Moffatt v. . Fulton

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 509 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 510 The Code provides that a defendant may be arrested in certain actions and, among others, in an action *Page 513 brought to recover damages for "a personal injury; an injury to property, including the wrongful taking, detention or conversion of personal property; a breach of promise to marry; misconduct or neglect in office or in professional employment; fraud or deceit; or to recover a chattel, where it is alleged in the complaint that the chattel has been concealed" in a certain manner and with a certain intent; "or to recover for money received, or to recover property, or damages for the conversion or misapplication of property, when it is alleged in the complaint that the money was received, or the property was embezzled, or fraudulently misapplied by a * * * factor, agent, broker, or other person in a fiduciary capacity. Where such allegation is made, the plaintiff cannot recover unless he proves the same on the trial of the action." (Code Civ. Pro. § 549.) The General Term based its judgment of reversal upon the ground that there was no express averment in the complaint that the money in question was received by the defendants in a fiduciary capacity, although one of the learned judges dissented from that conclusion. (Moffatt v. Fulton, 56 Hun, 337.) No such point, however, was taken at the Circuit. The sufficiency of the complaint was not questioned upon the trial, except by a motion to dismiss, made before any evidence was given upon the ground that the first count did "not contain facts sufficient to constitute a cause of action, and particularly, that it did not set forth facts constituting an action in tort;" that the second count did "not set forth facts constituting a cause of action either in tort or on contract;" and that the complaint united "an alleged cause of action proceeding upon the theory of tort, with one proceeding on the theory of contract." The motion at the close of the evidence was not based upon the facts alleged, but on "the facts proved." Even, therefore, if it was necessary to specifically allege that the money was received by the defendants, as agents, in a fiduciary capacity, advantage could not be taken of the omission for the first time upon appeal. (Lounsbury v. Purdy, 18 N.Y. 515; Cowing v. Altman, 79 id. 167; Knapp v. *Page 514 Simon, 96 id. 284.) If the point had been raised, a formal amendment might have been allowed. But, assuming that the question was properly raised, we do not think that it called for a reversal of the judgment rendered by the trial court, because it is sufficient to set forth the facts showing that the money was received in a fiduciary capacity, without copying the words of the statute, which would be pleading a mere conclusion of law. It was clearly the intention of the legislature by its last amendment of section 549, to require a plaintiff, intending to arrest the defendant, to predicate his action upon some ground of wrongdoing mentioned in the statute, as a substantive part of the cause of action, so that he could defend himself before a jury and recover costs if such defense was successful. (L. 1886, ch. 672; Code Civ. Pro. § 549.) The statute does not direct the plaintiff to state in his complaint that he claims the right to arrest the defendant. Such a statement in order to be effective as a notice would have to appear in the summons rather than the complaint, as the former must, while the latter need not be, personally served. No change was made where the right to arrest depended on the nature of the action, as in the case of fraud, deceit, conversion and injuries to person or property. The right of arrest, however, as it had previously existed, in so far as it depended upon extrinsic facts, that is upon facts not appearing in the complaint, was changed, except as provided in section 550, which is a substitute for the old writ of ne exeat, not by abolishing the right of arrest, but by requiring the facts which theretofore had been stated in part outside of the complaint, to be stated in it, as a part of the cause of action. The practice was thus made uniform, so that the complaint must now set forth the facts upon which the right to arrest depends in all cases, with the single exception aforesaid, just as formerly it was required in a majority of cases. The amendment as we construe it, introduced no new rule of pleading into the Code. It did not authorize the pleader to allege a conclusion of law instead of the "plain and concise statement of the facts." *Page 515 required by section 481. It changed the nature of certain causes of action somewhat, by requiring facts to be alleged and proved in addition to those previously required to be alleged or proved, in order to recover. If, therefore, the complaint under consideration sets forth facts showing that the defendant, as agent, received the proceeds of the two notes, in a fiduciary capacity, and converted them to his own use, it is sufficient, without characterizing those facts or repeating the language of the statute. The facts, as alleged, were, in substance, that the plaintiff entrusted his two notes to the defendants, as his agents, to return one with certain explanations and to procure the other to be discounted and forthwith remit the net proceeds to him. Exceeding their authority as to one note, they procured both to be discounted, received the proceeds, refused to pay them over on demand and converted them to their own use. The facts as proved were substantially the same, except that the defendants were authorized to procure the discount of either note and to return the other, with the net proceeds of the one discounted. The notes belonged to the plaintiff, and when they were discounted the proceeds belonged to him. The defendants had no right to either, except as the agents of the plaintiff. Agency is a fiduciary relation. It exists by virtue of the fiducia, or faith reposed, as where one man, confiding in another, entrusts his property to him for a particular purpose, and in the belief that he will in good faith use it for no other purpose. Property thus received is received in a fiduciary capacity, and when the property is turned into money, that is also received in a fiduciary capacity. It does not belong to the agent, who can lawfully exercise no power or authority over it, except for the benefit of his principal, and only as authorized by him. If the agent uses it for his own purposes, or fails to pay it over upon a seasonable demand duly made, it is a conversion of that which does not belong to him. The capacity in which the defendants received the notes was fiduciary in character, because it depended upon trust and confidence reposed in them by the plaintiff, as his agents. (Goodrich v. Dunbar, 17 Barb. 644, 646; Republic of *Page 516 Mexico v. De Arangoiz, 5 Duer, 640; Wolfe v. Brouwer, 5 Robt. 601.) He trusted them to handle his property as he directed, and they agreed. After they had received the money on the notes, they had no right to keep it, or even to pay it out on his account, but it was their duty to at once pay it over to him. They received it in trust for him, and the refusal to pay it over was not a refusal to pay a debt, but to deliver that which belonged to him. Under the circumstances this was not a mere "act of omission," but "an act of misfeasance." The transaction was isolated and independent of any custom or course of dealing. The complaint alleges that the proceeds of the first note "were received by him in trust to pay the same to the plaintiff forthwith," and that the second note was delivered to him "in trust to indorse and discount or sell the same for cash, and forthwith to pay the proceeds thereof to the plaintiff." When it is a necessary inference from the facts alleged that the money was received in a fiduciary capacity, the statute does not require that they should be labeled with that name. Since there was no agreement as to the method of transmitting the proceeds, the expectation of the plaintiff that the defendants would deposit them in their bank account and remit by check, is not important. They did not attempt to remit in any way. While some parts of the judgment as rendered by the trial court may be subject to criticism, we have not alluded to them, because only the part that was stricken out on appeal is before us for review. After examining the exceptions to which our attention has been called, we think that the judgment of the General Term, in so far as it modified the judgment of the Circuit, should be reversed, with costs.