Opinion
Argued November 25, 1872
Decided December 10, 1872
H.R. Selden for the appellant. W.F. Cogswell for the respondents.
The defendants derived title to the bonds in question from Van Alstyne, who took them by larceny from the possession of the plaintiff, the true owner.
They were payable to bearer, and were not over due, and the title of the defendants is protected to the same extent as would be that of the endorsee of a bill or note, transferred under the same circumstances. ( Delafield v. The State of Illinois, 2 Hill, 159; Mercer County v. Hacket, 1 Wallace, 95; Murray v. Lardner, 2 id., 110.)
The plaintiff's title was not lost by the transfer to the defendants, unless they were bona fide holders for value of the securities thus feloniously taken from his possession.
It was incumbent upon the defendants to show that they took the bonds upon some new consideration and incurred some obligation, or relinquished some existing right upon the credit of the bonds.
And if they had taken them as security for, or in nominal payment of an antecedent debt, they were not, within the decisions in this State, holders for value. ( Coddington v. Bay, 20 Johns., 645; Stalker v. McDonald, 6 Hill, 93; Barden v. Weaver, 49 N.Y., 286.)
It is conceded that the defendants took the bonds from Van Alstyne in good faith, and the only question is whether they took or held them for value within the rule of law established in this State.
The defendants on the 21st of February, 1868, contracted to purchase 2,100 shares of "Erie" stock, which was deliverable to them upon their contract on the 24th of the same month.
This purchase was made, so far as it appears, in their own names, but for Van Alstyne, and in pursuance of his directions contained in telegrams sent to them on the day of the purchase, and in which he promised to send "margin" on the same day to secure them against losses by the depreciation of the stock.
The stock so purchased by the defendants was delivered to and paid for by them on the 24th, and before such delivery and payment they received the bonds in question, which had been forwarded to them by express by Van Alstyne, part on the 21st and part on the 22d of the month.
The bonds were abstracted from the bank and taken by Van Alstyne on the 21st, but whether before or after the defendants contracted for the purchase of the stock, does not appear.
The defendants, by their contract of purchase, became bound to the vendors to pay purchase price upon delivery.
They stood in the relation of sureties as between themselves and Van Alstyne, and upon payment by them of the debt, could recover the amount paid from their principal. ( Markham v. Jaudon, 41 N.Y., 235; Story on Agency, § 335.) But as to the vendors they were bound, upon an original and independent contract, to pay the purchase-money.
The defendants acquired no lien or right to the bonds in question by anything which occurred on the 21st of February.
It need not be denied that a court of equity may, under special circumstances, enforce the performance of a contract to give to a creditor or surety, a specific lien, or to transfer a specific security, when relying upon the contract a credit has been given or a liability has been assumed.
But it would not follow that this principle could be applied so as to compel the transfer of a negotiable instrument to which the debtor had no title when the contract was made, so as to make the assignee a holder for value and overreach the title of the true owner. But we are not called upon to consider this question. The promise contained in Van Alstyne's telegram of the 21st of February was to send "margin," and referred to no specific security. His engagement would have been satisfied by sending money or other security usual in such cases. It does not appear that he had abstracted the bonds from the bank when the telegram was sent, and the defendants cannot be said to have relied upon the credit of these bonds or upon the expectation that they would receive them. They gave credit to the promise and not to the bonds, and if Van Alstyne had then owned them, the defendants could not have compelled him to transfer them. The subsequent receipt of the bonds, sent in fulfillment of the promise, did not strengthen the position of the defendants.
The reason upon which the title of a party is protected, to whom a negotiable instrument is passed in good faith and for value, although it was stolen or fraudulently put in circulation, is founded upon the possession of the instrument by the assignor, at the time of the transfer, and the implication of title arising therefrom, and the credit given upon the faith thereof. In this case the credit had been given before the receipt of the bonds. Nor did the performance by the defendants of their contract to pay for the stocks after the receipt of the bonds, make them holders for value. In making such payment, they simply performed their contract with their vendors. The obligation to make it existed before the bonds were received, and was not in any way induced or affected thereby.
By the payment Van Alstyne became their debtor, by reason of the implied promise upon which a principal is held liable to reimburse the agent for any payments or advances made in his behalf and under his authority. But the payment made by the defendants is to be referred to their contract, and not to any request, express or implied, made by Van Alstyne. The validity of their contract was assumed upon the trial. They recognized its validity by performing it, and there is no ground to infer that they performed it upon the credit of the bonds, or that they would have repudiated it, if they had not received them.
The defendants are entitled to be regarded as holders for value, in respect to any new transactions entered into, or any new liability incurred by them at the request of Van Alstyne, upon the credit of the bonds after the transfer to them And if the 400 shares of stock purchased for Van Alstyne on the 29th of February were bought by them upon the credit of the bonds, they were entitled to hold them as security for any loss arising in that transaction. But their lien was limited to the loss sustained, and the sale of the bonds beyond the amount necessary for such indemnity was a conversion for which an action can be maintained by the plaintiff. ( Waterbury v. Westervelt, 5 Seld., 598 Addison on Torts, 311.)
The judgment should be reversed and a new trial ordered, with costs to abide the event.
All concur.
Judgment reversed.