text:
    McCammon, administrator, vs. Worrall and others.
    Where the owner of premises subject to the lien of two mortgages given in 1810, and of a judgment docketed in 1815, and of a third mortgage given in 1816, sold the premises to W. with warranty subject to the payment of the three mortgages, the purchaser being ignorant of the existence of the judgment; and where the premises were subsequently sold and conveyed by the sheriff to the plaintiff in the judgment, under an execution issued thereon, and W. subsequently purchased the premises from the plaintiff in the judgment; Held, that W. was entitled to hold the premises discharged .of the lien of the third mortgage, which was overreached by the sale under the prior judgment.

      Held further, that if the premises had not been subject to any other incumbrances than the three mortgages mentioned in the original conveyance to W., the premises in the hands of W. would have been the primary fund for the payment of all the mortgages, and the grantor would have been relieved from personal liability for the payment of the debts secured by such mortgages.
    An executor or administrator who brings a suit in chancery in good faith for the recovery of a debt which he has reason to suppose is equitably due by the defendant, will not be charged personally with the costs of the latter in defending the suit.
    A decree cannot be so far reversed or modified upon an appeal as to deprive a party to the suit below, but who is not made a party to the appeal, of any rights which he acquired by the decree,
    This was an appeal, by the defendant Worrall, from a decree of the late assistant vice chancellor of the first circuit. On the 12th of April, 1816, E. Sturtevant was the owner of lots No. 44 and 45, in Elm-street in New-York, and of two other lots in Duane-street, subject to the lien of two mortgages belonging to the estate of J. Bogert deceased, executed in 1810 and 1812, and also subject to the lien of a judgment in favor of the defendant B. De Forrest, for $2259,56, docketed the 18th February, 1815. Sturtevant mortgaged the two lots on Elm-street to John Mc-Cammon, the complainant’s intestate, on the 12th of April, 1816, to secure the payment of $2000 in one year, with interest. In July, 1818, Sturtevant and wife conveyed the one half of the two Elm-street lots to the defendant H. Worrall, with general covenants of warranty, subject to the payment of one equal half of the moneys due and to become due upon the mortgages to McCammon and to Bogert’s estate; and in August, 1819, Stur-levant and wife conveyed the other undivided half of these lots to Worrail, with warranty, subject to the payment of the whole, of these mortgages. And as the defendant Worrail alleged in his answer, at the time he received these conveyances respectively, he was ignorant of the existence of the lien of the judgment of De Forrest upon the premises. In December, 1819, De Forrest took out a fi. fa. upon his judgment, for the $2259,56, and interest from February, 1815; and the two lots on Elm-street were sold by the sheriff, in January, 1820, under such fi. fa., and they were bid in by the defendant Keeler, as the agent for De Forrest, for $1000. De Forrest shortly afterwards sold the two lots to Worrail for $2000, subject to the lien of the mortgages due to the estate of Bogert, which were prior to the docketing of the judgment.
    The bill in this cause was filed, between nine and ten years afterwards, to foreclose the mortgage given to McCammon ; upon ■ which no interest had been paid subsequent to 1819. And Wor-rail, De Forrest, Keeler, R. McQ,ueen, and the executor of Bogert were made defendants therein. The bill charged that the premises in question were released by De Forrest from the lien of his judgment, and that the judgment was subsequently assigned to Worrail, or .to some one for his use; and that Worrail procured the execution to be issued, and the property to be bid in by Keeler for his benefit, and' that Keeler afterwards conveyed the same to him. These allegations, however, were' fully denied by the several answers of Worrail, and De Forrest and Keeler; by which answers it appeared that De Forrest, after Sturtevant had attempted to obtain a release of the premises from the judgment for much less than the amount due, by a false representation that McCammon’s mortgage was older than the judgment and that the incumbrances which were prior'to the judgment were to the full value of the premises, caused the execution tobe issued and the premises to be bid in for him, by Keeler, for the., sum of $1000; and that he subsequently sold the premises to Worrail for $2000, as above stated. And these answers were fully supported by the testimony of E. W. King, who was the attorney of De Forrest in the judgment.

      D. Lord, for the appellant.

      H. Nicoll, for the respondents.
   The Chancellor.

If the answer of Worrall is to be credited, and I see no ground whatever for impeaching it, he has not only the legal title to the premises, discharged of the lien of the complainant’s mortgage, but has also the equitable right to hold them as against the complainant’s claim.

The assistant vice chancellor is right in supposing that under the two deeds from Sturtevant to Worrall, if there had been no other, incumbrances than the mortgages mentioned in those deeds, the premises would have been the primary fund to pay off and discharge the McCammon mortgage, so as to relieve Sturtevant from personal liability. But when Worrall was after-wards compelled to pay the $2000 to De Forrest, to obtain the legal title to the premises which the latter had acquired under the sheriff's sale upon the execution issued on -the judgment, neither Sturtevant nor McCammon had any right, either at law or in equity, to insist that the premises, in the hands of Worrall under his subsequently acquired title, should Still be subjected to the payment of the $2000 mortgage of McCammon, the lien of which was overreached and discharged by the title received from De Forrest.

The assistant vice chancellor, however, has based his decree upon the supposition that, as there Is no evidence that Worrall ever paid the $1584, which, as appears by the testimony of Bo-gardus and the articles of dissolution, was to be paid to Sturte-vant at the time of the dissolution of the copartnership, the property in his hands ought to be subjected to the payment'of this larger sum' of $2000, which was due from Sturtevant'to McCammon. The short answer to that is, that no such claim is made in the complainant’s bill, and no such fact was in issue in the case. The defendant Worrall therefore has had no opportunity to prove that he fully paid to Sturtevant all that was due to him upon the copartnership account. And after the lapse of ten years, the legal presumption was that it had been paid; unless there was some proof to the contrary. Again, Sturtevant, or his personal representative if he was dead, was a necessary party to a bill to adjust the accounts between Worrall and Sturtevant arising under the agreement for the dissolution of the copartnership.

I have not been able to find any thing in the pleadings or testimony to show that lots No. 22 and 24, in Elm-street, where, by the articles of copartnership, the business was to be carried on, were the same as. lots No. 44 and 45 in that street which are the premises in question in this suit; yet the vice chancellor assumes that to be the fact, and perhaps he may be right. But there is nothing in the deed of the 7th of July; 1818, which was given more than four months after the commencement of the copartnership, or in the subsequent deed of August, 1819, to show that the premises in question were ever considered or treated, by either of the parties, as partnership property; although if the lots No. 22 and 24 Elm-street mentioned in the copartnership agreement of March, 1818, as the place where the business was to be carried on, were in fact the premises in question, it would have been perfectly proper that each partner should own one half of the property, to prevent any question as to the payment of rent from the one to the other.

I think the assistant vice chancellor, however, has done Worrall great injustice, in supposing that his answer is so entirely contradicted by testimony, not only in the main fact of his knowledge of the judgment at the time he took the deed, but in other particulars, as to be wholly unworthy of credit; and also in supposing that he was a party to the fraud which was attempted to be practised by Sturtevant upon De Forrest. The conclusion at which my mind has arrived upon the whole case is, that the answer of the defendant Worrall is true; and that General Bo-■gardus, the witness, after the lapse of more than sixteen years, made a mistake as to the time when the release of the judgment was brought to him. Such release, I think, was in fact brought to him after the deed had been executed and recorded; and probably after the payment of the interest on the McCammon mortgage in October, 1819. It appears that Bogardus was the attorney of Worrall in all his transactions about that time; and he must have been frequently called upon by Worrall in relation to his business matters. It would not, therefore, be surprising that the General, after such a lapse of time as occurred before he was called on to testify, should have mistaken the precise time and order in which events occurred, and their necessary connection with each other. The question whether the judgment was older or younger than the mortgage to McCammon, was not material to the execution of the deed. For Worrall,'if he knew of the existence of the judgment, would want it discharged before he took the conveyance, whether it was older or younger than the mortgage, which was to remain a lien upon the mortgage money in his hands. It is wholly improbable, therefore, that the deed was executed at the time the release was taken to Bogardus, as the counsel of Worrall, to see whether it was such an one as would discharge the premises from the judgment; or that he accepted the deed after he carried back the release to King, and'was told by him that he had discovered that the judgment was older than the mortgage, and that the agreement to release would not be carried into effect.'

My conclusion, from the pleadings and proofs, is that some other cause delayed the execution of the papers, after they were drawn, until the 30th of August, 1839, when the deed, dated the 25th of that month, .was executed and acknowledged, not in the presence of General Bogardus, but before N. B. Graham, and was witnessed by the latter and by his son N. B. Graham jun.; and that botli deeds were put on record by Worrall himself, on the 3d of September, 1819. For it appears by the register’s memorandum, on one of the deeds, that it was recorded for and at the request of Henry Worrall. The articles of dissolution, which provided for the payment of the $1584, may have remained in the hands of General Bogardus until the time when the release was brought to him for inspection ; as there might be a good reason for retaining that until Worrall had inquired and satisfied himself as to whether he had to pay off any incumbrances on the premises. Worrall, in his answer, swears that he discovered for the first time that De Forrest had a judgment which constituted a lien upon the premises, some short time after he had received the two deeds; that is, I presume, the last of the two deeds. And that he communicated the fact to Stur-tevant, who assured him the judgment was subsequent to McCammon’s mortgage, and that he could procure a release for far less than the amount of the judgment. The answer also states that, according to the belief of the defendant Worrall, the time when the release was handed to him to be shown to his counsel, was some time in November, 1819. As to the time when this release was thus delivered to him, his answer is corroborated by that of De Forrest; who swears that the time when Sturtevant called upon him to get him to give the release was about the first day of November, 1819; and that shortly after, in pursuance of the agreement made with Sturtevant, he executed the release, and delivered it to Worrall to be shown to his counsel. It is true, Mr. King, in his testimony, speaks of the time when Sturtevant first spoke to him about releasing the judgment, as in or about the month of August. But when he first saw his client and communicated the proposition to him, or whether Sturtevant had not seen the client personally, previous to the time when the release was drawn, as De Forrest in his answer swears he had, Mr. King does not state, in his testimony. And as he was the solicitor and had drawn both the answers of De Forrest and of Worrall, it is hardly probable that he meant to be understood that his recollection differed from theirs as to the time when the release was given to Worrall, to be shown to'General Bogardus as his counsel.

Again; the consent to the issuing of the execution was not signed until the 12th of November; and King swears that he obtained it the first time he saw Sturtevant after he discovered that the judgment was older than the mortgage, and the release was returned. And it is hardly probable that if this intended fraud of Sturtevant was discovered as early as the 80th of August, when the deed was acknowledged before Mr. Graham, or on the 3d of September, when it was actually recorded, that King or De Forrest would have waited two or three months before they attempted to enforce the collection of the judgment. The reasonable presumption from these facts, therefore, is that the release was shown to Bogardus at the time stated in the answers of Worrall and of De Forrest, and not befqre the delivery of the deed as the General supposed. And that after the release was returned, and Worrall was informed by King that De Forrest had been imposed upon, by the false representation of Sturtevant that the mortgage of McCammon was older than the judgment, Worrall communicated that fact to Bogardus his counsel; perhaps as a reason why the agreement for a dissolution should not be delivered to Sturtevant unfil some other arrangement was made between them; if that agreement was still in the hands of Bogardus. Whether it remained in the hands of Bogardus until the taking of testimony in this cause, and was produced by him, on the part of the complainant, or went into the hands of Worrall and was produced as an exhibit on his part, I am unable to ascertain from the papers before me; as there is no mark on this exhibit showing which party produced it on the examination of witnesses. But I infer from the testimony of Bogardus, and his reference to this exhibit, that it was a paper remaining in his hands.

I have been unable to discover upon what grounds the assistant vice chancellor arrived at the conclusion that Worrall was a party to the fraud attempted to be practised upon De Forrest, in direct contradiction to his sworn answer, that Sturtevant represented to him, when he ascertained the existence of such a judgment, that it was junior to McCammon’s mortgage and that he could get it released for a small sum. I have before shown that Gen. Bogardus must have been under a mistake in supposing that the question as to the existence of this judgment, and whether it was junior or senior to the mortgage, arose before {he execution of.the deeds. Independent of this, there is not a particle of testimony to show that Worrall was attempting to practise a fraud upon De Forrest by a false representation as to the priority of the mortgage. And the fact that he refused to receive the release when it was tendered to him, and to pay the $800, which would have been due from him under the agreement if a release could be obtained, without consulting his counsel in the first place, is a strong circumstance in his fqvor. For if he had suspected that the judgment was older than the mortgage he would have been anxious to obtain the release immediately, before De Forrest or his attorney should have ascertained the fact. The conclusion at which I have arrived on this question, therefore, is that Worrall as well as De Forrest were imposed upon by Sturtevant, in this matter; if the latter had not himself made a mistake as to the time when the judgment was actually entered.

How the matters were arranged .between Worrall and Sturte-vant, after it was ascertained that the judgment could not be released, does not appear, except from the answer of Worrall. And as the bill does not attempt to set up any equitable claim.arising out of any subsequent transactions between them, it is of no consequence whatever in this suit how they arranged the matter; as it could not affect the decision of this cause upon these pleadings.

The decree of the assistant vice chancellor in directing the lands of the appellant Worrall to be sold to pay the mortgage of the complainant, which mortgage was no longer either a legal or an equitable incumbrance upon the premises in question, after the sale by the sheriff, is therefore erroneous. It must be reversed, so far as respects the rights of the appellant and the respondent McCammon, as between themselves. But as I suggested on the argument, I cannot reverse or alter the decree so as to deprive other parties who have had no notice of the hearing upon this appeal, of any rights to costs, or otherwise, which they may have acquired by the terms of that decree. And as a part of the decree appealed from provides for the payment of the costs of Bogert and McQueen out of the proceeds of the appellant’s property, he must provide for the payment of those costs, or they must remain a charge upon the premises in question. So much of the residue of the decree as is appealed from must be reversed.

The circumstances of this case are such that an executor or administrator, suing in good faith to obtain a debt which he had reason to suppose was an equitable lien upon the premises in controversy ought not to be charged with costs personally; and I am also inclined to think that the costs ought not to be charged upon the estate of the decedent in his hands. I shall not therefore give costs to the appellant, as against the respondent, either in the court below or in this court.


source: Caselaw Access Project

author: The Chancellor.

license: Public Domain

text:
    Kitchen vs. Lee and Price.
    Where upon the dissolution of a copartnership between K. and L. the former conveyed his interest in the partnership effects to the latter, upon condition that- L. would pay the debts of the firm, and L. subsequently refused to pay such debts upon the ground that he was an infant; Held that the infant could not retain the partnership effects and at the same time refuse to perform the condition upon which they were assigned to him.

      Held also, that if he elected to rescind the agreement upon the ground that he was an infant at the time it was made, K. had a right to insist that the partnership effects should be applied to the payment of the debts of the firm in the same manner as if the agreement had not been made.; except so much thereof as had been sold to a bona fide purchaser and paid for, without notice of the complainant’s rights,
    An infant cannot retain property, purchased by him, and at the same time repudiate the contract of purchase under which he received the property, i And where the infant, after he becomes of age, repudiates the sale, the title to the property remains/ in the vendor, as between such vendor and the infant.
    This was an appeal, by the defendant Lee, from a decretal order of the vice chancellor of the first circuit, overruling the appellant’s plea. In February, 1841, the complainant and the defendant Lee entered into copartnership in the mercantile business in New-.York; and during the continuance of such copartnership they, as copartners, contracted debts by the purchase of goods upon credit. In September, of the same year, the com-' plainant retired from the business, and left Lee to carry it on' alone; and relinquished to him the goods of the firm, amounting to about $4500, upon condition that Lee would pay or pro-, cure to be paid the debts then due from the firm, and would indemnify the complainant against the same. The bill stated ¡ that previous to the complainant’s retiring from the firm, the defendant Lee represented to him that he was twenty-one years; of age; but that subsequent to the dissolution he had refused to ¡ pay the debts of the firm, upon the ground that he was an infant j and not legally liable to pay such debts; 'and that he had sworn to the truth of a plea of infancy, in a suit at law brought against, him by some of the creditors. The bill also alleged that a pre-j' tended sale of the goods had been made, by Lee, to the defendant Price, subsequent to the dissolution of the copartnership; but the bill charged that the same was made without consideration, and was made with a full knowledge on the part of the defendant Price that the debts of the copartnership remained unpaid, and that the sale to him was fraudulent as against the com-plainaht. The bill prayed for an injunction, and for a receiver, and that the goods might be applied to the payment of the copart-nership debts, or for such other relief as might be proper upon the case made.
    To this bill the defendant Lee pleaded that at the time of making the agreement to pay the copartnership debts, as stated in the bill, he was an infant within the age of twenty-one years, and that the complainant had notice of the same.

      J. M. Martin, for the appellant.

      A. P. Man, for the respondent.
   The Chancellor.

The plea in this case is founded upon the supposition that the complainant is not entitled to any relief whatever, if the defendant Lee, as an infant, was not bound by his contract to pay the debts of the copartnership. It does not follow, however, that the complainant is without remedy in this court, even if Lee is not legally bound by his agreement upon the dissolution of the copartnership. The contract was one which he might affirm or repudiate at his election; But he ; cannot be permitted to retain all the copartnership effects, and at thfe same time refuse to perform the condition upon which the complainant’s interest in the effects of the firm was to become his property. If the defendant Lee, therefore; elects to rescind the agreement, made upon the retiring of the complainant from the business, the latter has a right to insist that his interest in the copartnership effects shall be applied to the payment of the debts in the same manner as if thé dissolution had not taken place; unless the goods have gone into the hands of a bbná fide purchaser who had actually paid for them before he had áhy notice whatever of the complainant’s rights.

The rule of law on the subject is, that an infant cannot be permitted to retain the property purchased by him and at the same time repudiate the contract upon which he received it. (Lynde v. Budd, 2 Paige's Rep. 191. Deason v. Boyd, 1 Dana's Rep. 45. Cheshire v. Barrett, 4 McCord's Law Rep. 241.) If the goods in this case had belonged to the complainant exclusively at the time of the agreement, and the infant had repudiated his agreement when he became of age, trover or re-plevin would have been the proper remedy for the goods if they remained unchanged. (Badger v. Phinney, 15 Mass. Rep. 359.) But this being copartnership property, previous to the agreement, the only remedy of the complainant was in this court. And this plea of infancy is not a full defence to the case made by the bill. It was properly overruled, therefore, with costs. But as it is possible that the defendant Lee has not, since he became of age, done any act to affirm the contract made with the complainant upon the dissolution of the copartnership, he miist be permitted in his answer to set up the defence of infancy so far as to protect him from any personal liability arising out of the agreement mentioned in the bill, except such liability as may result from his repudiation of the agreement. This, if it had been asked for, would have been granted of course by the vice chancellor. Or the plea would have been permitted to stand for an answer, if the defendant had requested it; although that would not have been beneficial to him, as it would have deprived him of the power of setting up any othe.r matter of defence.

The order appealed from must be affirmed with costs, but without prejudice to the right of the defendant to set up the de-fence of infancy in his answer, as above suggested, so far as it can avail him


text:
    Cobb vs. Goodhue and others.
    Where the complainant applied to the several defendants to assist him in testing, by actual experiment, his supposed improvement in generating steam and applying it to the propelling of steamboats, and they agreed to take stock in a fund of $16,500 wherewith to build a steamboat, which was subscribed accordingly; and -the complainant subscribed $7500, and the defendants G. & Co. $3,500, which they paid, and the defendants B. & B. subscribed $3000, and agreed to build the boat for the $16,500, but actually expended about $2000 more in extra work upon the boat by the direction of the complainant, who subsequently purchased the interest of B. & B. in the boat; Held, that the subscribers to the stock were not liable to the complainant for any thing beyond the several amounts subscribed by them respectively.
    And the complainant having caused the boat to be sold at auction, and having bid it in himself for $4000, and afterwards sold it for $14,000; Held, that he was bound to account with G. & Co. for their proportionate part of the proceeds of the last sale, after deducting from such proceeds a proportionate share of the extra cost of the boat beyond the $16,500.

      Held further, that the defendants G. & Co. could not, upon the complainant’s bill, obtain a decree against him for their share of the proceeds of the sale of the boat; he having entirely failed in his suit so as not to be entitled to a decree for an account.
    This case came before the chancellor upon an appeal by the complainant from the whole of the decree of the late assistant vice chancellor of the first circuit; and also upon a cross appeal by the defendants, Goodhue, Perit and Durand, from so much of the decree as declared and adjusted their proportions of the proceeds of the sale of the steamboat Despatch, as between them and the complainant. The facts of the case, according to the conclusions at which the chancellor arrived upon the pleadings and proofs, were substantially as follows: P. Burnet, supposing that he had discovered or invented a new and useful improvement in the manner of generating steam, or in the application thereof to steamboats, transferred his interest in such improvement to a voluntary association, by the name of the Burnet Steam Power Company. And the complainant having great confidence in the value of the improvement, he and the defendant Brewster and H. P. Hardy, entered into a contract with the company to secure to themselves a part of the benefit of the improvement when it should be patented; the precise nature and terms of which agreement appear by an exhibit. But, for the purpose of testing the supposed, improvement, it became necessary for the complainant and his two associates to build a steamboat into which the improved machinery of Burnet might be placed. For this purpose the complainant applied to the defendants to assist him in the experiment. And in June, 1836, he procured from the defendants Brown & Bell an estimate of the terms upon which the latter would build the steamboat for the reception of Burnet’s improved machinery to try the experiment.; which was as follows: “Estimate to build a steamboat of the following dimensions, viz. 160 feet on deck, 20 “ beam, 11 “ deep. To do all the ship carpenter’s work, including sponsons to fit her for sea. To have two masts, and other spars, and copper fastened, for the sum of sixteen thousand five hundred dollars, ($16,500.) Payments £ when the keel .is laid; £ when the frame is raised ; £ when the deck is laid ; £ in 60 days after she is launched.
    We the subscribers have agreed to the above.
    New-York, 29 June, 1836. Brown & Bell, N. Cobb.”
    On the back of this agreement the following sums were after-wards subscribed, in this form:
    “ Subscribers to the within agreement for St. Boat.
    N. Cobb, five thousand dollars.
    Brown & Bell, three thousand dollars.
    L. Brewster, three thousand dollars.
    Goodhue & Co. twenty-five hundred dollars.
    C. Durand, one thousand dollars.
    N. Cobb, the balance, two thousand dollars.”
    The boat was built by Brown & Bell, under the* direction of the complainant, who paid th em the $16,500, after deducting tb ere-from the $3000 subscribed by them; and Goodhue & Co. and C. Durand paid to the complainant the $2500, and the $1000 subscribed by them. The experiment entirely failed. And in fitting up the boat and making the experiment, the complainant expended a large sum beyond the §16,500. After the failure of the experiment and about the 1st September, 1838, the complainant caused the boat to be put up at auction, and bid it in himself for §4000, having previously purchased from Bell his interest in the §3000, subscribed by Brown &. Bell. The complainant subsequently sold the boat, Burnet’s machinery being taken out, to the Georgia Steam Packet Company, for §14,000; $9000 of which was paid to him in cash, and the residue was taken by him in the stock of that company. In addition to the $16,500, Brown &• Bell paade a claim against the complainant for extra work upon the boat, and for wharfage, &c., of about $2250, which the latter refused to pay. And when the complainant afterwards sold the boat to. the (Georgia Steam Packet Company, Brown refused to give the builder’s certificate that the boat was built for the complainant, unless he settled this bill for extra work, and paid Brown for his interest under the subscription of Brown & Bell for $3000 towards the building of the boat. Those parties subsequently, and about the last of October, 1838, compromised, by the complainant’s giving to Brown $2700 for the bill of extra labor, and for the $1500 as his half of the subscription of Brown &, Bell; and the certificate was thereupon given that the boat was built for Cobb.
    The complainant afterwards filed his bill in this cause, seeking to charge Brown & Bell, and Go.odhue & Co., and Durand with a proportionate share of all his expenses incurred in building the boat and in the experiments therewith, beyond the $16,500; and claiming that he was duly bound to allow towards such expenditures the $4000, for which he bid in the steamboat when he caused it to be put up and sold at auction. The defendants Goodhue, Perit and Durand, composing the firm of Good-hue & Co., by their answer, denied that they were in any way interested in the profits or losses to be derived from the experiments with the boat, or in the Burpet improvement, or liable for any thing towards the building of the boat, beyond the sums subscribed and paid by them; and they alleged that these sums were subscribed at the solicitation of, and as an accommodation to,, the complainant, to assist him; and under an expectation that the same would be repaid to them out of the proceeds of the sale of the boat. And they insisted that the sale of the boat was unauthorized ; and they claimed their proportionate share of the amount for which the complainant afterwards sold the same to the Georgia Steam Packet Company, in proportion to the amount of their subscriptions. And Brown & Bell by their answer denied that they were ever liable for the expenditures of the complainant beyond the amount of the $3000 subscribed by them. And they set up the sale of their interest in the boat to the complainant, and the compromise between Brown and the complainant, as a bar to any claim on them, or on either of them, on account of the boat or the expenditures thereon, or on account of the moneys paid by the complainant on such compromise.
    The assistant vice chancellor .decided that under the compromise of October, 1838, Brown & Bell were not liable to any further payment on account of the expenses of the building of the boat; and that they were not entitled to any part of the proceeds of the sale. He, therefore, decreed that the complainant’s bill, as to Brown & Bell, be dismissed with costs. He also decided that Goodhue, Perit and Durand were not liable to account to the complainant for any part of the expenses, costs, and charges incurred or expended by him upon the boat, beyond the $3500 subscribed by them, and which they had paid before the commencement of this suit. But instead of dismissing the bill with costs as to these defendants, he proceeded to adjust their claims against the complainant, and to make a decree in their favor for what he considered their share of the proceeds of the sale of the boat by the complainant. In making such adjustment, however, he decided and decreed that the complainant was only to be charged with the $4000, for which he bid in the boat in September, 1838, and not for the $14,000, fof which he sold the boat a few weeks afterwards ; and that these defendants were to receive such proportions of the $4000 as their subscriptions towards building the boat bore to the cost of the boat; and that in estimating the cost of the boat, for the purpose of such adjustment, the expenses of additions to the boat of a substantial and permanent nature, beyond the $16,500, should be included.

      J. Anthon, for the complainant.

      J. R. Whiting, for Brown & Bell.

      J. Coit, for Goodhue & Co.
   The Chancellor.

The first question for consideration is, whether the decree was erroneous in directing the bill to be dismissed with costs as to the respondents Brown & Bell. And upon that question, I think there is no room to doubt that the compromise of October, 1838, put an end to all claim of the complainant upon either of those defendants for any expenditures for or on account of the boat. Whatever may be the construction of the original agreement, the testimony establishes the fact that the complainant, about the last of October, 1838, purchased whatever interest Brown had, under the subscription of Brown & Bell, or otherwise, in the subject matter of that agreement ; and that he had previously purchased the interest of Bell therein. And it is evident that it was the intention of the parties that this compromise should put an end to all claims between them on account of the boat, or of thq building thereof; and that the complainant should thereafter be entitled to all the rights of Brown & Bell under any previous arrangements between the parties, whatever those rights were. By the purchase of their interests in the concern he took them cum onere. And the payment by him of a portion of their claim for their extra work upon the boat is wholly inconsistent with the idea that either party then supposed that he was afterwards to be entitled to recover back from them a part of the amount thus paid for the extra work and for other expenditures made by him.- Again, if there was any debt previously existing against Brown & Bell on account of the building of the boat, &c., it was a partnership debt; as they subscribed the agreement as copartners originally; and a compromise with one of the copartners necessarily discharged the other, although he was not present.

But it is said that Brown refused to give the complainant the requisite certificate, to enable him to enrol the boat in his own name, unless this compromise was made; and that therefore it ought not to be binding upon him. It is evident, however, from the testimony, excluding that of Brown, that the complainant was not entitled to the certificate in his own name, so as to enable him to sell the boat without the assent of Brown; whether Brown’s interest in the boat was a mere lien thereon, for his half of the $3000 subscribed by Brown & Bell, or was the interest of a joint owner. The putting up the vessel at auction, by the auctioneer, under the direction of the complainant, and the purchase by the complainant himself, was a mere nullity as against the other persons who were interested in the .boat, if they did not afterwards consent to ratify that sale. (Hawley v. Cramer, 4 Cowen’s Rep. 717. Joy and others v. Childs, in the court of errors, Dec. 27th, 1843.) And there is no evidence in the case to show whether the claim of Brown & Bell, for extra work upon the boat, was or was not a fair claim against the com-, plainant. The whole therefore was a fair subject of compromise between the parties, and Brown was right in refusing to give the certificate until his claim upon the boait, as well as that for the extra labor, was in some way adjusted. It would be a violation of all principle, then, for any court to go back beyond that time for the purpose of settling the rights of the complainant and these two defendants. The part of the decree dismissing the bill with costs as to Brown & Bell, must therefore be affirmed, with their costs, upon the appeal, to be paid by the complainant.

I think the assistant vice chancellor was also right as to the construction of the written subscription of Goodhue & Co., and of Durand, one of the members of that firm, in relation to the building of the boat; when taken in connection with the answer, which is responsive to the bill, and the testimony in the case, so far as either party has-been able to obtain any testimony on the subject. Taking all the circumstances into consideration, it is very evident that Durand, who subscribed for.himself and for his firm of Goodhue & Co., did it to assist the complainant in his experiment; without any expectation on the part either of the complainant, or of Durand or his copartners, that as between the complainant and them, they were in any event to be liable for any more than the $3500, which they subscribed and paid. And they were probably willing to risk that sum to aid him in the experiment, without any other security for its repayment than their proportionate share of the proceeds of the boat, without the machinery of Burnet, if the experiment failed. They might also have expeeted that the complainant would make them some further compensation for their risk, in case his experiment should prove successful. But there does not appear to have been any definite agreement or understanding on that subject.

The assistant vice chancellor having arrived at the conclusion, however, that the complainant was not entitled to the account and relief prayed for in the bill, the whole foundation of the suit failed; and he was not authorized, without the assent of the parties, to proceed and make an adjustment of the claims of the defendants against the complainant, on account of the proceeds of the sale of the vessel, without a cross bill. But he should have dismissed the complainant’s bill against Good-hue & Co. and Durand, with costs; and without prejudice to their rights at law, in suits which might be brought by them against the complainant for their respective shares of the proceeds of the sale of the vessel, or in any suits which they might institute in this court to recover their rateable proportions of such proceeds. The principle upon which the court below directed their proportions of the proceeds of the vessel to be estimated, I think, was right as between the parties. For if the complainant had laid out more than the $16,500 upon the boat, in additions of a substantial and permanent nature, those additions would necessarily enhance the value of the boat, upon a sale ; and he might very properly be considered as a subscriber to that additional amount, towards the building of the boat. In an equitable adjustment of the proceeds of the sale, therefore, his proportion of those proceeds should be increased pro tanto.

But as I have before said, in relation to the claim of Brown & Bell’, the» sale of the boat by the complainant and the purchasing it in himself, for less than one third of its actual value, was a mere nullity, as against Goodhue & Co. and Durand, if they had any interest in, or lieu upon the boat. It is true there is some evidence that 'Goodhue & Co. assented to a sale. But there is not a particle of testimony to show that either of these defendants intended to consent that the complainant should have the property put up in their absence and bid it in himself; and that such a transaction. should be considered a real sale as to them. In the adjustment of their claims, therefore, the amount for which, the complainant actually sold the boat on the 10th of October, 1838, and not the nominal sum at which it was struck off to him, forty days before that time, was the proper sum to be apportioned between the parties.

If both parties consent to an adjustment of the amount upon these principles, without the necessity of further litigation, the decree of the assistant vice chancellor, as between the complainant and those defendants, may be modified accordingly; and without costs to either of them as against the other, upon this appeal. But if a stipulation to that effect is not filed within thirty days after pronouncing this decision, this court must make the only decree which it can properly make upon this bill and upon the facts of the case; that is, to affirm so much of the decree of the assistant vice chancellor ip, relation to the rights of these particular parties as declares or decrees that the defendants Goodhue, Perit and Durand, are not liable to account to the complainant for any part of the expenses, costs and charges incurred and expended by him upon the steamboat Despatch in the bill mentioned, beyond the specified sum of $3500, which sum has been paid by them in full satisfaction and discharge of their subscription ; and so much of the decree as awards costs to those defendants; and to reverse the residue of the decree which adjusts the claims of these defendants for their proportions or shares of the proceeds of the sale of the boat, and dismiss the complainant’s bill as against Goodhue, Perit and Durand, without prejudice to their rights to proceed either at law or in equity, as they may be advised, for their proportionate shares of the proceeds of the sale of the boat.

       Affirmed on appeal to the court for the correction of errors, August 26, 1845.


text:
    Mickles vs. The Rochester City Bank and others.
    It seems that the court of .chancery will not interfere to restrain persons claimingto he the rightful trustees of a corporation from acting as such upon the ground that they have not been duly elected; and that the remedy of corporators to contest the validity of the election of such trustees, is by an application to the supreme court.
    Although a corporation is deemed to have surrendered its charter in consequence of nonuser, as declared in the thirty-eighth section of the article of the revised statutes relative to proceedings against corporations in equity, the corporation is not actually dissolved before proceedings have been instituted, either at law or in equity, to have such dissolution judicially declared. And a judgment recovered against such corporation before the- institution of such proceedings, and a sale of the corporate property upon an execution issued on such judgment, will be valid and effectual to transfer the title of such property to the purchaser.
    Whenever any corporation, other than those which are excepted from the operation of the article of the revised statutes relative to proceedings against corporations in equity, has remained insolvent for a year, or has suspended its ordinary business, or has neglected to pay its ordinary and undisputed evidences of debt, for a year, any of its creditors, or stockholders, who have an interest in closing up its affairs, may file a bill in chancery against such corporation to have its dissolution judicially declared, and'to have its concerns closed up, and its property distributed, under the direction of the court.
    Whether a receiver appointed by the court upon such a bill, and in a case not provided for by the forty-fifth section of that article, will have the statutory powers of receivers of moneyed corporations, or only such powers as the court of chancery can confer upon receivers appointed in ordinary suits in that court? Quote.

    A corporation by nonuser and the suspension of its ordinary business, or by continued insolvency or the non-payment of its notes and other evidences of debt, for one whole year, does not become ipso facto dissolved. But the corporation continues to exist until its dissolution is judicially declared, by a decree of the court of chancery, or by the judgment of the supremo court upon a quo warranto.
    And until a decree of the court of chancery, or a judgment of the su preme court, has declared the surrender of the corporate franchises, and the dissolution of the corporation, any of the creditors of such corporation may proceed by suit, against it or its property, to obtain satisfaction of their debts • unless restrained by injunction.
    Upon a bill filed in the court of chancery against a corporation, to declare its dissolution, under the thirty-eighth section of the article of the revised statutes relative to proceedings against corporations in equity; the complainant may apply for an injunction to restrain creditors from proceeding at law to obtain satisfaction of their debts, and to allow them to come in and make themselves parties to his suit,
    The corporation is a necessary party to a bill in chancery to declare the dissolution of such corporation, and to have its property and effects distributed among its cred-tors and stockholders.

      But where the property of a manufacturing coiporation is all exhausted, and a bill is filed for the sole purpose of compelling its stockholders to pay the corporate debts out of their individual property, it seems that the corporation is not a necessary party to such bill, although its dissolution has not been judicially declared.
    A stockholder of a corporation, upon a sale of the corporate property, by the sheriff upon execution, may become the purchaser thereof for his own benefit; and if there is no fraud in the sale he is not accountable to any of the other stockholders, although the property is bid in by him much below its value.
    The stockholders of a corporation are neither tenants in common nor copartners ip reference to the corporate property, either before or after the dissolution of the corporation. Before the dissolution, the whole legal title is in the corporation; and after its dissolution it is in its directors or trustees, under the general provisions of the revised statutes on that subject, where no other disposition of the property is made by law.
    Where a judgment creditor of a corporation insured its real estate in the joint names of himself and of the corporation, and the property was afterwards sold under his judgment and bid'in by him, and after the sale such property was partially destroyed by fire, and the property was not redeemed from the sale; Held that he was entitled to the money received from the insurance company on account of such partial loss.

      Held also, that if the loss had happened before the sale, or if the corporation had redeemed the property from such sale, .the insurance money would have belonged to the corporation.
    This was an appeal from a decretal order of the vice chancellor of the eighth circuit. In February, 1840, F. M. Haight and three other persons associated together and incorporated themselves, under the general act relative to manufacturing in-corporations, by the name of “ The Genesee Cotton Mills,” with a capital "of $50,000, divided into shares of $100 each ; and R. Haight, A. Frost and A. Wolcott were duly appointed the first trustees of the corporation. Soon after the organization of the corporation, the trustees, by a by-law, fixed the time for the annual election of trustees on the first Monday of January in each year; but this by-law was never published as required by the statute, and no election was held under it' on the first Monday of January, 1841. In September of that year, however, an election was held under a special order of the old trustees, at which election two of the former old trustees were re-elected; and C. Frost was elected in the place of R. Haight. The secretary of the company gave notice of an election of directors for the first Monday of January, 1844; at which time the then stockholders met and elected the defendants Gould, Ward and Smith, trustees of the corporation. The Rochester City Bank, in June, 1841, became the owner of 163 shares of the stock of the Gen-esee Cotton Mills, and afterwards became the owner of 100 other shares. The complainant Mickles became the owner of 57 shares, and at the time of filing his bill, on the 25th of January, 1844, he claimed to be the owner of 210 shares. At that time R. Haight, one of the original trustees, was the owner of one share, and each of the defendants Gould, Ward and Smith owned one share, and J. Post owned twelve shares. And the complainant alleged that the owners of the remaining shares were unknown to him. In March, 1841, the Genesee Cotton Mills suspended the business of manufacturing, and never afterwards resumed it: and on the 6th of September of the same year, the trustees passed a resolution directing the agent of the corporation to close up its affairs as soon as the same could be done. On the 14th of October, the Rochester City Bank recovered a judgment against the manufacturing corporation for about $335, and in December of the same year, recovered another judgment for nearly $3000; and another judgment in October, 1842, for upwards of $6000, in a suit commenced in the preceding September. At the time the company suspended its manufacturing business, it was the owner of several lots of land and buildings thereon, in connection with water power, and of moveable machinery and other personal property. In November, 1842, executions were issued upon the first and third judgments against the corporation ; upon which executions the personal property of the corporation was sold and bid in by the bank for $575. And in February, 1843, the real estate was also sold upon the same executions, and was bid in by the bank for between nine and ten thousand dollars.' After the sale of the personal property, and a few days before the real estate was sold upon the executions, thp bank caused the moveable machinery to be insured in the name of the bank as owner and in trust; and also caused the real estate to be insured in the joint names of the bank and the manufacturing corporation. In December, 1843, the buildings were injured and the movable machinery was partially destroyed by fire. The insurance companies repaired the buildings and paid the bank $350 for the damage to the fixed machinery therein; and also paid to the bank $4200 for the damage to the moveable machinery by the fire.
    In January, 1844, the complainant, as one of the stockholders of the manufacturing corporation, filed his bill in this cause against the bank, and also against Gould, Ward and Smith, the newly elected trustees, and against R. Haight and J. Post, the two other stockholders whose names were known, stating in substance the above facts, and claiming a discovery of the amount which the bank had received upon debts of the corporation, which had been turned out to such bank in payment of the second judgment, and insisting that the corporation was dissolved before the issuing of the executions and the sale under the same, and that the bank was a tenant in common of the property with the complainant and other stockholders, and was bound to account to them as such for the property and for the moneys received from the insurance companies for the loss occasioned by the fire. The complainant, therefore, prayed that the manufacturing corporation might, by a decree of the court, be declared to be dissolved, and that a receiver of its property and effects might be appointed ; that the bank might be declared to hold the real and personal estate of the manufacturing company in trust for the stockholders, or that the sales thereof might be declared void; and that the bank might be required to account for the moneys received from the insurance companies; and that the real and personal property might be sold and the proceeds thereof distributed among the stockholders, after paying the debts due to the bank and to other creditors. The complainant also prayed foran injunction restraining the bank, and the defendaiits Gould, Ward and Smith, from selling, disposing of, Or otherwise interfering with any part of such real or personal estate, or the property or effects of the manufacturing company; and also restraining the bank from receiving from the sheriff a deed of the real éstate' sold upou the executions.
    The Rochester City Bank put in a demurrer to the whole bill for multifariousness; for a defect of parties in not making the manufacturing corporation a defendant; and in not making the trustees elected in September, 1841, parties; and generally for want of equity. The defendants Gould, Ward and Smith put in their answer to the bill, and moved to dissolve the injunction as to them. This motion and the demurrer were argued together, and the motion was granted and the demurrer allowed by the vice chancellor; and the bill was dismissed as to the bank. From the decretal order made thereupon the complainant appealed.

      D. Cady & E. Griffin, for the appellant.
    The corporation of the Genesee Cotton Mills became dissolved and surrendered its corporate rights and privileges by force of the 38th section of the article df the revised statutes relative to proceedings against corporations in equity. A corporation may by doing or suffering any of the acts specified in that section become dissolved, ipso facto, and without any process or judgment of a court of law or equity. If this position is not correct with respect to corporations created by special legislative enactment, or rather by special grant of the sovereign power of the state, it is nevertheless true with respect to associations under the act of 1811, relating to manufacturing companies, because these companies are voluntary associations or limited partnerships, formed or created by the act of the parties, and by consequence may be dissolved by the act of the parties. But if we are wrong on the question of the dissolution of the copartnership, still the bill can be sustained against the Rochester City Bank upon the other matters of equity stated in the bill; and if so, the demurrer being to the whole bill, must be overruled. The purchase of the real and personal property of the corporation, by the bank, was a purchase in trust for all the stockholders, or partners and associates in the corporation; and the assertion of -and attempt to acquire an absolute estate in the property purchased is inequitable, and a fraud upon the rights of the other stockholders or partners. The claim by the bank to retain the insurance moneys, for its exclusive and separate use, is inequitable and unconscionable, and the right of the complainant to have these moneys applied to the extinguishment of the debt of the bank against the company is sufficient to sustain the bill. The bill is not multifarious, for it is in substance a bill to settle a partnership; and every matter which would go to increase the assets of the partnership and diminish its liabilities, is a material subject of inquiry, and tends to the point in issue; and all persons interested, or who may be required to account, ought to be made parties. If we are right in supposing that the corporation is dissolved, then the corporation is not a necessary party. It cannot be sued, nor can it sue. The former trustees are not necessary parties, because it does not appear that they have any interest as stockholders, nor does it appear that they have in their hands any of the assets of the corporation for which they should account. They are then mere naked trustees under the act until a receiver is appointed. When the receiver is appointed, he will be entitled to all the property, and may require a surrender from the former trustees of any of the property which may be in their hands, whether they are parties or not.

      E. Peshine Smith, for the respondents.
    The corporation of the Genesee Cotton Mills was not dissolved quoad the complainant, by any of the acts or omissions charged in the bill. If the corporation is to be deemed dissolved, then the trustees of the corporation are the proper parties complainant. Whether the corporation be dissolved or not, the complainant makes no case to entitle him to any relief as against the Rochester City Bank. The bank is charged with no fraud, nor with any express trust, nor do the facts charged raise a trust by implication. This court has no jurisdiction in'respect to the affairs of corporations, except that declared by the article of the revised statutes entitled “ Of proceedings against corporations in equityand the complainant does not bring himself within that statute, he being a stockholder merely, and not a creditor, and not charging the stockholders with any fraud or breach of trust committed or contemplated.
   The Chancellor.

The question as to the validity of the election of Gould, Ward and Smith, as trustees, if the corporation is not actually dissolved, does not appear to be a proper subject of equitable cognizance. The legislature has provided a summary remedy, by an application to the supreme court, to set aside the election of these directors if it is illegal. (1 R. S, 603, § 5.) That court, therefore, is the proper tribunal to set aside the election if it has not been made in conformity to law. And there is no allegation in the bill that these new trustees are insolvent or irresponsible, so as to make it necessary for this court to interfere by injunction to restrain them from wasting the property of the corporation pending the application to the supreme court.

The complainant’s bill shows a case in which this manufacturing corporation is brought clearly within the provisions of the 38th section of the article of the revised statutes relative to proceedings against corporations in equity, which declares that by certain acts of nonuser incorporated companies shall be deemed to have surrendered their rights, privileges and franchises, and shall be adjudged to be dissolved. (2 R. S. 463.) Several questions are presented for consideration'upon this state of facts. The complainant insists that by the nonuser and suspension of the ordinary business of the corporation for one whole year the corporation became ipso facto dissolved; and that the judgments recovered after that time, and the sale of the property upon executions subsequently issued, were unauthorized and void, and gave no title to the purchasers of the property under those executions. The counsel for the respondents, on the other hand, insists that the corporation continues to exist until the surrender of its franchises has been duly declared by a court of law, upon a proceeding by quo warranto and that this court has no jurisdiction to declare the dissolution of the corporation upon a bill filed by a stockholder.

As to the first question, I have no doubt that the judgments and exéeutions, and the sale of the corporate property under them, before any proceedings had been instituted, either at law or in equity, to obtain a judgment or decree declaring a surrender of the corporate franchises and a dissolution of the corporation, was valid, And by the sale the purchasers acquired the legal title to the corporate property which was conveyed to them by the sheriff. The object of the statute was not to put an immediate end to the corporation for all purposes, at the termination of the year from which the insolvency or non-user commenced, so as to deprive its creditors of all the rights and remedies by suit against the corporation itself; but to enable the creditors, and all others who were interested in having the surrender of the corporate privileges and a dissolution of the corporation judicially declared, to take the proper proceedings for that purpose. Until a judgment upon a quo warranto, or a decree of this court, therefore, has declared a surrender of the corporate franchises and the dissolution of the corporation, any creditor is at liberty to proceed by suit, against the corporation and its property, to obtain satisfaction of his debt, in the same manner as if the alleged surrender by insolvency or non-user had not occurred. And if any of the creditors wish to prevent other creditors from obtaining a preference, they must file their bill for the purpose of obtaining a judicial declaration of the fact that the corporation has surrendered its corporate rights and franchises, according to the provisions of this 38th section, and for a decree declaring the corporation dissolved, and directing the appropriation of its property and effects to the payment of its creditors. Then, by an application under the 56th section of the same article, they may, if a proper case is shown, be entitled to an injunction restraining proceedings at law of the other creditors to obtain a lien and preference in payment out of the corporate property; and allowing such creditors to come in and make themselves parties to the suit in chancery.

The 38th section of the article before referred to has no immediate connection with the four sections which immediately follow it, and which appear to be confined to moneyed corporations ; nor with the two sections which precede it, which provide for the case where an execution at law against the corporate property has been returned unsatisfied. It is doubtful, therefore, whether a summary application, by petition and notice to the proper officers of the corporation, can be made-in the case of an incorporated company which is not a moneyed corporation, and where no execution at law has been returned unsatisfied. The object of introducing this 38th section into the article relative to proceedings against corporations in equity, when the same provision in terms was contained in the last clause of the fourth section of the title containing special provisions relative to certain corporations, (1 R. S. 603,) could have been for no other purpose, however, than to give to this court the power to decree and declare the surrender of the corporate rights and franchis.es, and to decree the dissolution, of corporations which were not moneyed corporations, in cases coming within the provisions of this 38th section. When any corporation, therefore, other than those mentioned in the last section of that article, has remained insolvent for a year, or has neglected or refused for that length of time to pay its ordinary and undisputed evidences of debt, or has for one whole year suspended the ordinary and lawful business for which the corporation was created, I think any creditor or stockholder, who has an interest in closing up its affairs, and having its effects applied to the paymeut of its debts or distributed among its stockholders, may file a bill in this court against the corporation, to have its dissolution judicially declared, and its concerns wound up under the direction of the court. Whether a receiver appointed upon such a bill, in a case not provided for by the 45th section, will have the statutory powers given, to receivers of moneyed corporations, or only such powers 'as this court can confer upon its receivers appointed in ordinary suits between party and party, is a question not necessary to be discussed here.

The objection raised by the demurrers, that the corporation itself is a necessary party to a bill, filed under this 38th section, to declare.the surrender of its 'corporate rights and privileges, and obtain a decree of dissolution, and to distribute its corporate property and effects among its stockholders, appears to be well taken. Where the corporate property of a manufacturing corporation is all exhausted, and the bill is filed against the stockholders by a creditor of the company, for the.mere purpose of enforcing the personal liability of the stockholders for the debts of the company, it may not be necessary to make the corporation itself a party, although .its dissolution has not been .judicially declared. But where the object of the bill is to divest the corporation itself of any of its property, or of any of its corporate rights or privileges, upon the ground that it has forfeited its charter or surrendered its franchises, the other defendants in the suit have a right to insist that the corporation itself shall be made a party ; to the end that the decree may be binding upon such corporation, and that the other defendants may not be subjected to future litigation with the corporation itself in relation to the same matters. In the present case, one object of the bill is to compel the bank to account for the money received for the insurance, which had been effected upon the real estate before the property was actually sold upon the execution. And a decree that the bank was not liable therefor, or that the bank should account for it to the complainant and other stockholders, would not prevent the manufacturing corporation from afterwards filing a bill for the same matter. For that decree would not be binding upon the corporation, nor be any evidence of the fact, as against the corporation, that it had surrendered its corporate rights and privileges.

It would be a matter of course to permit the complainant to amend, by making the corporation a party, if there was sufficient equity in the bill in other respects. But the principal object of the bill appears to be to set aside the sales of the property of the corporation, upon the ground that the sales were invalid,. In this, the complainant must necessarily fail, upon the allegations in the bill, even if the corporation is made a party. For the sales were valid, and gave a good title to the purchaser. And one stockholder of a corporation has a perfect right to become a purchaser, for his own benefit, at a sheriff’s sale of the corporate property upon an‘execution against the corporation; nor is he accountable to any other stockholder for such property, if there is no fraud in the sale, even where the property is bought in by him much below its value. The remedy of the other stockholders is to attend the. sale, upon the executions, and bid .up the property to its cash value, and thus prevent the same from being sacrificed. The stockholders of a corporation are neither tenants in common of the corporate property nor copartners, either before or after the dissolution of the corporation. Before the dissolution the whole title is in the corporation itself, as the legal owner; and upon its dissolution, if no other provision is-made, the whole title vests in the directors or trustees then in office, under the general provision contained in the revised statutes on that subject. (1 R. S. 601, § 9.)

This of course disposes of the whole question as to the insurance money received for the moveable machinery, as the property belonged to the bank at the time the insurance was effected. The insurance upon the buildings and fixed machinery was effected three days before the sale of that part of the property. And as it was effected in the joint names of the bank and of the manufacturing corporation, the $350, received for the damage to the fixed machinery, equitably belongs to the party who sustained the loss. If the fire had occurred before the sale, the amount of the proceeds pf the sale wouldhave been proportion ably diminished. The manufacturing corporation would in that case have sustained the loss and would equitably have been entitled to the money. But I infer from the bill that tlpe fire occurred after the sale. The loss, therefore, falls upon the purchaser at the sale, as the property was not redeemed within the time allowed by law for that purpose. If the corporation had elected to redeem within the year, it would have been entitled to this $350, as a part of the property redeemed ; that being the substitute for so much of the property bid off at the sale as was subsequently destroyed by the fire.

It is not stated in the bill that there is any property, or any effects of the corporation, other than the. property sold on the executions, which could give the complainant any interest in a formal decree declaring a dissolution of the corporation and directing its surplus effects to be distributed among its stockholders. It would, therefore, be a useless expense to the complainant to amend his bill and make the corporation a party. I presume then that no such amendment was asked for before the vice chancellor. The dismissal of the bill, as to the Rochester City Bank, was the necessary result of the allowance of its demurrer.

The bill being defective both in form and substance, the injunction should not have been granted as to any of the defendants. It was, therefore, properly dissolved upon the matter of the bill alone, and without reference to any thing contained in the answer of the other defendants.

The decretal order appealed from must be affirmed with costs.

       Affirmed on appeal to the court for the correction of errors, December 28th, 1845.


text:
    Franklin vs. Van Cott and others.
    Upon, a reference to a master to ascertain who are entitled to the surplus moneys brought into court in a foreclosure suit, the report on its face should show that all persons entitled to notice to attend upon the reference, were duly summoned.
    The report should also state what parties did appear before the master upon such reference. And if- they did not assent to the report, such report must be filed and duly confirmed, in the register’s office, before an application can he made to the court, for the payment of the surplus moneys in conformity with the decision of the master.
    Upon a reference as to surplus moneys, the master should ascertain the amount of such surplus and state it in his report. And if the party obtaining the reference is not entitled to the whole of such moneys, the master should ascertain and report who is entitled to the residue ; so that upon the coming in of the report, an order may be made disposing of the whole of the fund in court.
    Prima facie, the mortgagor, or the persons who are stated in the bill to be the owners . of the equity of redemption, are entitled to the surplus moneys brought into court under a decree of sale in a foreclosure suit. And if no person attends before the master and produces evidence of a better right, the master should report that the surplus moneys, or the balance thereof remaining unclaimed, belong to the persons thus prima facie entitled to the same.
    This was an application, by G. & W. Hastings, for the payment of $ 133, reported as due to them upon a judgment against the mortgagor, which was the first lien upon the surplus moneys brought into court upon the sale of mortgaged premises. It appeared by the report of the master that Ann Van Cott, one of the defendants, had appeared and filed a claim to the surplus moneys, and that another of the defendants in the suit had appeared by his guardian ad litem. But the master’s report did not show that the guardian ad litem of the infant defendant, or the solicitor for Mrs. Yan Cott, had been summoned to attend upon the reference ; or whether they did or did not attend before the master. Nor did the report state the amount of the surplus moneys, or who was entitled to the residue beyond the amount due upon the judgment of the applicants.

      O. L. Barbour, for the applicants.
   The Chancellor.

The master’s report is defective in form, as it-does not show that Mrs. Yan Cott, who had appeared and filed her claim, or that the guardian ad litem of the infant defendant, attended before him on the reference, or that evidence was produced to the master that they had been duly summoned to attend. Both were entitled to notice of the proceedings before the master. And in the case of Hulbert v. McKay, (8 Paige's Rep. 652,) this court decided that in such a case the master’s report should state that evidence was produced to him that the parties entitled to notice had been duly summoned, when they did not actually appear before the master upon the reference. Where such parties do appear, that fact should be stated in the report. And in -such case, if they do not consent to the report as made, the report must be filed and the usual order entered to confirm it, before an application can be made to the court for the payment of the money in conformity to such report.

The report is also defective in substance, if the amount of the surplus moneys exceeds the amount due upon the judgment of these claimants. The order of reference directs the master not only to inquire and report as to the amount due to the party obtaining the order of reference, but also as to the lien of any other person upon the surplus moneys. The master, therefore, should ascertain the whole amount of such surplus moneys, by the certificate of the register or otherwise, and if the incumbrance of the party obtaining the reference and entitled to priority is not large enough to exhaust the whole surplus moneys, the master must go further, and ascertain who is entitled to the residue of such surplus; so that upon the coming in of the report an order may be made to dispose of the whole surplus fund. Prima facie the mortgagor, or those who are stated in the bill to be his heirs or devisees, or grantees, if he is dead or has sold the property, are entitled to the surplus. And if no one attends before the master and produces evidence of a better right, and there is no evidence before him that the person prima facie entitled has parted with his interest, the master should report that the residue of such surplus belongs to the mortgagor, or to the person prima facie entitled to it.

This case must, therefore, be referred back to the master to review his report and correct it, so as to show upon the face thereof that the persons entitled to be summoned to attend the reference either attended, or had due notice by summons to attend ; and so as also to show who is entitled to the residue of the surplus, beyond the amount due to the applicants upon their judgment. But if any persons other than these judgment creditors appear,, or have appeared upon the reference, so as to entitle them to file exceptions to the report, the report must be confirmed, by the entry of the usual order nisi, and a certificate of the fact that such order has become absolute must be produced, before an order to pay the amount reported due to these applicants can be obtained.

Order accordingly.


text:
    Thomas vs. McEwen and others.
    Where the complainant, in a judgment creditor’s suit, after the filing of his bill became the owner of another judgment against the defendant, and issued an execution thereon which was subsequently returned unsatisfied, and the defendant acquired other property, subsequent to the filing of the original bill, which could not be reached by such execution; Held, that the complainant could file a supplemental bill, not only to have such after acquired property applied to the payment of the first judgment, hut also to have the subsequent judgment satisfied out of the after acquired property, as well as out of the surplus proceeds of die property which the defendant had at the time of filing the first hill, if there should be any such surplus.

      Held also, that a supplemental bill could be filed, upon the return of the execution upon the second judgment unsatisfied, to obtain satisfaction of that judgment out of tho surplus of the property which the defendant had at the time the first bill was filed, without alleging that the defendants had acquired any other property subsequent to that time.
    The provisions of the I89th rule of the court of chancery, requiring certain aver-ments to be inserted in a creditor’s bill, do not extend to the case of a supplemental bill; where such averments are contained in the original bill.
    And, independent of the requirements of the 189th rule of the court of chancery, if it does not appear upon the face of the complainant’s bill that the amount of the property in controversy in the suit does not exceed $100, the defendant can neither demur to the bill, nor move to dismiss it upon the ground that the subject matter of the suit is beneath the dignity of the court.
    Where the amount in controversy in a suit in chancery does not exceed one hundred dollars, in cases not provided for by the 189th rule, if that fact does not appear upon the face of the bill, the remedy of the defendant is to raise that objection, to the jurisdiction, of the court, either by plea or answer.
    And the defendant may insist upon the objection at the hearing, that the amount in controversy is beneath the dignity of the court, where the fact appears either by the pleadings or the proofs, that the value of the amount in controversy does not exceed $100.
    Where one execution against the defendant’s property has been returned unsatisfied, the issuing of an alias execution will not prevent the filing of a creditor’s bill before the return of such alias, unless it appears that the sheriff has levied or can levy on property sufficient to pay the amount due on the complainant’s judgment.
    This was an appeal from a decision of the vice chancellor of the fourth circuit, overruling the demurrers of the defendants to the complainant’s supplemental bill in this cause. The complainant filed his original bill in April, 1842, to obtain satisfaction of a judgment recovered by him against McEwen, one of the defendantS'in this suit, on which judgment an execution had been issued and returned unsatisfied. And the other defendants, Harrison and Day, were made parties to such original suit, to reach a contract for the purchase of laud and other property of the judgment debtor, which contract was alleged to have been fraudulently transferred to and held by them. After the filing of such original bill an execution was issued upon another judgment, recovered by the complainant in the name of another person, but for the benefit of the complainant as the assignee of the debt; which execution was subsequently returned unsatisfied. The complainant thereupon filed his supplemental bill, stating these facts, reciting the substance of the original bill, and also alleging that, subsequent to the filing of the original bill, the defendant McEwen, the judgment debtor, had acquired considerable property; but without stating whether such property was or was not of the value of $ 100 and upwards. The defendants put in their several demurrers to the supplemental bill; and among other objections to such bill, they insisted that the matters of the supplemental bill had no connection with the original suit; that the bill was to obtain satisfaction of a distinct and independent debt, and did not contain the averments required by the 189th rule of the court; that it was multifarious;. and that it appeared from such bill that alias executions had been issued upon the judgments, but had not been returned.

      A. P. Man, for the appellants.
    The supplemental bill is improperly filed. All the facts stated therein were known, or might have been known, before closing the proofs; and most of them before filing the replication. The supplemental bill is defective in the essential particulars required in a creditor’s bill by the 189th rule of this court. It omits the averment of “no collusion” as to the second judgment. The sum equitably due on the original judgment is not averred. There is no averment that the complainant is unable to reach the newly discovered property by execution. It is also defective in the particulars required as a bill at common law. It states no incumbrance on the newly acquired property; nor any execution creating a lien on incumbered property. The facts stated in the supplemental bill make a new and different case, and would form a proper subject of an original bill, and are not proper for a supplemental bill.

      M. Hoffman, for the respondent.
    The demurrer being to the whole supplemental bill, must be overruled if the bill is good for any part. (/Story’s Eq. PL 350. Higinbothum v. Burnet, 5 John. Ch. 186. Verplanck v. Carnes, 1 Id. 37. Livingston v. Livingston, 4 id. 294. Kuypers v. The Reformed Dutch Church, 6 Paige, 391.) The supplemental bill is good as to all its parts and objects, and in particular as to the following; to obtain the same relief upon the second judgment, (mentioned in the supplemental bill,) that the complainant was entitled to, on the first judgment. The remedy at law on this judgment not having been exhausted at the time of filing the original bill, a supplemental bill was proper. (Mitforchs PI. 99, note (1). Cundler v. Petit, 1 Paige, 168. Stafford v. Hoivlit, Id. 200. McElwain v. Willis, 3 Id. 505.) The issuing the alias fi. fa. on the first judgment was a material fact to show that the complainant had a specific lien on that part of the mortgaged property which remained in the possession of the judgment debtor; and the suit not being in a state to allow of an amendment, the supplemental bill was properly filed to show that fact. (Mitf. PI. 269. Stafford v. Howlit, 1 Paige, 200. 6 Id. 273.) .The supplemental bill was also properly filed to reach the acquisitions of the judgment debtor subsequent to the filing of the original bill, and it was not necessary that the matter in dispute on the supplemental bill should amount to $100, or that the averments required by the 189th rule, (being inserted in the original bill,) should be repeated in the supplemental bill, it being in the nature of an amendment, and the two comprising but one suit. (2 R. S. 102, § 40. McElwain v. Willis, 3 Paige, 505, Cooper’s Eq. PI. 44. 2 Paige, 333.)
   The Chancellor.

The cases of Cuyler v. Moreland, (6 Paige’s Rep. 273,) and of Thorn v. Badger, (8 Idem, 130,) dispose of the objection that the alias executions had not been returned at the time of filing this supplemental bill. The issuing of a second execution upon a judgment, after the first has been issued to the proper county and returned unsatisfied, does not render it necessary for the judgment creditor to wait until .the return of such new execution unsatisfied, before he 6an file his bill to reach the defendant’s property not liable to execution. To prevent' the right of the creditor to proceed in this court, upon the return of the first execution merely, while an alias fieri facias is in the hands of the sheriff, it must distinctly appear that the sheriff has levied, or at least that he can levy, upon sufficient property, under the execution in his hands, to satisfy the whole of the complainant’s debt. And if that fact does not appear upon the face of the bill itself, the defendant must bring it forward by plea or answer. The fact that alias executions have been issued and are still in the hands of the sheriff, upon these judgments, of course forms no good objection to this supplemental bill.

Nor is the objection of multifariousness sustainable. It is true the original bill stated that McEwen had more property, at the time of the filing of that bill, than was sufficient to satisfy the amount due on that judgment. But it does not follow from that statement that there will be sufficient to pay the debt, together with the costs of the complainant upon the original bill. < A part of the property acquired subsequently to the filing of that bill may therefore be necessary to pay the deficiency in the original suit. This forms such a connection between the original and the supplemental suits as to render it proper for the complainant to file a supplemental bill, instead of proceeding by a new original bill, to obtain satisfaction of the second judgment, as well as of the balance of the debt and costs in the first suit. On the other hand, if the property in controversy in the first suit should be more than sufficient to satisfy the amount of the first judgment, and the costs in the original suit, a part of such surplus may be required to pay the second judgment and the costs of the supplemental suit. The original and the supplemental suits are therefore properly united, as to all the defendants ; to save a double litigation between the complainant and those defendants in separate suits as to the property in controversy, which is claimed to have belonged to the judgment debtor, or rather to his creditors, as against the fraudulent- assignees thereof, at the time when the original bill was filed.

The vice chancellor was also right in supposing that the L89th rule was not intended to apply to the case of a supplemental bill, like the present. The necessary averments, as required by that rule, having been inserted in the original bill, that is sufficient for all the purposes which led to the adoption of that rule. And, independent of the requirements of that rule, if it does not appear upon the face of the bill itself that the amount of the property in controversy in the suit does not exceed one hundred dollars, the defendant can neither demur, nor move to dismiss the bill, upon the ground that the subject matter of the suit is beneath the dignity of the court. The proper remedy, in cases- coming within the statute, (2 R. S. 173, § 37,) and where the value of the matter in controversy does not appear upon the face of the bill, is to raise the objection by plea or answer; or the defendant may insist upon that objection at the hearing when the fact appears, either upon the pleadings or the proofs, that the matter in controversy does not exceed one hundred dollars.

The order appealed from is not erroneous. It must therefore be affirmed, with costs.