Smith v. . Frost

Miller, J. The title of the plaintiff to the bonds in controversy rests upon the prior ownership of ten bonds of the Peoria and Oquawka railroad company. This company was reorganized into the Toledo, Peoria and Wabash railroad company, and upon certain payments being made, the holders of the ten first mentioned bonds became entitled to receive the sixteen bonds of the latter company. The ten bonds had been hypothecated for a loan to one Camp, who wrongfully hypothecated said bonds to the Union Mutual insurance company for a loan to him of $5,000; and the sixteen bonds were retained by the railroad company until the ten bonds' should be surrendered under an agreement to deliver the same to the railroad company, and in the meantime it was to pay the interest to the owners. They were held in escrow awaiting the return and cancellation of the ten bonds, and belonged to the plaintiff and another person, subject to such rights as the pledgee still retained by the hypothecation of the ten bonds. The owners had paid the assessments made on the old bonds, which was required by the agreement for reorganization. The insurance company had paid nothing, refused to pay, and made no claim for the same, and whether they had a right to dispose of the same for the payment of the money loaned thereon, is not important to determine unless the defendant had a right to purchase the same. Such right depends upon the position which he occupied to the owners. If he was the agent of the owners, in reference to those bonds, or the relationship of trustee and cestui que trust existed between them, then any purchase which he might make in contravention of his duty was of no avail and inured to their benefit, and the defendant was liable to account for the same. Whether he was such agent or trustee is the main question to be determined, and *70 involves an inquiry as to the facts which bear upon that subject. The defendant was one of the trustees to buy the road for the benefit of the bondholders, under the plan for a reorganization, and for some time was its president. It may well be questioned whether under these circumstances he had a right to deal with these bonds for his individual benefit. But aside from this, there was evidence to the effect that he agreed to take the bonds and hold them in trust for the original owners. That he also paid the interest or coupons, or gave his check for the same to them. Although the testimony is conflicting in reference to the agreement referred to, yet there was sufficient evidence to justify a submission, of the question to the jury whether the defendant undertook to perform the duties of agent or trustee, and assumed to act in behalf of the owners in regard to the bonds, and to warrant the finding of the jury, that he acted as such agent or trustee. If he thus assumed to act on the behalf of the owners, he is estopped from claiming that he acted for his. own benefit. If an agent without the knowledge of his-principal assumes to act, the principal is entitled to all the benefits to be derived from such action. So also a trustee cannot profit by dealing with the property of the cestui que trust. The defendant had no right to act on his own behalf so long as he was a trustee or agent, and if he did so act, when upon demand he refused to surrender the bonds he had obtained, his act was wrongful and tortious. The fact that the new bonds were not issued until after the defendant had purchased the old bonds from the insurance company, is not important. It was enough to maintain the plaintiff’s claim that the owners were entitled to the bonds at the time of the reorganization of the company, by-payments of assessments afterwards, and by their agreement, with the company, as against the defendant; and that the defendant agreed to act on their behalf. -Nor can it be claimed that the agreement was never carried into effect, or acted upon, for as we have seen there was some evidence-tending to show that the defendant did act, and as he *71 obtained possession of the bonds, it is to be assumed that it was under the agreement, and not otherwise. If such was the fact, then the plaintiff was entitled to maintain an action to recover the value of the bonds. It is urged that the cause of action was not set forth in the complaint, which was in tort; and that a recovery was allowed on contract. The action was not on the agreement, but for the tortious act of the defendant after the agreement was made. The complaint alleged ownership of the bonds by the plaintiff, their possession by the defendant, a demand Tor their return, and a refusal of the defendant to deliver, which constituted a conversion. These allegations ' established a cause of action, and any statements in the complaint beyond this were not material. The defendant had obtained possession of the bonds while he was trustee or agent of the plaintiff, and held them as such, and when he refused to deliver them on demand, there was a conversion for which he was liable. . The case considered, bears no analogy to one where the testimony shows that there was no tortious act, as when the complaint alleges an agreement to deliver up securities, a demand therefor, and a refusal and conversion, and there is a breach of the contract merely. Austin v. Rawdon (44 1ST. Y., 63), or when the complaint alleges too much, as where an action on contract is stated, and an allegation of conversion also made, and it is held the plaintiff may recover on the contract, and the tort be disregarded. Oonaugldy v. Nichols (42 N. Y., 83.) These authorities have no application to a case where possession of property, by a trustee as such, is obtained, and there is a refusal to deliver on demand to the cestui que trust. There was no error on the trial in refusing to dismiss the complaint, in the admission of evidence, or in the submission of the case to the jury by the judge. The requests to charge which were refused were fully covered by the charge as made, and there was no valid exception in this respect. The testimony as to the value of the bonds was also sufficient to submit to the jury upon that question. The discus *72 sion had covers all the points and suggestions made which it is material to consider, and leads to the affirmance of the judgment. All concur, except Rapadlo, J., absent. Judgment affirmed.