text:
    Cunningham vs. T. & G. Freeborn.
    October 2.
    Upon a bill to set aside an assignment, on the ground of fraud, the answer of the defendant denying the fraud, if unreplied to, is conclusive evidence that no fraud exists, unless there are other admissions or statements in the answer inconsistent with such denial.
    A general denial of fraud in an assignment of property by a debtor, is not sufficient to sustain the assignment, if it appears upon the face of such assignment that its legal effect must be to defraud the creditors of the assignor.
    Where a party intentionally executes an instrument, the legal effect of which must be to defraud a third person, the question whether such instrument is fraudulent is a question of law and not of fact.
    It is the fraudulent intent, and not the question of fraud, which by the revis- " cd statutes is declared to be a question of fact and not of law.
    This was an appeal from a decree of the vice chancellor of the first circuit. The complainant was a judgment creditor of the defendant T. Freeborn, and filed his bill to set aside as fraudulent, an assignment of his property made by him to the defendant G. Freeborn. The cause was heard on bill and answer, before the vice chancellor, who decided that the assignment was not fraudulent; and he dismissed the bill as to the assignee, with costs. The reasons for this decision, as assigned by the vice chancellor, were as follows :
    W. T. McCoun, V. C.
    The complainant recovered several judgments against Thomas Freeborn, one of the defendants, upon promissory notes, and issued executions which were returned unsatisfied. He then filed his bill in this cause, seeking payment and satisfaction out of property covered by an assignment made by the debtor to his son, George Freeborn, on the 25th of March, 1830, which is alleged to be fraudulent and void. The answers fully deny all the allegations of fraud, but it is nevertheless contended that the assignment as set forth in the answers bears internal evidence of fraud; and this is the question which is now to be examined.
    By the revised statutes, the idea of fraud in law as distinct from fraud in fact, was done away; and indeed ever since the decision of the case of Jackson v. Seward, in the court of errors, (8 Cowen, 406,) this doctrine has been exploded. (See Jackson v. Peck, 4 Wendell’s Rep. 300.) In all cases arising under the statute against fraudulent conveyances as respects creditors, the question of fraudulent intent is now declared to be a question of fact, and not of law. Hence it is insisted on the part of the defendants, that their answers having expressly denied that the assignment was made with any of the fraudulent views chaiged in the bill, or in pursuance of any other fraudulent design or intention whatever, and the answers not being replied to, the question is as much at rest as if the alleged fraud had been negatived by the verdict of a jury. There is certainly some consideration due to this argument, yet I cannot admit it to be conclusive. For, notwithstanding the denial of .fraud, if it should plainly appear from the face of the instrument, that the acts of the party are inconsistent with his professions of fairness, and that the transaction was clearly intended to hinder and delay his creditors, by placing the property beyond their reach for his future benefit, I should not hesitate to set aside the instrument as fraudulent. I must therefore consider the several objections taken to the assignment in question. The first is, that the assignee, George Freeborn, is not a creditor. It appears from the recitals in the assignment, that the assignee had made and loaned to the assignor sundry promissory notes payable to his order, amounting to $2500, or thereabouts, which notes were outstanding, in the hands of third persons; and that he had also, for the accommodation of the assignor, endorsed another note for $ 1000, then held by one of the banks. These liabilities are averred to be a part of the consideration for the assignment, and bona fide in themselves; and it is one of the trusts declared, that out of the proceeds of the property the assignee shall pay off and discharge those liabilities. Not that he shall receive the amount as a creditor, whether he pays the notes or not; but that he shall appropriate the funds to the payment of the notes. Thus creating a trust for the benefit of the holders, which they could at any time enforce. This surely must be a valid trust; there being no question but that these were bona fide debts, which the assignor was bound to pay. The circumstance, therefore, that the assignee was not absolutely, a creditor, in my opinion, forms no objection to the validity of the assignment.
    The next objection is, that the assignee has not executed the assignment, and has entered into no covenant to perform the trusts. I am not aware of any case where the want of these formalities has been held sufficient to vitiate theHransfer, provided it was good in other respects. It is true, if the assignee did not accept or take upon himself the trust, the assignment would be considered a dead letter, or merely colorable. But when the instrument is executed and delivered to and accepted by the assignee, and he takes possession of the property and enters upon the performance of the trusts declared in the deed, as is shown by the answers in the present case, he is as much bound to a faithful performance of his duty as trustee, and to render a just account of the property, as if there were express covenants to that effect. And this is all 'that the cestui que trusts or the assignor can require. •
    But it is said that the creditors have not acceded to or become parties to the assignment, and hence that it is void. This renders it necessary to look a little more particularly into the nature and object of the assignment to see whether that formality is required, or whether the instrument is good without it. The property assigned consists of both real and personal estate, principally a large manufacturing establishment and iron foundry; and the trusts declared are to this effect: The assignee is to use and operate with the property in the manner before pursued in the establishment. He is to sell the manufactured, and work up and sell the unmanufactured articles as rapidly as the same can conveniently and without heavy sacrifice be done. And in general, he is to sell and dispose of all the assigned property as soon as the same can conveniently and judiciously be done. And he is then to pay off and discharge certain notes and endorsements loaned to the assignor, or made for his - accommodation, which were then outstanding, being liabilities which the assignor provides for as preferred demands to be paid off in the order mentioned. And then, after paying the reasonable expenses of executing the trusts, the assignee-is to distribute all the rest and residue of the property, or the proceeds thereof, equally among the other creditors according to the amount of their respective debts. These are the simple provisions of the assignment, which' is absolute in its terms, vesting the property in the assignee unconditionally, and giving to the creditors a perfect right to come in and take an equal share in the distribution of the surplus after the preferred debts are satisfied, without requiring a discharge of the debtor, or the performance of any condition precedent Or subsequent on the part of the creditors. The terms of the instrument do not require any assent on their part to make it valid. The right of property passed and vested in the assignee, and the relation of trustee and cestui que trust, as between the assignee and the creditors, was at once constituted so that the assignor could not recall the deed. (Ellison v. Ellison, 6 Ves. 656. Bunce v. Winthrop, 1 John. Ch. Rep. 329. Brooks v. Marbury, 11 Wheaton, 78.) The creditors may come in and take their dividends under the assignment without prejudice to the claims upon the assignor personally for any balance. And this right being left to them they cannot complain, so long as the law tolerates the practice of creating preferences among creditors. The case of Garrard v. Lord Lauderdale, (3 Simon’s Rep. 1,) has been referred to, as containing principles supposed to militate against the validity of this assignment. But it will be perceived, upon examining that case, that it contains nothing at variance with what I have just stated. There the deed purported to be made between the grantor of the first part, the defendants of the second part, and the several persons whose names were mentioned in a schedule as creditors, of the third part. And the creditors not having executed the deed or conformed to its terms, it was held, after the death of the grantor, and when a different disposition had been made of the property, that the deed could not be enforced by the creditors. That decision was made upon the authority of Walwyn v. Coutts, (3 Simon’s Rep. 14. 3 Meriv. Rep. 707, S. G.) There a bill was filed in behalf of creditors under a trust deed, by which the trustees were authorized, if they should think proper, but not otherwise, and at the request of the grantor, to pay such of his debts as they should consider advisable to be paid, &c. And the terms of that deed, which was a voluntary one, having been varied by subsequent deeds, the court refused to interfere to enforce the first. The reasons are obvious. Those deeds never took effect, and no rights had become vested under them. They remained executory; and being without any consideration moving from thé creditors, who were not privy to the making of the deeds, they remained subject to alteration or revocation by the grantors. The same principles are to be found in Page v. Broom, (4 Russ. Rep. 6.) Not so however in the present case, as I have already shewn; because, here the deed took effect. The assignee stood in the relation of a creditor, and as such, a priority existed between the debtor and him, which of itself was a sufficient consideration, and rendered the assignment irrevocable.
    Some other objections were made against the validity of this assignment; as that there was no schedule annexed, shewing the particulars of the property assigned, or the names of creditors and the amount of their debts. It has never-been held that such an omission was of itself sufficient to avoid an assignment. In some instances, and taken in connection with other circumstances, it might be considered a badge of fraud. In Burd v. Smith, (4 Dallas, 76,) a case very much relied upon by the complainant’s counsel, it is mentioned as one of the grounds of the decision that no schedule accompanied or followed the deed of the trust, by which the trustees could know to whom distribution was to be made. But that difficulty is obviated here; as the defendants have set forth a full inventory of the property, and a list of all the creditois, with the amount due to cacti, although the same were not annexed to the assignment. And every inference of fraud which could result from the omission is repelled. Another and a principal ingredient of the fraud in the case just adverted to does not exist in the present., viz. a resulting trust to the grantor, in the event of the creditors not accepting their dividend in discharge of their debts within a given time. That has always been held by the courts of bur state sufficient to avoid the instrument. And I know of no circumstance short of that, which at the present day is considered ipso facto evidence of fraud, arising from the deed itself. Í am satisfied, upon the whole, that there is not enough apparent upon the face of this assignment to justify me in setting it aside as fraudulent. And the facts and circumstances disclosed by the answers of the defendants, which stand admitted as true, taken in connection with the assignment, as respects either the execution of the instrument, or the possession and management of the property under it, are very far from making out a case of fraud in fact. Í cannot therefore interfere witlnlhe assignment upon the ground of fraud.
    A second point made by the complainant’s counsel is, that granting the assignment to be valid as to the preferred creditors, there are sufficient funds left to satisfy the complainant’s judgments ; and that by his diligence, he has entitled himself to a preference over the creditors not preferred. It is difficult to perceive, if the assignment is valid for one purpose, why it should not be so for another, which in itself is equally meritorious. If it be competent for a debtor to assign his property for the benefit of a favored and preferred few, in the first instance, why may he not in the next place secure in (he same manner an equal distribution of the residue among the .creditors at large 1 Indeed, a contrary proposition cannot be maintained for one moment; for it would be absurd to say-that the assignment shall not be disturbed to the prejudice of the preferred creditors, and yet that the order of payment as respects those not preferred, and who are to be paid pari passu, shall be broken up, and the provisions cf the assignment as to them be destroyed. I must therefore declare that the provisions of the assignment are in no respect to be varied in behalf of this judgment creditor,

      D. Graham <Sr D. Graham, jun. for the complainant, made the following points:
    1. The assignment is void by reason of fraud apparent on its face, and the circumstances disclosed by the answers.
    2. But granting the assignment to be valid as to the preferred creditors, the complainant having, by his diligence, secured a priority over the creditors not preferred, is entitled to an account against the assignee.

      John AnXhon, for the defendants, made the following points:
    1. The bill charges a fraudulent concealment by the defendants of the property of Thomas Freeborn, an insolvent; and also an assignment of property by Thomas Freeborn to George Freeborn, with a fraudulent intent to evade the-payment of judgments obtained by the complainant against Thomas Freeborn.
    2. These allegations are expressly denied by the answers; which also set forth an assignment made by Thomas to George, preferring certain creditors, and making an equal division of the remainder of the assignor’s property among all his creditors after paying such preferred creditors in full. All fraudulent concealment, and all fraud in the assignment, is fully denied.
    3. The cause is heard on the bill and answers, and consequently the answers being entirely responsive to the bill, are admitted to be true. The charge of fraud in fact, which is the only charge in the bill, is therefore disproved.
    4. Fraud in law is not charged in the bill; and since the passage of the revised statutes it cannot exist distinct from fraud in fact. And the admission, from the state of the pleadings, of the absence of fraud in fact, is tantamount to the finding of a jury, and is conclusive.
    5. If it is competent to the complainant, under the circumstances, to raise the question of fraud in law, that ingredient does not exist in this case.
    6. The assignment, if valid, secures to the preferred creditors their preference, and to the general creditors their equal distribution ; and the complainant cannot therefore disturb its arrangements as to either class, but must come in equally with the general creditors.
    ..7. The decree of the vice chancellor establishing the assignment is correct, on all these grounds. ness, and Smith one third. The bill further stated that the partnership continued until the first of April, 1812, when it was dissolved by mutual consent, and that Smith died in March, 1826; that from the commencement of thé copartnership, Smith took the sole charge of the books, notes and accounts of the firm ;■ that the complainant did not, during the continuance of the copartnership, nor until after the death of Smith, inspect the books of the firm, or know the contents thereof; and that he was not acquainted with his own and his partner’s accounts, kept in the books, except from the postings in the ledger ; that there were no annual statements made of the demands or accounts of either of the partners, and no annual inventories were taken of the stock, demands, or property of the firm; and that there had never been any statement or settlement of accounts of the copartnership concerns made by or between the partners. It was further alleged in the complainant’s bill, that during the continuance of the copartnership, and afterwards, Smith had received large sums of money belonging to the firm, which he had not entered upon the books of the company, but had appropriated the same to his own use ; that he had subscribed for and purchased stocks, in the Bank of Troy and other incorporated companies, in the name of the firm, and in his own name, and had paid for the same with the partnership funds; that he had afterwards appropriated the stock to his own use, without the assent of the complainant, and had received the dividends thereon ; that during the continunnce of the copartnership, Smith loaned the partnership funds without interest and against the will of the complainant, by which large sums were lost; and that he had also used the name of the firm in endorsing for the accommodation of various individuals, by which the partnership was made liable, and sustained losses. The complainant also claimed to be credited for the hire of a store, for the keeping and hue of a horse and carriage for the use of tire firry, and for boarding clerks; and also for large sums of money belonging to the complainant, alleged to have been received and appropriated for the purposes of the company, and trot credited on the books of the copartnership. Tire complainant waived an answer from the defendant on oath. under the provision of the revised statutes, and in conformity to the 40th rule of the court.
   The Chancellor.

As this cause was heard on bill and answer only, the denial of all fraud in the execution of the assignment is conclusive evidence of the fact in favor of the defendants, unless that allegation is inconsistent with or is contradicted by some other statement or admission in the answer. But the vice chancellor was correct in supposing that the general denial of fraud was not sufficient, if it appeared upon the face of the assignment that its legal effect would be to delay, hinder and defraud the complainant, or other creditors of the assignor. The revised statutes have not made the fraud itself a question of-fact; in all cases, neither indeed was it possible for the legislature to do so. For when a party has intentionally executed an assignment, or conveyance of his property, which must hinder and defraud his creditors of their just demands, the question whether the conveyance is fraudulent or not, necessarily becomes a question of law and not of fact. The object of the statute was to reach a particular class of cases, where the conveyance would not necessarily have the effect to defraud creditors or others of their lights; and where the question of fraud must of course depend upon the intent with which the conveyance was executed. In all such cases the question of fraudulent intent is declared to be a question of fact and not of law. But if a party admits he intended to do a particular act, the legal effect of which act the adverse party supposes to be to delay hinder or defraud' him as a creditor, and to be a violation of the statute, the .question whether the act complained of is such a fraud as the legislature intended to guard against, necessarily becomes a question of law; and must be decided as such by the court. In the case now under consideration, although the defendants have denied all fraud in the assignment, yet if the assignor has made an assignment in such a form as necessarily to produce the effect which the statute has declared to be a fraud upon his creditors, the court must declare that assignment fraudulent and void, notwithstanding this general denial in the answer. Upon an examination of this case, however, for the reasons given by the vice chancellor, I am satisfied that there is nothing upon the face of the assignment which shows it to be legally fraudulent. And the answer shows that, in fact, there was no intention to defraud.

The decree of the vice chancellor was also correct in dismissing the bill as against G. Freeborn, the assignee. The assignment being valid, and provision being made therein for the distribution of all the surplus proceeds of the assigned property among the remaining creditors rateably, after paying the debts of those who were preferred, such residuary cestui que trusts had an interest in the surplus, of which they could not be deprived without their consent- If the complainant wished to reach that surplus, he should have filed his bill in behalf of himself and all other creditors who might choose to come in under the decree. In that way those creditors might have been compelled to elect whether to come in and take the benefit of the provision made for them in the assignment, or to let him take the whole, or so much thereof as was necessary to pay his debt and costs. But the present bill is not framed in such a manner as to enable the court to make a decree of that kind, even if there had been a prayer for general relief.

The decree of the vice chancellor must therefore be affirmed, with costs.

       See Egberts v. Wood, ante p. 517.


source: Caselaw Access Project

author: The Chancellor.

license: Public Domain

text:
    Heartt vs. Corning, executor, &c.
    October 2.
    A plea to a bill in chancery must be verified by oath, although the complainant has expressly waived an answer from the defendant on oath.
    If a plea is not verified by the oath of the defendant, the complainant may apply for an order to set it aside, or to have it taken off the files of the court; but he cannot make the objection upon the argument of the plea.
    A plea is a special answer; and the defendant may therefore put in a plea to the bill, under the usual order for further time to answer.
    Where the complainant waives the necessity of an answer under oath, if the defendant puts in a plea to the bill, he will not be required to support it by an answer.
    If the negative averments in a plea, by an executor, relate to transactions in the life time of the testator, or to acts done by others, it is not necessary they should be sworn to positively ¡ it is sufficient if they are made upon the defendant’s belief only.
    Where the articles of copartnership require one of the copartners to make an annual statement of the copartnership accounts, upon the books of the firm, and he makes such statement accordingly, the other copartner will bo deemed to have acquiesced in the correctness of the statement, if he does not object to it within a reasonable time thereafter.
    In taking an account between partners, entries on the partnership books to which both parties had access at the time the entries wore made, arc to be considered as prima facie correct; but subject to the right of either partner to show mistakes or errors, in the account.
    Where the benefit of a plea is saved to the defendant until the hearing, neither party recovers costs on the argument of the plea.

      To all that part of the bill which related to errors in the books of the company, by supposed improper credits to Smith, or by the neglect to make proper charges against him, or to the neglect to give all proper credits to the complainant, and to that part which sought to charge Smith with the losses upon monies loaned or endorsements made for the accommodation of other persons, or which related to the bank stock subscribed for or purchased by Smith with the funds of the firm, or which related to any other errors in the books of the company previous to the first of January, 1812, the defendant pleaded that Smith, on the first day of January, 1811, did cause the partnership accounts of the firm, a§, between the company and the complainant, and as between it and the defendant, from the commencement of the partnership up to and including the first day of January, 1811, to be made and stated in the leger of the company, and caused the balance to be ascertained and struck in the several accounts of the said partners, under that date; which balances were then carried to the new accounts of the partners. respectively for the succeeding year, kept in the leger, as by reference to the accounts so stated, balanced and settled on the leger fully appeared. And also that the complainant and Smith, on the first of January, 1812, caused the partnership accounts as between the partners respectively and the company, from the first of January, 1811, up to and including the first of January, 1812, to be made and stated upon the leger ; that a balance of $5432,11 was found due from the partnership to the complainant, and of $3127,35 to Smith ; and that the balances were struck in the accounts so stated and settled, and were carried by the parties to the new accounts kept in the same leg-er. And that the schedules A. and B. annexed to the plea were true copies of the accounts as stated on the leger, and that the schedules C. and D. contained the items and particulars of those accounts, from the other books of the firm, as referred to in the accounts so stated, balanced and settled on the leger. The plea also av'erred that the accounts so stated, balanced and settled were just and true to the best of the defendant’s knowledge and belief; that the complainant, from the commencement of the copartnership, had at all times had free access to the leger, and all the other books of the firm, and was well acquainted therewith and with' the matters therein contained ; and that he always acquiesced in the justice and accuracy of the several accounts from the times of the statement and settlement thereof until at or about the time of the death of Smith, in 1826. The defendant put in an answer to the rest of the bill; but as the complainant had waived an answer on oath, the plea and answer were not sworn to by. the defendant. And the cause was brought to hearing, upon the plea, in the usual, form.

      Jl. Van Veehten J. P. Cushman, for the complainant.

      3. F. Butler fy T. Clowes, for the defendant.
   The Chancellor.

It is necessary in the first place lo dispose of a question of form, as .to the verification of the plea. The complainant having waived an answer on oath, the defendant’s counsel supposed the waiver extended to the plea, which in this case is connected with the answer, as the plea covers only a part of the bill. A plea for some purposes may be considered a special answer. And for this reason it has been held that the defendant might put in a plea to the whole bill, under the usual order for time to answer, although the de=. fendant in such a case is not permitted to demur. (2 Dickers R. 554. 1 Grants Pr. 166. 1 Brown's Ch. Pr. 356.) But it is not an answer within the meaning and intent of the statute under which this complainant has waived an answer on oath. A plea was never considered as evidence in behalf of the defendant, as to the facts stated therein, so as to require the testimony of more than one witness to contradict .it, even where it negatived a material averment in the bill. The object of the statute (2 R. S. 175, § 44,) was to prevent the complainant from being concluded by the answer of the defendant, in a case where he was compelled to come into this court for relief, but in which he did not need a discovery,

- and where he was unwilling to permit the defendant to be a witness in his own favor, by the forms of pleading. Bills filed under this new provision in the revised statutes, are strictly bills for relief only, and not bills for discovery and relief. Hence, in a case which is proper for a plea, as the complainant is not entitled to a discovery, it cannot be necessary for the defendant to support his plea by an answer, as he must do in most cases where the anwer on oath is not waived. A plea to a bill of this description can seldom be necessary, as the answer cannot be excepted to for insufficiency; and the defendant may set up any matter of defence in the answer. But where the defendant finds it necessary or expedient to resort to this mode of defence, to prevent the trouble and expense of a protracted litigation, he must conform to the former practice of the court, so far- as to verify the allegations and averments in his plea by oath, in the usual form. In a case of this kind, however, where the negative averments in a plea of an. executor relate to transactions in the life time of the testator, or to acts done by others, it is sufficient, if the averments are made upon the defendant’s belief only; and they need not be sworn to positively. (Drew v. Drew, 2 Ves. & Beame, 160.) The averments in this plea were therefore correct in point of form ; but the plea should have been put in upon oath in the usual manner.

The complainant, however, is wrong in supposing that this is an objection which he can take advantage of at the hearing as to the sufficiency of the plea. As well might he object", at the hearing, that a plea or demurrer wanted the signature of counsel. The proper mode of taking advantage of a formal defect of this description, is by an application for an order to set aside the pleading, or to take it off the files for irregularity. The case of Wall v. Hubbs, (2 Ves. & Bea. 354,) referred to by the complainant’s counsel on the argument, shows such to be the practice. The application there was to take the plea off the files; and the only question was, whether the complainant was not too late in making the motion, after he had entered an order, in the register’s office, setting down the plea for argument. The application would have been wholly unnecessary in that case, if the want of a proper verification would have been a sufficient ground for overruling the plea on the hearing. If a plea or answer was taken off the files for irregularity, on the ground that it had not been properly sworn to, the defendant, as a matter of course, would have the right to file a nev/ one, properly verified. But if a plea is overruled on the hearing, the defendant cannot have the advantage of his plea without special leave from the court to amend. The case of Wall v. Hubbs merely decided that the complainant, by taking a step in the cause after the irregularity accrued, was not precluded from making a motion to take the plea off the files of the court. But where, with full notice of the irregularity, he brings on the argument of the plea without asking to have it taken off the files, he is not entitled to have it overruled as an insufficient defence, if in other respects it is well pleaded. In the case of Beach v. The Fulton Bank, (2 Paige's Ch. R. 307, 6 Wendell's Rep. 36, S. C.) although an answer had been put in without oath, as to one of the defendants, and was therefore irregular, it was held that both parties were precluded from making any objection to the answer after a replication had been filed, and the proofs had been taken in the cause. And Chief Justice Savage there held that the complainants would have been precluded from objecting to the answer on the ground of the irregularity, by the filing of a replication thereto after notice of such irregularity. (See also Riky v. Kemmis, Beatty's Ch. Rep. 322.)

Upon the merits of the plea, if it turns out to be true in point of fact, my present opinion is, that it will be sufficient to prevent the parties from going into a general account of the partnership transactions, as between the copartners, previous to the first of January, 1812. The late chief baron of the exchequer in England, in a recent case, The Attorney- General v. Brooksbank, (2 Young & Jerv. R. 42,) expressed an opinion that an account stated must be actually signed by the parties to enable the defendant to plead it in bar to a suit for an account; although he seemed to suppose an account not signed might be a good defence if set up in the answer and proved at the hearing. That opinion is clearly not law; and it is directly opposed to that of Lord Hardwicke, in Willis v. Jernegan, (2 Atk. Rep. 252;) where he says, in express terms, that it is not necessary that the account should be'sigued by the parties. (See also Jessup v. Cook, I Halst. Rep. 436. La Malaine v. Caze, 2 P. A. Brown’s Rep. 128.) As there is no statute, or rule of law, which requires the signatures of the parties to an account stated and settled between themselves, to make it binding and obligatory, provided the fact of the settlement can be established by other proof, it cannot, upon any principle of pleading, be necessary to set out any particular species of evidence, in a plea in bar, to enable the defendant to avail himself of the stated account as a defence.

In the case under consideration it appears by the statement in the complainant’s bill, that it was one of the stipulations in the agreement of copartnership that Smith should make up and state the partnership accounts, annually, on the first of January in each year. Under that stipulation, even if Smith made up and stated the accounts ex parte, in the absence of Heartt, it was the duty of the latter to look into them within a reasonable time, and to point out the errors, if any existed therein, or he must be considered as having acquiesced in the correctness of the accounts as stated on the books of the firm ; to which books both parties had access during the existence of the copartnership. In stating the accounts of partners, as between themselves, the entries on the partnership books, to which both partners have had access at the time when those entries were made, or immediately afterwards, are to be taken as prima facie evidence of the correctness of those entries ; subject, however, to the right of either party to show a mistake or error in the charge or credit. And vouchers for the specific items can never be required except under very peculiar circumstances. Here the copartnership continued but a few months after the statement of the accounts on the first of January, 1812 ; and it is possible that some fact may be disclosed in the evidence which may render it proper to permit the complainant to surcharge or falsify the account, as stated on that day for the preceding year, at least. But this cannot be done if the plea is now allowed as a conclusive bar against opening the account. I therefore think this is a proper case for saving the benefit of the plea to the defendant until the hearing.

An order must be entered accordingly, directing the plea to stand over until the hearing of the cause; and saving to the defendant the benefit thereof at that time. In such a case neither party recovers costs as against the other on the argument of the plea, unless the contrary is specially directed by the court. (1 Brown’s Ch. Prac. 359.)


text:
    Champlin and others vs. The Mayor, &c. of the city of New-York.
    October 4.

    Where land has been taken by the corporation of the city of New-York for the purpose of opening a street, and the report of the commissioners of es-tímate and assessment has been confirmed by the supreme court, the court of chancery has no jurisdiction to restrain the corporation from opening the street, unless the proceedings are void, or there has been fraud or corruption on the part of the corporation.
    An injunction to restrain the corporation from opening the street will not be' granted, unless it is shown by the complainant’s bill that the proceedings are void; or that there is some particular act of fraud, or prima facie evi« dence of corruption on the part of the corporation distinctly stated in the bill, and positively sworn to by the complainant.
    Where the defendant has obtained an order to dissolve an injunction by the default of the adverse party after due notice of the application, the court will not vacate such order merely to enable the complainant to interpose a technical objection which does not go to the merits of the application.
    The bill in this cause was filed by certain landowners in the city of New-York, whose land had been taken by virtue of an ordinance of the corporation for widening Fifth street, between Broadway and the Washington square, to restrain the defendants from proceeding with the improvement, after the report of the commissioners of estimate and assessment had been confirmed by the supreme court. An ex parte injunction having been granted, an application was made to dissolve the "same, upon the coming in of the answer. In consequence of an accident, by which the steam-boat did not arrive at the usual time, the papers to oppose the motion were not received until after an order dissolving the injunction had been obtained by default, and the court had adjourned. Upon an ex parte application to the chancellor, 'an order was obtained requiring the defendants to show cause on the next motion day, why the default should not be set aside and the injunction restored. The order also restrained the defendants in the mean time from removing the buildings of the complainants. There was a technical objection to the original application to dissolve the injunction, and the defendants’ counsel insisted upon retaining his default, unless that technical objection was waived. But he was willing to have the default opened provided the question as to the right to a dissolution of the injunction could be heard and decided upon the merits. The Chancellor held that as the order dissolving the injunction had been regularly obtained, the complainants were not at liberty to have the order vacated merely for the purpose of insisting upon an objection which did not go to the merits, and which would only require the defendants to give a new notice of their application. The motion was thereupon heard upon its merits.

      II. W. Warner, for the complainants.

      Dudley Selden, for the defendants.
   The Chancellor.

This court cannot interfere to correct the proceedings of the corporation in a case of this kind, after confirmation of the report of the commissioners of estimate and assessment, upon a bill filed against the corporation alone, unless their proceedings are void. If the proceedings are merely voidable for error therein, all the individuals whose property has been vested in the corporation by the confirmation of the report and all whose property has been assessed for the improvement have a direct interest in the question, and they must be made parties to enable them to protect their rights. They cannot compel the corporation to appear and defend their rights for them; and they should not be deprived of the use of then property by an injunction founded on a bill filed against a mere nominal party, who may perhaps be willing to have the proceedings indefinitely stayed. If the corporation should neglect to proceed and open the street within a reasonable time after the confirmation of the report of the commissioners, the parties interested might apply to the proper tribunal to compel them to proceed. But this could not be done while they were restrained from proceeding by an injunction out of this court. Notwithstanding the injunction, however, per- , . . . ' , . , , sons not parties to the suit, in whose iavor damages had been assessed, might sue the corporation and recover those damages. (2 R. L. of 1813, p. 418, § 183.) The answer in this case is verified in the only way in which it was possible to verify it so as to entitle the defendants to a dissolution of the injunction. It is put in under the seal of the corporation, and the presiding officer of that body swears it is true as far as his own acts are concerned, and that he believes it to be true in all other respects. It is also verified by the oath of the individual upon whose petition the proceedings to widen Fifth street were instituted, and xvho undoubtedly knows more about the facts of the case than any of the nominal parties in this cause. All the material allegations in the bill, if there are any such, are fully denied by this answer, so far as it was possible for any person to deny them.

I am also satisfied from an examination of the bill and the verification annexed, that this injunction ought never to have been granted. And I presume, from the opinion of the vice chancellor which was delivered on the first application, that it would not have been allowed if the motion, which was referred to him by the chancellor, had been opposed. But as the defendants had received notice of the last application and did not attend, the injunction was granted as of course. The only possible ground upon which the jurisdiction of this court could be sustained is that the individual members of the corporation who voted for this improvement have not exercised their honest judgment as to the necessity or expediency of the measure as a public improvement; but that they have been corrupted, and have violated their duty and their oaths of office to benefit some individuals at the expense of others. Whenever such a case as that is shown by the pleadings, and sustained by competent proof, I will not say that this court has not jurisdiction to interfere and protect the rights of an individual whose property is attempted to be taken from him by such a fraudulent and corrupt proceeding. But it would certainly be both unwise and inexpedient for this court to stop the proceedings of a body whose powers and duties are more important to the public than those of the legislatures of some of our sister states, merely upon the suspicion, or even upon the honest belief of a party who is interested in opposing the proceedings of the common council in its legislative capacity. To authorize the issuing of a preliminary injunction in such a case the complainants should be able to point to some particular act of fraud, or prima facie evidence of corruption on the part of the members of the corporation who voted for the ordinance. Here there is only a general charge that the complainants believe and expect to make it appear that the conduct and proceedings of the corporation in relation to the widen ing ofthis street have been collusive, partial and utterly corrupt. And even this allegation of belief is not verified by the oaths of those complainants who had attended before the committee of the corporation and taken an active part in opposing the ordinance. The bill is sworn to by a female who probably could know very little about the proceedings of the corporation. And although I have no doubt she has sworn honestly in this case, it is hardly possible that she can have sworn understandingly. She does not pretend she has any personal knowledge that a majority, or even an individual member of the corporation who voted for this law had been corrupted, or that the complainants had obtained any such information from others. But this grave charge against such a respectable body of men is stated as a matter of belief merely. This was not enough, even prima facie, to satisfy the court of the existence of the fact; and unless sufficient is shown to induce the court to believe that such a charge is true, a preliminary injunction should not be granted.

The rule to show cause must therefore be discharged; and the order dissolving the injunction is to remain in full force.