Opinion
Argued April 13, 1920
Decided April 27, 1920
E.H. Sykes and Lawrence A. Crosby for appellants. James Jenkins and William H. Grogan for respondent.
This appeal is by permission from an order of the Appellate Division, third department affirming (two of the justices dissenting) an interlocutory judgment overruling a demurrer to the complaint. The demurrer was upon the ground that the complaint did not state facts sufficient to constitute a cause of action.
The complaint alleges, in substance, that on or about the 1st of March, 1913, one John D. Kline "as agent, partner or correspondent" of the appellants Van Buren and Day, took charge of a stock and grain brokerage office at Kingston, N.Y.; that between the date named and June 1, 1917, he took from various people a large number of orders for the purchase and sale of grain, stocks, bonds and other securities; transmitted the same to and they were received by said brokers, who had an office in the city of New York; that on the 1st of June, 1917, such brokers were carrying on margin a large number of shares of stock, were holding other shares of stock as collateral security for marginal transactions, were holding large sums of money belonging to various persons whose stocks they were carrying on margin, or had sold without orders from their principals, and without notice of the time and place of sale, all of which orders and transactions came through the Kingston office. Then follows an allegation to the effect that the appellants, on the 1st of June, 1917, had purchased and were carrying upon margin, upon orders received through the Kingston office, ten shares of the capital stock of the American Locomotive Company, for the plaintiff, of the value of $628.22, for which she had paid them, through Kline, certain charges for margins and commissions; that she never ordered the sale of such stock; never received any notice of the time and place of sale; that no demand had been made upon her for additional margins and she does not know whether the appellants still hold such stock or have sold the same and hold the proceeds for her; that prior to the commencement of the action the defendant Jenkins was appointed the general assignee of Kline for the benefit of creditors, and that statements had been rendered to him by appellants which show an indebtedness to Jenkins, as such general assignee, of $11,000; and treating Van Buren and Day as brokers for the principals in the various transactions, there is due from them to such principals, growing out of the orders received through the Kingston office, $55,000; and that by this action a multiplicity of suits to determine the rights of the plaintiff and the other persons on whose behalf the action is brought, will be avoided. The judgment demanded is that an accounting be had, to the end that it may be determined the amount of charges which Van Buren and Day have against the plaintiff and others on whose behalf the action is brought; that an apportionment and payment of such charges be made among them and the respective certificates of stock delivered to the owners thereof; that it also be determined the amount of money held by them as proceeds derived from the sale of stocks and transactions in relation to the matters set forth in the complaint, and directing payment to the persons entitled thereto.
I am of the opinion the complaint does not state a cause of action. So far as appears, Van Buren and Day are solvent and able to respond to any judgment which plaintiff may obtain against them. Indeed, it does not appear there is any dispute between plaintiff and them that they have refused to deliver the stock to her or have made any demand upon her for further payments. There is no allegation in the complaint, or any facts stated, from which an inference can be drawn, that the plaintiff and the principals for whom she is assuming to act have a community of right or interest in the subject-matter of the action, nor community of interest in the question of law and facts involved in the general controversy. The only fact common to them is that orders were taken through the Kingston office, and each transferred to the New York office by separate and distinct orders. It is obvious that to establish a cause of action against defendants on such orders, different proof will be required in each instance. A representative action cannot be maintained unless it appears from proper allegations in the complaint that the plaintiff not only has a cause of action, but that he is representative of a common or general interest of others. Unless both facts appear, a demurrer is well taken. It is, therefore, incumbent upon the plaintiff to show why an equitable action is necessary to secure her rights ( Marsh v. Kaye, 168 N.Y. 196), and that fact does not here appear.
Where the liability sought to be enforced is limited to an amount inadequate to satisfy all the claims, then an action in equity may be maintained on behalf of all the creditors, in which the fund can be applied ratably on all claims. ( Guffanti v. National Surety Co., 196 N.Y. 452.) In the instant case there is no fund to be distributed among the creditors of Van Buren and Day, except such as may be derived from judgments recovered against them, as to which no protection is required. The only thing to be reached is the personal liability of Van Buren and Day, and the presumption is that they are financially able to respond to any judgment which the plaintiff may recover. She, therefore, has an adequate remedy at law. The property which they hold for the plaintiff and the principals is not a trust fund, except in the broad sense in which it may be said that every man's property is a trust fund for the payment of his debts, but no action in equity, so far as I have been able to discover, has been maintained by a creditor at large to administer the estate of a debtor for the benefit of creditors generally. Bankruptcy proceedings are the only means to attain such an end. ( Marsh v. Kaye, supra.)
It is urged, however, that the action can be maintained to prevent a multiplicity of suits. But there is no allegation in the complaint that any of the principals for whom the plaintiff is assuming to act has brought, or threatens to bring, an action against Van Buren and Day, and if that fact appeared it would not enable the action to be maintained for the purpose stated. This is so thoroughly well settled that the citation of authorities seems hardly necessary, but see Warnock Uniform Co. v. Garifalos ( 224 N.Y. 522 ) ; Marsh v. Kaye ( 168 N.Y. 196); Dykman v. Keeney ( 154 N.Y. 483); Empire State Savings Bank of Buffalo v. Beard ( 151 N.Y. 638); O'Brien v. Fitzgerald ( 143 N.Y. 377).
The judgment appealed from, therefore, should be reversed, the question certified answered in the negative, and the demurrer sustained, with costs in all courts.
HISCOCK, Ch. J., CHASE, HOGAN, CARDOZO, CRANE and ELKUS, JJ., concur.
Judgments reversed, etc.