Rathborne v. Hatch

EAUGHEIN, J. The action is brought on an assigned claim of C. R. Rathborne & Co. for a balance alleged to have been due and owing to them from the defendant on account of certain stock transactions. The precise claim is that Rathborne & Co. were employed by the defendant to sell 900 shares of the capital stock of the Northern Pacific Railway Company and 200 shares of the capital stock of the Chicago, Burlington & Quincy Railroad Company; that they sold [348] the stock, and notified the defendant of such sale, and requested that he deliver the stock to them to fulfill the terms of their sale; that he failed to do so within a reasonable time, and they were obliged to purchase stock in order to make the delivery to the purchaser; that thereby the defendant became liable to them for their commissions, and the-difference between the amount for which they sold the stock and the amount they were obliged to pay for stock to fulfill the terms of sale, aggregating the sum of $17,155.78, together with interest thereon from the 9th day of March, 1900, besides costs. The answer put in issue the material allegations of the complaint, and set up a counterclaim for damages. The principal question presented on the appeal relates to an exception to the introduction of the account books of Rathborne & Co. as evidence of the sales of the stock by them, and' of the selling price, and of the purchase of the stock by them, and of the purchase price. The bookkeeper of Rathborne & Co. testified that he sent notices by mail of the purchases and sales to the defendant, and kept copies thereof; but it appeared that he did not mail the notices, but delivered them to a boy for that purpose, and had no personal knowledge as to whether they were mailed or not. It might be inferred, however, from a letter which the defendant wrote Rathborne & Co. on the 18th day of July, 1900, that he had in some manner received information concerning these transactions, for in the letter he acknowledged that he was indebted to them, and promised to settle. Nevertheless his letter throws no light on the question as to the amount of the indebtedness, and no evidence was offered tending to show that he had knowledge of the precise amount of their claim, or of. any other admission on his part concerning the same. If the plaintiff had shown the mailing of an account by Rathborne & Co. to the defendant of the purchases and sales, and of their claim for commissions, showing the balance owing, it might be inferred that the defendant’s letter related thereto, and constituted an admission of the correctness thereof; and if he retained the statement of the account, without objecting thereto, after reasonable opportunity to examine the same -and discover any error, it probably would have constituted an account stated. Spellman v. Muehfeld, 166 N. Y. 245, 59 N. E. 817. But neither of these things was shown. Proof was made of the employment of Rathborne & Co. to make the sales, that the sales were made pursuant to such employment, that the defendant failed to furnish stock for the purpose of making delivery to the purchaser, and that Rathborne & Co. purchased stock for that purpose. There was, however, no evidence, other than the account books, of the prices at which the stock was sold and the purchases were made. The member of the firm who made the sales and purchases on the stock exchange testified that he gave the figures to the telephone clerk on the exchange for the purpose of having the same phoned to the office of the brokers, according to the custom; and the bookkeeper testified that he made the entries of these transactions in the books from information received by phone from the telephone clerk, and that the entries were in accordance with the information thus received. The telephone clerk was in court, but was not called or sworn as a witness, and there was no evidence to [349] show that he correctly transmitted the information received. In this state of the proof, the books were offered and received in evidence over the defendant’s objection that they were incompetent and hearsay, and that a proper foundation had not been laid for their introduction; and .the particulars in which this foundation had not been laid were specifically and fully stated in the objections, and, among other things, that it had not been shown that Rathborne Sz: Co. kept fair and honest accounts, and also that the rule admitting account books was not applicable to principal and agent. We are of opinion that the reception of these account books was error, and, there being no other basis for the recovery, the judgment cannot stand. If it appeared that the broker who made the sales was unable to recollect the terms thereof, but had examined the entries made in the books at a time when he did recollect the figures, so that he knew that the entries were correct, and also that an examination of the books would not refresh his recollection so as to enable him to testify as to the figures, or if the telephone clerk had been sworn and testified that he transmitted the information to the bookkeeper correctly as he received it from the broker, then, doubtless, the books would have been competent evidence, in connection with the other testimony, to show the essential facts. 1 Greenl. Ev. (16th Ed.) §§ 120a, 120b; Bank v. Culver, 2 Hill, 531; Merrill v. Railroad Co., 16 Wend. 586, 30 Am. Dec. 130; Clark v. Bank, 32 App. Div. 323, 52 N. Y. Supp. 1064, affirmed in 164 N. Y. 498, 58 N. E. 659; Bank.v. Weed, 39 App. Div. 604, 57 N. Y. Supp. 706; Powell v. Murphy, 18 App. Div. 25, 45 N. Y. Supp. 374; Abele v. Falk, 28 App. Div. 191, 50 N. Y. Supp. 876; Bloomington Min. Co. v. Brooklyn Hygienic Ice Co., 58 App. Div. 66, 68 N. Y. Supp. 699; affirmed in 171 N. Y. 673, 64 N. E. 1118; Mayor, etc., of city of New York v. Second Ave. R. Co., ro2 N. Y. 579, 7 N. E. 905, 55 Am. Rep. 839. The proof, however, was insufficient to make them admissible upon either of these grounds. The only other theory upon which they could in any view be admissible, as not obnoxious to the rule against hearsay evidence and evidence made by a party in his own behalf, is that they fell within the rule relating to' the admission of shopbooks of services rendered, or the sale and delivery of merchandise on credit. This rule has been somewhat extended, but no authority has been cited, and we find none, in this state, extending its application tO' purchases from or sales to third parties by an agent in an action between him and his principal. It has been held not to apply to accounts of cash items or transactions, even between the parties. Dusenburv. v. Hoadley (Sup.) 20 N. Y. Supp. 911; Smith v. Rentz, 131 N. Y. 169, 30 N. E. 54, 15 L. R. A. 138. In Congdon & Aylesworth Co. v. Sheehan, 11 App. Div. 456, 42 N. Y. Supp. 255, it was held that this rule was not applicable to the account books of a corporation, and that such books w'ere not admissible as evidence of sales or deliveries. In Shipman v. Glynn, 31 App. Div. 425, 430, 52 N. Y. Supp. 691, it was held that the account books of a party are not admissible as evidence of sales and delivery of goods, where the delivery was made upon his order, but by a third party. The court of appeals in Smith v. Rentz, supra, expressly declare that this rule should not be extended. It would appear, there [350] fore, that.this rule should not apply to the account books of a broker, showing sales to and purchases of third parties, in an action between him and his principal. But if the rule were applicable, it would not avail the plaintiff. The rule as originally promulgated in the leading ■case of Vosburgh v. Thayer, 12 Johns. 461, required proof as a foundation for the introduction of the books first, that the party had no clerk; second, that some of the articles sold had been delivered; third, that they are the account books of the party; and, fourth, by persons who have dealt with him and settled by his books, that the party keeps fair and honest accounts. Where this rule is applicable, the courts have rigidly adhered to the requirement that this preliminary proof must still be made, before the books are admissible as evidence. Rice, Ev. p. 815; McGoldrick v. Traphagen, 88 N. Y. 334; Smith v. Smith, 163 N. Y. 168, 57 N. E. 300, 52 R. R. A. 545; Smith v. Rentz, supra; Stone v. Cronin, 71 App. Div. 565, 76 N. Y. Supp. 605; Powell v. Murphy, supra. It was shown that the account book received in evidence was the purchase and sales book of Rathborne Sr Co., and it probably sufficiently appeared that they kept no clerk, within the contemplation of this rule which relates to a clerk who has personal knowledge of the transactions. Smith v. Smith, supra; McGoldrick v. Traphagen, supra. But there was a complete failure of evidence that Rathborne Sr Co. kept fair and honest books, by any person who had dealt with them and settled by their books. It follows, therefore, that the judgment should be reversed, and a new trial granted, with costs to appellant to abide the event. PATTERSON and McRAUGHRIN, JJ., concur. VAN BRUNT, P. J., concurs in result.