[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 512
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 513 The direction of the verdict at the Trial Term in favor of the respondent, the Atlantic Trust Company, was made in pursuance of a prior determination by the Appellate Division, which reversed a judgment recovered by the plaintiff. The Appellate Division had held, upon what was the main question in the case, that the bondholders were bound by the judgment which their trustee, the Mercantile Trust Company, had obtained, in 1895, and were privy to it; that the effect must be the same as though the previous action had been brought in the names of the bondholders, and that the recovery of the judgment constituted an estoppel against the right of this plaintiff to maintain an action for any damages which he suffered, by reason of the retention of the stock by the Atlantic Trust Company until the termination of the litigation. I think the case has been correctly decided. The action cannot be maintained. It rests upon the facts which existed at the time of the trial of the trustee's action and, in order to make out his case, the plaintiff was only obliged to make proof of the additional material fact of the depreciation in the value of the securities between the time of his trustee's demand upon the Atlantic Trust Company and the time when the securities were delivered up. The former action was of an equitable nature and the plaintiff therein, as trustee, represented this plaintiff and all the other bondholders in all their rights and demands. The court acquired such jurisdiction as empowered it to render any judgment, which would determine all questions within the purview of the suit, and such an one as that of damages occasioned by delay in *Page 516 performance, or other default in any duty owing to the plaintiff, under the circumstances, would be incidental to, and flow from, the proper equitable relief. (Story's Eq. Jur., sec. 796.) The trustee's action had for its object the delivery of the stock held by the Atlantic Trust Company and its sale, for the purpose of applying the proceeds to meet the deficiency arising upon the foreclosure sale, within the contract of guaranty, and it cannot well be doubted but that the equitable jurisdiction of the court would have authorized it to award any damages provable against the defendant under the circumstances shown. The principle was asserted by the English Court of Appeal in Serrao v. Noel (L.R. [15 Q.B. Div.] 549); where the defendant was sued for damages for the unlawful detention of shares of stock, the delivery of which had been theretofore decreed in an action brought by the same plaintiff in the Chancery Division of the court. When the shares were finally delivered, they had so declined in value as, upon their sale, to bring a considerable loss to the plaintiff and it was sought, in the second action, to make the defendant liable in damages.
The defendant pleaded by way of estoppel the previous Chancery decree, and this defense was held to be good by all of the justices of the Court of Appeal. The principle of the decision, in the language of Lord Justice BOWEN, was that "the suit in the Chancery Division was an application to the High Court of Justice for all kinds of relief in order that the rights of the parties might be adjusted."
The precise question here is, whether the plaintiff's trustee, in pursuing its remedy to enforce a delivery of the stock, or its sale, has not so dealt with the subject of the controversy with the Atlantic Trust Company as to preclude the bondholders from setting up the present claim, based upon the alleged wrongful act of that company in not applying the stock, held by it as security for the guaranty of the bonds, to the satisfaction of the amount remaining due upon the bonds, when demanded of it. In effect, the stock had been deposited with the Atlantic Trust Company by the guarantor of the bonds, as security for the performance of the guaranty, and the *Page 517 undertaking of the depositary was to hold the stock for that purpose. When the time arrived for the application of the security to its purpose, the depositary, whether its duty be regarded in the light of a trust, or of a contract, was bound to deliver over either the stock, or the proceeds of its sale, to the trustee for the bondholders. When it refused to comply with the latter's demand to do the one, or the other, thing, there was a definite breach of its obligation and the trustee for the bondholders had the election to pursue either of two remedies. Their trustee could pursue the remedy by action on the equity side of the court to enforce the obligation to deliver over the stock, for its sale and application; or it could treat the refusal of the depositary to deliver the stock as a breach of its contract and sue at law for damages. The trustee had a lien upon the stock for the benefit of the bondholders. The defendant had recognized a right in the trustee to the stock in a certain contingency and its subsequent refusal to deliver it, if wrongful, amounted to a conversion of the bondholders' security, which gave to their trustee the right to recover its market value at the time. The cause of action in either case would be the same; for its establishment, notwithstanding the difference in form of action, would depend upon the same evidence. (Stowell v. Chamberlain, 60 N.Y. 272.) In electing to pursue the former remedy, the bondholders and their trustee were concluded from prosecuting a second action for damages. They could not treat the obligation as subsisting and sue to enforce its performance and then, subsequently, after obtaining the fruits of a decree, sue the same defendant for the recovery of damages, upon the theory that there had been a neglect of duty, or a breach of the obligation.
But it is clear that in the former equitable action full relief could have been granted, such as was consistent with the cause of action; even if, for the purpose of a recovery of damages, an amendment of the pleadings became necessary. The action was in equity; for it sought the enforcement by judicial decree of an asserted right to the stock. As it was observed below, it aimed at the same relief, which might have been *Page 518 obtained, had the plaintiff's title been such as to enable it to maintain replevin for the stock. But, within the rule of either action, damages were recoverable for delay in performance, or for unlawful detention of the property. In my opinion, the plaintiff's legal rights were resumed in the former action brought by his trustee and were merged in the judgment therein recovered.
In Phelps v. Prothero, (7 De G., M. G. 722), where there had been a decree for specific performance and, subsequently, a judgment at law was obtained for damages growing out of the same contract, the enforcement of which was restrained by injunction, it was said by Lord Justice TURNER, that "the defendant had originally the right to proceed either at law for breach of the agreement, or in this court for the specific performance of it. He adopted the latter remedy. I think that a plaintiff who has legal rights and comes to this court for its aid is bound to put his legal rights under the control of the court."
The whole theory of the former action by the trustee for the bondholders seems inconsistent with the present claim to recover damages for the failure of the defendant to deliver over the stock, or to apply the proceeds of its sale. By that action, the Mercantile Trust Company, for the bondholders, submitted the whole question to the court, as to the Atlantic Trust Company's obligation with respect to the security. The latter set up adverse claims, or liens, and, upon the issue raised, the whole controversy was thrown into court. The delays of the litigation caused, as it is claimed, a loss by the depreciation in the market value of the security; but where was the injury, which the law would recognize as giving rise to a claim for damages? That was a hazard, or an indirect result, of the litigation. It was not one which could be deemed to have been within the contemplation of the parties; for, in legal presumption, the judgment demanded would comprehend complete redress in its execution.
There was the one wrong, if any, committed by the Atlantic Trust Company and that was in its refusal to comply with the *Page 519 demand of the bondholders' trustee for the stock, or for the proceeds of its immediate sale. For that wrong the former action was brought and its redress was to be had in the judgment which should be awarded. If delays were caused by litigation, and loss resulted to the bondholders from a depreciation in the market value of the security intended for their benefit, I cannot see how a new, or separate, cause of action has arisen.
In that respect the case of Commerce Exchange National Bank v. Blye, (123 N.Y. 132), is of some application. There the plaintiff claimed the possession of certain bonds, as having a special property therein, which had come into the defendant's hands as receiver, and, upon the latter's refusal to deliver them up, the action was brought for their possession and damages were asked for their detention. The action was defended upon a claim of ownership and a denial of the plaintiff's title, and, after a trial, the judgment was in favor of the plaintiff for the return of the bonds, or their value, and for damages occasioned by their detention. The judgment was affirmed in this court. Thereafter, a second action was commenced against the same defendant; wherein the same plaintiff set forth the facts of the preceding litigation and alleged that during the interval between the time of the trial and the time when, upon the termination of the preceding litigation, the bonds were actually delivered, the defendant failed, neglected and refused to deliver to the plaintiff the bonds and that they were damaged by depreciation in value in a certain sum, for which judgment was demanded. A demurrer to the complaint was overruled, both at the Special Term and the General Term; but, upon appeal to this court, final judgment was ordered in favor of the defendant. It was held that the complaint disclosed a single tort, which had formed the subject of an action and had been redressed by judgment therein and that, if the defendant's continued possession, during the interval after judgment and pending the appeals therefrom, was a wrong, it was but a continuation of that wrong which was sued upon and damages which flow from a single wrong *Page 520 may not be divided, so as to form the subject of separate actions.
If the decline in the value of the stock occurred before the recovery of a judgment for the plaintiff, then that was a hazard of the litigation. If the decline occurred after the judgment and pending the appeals of the defendant, as would seem to be the case, then there was no new, or illegal, detention of the property in controversy. But another answer to such a claim would be that the plaintiff made no demand and took no steps to enforce its judgment. The defendant exercised its right to appeal; but there was no stay of proceedings upon the judgment pending the appeals.
Upon any view of the question, I am unable to perceive how the plaintiff could maintain his action and I advise the affirmance of the judgment, with costs.
PARKER, Ch. J., MARTIN, CULLEN and WERNER, JJ., concur; O'BRIEN and LANDON, JJ., dissent.
Judgment affirmed.