author: Wright, J. Balcom, J., Emott, J.

text:
    Sands, Receiver, &c., v. Sanders.
    Whether the statute (ch. 369 of 1854), authorizing directors of a mutual insurance company, organized under the general act, to give notice of an assessment “ in such manner as they shall see fit, or as the by-laws shall have prescribed,” vests any discretion in the directors, or in a receiver upon insolvency, where the by-laws prescribe the mode, qucere.

    A general assessment, and notice that each premium note of every class is assessed for the full amount thereof, is sufficient where the losses in the class to which the note belonged exceed the amount of all the notes received upon -that class of risks, and the losses of the company exceed what is collectible on all the notes of all classes and dates. It is unnecessary that the assessment should state the particulars of the assets and debts, upon which it is founded.
    Personal notice of the assessment and a demand of payment, less than the statutory time of publication previous to the time of bringing suit, does not aid a defect in such publication.
    Appeal from the Supreme Court. Action on a premium note given by the defendant to the ADtna Insurance Company. The company, of which the plaintiff was receiver, was organized as a mutual insurance company, under the act of 1849, and did business as such from April, 1851, to January, 1854, when it was declared insolvent, and one Edward Eames appointed receiver of its property and effects. On the 8th October, 1851, a policy of insurance was issued to the defendant, by which he was insured in the company for the term of one year from that date, and the defendant gave his note as follows:
    “ $180. For value received in policy No. 1447, dated 8th October, 1851, issued by the JEtna Insurance Company, of Utica, I promise to pay the said company, or their treasurer for the time being, the sum of one hundred and eighty dollars, in such portions and at such time or times as the directors of said company may, agreeably to their charter and by-laws, require. Jacob Sanders, Jr.”
    This was a premium note in the hazardous department of the company, whose policies and business were divided into this and other classes styled farm risks.
    On the 19th February, 1855, Eames, the receiver, assessed the said note of the defendant to the amount of $64.37, for losses which accrued while the defendant’s note arid policy were in full force and effect, and also for expenses for which the said note was chargeable; which assessment was made due and payable on the 17th May, 1855, and duly confirmed by an order of the Supreme Court on the 21st March, 1855. Notice of the assessment was published in two papers only, printed in the county of Oneida. The 12th by-law of the company provided as follows: “§12. The directors may make such
    assessments upon the premium notes as they may think necessary. Notice of such assessments shall be given by the secretary by the publication in three newspapers printed in Oneida county three weeks successively, the last publication of which shall not be less than thirty days prior to .the time-fixed for their payment; and in such other newspapers as the directors or executive committee- may deem necessary or expedient. The directors or executive committee may also cause such notice to be published in handbills, posted up in such places as they may direct.”
    Eames continued to act as receiver of the company until the 15th May, 1860, when the present plaintiff was duly appointed in his place. On the 23d June, 1860, the plaintiff assessed the note in action for losses, and for expenses and liabilities accrued whilst the defendant’s note and policy were in force, and also for expenses and liabilities incurred in executing the plaintiff’s trust as said receiver, and which expenses were chargeable upon said note. This assessment was duly confirmed by-an order of - the Supreme Court, and was published in three newspapers in Oneida county, for the time required by the by-laws of the company. The time fixed for the payment thereof was the ,22d August, 1860. This, assessment was general, assessing all the notes of all classes and of all dates to their full amount.
    The referee found, as matter of fact, that the amount due for - losses which occurred in the hazardous department, and which were due and not paid, for the time that the defendant’s note and policy were in force was more than could be collected on the notes of that department, which were in force and were liable for the losses and expenses which accrued during the year that the defendant’s note and policy were in force; that no assets came to the plaintiff’s hands as receiver except the stock and premium notes of the company, which amounted 'to $167,428.96, and that the same were insufficient to pay the losses and expenses due from the company; that before the commencement of this action the defendant was personally notified of the assessment of the receiver Eames, as well as of the assessment of the plaintiff, on the 23d June, 1860, and payment thereof was personally demanded, on behalf of the plaintiff, at the defendant’s residence.
    The referee’s conclusions of law were: First, That the note was not an original capital stock note, but that the same was a premium note, and subject to payment only agreeably to the charter and by-laws. Second, That the assessment of the receiver Eames was invalid, for the reason that the notice thereof was published in but two newspapers in the county of Oneida. Third, That the assessment of the plaintiff, of the 23d June, 1860, was invalid, as the same was general, and thereby all the notes in all classes, and of all dates, were assessed to their full amounts.
    The referee, for the two last reasons, nonsuited the plaintiff, and directed judgment to be entered in favor of the defendant, with costs.
    •On appeal to the Supreme Court, at general term, the judg ■ ment was affirmed, and the plaintiff appealed to this court.

      H. R. Mygatt, for the appellant.

      H. P. Townsend, for the respondent.
   Wright, J.

The action being upon a premium note of the defendant, an assessment was a necessary condition to its maintenance. In February, 1855, and after the company in which the defendant was insured became insolvent, Barnes, the then receiver of such company, assessed the note in action to the amount of $64.57 for losses which accrued while the defendant’s policy and- note were in full force and effect, and the expenses for which the note was chargeable. The collection of this assessment was stayed by injunction in a suit brought against the company and the receiver, and such injunction was not vacated or set aside until June, I860. On the 23d June, 1860, the plaintiff (who before that time had been appointed receiver in the place of. Fames) assessed the defendant’s note to its full amount for losses-and for expenses and liabilities accrued while the note and policy were in force, and also for expenses and liabilities incurred in' executing the plaintiff’s trust, as receiver, and which expenses were chargeable upon the note. If either of these assessments were regular and valid, the plaintiff was improperly nonsuited.

The only ground for claiming the assessment- made by Fames to be illegal, is that notice thereof was published in two newspapers only, printed in the county of Oneida. I do not think this was such an irregularity as to invalidate the assessment, and constitute a defence to the action. There was no provision in the charter of the -¿Etna Insurance Company for giving notice of assessments on the premium notes; but one of its by-laws, adopted in 1851, prescribed the mode, viz., “by publication in three newspapers printed in Oneida county three weeks successively, the last publication of which shall not be less than thirty days prior to the time fixed for payment, and in such other newspapers as the directors or the executive committee may deem necessary or expedient.” It is not important now to inquire what would have been the effect of omitting to publish the notice in three newspapers printed in such county, of an assessment made by the directors or a receiver of the company, prior to 1853. In 1853, in remodeling the general law for the incorporation of fire insurance companies, the directors of any mutual insurance company were authorized, after ascertaining the loss or damage by fire sustained by any member, or after the rendition of any judgment against the company for loss or damage, “ to settle and determine the sums to be paid by the several members thereof as their respective portions of such loss, and publish the same in such manner as they shall see fit, or as the by-laws shall have prescribed.” (Laws of 1853, chap. 466, § 13.) The statute thus left the manner of the publication of notice of the assessment to the discretion of the directors. They might pursue the mode prescribed by the by-laws of the company, or any other mode of publication deemed advisable and proper. Another provision of the statute would seem to strengthen this construction. Assessments are to be paid within thirty days next after publication of the notice; but a neglect or refusal to do so within such time, would not put the assessed member in default, so that an action could be sustained against him by the directors. Before he is in default, and a right of action upon his note is given to the directors, he must not only have neglected or refused to pay within the time prescribed, but there must have been a personal demand for payment of the assessment made- upon him. (Laws of 1853, chap. 466, § 13.) The only object of the publication is to notify the members of the assessment arid the amount they are required to pay, and afford them an opportunity to make payment. All this is effected by the personal demand for payment required to be made, and hence no injustice could be' done by lodging with the directors a discretion as to the manner of publication. It is enough, however, for the purposes of this case, that since the statute of 1853, the directors of a mutual insurance company are not required to publish an assessment for losses in such manner as “the by-laws shall have prescribed,” unless they choose to do so. Haying authority to publish it “ as they shall see fit,” they may adopt a mode of publication other than that prescribed by the by-laws, without invalidating the assessment. It may be conceded that it is -a prerequisite to a recovery upon a premium note, that there should be a publication of the assessment. But the statute has not restricted the mode of publication, but left it optional with the directors to pursue that prescribed by the by-laws of the company, or such other “ as they shall see fit.”

The receiver of an insolvent mutual insurance company is clothed with all the powers possessed by the directors for making and collecting assessments, (laws of 1852, chap. 71, § 2.) The referee has found that the receiver, Barnes, in this case, published the notice of the assessment made by him in but two papers printed in the county of Oneida. The by-laws of the company provided that the publication should be in three papers. Barnes was, no more than the directors would have been, at the time the assessment was made, restricted to the manner of publication prescribed by such by-laws. It is conceded that he published the assessment in two newspapers printed in the county of Oneida,.and it was proved and found as a fatit by the referee, that the defendant was personally notified of it, before the action was brought. Having a discretionary power or authority as to the manner of publication, the assessment was not invalid, nor was there a failure to put the defendant in default for not paying, for the reason that the latter was not notified of the assessment through the medium of three instead of two newspapers printed in the county of Oneida.

The assessment of the plaintiff, Sands, was not objectionable for the reason assigned by the referee. An assessment in form need not specify the name of the party bound to contribute, nor the amount of the note. A general assessment is good by which a receiver declares that each premium note is assessed to the full amount thereof. There is no indefiniteness or uncertainty about it, and the maker of each notéis distinctly informed of the sum he is required to pay thereon. It was no objection to the assessment, in this case, that the premium notes in all classes and of all dates were assessed. All the assets of the company that came to the hands of the plaintiff as receiver, were the capital stock notes, amounting to about $100,000, and premium notes of all classes and dates to the amount of $67,000, and these assets were insufficient to- pay the losses and expenses due from the company. The company had divided its applications for insurance into two classes, one of which was known as the hazardous department, and the premium note of the defendant was in that department. The amount of losses in the hazardous department, due and unpaid, which accrued during the year the defendant’s note and policy were in force, was more than could be collected on the notes of that 'department which were in force and were liable for the losses and expenses of that year. In addition, the ascertained losses and expenses of the company were more than the stock and premium notes of all classes and dates would pay. When it appears to a receiver, from the liabilities of the company and the times the liabilities occurred, and from an examination of all the classes and notes of the company, that there is no note that is not chargeable to its entire amount 'for liabilities which justly attached during the existence of the policy accompanying such note, a general assessment upon all the notes, without regard to classes, and to their full amount, is unobjectionable. All the notes of the company constitute its capital, whether they be in one department or another, and if the necessity exists, resort must be had to the entire fund. An assessment to-dáy, of one class, to pay all the losses of that class,-and an assessment "to the residue of the same class at a future day to pay the losses of another class, the assets of which are exhausted, would be idle and -attended with unnecessary expense and delay, when the same could all he effected by one assessment. The defendant was liable to be assessed for losses occuring in both classes of this company during the existence of this policy. If it required an assessment to the full amount of his note to pay such losses, the receiver could make it. It is true, that as his note was in the hazardous department,, and his policy ran but for one year, he was first liable to contribute for losses in that department, but if these losses did not exhaust his note, what was left was applicable to payment of losses in the other department accruing during the year that his policy ran. And this was the precise condition of all the other premium note makers. The defendant, however, in this case, cannot complain that the assessment was of' the full amount of his note. It was proved, and the fact was distinctly found by the referee, that the ascertained losses accruing during the year that the defendant’s policy was in force, were more than could be collected on'the notes of the hazardous department which were in force and liable for the losses of that year. • The receiver was consequently justified in assessing the defendant’s note to the full amount, and it was not for him to object that the notes in other classes and of other dates than his own were assessed.

I am of the opinion that both assessments were valid, and that the plaintiff was improperly nonsuited.

The judgment of the Supreme Court should be reversed, and a new trial ordered.

Balcom, J.,

referred and adhered to his dissenting opinion in the court below, in which he held that the publication by the first receiver, Eames, was sufficient, on grounds similar to those stated by Weight, J., and also because the direction in the act of 1852, in respect to a publication by a receiver of notice of assessment, was that'it should be in the manner prescribed by the charter of the company. The charter, in this case, was silent on the subject. The act of 1854 authorized the directors to publish the notice “in such manner as they shall see fit, or as the by-laws shall have prescribed.” He thought that Eames stood in place of the directors, and that, although the by-laws prescribed the mode of publication, it was in the discretion of the directors, or of the receiver, to adopt another mode.. Upon this point, Davies and Rosekbaets, Js., agreed with him, and the three concurred otherwise in the .opinion of Weight, J., except that Rosekeans, J., attributed no effect to the requisition of personal demand for payment in respect to the construction of the law as to the publication of the notice. All the judges concurred as to the validity of the assessment by the second receiver, Sands, upon the grounds stated in the preceding and following opinions.

Emott, J.

This action is brought by a receiver of the .¿Etna Insurance Company of Utica, alleging two assessments made upon a premium note given by the defendant. One Eames was originally appointed the receiver of the company, and on the 19th day of February, 1855, he made an assessment óf its premium notes. The amount of this assessment upon the defendant’s note was $64.57, and this is one ground of the present suit. The validity of this assessment is disputed on three grounds:

First. It is said that it is not made by any regular rule, and that it is unjust and unequal. This is a question of fact, which is not before us upon this appeal. The referee,' before whom the cause was tried, finds that Eames, as receiver of this company, made this assessment for losses and expenses for which the maker of this note was liable. He held the assessment invalid, on account of an objection arising as matter of law upon the undisputed facts, which will be presently adverted to, and did not consider how far the objection, that the assessment was unequal, was well founded in fact, nor whether such inequality, if it were shown, would constitute a valid • objection in law. It is not our province to examine the evidence and decide the question of fact upon which this question turns, and which has not been passed upon by the court below in any of the stages of this case. Until the question of fact is decided, however, the question of law discussed in the argumeat on this branch of the case does not call for any expression of opinion by this court.

The next objection made to the assessment of the receiver, Eames, is, that it includes the expenses of collection. The finding of the referee upon this point is, that the assessment was for expenses for which the note of the defendant was chargeable. There is nothing more in the case upon the point, and I am unable to see how the objection can avail the defendant in that state of the case. But I know of no reason why the legitimate and proper expenses of its collection should not be included in an assessment. There is no other means of providing for such expenses, which are, nevertheless, unavoidable. I am not aware that the power to include such expenses in assessments has ever been denied by the courts, and in Bangs v. Gray (2 Kern., 477), it was impliedly, if not expressly, sanctioned by this court.

The last objection to this assessment, and that upon which the Supreme Court held it invalid, was, that notice of it was not published in accordance with the by-laws of the company in regard to assessments .by the directors. The receiver of such a corporation is authorized by statute (Laws of 1852, ch. 71, § 2), to make such assessments as, by the charter thereof, the directors are authorized to make; and notice of any such assessment “ may be given in the same manner as is provided in the charter of said company for the directors of said company to give.” The charter of this company contains no special provisions in respect to such notice; but authorizes the directors generally to call for payment of the premium notes at such times as the directors may deem requisite. The legislature, however, in 1853, regulated, by general law, the mode of assessing premium notes by the directors of mutual insurance companies. (Laws of 1853, ch. 466.) This statute, as amended in 1854 (Laws of 1854, ch. 369), prescribes the manner and the extent of assessments by such companies upon their premium notes. Its provisions have been considered by the courts in various cases, and have always been held to be controlling, not only as to the amount of the assessment, but the manner of making it. They are in effect amendments or alterations of the charter or organic law of these companies respectively, and become incorporated in and a part of such •organic law. The power of directors, and, therefore, of a receiver, upon the point now under consideration, is to be measured and determined by any such provisions which may effect it, in the same manner as if they had formed a part of the articles of association or charter of this company. * -This act provides that notice of assessment shall be published in such manner as the directors shall see fit, or as the by-laws shall prescribe. • No action can be brought upon such an assessment "until after the expiration of thirty days from such publication, nor until personal demand has been made for payment. The kEtna Insurance Company had adopted bylaws which, among other things, regulated the publication of notice of assessments. They directed that notice of assessments should be published in three newspapers' printed in Oneida county three weeks successively, the last publication to be thirty days before the time fixed for payment of the assessment. The notice by the receiver, Eames, of his assessment, was published only in two papers, and, therefore, not according to the by-laws of the company. I think such an assessment cannot be sustained. All the requisites of the statute must be complied with before the makers of premium notes can be compelled to pay assessments upon them, and this applies as well to the provisions which relate to the manner, as to those which concern the substance, of the assessment. It is said that the meaning of the statute is, that publication should be made as the by-laws direct, unless the directors order otherwise, and in that case as they see fit; and that the receiver who succeeds them enjoys the same unlimited discretion. This is not, in my judgment, a fair construction. It gives too little force to the by-laws which were thus expressly referred to in the act, which we must suppose were intended by the legislature to be controlling when such by-laws existed and affected the question. The fair import of the act is, that such publication of the assessment must be made as the bylaws direct, if they contain any direction on the subject; or if they do not, then such as the directors see fit.

. The defect in the publication of the assessment made by Barnes is not aided by the personal notice which was proved,for two reasons: First, because a personal demand is required by the statute in addition to the notice by publication; and second, because the publication must be made and completed according to the statute and the notice thereby contemplated, thus giving thirty days before the assessment is payable. If a personal notice were claimed as a substitute for or equivalent to notice by publication, it should have been given thirty days before the time of payment and before suit, as the notice by the publication would have been. The personal notice in this case was a demand of payment, which was made on the same day on which the suit was brought.

I am, therefore, of opinion that the assessment made by Barnes was invalid, and that upon it this action would not lie. But the conclusion at which I have arrived upon the other questions in the case render this opinion of less importance.

After this assessment had been made, Eames was removed from the receivership, and the present plaintiff appointed in his place. On the 23d of June, 1860, the plaintiff made another assessment. This assessment was general, and it re paired payment of and assessed every premium note belonging; to the corporation to the entire amount due and unpaid the reon, declaring that the same was necessary to pay the del ts of the corporation.

1 i appeared on the trial that the policies and business of the JEtna Insurance Company were distributed into classes. In one of these, designated as farm policies, there had been no losses.' In the other divisions, however, described as hazardous risks, the losses had been so large as to require not only the premium notes given for policies of that class, but all the premium notes, and also the stock notes, and the whole assets of the company, to meet them. It is objected to this assessment that it is general, not discriminating between the notes given for these two classes of policies. The answer to this, so far as the defendant is concerned, is, that his policy was issued and his note given upon the insurance of what is known as a hazardous risk. All the notes of that class would be assessed to their full amount, if the assessment had been made by classes, and the notes of this class charged primarily with the losses o.n policies of a similar description. As the losses in this one branch of the business of the company were sufficient to absorb all that could be collected from all its notes, it was certainly not material to the defendant that.the notes given for farm policies should be separately assessed; nor is it necessary to discuss the rule in ordinary cases. The referee finds as facts that the assessment made by the plaintiff was for losses and for expenses and liabilities accrued while the defendant’s note and policy were in force. He also finds that the amount due for losses which accrued in the hazardous department, and which are due and not paid, for the time that the defendant’s note and policy were in force, is more than can be collected on the notes of that department which were in force, and were liable for the losses and expenses which-accrued during the same period. These facts seem to me to dispose of the theoretical objection to the general assessment made by the plaintiff on the ground of the injustice which might result from such an assessment in cases which could be supposed.

The Supreme Court seem also to have held .that the assessment was defective and insufficient, because it did not state the particulars of the assets and debts of the company upon which it was based. I confess that this idea seems to me to be founded upon a misconception of the nature and purpose of what is called an assessment under these laws. The act of the receiver in assessing premium notes is precisely the same as that of the directors in case of losses, which the company has not the ready means to pay, while it is yet solvent. The statutes upon which their action is based (Laws of 1853, ch. 466, § 13; Laws of 1854, ch. 339, § 3) authorize and require the directors, if they find it necessary after ascertaining the amount of a loss sustained by any member of the company, to “ settle and determine the sums to be paid by the several members thereof as their respective portion of such loss, and publish the samethat is, to publish their determination of the sum to be paid by each member. This is what is meant by an assessment, whether made by directors of a company or by the receiver who succeeds to their powers. It is the determination how much each member of the company shall pay to make good a loss or losses sustained by others. Fo particular form is requisite for this; nor is it needful, as was held in Bangs v. Duckenfield (18 N. Y., 598), to specify in the assessment the name of the parties bound to contribute, or the amounts of the notes. It is sufficient that the requisition be certain, or such that the parties called upon have the means of reducing it to certainty. It -is perfectly true that the assessment must be just and equal, after the rule of proportion laid down by the statute, and that there must be such a state of the assets and liabilities of the company as to justify the call. But it is very clear to my mind that the Supreme Court fell into an error in supposing, as they seem to have done, that all this should or could appear by the assessment itself. That is simply the resolution of the directors, or the act of the receiver, fixing the amount of the liability of the members of the company. It is said that the burden of proof to establish the facts requisite to a valid assessment should be thrown on the receiver or party suing under it. The question of the burden of proof in such cases is the-question presented by this objection. It would hardly be conceded by the defendant’s counsel that mere statements or recitals in an assessment, or in the preliminary proceedings to it, would be proof; certainly not that they would be conclusive proof of these vital facts. If such recitals, and statements were contained in the assessment, or in any of the formal proceedings which resulted in it, the question would still remain, whether the plaintiff was bound to sustain these statements by evidence, or whether the defendant was required to attack and impeach them. But here the referee expressly finds the facts which are necessary to sustain the assessment, and the objection only comes to this: that these facts are not set out by the receiver in mating it. I am certainly of opinion that such an objection should not prevail.

The other points taken by the respondent’s counsel have been disposed of by previous decisions of this court.

I, therefore, have reached the result that the assessment made by the present plaintiff is valid and sufficient to sustain this action against the. defendant, and that this judgment should be reversed and a new trial ordered.

Demo, Ch. J., Selden and Marvin, Js., concurred in this opinion, and Rosekrans, J., in so much as relates to the effect of personal notice and demand.

Judgment reversed, and new trial ordered.


source: Caselaw Access Project

author: Emott, J.

license: Public Domain

text:
    Wyman, Adm’x, v. Wyman et al.

    Upon, the death of one who has effected an insurance against fire of his house, the interest in the policy devolves upon his heirs-at-law, and, in case of loss, the damages accrue to them.
    Where the policy runs to the assured, his executors or administrators, the personal representative may, it seems, maintain an action, as trustee, for those beneficially interested in the real estate.
    The damages' recovered stand in the hands of the administrator, not as personal assets, but as realty, subject to dower and to the lien of creditors by judgment before distribution among the heirs-at-law.
    Appeal from the Supreme Court. The facts proved on the trial were these: John R. Wyman, the plaintiff’s intestate, died in January, 1859, seised of a hotel, on which he had effected insurance to the amount of $8,000. The policies ran to Wyman, “his executors, administrators or assigns,” and contained this clause, ■ “ the interest of the insured in this policy is not assignable unless by consent of this corporation, manifest in writing, and in case of any transfer or termination of the interest of the insured, either by sale or otherwise, without such consent this policy shall be void and of no effect.” Wyman died wholly insolvent, leaving a widow, the-plaintiff, who took out letters of administration, and two children, his heirs-at-law, who were defendants. In October succeeding Wyman’s death the insured property was destroyed by fire. The insurers adjusted the loss and paid the amount to David B. Prosser, Esq., who had been appointed guardian of the infant heirs, under a stipulation entered into by aJJ the parties concerned that Prosser should hold the money subject to the direction of the court, to be paid to the parties to whom it might be adjudged to belong, the heirs, the administratrix or certain creditors, who, before the intestate’s death, had recovered judgment against him, which was a lien on the insured property for an amount exceeding its value. Prosser insisted upon his right to hold the money for the heirs, and the action was in the nature of a bill of interpleader to try the right of the several parties. The decision of the Supreme Court, at general term in the seventh district, was that the plaintiff, as administratrix of Wyman, was entitled to the money, and not the heirs-at-law. From this judgment Prosser, as guardian of his wards, appealed to this court.

      David B. Prosser, for the appellants.

      John H. Reynolds, for the respondents.
   Emott, J.

The condition in the policy which-is cited by the appellants refers to assignments or transfers of the policy itself or of the interest of the assured therein, and not to transfers of the title to the building insured, or the land on which it stood, whether such transfers are voluntary or by operation of law. The clause is to the effect that the interest of the assured in this policy is not assignable; and it is a transfer or termination of the interest of the assured in the policy, and not in the premises insured, which, when made without consent, is to avoid the policy under this condition.

Policies of insurance against fire, however, are personal contracts with the assured. They are agreements to indemnify Mm against loss, and not guarantees of the immunity of the property insured. Such contracts do not attach to the realty, nor do they pass as incident to á conveyance or transfer of the title to lands. In the present instance, as ordinarily with us, in policies of insurance against fire, the contract is made with the assured, “his executors, administrators and assigns.” Both by force of these words, and from the nature of the contract itself, the right of action upon the policy at the death of John B. Wyman vested in his personal representative. It is not easy to see how any one but his administratrix, the present respondent, could have sustained actions on these policies which had been issued to John B. Wyman, for any loss whether it had occurred' before or after Ms death. It would have been a sufficient answer to any such action by the heirs, upon a policy of insurance, that it was a personal contract to which they were not parties, and that the right of action which it gave passed upon the death of the original' assured to his personal representative, who not only succeeded to all his mere rights of action, but was specifically named in this contract itself.

This, however, is not an action to recover on a policy for a loss; nor is the question between the insurance companies and these parties, or either of them. The companies have indeed, as far as it lay with them, waived any condition in the policies, or any objection to the payment of the loss. The insurance money was paid to David M. Prosser, under a stipulation by which he became in effect a stakeholder, and by which the ultimate disposition of the money is left to the judgment of the courts upon the rights of the parties. The present is an equitable action to ascertain and determine those rights. The plaintiff claims this money as personal property and part of the assets of the estate of John B. Wyman, to which she is not only primarily but absolutely entitled as Ms administratrix; while the defendants insist that it belongs to them as Ms heirs-at-law, and the owners of the real estate upon which the building stood which was insured in the policies.' It results that although we are not required formally to determine whether an action could have been sustained against the insurance company by either of these parties, yet the controversy between them cannot be determined except by ascertaining their legal or equitable rights to the amount due by the contract of insurance.

I have already intimated the difficulties in the way of an action to recover the insurance money by the heirs. On the other hand, it is said by the heirs that the administratrix could not have sustained such an action, because she had no interest in the property insured. It is unquestionable that the assured must have an insurable interest in the premises covered by the insurance at the time of the loss. But in the present case the title and interest in the lands, and with it the ownership of the building, passed to the heirs; yet, as we have seen, the right of action upon the contract vested in the administratrix. These parties are not strangers to each other, however, but both of them derive title from the intestate by a devolution or transfer, which is not only not forbidden but is recognized by the policy. The policy does not avoid the contract upon the transfer of the title to the property by descent to the heir, and the devolution of the right of action to the administratrix; but expressly preserves the right of action and continues and extends the privileges of the agreement to the executors and administrators of the assured. ' An action may be brought upon the contract of insurance by the latter as the successor of the original party, and as named in the instrument itself, to recover damages for the destruction or injury of the interest of the former in the property insured. Thus thecontract of insurance by the death of John B. Wyman became by its terms a contract with his administratrix for the protection of the interest of his heirs. So that the' right of action became vested in one person, while the interest in the property insured, which was requisite to sustain the action, belonged to another. The administratrix would thus have sustained her action upon the policy as a person with whom a contract is made for the benefit of another. She would have been regarded as a party to whom, as a trustee of an express trust, the right to sue in her own name is preserved under the Code (§118). The case would fall within the decision of Considerant v. Brisbane (22 N. Y., 389). See Freeman v. Fulton Fire Insurance Company (14 Abb., 404).

But it is difficult to reconcile the claim of the respondent to hold this insurance money, as part of the personal assets of the deceased, with this reasoning. The doctrine contended for by the appellant’s counsel that not only the right of action, but the beneficial interest in the contract with the insurers, passed to the administratrix at the death of John R. Wyman, fails when it is put to this test. She had no legal estate and no beneficial interest in the premises. The title to the contract, and to a recovery upon it, was vested in her by the operation of law, and not by express assignment or transfer. She is, of course, a trustee for creditors of the assets in her hands, but not of the lands of the deceased,' nor of a contract like this, which is fbr the indemnity of those who have the beneficial interest in the lands. Upon the reason of the matter it is equally evident that the beneficial interest in such a contract of insurance belongs to the heir and not the personal representative of the deceased. The heir is the absolute owner of the property, entitled to its income and its enjoyment and damnified by its destruction. He only can bring an action for any damage done to it after the title has passed to him from his ancestor. If the destruction of this building by fire had been the result of the malice or carelessness of another, the heirs of John R. Wyman would have had their action against such person and recovered damages for the very loss against which this contract is an indemnity. They could have destroyed, removed or sold the building at any time, and neither for such an act nor for any injury by a third person, could the administratrix have sued at all. Her rights rest upon the contract of the insurers exclusively; and that is a contract, as I have already said, not of guaranty against the destruction of the property, but of indemnity against a loss to the person injured by such destruction. It follows that it is a contract which, even if made or continued with her, is, in ■ truth, for the benefit of the parties to whom, that property belonged. The building which was burned was real estate. As such it vested in the heirs immediately upon the death of the intestate, and its subsequent injury by fire could not convert it into personal estate, so as to divest the right of the heirs or give a new direction or character to the money payable by way of indemnity for their loss. Again, it was a part of the contract of insurance in this case, as is usual in policies of insurance against fire, that upon the destruction or injury of the property the insurers, if they chose, might repair or restore it in specie. If they had elected to take that course the expenditure which would thus have been made would, of course, have been entirely for the benefit of the heirs. The building repaired or replaced would have been theirs, because standing upon their lands. The theory of the payment of money in lieu of such actual reparation, is that the party is thus enabled to replace what has been destroyed for himself instead of its being done by the insurers. This is very plain in the case of a partial loss where there is only an injury and not a destruction of the premises insured, but it is equally so in all cases. It would be a singular result if the election of the insurers could determine whether the heirs or the administratrix should take the benefits of their contracts; whether they would make compensation in money to the latter, or in kind to the former. And it is a strong implication from the existence of such a feature in the contract that its benefits must, in any event, and in either form of performance inure to those who would, in the case of its literal performance, reap its fruits. My opinion is that in such a case as this the executor or administrator is a trustee for the heir who alone has been damnified, who has sustained the loss, and who is entitled to the indemnity.

It is supposed that such a construction of the contract and of the rights of the parties will be in conflict with the authorities. It is somewhat remarkable that so few cases can be found in which a question of such interest, and which must frequently arise, has been considered. An attentive examination of the few decisions to be found bearing upon the question, will show that they do not really contradict the views which have now been expressed. The difficulties which have been found, and are stated by text writers, grow out of the character of the question, and the peculiar relations of the parties to the subject, rather than from judicial decisions. A leading case, which is much relied on in favor of the right of the personal representative is Mildmay v. Folgham (3 Ves., 471), in which Lord Chancellor Loughborough makes use of the strong expression, “it is impossible to make the executor a trustee.” But that case was decided upon its special circumstances, and cannot be cited to control others which are not in all respects similar. Judith Tucker had insured a house by becoming a member of a company formed by deed for purposes of mutual insurance. She received a policy declaring that certain persons named as trustees would pay to her or her personal representatives, in accordance with the deed, any loss or injury to her property within seven years, and at the end of that time, if no loss occurred, would repay her deposit. The deed provided against survivorship to those remaining, in the event of a death of any person becoming a party to it; and that, in such event, the interest in the deed, and in the association, of a member dying, should survive to his personal representatives, who thereby became members of the company. It was also provided that, if the interest or property in the house insured of any person should expire, inasmuch as the insurance thereby became void, such person could adjust his account and have the deposit repaid him, and that the person succeeding to the property might come in and renew the insurance, becoming a member of the association in turn. The suit was a bill filed by the heir against the trustees named in the policy: that is, in effect, against the association. The Lord Chancellor held that this was a partnership, ór a quasi partnership, and that no person could claim its benefits unless he was a member of the society according to its terms, which, he says, were very intelligible and consistent. The effect of the articles in his view evidently was, that the right to .their benefits could only survive to the personal representatives, and no one else could succeed to the membership of the .original assured. If the interest in the property insured passed to executors, no benefit was taken by the survivors from Ms death: the interest survived; and the right of membership attached to the representatives by force of the deed of partnership. If, however, the interest in the insured property did not vest in the executor, the only right which remained, according to the deed of insurance, was the right to claim a return of the deposit, wMch, he says, was with the executor, with whom the account must be made up. The heir or devisee ■ could only come in anew and insure, or become a member of the society on his own account. In other words, the construction put upon the scheme of insurance exhibited by the policy, and the deed of association in that case, was, that by the death of the assured, and the transmission of her interest to a person who was not, and was not entitled to become, by succession, a member of the society, the insurance terminated, and the only rights of the executors and the heirs were a return, of the deposit to the one, and a reinsurance by the other. The right of the executors to claim the insurance money upon a loss was not before the court; but the reasoning of the judgment, applied to the facts of the case, is equally fatal to the claim of the executor and of the heir against the company.

There is a case decided by Sir Lancelot Shadwell, Vice-Chancellor, Parry v. Ashley (3 Sim., 97), in which he held that the proceeds of a policy of insurance might be affected with a trust in favor of the parties entitled to the real estate. In that case certain real estate was charged with an annuity, and, subject to that, given to the defendant, who was sole residuary devisee and legatee and also executrix. The buildings were insured, and after the testator’s death the executrix renewed the policy. They were burned, and it was held that the insurance money should be regarded as real estate, and preserved for the benefit of the annuitant, and not be disposed of by the executrix as general personal assets.

Haxall v. Shippen (10 Leigh, 136), is an exceedingly well considered case in the Court of Appeals of Virginia. One Shore died leaving a plantation by will to his widow for life, and remainder to his children. There was an insurance on the buildings, running to him, his heirs and assigns. The widow occupied the house and the policy was kept in force. She married Haxall and afterwards the buildings were destroyed by fire. A suit in equity was brought upon the policy by Haxall and wife, and a decree made that the insurance money be paid to them, on their giving bonds to pay the principal to the children and heirs of Shore, at the death of their mother, Mrs. Haxall. The bond was given and the money received, and then used in rebuilding the house. At the death of Mrs. Haxall, suit was brought upon the bond, when the sureties commenced this action to stay its prosecution, on the ground that, by the expenditure of the money in rebuilding, the heirs had already had the benefit of it. The court held that the decree in the first suit, and the action of the parties under it, by giving the bond and receiving the money, was conclusive as to the lights of the parties, and that the subsequent application of the money in rebuilding was voluntary and could not prejudice the heirs. This was all which was necessary to the disposition of the ease, although the opinion discusses the rights of the parties, independent of the first suit and judgment. The case was not like the present, as the policy ran to the assured, his heirs and assigns, and was regarded as a covenant real. An adjudication in favor of the heirs could not, therefore, be cited as in point in a case where the policy was a purely personal contract. But, on the other hand, the reasoning of the court is not against the view which we take of the rights of the heirs in such a case. The proceeds of the insurance are, indeed, alleged to be money, and not lands, and not affected with any trust which would defeat creditors and require their use in rebuilding. But, at the same time, they were not considered to have been so entirely converted into personalty as to become the property of others than the owners of the insured property at the time of its destruction. It may be that the judges of that court would have so held in a case like this; but we are not obliged to dissent from their decision, or even to quarrel with their reasoning, as far as they went, in the case before them.

The case of Carter v. Rockett (8 Paige, 437), was between a mortgagee and the owner of property insured; and no question like the present arose. The owner had the entire interest both in the contract and the premises, and the only question was whether a mortgagee had by his mortgage merely a specific lien upon the money due to his mortgagor by the policy, simply because he had a lien upon the land, and because the value of his security was diminished by the destruction pf the buildings.

So far as we have thus considered the rights of these parties, and so far as their fights as against each other are concerned, the heirs-at-law are equitably entitled to this fund. If there had been no other allegations or proofs in the case, than such as we have thus far adverted to, the judgment of the Supreme Court would have been erroneous and must have been entirely reversed. The claim of the plaintiff to this fund as part of the ordinary personal assets of the deceased cannot be supported.

But there are other equities which it is necessary to consider. It was alleged and proved that the deceased died largely in debt and probably insolvent, and that the heirs were irresponsible. It was found by the judge who tried the cause that there was a judgment toi a considerable amount against John B. Wyman, which was a lien upon his real estate, and was held by persons not parties to this suit. Although this insurance money is to be treated as proceeds of real estate, it is nevertheless subject, as is the real estate itself under our laws, to the payment of the debts of the ancestor. A court having control of such funds should not allow them to pass into the hands of irresponsible and infant heirs, leaving the creditors of the deceased to pursue them by the dilatory remedy of a new and distinct proceeding. Having possession of the fund it is proper to retain it for the purposes of a just administration among the parties entitled to it. It is usual in cases where the proceeds of real estate come into the hands of the court, and it is shown that there are debts which the , real estate was liable to pay, or to be sold in the hands of the heir to satisfy, to order the money .paid over to the personal representative, for distribution so far as may be necessary, holding him to account for any balance or resulting residue to the heirs. The direction in the judgment appealed from in this case that the money in the hands of Mr. Prosser should be paid to the administratrix in order primarily to the payment of the debts of the deceased, need not therefore in fact be modified except in a single particular. That particular is one of which the respondent alone in her individual capacity, and not the appellants, can complain. As the widow of John R. Wyman, she is entitled to a dower interest prior to the rights of his creditors in this fund. That should have been preserved by the judgment. It may be that any direction as to the ultimate disposition of the residue, after payment of the debts of the deceased, will be unimportant in this case.' But the judgment taken with the complaint and the issue formed upon it by the answer, would imply, if not adjudge, that this money was regarded and ordered to be paid over by the court as part of the general personal estate, and should be distributed and áccounted for as such. This was erroneous, and whether the error is of any practical importance to these parties or not, this also should be corrected. Mo account has indeed been taken of the estate, nor are we in a situation to dismiss the appellants from a right to call for such an account of this fund or of its ultimate disposition. Their right to do so should therefore be preserved. The judgment should be modified so as to provide for the satisfaction of the dower interest of the widow in the moneys in question: for the payment of the surplus to her as the administratrix, to be applied by her in satisfaction of debts entitled to payment out of such assets in the order and manner established by law; and that the residue, if any, be divided among the heirs-at-law of the deceased according to their rights as such heirs. Neither party to have costs of their appeal.

Weight and Balcom, Js., dissented; Selden, J., did not sit in the case.

Judgment modified, in accordance with above opinion.


author: Selden, J. Rosekrans, J.

text:
    Simmons et al., Administrators, &c., v. Sisson et al.

    The complaint charged that the plaintiff, as the treasurer of a corporation, acting under the direction of its directors, expended §800 in its behalf over and above his receipts from its funds, and that the corporation was justly indebted to him in the sum of $700. Answers: 1. A denial of knowledge or information that the corporation was indebted in the sum of $700 or any other sum; 2. That the plaintiff was instructed by resolution of the directors to expend the earnings of the corporation which should come to his hands, and no more; and that, with knowledge of the amount of earnings and of such resolution, he made further advances in his own wrong:

      Held, that the answers did not admit, but denied, that the sum of $800 was expended by direction of the corporation.
    The first answer, it seems, is not a mere denial of a legal conclusion, but is ' equivalent to nil débet, and put the plaintiff to proof of his cause of action. If insufficient, it was too late to object at the close of the trial: Per Selden, J.
    Where an objection is thus reserved, the parties must stand on the pleadings and evidence taken together, and the court should disregard the defect in pleading, or order the requisite amendments: Per Selden, J.
    The second answer put in issue the plaintiff’s authority to make the expenditures. It is no objection that it also set up new matter not needed as the foundation of the denial, nor abridging or qualifying it.
    Section 399 of the Code of 1862 did not prohibit a party sued by an administrator from testifying to a conversation heard by him between the deceased and a third person. Such hearing is not a transaction between the deceased and the witness. Nor is such evidence prohibited by the Code of 1862:' Per Rosekrans, J.
    The admission of one of the defendants is inadmissible to charge others with whom he is sued, to enforce their personal liability as stockholders of an insolvent corporation. Their liability is several, and not joint: Per Rosekrans and Selden, Js.

      Whether one stockholder of a plank road corporation can maintain an action against one or more other stockholders, less than the whole, to recover a debt due him from the corporation, queere. It seems that he must bring his action against all the stockholders liable, for contribution: Per Bosekrans, J,
    The complaint in this action set out the organization of the Dresden and Penn Yan Plank Road Company, in June, 1850, and the construction, by such company, of a plank road from Dresden to Penn Yan: that, on the 4th of June, 1854, George W. Simmons (the intestate) was elected secretary and treasurer of said company, and immediately after such election entered upon the discharge of the duties of these offices, and continued in the discharge of such duties until his death. It also averred as follows: while thus acting he, “ from time to time, under and by the directions of the board of directors of said plank road company, and the person or persons authorized by the said directors, advanced and paid, laid out and expended, large sums of money in and about keeping said plank road in repair, and paying for material and work and labor done on said plank road, amounting, in the whole, to the sum of about eight hundred dollars, over and above the amount received by him, from the tolls and earnings of said plank road.”
    After making such advances George W. Simmons died intestate, and the plaintiffs, in March, 1858, received letters of administration upon his estate. At the time of his death the plank road company was justly indebted to him in the sum of $744.74, on account of his advances. At the time of the making of such advances the defendants were stockholders in the company to the amount of $1,950 [the amount of stock held by each defendant being stated]; since the death of Simmons the corporation has abandoned the road and has itself become dissolved, and all its property and effects been disposed of.
    The sum of $744.74 still remains due arid unpaid, and the defendants having been stockholders when the advances were made, are indebted to the plaintiffs therefor, and judgment is demanded for that amount with interest, and that an account be taken of the matters before mentioned, and that the plaintiffs have execution against the defendants respectively for such part of the sum which may be found due to the plaintiffs as they.shall be respectively adjudged liable to pay.
    The ’ defendants, in their answer, say, “ that they have no knowledge or information sufficient to form a belief that at or before the decease of the said George W. Simmons, the said Dresden and Penn Yan Plank Road Company were justly indebted to the said George W. Simmons, deceased, in the sum of $744.74, or any sum whatever for money paid, laid out and expended in and about the said Dresden and Penn Yan Plánk Road, in repairing the same, or in any other manner; or that these defendants are justly indebted to the said plaintiffs, as administratrix and administrator of the estate of the said George W. Simmons, deceased, in the sum of $744.74, or in any other sum whatever, and they, therefore, leave the plaintiffs to prove the same as they shall be advised.”
    For a further answer the defendants say they were stockholders of said company at the time alleged. Simmons,- deceased, was also a stockholder to the amount of $300, during the same time, and also secretary and treasurer during the time when the alleged indebtedness occurred, and as such received the earnings of the road, and was well acquainted with the condition of the company and the amount of its earnings and expenditures; and being such secretary and treasurer, “he was directed and authorized by said plank road company, to lay out and expend in the repairing, grading and the work and labor necessary to do the same, the surplus receipts and earnings of said road and no more. And these defendants say, upon their information and belief, that the said George W. Simmons, before and during the time that he was making the advances alleged in said complaint, was strictly forbidden by said plank road company, and by the members thereof, to expend any greater amount of money, materials and labor upon said road than he received from the earnings of said road, and not to incur any liability on the part of said company greater than the tolls and earnings thereof would pay, and was directed to apply the same no faster than the said earnings would reimburse him therefor. And the defendants allege that the alleged advances, if made at all, were made by Simmons in his lifetime, without the consent or procurement of these defendants, and in fraud of these defendants’ rights, and contrary to the wishes and instructions of said plank road company, and in his own wrong.”
    The cause was tried before a referee. The organization of the company was proved, and the election of six directors (that being the number authorized by the charter), at the annual elections in June, in the years 1855, 1856 and 1857, George W. Simmons being one of such directors in each year. By the articles of association he appeared as the holder of six shares of $50 each of the stock of the company. The plaintiffs proved that on a statement of accounts between Simmons and the company, on the 2d of June, 1857, the sum of $133.56 was found due to Simmons; but how the indebtedness accrued did not appear. They also proved a considerable' amount of advances to have been made by him for repairs on the road during the year 1857; but no authority in any way from the board of directors for making such advances was proved. The evidence of the advances consisted mainly of entries in a book of the company, kept by Mr. Simmons, to show the debt and credit of the company.
    At the close of the case on the part of the plaintiffs, the defendant’s counsel moved for a nonsuit, on the ground, among others, that the plaintiffs had failed to make out a cause of action. .The motion was denied, and the defendant’s-counsel excepted.
    The defendants then introduced proof to sustain the second division of their answer; and if the affirmative facts there stated were not conclusively proved, the testimony went very far toward proving them.
    It was shown that at the annual meeting in July, 1856, it was stated by the secretary and treasurer (Simmons) that the amount then in the treasury was about $700. A motion was made that a dividend of the amount on hand should be made, which was voted down. A resolution was then offered and adopted, that the moneys on hand should be applied, together with the earnings of the road, on the repairs of the road, and nothing further. Simmons was present, acting as secretary, when the resolution was passed. While at work on the road, Simmons was several times reminded by individual directors of the resolution, and he said he thought he could get the road in a shape to get his money out of it; that he did not expect to get pay of the company. There were several conversations to this effect. One other witness' said, “ I inquired of him how he got along with his plank road, and he said, it owes me so much. I laughed, and told him of the resolution, and repeated the substance of it to him! He made an evasive answer. He said he did it under the eye of the directors; and I told him I knew he was working on the road, and all he expended on the road beyond the moneys in the. treasury and the receipts and earnings, he was doing on his own hook. He evaded the conversation about the resolution of the board of directors, and said the law of the State would allow him to collect it out of the stockholders, and he would do it.” This was in the fall of 1857, and after that time no more work was done on the road. Several exceptions were taken to rulings as to the admission of evidence during the trial.
    The referee made his report, in which he found, as facts,’ that the plank road company was duly organized; the defendants were stockholders from its organization to its dissolution, and the amount of stock held by each; George W. Simmons was secretary and treasurer from June 5, 1854, until his death; that on the 2d day of June, 1857, the company was indebted to him, on settlement of his accounts as treasurer, in the sum of $133.56; that afterwards, and previous to his death, as such treasurer, he advanced, paid, laid out and expended for the company, in and about keeping their road in repair, and graveling it, and in paying for labor and materials therefor, and other incidental expenses, the further sum of $736.86.
    During the time last aforesaid he performed labor by himself and servants, on the road, and in and about the business of the company, and furnished materials therefor, to the amount of $187.32. During the last mentioned period he received in tolls and moneys of the company, $263.28.
    He also found, as a conclusion of law under the pleadings, that the plaintiffs are not éntitled to recover the said sum of $137.32.
    He also found, as a fact, admitted by the pleadings in the action, that the said sum of $736.86 was paid, laid out and expended as aforesaid, by the said George W. Simmons, in his lifetime, for the said company, under and by the direction of the board of directors of said Dresden and Penn Yan Plank Eoad Company, and of persons authorized by the said direc- • tors; and, as a conclusion of law, that the company was indebted to the intestate at the time of his death, and are now indebted to the plaintiffs, as administrators of his estate, in the sum of $607.14, together with $33.86 interest on the said $133.56, from June 2, 1857, to the date of the report, making, in all, the sum of $641, for which sum the plaintiffs were entitled to judgment. The defendant, Dox, was liable for the whole of said sum of $641. That each of the other defendants was liable therefor to the amount of $250.
    Several exceptions were taken to the report, but those which are material now were only to the finding as a fact admitted by the pleadings that the sum of $736.86 was paid out and expended by Simmons for the company, under the direction of the board of directors, and to the conclusion of law, that the plank road company were indebted to said Simmons at the time of his death, and were, at the time of the report, indebted to the plaintiffs, as stated in the report, and that the plaintiffs were entitled to judgment.
    Judgment was entered upon the report against each of the defendants for the sum for which he was declared liable in the report, and $102.35 costs, but the several sums to be collected were not to exceed the sum of $743.35, with interest from the time of entering-judgment. That judgment was affirmed at the general term, and the defendants brought this appeal.

      D. J. Sunderlin, for the appellants.

      D. B, Prosser, for the respondents.
   Selden, J.

The principal questions in this case are those raised by the exceptions to the findings of the referee: 1st, as fact admitted by the pleadings, that the sum of $736.86 was paid, laid out and expended by the intestate, in his lifetime, for the plank road company, by direction of the board of directors, and of persons authorized by them; and 2d, as a conclusion of law, that the company was indebted to the intestate, at the time of his death, in the sum of $607.14, besides interest.

The substance of the pleadings, so far as they relate to these questions, are as follows: The plaintiffs allege that the intestate, in his lifetime, while acting as treasurer of the plank road company, from time to time, by the direction of the board of directors, advanced and laid out in keeping the road in repair, a large sum, amounting to about $800, over and above the amount received by him from the tolls and earnings of the road; and that at the time of his death the company was justly indebted to him in the sum of $744.74, on account of such advances. To these allegations the defendants answer:

1. That they have no knowledge or information sufficient to form a belief that, at or before the decease of the intestate, said company was justly indebted to him in said sum of $744.74, or any sum whatever, for money expended in repairing the road, or in any other manner.

2. That the intestate, during the time the indebtedness is alleged to have accrued, was secretary and treasurer of the company, and well .acquainted with the condition and the amount of earnings and expenditures; and was directed and authorized by said company “to lay out and expend in the repairing, grading and the work and labor necessary to do the same, the surplus receipts and earnings of said road and no more; ” and that the alleged advances, if made at all, were made by said intestate, “ contrary to the wishes and instructions of said company, and in his own wrong"

The first defence (the particular form of denial being such as is prescribed by the Code) is the exact equivalent .of nil debet, at common law. It may admit of some doubt whether nil débet was not a proper answer to this complaint. The facts stated in the complaint are peculiar; and do not vary materially from an indebitatus count in debt, according to ancient forms of pleading. The statement of the. advances to the amount of about $800 beyond tolls and earnings, is not put forth as the cause of action, but only as inducement; the cause of action being that at the time of the intestate’s death there remained due to him, as a balance of advances, over and above tolls and earnings, the sum of $744.74; and for this sum judgment is demanded. To such a complaint I think the ancient plea of nil débet is a good answer under the Code. In Gates v. Wheeler (2 Hill, 233), Bronson, J., says: “ in debt for rent, by indenture, or for an escape, or for a devastavit by executor, it has been held that the indenture, or the judgment, is but inducement; and that the arrears of rent, the escape and devastavit are the foundation of the action; in these cases nil débet is a good plea.” (Bullís v. Giddins, 8 John., 82; Dartmouth College v. Clough, 8 N. H., 28.)

But whether the preceding position is correct or not, it was too late to object, at the close of the trial, that this division of the answer did not put the fact of indebtedness in issue. Hnder the former system of pleading, nil débet to an action of debt on bond or judgment was bad on general demurrer, but if, instead of demurring, the plaintiff went to trial on that issue, it was always held to put him to the proof of his cause of action. Mr. Starkie says (2 Starkie’s Ev., 140): “ The plaintiff in an action on a bail bond, whether he be the sheriff or his assignee, under the plea of non est factum need prove the execution only; but if he should inadvertently have joined issue upon a plea of nil débet, instead of having demurred, he will be bound to prove all the averments, the issuing of the writ, the arrest, the execution of the bond, and the assignment if the action be brought by the assignee.” This effect has constantly been given to the plea of nil débet, notwithstanding its acknowledged insufficiency if demurred to, both in England and in this country. (Rawlins v. Danvers, 5 Esp., 38; Anonymous, 2 Wils., 10; 2 Phil. Ev., Cow. & Hill's ed., 168; 1 Chitty on Pleading, 433, Springfield ed., 1844.) In Myers v. McLean (2 Johns., 183), the court says of such a plea to debt on a judgment: “We are all of opinion that the plaintiff, having treated this plea, in the present case, as a legal plea, and gone to trial upon it, he cannot now allege anything against it, and' is concluded by his own acts.” This decision was on a motion in arrest of judgment, but the ruling has been the same where the objection was taken in evidence, under the plea at the trial. In Rush v. Corbett (2 Johns. Cas., 256), where nil debet was plead to an action of debt on a judgment, it was insisted on the trial, that the plea did not put the judgment in issue. The contrary was held, and, on a motion for a new trial, Badcliff, J., delivering the opinion of the court, said: “ If the plea of nil débet had any effect or operation, I think it was incumbent on the plaintiffs to prove the record. It is the general issue which admits nothing, and is a total and general denial of the plaintiff’s right of action.” I think, therefore, that under the strictest rules of special pleading, the first defence of this answer, if not objected to as insufficient, before the trial, by demurrer, would always have been held sufficient, on the trial, to put in issue the plaintiff’s cause of action; and that, in view of the late gentle admonition of the legislature to courts, that, “in the construction of a pleading, for the purpose of determining its effect, its allegations shall be liberally construed, with a view to substantial justice between the' parties,” the referee erred in holding that the defendant had admitted the indebtedness of the corporation, when they expressly denied it.

There are, I think, much stronger reasons now for holding such answer sufficient, on the trial, to put the question of indebtedness in issue, than there were when the decisions were made, to which I have referred. There was then no method of objecting to the pleadings except by demurrer, which was an . expensive and dilatory proceeding. Parties are now provided with short and cheap methods, by motion, to compel defective pleadings to be amended, stricken out, or that judgment be pronounced upon them summarily; and they can have no excuse, for reserving such objections until the close of a trial. I am of opinion that where, that, course is. taken, the party must stand upon the, pleadings and th,e evidence together; that the judgment must be, such as the whole case, pleadings and evidence united, demands, and that it would be the duty of the court, under section 176 of the Code, to disregard defects in the pleadings, not before noticed, or to, order the, required amendments under sections 170 au4 173. If, however, the case should be. such as, to satisfy the court that either party had been misled by the defects in the pleadings, it should be disposed of under section 169. As the present case may be disposed of without adopting any principle so general, the decision, of course, will not depend upon its soundness.

The second division of the answer was also sufficient to put' in issue the alleged indebtedness. The plaintiffs say that Simmons made advances for repairs, by direction of the directors, to the amount of $800 over and above his receipts, and that when he died the company was indebted to him $744.74 on account of such advances. The defendants answer, that at the time the indebtedness is alleged to have accrued, Simmons was treasurer, and received the earnings of the road, and was authorized to expend in repairs the surplus earnings of the road, and. no more. This allegation, without any aid from the subsequent portions of the answer, puts in issue the authority of Simmons to make any advances beyond the receipts, or to create any indebtedness against the company. The words “and no more" are equivalent to “etnon” or “absque hoc," the technical words of traverse of the old system of pleading. The brevity of the expression takes nothing from its force, and it amounts to a denial of all authority in Simmons to make advances beyond the receipts, and consequently to create a debt against the company. The attention of the court below does not appear to have been called to this view of the answer.

There is a further allegation in the answer, to the effect, that Simmons was expressly forbidden to incur any liability on the part of the company, ’which was properly characterized in the court below as new matter, to be proved by the defendants; and that court held that the question whether the allegátion was proved was for the referee to decide, upon the evidence, and that his decision was final. If' he had decided the question upon the evidence, although it might appear to this court that the allegation was sufficiently proved, the decision would be regarded as conclusive. The referee, however, did not pass upon the evidence, but held the fact of indebtedness admitted by the pleadings, without reference to the evidence, in which respect I think he committed an error in law that cannot be overlooked. A new trial must, therefore, be granted, .and it is unnecessary to examine the questions presented by the decisions in regard to the admission and rejection of evidence."

Rosekrans, J.

The referee and the Supreme Court wholly misapprehended the nature and effect of the allegations of the complaint and answer, and both improperly held that the defendants admitted by their answer, the allegation in the complaint, “that Simmons, the plaintiffs’ intestate, while he was acting as treasurer of the Dresden and Penn Yan Plank Boad Company, advanced and paid, laid out and expended money, under and by the direction of the board of directors of said company and the person or persons authorized by said directors, in and about keeping said plank road in repair, and in paying for material and work and labor done on said plank road over and' above the amount received by him from the tolls and earnings qf said plank road.”

The second answer contains this language: “ And these defendants say that the said Simmons, before and during the time he was making said advances alleged in said complaint, was strictly forbidden, by said plank road company, to expend any greater amount of money, material and labor upon said road than he received from the earnings of said road, and not to incur ahy liability on the part of the said company greater than the tolls and earnings thereof would pay. And these defendants allege, that the said alleged advances, if made at all, were made by said Simmons contrary to the wishes and instructions of the said plank road company in his own wrong.”

The averment in the complaint, that the advances were made under and by the direction of the board of directors, and of the person or persons authorized by said directors,” simply means that they were made at the request of the company and in accordance with its directions. The word “ directions ” in the .complaint and “ instructions ” in the answer, in the connection in which they are used, are synonymous. Adopting this as the correct and legal paraphrase of the language used, it is impossible, in the nature of things, that the language of the second answer above quoted should not be regarded as a general, and a full and complete denial of the allegation in the complaint. It is a contradiction and an absurdity to say that the advances were made by the request of the company, and by its instructions or directions, and, at the same time, that they were made contrary to the wishes and instructions of the company. The answer does not need the aid of the liberal construction prescribed by the Code in order to constitute a full and complete denial of the allegations of the complaint. • Giving to its language its ordinary signification, it amounts to such a denial, and it is only by a forced and unnatural construction that it can be made to speak less. Mor is it the less a denial of the allegations of the complaint, if it be conceded that other portions of that answer introduce new matter. This new matter, so called, has no necessary connection with the portion of the answer above quoted. It is not needed as the foundation or inducement of the denial, nor does it qualify or abridge, in the least degree, the signification or effect of the part quoted. But if the liberal rule of construction prescribed by the Code is applied to the second answer, it is impossible, with any degree of fairness, to attribute to it an admission that the alleged advances were made by Simmons at the request, or even with the assent, of the corporation or of its board of directors, or of any of its agents.

The erroneous ruling of the referee in regard to the force and effect of the answer, was the cause of many of the other errors committed by him during the progress of the trial. In this class was his improper admission of the testimony of Graves and Brown, in opposition to the defendants’ objection, that no authority or request by the corporation to Simmons to make the advances had been proved. The question presented and decided by the referee under this objection was as to the competency of -the offered evidence in the absence of proof of the authority or request insisted on by the objection, and the error cannot be evaded by saying that the question was merely one relating to the order of proof. The referee did not put his decision upon any such ground.

The orders drawn by Legg and Sisson, as directors, on Simmons, as treasurer of the plank road company, were improperly admitted in evidence. Assuming that Legg and Sisson had authority to draw the orders, the payment of them ■by the treasurer is presumed to have been made out of the funds of the corporation in his hands, and they afforded no ground of action against the corporation. The evidence referred to by the court below, as the ground for sustaining the decision of the referee, instead of furnishing any reason for the admission of the orders in evidence, on the contrary furnishes the most conclusive reason for the rejection. It is said that it appeared that Sisson and Legg were appointed to superintend the labor on the road and the expending of this money; but the money referred to is distinctly designated in the resolution, spoken of by the witness as having been passed by the board of directors, to the effect that they should expend the money on hand and the receipts for tolls accruing on the road, in graveling, and no faster. In the absence of all evidence to the contrary, the drafts are presumed to have been drawn upon the fund in the treasurer’s hands belonging^ to the corporation.

The referee also erred in rejecting the testimony offered to be given by the defendant showing that he heard a conversation between the plaintiff’s intestate and Townsend, in June or July, 1857, in which the intestate admitted to Townsend that he was instructed by the board of directors of the plank road company, in June, 1856, to expend no more money on the road than the money in the treasury and the ordinary receipts frdm the tolls. This evidence was rejected upon the ground that a conversation heard by the witness, who was a party to the action, was a transaction had personally between him and the deceased, and could not, therefore, be testified to by him,* under section three hundred and ninety-nine of the Code of 1860. The prohibition of that section does not prevent a party testifying in an action in which the legal representatives of a deceased person are adverse parties, to a conversation between the deceased and a third person, which was overheard by the witness. The hearing of such conversation is not “ a transaction had personally between the deceased and the party,” within the meaning of the section of the Code referred to. This language has reference only to business done or negotiations carried on in person between the deceased and such party. That this is the true construction of this language is evident from the amendment of this section of the Code in 1862, which inserted the words “ conversation or ” before the word “ transactions,” so that the section now prohibits a party testifying in such.an action in regard to any conversation or transaction had personally between the deceased person and such party. Even as the section now stands, it does not prohibit a party testifying to a conversation between the deceased and a third person, heard by the party, and in which he did not participate.

The referee also improperly refused to allow this witness, Legg, to testify that the board of directors did not give the intestate any directions or permission to expend money upon the plank road, except the money in the treasury and the ordinary receipts of the road. This error was in consequence of the previous erroneous ruling of the referee as to the construction of the defendant’s answer.

It was also an error to allow proof of the admission of Legg that the account of the intestate against the plank road company was correct. The admissions of a member of a corporation aggregate are not competent to charge the corporation unless they are made in relation to a transaction in which such member is the authorized agent of the corporation. (Ogden v. Manhattan Co., 3 Cow., 623; Hartford Bank v. Hart, 3 Day, 493.) The doubt which formerly existed upon this subject was settled by these decisions, and the statute (2 R. S., 408, marg.; 3 id., 5th ed., 692), was merely an affirmance of this rule. That statute declares that in suits by or against an aggregate corporation, the admission of any member thereof, not named on the record as a party to such suit, shall not be received as evidence against such corporation, unless such admission was made concerning some transaction in which such member was the authorized agent of such corporation.

Nor were the admissions of Legg competent to charge his co-defendants. The liability of stockholders in plank road companies, for the debts of the corporation, is a several and not joint liability; and yet the referee allowed Legg’s admission to be proved to charge his co-defendants.

The referee’s report contains no finding as to whether the plaintiff’s intestate was a stockholder of the plank road corporation at the time .he made the advance for which he seeks to recover. The defendant’s second, answer, however, avers the fact, and the plaintiffs themselves gave evidence that he was such stockholder in the years 1855, 1856 and 1857. The 38th section of the general act (2 R. S., 5th ed., § 120) declares that no person shall be a director unless he is a stockholder in the company, and the plaintiffs proved that their intestate was a director during the years named. When the plaintiffs rested, a motion for a nonsuit was made, and the first ground stated is that the plaintiffs had entirely failed to make out a cause of action. This is the only ground stated under which it can be claimed by the defendants that the. question may be raised whether a stockholder can bring an action under section 46 of the act (2 R. S., 5th ed., § 129), against one or more stockholders, less than all, to recover a demand due to him from the corporation. We think the ground upon which the motion for a nonsuit was made was not sufficiently specific to bring the question referred to before the referee. And the referee’s report contains no finding as to whether the plaintiff’s intestate was a stockholder at the time he made the advances. The exceptions to the referee’s conclusions of law, based upon the facts found, do not enable the defendants to raise the question whether a stockholder could maintain such action. Without deciding the question, it may not be improper for the court to say that the more appropriate action would seem to be one 'brought under section 44 of the act (2 R. S., 5th ed., § 127) for contribution, against all the stockholders liable to contribution, as was suggested in the case of Bailey v. Banks (3 Hill, 188). In the act of 1855 (2 R. S., 5th ed., p. 514, chap. 390, §§ 154-156), the legislature deemed it necessary to declare that a stockholder, having a claim against the corporation, should be deemed a creditor, and entitled to appear in an action authorized by these sections and prove his claim and have judgment therefor. It would seem, from this decision and this legislation, that a stockholder could not bring an action under section 129:

The judgment should be reversed and a new trial ordered, with costs to abide the event.

Selden, J., concurred in all the points of this opinion not discussed in his own: all the judges concurring,

Judgment reversed, and new trial ordered.