Donovan v. Cornell.

Horace Secor, Jr. (John T. Cornell, attorney), for defendant, appellant.

It has been repeatedly held by the court of appeals, that an agent or person acting in a fiduciary capacity is not subject to an action for tort, for not paying over money due; and in an action against him for not paying over a balance due, the plaintiff does not, by alleging that the defendant has converted the money to his own use, convert the action into one for tort; that allegation is mere surplusage, and the action is ex contractu. Therefore, the cause of action is not identical with the ground of arrest. Segelken v. Meyer, 5 N. Y. Civ. Pro. 1; Greentree v. Rosenstock, 61 N. Y. 583; Prouty v. Swift, 51 Zb. 594; Wood v. Henry, 40 Ib. 124. The allegation in the complaint as to the alleged fiduciary capacity in which defendant acted, is not traversable, and does not constitute any part of the cause of action. (See cases above cited.) Cited to support claim, that the parties were mere debtor and creditor, and the defendant, therefore, not liable to arrest. Wallace v. Castle, 14 Hun, 106; Duguid v. Edwards, 50 Barb. 300, 301; Morange v. Waldron, 6 Hun, 529; Robbins v. Falconer, 43 N. Y. Super. Ct. (11 J. & S.) 363; Alliance Ins. Co. v. Cleveland, 14 How. Pr. 408; Grover & Baker S. M. Co. v. Clinton, 5 Bissell (U. S. Circ. Ct.) 324; Woolsey v. Cade, 15 Natl. Bkcy. Reg. 238; Ownsley v. Cobin, 15 Id. 489. The order is, of course, appealable. Code of Civil Procedure, § 3191, subd. 3, as amended by L. of 1882, chap. 399.

Joseph C. Wolff, for plaintiff, respondent.

The defendant acted in a fiduciary capacity, and was liable to arrest. Holbrook v. Homer, 6 How. Pr. 86; Turner v. Thompson, 2 Abb. Pr. 444; Frost v. McCarger, 14 How. Pr. 131; Schudder o. Shiells, 17 Id. 420; Ostell v. Brough, 24 Id. 274; Barret v. Gracie, 34

Donovan v. Cornell.

Barb. 20; Duguid v. Edwards, 50 Id. 288; German Bank v. Edwards, 53 N. Y. 541; Kelly v. Scripture, 9 Hun, 283; Trunninger v. Busch, 7 Daly, 124; Wallace v. Castle, 14 Hun, 106; King v. Arnold, 84 N. Y. 668, more fully reported in 12 N. Y. Weekly Dig. 30. The cause of action and the grounds of arrest are the same. In such cases the court will not vacate the order of arrest on motion. Republic of Mexico v. Arrangois, 5 Duer, 634: Geller v. Seixas, 4 Abb. Pr. 103; Barret v. Grace, 34 Barb. 20; Frost v. McCarger, 14 How. Pr. 131; Levins v. Noble, 15 Abb. Pr. 475; Lorillard Fire Ins. Co. v. Meshural, 7 Robt. 308; Swift v. Wylie, 5 Id. 680; Gibbs v. Hichborn, 12 Hun, 480; Merritt v. Heckscher, 50 Barb. 451. The granting or denying of the motion to vacate the order of arrest, rested in the discretion of the city court, and the order is not reviewable in the common pleas. Clarke v. Lowrie, 82 N. Y. 580, and cases there cited.

[']

J. F. DALY, J.-The complaint alleged a cause of action upon contract. The allegation of conversion of the proceeds of sale was mere surplusage. On the trial such allegation will be disregarded and plaintiff allowed to recover upon contract (Conaughty v. Nichols, 42 N. Y. 83). Even if the complaint alleged that the defendant received the proceeds in a fiduciary capacity, no proof of that allegation would be essential to plaintiff's recovery; a ground of arrest, based upon a claim that defendant acted in a fiduciary capacity, is extrinsic to the cause of action. It is not necessary to make such an allegation in the complaint, in order to sustain an order of arrest. Where such allegation is contained in the complaint, but no order of arrest has been granted, the defendant would not be subject to execution against the person (Segelken v. Meyer, 5 N. Y. Civ. Pro. 1).

[2]

It follows from this authority that the cause of

Donovan v. Cornell.

action here and the cause of arrest are not identical, and that the jury, upon the trial of this action, will not have to pass upon the questions which are involved in the arrest of defendant. It was the duty of the court to decide upon the pleadings and affidavits whether the relation between plaintiff and defendant was one of personal trust and confidence in the latter, or that of consignee and commission merchant as alleged in the answer (Fuentes v. Mayorga, 7 Daly, 103). And see on this subject Merrill v. Thomas, Id. 395; Clark v. Pinkney, 50 Barb. 226; Duguid v. Edwards, 50 Id. 288; Sutton v. DeCamp, 4 Abb. Pr. N. S. 483; Stoll v. King, 8 How. Pr. 298.

The city court did not examine the question presented by the affidavits in the light of this duty, but referred it to the jury on the trial. This is the express decision of the special term; and the general term, while it does state that "assuming that the order of arrest was granted on extrinsic facts, we are of opinion that the justice was correct in refusing to vacate," finally concludes that, for those reasons and "upon the ground stated in the opinion of the court at special term," the order must be affirmed.* This puts the

* The opinion of the special term of the city court (filed May 22, 1885), is as follows:

MCADAM, C. J.-The complaint alleges that the plaintiff delivered to the defendant, as a commission merchant, one hundred and seventy-seven sheep and lambs, to be sold for cash, the proceeds, after deducting commissions, to be returned to the plaintiff; that the defendant sold said sheep and lambs for $724.38, which he received, and that after deducting his commissions, which amounted to $35.40 there remains due to the plaintiff $688.95, which the defendant refused to pay over on demand, and that he converted the same to his own use.

These facts allege a fiduciary relation, a term which implies the idea of a trust, confidence, that is, where a trust is reposed and confidence given. The facts charged in the plaintiffs' complaint and affidavit, therefore, established a case in which, according to the

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Donovan v. Cornell.

affirmance upon the ground that in the language of

the special term opinion "The jury will be called [] upon to weigh and determine when the cause is

tried" the question of right to arrest, "which authorities, the defendant is liable to the arrest (Duguid v. Edwards, 50 Barb. 288; Schudder v. Shields, 17 How. Pr. 420). If, on the other hand, the defendant sold upon a del credere commission, the defendant was authorized to mingle the money collected with his own, and became only a general debtor to the plaintiff for the amount due (Sutton v. De Camp, 4 Abb. N. S. 484).

If the custom pleaded by the defendant in his answer exists, and was known to and acquiesced in by the plaintiff, the defendant had the implied right to mingle the money collected with his own, had the right to use it in the conduct of his business as a factor and commission merchant, and became a general debtor only to the amount of the sales. This perhaps was the arrangement between the parties hereto, for the payments to the plaintiff were made by checks of the defendant drawn against the bank account of the defendant, in which his funds were indiscriminately mingled, checks were given for the amount of the sales, whether the defendant had realized from them or not. While this circumstance is not controlling (Dugoid v. Edwards, 50 Barb. 292), it, with the general course of dealing between the parties, may have created between them the ordinary relation of debtor and creditor.

The test sometimes applied, is whether the specific moueys ought to have been kept and paid over, or whether the agent had the right, under the agreement of the parties, to use the money and mingle it with his own (See Grover & Baker S. M. Co. v. Clinton, 5 Biss. [ U. S. Circ. Ct.] 324; Woolsey v. Cade, 15 Nat. Bktcy. Reg. 238; Ownsley v. Cobin, 15 Id. 489). In conversion this is essent ally so (Morange v. Waldron, Hun, 529; Greentree v. Rosenstock, 61 N. Y. 583; Wood v. Henry, 40 Id. 124; Walter v. Bennett, 16 Id. 250; Harris v. Schultz, 40 Barb. 318), for conversion will not lie except for specific moneys, and not where the defendant may redeem himself by returning an equal amount of money (ABBOTT, C. J., in Ottom . Butler, 5 Barn. & Ald. [Eng. K. B.] 652). But I do not regard the present as an action for conversion, the use of that term in the present instance is mere surplusage. The action is to recover for money collected in a fiduciary capacity, and the question of preserving the identity of the money by deposit in trust or the like is important only as bearing on the question whether or not the plaintiff assented that it might be indiscriminately mixed with other funds of the

Donovan v. Cornell.

cannot be intelligently decided in the present instance in advance of the trial." Under the decision in Segelken v. Meyer, above cited, this view appears to be

defendant's for use in his business, and in that way establish that the ordinary relations of debtor and creditor between the parties were created. In the one case, the agent receives the money on a special trust to pay it over to his principal. The principal confided in the man and the nature of the trust, rather than in the pecuniary ability of the agent to pay. In the other, the principal is supposed to have reposed confidence in the honesty and pecuniary ability of the agent to make good his account (Stroll . King, 8 How. Pr. 298). The defendant undoubtedly became indebted to the plaintiff in the amount of the sales, but whether the mere deposit of the money collected with other moneys of the defendant, or the use of the proceeds of the sale in the defendant's business, can be called a misappropriation or conversion of the money, depends, as before remarked, upon whether the course of dealing between the parties countenanced and justified such application of the proceeds. The form of action, which is of some moment to the defendant, depends upon nice distinctions therefore to be drawn from the facts.

In order to apply the rule contended for by the defendant, it must affirmatively be made to appear that the plaintiff knew of and assented to the intermingling of the proceeds of sale by the defendant with money of his own, to be used in the defendant's business, so as to imply a credit to the defendant on his financial ability to pay, for as was said by the court in Duguid v. Edwards (50 Barb., at p. 501): "The right to arrest the factor for not paying over the proceeds of property placed in his hands to be sold for his principal, is one of the safeguards the law has provided for the protection of the confiding. . . . . . And the factor should not be allowed to evade or avoid it without satisfactorily showing that it was the clear understanding of the principal that he was to act for him in some different capacity, which necessarily conferred the right of making use of the principal's moneys if the convenience of his own business required him to do so."

The question, which is a close one, is therefore reduced to one of understanding and intent, evidenced by knowledge and circumstances which the jury will be called upon to weigh and determine when the cause is tried, and which cannot be intelligently decided in the present instance in advance of the trial.

Under these circumstances, I will not anticipate the finding of the