text:
    New York Central and Hudson River Railroad Company, Resp’t, v. Andrew J. Davis et al., App’lts.

      (Supreme Court, General Term, Fifth Department,

      Filed April 12, 1895.)

    1. Principal and agent — Undisclosed.
    A party who deals with the agent of an undisclosed principal, has, as soon as the identity of the principal is discovered, an undoubted right to look to him for the performance of a contract, made pursuant to his authority.

      2. Carriers — Lien—Waiver.
    To constitute a waiver of a lien for carrying freight, the delivery must be made with such intent, or under such circumstances that the law will presume the intent to have existed; and nothing must remain to be done by the carrier in order to fully perform the contract.
    3. Same.
    A delivery of a part of the freight does not discharge the lien on the portion retained.
    Appeal from a judgment in favor of plaintiff.

      J. B. M. Stephens, for app’lt; Albert H. Harris, for resp’t.
   Per Curiam.

— Judgment affirmed on the opinion of the referee.

The opinion of P. M. French, Esq., to whom the cause was referred, is as follows:

The plaintiff is a common carrier of goods, among other places between Lyons and Charlotte Docks, in the state of New York. The defendant Andrew J. Davis is a producer, a miner and shipper of coal, owning the mines known as the Warrior Run Colliery, near Wilkesbarre, in the state of Pennsylvania. In the months of March and April, 1893, the defendant Davis shipped from his said mines to Charlotte Docks two thousand four hundred and twenty tons (2,420) and twelve hundred weight (12 cwt.) of coal, which was consigned to the defendant Arthur Gr. Yates. Although Mr. Yates was the consignee, he was not the owner of the coal, and ¡had no interest in it. It was sent to him by the.owner, Mr. Davis, ;as had been done for several years before, for what was known between them as “ stocking purposes,” — i. e. to be retained by Mr. Yates until Mr. Davis should sell it, 'when it was to be forwarded in vessels loaded from Mr. Yates’ docks, and for which service Mr. Yates was to be paid by Mr. Davis a handling charge of thirty -cents ($.30) per ton ; and the question presented is precisely the same as though the coal had been consigned by the defendant Davis to himself. The coal in question was by the defendant Davis, at his said mine,' delivered to the Lehigh Valley Railroad Company, which is also a common carrier of goods, having a line connecting with the plaintiff’s line at Lyons, and upon the delivery of such -coal he received from the Lehigh Valley Railroad Company a manifest, dated at the Warrior Run Colliery, in the following language : “ Shipped by A. J. Davis, per Lyons and N. Y. C. Railroads, the following cars of coal to be delivered to A. Gr. Yates, at ‘Charlotte Docks,” and then follow the car numbers with the total tonnage. The Lehigh Valley Railroad Company transported the coal in question to Lyons, and there delivered it to the plaintiff with the request that it be carried thence to Charlotte Docks, which service was performed, and for which the plaintiff has received no compensation. Although nearly 200 typewritten pages of evidence have been taken, and exhibits by way of manifests and waybills have been offered in evidence until, in their marking, the alphabet has been more than exhausted, the question, so far as this branch of the case is concerned, seems to me to be elementary and very simple. It is evident from the manifests that the defendant Davis requested the Lehigh Valley Railroad to transport this coal So Lyons, and to request the plaintiff to transport it from there to Charlotte Docks, and the service so requested has been performed. ZFor the purpose of delivering the coal to the plaintiff at Lyons and ¡requesting its transportation to Charlotte Docks, the Lehigh Valley Railroad Company was the owner’s agent, and the situation is the same in that respect as though the owner had personally delivered the coal to the plaintiff, and requested the plaintiff to carry it. The law at once, upon such request and service, implies a promise upon the part of the shipper, the defendant Davis, who was the •owner of the coal, to pay to the plaintiff whatever such service is reasonably worth, which the evidence shows to be forty cents ‘•($.40) per ton, making for the coal so transported the sum of nine hundred sixty-eight dollars and twenty-four cents ($968.24), a demand for which was made upon defendant Davis before the 1st of May, 1893, and for which sum, with interest from May 1, 1893, the plaintiff is entitled to judgment against him. The fact that "the plaintiff at the time of performance did not know the owner’s name, and had no personal dealings with him concerning the transaction, in no way affects the question. It dealt with the agent of an undisclosed principal, and as soon as the identity of the principal was discovered it was the plaintiff’s undoubted right to look to him for a fulfillment of the contract so made pursuant to his authority.

The other branch of this case presents a question which to my mind is much more difficult of solution. The plaintiff seeks in this action also to enforce its lien for carriage upon the coal so carried. No question,has been’ raised concerning the misjoinder of causes of action, but the parties have tried both causes of action together. The difficulty occurs in determining whether the coal has been delivered to the consignee. Mr. Yates. At the time of thip transaction Mr. Yates was the owner of property known as “Charlotte Docks.” situate near the village of Charlotte, upon the left bank of the Grenesee river, and comprising between,eight and nine acres of land, adjoining the plaintiff’s right of way. At that, point the river bank is about twelve hundred feet (1,200) easterly from the main track of the plaintiff leading from Rochester to-Charlotte. Mr. Yates was, and for many years had been, a very-large dealer in coal, and for the purpose of handling it it wa„s found necessary to build certain spurs, or, as they have been called in the evidence, “stub tracks,” leading from the plaintiff’s main line-on to the said real estate owned by Mr. Yates, upon which tracks the coal in question was placed by the plaintiff, and there remained up to the time of the commencement of this action. The tracks are seven (7) in number, and where built upon "land owned by Mr.. Yates. The land and ties were furnished by him. and the iron was furnished by the plaintiff. The tracks were to be maintained from time to time by the furnishing of tics by Mr. Yates, and the-furnishing of the iron by the plaintiff. They were operated solely by the plaintiff, and a part of the charge of forty cents ($.40) for-transporting the coalfromLyons to CharlotteDocks included not only the placing the coal upon these tracks, but also from time to time,, as it was needed at the docks, transporting it from these tracks to-the docks proper. The stub tracks connected with the main line-of the plaintiff’s road at their northerly end, and led thence southerly and easterly, and terminated before reaching the coal docks; and the only way that the coal could be transported from them to the coal docks was by drawing the cars northerly upon the right, of way of the plaintiff, and thence transporting them southerly and easterly upon another track which led directly to the docks.- From, time to time as this coal was wanted at the docks, Mr. Yates or his superintendent would so inform the plaintiff’s agent, and the-plaintiff’s engine and crew would draw the cars from the stab tracks on the plaintiff’s right of way, and thence to and on to the tracks leading to the coal docks at the river bank. Of course, if placing the coal upon these stub tracks amounted to a delivery to-Mr. Yates it was the same as a delivery to the defendant Davis, and the lien for carrying the coal would at once be lost. To constitute a waiver of lien, the delivery must be made with intent, or it must be made under such circumstances that the law will presume the intent to have existed; and nothing must remain to be done by the caarier in order to fully perform its contract. This coal was transported to the point of destination and the cars containing it were disconnected from the engine which had drawn them. It stood on the stub tracks ready for delivery, just as other property more easily unloaded from the cars might have been stored in the railroad warehouse until the consignee should be ready to receive it. It thus stood ready for delivery within sight of consignee's superintendent of the dock property, ready to be drawn on to the coal dock track when it was wanted there. I am unable to discover the act on the part of the plaintiff which shows an intent to waive its lien. The coal could not be unloaded at the docks, its final destination, without plaintiff’s further intervention, nor without the use of its engine and crew; something for it to do still remained. I think, for the purposes of its lien, it must be held that the coal was still in the plaintiff’s possession. A delivery may be complete for one purpose and not for another. Lane v. Railroad Co., 14 Gray, 143. All of this coal, except seven hundred twentjr-six tons (726) and twelve hundred weight (12 cwt.) had, before the commencement of this action, been actually delivered to Mr. Yates and dumped from the cars at the river bank upon the coal docks, and as to the coal so delivered no claim for a lien could be sustained or is made, but a delivery of a part of the coal does not discharge the lien on the portion retained. If not waived, it remains attached to whatever part of the property carried may remain in possession of the carrier. Potts v. Railroad Co., 131 Mass. 456 ; Barker v. Brown, 138 id. 340-344. The plaintiff claims a lien upon this coal so upon the stub tracks, amounting to seven hundred and twenty-six tons (726) and twelve hundred weight (12 cwt), only for its carriage, and not for the carriage of any other portion of the coal, and it is, therefore, unnecessary to determine what particular cars were included in each particular consignment. The defendant Davis insists that the plaintiff’s lien for carrying this coal was lost, because it extended credit to Mr. Yates. I am unable to find from the testimony any agreement for such extension of credit. The business was conducted, the coal delivered, and the freight collected as such transactions are usually conducted when bulky articles are transported, and a little time must necessarily intervene between delivery and payment. Under such circumstances delivery and payment could only be practically concurrent; they could not be actually so. The evidence shows it was the habit of the station agent in charge of the Charlotte station to present at Mr. Yates’ general office in Eochester, on the 7th, 14th, 21st, and last days of each month, bills for freight for the coal delivered during the ten preceding weeks. That seems to have been the custom in the transaction of this business, adopted for the convenience of all parties concerned. I find from the testimony no agreement that the plaintiff should wait any length of time after delivery of coal before collecting its freight. If the defendant Davis is correct in his version of his conversations with the assistant general freight agent of the plaint-iff at Hew York, there is no estoppel, for the reason that defendant Davis has done nothing, and has lost no rights which he had before, in reliance upon anything which he says was told him, or which was written, to him by the assistant general freight agent. For the reasons stated above, it seems to me that the defendant, Davis, has failed to establish a defense to either cause of action, and the plaintiff is entitled to the relief asked for in the complaint.


source: Caselaw Access Project

author: Parker, J.

license: Public Domain

text:
    Thomas A. Patterson, Resp’t, v. Ongley Electric Company, App’lt.

      (Supreme Court, General Term, First Department,

      Filed June 14, 1895.)

    1. Corporations — Contracts.
    Where a contract, made in the name of the corporation by its president, is one the company has power to authorize the president to make, or to ratify after he has made it, the burden is upon the corporation of showing that it was not authorized.
    2. Same — Ratification.
    The evidence of ratification and approval by the corporation, its officers, directors and stockholders, was held' to be so complete as to justify the direction of a verdict in favor of plaintiff.
    Appeal from a judgment in favor of plaintiff, directed by the court.

      Rufus W. Peckham, Jr., for app’lt; John R. Dos Passos, for resp’t.
   Parker, J.

— In pursuance of a written contract, signed, “The Ongley Electric Company, T. W. Robertson, President,’’ the plaintiff’s assignor, J. F. Wiechers, undertook to and did sell 1,500 shares of the treasury stock of the Ongley Electric Company for $90,000, upon an agreed commission of five per cent. $1,550 was paid out of the treasury of the company to Wiechers on account of the commissions, but it has refused to pay the balance. The grounds on Which defendant bases its refusal to pay is that the president had no authority to make the contract. The facts are briefly that on the 5th day of April, 1892, plaintiff’s assignor received a letter signed, “ Ongley Electric Company, T. W. Robertson, President,’’ in which reference was made to a conversation of the day before had between Wiechers and Robertson on behalf of the electric company, which concluded with the proposition that, for services to be rendered, the company would pay a commission -of five percent, upon the proceeds of the stock sold. Subsequently, but on the same day, plaintiff received a contract, signed as stated in the opening sentence, which provided, among other things, that he should receive a commission of five per cent, on account of stock sold for cash, for his services.. ' Wiechers brought about a sale of 1,500 shares to a Mr. Hopkins, making a total purchase price of $90,000. The contract of sale between the Ongley Electric Company and Gfeorge B. Hopkins was in writing, and signed in precisely the same manner as the contract with plaintiff’s assignor. It appears from, the minutes of the board of directors that subsequently the contract of sale with Hopkins was fully ratified, and touching that general subject there was adopted a preamble and resolutions. One of the resolutions reads as follows:

“ Resolved, that all and everyone of the acts of the president of this company and of this said J. T. Thompson & Company in respect to the stock which belonged to this company, above referred to, be and hereby are in all things approved, ratified, and confirmed.”

After the stock had been transferred to Hopkins, and the defendant had received the price agreed to be paid therefor, Wiechers received $1,550, which was paid to him in five checks of the defendant, •each of which was signed by the president and treasurer of the company. These checks were paid in due course, and subsequently came back to the company. When produced upon the trial, there was stamped on the face of each check the following: “Henry M. Tate, Auditor, Feb., 1893.” The first check bears date November 10, 1892, and the last one November 21, 1892. In February following, there was a meeting of the directors and stockholders of the defendant, at which Wiechers was present. At this meeting there was presented a balance sheet taken from the books of the compnny, which, among other things, purported to state the indebtedness of the company, and to whom such indebtedness was due, and that the same had been duly audited by Henry M. Tate, auditor of the company. This statement represented that there was due to Wiechers the amount which is claimed in this action. Wiechers says that there was no objection by any one, and that there was a resolution adopting the statement as a whole. This statement is not controverted. On the contrary, it is fully corroborated by the books and testimony of certain officers of the company. John B. Underhill, who was at the time of such meeting the secretary of the company, read the following extract from the book of minutes of the company :

“ The treasurer submitted a statement of the company of Dec. 81, 1892, audited by Mr. Tate, the auditor of the company. Mr. Dixon asked for the results, and, on his being shown the balance sheet and examining it, moved that it be accepted, which motion was seconded by Mr. Hopkins and Mr. Devi-na, and passed by all present.” s

There is no pretense that the president or other officers of the company attempted to keep away from the directors and stock,-, holders the facts relating to the contract by whicli it was agreed-to pay to Wiechers his commissions. Some of the officers at least knew it at about the time the contract was made, and it does not appear but that all of them did. The secretary of the meeting, who was called by the defendant, admitted that he knew that Wiechers was negotiating for the sale of the stock with Hopkins, and that it was agreed that he should receive five per cent, for commissions if successful. The transaction was entered upon the books of the company in the regular way, an account being •opened with Wiechers after the sale of the stock, in which he was charged with the payments made on account; and the bill of Wiechers came regularly to the attention of the auditor employed by the company to audit its accounts, who, after making the audit, entered it in the statement, as we have already observed, which, in due course, came before the directors and stockholders, at a meeting at which a majority of both were present. This statement, as we have seen, was after an examination accepted and passed. It does not appear that there was any other method by which this company formally passed upon claims against it. At the close of the testimony, the court directed a verdict in favor of the plaintiff for the balance claimed to be due, with interest.

We think this judgment can stand for two reasons :

1. Because the contract made in the name of the corporation by its president is one the company had power to authorize the president to make, or to ratify after he had made it; and therefore the burden was upon the corporation of showing that it was not authorized. Patterson v. Robinson, 116 N. Y. 193; 26 St. Rep. 685; Jourdan v. L. I. Railroad Co., 115 N. Y. 381; 26 St. Rep. 138; Oakes v. Cattaraugus Water Co., 143 N. Y. 430; 62 St. Rep. 445. This burden the appellant did not meet. Its counsel correctly states in his brief that all the evidence offered by either party which in any way tended to show the powers of the president was put in evidence by the defendant, and consisted of a. resolution of the board of directors appointing the president and. two other members of the board an executive committee to act in minor matters.

2. The evidence of ratification and approval by the defendant, its officers, directors, and stockholders, was so complete as to justify the direction of a verdict. The appellant urges that this question ought to have been submitted to the jury, but it seems to ns not. There was no dispute as to the facts. The history of the transaction, from the date when the president signed the contract down to and after the meeting of the directors and stockholders at which the auditor’s statement was presented, seems to be complete. Ho part of it is in conflict, and therefore it was proper for the court to determine what conclusion of law should follow from the undisputed facts.

The judgment should be affirmed, with costs.

All concur.


author: O’Brien, J. Parker, J.

text:
    Albert S. Moore, Resp’t, v. John A. Potter, Individually and as Receiver, etc., App’lt.

      (Supreme Court, General Term, First Department,

      Filed June 14, 1895.)

    Receives. — Refusal to beceive goods.
    Upon the refusal by the receiver to receive goods under a contract, made before his appointment, the vendor cannot resell the goods on the purchaser’s account and sue the receiver for the deficiency in violation of a clause, contained in the order of appointment, restraining all persons from interfering with the receiver’s possession and control of the assets.
    Motion for a new trial on exceptions, ordered to be heard at general term in the first instance.

      Leopold Wallach, for the motion: R. B. Moffit, opposed.
   O’Brien, J.

— When the receiver refused to receive the yarn under the contract, the plaintiff was at liberty to elect his remedy, which it is conceded he did by regarding the property as that of the buyer, and selling it for his account, crediting him with the amount of the sale, and seeking in this action to charge him with the loss. It being the property, therefore, of the receiver, and the plaintiff having been served with the injunction prior to the sale, as the receiver was justified in doing after having been notified of the election made by the seller, the latter could not, in violation of the terms of such injunction, proceed without leave of the court, and thereby acquire rights as against such receiver. Having been guilty of a contempt of court in his procedure, he cannot get the aid of the court to enable him to reap the fruits of his contempt. The exceptions should be sustained, and a new trial granted, with costs to the plaintiff to abide the event.

Van Brunt, P. J., concurs.

Parker, J.

(dissenting). —When the defendant Potter was ap-

pointed temporary receiver of the American Lace Manufacturing Company in proceedings had for a voluntary dissolution of the •corporation, it was, and for some time prior had been, under contract to take from this plaintiff 10,100 pounds of cotton yarn at an agreed price of $2,020. Three days after the appointment of the temporary receiver, in reply to a letter of inquiry from the plaintiff, the receiver responded that he could not receive the yarn under the contract. Later plaintiff advised the receiver that he would" sell the yarn for his account, and hold him for any loss that might ensue. Prior to the sale the plaintiff was served with a copy of the order appointing the temporary receiver, which order contained the usual clause restraining all persons from interfering with the receiver’s possession and control of the assets and property of the corporation. The plaintiff nevertheless advertised the goods for sale in several different publications, and a sale was had at public auction. A number of competing bidders were present and made bids, the property being finally struck down to a Mr. Whittemore, who had been sent to the sale by plaintiff for the purpose of buying the goods in. The goods netted on the sale $1,247.70, leaving a deficit from the agreed price of $772.30. In due course the defendant, Potter, was appointed permanent receiver, and leave to bring an action against him in that capacity for the deficit was applied for and granted. The result of the trial was the direction of a verdict in favor of the plaintiff for the amount of the deficit, with interest aggregating the sum of $826.60.

The only questions on this appeal are presented by the requests of defendant’s counsel for the direction of a verdict “on the grounds that this plaintiff was without any power, without the consent of the court, to sell this property ; that the plaintiff had no power; also on the further ground that it appears the sale by Woodrow & Evans was a collusive sale.” As to the latter ground it may be dismissed with the remark that the evidence was not only insufficient to warrant the direction of a verdict in favor of the defendant on the ground that the sale was collusive, but there was no evidence entitling defendant to go to the jury on that question. From the defendant’s argument on this appeal it is apparent, that by the other ground of his motion he intended to insist that the title to the yarn sold was in the receiver of the American Lace Manufacturing Company, and that its sale by the plaintiff was therefore an interference with property in the possession of the court through its receiver, which constituted a contempt of court, and resulted in talcing away from plaintiff the right to maintain this action to recover a sum justly due to him. We think it might, well be held that this proposition was neither fairly nor .at all presented to the court by the motion made. But if it be treated as being sufficient to raise the question, no error was committed by the court in denying the motion. His claim as to the title is that the plaintiff, as the vendor of the yarn not delivered, had three remedies: (1) To store the property for the vendee, and sue for the entire purchase price ; (2) to sell the property as the agent for the vendee, and recover the difference between the contract price- and the price obtained on such resale; (3) to keep the property as his own, and recover the difference between the market price at. the time and place of delivery and the contract price. Van Brocklen v. Smeallie, 140 N. Y. 70; 55 St. Rep. 263. The first two-remedies are based upon the theory that the title to the property by the contract and tender and assent of the seller becomes vested in the buyer. Mason v. Decker, 72 N. Y. 595-599. This, in a. sense, is a legal fiction respited to for the purpose of ascertaining the damages sustained by the vendee. The plaintiff adopted the second remedy. Whether the sale of the property after the receiver had refused to receive it or have anything to do with it,, under such circumstances as caused the title by operation of law to become vested in the buyer, constituted a technical contempt of court., need not be decided; for, if it did, there is nothing in this, record which entitles the defendant to defeat a recovery. If the alleged contempt be a criminal contempt, it involves no element of personal injury, and the punishment to be imposed by the court, is for the purpose of asserting its own power and maintaining its own dignity. If a civil contempt, before punishment can be inflicted for the benefit of a party, it must appear that “a right or remedy of a party in a civil action or special proceeding pending in the court may be defeated, impaired, impeded, or prejudiced.”’ Code Civ. Proc. § 14. Conviction for such an offense involves a judicial determination that the party’s rights or remedies have in some way been defeated or impaired by the contemptuous act. Sections 2266 to 2292 prescribe the proceedings to be taken forth e punishment of a contempt of court other than a criminal contempt ; the first-named section providing that in a case specified in section 14 of thie Code the offense must be punished as prescribed in this title. It does not appear in this record that the orderly mode of establishing the guilt of the accused as provided by the Code has been followed. Instead, the defendant shows what he claims to be a technical violation of the injunction order, that then insists that without further inquiry the plaintiff can be prevented from prosecuting a meritorious cause of action ; that, without showing that defendant’s rights or remedies have at all been impaired or affected, the plaintiff should, in effect, be fined the amount due to him, which in this case was the sum of $826.60. Even if it should be conceded that an unadjudged contempt may be successfully pleaded as a defense to a common-law action on contract, it would not avail the defendant, because of his failure-to establish the proof essential to make out the defense. As I view it, the utmost that the pleadings or proof establish is that there was a technical violation of an order punishable as a criminal contempt, which does not constitute the matter of defense.

Defendant’s exceptions should be overruled, and judgment ordered for plaintiff, with costs.


author: Follett, J. O’Brien, J.

text:
    Frank Merz, App’lt and Resp’t, v. Interior Conduit and Insulation Company et al., App’lts and Resp’ts.

      (Supreme Court, General Term, First Department,

      Filed June 14, 1895.)

    Corporations — Bonds—Scrip dividends.
    A corporation cannot, under section 42, chap. 688 of 1892, issue bonds, to pay scrip dividends.
    Appeal from an order denying in part a motion to continue an injunction.

      A. J. Dittenhoefer and David Gerber, for pl’ff; Eugene H. Lewis, for def’ts.
   Follett, J.

— Stripped of unnecessary words, the scheme of the corporation is to issue $500,000 of its bonds, payable in gold coin April 1, 1925, with interest at six per cent, per annum, payable on the first days of April and October in each year, which are not to be issued “ for money, labor done, or property actually received for the use and lawful purposes of the corporation,” but for the following purposes :

12-| per cent, of the bonds to be devoted to paying.....

scrip...................................... $62,500

50 per cent, of bonds to reduction of stock of corporation ....................................... 250,000

37£ per cent, of bonds for cash...................... 187,500

$500,000

In Jhne, 1894, the directors of the corporation declared a scrip dividend of 5 per cent, on its capital stock of $1,250,000, the total amount of which dividend being $62,500. At the same time it declared a scrip dividend of 5 per cent, on $500,000, on capital stock not then issued, but which it is alleged ought to have been, issued to the Johnson Standardizing Company. This scrip, amounting to $12,500, was turned over to the latter company. The total amount of dividend scrip outstanding is $75,000, besides interest, $62,500 of which is to be paid by exchanging it, for the bonds to be issued.

Section 23 of the stock corporation law provides :

The directors of a stock corporation shall not make dividends, except from the surplus profits arising from the business of such corporation; nor divide, withdraw or in any way pay to the stockholders, or any of them, any part of the capital of such corporation or reduce its capital stock, except as authorized by law.”

There is no authority for making a scrip dividend in one year and in the succeeding year issuing bonds to pay such dividend in whole or in part. This seems to me to be a plain violation of the statute. If this is sanctioned the entire capital stock of a corporation can be wiped out by the declaration of dividends and subsequently issuing bonds wherewith to pay the dividends. I fail to find any provision in the statute authorizing the capital stock of the corporation to be reduced by the substitution of bonds therefor. The forty-second section of the stock corporation law provides :

“ Ro corporation shall issue either stock or bonds except for money, labor done or property actually received for the use and lawful purposes of such corporations. Ro stock will be issued for less than its par value. Ro such bonds shall be issued for less than the fair market value thereof. ”

Under this section the corporation cannot issue bonds to pay scrip dividends, or for the purpose of reducing its capital stock. This is in no sense a scheme for the reduction of the capital stock of the corporation, and for a division among the shareholders of the property of the corporation in excess of the amount of the capital stock as reduced, and the cases sanctioning such reductions and disbursements are not in point. Whether the proposed scheme will advance the interests of the corporation or not is a question with which we have nothing to do. The statute prescribes the purposes for which stock and bonds may be issued, and every stockholder has the right to compel the directors to observe the statute. That part of the order which vacated the original injunction should be reversed, and the original order restored, with costs to the plaintiff.

Van Brunt, P. J., concurs.

O’Brien, J.

(dissenting). — I do not concur with the views of the majority of the court, for the following reasons :

The defendant the Interior Conduit & Insulation Company is a domestic manufacturing company, having as its president the defendant Johnson, of which company the plaintiff is a stockholder, owning 100 shares, of the par value of $10,000. The company had an authorized stock issue of $1,250,000. In February, 1895, a meeting of the stockholders was called for the purpose of increasing the capital to $1,575,000, the purpose of which increase was to retire outstanding scrip amounting to $75,000 by converting the same into stock, and to discharge an obligation due by the conduit company to a corporation known as the Johnson Standardizing Company, which latter had transferred certain patent rights to the former in consideration of an agreement that it should receive $250,000 of the capital stock of the conduit company therefor. The meeting resulted in an authorized increase o£ the capital stock by the sum of $325,000, which was the requisite amount for the purposes aforesaid. About the same time the board of directors caused a plan to be formulated for submission to the stockholders after the approval of the increase of the capital stock, the creation of preferred stock of $500,000 of the then to be authorized capital stock of the company, and provided further that such preferred stock should be issued- upon subscription to the stockholder of the company under the plan by which each stockholder of record was to be entitled to subscribe for the preferred stock to the extent of 40 per cent, of his present holdings, paying therefor 50 per cent, in common stock of the company, 12-J- per cent, in dividend scrip or cash, and 37-£ per cent, in cash. To carry out this plan the directors negotiated with the standardizing company, in lieu of the $250,000 of stock due it from the conduit company and of the $12,500 of dividend scrip owned by it, to pay the gross sum of $87,500 in cash. If this plan had been carried out, it would have resulted in a capital stock of $1,500,000, of which $1,000,-000 would be common and $500,000 preferred stock; and from the moneys received in payment for such preferred stock the obligations of the standardizing company would be discharged by the payment of $87,500, and there would be left in the treasury of the company for working capital the sum of $100,000. Inasmuch as unanimous consent, which was necessary under the statute, was not obtained from the stockholders for the issue of such preferred stock, — 300 out of the 12,500 shares having dissented from the plan, and 700 shaves not having voted, — the plan was abandoned. The conduit company thus found itself with an authorized increased capital of $1,575,000, which, though available, if accepted, to discharge the obligations to the holders of scrip dividends and the standardizing company, in no way met the need that still existed of supplying the conduit company with cash resources for the conduct of its business. The directors were therefore confronted with the necessity of presenting some other plan, and another meeting of the stockholders was called to reduce the stock to $1,000,000, from $1,575,000. to which it had been increased at the preceding meeting. This was carried, and thereupon the directors issued a notice that they had resolved to issue what they termed “gold debenture bonds” to the amount of $500,000, to be subscribed for the stockholders in the same proportion as was contemplated in the event that the issue of preferred stock had been approved, viz. each stockholder was to be permitted to subscribe to the bonds to the extent of 40 per cent, of his stockholdings, and pay therefor 50 per cent, in stock at par, 12-|-per cent, in dividend scrip at par or cash, and 37|- per cent, in cash. In that way, it will be seen, it was intended to raise $187,-500, out of which to pay the standardizing company $87,500, leaving $100,000 in the treasury as working capital. The question, however, presented itself to the directors as to what should be done in regard to stockholders who would not.or could not subscribe for these bonds. Accordingly an alternative was presented by which stockholders not making such subscription were to surrender for retirement one-fifth of their holdings of stock, and' accept in lieu thereof certificates of interest in the company’s surplus, which recited that they entitled the holder “to a fractional interest in the surplus capital of the company. Such surplus capital is represented by the difference between the outstanding capital stock prior to the reduction of the authorized amount thereof, and the amount to which the same was reduced; ” the stockholder “to receive such fractional interest out of the proceeds of the sale and conversion of said surplus capital into cash at such time or times as the directors shall determine to make such sale and conversion.” To prevent the issue and the circulation in the market of the bonds and the compelling of the plaintiff to accept the certificate-of interest as an alternative to subscribing, and in effect to prevent the carrying out of the plan of the board of directors, this action was brought, and, a preliminary injunction having been obtained, it was, on motion for its discontinuance, vacated, excepting that the conduit company was enjoined from calling upon the plaintiff to surrender any part of his stock for retirement, or to subscribe-for the debenture bonds, unless he so desired. From that order both plaintiff and defendants have appealed; the former upon the ground that the injunction should have enjoined the carrying out of the plan, and the latter upon the ground that it should have been wholly vacated.

With respect to the proceedings taken to increase the stock, and subsequently to reduce or decrease it, the statutory requirements having been fulfilled, these were legal and regular. The .criticisms made on such proceedings are in respect to Mr. Johnson’s acts as director and stockholder. He was the president of the conduit company, and the principal stockholder in the standardizing company; and it is suggested that his participation, in the deliberations of the directors and stockholders is in itself sufficient to taint with invalidity the entire dealings of the company, not only with Johnson and the standardizing company, but with the plaintiff and other stockholders. It is not claimed that there was any wrong in Mr. Johnson’s actions, but that his positions as a stockholder and as a creditor were inconsistent. The fact, however, that he had a claim against the company did not prevent his exercising the rights which, as a stockholder, he undoubtedly had, to participate in the stockholders’ meeting, and vote, either on his own stock or as proxy of others, in favor of a proposition to increase or reduce the company’s capital stock. Gamble v. Queens Co. Water Co., 123 N. Y. 91; 33 St. Rep. 88. The effect of the-plan to issue the bonds.is undoubtedly, as claimed by the plaintiff, to place things in practically the same position as they would have-been, had the minority stockholders, consented to the issue of the preferred stock, because the debenture bonds would take precedence of the common stock, and, the bonds being distributable upon precisely the same plan as the preferred stock was to be, the plaintiff is entitled to feel as much aggrieved by the one plan as the other. The feelings of stockholders,' however, are not the subject' óf bur consideration, our duty being to determine whether the-action of the directors in what they propose is either so unjust or illegal that is should be restained by the court. In determining this question, regard must be had to the situation of the company, its necessities, and the powers which the directors possess; and, so considered, if the contemplated action is neither ultra vires nor illegal, the court should not interfere, the rule being that the directors are entitled, while acting within the scope of their authority and powers, to do what they think best for the interests of the corporation; and it is only when the intended act is illegal, or the directors’ purpose is to exceed their powers,' or evidence is presented that they are proceeding erroneously to the injury of the corporation, its creditors or stockholders, that the aid of the court will be extended.

In March, 1895, the conduit company found itself with an outstanding capital stock of $1,250,000, being $250,000 in excess of its authorized capital, then reduced to $1,000,000. It was obligated to retire $75,000 of dividend scrip, which, by reason of the recent increase of capital, had become immediately convertible into stock. It owed the Johnson Standardizing Company either the sum of $87,500 in cash or $250,000 in stock, and it required some cash for working capital. In this situation the directors, in the interest of everyone connected with the corporation, were compelled to take some action or adopt some plan that would relieve it from embarassment, and enable it to continue its operations. The fact that the issuing of preferred stock had been prevented by a minority of the §tockholders, who, in the exercise of their legal right, had spoiled the success of that plan, by no means freed the directors from the necessity or responsibility of formulating and carrying out some other which would bring relief to the company. That its condition in March was as stated, and that some action was required on the part of those conducting its affairs, is not seriously disputed. The plaintiff speaks doubtingly in regard to the existence of the claim of the Johnson Standardizing Company, but the support which it receives from the statement of the manner in which it was created and its character, removes any doubt as to its justice and validity. The directors, therefore, were justified in adopting any fair and legal plan to meet the pressing exigencies of the company; and, with this conceded, the question is narrowed down to whether the contemplated bond issue was authorized and legal. The plan of issuing the bonds and certificates of interest was one presented by the board of directors, and not submitted to the stockholders, and this is one of the grounds assigned against the legality of the scheme. Section 2 of the stock corporation law (chapter 688, Laws 1892) expressly authorizes any stock corporation “ to borrow money,” and “ to issue and dispose of its obligations for any amount so borrowed.” For this purpose full power is vested in the board of directors, and it is only when it is proposed to mortgage the corporate property and franchises to secure corporate obligations that the consent of the requisite proportion of stockholders is necessary. Here the obligations or certificates of indebtedness which it is proposed to issue under the designation of debenture bonds are not to be secured by any mortgage upon the franchises or property of the company; and, unless there is some other ground of illegality assigned, it was within the scope of the powers conferred upon the directors to authorize the issue of such obligations without obtaining the consent of the stockholders. Several other grounds of illegality are assigned, however, and these will now be considered. Section 42 of the stock corporation law provides that:

“ No corporation shall issue either stock or bonds except for money, labor done or property actually received for the use and lawful purposes of such corporation. No such stock shall be issued for less than its par value. No such bonds shall be issued for less than the fair market value thereof.”

It is insisted that this provision is violated in two particulars : First, that the bonds are not issued for money, labor done, or property received for the use and lawful purposes of the company; and, second, that they are not to be issued for the fair market value thereof, but that what in effect is attempted to be done is to convert the stock and scrip dividends into' bonds; and this, it is insisted, is not the issuing of bonds for cash or for property necessary for the use and lawful purposes of the corporation. As we have seen, if a corporation is in debt, it has the power conferred by statute to issue its obligations therefor. A distinction is, therefore, I think, to be observed between simple obligations to pay an indebtedness, which a board of directors may issue pursuant to section 2, and bonds secured by mortgage, which latter is a lien on property, and requires the assent of stockholders, and is controlled by section 42 of the stock corporation law. The so-called “ debenture bonds ” are nothing more than obligation notes or promises to pay, and are not the “ bonds ” referred to in section 42, which has undoubted reference to bonds secured by mortgage. If, however, section 42 is applicable, then the word “ property,” as therein used, should be construed to mean anything of value. If so, it cannot be held that outstanding indebtedness of a live, solvent corporation can be regarded as other than a thing of value or property. The “ scrip dividends ” of this corporation declared in the previous June were an existing indebtedness. Their validity is not assailed, nor is it claimed that they were not lawfully .and properly issued. It is true they were issued in June, 1894, and the bond scheme was presented in March, 1895. Hence the inference is sought to be made that the corporation had no right to make such scrip dividends. This is not, however, justified, for it appears that the company had property, — real estate, and the plant of a going business, — the value of which is not claimed to have been overestimated. Its difficulties seem to have arisen from an insufficiency of cash, not of property. In the development of its business it required, and now requires, more cash, and/so far as appears, instead of depleting its treasury of cash, it divided its surplus property by means of scrip dividends, which it had a right to do. If it had been shown or claimed that the scrip” had been issued,unlawfully, or at a time when it had not surplus assets, then an entirely different question would be presented. I concede that a dividend in bonds could not bo legaily made. Nor could a scrip dividend be lawfully declared for the purpose of afterwards issuing bonds to retire them. But where, as here, no charge of that kind is made, and it is assumed by all that a scrip dividend was lawfully made to represent actual surplus assets, then an inference which is lacking in foundation or proof should not be made to the contrary. It cannot, therefore, be assumed, because -neither claimed or proved, that this corporation. made a scrip dividend, except from surplus profits, pursuant to section 23 of the stock corporation law. As the “ scrip dividends” are not claimed to represent any other than an actual, valid, outstanding indebtedness of the corporation, bonds to pay the same, or other obligations to discharge them, could be issued, the same as could be done with respect to any other debts owing by the corporation.

In the way of dividends, what a board of directors may do has been so clearly and fully stated in the well-considered case of Williams v. Telegraph Co., 93 N. Y. 162, that further elaboration is unnecessary; it being therein held, in construing a provision of the Revised Statutes similar to section 23 of the stock corporation law, as follows (headnote):

“ The térm ‘ capital stock ’ in the provision of the Revised Statutes (1 Rev. St. 601, § 2) prohibiting the directors of a corporation from making dividends except from the surplus profits of the corporation, or from dividing, withdrawing, or in any way paying to the stockholders any part of the capital stock of such company, means the property of the corporation contributed by the stockholders or otherwise obtained to the extent required by its charter. The object of the provision was to prevent a withdrawal of the property which would reduce the value of its assets below the sum limited for its capital in its charter or articles of association. When the property of the corporation exceeds that' limit, the ekcess is surplus, which may be divided among the stockholders either in money or in property. Where, also a corporation has accumulated such a surplus, and an increase of its share capital has been lawfully authorized, a dividend of shares is not prohibited by said provision; and where such a dividend does not exceed in amount the amount or value of the surplus, it is not in conflict with any principles of public policy.”

Having issued scrip dividends, and their validity not having been assailed, they became obligations of. the company, and in receiving them in part payment of the bonds issued the corporation obtained property.

In regard to accepting the stock in part payment, a similar line of argument may be pursued. It is true, it appears that the stock of the company has a market value of but $40 a share; but it does not therefrom necessarily follow that that is its value. Whatever may be the value of the company’s stock upon the market, so long as the capital is unimpaired, — which, as to this company, appears to be the case, — it may be assumed, for the purposes of purchase and retirement, to be of its full face value. This being so, it is shown that the bonds are to be issued for cash, for dividend scrip which are obligations of the company, and the return of a certain proportion of the stock, which it was not only lawful, but necessary, for the corporation to get possession of,.to the end that it might be canceled, and thus bring the stock down to the authorized amount. It will be noticed that by-the section of the stock corporation law quoted (section 42), while the stock , shall not be issued for less than its “ par value,” bonds may be issued for their “ fair market value”; and plaintiff does not make it appear that the debentures are to be sold at less than their, fair market value, which it would be necessary for him to show if he desired to prevent them being sold. The company received par value for its stock, and when purchasing it for the purpose of retirement no injustice is done by giving it for the same price that it received, particularly as it is here shown, as before stated, that the capital of the. company is unimpaired, and the stock is presumably intrinsically worth its par value. Cook, in his work on Stock and Stockholders, says (section 282):

“ If a corporation has power to reduce its capital stock, it has been held that it may do so by purchasing and retiring a portion of its shares.” Bank v. Bruce, 17 N. Y. 507 ; Seeley v. Bank, 8 Daly, 400, 405 ; 78 N. Y. 608.

There is authority, therefore, for the position that, where a reduction of a company’s capital stock is sought, it may be accomplished by the company’s buying its own stock for retirement, or by requiring a. pro rata surrender of the same by its stockholders. In the latter event the statute provides (Stock Corp. Law, § 46):

“ If the capital stock is reduced the amount of capital over and above the amount of reduced capital shall be returned to the stockholders pro rata at such times and in such manner as the directors shall determine.”

Upon the reduction of the capital stock, therefore, it became incumbent under the statute, to return to the stockholders the surplus, though the time and manner in which that should be done •was committed to the directors. In distributing surplus assets after diminishing the capital, reason and authority require that, this shall be done equally, and without any partiality or preference. As said in Jones v. Railroad Co., 57 N. Y. 206 :

“After a dividend is declared, each stockholder has a right in severalty to his particular proportion ; and this right cannot, I think, be abridged by any discrimination of the directors in any form whatever.”

And it is only when the corporation has on hand actual capital sufficient to pay its debts, and in excess of the amount to which it lias reduced its capital, that such excess may be distributed. Strong v. Railroad Co., 93 N. Y. 426. A distribution of surplus capital, therefore, is'like a distribution of surplus profit when a dividend is declared. It is intended as a distribution among the stockholders of something on hand above the liabilities of the corporation, without the impairment of the reduced capital stock, and' there must be equality among the stockholders without any unfair discrimination. As said in Seeley v. Bank, supra:

“If the retired capital be a liability of the corporation in favor of the shareholders who give up the stock that is called in, the payment of that debt cannot lie in any man’s discretion. Payment cannot be deferred because the directors believe it for a creditor’s advantage to keep him out of his money.!’

Applying these principles to the facts as they appear with reference to the respective terms of the debenture bonds and the certificates of interest, we find that, so far as the subscribers to the bonds may be affected, assuming there is an excess of capital, they receive obligations of the company entitling them to-share in such excess. But what is the position of those who are compelled to surrender a portion of their stock, and take in lieu thereof the certificates of interest in surplus capital? ” That they do not obtain equal rights with the holders of the bonds is evident, it appearing that the bondholders will be paid out of the entire assets a definite amount in gold, at a fixed time, with interest; while the holders of the certificates are to be paid out of the surplus assets, if any, without interest, at a time not fixed, such sum as may be realized when the surplus assets are sold, and the amount determined. In addition, the bond, to the extent of 50 per cent, thereof, is issued for the amount of par value of stock surrendered, while the holders of certificates are to receive only such percentage or proportion of the property as the surplus assets, when converted into cash, will justify. But, back of these inequalities, the more serious question is presented, whether there will be any surplus capital to divide among those who surrender their stock. So far as the statement goes, it shows such a surplus; but when we undertake to analyze the character of the assets and the condition of the company, it is difficult to determine what there will be for distribution. When it was proposed to issue $500,000 of preferred stock, the company had an unsatisfied judgment against it of $3,800, and was without sufficient money in its treasury to carry on operations, and the purpose of issuing it was to discharge obligations to a large amount which at that time were pressing. Its assets not being available to discharge such obligations, the plan for the issuance of the preferred stock was proposed. That having failed, the reduction of stock took place, and the bond plan was resorted to to accomplish the same end, viz. to discharge existing obligations and debts, and to place the company in funds with winch to carry on its business. The surplus in assets mainly consists of the value placed upon certain patent rights and inventions essential to the company’s business. These could not be sold or converted into cash without destroying or injuring the business, and it is difficult to see in what way there ever can be a distribution of surplus assets, because there is nothing in excess of the necessities of the company which, for that purpose can be sold. If, as contended, these patents in their entirety are essential to the company’s business, how is it possible to take any portion and segregate it for the purpose of sale and distribution? And, yet, outside of the value attached to the plant, fixtures, and patent rights, and the real estate and buildings used by the company in its business, the remaining assets consist of customers’ accounts and goods on hand and in process of manufacture. The main asset, however, is the plant, fixtures, and patent rights, which are placed at over $1,000,000. This statement shows that the capital of the company is principally based upon the value of the patent rights and inventions held by it, and it could not for a moment-be assumed that the company intended ever to sell or part with them, because essential to the carrying on of its operations. As the “ certificates of interest in the surplus ” proposed to be given therefor impressed no fixed obligation upon the company, and it is problematical whether the holder will ever receive any portion of the surplus capital that exists, and as the stockholders who are obliged to receive these are not placed in an equally favorable position in respect to the distribution of such surplus with those who may subscribe for the bonds, we think a case was made out for an injunction until such time as, upon a full showing at the trial, it could be made to appear that plaintiff and those who stood like him in the position of nonsubscribers to the -bonds would be equally fairly and proportionately dealt with, in the distribution. Upon this ground, therefore, we think the plaintiff was entitled to on injunction pendente lite.

Considering the interests of the company, and the conceded good faith of the directors and their honesty of purpose in presenting-the bond plan, I have sought for some way to meet this last legal objection, so that they might, without interference by the court, carry it into successful operation. That nearly all the stockholders"and those interested in the company desire it, and that it would be of advantage to the company that those who participate therein by subscribing for bonds would receive a just proportion of surplus assets, appears. The plaintiff, however, being either unwilling or unable to comply with the terms of the subscription, has the legal right to object to a plan by which, in lieu of stock surrendered, he is obliged to take the proposed “certificates of interest in the surplus.” But upon all the facts, if an alternative can be fonnd that will give full protection to the plaintiff, the-court should accord that, instead of injuring the interests of all the others concerned by enjoining the carrying out of the bond, plan. The defendants tendered in the court below a stipulation that if the plaintiff did not desire to subscribe for the debentures he might retain his full holding of stock, without surrendering any portion for retirement. Should plaintiff be unwilling to accept such offer now, then, in addition, che defendants should enter into an undertaking to the effect that, should the trial court decide in plaintiff’s favor, then, instead of certificates of interest, they would pay him the par value of his stock which they retired.

The order should be modified in accordance with the views expressed, and, upon defendants complying with the conditions fixed, it should be without costs to either party on this appeal otherwise with costs to plaintiff.


author: Bookstaver, J.

text:
    Paul G. Decker, Resp’t, v. John E. O’Brien et al., App’lts.

      (New York Common Pleas, Special Term,

      Filed June 3, 1895.)

    Referee-Reopening case.
    A referee may reopen a case tried before Mm and allow a party to introduce further evidence.
    Appeal from an order, denying a motion to vacate an order of the referee reopening the case, and allowing plaintiff to produce further evidence.

      Matthew Daly, for app’lt; Jerolomon & Arrowsmith, for resp’t.
   Bookstaver, J.

— Appeal from an order made at special term denying a motion to vacate an order of the referee reopening the case, and allowing the plaintiff to produce further evidence, etc. The action was brought to foreclose a mechanic’s lien, and was duly referred to a referee to hear and determine. The case was finally submitted on the 5th of December, 1893. On the 29th of that month the referee rendered an opinion, but neither filed nor delivered his report. Thereafter the plaintiff’s attorney served a written notice on the defendant’s attorney, returnable on the 1st of February, 1894, before the referee, to reopen the case, at which time the defendants’ attorney objected that, under section 1018 of the Code of Civil Procedure, he had no right to entertain the motion. At that time the referee stated that he had not signed or delivered his report, and therefore believed he still had jurisdiction, and granted the motion. The appellant thereupon obtained from the special term of this court an order to show cause why the order of the referee reopening the case should not be vacated. After argument the motion was denied, and from that order this appeal is taken.

Section 1018 of the Code of Civil Procedure provides that the powers of a referee under that section are to be exercised in like manner, and upon like terms, as similar powers are exercised by a court upon a trial without a jury. Section 723 of the Code of Civil Procedure provides that the court may upon the trial, or at any stage of the action, before or after judgment, in furtherance of justice, correct a mistake in any other respect by conforming the pleadings or other proceedings to the facts proved. If a judge, during the progress of a trial, makes a mistake in either fact or law, he may correct such mistake at any time before final judgment. If a wrong amount is stated, and the jury, in rendering a verdict, fall into the same error, they may be sent back to reconsider their verdict; and a judge before whom a case is tried, before he signs a final judgment or decree, may correct his findings of fact and law to conform to the evidence. And we see no reason why such power should not be exercised by a referee, under like circumstances. It is within a referee’s discretion to reopen a case after it has been closed, but before signing the findings of fact, or to refuse to do so. Loonam v. Myers, 13 Daly, 535 ; Pearson v. Fiske, 2 Hilt. 146 ; Trimble v. Stilwell, 4 E. D. Smith, 512 ; Williams v. Hayes, 20 N. Y. 58 ; Litch v. Brotherson, 25 How. Prac. 407; Schuyler v. Smith, 51 N. Y. 309. It is true that the decisions cited were made under the old Code, but we think the provisions of the New Code as broad as the old. In Kissam v.Hamilton, 20 How. Prac. 369, the court says : “The •case is not decided until the report is signed. Until then they (referees) may open it for further evidence, reconsider and change their conclusions." To the same effect is Ayrault v. Sackett, 17 How. Prac. 507, which was cited with approval in Craig v. Craig, 50 St. Rep. 461.

In the case under consideration the referee had neither signed bis report, nor delivered the same. The referee so expressly stated. The appellant contends, however, that the opinion was in reality his report; but it was not, at the time kof signing it, so considered by either party. Perhaps the best test to apply in a case like this is whether a judge, in case this action had been tried before one, would have had the power to correct the mistakes which the referee made in this case before he had signed the final judgment.* . To this there could be but one answer. We therefore think the order appealed from was proper, and should bQ affirmed, with costs.

All concur.


author: Daly, C. J.

text:
    John Hutchinson, as Executor, etc., Resp’t, v. John V. Campbell, individually and as Executor, etc., App’lt.

      (New York Common Pleas, General Term,

      Filed June 3, 1895.)

    Paktnekshtp — Survivor— Assignee.
    The purchaser of the interest of a surviving partner' in the firm property will be required to account at the suit of the deceased partner’s executor, where he seeks to convert the property to his own use.
    Appeal from an order appointing a receiver of the assets of the late firm.

      Theo. H. Friend, for app’lt; Powel & Krope (Hector W. Thomas and Henry Krope, of counsel), for resp’t.
   Daly, C. J.

— The plaintiff is the executor of Bernard Mooney, who, with John Connor, composed the partriership of Mooney & Connor, carrying on the livery stable business on West Ninety-ninth street, in premises of which they were the owners of undivided equal shares. Mooney died on March 10, 1894; and 'Connor continued the business until June 25, 1894, when he sold to the defendant Campbell all his interest, as surviving partner of the late firm, in and to the chattels, personal property, outstanding bills, good will, and business, and on the same day conveyed to Campbell his one-half of the said real estate. On September 21, 1894, Connor also died, leaving a will appointing Campbell his executor. No consideration was paid by Campbell for the ■conveyances from Connor, except the execution of a mortgage to the latter upon the real estate for $13,000. The nominal consideration for the transfers was $25,000; but, as the real estate was subject to a mortgage of $24,000, one-half thereof (as the incumbrance on the undivided half conveyed to Campbell) was deducted from the $25,000, leaving a balance of $13,000, for which the aforesaid mortgage was executed. Upon this mortgage Campbell claims credit for various sums paid to Connor in his lifetime, and moneys laid out and expended for his account, amounting in the -aggregate to $4,000. The plaintiff, as executor of Bernard Mooney, the deceased copartner, brings this action to declare the said transfers void, and for an accounting of the affairs of the co-partnership, and of the moneys received and paid out by Connor and Campbell, and to ascertain the gains and profits of the business, and for the recovery of one-half thereof; alleging that the aforesaid transfer to Campbell by Connor was wrongful, and that the assets and property of the late firm are being wasted and there is no one in possession thereof for the purpose of winding up the business. The defendant claims the property, real and personal, conveyed to him by Connor, as his own, and denies any interest of the estates of Mooney and of Connor therein, and resists the demand for accounting. The complaint alleges, and the evidence shows, that, after the death of Mooney, Connor carried on the business as his own, without accounting to the executor of Mooney, and neglected to settle and wind up the affairs of the co-partnership. Upon the facts shown, the court, at special term, upon plaintiff’s motion, appointed a receiver of the assets of the late firm, and of the livery stable business carried on in the premises aforesaid, and from such order the defendant appeals. „

The order contained a provision authorizing the receiver, during the pendency of the action, to carry on the business, and this provision must have been intended for the benefit of all parties, so that, whatever might be the ultimate judgment in the action, the good will of the business would not be destroyed by the litigation. If such authorization does not tend to the advantage of the parties, the permission to carry on the business may be revoked at any time, and the receiver directed to dispose of the assets at once, and hold the proceeds to abide the event of the action, since the cost of keeping the horses and the use of the premises might eat up the assets, but the order appointing a receiver to preserve the assets must be affirmed. It was the duty of Oonnor, as surviving partner, to dispose of the assets of the co-partnership for the benefit of himself and the estate of his deceased partner, and if, instead of gathering the assets, paying, the debts, winding up the business, and distributing the surplus, he misappropriated them, and converted them to the use of himself, and others, he was guilty of a breach of trust, and a court of equity may give appropriate relief. Russell v. McCall, 141 N. Y. 437; 57 St. Rep. 623. Although, as surviving partner, Connor had the exclusive right to dispose of the assets of his late firm, such right was to be exercised in the performance of his duty to close up the affairs of the copartnership; but, if he failed to do so, the representatives of the deceased partner have the legal right to interfere, to protect their legal rights in the due application of the proceeds, and the distribution of the surplus after payment of debts. Williams v. Whedon, 109 N. Y. 333; 15 St. Rep. 265. The purchase by Campbell from Connor was specifically of the latter’s “ interest as surviving partner in the late firm of Mooney & Connor." One who purchases the interest of a partner in a firm acquires simply a right to an accounting in respects to the partnership effects, and to a share of the surplus remaining after-payment of the partnership debts, deducting any balance that may be due from the vendor to his copartner on .accounting. Morss v. Gleason, 64 N. Y. 204 ; Menagh v. Whitwell, 52 id. 146. One who purchases such interest from a surviving partner, therefore,, while he obtains the legal title and possession, takes with all the obligations of his vendor to wind up the business, and realize upon the assets for his own benefit and that of the estate of the deceased partner, because he takes the property impressed with the trust growing out of the duty of the vendor to realize upon them for such purpose. Preston v. Fitch, 137 N. Y. 41; 50 St. Rep. 72; Holmes v. Gilman, 138 N. Y. 369; 52 St. Rep. 873 ; Russell v. McCall, 141 N. Y. 439 ; 57 St. Rep. 623. As Campbell, the purchaser of Mooney's interest in the firm, repudiates his obligations, and denies his trust, and resists the claim of the representatives of the other partner for an accounting, he manifestly seeks to convert the property to his own use; and the right of the representatives of the deceased partner to interfere and invoke the aid of a court of equity is as clear as their remedy against the surviving partner would be if he acted in a similar manner.

It is objected that the court had no right to interfere with defendant’s occupation of the real estate, which he claims was owned by Mooney &- Connor as tenants in common. Connor’s half of which had been conveyed to him. The complaint alleges that the real estate was copartnership property, and until that question is determined the receiver must keep possession of it. The allegation is supported by the fact that the firm busi ness was carried on in the premises, and, as the defendant bought the interest of the survivor in the business so carried on, he cannot complain that the court feels bound to preserve the whole property until the determination of the action.

The order appealed from must be affirmed.

All concur.


text:
    Oscar Hedin, Resp’t, v. Long Island Railroad Company, App’lt.

      (New York Common Pleas, General Term,

      Filed June 3, 1896.)

    Appeal — Evidence.
    Where, in an action for personal injuries, the sole ground of appeal is that the verdict is against the weight of evidence, it is the duty of the general term ;o review the evidence and determine whether the plaintiff has established the negligence of the defendant, and his freedom from contributory negligence, by a fair preponderance of evidence.
    Appeal from a judgment, entered on a verdict in favor of plaintiff.

      W. C. Beecher, for app’lt; J. Edward Swanstrom, for resp’t.
   Bookstaver, J.

— This action was brought to recover for personal injuries sustained by respondent as he was alighting from a oar on appellant’s road at Woodside, L. I. The case turns upon whether the respondent undertook to jump from the train while in motion, or whether the train was suddenly started while he was in the act of alighting. The sole ground of appeal in this case is* that the verdict of the jury was against the weight of evidence. Where such a motion is made, it is the duty of the general term to review the evidence, and determine whether plaintiff has established the negligence of the defendant, and that he was free from -contributory negligence, by a fair preponderance of evidence. Curtis v. W. & W. Manufacturing Co., 40 St. Rep. 722; Ferguson v. Gill, 74 Hun, 566; 57 St. Rep. 213 ; Cunningham v. Gans, 79 Hun, 434; 61 St. Rep. 249; Kummer v. Christopher & E. T. St. Railroad Co., 2 Misc. Rep. 298; 50 St. Rep. 332. Accordingly, we have read the testimony with great care, and while, from the number of apparently disinterested witnesses called on behalf of the defendant, who all unite in testifying that the train was in motion when the plaintiff undertook to alight, we would be led to believe that the plaintiff was guilty of negligence, yet it was pre-eminently a question for the jury to determine, inasmuch as the plaintiff and his witnesses, two in number, testify that the train was at a stand still when he undertook to alight, but was suddenly started with sufficient force to throw him down. There is no inherent improbability in either version of the transaction. The testimony on both sides, as it appears in print, is equally -credible. The jury had the advantage of seeing the witnesses, and of observing the manner in which they gave their evidence, and were fully instructed as to the weiget which ought to be attached to the evidence given. They do not seem to have been influenced by passion, prejudice or bias. Under such circumstances we feel constrained to affirm the judgment, rather than to grant a new trial upon our view of the weight of evidence.

The judgment should, therefore, be affirmed, with costs.

All concur.


text:
    Henry A. Brookman, Resp’t, v. John Y. Stetson, Impleaded, etc., App’lt.

      (New York Common Pleas, General Term,

      Filed June 3, 1895.)

    1. Evidence — Declarations.
    The declaration, of a member of a firm that another person is a member thereof is not competent to bind the latter.
    2. Appeal — Evidence.
    Though there is no error of law, the judgment of the district court will be reversed in the absence of any evidence to support it.
    Appeal from a judgment in favor of plaintiff.

      Charles A. Runk, for app’lt; Joel M. Marx, for resp’t.
   Bookstaver, J.

— This action was brought against James Budd, .John Y. Stetson, Marshall E. Hunter and Jott Grant, as copartners, composing the firm of J. Budd & Co. James Budd and John Y. Stetson were the only defendants served. Budd allowed judgment to be taken against him by default. Stetson put in a general denial. It was claimed by the defendant that Stetson, by his conduct, held himself out to the world as a partner and ' “ backer ” of the firm. Defendant put in evidence an agreement between the four defendants, by which it appeared that he advanced money to Budd for the purpose of developing certain patents and the processes thereunder, and establishing a business. He had no interest in the profits, nor was he liable for the losses of the business. Plaintiff does not claim that this agreement constituted Stetson a partner, and in. fact he contends that this secret agreement is not binding upon him, and endeavors to show Stetson’s connection with the partnership by his acts. To do-this, plaintiff put his father, the manager of Budd & Co., on the stand. He testified to certain acts of defendant; but, as far as plaintiff was concerned, it is not shown that he knew of these acts, or that he had any knowledge that Stetson was a partner, or that in accepting the employment plaintiff relied upon either the act or the fact. The only testimony upon this point by plaintiff was given under objection and exception by the defendant, and was to the effect that he was employed by Budd, who told him that Stetson was a partner. While Budd’s admission that Stetson was a partner would be binding upon him, it was not competent to bind Stetson, Whitney v. Ferris, 10 Johns. 66 ; and it was error to admit this testimony. Plaintiff’s case rests upon this one piece of incompetent testimony. There is no other evidence that he had reason to believe that Stetson was a partner, or relied upon that fact in accepting the employment. The evidence given by the elder Brookman is of little effect in the face of the fact that he knew of the negotiations leading up to the agreement made by the defendant, and was acquainted with and interested in the provisions thereof.

We, therefore, think that there is no evidence to support the judgment appealed from, and we are satisfied that justice has not been done, in which case we will reverse, even though there be no eror of law. Jourdan v. Healey, 46 St. Rep. 198.

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

All concur.


text:
    Michael Goodman, Resp’t, v. Abele Riccadonna, App’lt.

      (New York Common Pleas, General Term,

      Filed June 3, 1895.)

    Appeal — Conflicting evidence.
    The determination of a justice of the district court, upon conflicting evidence, is not the subject of review by the common pleas, unless it appears that he was influenced by prejudice, passion, or partiality.
    Appeal from a judgment in favor of plaintiff.

      Friend & House, for app’lt; Arthur Rothschild for resp’t.
   Bookstaver, J.

— At the close of the testimony, defendant moved for judgment, on the ground that no authority had been shown in the defendants chef to receive the goods, and duly excepted to the denial of the motion. This is the only exception in the record. The evidence upon this point, as well as upon every material fact at issue, is conflicting. Plaintiff testified that the' defendant had dealt with him for about twelve years; that he ordered the goods in question, which were delivered and at his request taken upstairs to the head cook or chef, who receipted for them. When asked upon his direct examination whether he received the goods, defendant said, “I do not know,” and afterwards said he did not receive them. Plaintiff’s testimony was corroborated by the evidence given by his employe who delivered a part of the goods; defendant’s, by his wife.

The determination of a justice of a district court, upon conflicting evidence, is not the subject of review by this court, unless it appears that he was influenced by prejudice, passion, or partiality. Prince v. Feller, 10 Misc. Rep. 422; 63 St. Rep. 521. This judgment must therefore be affirmed, with costs.

All concur.


text:
    Catharine O’Shaughnessy, Resp’t, v. Workingman’s Cooperative Association of United Insurance League of New York, App’lt.

      (New York Common, Pleas, General Term,

      Filed June 3, 1895.)

    1. Insurance — Life—False statements.
    In order to avoid a policy of insurance, it must be proved affirmatively that there was a false statement,' in the application, of a material fact, by which the company was fraudulently induced to accept the risk.
    3. Same.
    Where the alleged false statement was that the insured had never been afflicted with rheumatism, the fact of one or two visits from a physician as to a matter which he would not testify was rheumatism, is too trifling to be-regarded as sufficient to avoid the policy, especially where the insured died from a cause in no way attributable to rheumatism, if there had ever been any.
    Appeal from a judgment of the city court, affirming a judgment in favor of plaintiff.

      W. B. Donihee, for app’lt; W. E. Morris, for resp’t.
   Bookstaver, J.

— The respondent contends that we ought not to review the questions of fact in this case, inasmuch as the case does not include a certificate that it contains all the evidence upon the trial. This, however, makes practically little difference, as at the close of all the evidence, the defendant moved for the direction of a verdict in its favor, thereby conceding there was no question of fact for the jury. The complaint alleges that the defendant is a domestic corporation, conducting the business of life-insurance in the city of New York; that on the 4th day of July, 1892, in consideration of a joining fee of $5, $3 annual dues and assessments, at the rate of sixty-five cents, it entered into a contract of- insurance, and issued its certificate of membership No. 1,154, under the seal of the corporation, etc., whereby it agreed to pay to plaintiff the sum of $500 thirty days after satisfactory proof of the death of Catherine Clifford had been furnished to the officers of the association, if during her lifetime she had complied with the terms of the contract of insurance ; that she died in the city of New York in 1893, while the contract of insurance was in full force, and that due proof of her death was presented to the defendant, and that .more than thirty days had elapsed since the presentment of proofs of death ; that, by reason of the premises, there was due from the defendant to the plaintiff the sum of $500, which had not been paid, although duly demanded ; and prayed judgment accordingly. The answer alleged that the policy wab null and void from the beginning by reason of false and untruthful answers given by the insured to questions and interrogatories set forth in a printed application made to the company, and signed by the insured, which constituted the basis of the contract between the parties, and denied each and every allegation of the complaint not consistent with the answer. Such a denial, if good for any purpose, did not put in issue any of the allegations of the complaint, except possibly that the plaintiff was the beneficiary under the alleged policy, and the amount due thereunder. The court, therefore, was justified in denying defendant’s motion, made when the plaintiff rested, to dismiss the complaint, as the defense was an affirmative one, to be proved by the defendant. Thereafter the defendant put in evidence the plaintiff’s proof of death, the application of the insured for a policy of insurance, the physician’s certificate, and certain by-laws of the defendant, and called the attending physician, who was examined as a witness, but failed to testify very clearly, as to what disease he had attended the deceased for at a time prior to the issuing of the policy. The original application for insurance was in the handwriting of the president of the defendant, and was signed by the mark of the deceased only. After some further testimony by the plaintiff, both parties rested, and defendant moved for the dismissal of the complaint or the direction of a verdict in its favor, on the ground that, by the application of the insured upon which the policy was issued, it appeared she was asked whether she had been sick at any previous time, and had any physician attending her for any previous illness, and the name of the physician, and she had answered she had not been sick, and had no attending physician ; and that it had been been shown by the evidence that the insured had been ill previous to the date of the application, and had had an attending physician who had prescribed for her. This was denied, and brings up the principal question in the case. It is conceded that the application which the insured signed when asking for a policy of insurance forms a part of the contract, and sets forth the conditions on which the policy was issued, one of which was that “all answers in the application must be true, or the certificate will be void,” as they constitute the basis of the contract between the member and the association. Among the questions asked were the following:

“ Q. When last sick ? A. Never. Q. Oí what disease ? A. None. Q. Name of physician who last attended member proposed, and when ? A. None. Q. Has member ever had (if so, give particulars) rheumatism ? A. No. * * * Q. Has applicant withheld any material facts about the member proposed ? A, No.”

The affidavit of the plaintiff contained in the proof of death states that Dr. McLaughlin attended the insured for inflammatory rheumatism in the hands in the summer of 1891, before the application for insurance was made, and that he made her one visit. The doctor testified that he had visited the insured on two occasions in 1891, and attended her during the last illness, but could not testify as to the nature of the illness from which she suffered when he visited her in 1891, further than, judging from the prescription which he gave, he inferred that it was for rheumatism, but whether inflammatory or otherwise he does not state. He further testified that he treated the insured during her last illness, and that she was not then suffering from rheumatism, and had no signs of it to his knowledge ; and in his certificate he stated the cause of death to be senile dementia, — exhaustion.

In order to avoid a policy of insuaance, it must be proved affirmatively that there was a false statement in the application of a material fact, by which the defendant was fraudulently induced to accept the risk; and we think one or two visits from a physician for some illness which he would not testify was rheumatism is too trifling to be regarded as sufficient to avoid the policy, especially in view of the fact that the insured died from a cause in no way attributable to the rheumatism, if there ever had been any. Spitz v. Mutual Life Association, 54 St. Rep. 818. The plaintiff testified as to the way in which she was induced to make the affidavit she did in regard to the deceased suffering from rheumatism in 1891; and the physician also testified as to the way in which he was induced to give the certificate of death he did. This testimony, together with other facts in the case, raised a question of fact as to whether the plaintiff had ever suffered from rheumatism, to be determined by the jury, had that right not been waived by the defendant, and had he not expressly consented that all the questions, both of fact and law, should be determined by the court. There was certainly quite sufficient evidence to warrant the court in arriving at the conclusion it did upon that question, and its findings are conclusive upon us. Provost v. McEncroe, 102 N. Y. 650.

After the rendition of the verdict, the defendant made a motion for a new trial, on the ground, among other things, that the damages were excessive, and contrary to the evidence. The only evidence in the case as to the sum realized from the assessment was given by the secretary of the defendant, who testified that it amounted to $204 only. The judge at trial term directed a verdict for $207, instead of $204, with $12.36 interest. This was $3 more than it should have been on the principal sum, and 13 cents more than was proper for interest. The judgment must accordingly be reduced by $3.13, and, as thus reduced, must be affirmed, with costs to the respondent, as it does not appear from the case that the court’s attention was specially drawn to this error, or it doubtless would have been corrected on the spot.

All concur.


author: Pryor, J.

text:
    Luke Higgins, Resp’t, v. Thomas Engleton, App’lt.

      (New York Common Pleas, General Term,

      Filed June 17, 1895.)

    1. Contract — Rescission—Equitable relief.
    Where, in an action to recover the purchase money paid for land to which the title is defective, no equitable relief is asked by either party, it does not avail the vendor that the defpct is removed before trial.
    2. Same — Construction.
    The expression in a land contract that the northerly wall is a party wall, clearly indicates that the other walls are independent structures.
    3. Vendor and purchaser — Defect in title.
    When a wall is wholly on one of two contiguous lots of land, yet subject to appropriation and use for the purpose of a party wall, it constitutes an incumbrance or defect in the title of the lot on which it stands, and a right of action immediately accrues on the covenant against incumbrances'by reason of the breach thereof.
    4. Same — Objection to title.
    An objection to title that the premises are incumbered by an easement in favor of the ‘ ‘owner” of an adjoining lot, includes the mortgagee as well as the legal owner of the house.
    5. Same — Tender.
    If the vendor’s title is defective, the vendee can rescind the contract and sue for damages without making a formal tender.
    6. Same — Damage.
    A purchaser, who rescinds a contract because of incumbrances, can recover the expenses of examining the title.
    Appeal from a judgment for plaintiff.
    A. H. Stoiber and Ezekiel Fixman, for app’lt; John J. Macklin and James F. Swanton, for resp’t.
   Pryor, J.

— The plaintiff entered judgment, on a verdict directed by the court, for the sum of $1,350, of which $1,000 was paid by plaintiff, on account of the current price of premises known as “420 Hudson street,” in the city of New York, with interest, and $200 for plaintiff’s expenses in examining the title. Defendant appeals from the judgment, and from an order denying a motion for a new trial. Defendant agreed to sell to plaintiff the premises No. 420 Hudson street, twenty-three feet front and rear, by sixty feet on each side, the northerly wall being a party wall, and, on. receipt of the contract price, to convey the premises by a proper deed containing a general warranty and the usual full, covenants for conveying and assuring to plaintiff the fee simple, free from all incumbrances; except a mortgage of $20,000, certain specified tenancies, and certain covenants against nuisances. At the time appointed for closing the title defendant tendered a deed, unexceptionable in form; but plaintiff objected to the title on the ground 11 that the premises are now incumbered by an easement in favor of the owner of the adjoining house on Leroy street, in that the beams of said house arc inserted in the wall of the house you contracted to convey free from any incumbrance.” Other objections were that the premises were incumbered with a mortgage of, $26,000; taxes, $328; and water taxes, $25, — none of which were mentioned in the contract. Defendant tendered a release and checks for, and offers to pay, the taxes. Defendant claims that plaintiff waived strict performance in respect to these incumbrances. Webster v. Kings County Trust Co., 64 St. Rep. 698. Plaintiff elected to rescind the contract, so notified defendant, and demanded the return of the $1,000 paid on the contract, and $500 damages; but no damages were shown on the trial or recovered, other than the $200 expense in examining the title. The action is at law, not in equity; and proceeds on the theory that plaintiff was justified in rescinding, and did rescind, the contract at the time appointed for closing the title. Ho equitable relief is demanded by either party; and they are concluded by the form of the action. Zorn v. McParland, 59 St. Rep. 521.

The evidence shows that the vendor was the owner of both parcels of land, No. 430 Hudson street and 3 Leroy street (St. Luke’s Place); that the houses were built together in 1855; that beams of the house No. 3 Leroy street extended over and were inserted about four inches in the rear wall of No. 420 Hudson street; that said wall was entirely on the premises contracted to be conveyed ; that there was a mortgage on No. 3 Leroy street; that defendant’s attorney proposed to have defendant sign a release of the easement, but did not procure or tender the release, as plaintiff objected that, signed by him alone, it would bu unavailing. Plaintiff was ready and willing to perform his part of the contract, but made no tender, because advised that it would be useless, since defendant could not convey a clear title. There is no evidence that plaintiff knew of the situation of the rear wall at the time he signed the contract. The expression in the contract that the northerly wall is a party wall very clearly indicates that the other walls are independent structures. O'Neil v. Van Tassele, 137 N. Y. 297, 301; 50 St. Rep. 662. When a wall, as in this case, is wholly on one of two contiguous lots of land, yet subject to appropriation and use for the purpose of a party wall, it constitutes an incumbrance or defect in the title of the lot on which it stands, Giles v. Dugro, 1 Duer, 331, and a right of action immediately accrues on the covenant against incumbrances by reason of the breach thereof. Mohr v. Parmelee, 43 N. Y. Supr, Ct. 320. If the owner of two adjoining lots erects a house on each, with a party wall between them, and conveys them on the same day to two different purchasers, but one of the deeds exclude the party wall, the purchaser of the other house is nevertheless charged with having the wall stand as a support to the other house, — at least, as long as the building will endure. Rogers v. Sinsheimer, 50 N. Y. 646.

It is plain that the rear wall of the premises which defendant agreed to sell was incumbered with an easement not mentioned in the contract; that the deed tendered by defendant would not have extinguished it; that the release signed by defendant alone, which his attorney proposed to have executed, but did not tender, wou.ld have been unavailing without the consent of the mortgagee ; and that, even with the deed and the release of the easement signed by both vendor and the mortgagee, the beams would still have remained a physical incumbrance menancing the free use and possession of the wall. Whether or not the defendant offered to remove the beams, the fact remains that they were not removed. Had plaintiff taken title with the beams still in the wall, it would have cost something to remove them, and considerable damage to Ho. 3 Leroy street. Plaintiff denied, however, that such proposition was made. The mortgage on Ho. 3 Leroy street was canceled after the recission of the contract and before the trial; but as specific performance is not sought in this action, such a cancellation does not help the defendant. Mott v. Ackerman. 92 N. Y. 539.

Defendant claims that plaintiff did not object to the title on the ground that there was a mortgage on Ho. 3 Leroy street which prevented a release of the easement. We think the term owner,” used by plaintiff in his objection to the title, is broad enough to include both the vendor and the mortgagee — the legal, as well as the equitable, owner.

At the close of the case, defendant moved to dismiss the complaint, on the ground that there was no proof of tender made, so as to entitle plaintiff to any damage by reason of defendant’s failure to carry out the contract; but the court properly denied the motion. In Bigler v. Morgan, 77 N. Y. 312, 317, the referee found that no formal tender was made by plaintiff; that plaintiff was ready and willing to perform ; that defendant could not convey a clear title. And plaintiff recovered judgment for $500 expended in searching the title, which was affirmed by the general term and the court of appeals. The expert witness Kenelly testified, without contradiction, that in his opinion the fact that the beams were inserted in the wall of 420 Hudson street did not affect the value or salability of that property. This opinion differs from the opinion of the court in Giles v. Dugro, 1 Duer, 331, where it is held that more than nominal damage might be recovered because of the easement. The defendant requested the court to submit to the jury the question whether the purchaser was or was not justified in refusing to accept the title because of the fact that the beams in the house Ho. 3 St. Luke’s Place (Leroy street) were inserted in this wall, and more especially because, according to the testimony, the insertion of the beams in the wall had no effect upon the value of the- property. If this submission had been made, and the jury had found for the defendant, it would have been the duty of the court to set the verdict aside. The request was, therefore, properly refused.

Judgment affirmed, with costs.

All concur.