Sharpe v. National Bank , 87 Ala. 644 ( 1888 )

CLOPTON, J.

Before the trial was entered upon, plaintiff moved to amend the complaint by adding a count, formally and substantially, in case. The court refused to allow the amendment, evidently on the idea that the original complaint counts on a breach of the contract, and is in assumpsit. In cases where the plaintiff has an election to sue in assumpsit for a breach of the contract, or to bring an action on the case, for a violation of duty growing out of the contract, it is often difficult to determine whether a count is in form ex contractu or ex delicto. The same facts have to be averred substantially in both instances, the difference being, that in one the complaint declares on the contract, and assigns breaches of the contractual stipulations; and in the other, the contract is stated as mere inducement, and the cause of action is founded on a breach of duty growing out of the contract, and imposed by law. In Whilden v. Mer. & Plant. Nat. Bank, 64 Ala. 1, the test is stated as follows: “It is from the facts stated in the body of the count the question must be determined; and when these indicate that the plaintiff is proceeding for a measure of recovery adapted only to the one form of action, it must be intended that the count belongs to that form of action, whether it is eic delicto or ex contractu.” Though the transaction may have had its origin in a contract, if the facts stated show that the cause of action is a violation or disregard of duties which the law implies from the contractual relations and conditions of the parties, the count will be regarded as in case. —Mo. Life Ins. Co v. Randall, 74 Ala. 170. The test of certain and easy application is, the measure of recovery to which the count is adapted

It may be conceded that the counts in the original complaint are not formally and technically in case. After stating the pledge contract, inapt words are used to aver the duties growing out of the contract, which the law devolved on defendant; such as, “the defendant, in consideration of the premises, then and there undertook and promised the plaintiff,” followed by averments of violation and disregard of the legal duties which devolved on defendant as pledgee. But, considering all the averments, it seems that the contract is stated as inducement, and that the pleader did not intend by these words to allege that what follows them were express stipulations of the contract, but duties implied by law. The counts do not proceed for the recovery of the excess of the proceeds of the sale of the stock pledged, but for its value, as the measure of recovery. The amendment should have been allowed. Its refusal, however, would not operate a reversal, as it appears from the record that the whole case was tried as if the action was in form ex delicto. The plaintiff having had the same and as full benefit under the complaint is it stood, as if the amendment had been allowed, we regard its rejection as error without injury.

The undisputed facts are: About February, 1878, the plaintiff placed with the National Bank of Birmingham twenty shares of the capital stock of the Newcastle Iron and Coal Company, as collateral security for debts due the bank, and its president individually. The debts were renewed or extended from time to time, the stock remaining in pledge. In October, 1879, the demands having matured, the president of the bank instructed the cashier to give the plaintiff par for his stock, credit him for the amount, and render him a statement of his account. The sale was private, and no notice thereof was given to the plaintiff, nor was there any demand of payment.

When the debt for which shares of stock' are pledged matures, and is unpaid, the pledgee may file a bill in equity for a foreclosure of the pledge, and a sale under the order of the court, or he may exercise the implied power to sell without resorting to judicial proceedings. If he elects to pursue the latter remedy, the law requires, in the absence of an agreement, that the sale shall be made at public auction, and reasonable notice of the time and place given to the pledgor, that he may have opportunity to redeem the pledge. If there is a stipulated day for payment, demand of payment is not required; notice of the sale being considered as equivalent to a demand. —Nabring v. Bank of Mobile, 58 Ala. 204. The sale of the .stock, having been made privately, and without notice, was inoperative to transmute the title, or to dissolve the relation of pledgor and pledgee, the bank being the purchaser; and retaining its possession. Md. Fire Ins. Co. v. Dalrymple, 25 Md. 242; Middlesex Bank v. Minot, 4 Met. 325; Cook on Stock, §§ 477-479.

These principles are not controverted; but defendant contends, that plaintiff, with knowledge that the sale was unauthorized and inoperative, ratified it. The ratification is claimed on the undisputed facts, that in December after the sale, plaintiff was informed that his stock had been sold at par, received a statement of his account, showing a credit of the proceeds of the sale, and a few days afterwards, without objection or further inquiry, settled with the bank by giving his note for the unsatisfied balance due by him. Unquestionably, plaintiff had the right, at his election, to ratify the sale, and receive the benefit of the credit of the proceeds, thereby relieving it of any imputation of tortiousness, or to treat it as futile, and be remitted to Ms rights, as they existed before the attempted sale. By giving his notes for the deficiency, after deducting the proceeds, without objection, and after being informed and receiving his account, was a ratification, if the other essential elements existed. — Childs v. Hugg, 41 Cal. 519.

Plaintiff, admitting that he knew his stock had been sold, and that notice of the sale was not given, seeks to avoid the ratification on the alleged ground, that it was made in ignorance of the fact that the bank was the purchaser, and that it was a private sale by the bank to itself. Defendant does not claim or pretend that this fact was communicated to plaintiff, or that he was otherwise informed of it at the time of the alleged ratification. As to this question, the court instructed the jury, that if, at the time the sale was reported to plaintiff, it was impeachable, and he knew it was impeachable, and elected not to impeach it, but to accept and enjoy its benefits, he can not now impeach the sale. When referred to the evidence, the charge imported to the jury, that if plaintiff had knowledge of the invalidity of the sale, on the ground only that the notice of the time and place had not been given, and elected to assent to and ratify it, he can not afterwards disaffirm it, though he was not informed that the pledgee became the purchaser at a private sale.

The salutary doctrine, that trustees and others, holding fiduciary relations, are incompetent to purchase the trust property at their own sales, applies with full force to pledges. Knowledge of all the material facts and circumstances is essential to an efficient and valid ratification of a sale made by a pledgee in disregard of the requirements of the law, and of the rights of the pledgor. It is readily supposable, that a pledgor might be willing to abide by a sale, though made without notice, and even a private sale, if made in open market, where there may be competition, and yet be unwilling to assent to a sale made by the pledgee to himself, without affording others an opportunity to buy. A confirmation, to be effectual and binding must be tantamount to a valid and binding agreement. Partial knowledge of the facts is insufficient: and knowledge of some of the grounds on which a sale may be avoided, there being others, is not the equivalent of information of all the material facts necessary to enable the party to form a correct judgment.

The ratification may be subject to objections and disabilities, as well as tbe attempted sale; and is so subject, if made in ignorance of some of the material facts, unless it was done with the intent to ratify, irrespective of the character of the sale, and of who was the purchaser. When plaintiff received information of the material facts of which he was ignorant at the time he ratified the sale, he was entitled to disaffirm the ratification. — Bannon v. Warfield, 42 Md. 22; Miller v. Board of Ed., 44 Cal. 166. If promptly disaffirmed, the disaffirmance would relate back, and operate to avoid the sale. On the case as presented by the record, the real matter of controversy between the parties arises at this point. The entire case would be simplified, and rendered easier of solution, if, assuming the uncontroverted facts, the investigation of the jury were directed to the inquiries, whether the ratification in December, 1879, was made with the intent to ratify without full knowledge of all the material facts; and if not, of ratification vel non after plaintiff received information of the character of the sale and the purchase by the bank. The evidence leaves in doubt the time when plaintiff obtained this information, and consequently it is an inference to be drawn by the jury. Having once ratified, it was especially incumbent on plaintiff, on obtaining information of these material facts, to act with promptness, and without unreasonable delay. Having assented to the sale, and having recognized it as valid and operative, by obtaining and retaining its benefits, he will not be permitted to continue to retain them, acting inconsistently with the repudiation of his former ratification, speculating upon the consequences of affirmance or disaffirmance, and inducing the defendant to regard it as in force, for an unreasonable time,, and then repudiate it, when it may suit his convenience or advantage. Unreasonable and undue acquiescence, under circumstances, is tantamount to a ratification.

It is admitted that Linn, the president of the bank, died in August, 1882; and there is evidence tending to show that plaintiff was informed of the facts prior to his death. If the jury should so find, and further find that he retained the benefits of the sale, without objection brought home to defendant until shortly prior to the commencement of this suit, in October, 1883, his former ratification should be regarded as unimpeachable. But, if he did not receive the information until the spring or summer of 1883, the question of ratification should be submitted to the jury, to be determined by the conduct of the plaintiff, and on the entire evidence.

It appears that L. P. Worl owned a part interest in the stock, which was pledged by plaintiff, for his individual benefit, by Works authority and consent. The pledge, under such circumstances, did not create any relation of pledgor and pledgee between defendant and Worl, and devolved on defendant no duty to him. The relation existed alone between plaintiff and defendant, and estopped the latter from disputing the title of the former. If plaintiff is entitled to recover, his right of recovery extends to the entire stock pledged.

Reversed and remanded.