Keys v. Leopold

Finch, J.:

The defendants are stockbrokers and members of the New York Stock Exchange. The plaintiff was one of their customers. In so far as material to the questions here involved, the complaint alleges as follows:

“ That on and from the 7th day of May, 1903, to and including the 9th day of July, 1908, the plaintiff herein, relying upon the statements of said James M. Leopold & Co., and each of said co-partners, then and there made to her that the plaintiff would make great profits upon her investments with them, she, the plaintiff, then and there between said dates as aforesaid, paid to the said co-partners the sum of Twelve thousand five hundred fifty ($12,550) Dollars, to be invested by said co-partners for her account, and that it was by reason of the promises of the said co-partners that they could make great profits for her, and of her confidence in their honesty and integrity, and by reason of their being members of the New York Stock Exchange that she paid to said co-partners said moneys, and then and there constituted the said James M. Leopold & Co. her true and lawful agents in the premises, and implicitly trusted in and relied upon them * * *. That the plaintiff herein has repeatedly since 1916 demanded of said defendants an accounting of the principal, as well as the profits of her said investment as aforesaid, but the said defendants refuse to render to her any accounting for her said moneys invested as aforesaid, or any part thereof, or to inform plaintiff how said money was invested. Wherefore, plaintiff demands judgment that the defendants be directed to render to plaintiff a true and correct accounting of the moneys so received by them on behalf of plaintiff, as well as the profits of any investments made by them, as well as the interest upon the principal ■ and upon the profits, and the plaintiff have judgment against the defendants for the amount found to be due and that she have such other and further relief as she may be entitled to in the premises * * *.”

The question first presented is as to the relationship between the parties, whether it was a debtor and creditor relationship or whether a fiduciary relationship was established. It is to be noted that the plaintiff alleges that the defendants represented that they would make great profits “ upon her investments,” arid the plaintiff paid to the said copartners the sum of $12,550 to be invested by said copartners “ for her account,” and that the plaintiff demanded an accounting of the principal as well as the profits of her said investment. The prayer of the complaint is that the defendants be directed to render a true and correct accounting of the moneys so received by them'" on behalf of plaintiff.” Upon this motion it is necessary to take the allegations of the complaint as admittedly true. If, as urged by the respondents, the relationship of debtor and creditor immediately arose, upon the payment of the money, the money would then belong to the defendants, who would be debtors of the plaintiff, and the latter would have no further concern with what was done with the money. If such a relationship arose, the plaintiff could not allege in her complaint that she had paid over the money to be invested for her account. In Haight v. Haight & Freese Co. (112 App. Div. 475) the defendant was a corporation engaged in the business of stock brokerage, and the plaintiff paid over to the defendant certain moneys for the purchase and sale of various stocks, and while the plaintiff had ample margin to secure his account, the defendant sold out the stocks and refused the plaintiff an accounting. The claim of the defendant was there, as here, that the only relief the plaintiff could have was in an action at law, either for the amount due to the plaintiff or for damages; and that, therefore, the defendant was entitled to a dismissal of the complaint. This court, through Mr. Justice Ingraham, said: “ The right of the plaintiff to an accounting must depend upon the relations that existed between him and the defendant. If the relation was, in its nature, fiduciary, then the plaintiff has a right to come into a court of equity and require the defendant to account for its acts in relation to the transactions between the parties.” The court then quoted from Marvin v. Brooks (94 N. Y. 71), and said of that case: “ This case has been since followed and has been considered as establishing the jurisdiction of a court of equity to require a person occupying the relation of broker who receives money from another to invest under his directions to settle and adjust the accounts between them.”

Looking at the allegations of the complaint from another angle, it is to be noted that the plaintiff alleges that she constituted the defendants her true and lawful agents to make investments for her account. In Marvin v. Brooks (94 N. Y. 71) the plaintiff intrusted the defendant, as his agent, with money sufficient to pay one-half of the purchase price of certain securities. The court there said: “ Such a decree [for an accounting] proceeds upon the ground that the defendant stands in the attitude of an agent dealing to some extent with the money or property of the other party; intrusted in a confidential relation with an interest which makes him a quasi trustee, and by reason of that relation knowing what the other party cannot know, and bound to reveal to him the entire truth.” It thus appears that the plaintiff has alleged a cause of action in equity for an accounting.

The next question which arises is whether 'the six-year Statute of Limitations or the ten-year statute applies. (See Civ. Prac. Act, §§ 48, 53.) Because of the relation of trust between the parties set forth in the complaint, the cause of action is inherently equitable in character. It falls within the provision of section 53 of the Civil Practice Act, prescribing a limitation of ten years to actions not specifically enumerated in article 2, in which section are included actions of equitable jurisdiction. In Beugger v. Ashley (161 App. Div. 576, 581) the court, by Scott, J., said: “ The plaintiff’s right to come into equity for an accounting is not to be doubted. It is urged, however, that whatever cause of action plaintiff has ever had is barred by the Statute of Limitations. Clearly, the only limitation applicable was the ten-year statute, which applies to an equitable action. (Gilmore v. Ham, 142 N. Y. 1.)” In Treadwell v. Clark (190 N. Y. 51, 59) the court said: “ I think that the action was governed by the provision of section 388 of the Code of Civil Procedure [now section 53 of the Civil Practice Act] which fixes a limitation of ten years after the cause of action accrues, in a case where a limitation is not specially prescribed. This section applies to all equitable actions (Gilmore v. Ham, 142 N. Y. 1).” See, also, Sheldon v. Sheldon (133 N. Y. 1, 5), where the court said: “ If the finding in this case was that the husband had simply received the wife’s money for her use, to be paid to her upon request, the claim would be barred by the Statute of Limitations. (Mills v. Mills, 115 N. Y. 80; Code, § 410.*) ) But the finding contains an additional element, which is relied upon to take the case out of the statute. * * * . It was further found that the money was received by the husband ' upon an understanding and agreement with the plaintiff, his wife, that he should control and invest the same for her benefit, and that he should, when requested, account to her for the said money and whatever increase there might be from investments thereof.’ * * * The only question that is open for consideration in this court is whether this important part of the finding is based upon evidence.”

The next question which arises is as to the commencement of the running of the Statute of Limitations. According to the allegations of the complaint, the money was received under such circumstances that there arose a trust relation of a continuing character, so that the statute did not commence to run against the plaintiff during the continuance of the relation, or until there had been some unequivocal act of disaffirmance on the part of the defendant.

As was said in Stephens v. Crawford (209 App. Div. 142, 149; affd., 239 N. Y. 535): “ The defense of the Statute of Limitations was urged at the trial. As to this point, the learned trial justice said: ‘ As the complaint states a cause of action for a breach of contract of bailment of plaintiff’s stock, unlimited as to time, for the benefit of the decedent-bailee, * * * the bailorplaintiff’s cause of action * * * did not accrue until January 19, 1922, the date of the conceded demand, when for the first time, as far as appears, there was a denial of the bailment by the decedent-bailee * * * and the statute would have commenced to run only on January 19, 1922 * * *.’ With this construction of the complaint we are in accord. ‘ A bailor’s right of action against his bailee accrues at the time of the latter’s breach of duty under the contract of bailment, and the Statute of Limitations then begins to run. Unless the term of the bailment is limited, no lapse of time bars the bailor’s right to the property, and his right of action does not accrue and the statute does not begin to run until denial of the bailment and conversion of the property by the bailee or someone claiming under him. To set the statute in motion there must be some act of the bailee inconsistent with the bailment and changing the nature of his holding, such as a refusal to deliver on demand.’ (See 25 Cyc. 1094, and cases there cited.)” It, therefore, follows that the statute did not begin to run until 1916, the date of the demand as alleged in the amended complaint.

Attention is called to the fact that the motion arises on an amended complaint, and that in the original complaint the plaintiff alleged a demand in 1908. The original complaint is superseded by the amended complaint for all purposes on this motion, and if the plaintiff had inadvertently stated a wrong date of demand in the original complaint, she has a right to correct it in the amended complaint and to stand alone on the latter upon this motion.

It follows that the order should be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs, with leave to the defendants to answer upon payment of said costs.

Glasee, P. J., Mebbell and Bubb, JJ., concur; Mabtin, J., dissents.