
    Samuel J. Stiebel and Others, Copartners, Doing Business under the Firm Name of Stiebel, Hernsheim and Company, Respondents, v. John J. Haigney, Appellant, Impleaded with George E. Voorhees and Others, Defendants.
    (No. 1).
    First Department,
    November 19, 1909.
    Contract — bailment — stockbrokers — account stated — agency— unauthorized act of agent — ratification by principal.
    Where a customer having a margin account with stockbrokers receives monthly-statements for nine months showing a balance due the brokers without making any protest, denial of their accuracy or demand for the return of his collateral within a reasonable time thereafter there is an account stated.
    Where the defendant in dealing with the plaintiffs had started his account to help R., one of their employees, had given every direction in relation to the account through such employee, and the plaintiffs had promptly transmitted notice of their action upon these orders and sent statements to the defendant at the address given as his by R., they had the right to regard all orders respecting the account received from the employee as sent by the defendant through R. as his agent for that purpose, at least until they received notice to the contrary.
    Where R. gave certain orders respecting the account without authority, which resulted in a loss, and three months later the defendant received an account showing such losses and the court finds upon sufficient evidence that, with full knowledge of all the facts, he admitted to the plaintiffs that the amount claimed was due and manifested an intention to adopt the transactions as his own and promised to pay, there is a ratification of the unauthorized acts.
    The difference between an estoppel and a ratification discussed.
    Appeal by the defendant, John J. Haigney, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Hew York on the 9th day of February, 1909, upon the decision of the court rendered after a trial at the Hew York Special Term in an action in equity to foreclose a lien upon certain shares of stock.
    
      Ernest P. Seelman of counsel [Seelman & Farley, attorneys], for the appellant.
    
      Francis L. Kohlman of counsel [Hand, Bonney & Jones, attorneys], for the respondents.
   Clarke, J.:

The complaint alleged that the plaintiffs were stockbrokers and "that on or about the 13th of September, 1906, the defendant Haigney opened an account with them; that thereafter at his request they purchased and 'sold on his account various securities and defendant deposited with them certain shares of stock as margin. On the 31st of December, 1906, an account was stated, showing $2,318.20 due and owing to the plaintiffs, which sum defendant promised and agreed to pay ; that he had refused upon demand; that the plaintiffs have the said stock deposited as margin or security in their possession; that the three other defendants may have or claim to have some interest or lien in said shares which interest or lien, if any, is subordinate to the interest of the plaintiffs therein; and plaintiffs demanded judgment that said sum is due by the defendant Haigney to the plaintiffs and that each of the defendants be foreclosed of all right, title, interest and lien at law or in equity upon said shares of stock; that they be sold and the proceeds applied to the payment of said debt and the costs of this action, and the surplus, if any, be paid to the defendants as they may be entitled to the same, and if there be a deficiency that plaintiffs may have judgment therefor against the defendant Haigney.

The answer denied the account stated and the promise to pay, and for a separate defense and counterclaim alleged that certain of the agents and servants of the plaintiffs, -without any authority from the defendant, and without his knowledge or consent, conducted the buying and selling of stocks for their own account and charged the said purchases and sales to the account of this defendant ; and that upon the entire account, after deducting therefrom said spurious and unauthorized sales, plaintiffs were, on the 31st of October, 1906, justly indebted to this defendant in the sum of $12,000, for which he demanded judgment, and that the plaintiffs be compelled to deliver to the defendant the shares of stock held by them as alleged in their complaint.

It appears that one Ryan was a telegrapher in the plaintiffs’ office; that the defendant had known Ryan for some six years before the trial of the action, when he was employed by another firm of bankers and brokers; that the defendant first opened an account with the plaintiffs December 30, 1905, and had opened that account through-Ryan, who solicited the account, saying to the defendant that it would help him along and give him an increase of salary if defendant would turn some of his business into plaintiffs’ firm ; that all of ITaigney’s instructions in regard to the account were given to the firm by Ryan, Haigney having no personal dealings whatever with the plaintiffs; that tlie- customary notices of the transactions, as they occurred, were sent by the firm to the address or addresses indicated by Ryan. The defendant testified that the last transaction that he authorized occurred on November 6,1906. He claimed that after that date he had not received any of the statements, letters or communications which the plaintiffs proved to have been sent, including the account of December thirty-first, at the time of their transmissal, but that the first knowledge that he had of any transactions charged in his account after the 6th of November, 1906, was in the month of February, 1907, when Ryan, who was ' still in the office of the plaintiffs, handed said December statement to him; that thereafter he received many visits from Ryan; that he knew in February that the plaintiffs had a claim against him on his account; that he never made any protest to the firm between February and April; that he received accounts at the end of each month down to October of 1907, which carried forward the balance as stated on the December, 1906, account, with the addition of interest.

In answer to the court the defendant testified: “ This stock, which is the collateral on these matters in dispute here, had been deposited by me with the plaintiffs. I deny now that I owed the plaintiffs anything in these transactions. That position I did not take until October, 1907. I can state the reason. I never demanded back the certificates of stock which I turned over to the plaintiffs.” His reason may be, as he testified at another time in the case, “ I did not want to do Mr. Ryan any injury in regard to it.”

The defendant practically concedes that the accounts which he admits having received in February and the monthly reduplications thereof, so far as totals are concerned, with the addition of interest which he received down to October, constituted an account stated, because having received them, showing a balance against him, he did not within a reasonable time after their receipt make any protest, deny their accuracy or demand an amount which he now claims to be due or the return of his collateral securities; and he admits the force and effect of an account stated, but claims that such an account is always open to attack upon the ground of fraud or error, and that mere silence simply shifts the burden of proof ; that the account is prima facie evidence of the debt, and if fraud or error be claimed, it simply puts the burden of showing such fraud or error upon the defendant, and that he has sustained that burden when he has testified that he gave no instructions whatever in regard to the acts after Hovember 6,1906, and when he has shown that Peter Ryan, who did give all the instructions in regard to the account, was the employee of the plaintiffs, and that there is no reason why he should suffer for the fraud, misconduct or crime of the plaintiffs’ employee. He admits that there may be an estoppel in pais which would prevent an attack upon an account stated even for fraud or error, but claims that such an estoppel cannot arise from mere silence, but only from such conduct as induced the plaintiffs to do or refrain from doing some act in reliance thereon to their detriment, and claims that none of the acts of Ryan were done after he acquired knowledge of Ryan’s misconduct, and that, therefore, the plaintiffs took no harm by reason of his delay in repudiating the account and making his demand.

If it be conceded that no estoppel in pais was created by mere silence after discovery, the acts having all been performed and the fraud perpetrated and the loss occasioned before discovery, there remains the question of ratification.

It is said in 31 Cyc. 1247: “ In the literature of the law there has often been little inclination displayed to distinguish between ratification and estoppel in pais. * * * The substance of ratification is confirmation of the unauthorized act or contract after it has been done or made, whereas the substance of estoppel is the principal’s inducement to another to act to his prejudice. Acts and conduct amounting to an estoppel in pais may in some instances amount to a ratification ; but, on the other hand, ratification may be complete without any of the elements of an estoppel, and if the act or contract in question has in fact been ratified, and the ratification is sufficient, there is no need of invoking the doctrine of estoppel.” Forsyth v. Day (46 Maine, 176) is cited, which holds that the distinction between a contract intentionally assented to or ratified in fact and an estoppel to deny the validity of a contract is very wide. In the former case the party is bound because he intended to be; in the latter, he is bound notwithstanding there was no such intention, because the other party would be prejudiced and defrauded by his conduct unless the law treat him as legally bound. In the one case the party is bound because the contract contains the necessary ingredients to bind him, including a consideration. In the other he is not bound for these reasons, but because he has permitted the other party to act to his prejudice under such circumstances that he must have known, or be presumed to have known, that such party was acting on the faith of his conduct and acts being what they purported to be without apprising him to the contrary.

In Merritt v. Bissell (155 N. Y. 396) Martin, J., said: “A ratification of the unauthorized act of an agent, or of a stranger who claims to act as such, if it exists, must be found in the intention of the principal, either express or implied. If that intention cannot be shown, no ratification can be held to have been established. While it is the duty uf a principal to disavow the unauthorized act of his agent within a reasonable time after it comes to his knowledge, or otherwise, in some cases, he makes the act his own, still, where one who has assumed to act as an agent for another has no authority to do so, but is a mere volunteer, a failure to disavow his acts will not amount to a ratification unless under such circumstances as indicate an intention to do so.”

As every direction in relation to this account had been given by Ryan to the plaintiffs and they had promptly transmitted notice of their action upon these orders, and had sent statements to Haigney, at the address given as his by Ryan, they had the right to regard the orders as sent by Haigney through Ryan as his agent for that purpose up to the time at least that they received information to the contrary.

The learned court has found : “ The said account of December 31st, 1906, and the said subsequent statements of account which were retabulations of the said December statement with interest charges added, were accepted, ratified, acquiesced in and assented to by the defendant John J. Haigney as rendered by the plaintiffs.” Hr. Homan, one of the plaintiffs, testified to a conversation with the defendant in the latter part of November, 1907.' “ I said to him, according to our books, about the market price of the day, you owe us, Hr. Haigney, between $6,000 and $7,000 ’— according to the market prices that prevailed at that time. I said, ‘ Hr. Haigney, do you owe this money or do you not % ’ Hr. Haigney answered me, ‘ I do. I don’t intend to go back on it, and I owe it, and I called here and I am going to fix it up, but I do want to say this to you, Hr. Homan, Ryan got me into trading or selling Reading short, and if it had not been for that I would have made no such loss, but that is neither here nor there ; I am not going to plead the baby act, and I am going to take care of the account and fix it up and I am here for that purpose.’ ‘ Well, that is no more than I expected from you, Hr. Haigney, and I am glad I was not mistaken in you.’ I said, ‘ What we want to do now is, if you feel that way about it, to get this stock signed properly and put in negotiable shape.’ ”

Weiss also testified to admissions by Haigney that the amount was due, and there was other testimony showing a meeting between the parties and an attempt to get releases from all the parties claiming an interest in tlie stock and a proper indorsement thereof so that it might be negotiable. •

The defendant admits conversations with Weiss and Homan, but denies an admission upon his part that the amount claimed was due. There being evidence to support the finding of the Special Term, we are not prepared to say that said finding was against the weight of evidence. If such conversation was had it satisfied all the legal requirements of a ratification. It was held when the defendant was possessed of full knowledge of all the facts and exhibited the full intention to adopt the transactions as his own, a refusal to plead the baby act and a direct promise to pay.

The defendant had full knowledge upon his own testimony of what ho claims to be the rascality of Ryan and made no mention of it for months to the plaintiffs through his unwillingness, as he expressed it, to harm Ryan. There must come a time in the relation of parties when their respective rights and liabilities become fixed. We think that time arrived as indicated when the defendant, having had the claims of the plaintiffs in his possession for months, with full knowledge of all the facts, promised to pay the account as rendered.

The judgment appealed from should be affirmed, with costs.

Ingraham, Laughlin, Houghton and Scott, JJ., concurred.

Judgment affirmed, with costs.  