White v. . Baxter , 71 N.Y. 254 ( 1877 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] We are of opinion that the agreement testified to by the plaintiff and found by the jury, was supported by a sufficient consideration. When the plaintiff was called upon by Currie, Martin Co. for the deposit of $10,000, it was an open, and perhaps doubtful, question whether they had a right to make the call. The president of the board and the arbitration committee, appear by their acts to have been of opinion that Currie, Martin Co. had such right. The defendant deemed that they had not. The plaintiff, however, by refusing to make the deposit, incurred the risk of suspension; and for his own protection against that risk, which, as shown by the evidence, involved a loss to him of more than the $10,000, would have had the right to make the deposit. If it should ultimately have been determined that the call was rightfully made, the defendant would have been bound to reimburse the plaintiff. If determined otherwise, the plaintiff could have obtained a return of the money. In either event, he would have escaped the loss arising from his suspension. In this state of affairs, the defendant, according to the finding of the jury, requested the plaintiff not to make the deposit, and promised the plaintiff that if he would not make it, nor appear before the arbitration committee, when summoned to do so by Currie, Martin Co., he (the defendant) would protect the plaintiff against all loss which should ensue to him from such refusal; and if he was suspended, would pay him during the time of his suspension from the board, at a rate equal to the defendant's average business for the previous year, with ten per cent. added thereto. Upon this promise being given, the plaintiff refused to put up any margin, and was thereupon suspended from the board by the president, and was duly summoned to appear before the arbitration committee, which he refused to do. He thus performed his part of the agreement, and in consequence thereof remained suspended, and lost his ordinary business for a period of about twenty months.

Irrespective of the question, whether the defendant was legally bound to put up the margin demanded, or whether he might lawfully have instructed the plaintiff not to put it up for his account, the fact that he by his promise induced the plaintiff to forego the steps which he might have taken for his own protection, and thus to incur a loss, furnishes a good consideration for the promise. The defendant, doubtless, had good reasons for desiring to take his ground at that stage of the matter. The contract was a large one, and according to his construction of it, no margin was then demandable of him. According to the construction of Currie, Martin Co., they had a right to demand a margin, for if they were entitled to the additional shares issued by the company, there was a difference in their favor exceeding the amount already deposited in the trust company. The contract was in the name of the plaintiff. The defendant was the principal in the transaction, but was not disclosed. Any concession, therefore, which might be made by the plaintiff would affect the interest of the defendant as between him and Currie, Martin Co. He may have been willing to assume the risk of any loss which the plaintiff might incur by setting at defiance the rules and usages of the board of brokers, in preference to allowing the plaintiff to protect his own position by submitting to them. But whatever may have been his reasons, if he by his promise induced the plaintiff to forego any steps which he had a right to take, and thereby caused him damage, that was a good consideration. It is claimed, on the part of the defendant, that the plaintiff would have had no right to have submitted the matter to arbitration contrary to the objection of the defendant, and, therefore, his forbearing, at the request of the defendant, to appear before the arbitrators, furnished no consideration for the promise. What the plaintiff might have done to save himself from suspension, without compromising the rights of the defendants, had he attended before the arbitration committee when summoned, does not appear, but it is not impossible that some course might have been taken to that end. It is not necessary, however, to pursue that inquiry, inasmuch as we think that the plaintiff clearly had the right to put up the margin for his own protection, and no right of the defendant would have been affected thereby, except that he would have been bound to reimburse the plaintiff, if it turned out that the deposit of the margin was rightfully demanded. The forbearance of the defendant to exercise that right was the cause of his suspension, and was sufficient to constitute a consideration for the defendant's promise.

The agreement was not void for want of mutuality. It is true that it does not appear that the plaintiff, simultaneously with the defendant's promise, agreed that he would not deposit the margin, or appear before the arbitration committee. But he performed what was demanded of him as the condition of defendant's promise, and that was sufficient. When one, acting on the faith of a promise, performs the condition upon which the promise was made, the promise attaches to the consideration so performed, and renders the promisor liable. After the promisor has had the benefit of the consideration for which he bargained, it is no defence to say that the promisee was not bound by the contract to do the act. (Addison on Contracts, 13, and cases cited; 1 Parsons on Contracts, 451; Sands v. Crooke,46 N.Y., 564, 570.)

The appellant contends that the impropriety of the call of Currie, Martin Co. was clear beyond all doubt, and he refers to the decision of the case of Currie v. White as establishing this proposition. It is true, that by that decision, the defendant was fortunate enough to escape the large loss for which he was liable on the construction of the contract claimed by Currie, Martin Co., through their inadvertence in not tendering the funds to pay for the additional stock. But the defendant's construction of that contract, on the basis of which he entered into the speculation, and claimed that a delivery of 1,000 shares of the watered stock would be a compliance with his contract under all circumstances, was not sustained by that decision. That point was the main subject of controversy between them, and had Currie, Martin Co. taken the proper steps to obtain the benefits to which the contract entitled them, the call would have been proper. The defect in their manner of proceeding was developed in the subsequent litigation, but was not pointed out or insisted upon at the time. Both parties were mistaken in respect to their rights, and it was a case where prudence would have dictated to the plaintiff to make the deposit and avoid all risk of suspension. But the appellant contends that a contract to indemnify against a neglect to exercise ordinary prudence is contrary to law. I know of no such principle as applicable to a case like the present. The prudence which might have been exercised in the present case was that of submitting, temporarily, to a demand supposed to be unjust, but compliance with which involved no permanent loss, rather than resisting it under such circumstances that great damage would ensue. In such a case I see no illegality in a contract by a third party, who conceives himself interested in having the demand resisted, agreeing to indemnify the person upon whom the demand is made, against the loss arising from such resistance. The illustrations given on the argument are those of threatened injury to the person, or acts of violence, in which considerations of public policy may intervene, but no such considerations enter into the present case. It is further claimed that unless the the indemnitor has an actual interest in having the demand resisted, or unless such resistance is in fact a benefit to him, his promise is nudum pactum. This proposition cannot be sustained. Injury to the promisee is a good consideration, even in the absence of benefit to the promisor. It cannot be supposed that the defendant would have made the agreement in question, unless be believed that it would benefit him in some way. Of this he was the sole judge, and the validity of the contract does not depend upon the correctness of his judgment in that respect; especially after the plaintiff had sustained the contemplated damages by performance on his part.

The judgment should be affirmed.

All concur, except FOLGER and MILLER, JJ., absent.

Judgment affirmed.