Lawyers' Title Insurance & Trust Co. v. Jones

Laughlin, J.: This is' an action, against a firm of stockbrokers to recover $35,213.13, exacted by them as a condition of returning certain corporate bonds which had been stolen from tile plaintiff. It is" alleged in the complaint that the bonds'were stolen by one Thomas G. Wylie, án employee of the owner of some of- the bonds and the 'custodian of the others, and delivered to the brokerage, firm of Willard"H. Jones & Go., to whose rights and liabilities the defendants have, succeeded, “ to be held as collateral security for the pay-' . jnent of any sums of money that might be or becopie due to sáid' firm upon open account between the said firm and the said Thomas G. Wylie*” T'íie plaintiff sufficiently alleges facts showing its right to the possession of the bonds, and. also alleges that the defendants wrongfully refused to return- the bonds except upon payment of the amount, for which recoveiy. is demanded,- which the plaintiff paid, believing that the defendants’ predecessors “ believed Wylie ■to be the. rightful o,wrier of said bonds and to have the legal right thereto and.the legal'right to deliver” the bonds to.them, and believing that the. defendants’ predecessors “ received said bonds as innocent purchasers for. value.”; There is no allegation that the defendants made any representation to the plaintiff which justified or .gave rise to this belief .on its part, nor is there any allegation that said Wylie did not owe the defendants- upon open account .for' credit -extended On the security of the bonds the amoimt which .the plaintiff was obliged to pay the defendants ás a condition of recovering possession of the bonds, or that they were not accepted in payment and cancellation of an antecedent debt "which would- make them bona fide holders for value. (Sutherland v. Mead, 80 App. Div. 103 ; Citizens' State Bank v. Cowles, 180 N. Y. 346) The only allegations tending to impeach the right of the defendants to hold the bonds as security are, that their predecessors, “ at the time they so received the said [107] bonds, and from time to time thereafter, they learned facts concerning the sai(J Wylie and ins connection with ” the plaintiff “ from which they knew or could have ascei'tained, and were bound to ascertain by inquiry from ” the plaintiff “ that the said Thomas Gr. Wylie was not the rightful owner of the said bonds and had no legal right to the same, and had no legal.right to deliver the same to them,” and that the plaintiff paid the money demanded by the defendants in ignorance^ of the fact that the defendants’ predecessors “ at the time of receiving said bonds had knowledge of facts from which they knew or should have known that Wylie was not at that time the rightful owner of said bonds.” The bonds in question were negotiable instruments, and the holders thereof were entitled to all the protection accorded the purchasers or pledgees of other commercial paper. The plaintiff, without any fraudulent or other misrepresentation on the part of the defendants, apparently accepted their statement as to the amount for which they held the bonds as security, and paid the same without questioning their right thereto. The action to recover the money thus paid is one for money had and.received, and although the payment may not be held to have been voluntarily made in a sense to deprive the plaintiff of a right of "recovery (Scholey v. Mumford, 60 N. Y. 498), yet the plaintiff must allege and prove that the defendants were not Iona fide holders. (Iselin v. Chemical Nat. Bank, 6 App. Div. 682.) If the plaintiff had sued for the bonds, doubtless, on showing title and that they were stolen, it would have been incumbent upon the defendants to give evidence that they were iona fide holders for value. (Neg. Inst. Law [Laws of 1897, chap. 612], § 98.) But that is no.t this case. The plaintiff accepted and retains the bonds on the terms offered by the defendants, and the burden is now upon it of alleging and proving the facts impeaching the defendants’ right to the money they have received, which necessarily involves the allegation and proof of the facts showing that the defendants were not entitled to it. There is no positive allegation that the predecessors of the defendants knew that Wylie did not have the right to pledge the securities. The allegation and the subsequent recital concerning it are both in the alternative; and the alternative clause is in each instance a legal conclusion without a statement of the facts upon which it is based. (Knowles v. City of [108] New York, 176 N. Y. 430 ; Second Nat. Bank of Clarion v. Morgan, 165 Penn. St. 199; Stitt v. Garrett, 3 Whart. 281.) It is now the well-settled law of the State that the rights of a holder of a negotiable instrument ‘“are to be determined by the simple test of honesty and good faith, and not by a speculative issue as to his diligence or negligence.’ , * * * ‘ The holder’s rights cannot, be defeated without proof of actual notice of the defect in title or bad faith on his part evidenced by circumstances. ' Though he may have been negligent in taking the paper, and omii ted precautions which a prudent man would have taken, nevertheless, unless he acted mala fide, his title, according to settled doctrine, will prevail.’ ” (Second Nat. Bank v. Weston, 172 N. Y. 250 ; Manhattan Savings Inst. v. N. Y. Nat. Exch. Bank, 170 id. 58; Welch v. Sage, 47 id. 143; Seybel v. Nat. Currency Bank, 54 id. 288; Neg. Inst. Law,. § 95.). Tested by this rule,, it is evident that the allegations of facts are insufficient to impeach the title of the defendants. It follows that the judgment should be affirmed, with, costs, with leave to the plaintiff, within twenty days from the service of the order to be entered hereon, to serve an amended complaint on payment of costs in this court and in the court below. O’Brien, P. J., Patterson, McLaughlin and Houghton, JJ., concurred. Judgment affirmed, with costs, with leave to plaintiff to amend on payment of costs in this court and in the court below. Order filed.