author: Ingraham, J.

text:
    Charles Robinson, App’lt, v. The New York, Lake Erie & Western Railway Co., Resp’t.

      (Supreme Court, General Term, First Department,

      Filed April 14, 1892.)

    1. Former adjudication—Evidence.
    An opinion of the appellate court, affirming a judgment of a court below which disposes of but one issue in the case, is not competent evidence to prove that such judgment of affirmance was an adjudication of other issues in the case not passed upon by the trial court, where the judgment record on the appeal contains no adjudication except that the judgment be affirmed.
    2. Same.
    The answer in a former action on the same contract set up as defenses that there were no net profits and therefore nothing was due, and also that the contract was invalid. The referee found that there were no net profits and that the complaint should be dismissed and the judgment entered thereon was in all things affirmed by the general term and court of appeals. Held, that there was nothing to show that such judgment was an adjudication as to the validity of the contract.
    Appeal from judgment entered on report of referee dismissing the complaint upon the merits.

      Edward B. Whitney, for app’lt; Joseph Larocque, for resp’t.
   Ingraham, J.

This action is brought upon a contract made between the plaintiff and one Hugh J. Jewett as receiver of the Erie Railroad Co., whereby the said Jewett as such receiver agreed to pay one-fifth of the net profits arising from the business to be carried on upon certain premises which plaintiffs agreed to assign to a corporation known as the Rational Stock Yard Company, and in which corporation by the recitals of the agreement the Erie R. R. Co. had become largely interested.

The defendant for a separate defense to the action alleged in its answer that, prior to the commencement of this action, plaintiff had commenced another action in this court against said Jewett as receiver upon the same alleged contract to recover under the contract for the net profits alleged to have accrued from September 1, 1877, to October 1, 1878; that judgment had been entered in that action in favor of the defendant, and that on appeal to the general term such judgment was affirmed, and that such judgment of the general term was affirmed by the court of appeals, and that by such judgments, so rendered and entered, there was a final judicial settlement and determination conclusive upon both parties of the issues in controversy ; that one of such issues embraced in such final settlement and determination was as to the validity of said contract, and that in and by the judgment so rendered and entered by this court and by the court of appeals it was adjudged that the said alleged contract upon which this action is based was and is without legal-consideration and void as against public policy.

The learned referee decided upon this trial that by the said judgment in the prior action in the supreme court and the court of appeals there was a final judicial settlement and determination conclusive upon both parties of the said issue as to the validity of the said contract, which was determined by the said judgment to be void and invalid for want of legal consideration, and as a conclusion of law. that the said judgments so rendered in the said action between the plaintiff and the said Jewett as receiver are conclusive upon both parties and their privies as to the issues raised in said action and determined by the judgments therein, and that there should be judgment in this action for the dismissal of the complaint on the merits, with costs.

If this allegation in the answer and this finding of fact of the referee is sustained by the evidence, the legal conclusion is right and must be affirmed.

The sole question for us to determine, therefore, is whether there is any evidence in this action that the issue as to the validity of the contract sued on was presented to the court in the former action, and was there determined by the judgment either of this court or the court of appeals.

The judgment roll entered in the former action was offered in evidence before the referee. From it it appears that two defenses were interposed in that action; one, that there were no net profits and nothing, therefore, due under the contract; and, second, that the contract was invalid for want of legal consideration.

The issues in that action were referred to a referee, who filed his report whereby he found as a fact that no profits were made from the business carried on at such premises or from their use and occupancy, and as matter of law that the defendant was not indebted to the plaintiff in the sums mentioned in the complaint or any part thereof, and that the defendant is entitled to judgment that the complaint be dismissed on the merits, with costs; and upon such report judgment was entered that the complaint be dismissed upon the merits.

There was also introduced in evidence a notice of appeal to this court by the plaintiff from such judgment and the judgment of this court, adjudging that the said judgment appealed from was in all things affirmed, and also a notice of appeal from such judgment of this court to the court of appeals, and the remittitur from the court of appeals in all things affirming the said judgment of tlris court, and the order of this court making the judgment of the court of appeals the judgment of this court.

This record standing by itself would show that the judgments entered upon the report of the referee and its affirmance by this court and by the court,of appeals was an adjudication that there were no profits made from the business carried on on the premises described, in the contract, and that there had been no determination of the issue raised as to the validity of the contract.

There appears, however, in the case, as introduced in evidence by the defendant, under the objection and exception of the plaintiff, an opinion of the general term of this court, and also an opinion of the court of appeals, and the only evidence to sustain the finding of the referee that the judgment of the general term and of the court of appeals was an adjudication that the said contract was void is what is claimed to be found in these opinions.

We have now to determine whether such opinions of the appellate court, affirming a judgment of a court below- which disposes of but one issue in the case, are competent evidence to prove that such judgments of affirmance were adjudications of other issues in the case not passed upon by the trial court, and where the judgment record on the appeal contained no adjudication except that the judgment be affirmed.

In considering this question, the distinction between the effect of the judgment as a bar or estoppel against the prosecution of a second action against the same claim or demand, and its effect as an estoppel in another action between the same parties upon a different cause of action, should not be lost sight of. “ In the former case, the judgment, if rendered upon the merits,'constitutes an absolute bar to a subsequent action.”

“ But where the second action between the same parties is upon a different claim or demand, the judgment in the prior action operates as an estoppel only as to those matters in issue or points controverted upon the determination of which the finding or verdict was rendered.

“ In all cases, therefore, where it is sought to apply the estoppel of a judgment rendered upon one cause of action to matters arising in a suit upon a different cause of action, the inquiry must always be as to the point or question actually litigated and determined in the original action; not what might have been thus litigated and determined. Only upon such matters is the judgment conclusive in another action.” Cromwell v. County of Sac, 94 U. S., 353, and see Lewis v. O. N. & P. Co., 125 N. Y., 348; 34 St. Rep., 973, where Peckham, J., says:

“ In such a case, where a judgment may have proceeded upon either or any of two or more distinct facts, the party desiring to avail himself of the judgment as conclusive evidence upon some particular fact must show affirmatively that it went upon that fact, or else the question is open for a new contention.” In Bell v. Merrifield, 109 N. Y., 212; 14 St. Rep., 796, it was said:
“ So in order to obtain the benefit of the prior adjudication of a fact it is entirely reasonable to exact from the party asking its benefit clear proof that such adjudication has been made.”

In other words, the burden of proof in this case is upon defendant to show that the adjudication in the prior action was an adjudication that the contract sued on in this action was invalid and not binding upon this defendant.

The judgment in the prior action that was appealed from dismissing the complaint might have been upon either of the several defenses set up in the answer.

The record shows that that judgment was entered upon the report of the referee who found that nothing was due under the contract. The record itself therefore shows that the judgment entered upon the report of the referee did not determine that the contract was invalid. The record thus showed that that judgment was in all things affirmed by the general term and by the court of appeals.

Is it competent to introduce evidence of the declarations of the judges who affirmed that judgment, either verbal or written, or by their written opinions or by their oral testimony to show that the question determined-was different from that in the record? I think not The rule that allows oral testimony to be given as to what questions were actually determined upon the trial of the action have always been restricted, so far as I have been able to discover, with one or two exceptions, which will be hereafter-mentioned, to what actually happened upon the trial of the action and to the questions submitted for determination, and such evidence has always been limited to facts that are not inconsistent with the record and do not impugn its verity.

Thus in Gardner v. Buckbee, 3 Cowen, 127, the court in stating the ground upon which such evidence is admitted says:

“It is true .that the record merely proves the pleadings, and that judgment was rendered for the defendant Without proof it would not make out the defense. The record shows that it was competent on the trial to establish the fraud of the plaintiff. Whether fraud was made out, and whether that was the point upon which the decision was founded, must necessarily be proven by evidence extrinsic of the record. To do so is not inconsistent with the record, nor does it impugn its verity.”

So in the case of Wood v. Jackson, 8 Wend., 17, the evidence admitted was, what question was submitted to the jury on the trial, but such evidence has never been received to contradict the record, or which is inconsistent with it, and I think it clear that the effect of these opinions as evidence, if they were admissible at all, was to contradict the record; that is, that the judgment affirming the judgment dismissing the complaint because of the failure to prove anything due under the contract was an adjudication that the contract sued on was void.

Had the referee in this case written an opinion in which he stated that he dismissed the complaint because the contract was void, and then filed the decision in question, would that opinion have been admitted to show that the question that was determined was not the question stated in his report, but was the question which the report did. not determine ? Clearly not, and upon what principle therefore can the opinion of the appellate court, which in all respects affirms his judgment, be competent proof that their judgment is not an affirmance of the judgment entered on the decision of the referee, but an adjudication of an entirely different issue.

If the defendant had desired to have this judgment entered as an adjudication as to the validity Qof the contract, they should have applied to the appellate court to have inserted in their judg^. ment of affirmance an adjudication as to the validity of the contract, but such adjudication not appearing in the judgment of affirmance, it must be deemed to have affirmed the judgment that was given by the referee.

But assuming that the defendant could prove by competent evidence that the appellate courts in affirming this judgment adjudicated that this contract was void, I do not think the opinions of the court containing the reasons for their judicial action is competent evidence of what was so adjudicated. The opinions are. no part of the record, and that on an appeal from an order or judgment the appellate court cannot look into the opinion to ascertain the grounds upon which the court below proceeded is settled by many cases, and is almost a universal rule. See Direct U. S. Cable Co. v. The Dominion Telegraph Co., 84 N. Y., 156; Hewlett v. Wood, 67 id., 394.

The opinion being no part of the record, must be considered as nothing but the reasons of the judge or court for their judgment, and could certainly have no greater weight than the testimony of the judge who wrote the opinion as to his reasons for his judgment.

It is settled that it would not have been competent to call a judge or juror who decided a case as a witness to state the reason of their decision, or what was decided.

Thus in Agan v. Hey, 30 Hun, 594, the court say in speaking of oral testimony to be given in such an action:

“ But such evidence should be limited to proving what occurred upon the trial; the proofs which were given, the arguments and contentions of the respective parties as to the facts and law of the case.
“ I am of the opinion that it was error to receive the statement of the justice himself as a witness as to the ground upon which he placed his decision in the defendant’s favor. He was a competent witness to prove all that occurred before him, for that nowise contradicted the record which he caused to be made and entered in his docket.
“ The question whether a former suit is a bar to a pending one is to be determined as a legal question from the record of the former suit and the proceedings had upon the trial. Whether the rent was due or not was a question of fact, and it was not competent to prove by the justice how he determined that question. The mental conclusions reached by the magistrate on the law or facts of a case tried before him cannot properly be given in evidence.
“ If his conclusions are the same as those he had inserted in the record, then there was no necessity of proving the same. If they are in contradiction of the same, then they should be excluded for the reason that they contradict the record.”

In the case of the Union National Bank v. Kupper, 63 N. Y., 618, it was held “That the record, which is the highest evidence of what the court decided, showed clearly that the point was adjudicated the other way, as the judgment of the special term was explicit, and this was affirmed, and that this court is bound by the record even if the opinion contains adverse expressions. If there was a mistake .in the judgment entered, the remedy was by motion to correct.”

The same question was presented to the supreme court of the United States in the case of Packet Co. v. Sickles, 5 Wallace, 592.

In that case the defendant in error relied upon a former adjudication, and the jurors who determined the question in the former action were called to testify as to the grounds upon which they found their verdict,- but the court held that the record of the former trial, together with the extrinsic proof, failed to show that the contract in controversy in that suit was necessarily determined in the former action; and although the evidence of the jurors was received without objection, it was expressly held “ that the-secret deliberations of the jury or grounds of their proceedings while engaged in making up their verdict are not competent or admissible evidence of the issues or finding.

“That the evidence should be confined to the points in controversy on the former trial and the testimony given by the parties,, and to the questions submitted to the jury for their consideration, and then the record furnishes the only proper proof of the verdict.”'

I can see no reason why the written opinion of the judges of the appellate court giving their reasons for affirming the judgment does not come within this rule.

The case of Birckhead v. Brown, 5 Hill, 634, appears to have adopted a different view, but no authority is cited to sustain that conclusion, and we think it should not be followed.

The question here presented is different from that presented in Esterbrook v. Savage, 21 Hun, 149, for there the appellate court reversed the judgment entered on the trial before a referee, and it entered a judgment dismissing the complaint in the action ; and while in that case the learned justice delivering the opinion said that the court could consider the opinions upon the question as to what was really decided, as on the record there was no adjudication, he holds that, considering the opinions, there was no "adjudication. That remark was necessary to the decision of that case. It does not appear that the opinion of the appellate court was introduced in evidence, and what was decided was that, considering the opinion, it did not appear that the questions at issue were res adjudicatq.

We think the true rule is that stated in Packet Co. v. Sickles, supra, “If the record on the former trial shows that the verdict could not have been rendered without deciding the particular matter, it will be considered as having settled that r latter as to all future actions between the parties; and further, .in cases where the record itself does not show that the matter was necessarily and directly found by the jury, evidence aliunde consistent with the record may be received to prove the fact; but even when it appears from the extrinsic evidence that the matter was properly within the issue controverted in the former suit, if it be not shown that the verdict and-judgment necessarily involved its consideration and determination, it will not be concluded.

“ That tho evidence aliunde should be confined to the points in •controversy on the former trial, to the testimony given by the parties and to the question submitted for determination, and that unless it appears from such evidence and the record that the question was necessarily determined, the parties are not concluded.”

We think, therefore, that there was no evidence before the ref' eree to sustain his finding that the former judgment was an ad • judication that the contract sued on was invalid, and that the judg inent must be reversed and a new trial ordered, -with costs to appellant to abide the event.

O’Brien, J., concurs; Van Brunt, P. J., concurs in result.


source: Caselaw Access Project

license: Public Domain

text:
    Charles Robinson, App’lt, v. Hugh J. Jewett, Receiver, Resp’t.

      (Supreme Court, General Term, First Department,

      Filed April 14, 1892.)

    Appeal from judgment dismissing complaint, entered on report of referee.

      Henry L. Burnett and Edward B. Whitney, for app’lt; Joseph Larocque, for resp’t.
   Ingraham, J.

The questions presented in this .case are the .same as those presented in the case of Robinson v. The New York, Lake Erie & Western R. R. Co., decided herewith, and for the reasons .stated in the opinion in that case the judgment must be revérsed and a new trial ordered, with costs to appellant to abide the •event.

O’Brien, J., concurs; Van Brunt, P. J., concurs in result.


author: Per Curiam.

text:
    The People ex rel. James W. Ketcham, App’lt, v. The Excise Commissioners of New York, Resp’ts.

      (Supreme Court, General Term, First Department,

      Filed April 14, 1892.)

    Excise—Hand ahus—Jury.
    Upon the return to an alternative mandamus to review the action of excise commissioners in refusing to grant a li.-ense, the court is to decide in a summary way whether the defendants have acted arbitrarily and abused their power; the framing of issues for trial by jury is not contemplated by the act of 1886 and cannot be permitted.
    Appeal from order denying motion to frame issues upon the return to a writ of alternative mandamus and to send issues before a jury for trial.

      Mandamus to require the commissioners to grant a license to relator.
    The opinion at special term was as follows:
    Barrett, J.—The The review of the excise board contemplated by the act' of 1886 is summary, and the question whether the board acted arbitrarily has been left to the court or judge issuing the mandamus. The discretion, vested in the excise commissioners will not be interfered with on such an application. It is only where there has plainly been an arbitrary abuse of that discretion that the court will interfere. But whether the court will interfere or not is plainly a matter for its judgment upon the petition, writ, return thereto, and the .evidence and papers which were before the commissioners. Upon looking over the whole ground, the court will, in a summary way, decide whether the commissioners have abused their power and arbitrarily rejected the applicant’s petition. It is the court which must decide this, not a jury. The framing of an issue was never contemplated by the act of 1886 ; and if that practice were permitted, juries would soon be turned into excise commissioners. We require no opinion from a jury as to whether the commissioners acted arbitrarily in the matter, but the court will itself decide that question. The order to frame issues should therefore be vacated.

      Albert I. Sire, for app’lt; Edward Browne, for resp’ts.
   Per Curiam.

We think the order appealed from should be affirmed on the opinion of the court below, with costs.

Van Brunt, P. J., O’Brien and Andrews, JJ., concur.


author: O'Brien, J.

text:
    Charles C. Webb, Resp’t, v. Theodore A. Myers, App’lt.

      (Supreme Court, General Term, First Department,

      Filed April 14, 1892.)

    1. Stock exchange—Gratuity.
    A member of the New York Stock Exchange has no power to disposer by will of the gratuity provided for by the constitution of the exchange.
    2. Same—Honey had.
    Where the trustees of the gratuity fund have in good faith distributed; the entire amount of the gratuity among the next of kin.named in the petition in probate proceedings, when in fact there were others entitled thereto who were omitted from said petition, the latter may recover their share from those who received it as money had and received to their use.
    Appeal from judgment overruling defendant's demurrer to the complaint

      A. Shiland, Jr., for app’lt; Hamilton R. Squier, for resp’t.
   O'Brien, J.

The complaint in substance alleges: That one Alfred Gr. Myers died March 4th, 1887, a member of the New York Stock Exchange in good standing; that as part of the benefits accruing from membership in said exchange, it is provided in the constitution of said exchange that, upon the death of any member in good standing, leaving neither widow or children, there shall be given to his next of kin within the limit of representation prescribed by the statutes of the state of New York the sum of ten thousand dollars as a gratuity from the surviving members of the said exchange, which said constitution further provides as follows:

“ The faith of the New York-Stock Exchange is hereby pledged to pay, within one year after proof of death of any member, out of the money so collected, the sum of ten thousand dollars, or so-much thereof as may have been collected, to the persons named in the next section, as therein provided, which money shall be paid as a gratuity from the surviving members of the exchange, free from all debts, charges or demands whatever. * * * In all cases a certified copy of the proceedings before a surrogate or judge of probate shall be accepted as proof of the rights of the claimants; be deemed ample authority to the stock exchange to pay over the money; shall protect the exchange in so doing, and. shall release the exchange forever from all further claim or liability whatsoever. * * * Nothing herein contained shall be construed as constituting any estate in esse which can be mortgaged or pledged for the payment of any debts; but it shall be construed as the solemn agreement of every member of the stock exchange to make a voluntary gift to the family of each deceased member, and of the exchange to collect and pay over to such family the said voluntary gift; it being understood and hereby expressly declared that the provisions of this article XVIII of these rules shall only be in force in, and apply to, cases of death which shall take place alter its adoption.

That said Alfred (x. Myers left him surviving as his next of kin his two sisters, Matilda and Louisa Myers, one brother (the defendant), Theodore A. Myers, and four children of a deceased half-brother, viz.: Ada Frank, Sarah Myers, Maria Moss and Frederick S. Myers ; that said Alfred Gr. Myers left a last will and testament, and in and by said will he bequeathed said gratuity fund of $10,000 to his two sisters and his said brother (this defendant), share and share alike; that thereafter one Joan A. Rutherford, one of the executors of said will, presented a petition to the surrogate of the county of New York for the probate of said will, and said will was thereupon duly admitted to probate; that in said petition said Rutherford alleged that the only next of kin of said Alfred Gr. Myers, deceased, were the defendant Theodore A. Myers and his said two sisters; that said petition was erroneous. and untrue, in that the petition should have recited that the said Sarah Myers, Maria Moss, Ada Frank and Frederick S. Myers were also of the next of kin of the said Alfred Gr. Myers, deceased; that if said petition had stated the relationship of the said Sarah Myers, Maria Moss, Ada Frank and Frederick S. Myers to said deceased, the trustees of the gratuity fund of the New York Stock Exchange would have divided said fund into four parts, and given one-fourth of a fourth, or one-sixteenth, to each of said alleged children of the deceased half brother of said Alfred Gr. Myers; that the trustees of said gratuity fund, in good faith and in ignorance of the relationship -of said Sarah Myers, Maria Moss, Ada Frank and Frederick S. Myers to said Alfred Gr. Myers, deceased, and misled by said probate proceedings, paid said gratuity fund to the said two sisters and this defendant, one-third thereof to each; that before the commencement of this action a demand was made on the defendant, in behalf of said Sarah Myers, Maria Moss, Ada Frank and Frederick- S. Myers, that he pay over to each of them the sum of $208.33 of the money so received by him from the trustees of the gratuity fund of the New York Stock Exchange; that be refused to make any payment, and claimed that he was entitled to the full amount he had received from said trustees of the gratuity fund under the said will of Alfred Gf. Myers, deceased; that before the commencement of this action Sarah Myers sold and transferred to plaintiff her right, title and interest in and to the claim and demand which she had against said defendant for her share of the moneys received by said defendant from the trustees of the gratuity fund.

The defendant demurred to the complaint on the ground that it did not state facts sufficient to constitute a cause of action. The court at special term overruled this demurrer, and from the judgment thereupon entered this appeal is taken.

We think that the stock exchange having created the gratuity fund for the next of kin of a deceased member, and having provided that it should not be construed as constituting any estate in esse to which a member had title, that the deceased had no-such property right therein as would have enabled him to change-the beneficiary while living, or dispose of the fund by will after death. The by-laws of the exchange designated to whom- the-money should go after a member’s decease, and the title or right of such persons designated to share in the fund was immediately created and vested upon a member’s death. While it is called a gratuity, it was beyond the power of the exchange itself to withhold it after collection against those beneficially interested, though when paid to persons not justly entitled thereto pursuant to an order or other proceeding before a surrogate, such payment discharges the exchange from any liability to again pay it over even to the rightful owners thereof. Such protection, however, thrown about the exchange in making payment, does not affect the right or title of those legally entitled to the fund. Moneys, therefore, which should have been received by plaintiff’s assignor, having been through mistake paid to defendant, the question presented is, can a recovery be had ?

The action is one for moneys had and received, and plaintiff’s theory is that having been wrongfully deprived of the money through the mistake or misrepresentation of the true facts to the exchange which resulted in payment to defendant, that the latter has received money which ex quo et cebono belongs to plaintiff and which after demand and refusal he is entitled to recover.

On the other hand defendant insists that the action cannot be maintained. That “ the complaint does not allege any fraud, deceit or misrepresentation on the part of the defendant, nor does it allege that the defendant was the agent expressly or impliedly of the plaintiff or his assignor in any way, or that there was paid to him or that he received any sum whatever "as the agent or representative of the plaintiff or his assignor, or for his or her account or in trust for him or her; or that he concealed any fact from the New York Stock Exchange or from the trustees of the gratuity fund thereof, or that he had any knowledge of the contents of said petition for probate or made any claim based thereon, or that he had any knowledge of the existence of the plaintiff’s assignor or of any of the alleged children of the alleged half-brother; or that any proceedings have been had to probate their heirship or amend the petition for probate referred to in the complaint; but the complaint does show that the money paid to the defendant was a “ voluntary gift” and “ gratuity ” from the stock exchange to him; that the exchange was directed to make such gift to him bjr the will of the deceased member on whose account it was to be paid; that it was claimed by defendant for himself only, and that it was paid to and received by him as his own and for his exclusive use and benefit.”

Having disposed of the question of the effect of the will, and reached the conclusion that the plaintiff’s assignor was entitled to a portion of the fund as one of the next of kin, it remains to consider the authorities upon which the appellant’s contention is claimed to be supported. Patrick v. Metcalf, 37 N. Y., 332; Butterworth v. Gould, 41 id., 450; Rowe v. Bank of Auburn, 51 id., 674; Hathaway v. Town of Horner, 54 id., 655; Decker v. Saltzman, 59 id., 275; Peckham v. Van Wagenen, 83 id., 40.

We had occasion to examine these cases recently in the case of Fox, Receiver, v. McComb, decided herewith, 45 St. Rep., 754, and it is not necessary for us to do more than state in the language of Woodruff, J., in the case of Butterworth v. Gould, the principles underlying these cases. He says, at page 463, “ The principle of the decision is in accordance with the case in this court, viz., where a defendant has received moneys due to the plaintiff, but claiming it as his own under circumstances in which he has no authority from the plaintiff and does not act under pretense of .such authority, and the payment to him is made in proposed recognition of his title thereto as his own, and does not operate to discharge the payor from his liability to the plaintiff, then and in such case there is no trust, and no implied promise to pay the money to the plaintiff.” The decision referred to in the foregoing quotation was that of Sargeant v. Stryker, decided in the supreme court of New Jersey, and which was to the same effect as Patrick v. Metcalf supra.

As shown, however, in Butterworth v. Gould, there is a class of cases, namely, where fees are collected by an officer de facto, he may be proceeded against by the officer de jure as for so much money had and received to his use. Why ? Because he has received them by a color of authority; and those who paid had a right to pay them, and are protected in making such payments.

The principle underlying this latter class of cases seems to us to be analogous to the one at bar.

We have, however, as shown by the learned judge in his opinion below, another class of cases also relied upon here by the appellant where payment has been made upon conflicting claims known to the person who made the payment. In some of these the payment resulted in discharging the principal debtor and in others .again the debt was not discharged. But it was still held that no recovery could be had in favor of one rightfully entitled to the money against one to whom the payment was made where it appeared that such moneys were received under an adverse claim and in hostility to the person really entitled thereto.

The quotation from Mr. Justice Blaclcstone by the learned judge below is apt, viz. : that indebitatus assumpsit lies “ when one has received money belonging to another, without any valuable consideration given on the receiver’s part, for the law construes this to be money had and received for the .use of the owner only and implies that the person so receiving promised and undertook to account for it to the true proprietor.”

The principle thus enunciated is in entire harmony with the view expressed by Mr. Justice Andrews in the case of Roberts v. Ely, 113 N. Y., 131; 22 St. Rep., 185.

“ The case falls within the familiar doctrine that money in the hands of one person to which another is equitably entitled may be recovered in a common law action by the equitable owner upon an implied promise arising from the duty of the person in possession to account for and pay over the same to the person beneficially entitled. The action for money had and received to the use of another is the form in which courts of common law enforce the equitable obligation. The scope of this remedy has been gradually extended to embrace many cases which were originally cognizable only in courts of equity. Whenever one person has in his possession money which he cannot conscientiously retain from another, the latter may recover it in this form of action, subject to the restriction that the mode of trial and the relief which can be given in a legal action are adapted to the exigencies of the particular case, and that the transaction is capable of adjustment by that procedure without prejudice to the interest of third persons. No privity of contract between the parties is required except that which results from the circumstances. Mason v. Waite, 17 Mass., 560. The right on the one side and the correlative duty on the other create the necessary privity and justify the implication of a promise by defendant to do that which justice and equity require.

“ It is immaterial also whether the original possession of the money by the defendant was rightful or wrongful. It is sufficient that the duty exists on his part, created by the circumstances, to account for and pay it over to the plaintiff.”

The facts presented, namely, that the Stock Exchange by payment to the defendant became discharged from all liability to pay over the amount again to the plaintiff; that the payment was made by mistake and was received by the defendant, not asserting any hostile claim thereto, but merely accepting the same as paid to him, and no question existing but that the title of the plaintiff to so much thereof as was payable to him was valid and that the same came wrongfully into the possession of the defendant, we think, distinguish this case from those relied upon by the appellant, and bring it within the principle stated in Roberts v. Ely, supra, and Carver v. Creque, 48 N. Y., 385, that money in the hands of one person to which another is equitably entitled may be recovered.

It is true that the case of Roberts v. Ely was decided upon the ground that the statute of limitations had run, and no recovery could be had. But as an argument and an expression supported by authority as to what principle should be applied in cases of this kind it is of great value and weight, expressing to say the least the views of a learned and able judge of our highest appellate court.

We are therefore of opinion that the complaint does state facts sufficient, to constitute a cause of action and that the demurrer was properly overruled.

The judgment should be affirmed, with costs, and with leave to answer over on payment of costs in this court and court below.

Van Brunt, P. J., and Ingraham, J., concur.


author: Ingraham, J. Van Brunt, P. J.

text:
    Florence May Lane et al., by Guardian, Resp’ts, v. Franklin Moss et al., Ex’rs, Impl’d, App’lts.

      (Supreme Court, General Term, First Department,

      Filed April 14, 1892.)

    Infants—Judgment affecting property of—Modification.
    A compromise of a contest over probate was effected by the adult parties by which the infant plaintiffs were to receive a certain proportion of the property. An action was brought by them to ratify and carry out such compromise in which a judgment to that effect was recovered, which also provided that the executor should pay a certain sum to the infants’ counsel for their services. In this action to modify said judgment it was alleged that the infants’ guardian was induced to sign the agreement by reason of a belief that the value of the estate was greater than it actually was and that the shares of the infants would be greater, and that the sum directed to be paid to counsel was exhorbilant. Held, that the complaint stated a good cause oí action; that there was no real controversy which resulted in said judgment and that the rights and interests of the infants were not protected, and hence they are entitled to relief.
    Appeal from judgment overruling demurrer to the complaint.

      Stephen D. Brague, for app’lts; Morgan & Ives, for resp’ts.
   Ingraham, J.

The complaint alleges that the plaintiffs are in- . fonts, and are heirs at law and next of kin of Maltby G. Lane, deceased; that the said Maltby G. Lane left a certain paper purporting to be his last will and testament, which was offered for probate, the probate of which was contested by these plaintiffs successfully, and a decree entered refusing probate; that subsequently another paper purporting to be a will was produced and offered for probate, and also contested by these plaintiffs; that subsequently a compromise was effected and agreed to by all the adults interested in the estate of said Lane, whereby these plaintiffs would each receive two-tenths of thy balance of the estate after making certain payments provided for, and to carry such compromise into effect an agreement was signed between the adults interested in the estate and by the two infant plaintiffs, by Marietta G. Lane, their mother. That subsequently an action was commenced in this court by these plaintiffs in order to ratify and carry the said agreement of compromise into effect, and that subsequently a decree was entered in such action ratifying and confirming said agreement, and directing the defendant Moss, as executor of the said Maltby G. Lane, deceased, to pay to the defendants Hastings and Curtis the sum of $26,000, it being provided in the agreement that that sum should be fixed as the value of the legal services rendered by said Hastings and Curtis as counsel for the said infants in the proceedings mentioned.

The complaint also alleges that the guardian ad litem of the infant defendants in this action, who signed the said agreement for the infants, was induced to sign the said agreement on behalf of the infants allowing the amount of the compensation of the said Hastings and Curtis by reason of her belief that the _ value of the property of the deceased was at least $500,000; that the debts and liabilities of the deceased did not exceed $225,000, in which case the shares of the said infants under said agreement would have been about $75,000 apiece; that the said share of the said infants would not amount to $15,000, and might not amount to over $4,000, and that the sum of $26,000 was an ex-horbitant and unreasonable charge, and that the value of such services were not worth the sum of $10,000.

The agreement signed by plaintiffs and thus ratified and affirmed by the judgment in such action recites the fact that the estate of the said Maltby Lane was deemed to be of the value of •$500,000 and was subject to an indebtedness of $225,000 and it may thus fairly be said that the agreement was executed upon the assumption that these facts were true, and that the amount to be paid to Hastings and Curtis for their services to the infants was based upon the facts that the infant’s share in the estate upon the basis of the settlement would amount to the sum of $50,000 apiece, and this sum of $26,000 was by the agreement to be paid out of the balance of the estate of which these plaintiffs were entitled to two-tenths.

The defendant Frank Moss as executor demurred on the ground that the complaint. does not state facts sufficient to constitute a cause of action.

The plaintiffs are infants and as such are wards of the court. The agreement made on their behalf by their mother was not binding upon them until ratified by the court, and where it appears that the judgment of the court has been obtained which ratifies an agreement made on behalf of infants based upon a false estimate of the interest of the infants in the property affected by the judgment and by it the infants’ property is applied to the payment of claims which are excessive and unjust, and the approval of the court to such payments has been obtained by such false statements, I think it clear that the court has jurisdiction to intervene and protect the infants so its judgment shall not be used to appropriate the infants’ property -to the payment of such unjust and exhorbitant claim§.

The rule is stated in the 12th American Encyclopedia, p. 144.

“A court of equity may interpose to grant relief where on account of some mistake of fact made by the judge or a party to the action an inequitable judgment has been rendered.” And this case would seem to come expressly within this provision.

While it is usual in such cases to make the application in the action in which the judgment was rendered, I can see no reason why the relief cannot be given by the same court in which the judgment is rendered by an independent action.

The demurrer is not upon the ground of a defect of parties, and that objection to the complaint is, therefore, waived.

I think, therefore, the complaint alleges a good cause of action against defendant, and that the demurrer was properly overruled, and the judgment appealed from must be affirmed, with costs, with leave to defendant to withdraw the demurrer, and answer over on payment of costs in this court and court below.

Van Brunt, P. J.

I concur. There was no real controversy which resulted in the judgment of this court, and consequently no binding adjudication. The rights and interests of the infants were in no wise protected, and hence they are entitled to relief.

O’Brien, J., concurs with presiding justice.


author: Van Brunt, P. J.

text:
    The American National Bank of Providence, Resp’t, v. William R. Grace, App’lt.

      (Supreme Court, General Term, First Department,

      Filed April 14, 1892.)

    Pleading—Misjoinder of causes of action.
    The complaint in this action set out two causes of action; the first for fraud and deceit in inducing plaintiff to purchase two promissory notes by means of false representations and concealment in relation to the makers' ability to pay their debts, and the second alleged that the makers of said notes paid the amount thereof to defendant under an agreement that he should apply it to the payment of said notes, and that he failed to do so, and converted the same to his own use. Held, that said causes of action were improperly joined in the complaint; that the first was for fraud and deceit, and the second for money had and received; that they are distinct and do not arise out of the same transaction.
    Appeal from interlocutory judgment overruling demurrer to amended complaint.

      F. R. Coudert, for app’lt; De Lancey Nicoll, for resp’t.
   Van Brunt, P. J.

Two causes of action are alleged in the complaint. The first is to recover damages for fraud and deceit, such fraud and deceit consisting of the inducing, by false and fraudulent representations and concealment, the plaintiff to purchase of the defendant two promissory notes of the firm of Grant & Ward and to pay him therefor the sum of $19,600; the false and fraudulent representations and concealment being the represenfcation that Grant & Ward were a prosperous and solvent firm, whereas the defendant well knew that they were wholly insolvent and unable to pay their debts.

It is true that many other facts are alleged in the complaint in respect to the first cause of action ; but this seems to be its true statement.

The second cause of action is for money had and received to the plaintiff’s use; the evidence alleged being that Grant & Ward paid to the defendant the amount of the two notes sold by the defendant to the plaintiff, under an agreement that the defendant should apply the money so received by him to the payment of said notes, but that the defendant has failed to apply the said suni or any part thereof to the payment of the same and has converted the same to his own use. The allegation of conversion seems to be entirely surplusage, because it is apparent that he has not converted any property of the plaintiff to his own use, as he never had any of their property in. his possession except the money which he is alleged to have received upon the purchase of the notes.

The defendant; demurred to this complaint upon the ground that it sets forth two causes of action which are improperly joined This demurrer was overruled by the court below upon the ground, first, that each cause of action set out in the'complaint was in tort, one for fraud and deceit and one for conversion, and that the two causes of action related to transactions connected with the same subject of action, viz.: the alleged wrongful conduct of the defendant-in respect to the notes in question.

It seems to us clear that the learned judge below fell into error in his conclusion that the second cause of action sounded in tort

The sole ground of action is that the defendant has money in his hands which has been paid by Grant & Ward to the use of the plaintiff and which it is entitled in equity to receive from the defendant The allegation in respect to conversion cannot apply, because it is not claimed that any specific sum was converted; but that Grant & Ward placed the defendant in funds to take care of the notes belonging to the plaintiff with others, and that the defendant'has not taken care of the two notes held by the plaintiff. The most that can be made out of this is that Grant & Ward have paid to the defendant money to the use of the plaintiff. Therefore it is an action on contract and in no respect sounds in tort, any more than any case for money had and received.

The question then is presented whether the transactions forming the subject matter of the two causes of action are connected with the same subject of action, and that is substantially what seems to have been claimed by the learned counsel upon the argument of this appeal.

We think that a very brief examination of the causes of action will show that they are entirely independent and not connected with each other. The first cause of action, as already stated, is for fraud and deceit in inducing the plaintiff to purchase these notes by false and fraudulent representations. In connection with this alleged cause of action are allegations of the circumstances under which the defendant became" possessed of the notes in question, and of the agreement between Grant & Ward and the defendant in respect thereto, whereby Grant & Ward agreed to pay a certain bonus for the procuring of a loan upon these notes and others, and also agreed to take up the notes two months prior to their falling due.

These allegations of course have no connection with or relevancy to the cause of action set out in the first subdivision of the complaint, viz.: for fraud and deceit. As far as that cause of action was concerned it was entirely immaterial what the agreements between Grant & Ward and the defendant were. If he induced the plaintiff to take these notes on false and fraudulent representations and damages are demanded therefor, the relations between Grant & Ward and the defendant (except so far as they may tend to establish the defendant’s knowledge of their insolvency) are entirely immaterial, and allegations in respect thereto are allegations of evidence and not of facts necessary to the proper averment of the cause of action.

We next come to the cause of action for money had and received. In this cause of action is re-alleged each and all of the allegations contained in the first cause of action. How this cause of action is founded upon the claim that Grant & Ward had paid to the defendant these notes and that he was in duty bound to pay the money over to the plaintiff. This evidently has no connection with the original transaction between the defendant and the plaintiff.

In order to unite causes of action between two parties, the claims must arise out of the same transaction between those parties or transactions connected with the same subject of action. How in the first cause of action, whatever the relations as already said existing between Grant & Ward and the defendant, the plaintiff has no interest therein except so far as they may tend to prove scienter on the part of the defendant. The subject matter of that cause of action is the fraud and deceit in getting the plaintiff to purchase the notes of a firm which defendant knew to be insolvent. The second cause of action cannot possibly have its inception or be connected with anything prior to the time of the payment of the money by Grant & Ward to the defendant. It is the money paid to the defendant by Grant & Ward which is the subject of that action and it is that transaction which forms its basis.

Therefore what the connection is betweemthe cause of action arising out of the payment of money by Grant & Ward to the defendant and the cause of action based upon the fraud and deceit of the defendant we cannot perceive.

The very statement of the inconsistencies between these two causes of action shows that they cannot arise out of the same transaction or transactions connected with the same subject of action, as they both arise at different times and periods. The one is founded upon the allegation of the insolvency of Grant & Ward, and their inability to pay the notes in suit; and the other is founded upon the claim that they have paid the notes in suit to the defendant; claims clearly inconsistent with each other.

It seems, therefore, that the one cause of action being for fraud and deceit, and the other for money had and received, the subject matter of the causes of action are entirely distinct, and arise out of different transactions.

We think, therefore, that the demurrer should have been sustained, and that the judgment should, therefore, be reversed, with costs to appellant, the plaintiff to be allowed to amend on payments of costs of appeal and costs of demurrer in the court below.

O’Brien and Ingraham, JJ., concur.


text:
    Aaron Levy, Resp’t, v. John Beacham, App’lt.

      (Supreme Court, General Term, First Department,

      Filed April 14, 1892.)

    Supplementary proceedings—Examination before return of execution. j
    An order to examine a judgment debtor before return of execution in aid thereof cannot he granted in the absence of proof that a demand for the application of property to the payment of the judgment has been made.
    Appeal from order denying motion to set aside for the examination of defendant as a judgment debtor in aid of execution.

      P. P. Eckerson, for app’lt; J. Goldman, for resp’t.
   Per Curiam.

Without disposing of the other questions raised upon this appeal as to the sufficiency of the affidavit, there is one respect in which it appears to be fatally defective and to require a reversal of the order.

Section 2436 of the Code requires that in order to. obtain an order requiring the judgment debtor to be examined concerning his property in aid of the execution the judgment creditor must prove to the court that the judgment debtor has property which he unjustly refuses to apply towards the satisfaction of the judgment Such proof must show that a demand of the application of the property to the payment of the judgment has been made, otherwise no refusal can be established. This is the rule which has been laid down in the case of the First National Bank v. Wilson, 13 Hun, 232, and Hutson v. Weld, 38 id., 142.

The order should be reversed and the order for the examination dismissed, with costs.

Yak Brunt, P. J., O’Brien and Andrews, JJ., concur.


author: Andrews, J.

text:
    The Toronto General Trusts Co., Trustee, Pl’ff, v. The Chicago, Burlington & Quincy R. R. Co. and The National Bank of Commerce of New York, Def’ts.

      (Supreme Court, General Term, First Department,

      Filed April 14, 1892.)

    1. Will—Trusts—Power of trustee to sell securities.
    By the will and codicil of a testator, he gave to his wife for life the income of his estate and the principal to his children on her death; provided that the estate should he realized at public or private sale at her death and divided among the issue of the marriage, and appointed a trustee to collect and pay over the income to the widow, and at her death “to dispose of the real and personal estate as above directed.” Certain railroad stock was transferred by the widow, as executrix, to the trustee, which was of fluctuating value, and it falling below par, he sold the same and invested the proceeds in mortgages, which proved to be worthless. Held. that the provision of the codicil as to a sale of the estate was only a general direction as to its disposal and division at the wife’s death, and did not forbid the trustee to sell the stock before the wife’s death, and that such sale was valid.
    2. Same.
    Where a trustee receives such securities as railroad stocks, and the instrument creating the trust neither empowers nor forbids a sale, he has the right to sell the same for the purpose of reinvesting the proceeds in such securities as he is authorized by law to invest in.
    Appeals by the plaintiff from a judgment of the special term which dismissed the complaint as to the defendant railroad, and by the defendant bank from a judgment against it in favor of the plaintiff.

      Parrish & Pendleton, for pl’ff; Benjamin D. Silliman, for def’t Bank; Root & Clark, for deft Railroad Company.
   Andrews, J.

George H. Dunscornb, of Coburg, in Canada, died in Florida on March 25, 1871. He left a will, executed on December 14, 1870, whereby he specifically bequeathed to his wife certain stock and bonds, and gave certain pecuniary legacies to his relatives. His wife was named as executrix, and his brother John as executor. On the same day he executed a codicil, which, except as to the appointment of said executrix and executor, superseded the will, and was as follows: “ In the event of my having issue by my wife, Harriette Catharine Dunscornb, I give, devise and bequeath to my said wife for the term of her natural life, the income from all the real and personal estate that I may die possessed of, and on her death to the child or children of our marriage now living, or who may be living at the time of my death, or born after my death, to be divided equally among them share and share alike.

“The real and personal estate to be realized by my trustee either at public or private sale, whichever may, in the discretion of the said trustee, be deemed best for the interest of my estate, at the death of my wife, and divided among the issue of my marriage, as above directed.

“ And I do appoint Charles H. Muirhead, of the city of Philadelphia, in the state of Pennsylvania, in the United States of America, as trustee under this my will, to collect and receive and pay over the income of the trust estate therein comprised to my wife, if she survives me, during her life, and at her death to dispose of- the said real and personal estate as above directed.

“And I bequeath to the said Charles H. Muirhead, for his services as trustee, the usual commission.”

Mr. Dunscornb left a widow, who at the date of the will was twenty-six years of age, and a posthumous son, both of whom are still living. The widow qualified as sole executrix, and on January 23,1872, as such executrix, transferred to Muirhead 261 shares of the stock in controversy, describing him in such transfer as: “ Trustee for Harriette C. Dunscornb under the will of George H. Dunscornb,” and on January 31, 1875, a certificate for a stock dividend of twenty-one shares was issued, by direction of the defendant railroad, by the defendant bank to Muirhead, as: “ Trustee for Harriette C. Dunscornb, under the will.” At the time when the transfer was made by the executrix to the trustee, in January, 1872, she lodged with the bank, with the certificate of her qualification, a copy of said will. On July 3, 1877, Muirhead, as trustee, sold all of such stock, and transferred the same upon the books of the defendant railroad, kept by the defendant bank, to Ward, Campbell & Company. This sale and transfer were made with the full knowledge and approval of the widow, who, as above stated, was executrix, and, under said codicil, was entitled to the income received therefrom during her life. Such stock had fluctuated, since the death of the testator and the transfer to the trustee, about forty cents on the dollar in its market price, and had declined below its par. The money derived from this sale was loaned by Muirhead upon mortgages on real estate in the city of Philadelphia, but said mortgages turned out to be worthless, although the interest upon the same was paid to Mrs. Dunscomb until December, 1882. Muirhead died at Philadelphia, May 7, 1883, and was at the time of his death insolvent. Upon July 6, 1883, this action was commenced by the plaintiff, an institution alleged to be incorporated under the laws of the province of Ontario, and which appears to have been appointed a collector of Dunscomb’s estate by the high court of justice in Canada. Upon the trial the special term decided that Muirhead had no right to sell the stock; and that the defendant bank had notice of such want of authority, and judgment was thereupon entered in favor of the plaintiff against the bank as prayed for in the complaint, but the complaint was dismissed as against the defendant railroad, and from such judgment appeals were taken by the plaintiff and the bank.

It was held by the special term that the trustee Muirhead had no right to sell the stock in question because such codicil not only did not expressly authorize the trustee to sell the same but also because the authority given to him to sell the stock, at the death of the widow, inferential-ly excluded the power to sell it before that time. We think that the grounds upon which the decision was placed are untenable, and that the judgment in favor of the plaintiff must therefore be reversed, and that the judgment in favor of the defendant railroad must, for the same reason,- be affirmed.

As the testator left a posthumous child, the will was practically superseded by the codicil, which is inartificially drawn, and does not in terms give the stock in question, or any other property, to the trustee. The first sentence of such codicil gives the income of all the testator’s real and personal estate to his wife during her life, and then, according to its grammatical construction, gives the income to his child or children; although the draughtsman of the will, and the testator, may have supposed that the division of the whole estate was provided for in the last clause of the same sentence.

The next sentence provides, in effect, for a sale of both the real and personal estate, at the death of his wife. The third sentence appoints Muirhead trustee, and empowers him to collect and receive and pay over the income to the wife during her life, and at her death, “ to dispose of said real and personal estate as above directed.” This is substantially all there is of the codicil, and it is apparent, therefore, that it does not contain, in terms, any devise or bequest whatever to the trustee. It is not necessary, however, to consider whether, in view of the duties devolved upon the trustee, it is to be implied that the legal title to the personal estate was vested in him by the codicil, because, as above stated, the executrix herself formerly transferred the stock in question to him, and the'legal title to such stock was certainly vested in him in one way or the other.

bate of the will. We are unable, however, to adopt this view, and are of the opinion that the express power of sale given by the codicil could not have been exercised until after the death of the wife. Nor can we adopt the view taken by the special term, that the sale by the trustee was unlawful because it was not authorized in express terms by the codicil. The stock in question had fluctuated greatly in value during the time it was held by the trustee, and continued to fluctuate afterwards. It had declined about forty cents oil the dollar, while in the hands of the trustee, at the time when the sale was made. The evidence shows such fluctuations prior to the time of the sale to have been as follows ; in January, 1873, price was 138½; in November, 1873, the price was 78; in 1874, the lowest price was 97 and the highest 109. In 1875, the highest price was 119, and the lowest 103¼. In 1876 the highest price was 121¼ and the lowest 103½. In 1877 the highest price was 118⅞ and the lowest 96. In the month of July, 1877, it ranged from 97, the lowest price, to 100, the highest. On the 3rd of July, 1877, the price was 98⅝ and 99.

After the sale and up to the time of the trial it fluctuated from 183½ to 78, and on the day of the trial it was selling at 79.

If the trustee had received from the executrix money which, under the codicil it would have been his duty to invest, and had purchased the stock in question, he certainly would have been personally liable had there ultimately been a loss upon the transaction, Ackerman v. Emott, 4 Barb., 626, and unless the codicil is to be construed as in effect forbidding a sale before the death of the wife, a court of equity would have directed a sale at the instance of the trustee, or the cestui que trust. For aught that appears in the evidence, the trustee acted in good faith in making the sale. It appears that before the sale was made he submitted to the executrix, and her second husband, the question whether the stock should be sold, and that on June 13, 1877, the husband wrote to the trustee a letter which contained the following: “ In reply to yours dated.on the 25th ult. and received yesterday, both my wife and self think it would be most advisable to sell the railway stock you mention and to invest it as you may think advisable, and if you will see to this as soon as possible we shall be very much obliged to you, and we shall be anxious to hear that you have sold out as it would be better to receive less interest and have it quite safe.”

No one but the executrix was interested in the matter, except her son, who was then an infant of tender years. There was apparently some ground for apprehending that the stock might further depreciate in value, if it did not become entirely worthless, and it doubtless appeared to the trustee, the executrix, and her second husband, to be a wise and prudent thing to do, to sell the stock and invest the proceeds in some other manner, and it doubtless would have so appeared to any person who was accustomed to exercise reasonable care and prudence in managing his own pecuniary affairs, and especially so to a trustee who honestly desired to protect the interests of his cestui que trust, and to avoid liability on his part.

It is urged on behalf of the plaintiff that in determining the question whether the trustee'had the right to sell sueli stock, the intention of the testator should be sought and that the codicil should be construed in such manner as to carry out that intention. This contention is, undoubtedly, well founded, but the difficulty is that, as we read the codicil, the testator did not therein declare what his intention was as to the question whether the stock should, or should not be sold before the death of his wife ; and, if this be so, then the fair and necessary inference is that the testator intended that the trustee should be governed by whatever rules the law prescribes in such a case.

It is also said that trustees have those powers only which are > expressly conferred upon them by the will, deed, or other instrument which creates the trust, and that to imply a power of sale, because securities are of an uncertain and fluctuating value is to vary the terms of the trust. It frequently occurs, however, that courts, in the administration of justice, are obliged not only to enlarge or vary the terms of a trust by implication, but even to imply an intention to create a trust when a trust has not been directly or expressly declared in terms.

It is also urged that to imply a power of sale not expressly given by the instrument creating the trust, is to invest the trustee with a discretion, the exercise of which may, as in the case at bar, result disastrously for the cestui que trust. The answer to this argument is that, in the absence of a statute governing the case, courts should adopt a rule which it is reasonably certain will produce the best results in the-greatest number of cases. The rule in England and in this state, which forbids a trustee to invest trust funds in railroad and other corporations, is a most salutary one ; and we think the rule is, or ought to be, that a trustee who receives trust property invested in such securities should, if he is not required to sell the same, at any rate have the right to make such a sale, and invest the proceeds in the same manner that he would be required to do if the trust property received by him consisted of money. In some cases this course may result in loss of income, but if the trustee is honest, and reasonably careful, the principal at least will be safe. On the other hand,'the doctrine contended for by the plaintiff’s counsel would, in many cases, lead to the result that when, as frequently happens, the instrument creating the trust contains no power of sale, the trustee has no duty to watch the securities in his charge, to see whether they are appreciating or depreciating in value, and even if he sees that they are depreciating in value, and may eventually become worthless, he is wholly powerless, and must stand idly by until the trust fund has entirely disappeared. A doctrine which leads to this result cannot be a sound one,, and while we concede that the general rule, is, as claimed by plaintiff’s counsel, viz: “ That trustees may not sell or vary specific securities, given in trust, nor securities left by a testator, in which he has himself invested the funds," we think that this role does not prevent trustees from converting wasting securities into those of a permanent character, and converting investments that are not authorized by law into such as are allowed by law. We are also of the opinion that the general rule applicable to this class of cases is correctly stated in § 465 of Perry on Trusts, and is as follows: '‘There is said to be a distinction between an original investment improperly made by trustees and an investment made by the testator himself and simply continued by a trustee; but it is a distinction that cannot be safely acted upon. If a testator gives any directions in his will to continue his investments already made, trustees must of course follow such directions; and if they follow them in good faith, they will not be liable for any losses unless they are negligent in failing to change an investment when it ought to be changed to save it; for it cannot be supposed that the direction of a testator to continue a certain investment relieves the trustee from the ordinary duty of watching such investment, and of calling it in when there is' imminent danger of its loss by change of circumstances. If no directions are given in the will as to the conversion and investment of trust property, trustees, to be safe, should take care to invest the property in the securities pointed out by the law. It is true that a testator, during his life, may deal with his property according to his pleasure, and investments made by him are some evidence that he had confidence in this class of investments; but in the absence of directions in the will, it is more reasonable to suppose that a.testator intended that his trustees should act according to law. Consequently, in states where the investments which trustees may make are pointed out by law, the fact that the testator has invested his property in certain stocks or loaned it on certain security will not authorize trustees to continue such investments beyond a reasonable time for conversion and investment in regular securities. * * * Taking all the cases together, it would appear to be a settled principle that "-trustees are not justified, in the absence of express or implied directions in the will, in continuing an investment permanently, made by the testator, which they would not be justified themselves in making. The principle probably has its qualification that if a trustee continue such investment in good faith and a loss happens, he would be held to replace the original sum only without interest.”

We are referred to quite a number of cases by the counsel for the respective parties. Some of these tend to support the views above expressed, and some do not. Some of them arose in the case of executors, and it is claimed by plaintiff’s counsel that they are therefore inapplicable. Most of the cases cited arose in the English courts,- and are not controlling here, except so far as the decisions appear to be based upon sound principles of natural justice. We do not see that it would subserve any useful purpose if we should make an elaborate examination of these cases, and point out wherein they support or antagonize the views entertained by us. In the absence of any controlling decision by the courts of this state to the contrary, we feel at liberty to adopt the rule which is founded, as we think, in reason and justice, and which is, that where a trustee receives such personal securities as the stock in question, and the instrument creating the trust neither empowers nor forbids a sale, he has the right to sell the same for the purpose of reinvesting the proceeds in such securities as he is authorized by law to invest in. Whether it is the absolute duty of the trustee, in such case, to sell the securities, and whether in case he does not sell them, and loss ensues, he can be held liable for such loss, it is not now necessary to decide. If Muirhead had the right to sell the stock in question, the defendant bank, though chargeable with notice that he held the stock as trustee, was justified in permitting the transfer of the stock upon the books of the defendant railroad, which were in its custody, and was not bound to see to it that the proceeds were thereafter properly reinvested, and cannot be held liable for the subsequent loss of the trust fund.

The plaintiff’s counsel, however, contends that the codicil contains a provision which, by necessary implication, forbade the sale before the death of the wife, and this view was also taken by the special term. The provision in question is the One which declares that the real and personal estate is to be realized by the trustee, at public or private sale, at the death of the wife.

We are unable to accept this construction of the codicil. Said provision must be construed with reference to the rule above laid down as to the right of the trustee to sell when he is not, in terms, forbidden to do so. There was no specific bequest of the stock to the trustee, for, as above stated, the codicil does not, in terms, give anything to the trustee.

Such stock, if needed to pay the testator’s debts, might have been sold by the executrix, and never have come into the trustee’s hands. The testator saw fit to provide for the distribution of his estate, at the death of his wife, among his children, in cash, and the provision for the sale appears to have been inserted solely for the purpose of enabling the trustee to make such distribution. It does not in any way refer to said stock, or any particular property, but, as we construe the codicil, it is merely a general direction that whatever real and personal property should be held by the trustee at the time of his wife’s death should then be sold, and the proceeds divided among his children. ■ We cannot think that this provision should be regarded as forbidding the trustee to sell the stock before the death of his wife.

Upon the whole case we are of the opinion that the judgment in favor of the plaintiff; against the defendant bank should be reversed and a new trial ordered, with costs to appellant to abide event, and that the judgment in favor of the defendant railroad should be affirmed, with costs.

Van Brunt, P. J., and Barrett, J., concur.


author: O’Brien, J. Van Brunt, P. J.

text:
    John A. Nichols, Resp’t, v. The Scranton Steel Co., App’lt.

      (Supreme Court, General Term, First Department,

      Filed April 14, 1892.)

    1. Contract—Breach—Refusal to make payments.
    Where an entire contract for the sale of goods provides that payments shall be made monthly for deliveries of the preceding month, and the vendee refuses to make such payments, the vendor may maintain an action for the goods already delivered and for breach of contract as to the remainder, without delivering or offering to deliver the remainder.
    2. Same—Evidence of mistake.
    The parties to a contract of sale entered into an agreement modifying the same, by which it was provided that the monthly settlements should he at a certain sum less than the contract price, and that the difference between that and the market price should be adjusted at the termination of the contract. In an action for breach of the contract, the defendant claimed that as the market price did not exceed the sum named, nothing was shown to be due. Held, that the agreement having been pleaded as an affirmative defense, evidence was admissible to show that the words “market price” were used therein by mistake in place of the words “ contract price.” (Van Brunt, P. J., dissents.)
    Appeal from judgment entered upon report of referee.

      H. Wallis, for app’lt; H. P. Starbuck, for resp’t.
   O’Brien, J.

This action was brought to recover (1), the balance of the contract price of a certain quantity of Bessemer pig iron sold and delivered and partly paid for; (2), the contract price of a certain other quantity of the same iron sold and delivered, no part of which had been paid for; and (3), the difference between the contract and the market price of a third quantity of the iron, sold, but of which the delivery has been prevented by the repudiation of the contract on the part of the purchaser.

The trial resulted in a judgment for the balance due upon the contract and the damages in favor of the plaintiff, from which this appeal is taken.

In view of the amount of testimony taken, the elaborate findings presented by the parties, and passed upon, and the opinion of the referee, it will only be necessary for us to state so much of the facts as will present the questions relied upon by the appellant upon this appeal.

It, is conceded that to a great extent the rights of the parties are to be determined by two agreements entered into between them, one dated December 20, 1889, and the other July 1, 1890.

They are as follows:

Charles W. Matthews,
Metal Broker,
Philadelphia, December 20(/t, 1889.

Sold to the Scranton Steel Company, for account of Messrs. Wm. R Hart & Co.:

Thirty thousand (30,000) tons of Bessemer pig iron, to be run of furnace as nearly as possible equal quantities numbers 1, 2 and 3. For delivery, 1,000 tons in January, 2,000 tons in February; 2,000 in March, and balance in equal monthly proportions during the months of April, May, June, August, September and October, A. D. 1890, and deliverable f. o. b. cars purchaser’s works, Scranton, Pa., at twenty-three and a half ($23.50) dollars per ton of 2,240 lbs. Settlements to be made in cash on the twenty-seventh (27) of each month for the previous month’s shipments. The above-named iron to contain not over .10 phosphorus, and to be in other respects suitable for the. Bessemer process.
(Signed) Charles W. Matthews,
BroTc&r.
Accepted by the Scranton Steel Co.
W. W. Scranton,
President

Deliveries under this contract were commenced in January, 1890, and continued until July 1, 1890, all iron delivered up to that time having been paid for in full. On July 1, 1890, the contract was modified by an agreement in writing, as follows:

That on the first day of July, the said William R. Hart, under said name and style of William R. Hart & Co., made and entered into an agreement in writing with the said the Scranton Steel Company in word and figures as follows, to wit:
Agreement.
W. W. Scranton, President.
Walter Scranton, Vice-President.
E. P. Kingsbury, Sec’y and Treas.
The Scranton Steel Company,
Manufacturers of Steel Rails,
Works at Scranton, Pa.
No. 47 Broadway.-
New York, July 1, 1890.

Memorandum of understanding between Crane Iron Company and W. R. Hart & Co., of the first part, and Scranton Steel Company, of the second part:

First At the request of Scranton, Crane and Hart will suspend shipments for the next two months, with the exception of about 1,500 tons per month by Hart from Parryville.
Second. Scranton will give thirty and sixty days paper for amounts now due, but will anticipate, if possible.
Third. Crane and Hart will resume shipments, but making monthly deliveries as light as possible, and, if necessary, not exceeding one-half of amounts specified in contracts, and settlements will be made at the rate-of eighteen dollars per ton-on account from month to month, unless market price should advance above that figure, and then at current rates, such settlements to be taken on account and balances due to be adjusted at termination of contract. But Hart and Crane Co. -will accept, if desired, four months paper, with privilege of one renewal, and question of what abatement, if any, should be made from market price to be then settled between the parties, and if they fail to agree to be left to the decision of John C. Bullitt, Esq., who shall have power to decide according to what he thinks just and equitable between the parties!
The Scranton Steel Company,
W. W. Scranton,
President.

Under this July agreement Hart & Co. undertook to deliver the iron then undelivered in monthly instalments, the defendant to pay for each month’s shipments at the rate of eighteen dollars per ton, or at market rates on account; settlements to he made on the 27th of each month for the prior month’s shipments either in cash or in four months paper at the option of the defendant. Deliveries were made until March 9, 1891, which were paid for at the rate of eighteen dollars per ton, except the deliveries of January, February and March, 1891. Payment for the January deliveries became due February 27th, which was demanded in March and refused by the defendant, and thereafter this action was commenced, at 'which time it is conceded that 4,800 tons still remained undelivered under the contract. This latter fact, of a failure to deliver the full quantity, is sought to be made available as a ground of defense to the plaintiff’s right to maintain the action at all, it being insisted that until the entire contract was completed no right of action could accrue.

It seems to us that this question must be disposed of by a consideration as to whether, upon the evidence, the proof was sufficient to justify the conclusion reached by the referee that there was a breach of the contract first on the part of the defendant.

The evidence shows that _the defendant refused to make the payments in accordance with the terms of the contract; but notwithstanding this fact it is insisted that at most the plaintiff could only maintain an action for the amount then due for iron actually delivered, and could not maintain an action such as this, involving a repudiation of the entire contract.

It would be a strange rule of law, and one for which we think no support can be found, to hold that for the purpose of justifying defendant’s breach of its contract a construction should be placed thereon which, by making each monthly delivery a separate and independent contract, would render it necessary for the plaintiff’s assignor to show that he had made each month thereafter a full delivery of the iron contracted for before he could maintain an action thereon, notwithstanding that during this same period the defendant absolutely refused to make any payments of any kind until it got what it wanted and was insisting upon, viz.: a release from some part of its obligations under the contract.

We think the law to be settled that no one is required to go on delivering goods after he has been notified by the purchaser that he will not pay for them at the agre'ed price at the end of the contract. This was practically the defendant’s position, and in taking that position it repudiated the contract, and the plaintiff’s assignor was not thereafter required, for the purpose of enforcing his rights thereunder, to continue deliveries when he had been notified that he would not be paid therefor.

This consideration we think disposes of the question presented by the appellant as to the action having been prematurely brought.

It is insisted, however, that even if the action could be brought if any amount was due, nothing appears to have been due under the contract in any event. This contention is predicated upon the theory that the contract by its terms provides that the difference between the price of eighteen dollars per ton and the market price of iron should be adjusted at the termination of the contract, and as the referee found as a fact that no difference existed between the market price and eighteen dollars per ton, that therefore the plaintiff has been paid in full.

If the appellant was right in its facts, that the contract was one by the terms of which the difference between the price paid of eighteen dollars a ton and the market price should be adjusted at the termination of the contract, then no difference appearing; no damages would result by reason of the breach. In this, however, the appellant seeks to take advantage of a mistake occurring in the drawing of the July agreement, in which the words market price ” were inserted instead of the words “ contract price.”

Mo question could arise but that, had the July agreement said “ contract price ” instead of market price,” there would be no room for controversy in reference to the conclusions reached by the learned referee. Having, however, on satisfactory evidence reached the conclusion that the insertion of the words “ market price ” was the result of a mistake, he was justified in awarding a judgment determining the rights of the parties according to the agreement entered into between them as really and actually made.

This consideration of the mistake resulting from the insertion of the words “ market price ” instead of “ contract price ” presents the question mostly relied upon by the appellant, and upon the solution of which the judgment must stand or fall.

The right to allow an amendment of the-complaint which was attempted upon the trial, so as to permit a reformation of the contract, and the exceptions taken to the evidence presented on the part of the plaintiff to prove the existence of the mistake so as to make it a basis for reforming the contract, are the questions most pressed upon our attention by the appellant. It insists that the privilege granted of amending the complaint was improperly given, and that the testimony offered relative to the proceedings had before the arbitrator was irrelevant and incompetent, as were the negotiations which led and were prior to the July contract, all of which were admitted in evidence over the defendant’s objection.

By reference to the judgment in this case it will be seen that it has not been adjudged that the contract should be reformed. Regarding, therefore, the action as having been brought upon the original contract, and upon the facts stated in the complaint as it stood prior to the trial, it remains to be determined whether the objections taken to the admissibility of the . evidence already referred to show error requiring a reversal of the judgment.

We think that whether the effect of the decision of Mr. Bullitt, the arbitrator, was to terminate the agreement of July and restore the parties at once to their original rights and liabilities under the December contract, or to leave the July agreement in full force, merely determining in advance upon what basis final settlement should be made, in either case the defendant’s repudiation of that decision and refusal to perform any more of its obligations until the plaintiff’s assignor should consent to forego some of his legal rights, gave the plaintiff’s assignor an immediate right of action for the full value of the original or modified contract, as the case may be, the two values being in this case and under the decision of the arbitrator identical.

If, however, in determining the theory upon which the plaintiff’s action coujd be predicated, we leave out of consideration for the time being the effect of the modified agreement, whether repudiated or not, we think it will be found that it can be sustained by a pleading of the original contract. For breach of this a recovery could be had unless some defense was interposed which would destroy its force and effect. This was substantially the view and position taken by the appellant in formulating the pleading which submitted the questions to the court for determination. The agreement of July was pleaded as an affirmative defense to the plaintiff’s cause of action. It was, therefore, proper for the plaintiff to show any fact, such as want of consideration, going to show its invalidity, or any fact such as fraud or mistake, going to show that it was, or ought to be, made in whole or in part different from its form and effect as pleaded, and this would be clearly admissible by way of reply.

It will be noticed that to the evidence offered as to the correction of the July agreement no objection based on the state of the pleadings was taken, nor do we think that any such objection would lie.

What was awarded to the plaintiff’s assignor was his rights under the original contract, and proof of the award under the July agreement and its repudiation was therefore competent and admissible by way of reply.

In other words, the plaintiff having declared upon his contract, and the defendant having set up a modification of that contract, the plaintiff was entitled to reply by showing a restoration of the original contract after modification; and this, whether the restoration was the direct effect of the award as expressed by its terms, or the indirect effect through the termination or extinguishment by the award of the July agreement.

We do not think therefore that any amendment of the complaint was necessary; it appears to have been allowed, as stated, to conform the pleadings to the proof; as this error, if error it can be called, was not carried into force and effect by the judgment, it cannot be available for the purpose of reversing the judgment.

Nearly all the objections to the rulings made by the learned referee were predicated upon the theory that the testimony was offered for the purpose of supporting the complaint as thus amended. But if we disregard such amendment, and view the case as though the same had not been made, then, as we have seen, the case is presented of a right predicated upon the original contract, the force and effect of which is sought to be destroyed by the modified agreement, and then by way of reply the plaintiff introduced evidence showing that by reason of the mistake made in the drafting of this modified agreement it was not entitled to the force and effect which the appellant in its defense sought to have attributed to it. As evidence to support a reply, the testimony objected to was clearly competent.

' There are some other exceptions which have been referred to upon the appellant’s brief, but after examination we do not regard them as of sufficient importance to justify a reversal of a judgment such as this which, by testimony sufficiently clear and satisfactory, establishes the plaintiff’s right to recover the amount which has been adjudged by the referee.

We are of opinion, therefore, .that the judgment should be affirmed, with costs.

Ingraham, J., concurs.

Van Brunt, P. J.

I dissent. I think it was wrong to admit evidence in respect to error in modification contract. Evidence of the latter could have been offered under general denial and because pleaded unnecessarily the position of. the parties is not changed.


text:
    Mitchel Valentine, App’lt, v. Wilhelmine Juch, Resp’t.

      (Supreme Court, General Term, First Department,

      Filed April 14, 1892.)

    Receiver—When will not be appointed.
    In an action for an accounting of rents received by defendant, to which plaintiff claims he is entitled by reason of holding the legal title to the property under an agreement by which he was to hold it to secure moneys advanced, where there is a dispute as to the amount actually due him, a refusal to appoint a receiver of rents and profits is not an abuse of discre- . tian.
    Appeal from order denying motion of the plaintiff for the appointment of a receiver of the rents and profits of real estate.

      R. N. Arnow, for app’lt; H. Frank, for resp’t.
   Per Curiam.

As shown by the complaint, the action is not one to affect the possession of property, but it is brought to obtain an accounting of the rents received by the defendant, to which the plaintiff claims that he is entitled by virtue of holding the legal title to the premises under an agreement between himself and the executors of the estate of Juch, by which it appears that he virtually holds this title as mortgagee to secure certain amounts which he claims to be due him. It appears by the plaintiff’s affidavit that he stands ready to transfer the title to any person designated by the executors of Juch upon receipt of the amount claimed to be due to him. A dispute exists as to what is actually due him ; and in this state of the controversy, it is suggested that the questions should be resolved in the plaintiff’s favor, and in advance of any determination in the accounting which plaintiff seeks that he should disturb the possession and take from the defendant the rights which were conferred upon her, either as the representative of the estate, or, as is claimed by the plaintiff, as his agent, by the appointment of a receiver.

Upon this state of facts, it is clear that at least a question was presented, even if we assume that it was a case in which a receiver could be appointed, for the exercise of discretion, and we are unable to conclude, after an examination of the facts disclosed by the record, that there was no abuse of such discretion.

We think, therefore, that the order should be affirmed, with ten dollars costs and disbursements.

Van Brunt, P. J., O’Brien and Andrews, JJ., concur.