris v. Van Vechten ( 73 N.Y. 113) is an example. There is no inconsistency in holding the trustee personally responsible, and also pursuing other wrongdoers and seeking relief against them as trustees de son tort by way of damages for the same wrong.
It is true that one cannot recover the purchase price of land and the land too. If one choose to hold his trustee for the amount of the price he received for trust property wrongfully sold, it may well be that the plaintiff thereby affirms the sale and seeks to recover the price. This is no such case. The plaintiff does not seek to hold the property which has been substituted in place of trust funds and to hold the trustee also. There has been no substitution of trust property, but the funds themselves have been converted by the survivor and others to their own use, and the plaintiff asks to recover damages for that wrong. Because the survivor was proceeded against alone, and a personal judgment recovered against him which has not been satisfied, furnishes no evidence of an election of inconsistent remedies to the extent of freeing the other wrongdoers from the consequences of their wrong.
The cases cited by defendant's counsel, of which Fowler v. Bowery Savings Bank ( 113 N.Y. 450) and Terry v. Munger (121 id. 161) are examples, are not in point. In the former action the plaintiff, by commencing his action against the person to whom the defendant bank had paid the money, affirmed the validity of the payment and sought to recover its amount from him. After failing to recover the amount on a judgment entered against him, the plaintiff then commenced his action against the bank and sought to recover from it on the ground that the bank had never made a valid payment of its debt. We held the plaintiff had made an election to consider the payment made by the bank to the third person as a valid payment of such debt so far as the bank was concerned, and the plaintiff ratified it by commencing the suit.
In Terry v. Munger the owner of the property elected to treat its conversion as a sale and commenced his action accordingly. It was held he could not thereafter commence an action against others in which his cause of action was founded upon the conversion instead of the sale of the same property upon the same occasion and in the same transaction. In all the cases cited there is an element of inconsistency involved in which the plaintiff seeks to occupy with reference to the same transaction and upon the same facts, a position which is antagonistic with one already taken by him. I can see none such in this case. He took no position, proved no fact, asked for no relief in the first case which is in any way inconsistent with the position he now assumes, unless it be said that the recovery of the personal judgment has effected this great change. For the reasons already given, I do not think it has.
The failure to have a receiver appointed in the first suit is, as it seems to me, immaterial. The point is that no absolute right to these assets, freed from any duty with regard to them, was ever transferred to the surviving partner by reason of the mere entry of this personal judgment so long as it remained unsatisfied. Nor are the other defendants absolved by any such reason from answering to the plaintiff for what would otherwise be a conceded wrong. No cause of action against them for such a wrong was waived or in any wise affected by the plaintiff's effort to recover the value of the assets which the survivor had misappropriated, or shared with others in misappropriating. It was simply a separate proceeding against one wrongdoer, and no satisfaction.
In this case the survivor has in fact never transferred the assets to others. He has simply shared with others in the misappropriation of the firm assets, and I can see no principle upon which a proceeding against one of the wrongdoers should be regarded as an election to dismiss the others from all liability arising out of the same wrong. Under these circumstances the defendant can obtain no consolation from the entry of that judgment.
Second. The defendant also objects that the plaintiff's right of action was merged in the judgment recovered against the surviving partner.
Where there is a joint indebtedness (not a joint and several) a judgment recovered against one of two or more joint debtors merges the original debt in the higher security of the judgment, and no action can thereafter be maintained against any of the other defendants, even though no satisfaction is received of the judgment against the one debtor. ( King v. Hoare, 13 M. W. 494; Olmstead v. Webster, 8 N.Y. 413; Candee v. Smith, 93 id. 349, 352, and cases cited; Mason v. Eldred, 6 Wall. 231.) But a judgment against one wrongdoer unsatisfied is not a bar to the maintenance of an action against the others. ( Livingston v. Bishop, 1 Johns. 290; Osterhout v. Roberts, 8 Cow. 43; Lovejoy v. Murray, 3 Wall. 1, where Mr. Justice MILLER reviews the cases; Sessions v. Johnson, 95 U.S. 347, 348.) By taking judgment against the survivor the plaintiff did not make the partnership assets the absolute property of the survivor free from any duty on his part regarding them. Nor did he thereby vest in such survivor a legal right to convert those assets and apply them to his own use, or to transfer them to a mere volunteer free from all liability to the estate of the deceased partner. Until the judgment against the surviving partner was satisfied he took no further or greater right to the assets than he had before. Of course, as survivor and originally he could sell or mortgage them or otherwise dispose of them for the purpose of paying the debts and winding up the affairs of the partnership and making distribution of the surplus, but I think the entry of the judgment gave him no greater rights over the assets of the partnership than he had before. Satisfaction of the judgment was necessary for that result.
Third. The defendant also objects that even if the parties were all wrongdoers in such manner as to render them jointly and severally liable, then the judgment against Schamu M. Moschcowitz, one of the wrongdoers, is a bar to an action against all of them, on the ground that pursuing one of the parties severally is an election to sever the joint liability, and it cannot be revived. Counsel cites Sessions v. Johnson ( 95 U.S. 347); Daniel on Negotiable Instrmts. (sec. 1296), and Story on Bills (sec. 428), as authority for his contention, and he urges that this is a matter which the party who has not before been sued can take advantage of, because the plaintiff has elected a different remedy which operates as a general bar to the maintenance of the action.
The principle claimed is applied in the two above-cited works upon negotiable paper to contracts of a joint and several nature, while in the case of Sessions v. Johnson ( supra) the court, in deciding another matter, asserts the principle that a party who sued any one of several wrongdoers and had judgment could not afterwards seek his remedy in a joint action against all, because the prior judgment against one was in contemplation of law an election on his part to pursue his several remedy. Where there is a joint and several contract it is held that the plaintiff may sue jointly or severally, but he cannot do both, and the pendency of one suit may be pleaded in abatement of the other. In such case there is, it is said, an election as to which character of the expressed contractual obligation the party will enforce. ( Ex parte Rolandson, 3 P. Wms. 405; 5 Robinson's Prac. 823.) In the P. Williams case above cited it is stated in a note (page 405) that if three are bound jointly and severally the obligee cannot sue two of them jointly, for this is suing them neither jointly nor severally. In regard to the liabilities of joint and several tort feasors the law is not so clear. I think there is a radical difference in principle between a joint and several obligation evidenced by an expressed contract or arising by implication from the facts proved, and a joint and several liability on the part of several tort feasors. A joint and several obligation based on a note, bond or other written contract, or one arising out of an implied contract, is a well-known kind of obligation, and its legal meaning has come to be that each one is liable to a separate suit, or that all are liable to a joint suit, and in no other way can they be held. This is known as part of the obligation they entered into. But a joint and several liability, arising out of a particular wrong having been done the plaintiff by several wrongdoers, is not so precisely limited. Thus, Cooley says that in such case more than one and less than all may be sued. (Cooley on Torts, 133.) And in suing less than all it is not an election to take one of two remedies which the defendants have by their contract consented to give the plaintiff his choice of, but have not consented to give both. It is the pursuit of certain of the wrongdoers who are in any event liable, and if unsuccessful in obtaining satisfaction the right remains to pursue others, although in each case the defendants chosen may have been more than one and less than all the wrongdoers, and so the remedy may have been strictly neither joint nor several, as that term is applied to cases of joint and several contractors. Hence, when, subsequent to the first action, the plaintiff commences one against all of the wrongdoers, he has not lost the right to maintain it by reason of an election to waive such a remedy, but he has lost it only as against those whom he has already sued, and he has lost it in their case only for the reason that he has no right to vex them twice for the same cause of action. The parties who have not been already sued cannot take advantage of this ground as a defense on their part. As to them the plaintiff has made no election of remedies and their liability remains unaffected.
I think the objection to maintaining the joint action ought to be held personal to the one who has already been sued and against whom judgment has already been obtained. His objection is pertinent, he has once already been proceeded against and judgment has gone against him, and he ought not to be again vexed for the same cause. I have found no case where the objection has been made and allowed in favor of a defendant who had not before been sued. I see no reason why it should be. He has not been harmed in any conceivable way, nor his interests or defenses in the least degree jeopardized.
In this case the trial resulted in a judgment against the defendant McCall only, who was not before sued. The trial court refused to give a further judgment against the survivor in the partnership. It was in effect the same as if there had been a discontinuance as against that defendant. I do not understand the defendant to question the proposition that a plaintiff can pursue the several wrongdoers separately, although while obtaining several judgments he can have but one satisfaction. So here, if he had pursued McCall alone subsequent to the judgment against the survivor, such action, so far as this point is concerned, could be maintained. The course pursued is the same as a discontinuance, and I think that would be, in effect, the same as if the action had not been brought against the party in regard to whom a discontinuance was entered. That McCall, by taking this property and applying it, with the surviving partner, to his own uses, with knowledge of its character and without paying any consideration therefor, can be properly treated as a wrongdoer and trustee de son tort, and be made liable in an equitable action for his acts, is, as it seems to me, undoubted. ( Vyse v. Foster, L.R. [8 Chy. App.] 309, 323; Flockton v. Bunning, note to above case, at page 323; Perry on Trusts, § 245; Hooley v. Cleve, 9 Abb. N.C. 8; In re Jordan, 2 Federal R. 319; 2 Pom. Eq. Jur. 1079.) Although the party sued the second time in this action did, by his answer, take the objection that no further judgment ought to be entered against him, yet as none was entered he has no further cause of complaint, and he took no appeal from the judgment that was entered herein against McCall. As to McCall, we think the judgment was a proper one, so far as this point is concerned.
Fourth. The objection that plaintiff is only entitled, in any event, to recover the balance over and above the amount which was ordered to be deposited by the court in the other action to meet the possible claim of Herman Moschcowitz, and which balance is only about $300, cannot prevail. Herman is a party to this suit, and it has been found that in no event is the estate of McCall liable to him for any portion of his claim against the old firm, and Herman has not appealed. That amount cannot be properly deducted from the amount of McCall's liability for the value of the share of the estate of the deceased partner which came into the hands of the firm, and was converted to his use. Each one of several wrongdoers is liable for the full amount of the conversion or misappropriation. ( Atty.-Genl. v. Wilson, 1 Cr. Ph. 1; Cunningham v. Pell, 5 Pai. 607; 2 Pom. Eq. Jur., note at end of section 1081.)
By this judgment there is no danger of the defendant's estate being made liable to pay a second time. McCall's estate stands in no position as surety for any creditors of the original firm. It is found that the estate of McCall owes a certain sum to plaintiff as payment for one-half the assets of the old firm for which the estate is liable. Whether plaintiff, as administrator, will have to pay anything by way of satisfaction of the debts of the old firm will be known hereafter when Herman endeavors to prove his claim. McCall's estate has no interest in that question, nor has it any in the question whether the individual creditors of Miss Russell, the deceased partner, will be able to obtain payment out of the assets that are to be paid over under this judgment before a creditor of the partnership will be able to do so. These various creditors will enforce what rights they have without any aid from McCall's estate as a volunteer on that subject. It is not to be assumed that any improper or undue preference will be obtained by any one after the McCall estate has made its payment to the plaintiff. A payment under this judgment will protect all the rights of the estate. And, lastly, there are no debts left excepting the claim of Herman, which is disputed.
If this judgment is paid it will satisfy the judgment against Schamu M. Moschcowitz, obtained by this plaintiff, and if that judgment should be paid, it will satisfy this one as to principal and everything but costs. There is no difficulty in providing for but one payment and a satisfaction of both judgments thereby.
Fifth. The judgment against the surviving partner was not used as evidence against the McCall defendant as to the amount or value of the assets converted. The learned judge held it was conclusive against the plaintiff, but that it was no evidence against defendant as to what the value of the property was, and he said that upon the evidence in the case outside of the judgment he thought the value was greater than had been allowed in the former suit, yet he held the defendant only liable for that amount.
Sixth. There is nothing in this case showing any following of any trust funds or any lien upon their proceeds. If there had been any such, it would in such an action have been to the benefit of the defendant by lessening the amount of a recovery against it by just the amount of the funds identified and obtained. But as to the $7,000 deposited by the receiver of Moschcowitz Brothers in the trust company, it appears the expenses were more than enough to eat them up and no judgment for their payment has been recovered.
Seventh. Nor is the fact that Herman Moschcowitz claims to be a creditor of the old firm while he is one of the defendants charged with this conversion of assets, an answer to the plaintiff's demand. Herman could not by his illegal interference with these assets, pay his debt, nor had he the right to take possession of the property for that purpose. When the surviving partner violated his duty and was one of the parties that converted the assets of the partnership to his own use, so that judgment was recovered against him for the amount of one-half of the assets after he had deposited in the trust company by the direction of the judgment all that was necessary to meet all the debts of the firm, his further rights as surviving partner ceased. There are no other debts. If, being insolvent, or for any other reason, he has failed to make the deposit as directed by the judgment, he did not after the judgment was entered have the right to demand from defendant McCall any portion of the money which the latter was liable to pay to plaintiff on account of his own wrong in converting the assets of the partnership in connection with the surviving partner. The only debt outstanding is the Herman Moschcowitz claim, which is disputed and which does not appear to be prosecuted as if it had much merit. And it must be upon these facts that the rights of the parties are to be adjudged.
Eighth. The defendant also contends that the plaintiff's complaint should have been dismissed on the ground of inexcusable laches in bringing the action. The litigation arising out of the attempt to make the surviving partner responsible for his misconduct was not concluded until the entry of the modified judgment of the General Term late in the year 1886, and a short time thereafter the plaintiff probably discovered the ineffectual character of his attempt at redress in that direction. Early in the year 1888 this action was commenced. We think the record discloses reasonable cause for the delay in bringing this action, and the plaintiff is not within the principle regarding stale claims invoked by defendant.
Ninth. We think the trial judge committed no error in practice when, under the circumstances, instead of entering an interlocutory judgment and sending it to a referee to inquire whether there was anything left of the $7,000 paid by the receiver over and above the expenses consequent upon its collection, etc., he took the evidence upon that point himself and ordered final judgment in accordance therewith to be entered.
These are the principal grounds urged by respondent for an affirmance of the order of the General Term. It is unnecessary to more fully mention the other points, and it is enough to say we do not think them sufficient to reverse the Special Term judgment.
We have given this case and the very able argument of the counsel for the defendant all the consideration possible, but for the reasons stated we are unable to agree with the conclusion arrived at by the General Term. We think on the contrary the learned judge at Special Term arrived at the correct result, and, therefore, the order of the General Term must be reversed and the judgment of Special Term affirmed, with costs in the General Term and in this court to the appellant here.
All concur.
Ordered accordingly.