Moore v. . Potter , 155 N.Y. 481 ( 1898 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The sole ground upon which the General Term reversed the determination of the trial court and directed a new trial was, that the plaintiff's assignor, having been served with the order appointing the defendant as receiver, could not sell the property, which was the subject of the contract of purchase and sale, without leave of the court and thereby acquire any rights against the defendant, but that he was guilty of a contempt in making the sale, and, therefore, the court would not aid him to reap its fruits. This determination is based alone upon the defendant's exception to the refusal of the trial court to direct a verdict in his favor upon the grounds: 1. That the plaintiff's assignor had no power to sell the property without the consent of the court, and, 2. That the sale was collusive. No effect was given to the last ground by the court below. It is plain that the evidence was insufficient to justify a direction of a verdict in favor of the defendant upon the ground that the sale was collusive. Nor was it sufficient to authorize the submission of that question to the jury.

Therefore, the only question involved on this appeal is that upon which the General Term based its decision. It is well established by the decisions of this court that a vendor of personal property, when the vendee has declined to take the property and pay for it, ordinarily has the choice of any of three methods to indemnify himself against loss: 1. He may store or retain the property for the vendee and sue him for the entire purchase price; 2. He may sell the property and recover the difference between the contract price and the price obtained upon a resale; or, 3. He may keep the property as his own, and recover the difference between the market value at the time and place of delivery and the contract price. (Dustan v. McAndrew, 44 N.Y. 72,78; Lewis v. Greider, 51 N.Y. 231, 237; Hayden v.Demets, 53 N.Y. 426, 431; Cahen v. Platt, 69 N.Y. 348, 352;Mason v. Decker, 72 N.Y. 599; Quick v. Wheeler, 78 N.Y. 305;Porter v. Wormser, 94 N.Y. 431, 442; IthacaAgricultural Works v. Eggleston, 107 N.Y. 272, 276; Tuthill v. Skidmore, 124 N.Y. 148, 154; Van Brocklen v. Smeallie,140 N.Y. 70.) The plaintiff's assignor sought to avail himself of the second method, by selling the property at the best price he could obtain and then recovering of the defendant the difference between the price thus obtained and the contract price.

It is to be observed that in many of the cases cited it has been said that in thus selling the property the vendor acts as the agent of the vendee for that purpose. Clearly, the use of the words "as agent of the vendee" was not intended as a determination that the relation between the parties was that which ordinarily exists between a principal who owns property and an agent who may be authorized to manage or sell it. But it is a general expression which has been somewhat inaccurately used to define the right of a vendor to make a resale and hold the vendee responsible for his loss. It is quite manifest that a resale made under such circumstances is not made by the vendor strictly as the agent of the vendee, but he acts for himself in disposing of the property for the purpose of ascertaining the actual damages he may sustain. Doubtless in making it the vendor would be bound to sell within a reasonable time, to exercise good faith to effect a sale at the best price he could obtain, to follow any proper instructions the vendee might give as to the time and manner in which it should be made, and to give credit upon the contract price for the amount received. His duties in making the sale may, in some respects, resemble those of an agent, and thus the expression that he acts "as the agent of the vendee" has arisen. That he owes the vendee the duty to thus conduct the sale is clear, but that his acts in making it can be properly regarded as the acts of an agent, as that word is generally understood, is quite otherwise. Surely the fact that a vendor might seek this remedy against an insolvent or doubtful vendee, would not confer upon the latter such a title as would enable him to demand and hold the property without complying with the terms of the contract. To say then that the vendor becomes the agent of the vendee in making the sale is not quite correct, and is to be regarded at most as a mere fiction of law, and the beneficial title does not pass to the vendee.

The first case in this state which has come to our notice relating to this subject is Sands v. Taylor (5 Johns. 395). In that case the right to make a resale and hold the vendee responsible for the difference between the contract price and the amount received upon a resale was considered and held to exist by a unanimous court. Several opinions were written. Some of the judges expressed the view that, after a vendee had refused to accept the property, the vendor became a trustee or agent by necessity to sell the property, but that the exercise of the right to sell was not a waiver of his rights under the contract. Others based this right, not upon any principle of agency, but upon the existence of a common usage, which was said to be convenient and reasonable and should be sustained by the courts. While the court unanimously held that the right of resale existed, there was some difference of opinion as to the precise language which should be employed in describing that right, or the principle upon which it was founded, some holding that it existed by virtue of a common usage which was sanctioned by the courts, while others were of the opinion that the vendor became an agent of the vendee by necessity. It is quite obvious that the language employed in that case has led to the use of the words "as agent for the vendee" in stating this rule in subsequent cases. When, however, we consider the manner in which the use of this phrase arose and the sense in which it was used, it becomes quite apparent that it was employed merely for the purpose of briefly describing the right which a vendor possessed to make a resale. It is clear that the court in that case did not hold, or intend to hold, that the general relation of principal and agent existed between the parties. But even if it could be regarded as proper in such a case to define the position of a vendee as that of an agent by necessity, yet, when the sense in which the term is used is understood, it is plain that it is not to be regarded as an assertion that the vendee becomes the absolute owner of the property by the act of the vendor in thus seeking to establish the amount of his actual loss. It would be manifestly unjust to hold that in such a case the title passed to a vendee, and that the vendor could not adopt this method of reducing the amount of his damage, and ascertaining the precise amount of his loss, without assuming the risk which might follow if the title actually passed to the vendee without payment, upon the vendor's election to pursue that method of indemnifying himself. Moreover, even if it could be said that the title passed to the vendee, still the vendor would retain his lien for the purchase price that could be foreclosed by a sale, and which would continue in the vendor not only the right of possession, but the right to sell and hold the defendant for any deficiency that might arise. Although a vendor may elect to pursue that method of indemnifying himself against loss, the title still remains in him to an extent which would prevent the vendee from demanding or recovering the property sold without complying with the provisions of the contract. Therefore, the General Term erred in holding that the title to this property passed to the receiver, so that the vendor was unauthorized to pursue that method of ascertaining the amount of the loss for which the defendant should be held responsible without the consent of the court.

It is true that it has been held by this court that a sale of property under an execution without leave of the court, while the property is in the possession of a receiver, is illegal and void, although the levy was made before his appointment. (Walling v.Miller, 108 N.Y. 173.) In that case it was said that persons having liens upon property had no right to interfere with its possession by a receiver without the authority of the court, and thus dissipate it and deprive the court of jurisdiction to administer it. It is, however, no authority to sustain the doctrine involved in the determination of the General Term. In the case at bar the receiver had no possession nor right of possession, and no title to the property in question, but had only the right to receive the property purchased by the corporation upon paying the agreed price. No fund or property that had passed into the hands of the receiver was attempted to be disposed of or sold. The property had never come into the possession or fallen within the jurisdiction of the court appointing him. It continued the property of the plaintiff's assignor, subject only to the power of the receiver to take it upon paying the consideration. The right to do so he absolutely declined to exercise. When he did that, the plaintiff's assignor was entitled to recover the damages which he sustained by reason of a breach of the contract. One of the methods of ascertaining their amount was a resale of the property. This was the method pursued. The defendant was given notice of the time and place of sale, and had every opportunity to protect any interest which the corporation or he, as receiver, had. The result of the sale, as well as its purpose, was to ascertain and establish the amount of damages the plaintiff's assignor in fact sustained.

Moreover, that the doctrine of the Walling case has no application here is clearly established by the decision of this court in Varnum v. Hart (119 N.Y. 101). In that case it was claimed by a receiver that a sale of the property of the corporation under an execution after his appointment was absolutely void, but this court held that, as the sheriff had seized the property and had it in his possession at the time of the appointment of the receiver, the sale was not void, but at most should be held simply voidable.

It appears to us that there is no question of contempt in this case. No right of possession in the receiver was disturbed, and the plaintiff's assignor only asserted a legal right which he possessed as to the property. Its resale was but the assertion of that right, and cannot be properly held to be illegal and void on the ground that leave of the court was not first obtained. In discussing a similar question in Chautauque Bank v. Risley (19 N.Y. 369, 376), COMSTOCK, J., said: "It may be that the creditor should ask leave of the Court of Chancery before he proceeds to sell, or that the purchaser acquiring the title should make a like application before he brings his ejectment. If, however, he fails to do so, the question is merely whether the court will consider him in contempt and punish him accordingly. The sale itself is but the assertion of a legal right, and it cannot be illegal and void on the ground that the leave of an equitable tribunal is not first asked and obtained." Hence, it would seem that even if the plaintiff's assignor was guilty of contempt, yet as the rights which he pursued were legal, the fact that he failed to obtain the consent of the court did not render his action void. While the order appointing the defendant as receiver of the corporation enjoined all persons having notice from transferring any of its property, except to deliver it to him, still it is manifest that the corporation had no such possession of, or title to, the property in question as would make a resale of it by the vendor a disobedience of that order.

We think the learned General Term erred in sustaining the exceptions and directing a new trial; that its order should be reversed and judgment is ordered to be entered for the plaintiff on the verdict of the jury, with costs to the appellant in all the courts.

All concur, except PARKER, Ch. J., not sitting.

Order reversed, etc.