
    Arthur T. Ramsay, Respondent, v. Abraham P. Miller and Others, Appellants.
    First Department,
    December 30, 1909.
    Principal and agent — conversion by agent of stockbroker—agreement not amounting to novation — election of remedies — ratification.
    Where one deposited money with the foreign agent of stockbrokers with a direction to purchase certain stock and, on learning from the agent that he had not transmitted the ordérfe to his principal as given but had misappropriated the money by transmitting other orders in the name of the investor, agreed to keep silent and give the agent time to adjust the matter and repay him, there was not a novation which released the brokers from liability to the investor, if at the time he did not know the state of his accounts on the brokers’ books. Mere silence on the part of the investor not resulting in prejudice to the brokers does not estop him from recovering from them.
    There was no election of remedies where the investor never attempted'to pursue his remedy on the agent’s promise to repay.
    As the agent represented the brokers, not the investor, his act was a breach of duty to the former and the silence of the investor was not a ratification of the act, for the doctrine of ratification only applies as between principal and agent. Moreover, as the investor was ignorant of the extent and nature of the agent’s acts, there was no ratification. A principal in order to ratify an unauthorized act of an agent must have full, not merely partial, knowledge of the facts. Ihgraham and Laughlih, JJ., dissented, with opinion.
    Appeal by the defendants, Abraham P. Miller and others, from from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Bew York on the 31st day of July, 1909, upon the verdict of a jury rendered by' direction of the court, and also from an order entered in said clerk’s office on the 21st day of July, 1909, denyingthe defendants’ motion for a new trial made upon the minutes.
    
      Benjamin W. Gardozo, for the appellants.
    
      William W. Mumford, for the respondent.
   Soott, J.:

Appeal from a judgment for plaintiff entered upon a verdict directed by the court.

The plaintiff was a resident of Washington, D. C. Defendants, a firm of stockbrokers, maintained a branch office in Washington, of which one Ludwig was general manager.. On January 28,1907, plaintiff opened an account with defendants by depositing $1,000 with Ludwig and ordering the purchase of 100 shares of the common stock of the Steel corporation. He received a notice from defendants’ main office in New York advising him of the purchase of'the stock. From time to time plaintiff paid other sums into the branch office and ordered further purchases of Steel stock, until lie had finally paid in all about $6,000. Ludwig transmitted this money, as it was received, to. defendants. He did not, however, transmit, plaintiff’s orders as to the purchase of stock, but, on the contrary, transmitted in plaintiff’s name a great number of orders to buy and sell various stocks, all of which were executed by defendants, who believed them to be plaintiff’s orders and entered them on Iris account. Plaintiff was in ignorance of these transactions^ and in July, 1907, ordered the sale, of all of the Steel" stock which he supposed he had bought, Ludwig then confessed to plaintiff that .he had misappropriated his money. Ludwig said: “ If you will just be quiet and will not do anything about it I will readjust this matter, and pay you your money.” To which plaintiff replied: “ Very well, Mr. Ludwig, I have no disposition to be hard, on you. If you have made a mistake, and if you have done a wrong thing, I am the last man. when you are down to kick you further.” It' does not appear that plaintiff at this time knew the state of his' account- on defendants’ books. He had .received no statement except the first one showing the purchase of 100 shares of Steel.. In accordance with his promise to Ludwig, plaintiff kept silence until .early-in'November, 1907, when he wrote to defendants asking for a copy of his account, and when it was received he at once disavowed it.

Upon this state of facts we think that the court below was right in directing a verdict for the plaintiff. The situation of the parties, when plaintiff and Ludwig had the conversation above mentioned, was that defendants owed plaintiff the amount of money he had paid, and Ludwig in turn owed defendants the same sum.' .The conversation between plaintiff and Ludwig did not amount to a novation, because it indicated no intention or disposition on plaintiff’s part to release his claim against defendants, and accept Ludwig as his; debtor in defendants’ place. All he did was to agree to keep silence for an unspecified time in order to étiable Ludwig, if he could, to satisfy the defendants’ debt to plaintiff. All that plaintiff did, or agreed to do, was to keep silence. Mere silence, no prejudice resulting therefrom to the defendants, does not estop plaintiff from recovering from defendants. (Norden v. Duke, 120 App. Div. 1.) There was no election of remedies, for plaintiff never attempted to pursue Ludwig’s promise to readjust the matter. The defendants rely chiefly upon what they claim to have been a ratification of Ludwig’s acts by plaintiff’s silence. The doctrine of ratification is usually applied as between principal and agent, when the principal, through some form of acquieseencé, is held to have ratified and adopted his agent’s unauthorized -acts, and the many, cases cited by defendants are in the main of this character. There are difficulties, however, in the way of applying that doctrine to the present case. In the first place, Ludwig was the general agent of ' the defendants, and in no sense an agent of plaintiff. His breach of trust was a breach of the duty which he owed to defendants. It would be inaccurate, therefore, to speak of plaintiff as ratifying the acts of defendants’ agent. If anything were to be claimed in that regard it must be that he adopted them as his own, and of that there is no evidence. But even if we could consider Ludwig as in any sense the plaintiff’s agent and speak of a ratification by plaintiff of Ludwig’s acts, it would be impossible to find such ratification in the present case, because it does not appear that plaintiff knew the whole extent and nature of Ludwig’s acts. On the contrary, the evidence is that he did not. “ Before a principal can be held to have ratified the unauthorized act of an assumed agent he must have full knowledge of the facts, so that it can be said that he intended to ratify the act. If 1ns knowledge is partial or imperfect he will not be held to have ratified the unauthorized act, and the proof of adequate knowledge of the facts should be reasonably clear and certain, particularly in a ease like this where, so far as the record discloses, no substantial harm has come to the defendant from the delay or the acts of the principal.” (Trustees, etc., v. Bowman, 136 N. Y. 521, 526.)

The judgment and order appealed from are affirmed, with costs.

McLaughlin and Houghton, JJ., concurred; Ingraham and Laughlin, JJ., dissented.

Ingraham, J. (dissenting):

This kction comes up on an appeal from a judgment entered upon a verdict for the plaintiff, directed by the court. The defendants requested the court to submit to the jury the question whether or not there had been a, ratification by the plaintiff of the acts of one Ludwig through whose fraud the loss occurred. This request was denied and the. defendants excepted.

I think there was a question for the jury as to whether the plaintiff had not ratified the acts of Ludwig, which should' have been submitted. Ludwig was the defendants’ agent in Washington. The plaintiff had opened an account with the defendants through Ludw%, and ordered the purchase of certain stocks and had deposited with Ludwig certain sums of money as' margin. Ludwig then gave the defendants orders for the purchase .and sale of stocks on this account not authorized by the plaintiff and failed to give orders for the purchase of stocks which the plaintiff had directed him to give. The result of Ludwig’s transactions was that the money that the plaintiff had given to Ludwig as margin to be deposited as such had been lost, and this action is brought to recover the amount so deposited. According to the plaintiff’s testimony he went repeatedly to Ludwig and asked for a statement of his account, bio such statement was furnished, Ludwig making excuses for his failure to furnish the same. The- matter was thus extended from January, 1907, when the account was opened, until about' the first of July, when the plaintiff said to Ludwig that he must have his account closed, and finally on or about the 1st of July, 1907, he ordered all of his stocks sold. On the morning of the eighth of July he received a telephone message from Ludwig’s wife stating that Ludwig was home sick, and the plaintiff went to' see him. . Ludwig then told the. plaintiff that his money was all gone; that Ludwig had not given the defendants orders for the purchase of. the stock that the plaintiff had ordered, and said to the plaintiff: “ If you will just be quiet and will not do anything about it I will readjust this matter and pay you yotir money.” Ludwig’s wife said to the plaintiff: “ Mr. Ramsay, this house belongs to me, and you know7 that it is worth four or five thousand dollars, and I will deed it to you to pay back the money that has been wrongfully used of' yours.” She also said that her brother had money and she would send for him and they would adjust this matter. Finally the,plaintiff told Ludwig that he would wait for an adjustment to be made. On cross-examination he testified that Ludwig and his wife stated to him that if he would be quiet and would not do- anything about it, Ludwig would adjust the matter and save the plaintiff his money, and that the plaintiff told Ludwig that he would keep quiet if he would readjust the- matter, as he promised he would. Ludwig subsequently gave to the plaintiff as security a policy of life insurance and also some shares of mining stock. These were subsequently returned to Ludwig in the winter of 1907, or in the early part of 1908. After this conversation the plaintiff did not tell the defendants anything about the transaction, as he had promised not to do it. On November 8, 1907, he first communicated with the. defendants about the wrong that Ludwig had done, and this action seems to have been commenced on February 5,1908. This is the plaintiff’s statement of the transaction, and I think there was sufficient to justify a finding that the plaintiff for a valuable consideration, which consisted of the promise of Ludwig and his. wife to adjust the matter so that the plaintiff would receive 1ns money by a conveyance of the house belonging to Ludwig’s wife and receiving the securities which Ludwig delivered to the plaintiff, to justify a finding that the plaintiff had ratified the acts of Ludwig in assuming to make the purchase' of the stocks on the plaintiff’s account which he had not authorized, and agreeing to look to Ludwig for an adjustment of his claim against the defendants. " It was certainly capable of the construction that the plaintiff, knowing all the facts, agreed, for a valuable consideration, to accept Ludwig as his debtor and to discharge the defendants from responsibility for Ludwig’s wrongful acts. While it is quite clear that Ludwig was the agent of the defendants and that at the time this conversation took place the defendants were liable to the plaintiff for Ludwig’s acts, the plaintiff could adopt Ludwig’s acts in relation to the transaction between himself and the defendants and agree to substitute Ludwig as his debtor instead of the defendants ; and if this was based upon a valuable consideration, I can see no reason why the plaintiff should not be bound. There is no question of estoppel, as it does not appear that the defendants were in jured in any way by the delay; but, as I view it, the case rests .entirely upon a ratification. Ludwig, as agent of the defendants, had accepted the plaintiff’s accounts and had undertook to transmit orders from the plaintiff to the defendants. Ludwig had failed to transmit the orders and had transmitted orders for which the plain'tiff was-not responsible, and when the. plaintiff ascertained this fact lie accepted Ludwig’s obligation to repay him the amount that he .had lost. Thus it seems to me that there was a question presented as to whether the plaintiff did not ratify Ludwig’s acts in the transaction with the defendants and accepted the promise of Ludwig as a substitution for the obligation of the defendants.

I think this question should have, been submitted to the jury and that.the judgment and order should be reversed.

Laughlin, J., concurred.

Judgment and order affirmed, with costs.  