text:
    SARAH L. SWAN, Respondent, v. THE PRODUCE BANK OF THE CITY OF NEW YORK, Appellant.

      Receipt for bonds deposited — tlw fact that the person is described in it as a trustee, is notice to those dealing with him.

    The plaintiff, who was the owner of certain bonds which had been deposited with a trust company, and for which a non-negotiable receipt had been issued in the name of her son “as trustee,” delivered the receipt to her son and authorized him to use it for his own benefit with the defendant to the extent of $750. The son pledged it with the defendant to secure a note for $1,650, and received from it obligations of his own amounting to that sum, among which were two upon which his mother was liable, which amounted to $750. The mother having disaffirmed the arrangement, tendered'to the defendant the securities surrendered to her son and demanded a return of the receipt, and upon the refusal of the defendant to comply with the demand brought this action to recover the receipt.

      Held, that the fact that the son was described in the receipt as a trustee was notice to the defendant that he was not the absolute owner of it, and imposed upon the defendant the duty of ascertaining the limits of his authority over it, and of restricting its transactions with him within such limits.
    That the plaintiff was entitled to recover.

      Appeal from a judgment in favor of the plaintiff, entered upon the report of a referee.

      George G. Frelinghuysen, for the appellant.

      Henry Parsons, for the respondent.
   Daniels, J.:

This action was instituted to recover the value of a receipt issued on the 11th day of April, 1876, by the Farmers’ loan and Trust Company for seven first mortgage bonds of the New Jersey Southern Railroad Company, with the coupons attached. Since it was commenced and by the consent of both parties the receipt was surrendered, and four of the bonds received for it have been retained by the defendant as the substitute for the receipt. The judgment recovered was for the value of these four bonds on the ground that they were unlawfully withheld from the plaintiff by the defendant. At the time when the receipt was issued the plaintiff’s daughter was the owner of the seven bonds mentioned in it, and they were placed in the possession of the trust company to be used under an agreement in adjusting the affairs of the railroad company. The receipt for them was issued to David E. Swan, as trustee; that appeared upon its face. He acted in the business for his sister, having no interest in the bonds himself, and to that extent he certainly sustained the relation of trustee to her in the transaction. She was afterwards in failing health and transferred the receipt, as well as her interest in or right to the bonds, to the plaintiff, who continued to own the same after that time.

This receipt was placed by her in the hands of her son, David E. Swan, to be used in settling the claim existing under it in her favor with the railroad company, and, also, with liberty to use it for his own benefit with the defendant to the extent of $750. He did not ■make either of such uses of the receipts, but in adjusting his affairs with the defendant he entered into an obligation for the future payment of the sum of $1,650, and the receipt was transferred to it by him to secure the discharge of that obligation.

This was not within the limits of the authority conferred by the plaintiff, and when the transaction was brought to her knowledge she disaffirmed it and refused to be bound by it. At the time when the adjustment was made between her son and the defendant, obligations held by it amounting to as much as the note made by him, were delivered up to him, and when the plaintiff declined to assent to what had taken place in the transaction of the business with the defendant, an offer was made to return all the securities surrendered hy it. That offer was refused and the defendant declined to comply with the demand made at the same time for the return of the receipt.

This receipt contained no terms rendering it a negotiable instrument; for that reason title to it could not be acquired by the defendant in violation of the limits of the authority given by the plaintiff. Neither were there any terms contained in it from which it could be inferred that the plaintiff’s son was the owner of or interested in either the receipt or the bonds, otherwise than that of being a mese trustee in the transactions which had transpired and to which it related.

The fact that he was described as a trustee was a circumstance from which persons disposed to deal with him upon the basis of the receipt should have inferred that his right to dispose of it, or of the bonds mentioned in it, was no more extended than that of the terms of the trust which had been created. The description of a person as trustee in an instrument of this nature is necessarily notice that he is not the absolute owner of the property affected by the terms of the instrument, but that he holds it for the benefit of some other person. This was the situation in which the individual was placed with whom the defendant dealt upon this occasion, and from the evidence in the case it appears that the attention of its officers was attracted to the fact that Swan was described in the receipt as trustee. Before they could safely deal with him for the disposition of either the receipt or the bonds it was incumbent upon them, therefore, that they should ascertain what were the limits of his authority over the subject matter of the trust, and to restrict their transactions with him concerning it within those limits. This they failed to do, and entered into an agreement with him hy which they took the receipt for the surrender to him of seven different obligations, upon three of which he was indorser, another was made by •him, and the two others were subscribed by him as agent and attorney. One of these obligations so subscribed appeared to have been that of the plaintiff in the action; but the defendant did not take the receipt simply for the adjustment of that, or of that with the other signed by Swan as agent, amounting to the sum of $750, and for which he had been authorized to make use of this receipt. The transaction was broader than these obligations; and for the residue, for which the security was attempted to be created, it was made up of the individual obligations of the trustee. The fact that the instrument stated Swan to be a trustee, for the benefit certainly of some other person, was sufficient to admonish the defendant that he was incapable of using it for the purpose of adjusting obligations existing against himself. A trustee has no such authority over the subject matter of the trust committed to his charge, and persons dealing with him are bound to take notice of the existence of that restriction when the design of the transaction is to appropriate the trust property to the discharge of his own obligations.

The simple circumstance that the person is described as trustee is equivalent to full notice that in such a transaction he is engaged in the misappropriation of the trust estate. (1 Perry on Trusts [2d ed.], 270, 271, § 255, and cases cited in notes; 2 id., 444, § 810, and cases cited; Duncan v. Jaudon, 15 Wall., 165, 175; Budd v. Munroe, 18 Hun, 316.)

Through such a disposition of the receipt and the bonds mentioned in it no valid title was acquired by the defendant against the plaintiff. In this respect this case differs from Dickinson v. Dudley (17 Hun, 569), for no attempt was made to restrict the dealings of the parties within the limits of the powers of the trustee over the property; and in addition to that when the plaintiff, who was its beneficial owner, discovered what had taken place she immediately disaffirmed the arrangement and offered to return what the defendant had parted with by means of it. This she had the right to do, because the authority given to her son over the property had been exceeded, and the offer which was made, if the defendant had accepted it, would have placed it precisely in the situation it occupied before this unauthorized transaction took place.

The evidence in the case established the fact that the trustee was the general agent of the plaintiff, and was authorized by her to transact her business. But the terms of that agency conferred upon him no authority to appropriate her property to the adjustment of his own individual affairs.

An agent authorized to act as this trustee was can only make use of his power in the service of his principal. If he steps outside of that and makes use of the subject of his agency for the adjustment of his own affairs, his acts are unauthorized and the principal will not be bound. For this reason the defendant derived no right to withhold this receipt from the plaintiff, at the time when it was demanded, from the circumstance that it had obtained it from her agent.

All that was done arose out of a violation of the restraints properly existing upon his authority, and the defendant was bound to infer that to be the case when the agent proposed to use the property of his principal for the adjustment of his own individual affairs.

The fact that two of the claims included were obligations existing against the plaintiff will not change the case, inasmuch as they were not made the real basis of the transaction with the agent. He did not act within the line of his authority, and for that reason the plaintiff had the right to rescind what had taken place, and upon returning the securities surrendered by the defendant to demand that belonging to herself.

The judgment in the case was right and it should be affirmed.

Davis, P. J., and Beady, J., concurred.

Judgment affirmed.


source: Caselaw Access Project

author: Daniels, J.:

license: Public Domain

text:
    CHARLES FRAZIER and F. E. WILLIAMS, Respondents, v. TROW’S PRINTING AND BOOKBINDING COMPANY, Appellant, Impleaded, etc.

      A post dated cheek is valid — A corporation cannot plead usury — What is not a defense to an action on a check.

    The fact that a check hears a date subsequent to that on which it was made and issued does not render it invalid.
    A corporation cannot set up the defense of usury when sued upon its own obligations.
    Where two persons have exchanged checks, upon the agreement that each will keep his account good to meet his check at maturity, the fact that one person has failed to keep his account good constitutes no defense to the other when sued upon his check by a Iona fide holder thereof.

      Appeal from a judgment in favor of the plaintiffs, entered upon the verdict of a jury, and from an order denying a motion for a new trial made upon the minutes of the justice before whom the action was tried.

      Raphael J. Moses, Jr., for the appellant.

      Chambers, Boughton & Prentiss, for the respondents.
   Daniels, J.:

The judgment was recovered for the amount due upon two checks, drawn by the defendant as a corporation.

The first was dated March 20,1879, and the secondMarch 28,1879.

They were in fact made and delivered previous to that time to Patrick O’Shea, the payee named in them; for the first was indorsed by him and delivered to the plaintiff on the 26th day of February, 1879, and the second on the 5th day of March, 1879. The evidence shows that they then discounted the checks for him. It appeared that these checks were given to the payee in exchange for his own, drawn for the same amounts, and he verbally agreed at the time to keep his own checks good, but failed to do so and became insolvent. The fact that his own checks were received for those made by the defendant created a good consideration for the latter. (McSpedon v. Troy City Bank, 2 Keyes, 35; Newman v. Frost, 52 N. Y., 422.)

It was claimed, however, on behalf of the defendant that these instruments were void as legal obligations, because they were issued before the time when they respectively bore date, and cases have been cited containing intimations that such should be the legal principle applicable to them.

Those cases, however, have not been followed, and no reason seems to exist for holding that an instrument of this nature may not lawfully be issued as of a date subsequent to the time of its delivery. It then contains all the elements of a contract, but payment upon it can only be demanded upon the day of its date, or some day succeeding that time, and so' they have been regarded by the courts of this State. (Mohawk Bank v. Broderick, 10 Wend., 304.) This case was afterwards taken to the Court of Errors, where the determination made by the Supreme Court was affirmed, and notwithstanding the fact that the instrument was post dated, it was held to be valid and payable on the day of its date. (Mohawk Bank v. Broderick, 13 Wend., 133; Salter v. Burt, 20 id., 205.)

It has been urged that a different conclusion was reached in the case of Clarke National Bank v. Bank of Albion (52 Barb., 593). But that is a misapprehension, for no such point was presented by or considered in that case. The simple question there was whether the bank could render itself liable by certifying such a check to be good, before the time when it could be presented for payment, and in that manner substantially incur the liability of a surety for the obligation of the drawer. It was held that it could not, but the point now under consideration was in no manner either discussed or determined. To protect itself against liability upon these checks, it was further claimed by the defendant that the plaintiffs had received them upon a usurious rate of interest or discount, and that defense was proposed to be proved at the trial, but it was excluded by the court and the defendant excepted to the decision rejecting the evidence offered upon this subject.

The determination was entirely correct, for the reason that the defendant is a corporation, and under chapter 172 of the Laws of 1850, it was precluded from resisting payment of its own obligations on account of the fact that they had been discounted at a larger rate of interest than that otherwise prescribed. (Southern Life Insurance Co. v. Packer, 17 N. Y., 51; Rosa v. Butterfield, 33 id., 665; Merchants’ Nat. Bank v. Com. Warehouse Co., 49 id., 636.)

It has also been insisted that O’Shea’s failure to keep his own account good for the purpose of meeting the checks delivered to the defendant, as the consideration of those received by him, constituted a defense in this action.

It did not in terms appear that such an agreement was made concerning these particular checks. But that evidently had been the arrangement, including other checks similarly received, and it was rather assumed from that, than stated in this instance, that the payee’s account should be in a condition to meet those last drawn by him at the date when they should become payable.

But even if this understanding had been in terms repeated, it would not have created a defense to these checks.

That point was distinctly presented in the case of Mayer v. Mode (14 Hun, 155), and held to be insufficient.

As no other point has been made in support of the appeal the judgment in the case should be affirmed.

Present — Davis, P. J., Beady and Daniels, JJ.

Judgment affirmed.


text:
    THE PEOPLE OF THE STATE OF NEW YORK ex rel. SAMUEL A. STEVENS, Appellant, v. THE BOARD OF POLICE COMMISSIONERS OF THE CITY OF NEW YORK, Respondent.

      Certiorari — when an application therefor will he denied because of the laches of the petitioner.

    On September 8, 1879, the relator applied for a writ of certiorari to review the proceedings by which he was removed from his position as a member of the police force of the city of New York, which proceedings were completed and terminated on December 24,1878.

      Held, that in the absence of any excuse for his omission to sooner apply for the writ his application was properly dismissed, because it was not made with reasonable diligence.
    Appeal from an order made at Special Term, quashing and vacating a writ of certiorari.

      Louis J. Grant, for the appellant.

      D. J. Dean, for the respondent.
   Daniels, J.:

The relator was tried upon charges made against him as a member of the police force of the city of New York. They were found to be sustained by the evidence which was taken and he was dismissed.

The proceedings in which this was done were completed and terminated on the 24th day of December, 1878, and the writ which was issued to review them was not obtained until the 8th day of September, 1879. On account of this delay, for a period exceeding eight months, the Special Term made an order dismissing the writ.

No reason was stated in the relator’s petition excusing his omission to apply for it before the time when his application was made. While the settled principle in cases of this nature requires that the writ shall be obtained with all reasonable diligence to entitle the applicant to review a decision of the nature of that which is made the subject of complaint. No particular time has been prescribed for that purpose beyond the fact that the delay cannot be allowed to extend beyond the- period of two years. Within that time the action of the court, in the allowance of the writ, has been established to be discretionary, and when the circumstances are such as to show that the application has been made with reasonable diligence, there the writ has been sustained. But when delay will necessarily have the effect to derange the interests of the public, there the party is required to act speedily in making his application. This was a case of that nature, for the good order and’ security of the city required that the police force should be fully supplied, and that could not ordinarily be done if it was liable to derangement and changes by means of proceedings of this nature, instituted after it might fairly be assumed that the party affected acquiesced in the determination which had been, made against him. It is probable, from the nature of the proceed ings, that the relator became speedily informed of the result. And if it was his purpose to obtain a review of the determination, the obligation was then imposed upon him to act at once, and if he believed he had been unjustifiably dismissed, his own interests would also stimulate him to speedy action. He failed to take it, and because of that failure for the intervening period already mentioned it might well be assumed that he had abandoned all intention of endeavoring to review what had taken place. As the law has since been enacted, where the party is subjected to no disability his application for this writ must be made within four calendar months after the determination it may be its object to review. (Code Civil Procedure, § 2125.) That has been prescribed as the period which the legislature deemed to be reasonably proper for this purpose. It is the expression of the sense of that body as to what should be the extreme limits which reasonable diligence on the part of the applicant would appear to require. In this case more than double that length of time expired after the decision before the writ to review it was procured, and as no explanation was made excusing this delay, and the case was one where the public interests required prompt action, the order dismissing the writ seems to have been warranted.

That disposition was within the power possessed by the court over this subject. (People v. Common Council of Utica, 65 Barb., 9-22; Elmendorf v. Mayor, etc., 25 Wend., 693; People v. Landreth, 1 Hun, 544; People v. Hill, 53 N. Y., 547.) And it was not improperly exercised under the circumstances appearing in this case. The order appealed from should be affirmed.

Davis, P. J., and Beady, J., concurred.

Order affirmed.


text:
    SAMUEL L. M. BARLOW and others, Respondents, v. MARIA J. MYERS, Appellant, Impleaded, etc.

      Promissory note indorsed in hlank — who may sue thereon — when the title thereto ■vests in a residuary legatee on the death of the testator.

    Where a promissory note indorsed in blank by a testator, and deposited in a bank for collection, comes after his death into the possession of his executor, the executor may maintain an action thereon in his own name, or may rely upon it as a defense by way of set-ofE to an action brought against him in his individual capacity to enforce a claim for which he is individually liable.
    When a testator gives and bequeaths all the rest and residue of his estate, both real and personal, of every name and nature, remaining after his debts have been paid, to his wife, who is also appointed executrix, for her own use and benefit, to be disposed of as she may desire or deem just, the title to a promissory note indorsed by him in blank and deposited in a bank for collection, passes at once to his widow, individually, her title thereto being derived from the provisions made for her in the will, and not from the fact that letters testamentary were subsequently issued to her thereon.
    Appeal from a judgment in favor of the plaintiffs, entered upon the report of a referee.

      Daniel Pratt, for the appellant.

      Joseph Larocque, for the respondents.
   Daniels, J.:

The plaintiffs are the holders and owners of three promissory notes made by the firm of Randall & Williams, to the order of Nathan Randall, and indorsed by him to them. They were given for borrowed money and were respectively for the sum of $1,000, $500, and $2,400. They were held and owned by him on the 3d day of April, 1871. On that day the firm mailing the notes entered into an agreement with the defendant, who at that time was the executrix of the estate of her deceased husband, Austin Myers.

The firm had become indebted to the testator in his lifetime, and apparently for the purpose of obtaining satisfaction of her claim, she entered into the agreement with the firm for the purchase by her as executrix of their property, and as a part of the consideration for such purchase she agreed, as executrix, to pay all the company debts of the firm then outstanding and not exceeding the sum of $22,000. To the extent to which the firm was indebted upon these notes to Nathan Randall, this clause in the agreement inured to his benefit and rendered her liable to him for the payment of the amount of these notes, for the reason that they, together with the other indebtedness of the firm, did not exceed the specified limit of $22,000.

After one of these notes matured, but before the other two became due, they were all transferred by Nathan Randall to the plaintiffs in this action, who received them for a valuable consideration and in good faith. By this transfer, as the defendant under her agreement had assumed the payment of the notes, so much of her covenant as included them was assigned and transferred to the plaintiffs. Under the title so derived by them they commenced this action against the defendant for the recovery of their debts, after the notes by their terms had all become due, and it has been held, inasmuch as it is not within the ordinary scope of the authority of an executor to enter into such an agreement on behalf of the estate as was made in this instance, that the defendant became personally liable upon it, although such was evidently not her intention at the time’ when it was made. It was entered into upon a different supposition as to her legal rights, but as she was mistaken upon this subject, she became personally bound for the performance of her covenant instead of being held, as she intended to be, simply as executrix. (Story on Bills of Exch., etc. [3d ed.], § 74; Hills v. Banister, 8 Cow., 32; Byles on Bills [3d ed.], marginal paging 43.)

If the theory on which the agreement was entered into by her could have been sustained, then she would have had an unquestionable defense by way of offset to the claim made upon it by the plaintiffs. For her husband at the time of his decease was the owner and holder of a promissory note made by Nathan Randall, and payable to the testator’s order in ninety days after the 18th day of November, 1878, for the sum of $5,000 with interest, and the amount due upon it at the time of the trial was shown to be $8,644.86. But as she was personally liable upon the covenant made for the payment of the debts of the firm of Randall & Williams, it was held by the learned referee that this note could not be allowed as a set-off in her favor against the demand which had arisen under her covenant in favor of the plaintiffs.

If this note had been held by her in her own right, then the referee was of the opinion that the set-off should be allowed, but he held that she owned it simply as the executrix of her husband’s estate, and for that reason rejected the defense in her favor made upon it. Whether he was right in the conclusion he arrived at upon this subject is the only point to be considered in the disposition of the present appeal.

As the plaintiffs acquired their rights to collect the amount of the indebtedness owned by them from her, substantially as the assignee of Nathan Randall, it was subject to all the defenses existing in her favor against him at the time of the transfer.

This was the view which- was taken of this point by the Court of Appeals when another action between these parties was before it for decision. (Barlow v. Myers, 64 N. Y., 41-46.) The facts then presented in favor of the plaintiff were practically the same as they now appear, but the note had been rejected as evidence upon the trial. That was held to be improper for the reason that it was a lawful subject of set-off if the defendant held it in her own right, and such is substantially the terms of the statute existing'ujDon this subject, for it provides that the defendant may set-off demands which he has against the plaintiff if the action be founded upon a contract other than a note or bill, etc., which has been assigned. In that event a debt due to the defendant being the proper subject 'of set-off in his own right, either as the original payee or the assignee or owner of it-at the time of the assignment of the cause of action, may be used as a set-off for the purpose of defeating a recovery by the plaintiff. (3 R. S. [5th ed.], 634, 635, § 12, sub. 2, 8.) The note held by the testator against Nathan Randall was indorsed by him in blank and deposited in a bank for the purpose of being collected, and after his decease it passed into the possession of the plaintiff in that condition.

If an action had been brought upon it by her against the maker, she- would not have been obliged to prosecute it as executrix, for as the note was negotiable and had been indorsed in blank it passed immediately to her by virtue of the testator’s will and its own delivery, and the fact of her possession would have sufficiently ^proved her property in it. This point was considered in Conroy v. Warren (3 Johns. Cas., 259). It was there said by Kent, J., who delivered one of the opinions, that if a note be indorsed in blank the court never inquiries into the title of the plaintiff whether he sues in his own right, or as trustee; any person in possession of the note may sue upon it, and may, in court if necessary, fill up the blank and make it payable to himself. (Id., 263.)

This statement of the law was in part placed upon the authority of Cooper v. Kerr, of which a note was made on page 606 of the same volume. (3 Johns. Cas.) There it was stated that a note negotiable and indorsed in blank, coming into the hands of an administrator as such, may be sued by him in his proper name as if it were indorsed to him individually, and the decision made in that case is stated to have been affirmed in the court of errors. (Conroy v. Warren, supra.)

The same principle is affirmed by Kent in his commentaries (vol. 3 [7th ed.], 92), where the law is stated to be that possession is prima facie evidence of property in negotiable paper, payable to bearer or indorsed in blank, and the bearer, though a mere agent of the original payee when the indorsement is in blank, may sue on it in his own name without showing tide, unless circumstances appear creating suspicion, and this rule appears to be fully warranted by the authorities. (Lovell v. Evertson, 11 Johns., 52; Mauran v. Lamb, 7 Cow., 174; Robinson v. Crandall, 9 Wend., 425; Patchen v. Wilson, 4 Hill, 57; Parsons on Notes and Bills of Ex., 155; Sanford v. McCreedy, 28 Wis., 103; Brooks v. Floyd, 2 McCord, 364; Bright v. Currie, 5 Sandf., 433-437, 438.) By tlie acquisition of the note in this manner the defendant became for all legal purposes its owner, and she could have transferred a good title to it to any other person receiving it from her (Middlebrook v. Merchants' Bank, 41 Barb., 481), and as she could sue upon it in her own name as her property, it would seem to follow that she could also rely upon it as a defense by way of set-off to the plaintiff’s cause of action.

,' But if the delivery of the note indorsed by the payee to her was not sufficient for that purpose, she did become the actual owner of it by the terms of the testator’s will, for after the payment of his debts he gave and bequeathed the entire residue of his estate, both real and personal, of every name and nature, to her for her own use and benefit to be disposed of as she might desire or deem just. Under this provision of the will she acquired the absolute title to this note. It was derived from that instrument, and it passed at once to her upon the death of her husband.' She derived title from this provision made in her favor, and not from the circumstance that letters testamentary were afterwards issued to her. (Parsons on Notes and Bills [vol. 1], 160, 161, 162, 163.) It seems to follow from these circumstances, and the authorities indicating their proper legal effect, that the note held by the defendant should have been allowed as a set-off in this action, and as that was not done the judgment in the case should be reversed and a new trial ordered, with costs to abide the event.

Davis, P. J., and Brady, J., concurred.

Judgment reversed, new trial order, costs to abide event.


text:
    CHARLES STANFORD, as Assignee, etc., Appellant, v. WILLISTON B. LOCKWOOD and others, Respondents.

      Claims against the United States — may be tra/nsf erred to an assignee for the benefit of creditors — 10 U S. Stat. at Large, 170, § 1— US. Rev. Stat., § 3477. •
    Section 1 of the act of congress of 1853 (LOU. S. Stat. at Large, 170),prohibiting the transfer or assignment of any claim against the United States, or any share thereof or interest therein, whether absolute or conditional, before the allowance of such claim, or the ascertainment of its amount and the issuing of a warrant for its payment, and declaring every assignment in contravention of such restraint absolutely null and void, does not prevent the assignment to an assignee for the benefit of creditors, under the laws of New York, of a claim made by the assignors against the United States to recover income taxes paid under protest, which claim is, after the making of the assignment, decided upon and allowed in favor of the assignors.
    Appeal from a judgment in favor of the defendants, entered on the report of a referee.

      L. A. Gould, for the appellant.

      George Douglass, for the respondent Lockwood.

      William, H. Scott, for the respondents Dominick and Dickérman.
   Daniels, J.:

The plaintiff is the assignee for the benefit of creditors of the firm of Lockwood & Co., under a general assignment made under the laws of the State of New York, in April, 1873. At the time when this assignment was executed the firm had a claim against the government of the United States amounting to a large sum of money for the return of income taxes paid to it under ^protest. After the delivery of the assignment, this claim was allowed in favor of the firm, and on the 19th day of October, 1875, a draft for its payment was drawn by the proper authorities upon the assistant treasurer of the United States. At that time there was due on account of the claim the sum of $11,696.33, and the draft drawn and delivered for its payment was made payable to the order of Lockwood & Co.

This draft was indorsed with the firm name by the defendant Lockwood, and payment was received upon it by the other defendants in the action who had knowledge of the firm’s insolvency, and of the assignment made to the plaintiff, but notwithstanding that they paid the money over to the defendant Lockwood.

The object of this action was the recovery of this sum of money from these individuals; but the referee, before whom the trial was had, concluded that it could not be permitted and directed a dismissal of the plaintiff’s complaint.

This direction was deemed to be required by the provisions of the act of Congress, enacted in 1853, prohibiting the transfer or assignment of any claim against the United States, or any share thereof or interest therein, whether absolute or conditional, before the allowance of such claim, or the ascertainment of its amount and the issuing of a warrant for its payment, and declaring every assignment in contravention of this restraint absolutely null and void. (U. S. Stats. at Large [vol. 10], 170, chap. 81, § 1.) This prohibition continued in force until the revision of the United States statutes, and it was then incorporated therein as one of its sections. (U. S. R. S., § 3477.)

While it was made exceedingly broad and comprehensive, it has still been held not to include such assignments or transfers as are made by operation of law, and for that reason that it did not include the transmission of claims to heirs, devisees, or assignees in bankruptcy. (Erwin v. United States, 97 U. S., 392.) And the reason for the exceptions so made would seem to require that the construction placed upon the terms of the act should also allow them to be so far extended, as to except a transfer made by an instrument of the character of that in controversy in this case, for its object was not merely a change of title to the claim, but it was to place the debtors’ estate in such a condition as to be available to their creditors and applicable to the payment of their debts. If the creditors had prosecuted their debtors in the forms allowed to be adopted to reach their claims and equitable interests, and the same result had been secured, it is very clear that the statute would not invalidate the transfer procured in that manner. And the same reason which would except such a result from its operation would seem equally to include a similar transfer, made through the instrumentality of a general assignment, produced, by tbe stress of tbe insolvent debtors circumstances. The object is practically tbe same in each instance, and tbe law which has been so construed as to sustain tbe one, cannot properly be held to defeat tbe other. In Goodman v. Nibloch (MSS. opinion of Miller, J.) this precise point seems to have been considered by tbe Supreme Court of tbe United States, and it was there held that such an assignment was not within the restraint of these provisions of the statute, and that a transfer, by means of it, of a claim against the United States government could still be lawfully made.

The conclusion reached by the learned referee, and which formed the basis of the direction given by him for the dismissal of the complaint cannot, therefore, be sustained, and because of this misapprehension the judgment in the case should be reversed, and a new trial ordered, with costs to abide the event.

Davis, P. J., and Brady, J., concurred.

Judgment reversed, new trial ordered, costs to abide event.


author:
Daniels, J. :
      Davis, P. J.: Brady, J.:

text:
    CHARLES W. LAWRENCE, Appellant, v. PATRICK FARLEY, Respondent, Impleaded, etc.

      Deed by which a grantee assumes mortgages — when the delivery of, will be presumed from the fact of its homing been recorded.

    This action was brought to foreclose a mortgage upon certain premises which were, in 1861, conveyed by the mortgagor to the defendant subject to the mortgage now in suit and other mortgages, amounting in all to $7,000, which the grantee (the defendant) assumed to pay as so much of the consideration ($10,000) expressed in the deed. The plaintiff sought to charge the defendant with any deficiency that might arise upon the sale. Upon the trial the plaintiff offered in evidence a certified copy of the record of the deed, which was, upon the defendant’s objection, excluded upon the ground that there was no evidence of its delivery.

      Held, that this was error; that in the absence of any evidence to the contrary, the fact that the instrument was found upon the record duly acknowledged or attested, was prima facie evidence of its delivery. (Brady, J., dissenting.)

      Appeal from a judgment entered upon an order dismissing the plaintiff’s complaint, made on the trial of this action at Special Term.

      Charles N. Black, for the appellant.

      Albert Cardozo, for the respondent.
   Daniels, J. :

The object of this action was the foreclosure of a mortgage given by Daniel Shepherd to Alfred N. Lawrence to secure the payment of $3,500.

The mortgage was made in or about the month of December, 1860, and by its terms it secured the bond of the mortgagor given for the payment of the same debt. The bond and mortgage appear to have continued to be the property of the mortgagee until the 6th day of March, 1862, when they were assigned to the plaintiff in this action. Before that time, and in the month of July, 1861, a deed was executed by the mortgagor to the defendant in this suit, in form conveying to him the mortgaged property subject to the payment of this and other mortgage debts, and in terms declaring that they were assumed by the grantee as so much of the purchase or consideration money expressed in the deed.

These mortgages together amounted to the sum of about $7,000, while the consideration expressed in the deed was the sum of $10,000. The deed was by warranty containing full covenants, except as against these mortgagees. One of the objects of the action was to charge the grantee in the conveyance personally with the payment of the amount secured by this mortgage which should remain uncollected after the sale of the mortgaged property.

The deed itself was not produced upon the trial, but a certified copy of it was offered in evidence and rejected by the court, and the plaintiff excepted to the ruling by which that was done.

Whether this ruling was correct is the only point now required to be' determined for the purpose of disposing of this appeal. An ineffectual effort was made on the part of the plaintiff to prove the actual delivery of the deed to the defendant. But that was not shown, although the evidence tended to warrant the inference that he was connected with the transaction. It did not, however, appear that the deed had not in fact been delivered to him, or that he was not the person mentioned in it as the grantee. On the contrary, evidence was given tending to establish his identity, _ and without that it might be inferred from that of the name. (Hatcher v. Rocheleau, 18 N. Y., 86; People v. Smith, 45 id., 772.) By whose agency the deed was caused to be recorded in the office of the register was not shown; neither did it appear what became of it after the record of it was made. By its terms it appears to have conveyed a valuable interest in the property described in it, and when it was delivered to the register to be recorded it is to be presumed that the title to the property vested in the defendant, as long as it was not shown that he did not accept it or dissent from this delivery of the deed. As to instruments of this nature by which a valuable interest in lands may be conveyed, the assent of the person to be benefited by them is ordinarily assumed after they have been placed in the hands of some other person for the use of the grantee. This is the theory of the common law upon this subject. In Verplank v. Sterry (12 Johns., 536), this presumption was referred to as one existing in the law, and it seems to have formed the basis of the statutory provision declaring the effect of the record of a deed as evidence. Upon that subject it has been provided that the record or a duly certified transcript thereof may be read in evidence with the like force and effect as the original conveyance. But that is not to be conclusive, but it may be rebutted and the force and effect thereof contested by any party affected thereby. (3 R. S. [5th ed.], 54, § 41.) This provision carries with it a clear implication that it was intended by its enactment to sanction the substantial existence of this rule, and to allow a deed which has been recorded to be read as presumptive evidence of the truth of the record itself. That this was conformable to what was understood to be the existing rule upon the subject further appears from the authorities. In Jackson v. Perkins (2 Wend., 308) it was said that proof of the due execution of a deed and of its having been recorded is perhaps presumptive evidence of its delivery. (Id., 318.) This was repeated in terms of a more decisive nature in Tompkins v. Wheeler (16 Peters, 106),"where it was declared, as to an assignment, that being for the benefit of the grantees the presumption of. law is, in the absence of all evidence to the contrary, that they accepted it. And if a deed be delivered to a stranger for the nse of the grantee without any condition annexed, making it an escrow, it is a delivery to the grantee, and the delivery to the clerk to be recorded may well be considered as falling within this rule. (Id., 119.) In Doe v. Knight (5 Barn. & Cress., 692) the delivery of a deed to a third person for the use of the party in whose favor it was made, where the grantor parted with all control over it, was considered effectual and as operative from the instant of such delivery, and that principle was followed and acted upon in Van Rensselaer v. Vickery (3 Lans., 57); Clark v. Nixon (5 Hill, 36); Lady Superior, etc., v. McNamara (3 Barb. Ch., 375). In the last case it was held that a deed may be delivered to a stranger for the grantee named therein without any special authority from the grantee to receive it for him, and if a grantee assents to it after-wards the deed is valid from the time of the original delivery. It is upon the principle supported by these and other authorities that it has frequently been held that a delivery of a deed to the proper recording officer to be recorded, if intended to vest a title in the grantee,, is a valid delivery if not afterwards dissented from by him. (Id., 378; Rathbun v. Rathbun, 6 Barb., 98; 2 Hilliard on Real Prop. [4th ed.], 434, § 85.) And the same thing was held in Wilsey v. Dennis (44 Barb., 354). It is a presumption, when the instrument is found upon the record properly attested qr acknowledged, that it was placed there to convey the title mentioned in it, and that presumption is warranted by the ordinary experiences resulting from transactions jf that nature. It is, however, simply a presumption liable to be removed and overcome by any evidence sufficient to show that the fact was otherwise. Nothing was shown in this case tending in any manner to indicate that this presumption was not in accordance with the truth. The record was in no manner impeached or discredited, and the transcript of it offered should have been received as evidence upon the trial of this action. It was competent proof, though not controlling or conclusive under the terms of the statute and of the authorities already mentioned; and because of its exclusion when it was offered the judgment in the case should be reversed and a new trial ordered.

Davis, P. J.:

Tbe case presents a question of tbe onus of proof. If tbe recording of. the conveyance is prima faoie evidence of delivery it is sufficient to cast tbe burden of proof on the grantee. On that ground I think tbe views of my brother Daniels to be right. Yery slight evidence however would, I think, suffice to change the onus.

Brady, J.:

. "When the object is to compel the payment of a mortgage on the ground that a grantee assumed the payment of it, proof should be given of the delivery of the deed, or of notice of its' recording, in order, as to the recording, to show that the grantee had notice and might assent to or reject the incident. It is easy to create such an obligation, and the debt assumed might exceed the value of the property. No benefit in such a case would be derived from the deed. The assumption, amounting to a covenant to pay, proof of having made it should be required in all cases.

I therefore dissent.

Judgment reversed, new trial ordered, costs to abide event.


text:
    NELSON MERRILL, Appellant, v. THE FARMERS’ LOAN AND TRUST COMPANY, Respondent.

      Trustee of a mortgage — duty of, as to bondholders — when liable to one injured by his neglect 'of duty.

    When a mortgage, given to secure the payment of bonds issued by the mortgagor, is executed and delivered to a person in trust for the security of those who may thereafter become the owners of the bonds, and such trust is accepted, and an indorsement to that effect made upon each of the bonds, a duty is imposed upon the trustees of enforcing the mortgage against the property, in case default is made in the payment of the bonds, and of making such a disposition thereof as will best promote the interests of the bondholders.
    The duty so imposed upon the trustee is a personal one, and he cannot divest himself of it by delegating its performance to any other person or persons.
    Where a trustee of a mortgage, given by a railroad company to secure the payment of bonds issued by it, upon the application of persons claiming to own a majority of the said bonds allowed the applicants to institute proceedings in its name to foreclose the mortgage, and to carry on the proceedings to final judgment and sell the property thereunder, the trustee paying no attention to the said proceedings, hut leaving them wholly subject to the control and direction of suoh persons, held, that the trustee was liable to a holder of one of the said bonds for the damages sustained by him, by reason of its neglect to faithfully perform and discharge the duties imposed upon it by the acceptance of the trust.
    Appeal from a judgment in favor of the defendant, entered upon the report of a referee.

      Nelson Merrill, in person, and A. E. Blackmar, for the appellant.

      Herbert B. Turner, for the respondent.
   Daniels, J.:

The plaintiff brought this action as the owner of a bond for the sum of $1,000 issued by the Milwaukee and Beloit Railroad Company on the 8th day of March, 1857. Possession of the bond had been acquired by a person in whose hands it had been placed, with many others, for the purpose of making a sale of them. No sale was in fact made by him; but when he was required to return the bonds he retained this one with either three or five others. A public sale was afterwards made of it, at which the plaintiff became its purchaser without notice of what had previously taken place, for the sum of $231.22. This bond was negotiable by its terms, and upon the sale the plaintiff for that reason acquired a good title to it. The bond was one of a series of 630, each made for the sum of $1,000, and secured by mortgage upon the property of the railroad company, subject to certain exceptions not requiring to be noticed in the disposition which should be made of this case. The mortgage by which the bonds were secured was made and delivered to the defendant in this action. It in'terms conveyed the property mentioned and described in it to the defendant in trust for the security of the persons who might become the owners of the bonds, and in case of default in payment, authority was given to sell the mortgaged property and to pay the proceeds, so far as they might be required for that purpose, in satisfaction of the principal and interest due upon the bonds The mortgage was accepted by the defendant, and an indorsement was also made upon each of the bonds showing that they were secured, and that the defendant held the mortgage in trust for the use and benefit of the holders of the bonds, with power to take possession of and sell the property in case of default in paying the interest or principal of the bonds or any of them. By this instrument and the acceptance of it by the defendant, a trust in fact and in law, as well as in name, was created for the security of the persons who purchased the bonds secured, and in case of default the trusts at once became active and important in favor of the creditors. It imposed upon the defendant in their behalf, the duty of enforcing the mortgage against the property and making such a disposition of it as would best promote their interests. In trusts of this nature, responsible, reliable and intelligent parties are commonly selected to receive them, for the purpose of assuring the creditors that they will be faithfully executed for their benefit, and their interests in the property protected as far as that can be done by fidelity and attention on the part of the trustee. As to these securities, it has very properly been said that the salability of the bonds depends in no inconsiderable degree upon the character of the persons who are selected to manage the trust. If they are of well known integrity and pecuniary ability, the bonds are more readily sold than if this were not the case. It is natural that it should be so, and on this account the trustees usually appointed in this class of mortgages are persons of good reputation in the cities where the bonds are likely to be sold. To change them is to change the contract in an important particular, and this cannot be done without the consent of the parties for whose benefit the trust was created. (Knapp v. R. R. Co., 20 Wallace, 117-123.) And so long as such a trustee does not refuse to discharge the trusts reposed in it or him, other parties have not been authorized to institute or prosecute any proceedings for the enforcement of the mortgage, or to exercise any control over it. (Coal Co. v. Blatchford, 11 id., 172-171.) And when an action is brought by the trustee to enforce the mortgage, so important and complete is the authority which the law allows to be exercised, that the creditors are not ordinarily permitted to be parties to the action (Kerrison v. Stewart, 93 U. S. Rep., 155-160; Shaw v. Norfolk R. R. Co., 5 Gray, 162), their rights and interests being exclusively confided to the care and protection of the mortgagee.

In these respects a complete trust is reposed in the mortgagee, and the general rules of the law of trusts are for that reason rendered applicable. (Sturges v. Knapp, 31 Vt., 1.) Whenever default- has taken place and a forfeiture occurs by reason of the non-payment of either the principal or interest of the debt, the duties of the trustee are rendered responsible, critical and active. It is then required to act discreetly as well as judiciously in making the best use of the security for the protection of the beneficiaries, and that duty is personal to the trustee, and it cannot divest itself of its responsibility by delegating its performance to any other person or persons. (Wilkinson v. Parry, 4 Russ., 272; Chalmer v. Bradley, 1 Jacob & W., 51-68; Wilson v. Towle, 36 N. H., 129; Hawley v. James, 5 Paige, 318-487; Newton v. Bronson, 3 Kernan, 587; Suarez v. Pumpelly, 2 Sandf. Ch., 336-340.) While the defendant did not in terms transfer the mortgage which it held to others, it did so in effect by committing to them the execution of this important trust, and the persons to whom that was done were not such as would probably promote the interests of other creditors than themselves. They were the- holders of the larger part of the bonds secured by the mortgage, who evidently desired to control it for the purpose of advancing their own interests alone. It appeared that the work of constructing the railroad was let by contract to the firm of Mullins & Co., composed of William and James Mullins, Duncan McDonald and J. N. McCollough. The work proceeded under the contract until June or July, 1858. During that time nearly, if not quite, three hundred thousand dollars were expended in that which was performed. Then the company failed to keep up its payments to the contractors, and the further prosecution of the work was suspended. A settlement took place between the contractors and the railroad company, and they received from it one hundred of its thousand dollar bonds for the sum of $80,000. After that one of them, and two other persons with him, acquired the possession of upwards of four hundred more of the bonds and deposited them with those they had previously taken from the company, with the defendant in this action.

They then claimed to own 524 of the bonds of the company, secured by the mortgage held by the defendant, and they in writing requested the defendant to foreclose the mortgage and have the road sold for the benefit of the bondholders.

It was further stated in the instrument subscribed that a bill of complaint was in preparation by Mr. 'Randall, who had been employed as attorney to conduct the proceedings, so as to bring the matter to a speedy close, and by the same instrument they agreed to indemnify and save the company harmless against all costs and charges growing out of the foreclosure suit, and from any personal trouble in the matter, except that of verifying the bill of complaint.

Mr. Randall had, at that time, been employed by these three persons to take charge of the foreclosure case, and they paid him as their lawyer.

The defendant assented to this application which was made to it, and allowed the proceedings to be instituted and carried on for the foreclosure of this mortgage by Mr. Randall and another person selected by him in Milwaukee to look after the suit. The action was instituted and carried on to its final completion without the least attention to it on the part of the defendant. The proceedings were as fully and completely subjected to the control and direction of these persons, and the other contractors interested in the bonds, as though the mortgage had been given to them for their own exclusive use and benefit.' It was a complete surrender by the defendant of the duties and obligations it had incurred by the acceptance of the mortgage and the indorsement made upon each one of the bonds; and that such was designed to be the effect of the arrangement is evident from the acceptance of the agreement, offered to the defendant, by' which the three persons who subscribed it undertook to indemnify the company and save them harmless against costs and charges and the actual conduct of the litigation itself. When a judgment in the action had been obtained and the property of the railroad company was about to be sold, the persons to whom the suit had been committed by the defendant held a meeting at which they arranged the manner in which the sale under it should be made, and the terms and amount for which the property should be sold, and the sale took place conformable to the understanding then .entered into. The plaintiff had received information of the pendency of the suit, and was to have been informed when the sale would take place, but it appears from his evidence that no information of that nature was in fact received by him.

The parties carrying on the litigation in the name of the defendant so arranged it between themselves as to dispose of the property in accordance with what they believed to be the promotion of their own interests, and when the sale took place the property of the railroad company affected by it was bid off by McDonald, one of the contractors, for the sum of $20,000. That bid was satisfied by the surrender of 524 of the bonds of the railroad company and the payment of $3,322.04, in cash for the remaining bonds outstanding. One of them was the property of the plaintiff in this action, and 100 of the others had been deposited with the city of Milwaukee as collateral security for its own bonds issued in favor of the railroad company. From the statement made of the assets which the company had on hand the 1st day of July, 1858, and the expenditures made for the construction of its road, they together appear to have amounted to near, if not quite, the sum of $700,000, and it is plausibly insisted on the part of the plaintiff that the sale would have produced a much larger sum than that which was bid for the property if the suit had been carried on under the control of the defendant, and it had exercised that attention and oversight which would have been observed by the employment of intelligent, competent and impartial agents upon its part.

It appeared, further, that the 400 bonds already mentioned were not issued by the railroad company itself, but they were taken by individual directors and hypothecated by them to secure debts which they had incurred for money advanced to the company. These bonds, it was stated, had been sold for the payment of such debts and bid in by different individuals, who were induced to sell them to the persons who were allowed to prosecute the foreclosure suit for the sum, in the aggregate, of $38,000. In the proceedings taken in the action these bonds were not even produced for the purpose of substantiating them as charges against the mortgaged property, and it did not appear that the persons who sold the bonds to the individuals carrying on the foreclosure suit had acquired them in good faith for value or without notice, or that they had not been unlawfully put in circulation. Upon the proof which was made neither of these facts can be considered as established, for that reason these 400 bonds appear to have been improperly used, so far as that was done, in satisfying the bid which one of the contractors made for the purchase of the railroad property, and in that manner the amount which would be otherwise payable in cash upon the plaintiff’s bond was materially and largely diminished. The transaction from the commencement to the completion of the foreclosure proceedings was irregular in the extreme. Erom the commencement, to and including the time when the sale was made, it appears to have been carried on exclusively for the promotion of the interests of the persons who were allowed to take charge of it by the defendant. Its conduct was entirely improper. It violated the duties and obligations to which the defendant had become subjected by the acceptance of the mortgage and the indorsement made upon the bonds, and resulted in a sale which now appears to have been seriously injurious to the plaintiff in this suit.

Somewhat similar dispositions of railway property have already been censured and condemned by the courts (James v. R. R. Co., 6 Wallace, 752; Drury v. Cross, 7 id., 299), and the defendant, through whose agency this has been allowed to be accomplished in this case, should not be permitted to escape liability for it. The violation of the duty which it owed to the plaintiff to carry on the foreclosure of his mortgage carefully and effectively, for the protection and promotion of his interests as one of the owners of the bonds secured by it, and of which it had actual notice, was a legal wrong as to him, constituting the proper subject of an action; and the injury probably produced to him by the disposition which was made of the property, and the satisfaction of so much of the amount paid as was produced by the surrender of the 400 bonds appearing to have been issued, without authority, resulted in producing a loss to him for which he is lawfully entitled to claim indemnity against the defendant.

It may possibly be that upon another trial facts may be established, which will justify the course which was taken by the persons to whom the foreclosure of the mortgage was intrusted. If that shall prove to be the case, then the plaintiff will not appear to have been injured by the failure of the defendant to discharge the legal duty which it owed to him, but as the evidence is now presented, no indication is given rendering it probable that such facts can be proven. As the case now stands, the plaintiff had good grounds for complaint, and his action, instead of being dismissed, should have been sustained, and a recovery directed in his favor for the loss he appeared to have sustained by reason of the improper manner in which the foreclosure proceedings were carried on and consummated.

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

Davis, P. J., and Brady, J., concurred.

Judgment reversed, new trial ordered, costs to abide event.


text:
    AARON BARNETT, Appellant, v. PAULINE ZACHARIAS and ELIAS J. ZACHARIAS, Respondents.

      ■Estoppel — when a mm'tgagor cannot set up the invalidity of a mm'tgage, as against one whom, Tie has induced to purchase it

    The assignee of a mortgage given by the defendants having threatened to foreclose the same, and the defendants having applied to the plaintiff to take an assignment thereof, the latter agreed to take such assignment and extend the time of payment for one year, in consideration of which the defendants paid to him the sum of $250. The plaintiff took the assignment in good faith, and without any notice or knowledge that the mortgage had been given to secure an usurious debt.
    In an action brought by him to foreclose the mortgage, Tield, that the defendants were estopped from alleging that the mortgage was void for usury.
    Appeal from a judgment in favor of the defendants, entered on the trial of this action at Special Term.

      A. R. Dyett, for the appellant.

      James C. De La Mare, for the respondents.
   Daniels, J.:

A bond and mortgage existed against the defendants which had been given for the loan of money at a usurious rate of interest. They had been assigned by the mortgagee to another person who was threatening to foreclose them.

The defendants were unable to pay the mortgage debt, and for that reason an agreement was, at their instance, made between them and the plaintiff that he should take an assignment of these instruments. He did so in good faith for a valuable consideration, and without any notice or knowledge that they had been given to secure a usurious debt.

Neither at the time when the plaintiff purchased them, nor at any period previous to that time, did the defendants, or either of them, inform him that they claimed the bond and mortgage to be usurious. He agreed with them to take the assignment which was made to him, and to extend the time for the payment of the $2,500 secured, for the period of one. year .from the 8th. day. of July,. 1873, for which the defendants paid him the sum of $250. Upon these facts being made to appear on the trial of the cause, the complaint was dismissed and judgment given in favor of the defendants.

That direction is now assailed as erroneous, for the reason that, the defendants should not be permitted to allege or establish the invalidity of the bond and mortgage after inducing the plaintiff to purchase and to advance his money upon them. What transpired at the interview which led to the plaintiff’s agreement to take the assignment, was sufficient to create the belief that the bond and mortgage were lawful obligations existing against the defendants. If that had not been the fact they could have been in no danger from the threatened foreclosure, and could have had no object in endeavoring to induce the plaintiff to acquire the title to them. That would ordinarily be the impression produced upon The min d of any intelligent person by what was said, and for that reason it was equivalent to an affirmative representation that no obstacle stood in the way which would prevent the enforcement of the mortgage as a security against the property described in it.

The plaintiff was induced to act upon such an understanding of its nature, and although that was not declared in words to be the case, the effect was the same, because it was plainly to be implied; which was sufficient to constitute what the law has denominated an estoppel. For the defendants induced the plaintiff, by what was the fair construction of their conduct and their words, to advance his money upon a security which they now allege to be inoperative and unlawful.

The rule upon this subject is, that a person who negligently or -culpably stands by and allows another to contract on the faith and understanding of a fact which he can contradict, cannot afterwards dispute that fact in an action affecting the person whom he has himself assisted in deceiving. (Thompson v. Blanchard, 4 Comst., 303-309).

Where one by his words or conduct willfully causes another to believe the existence of a certain state of things, and induces him to act upon that belief so as to alter' his own previous position, the former is concluded from averring against' the' latter a different state of things as existing at the time. The rule has been stated to be that when a man has made a declaration, or representation, or caused or in some cases not prevented a false impression, or done some significant act with intent that others should rely and act thereon, and upon which others have honestly relied and acted, he shall not be permitted to prove that the representation was false or the act unauthorized or ineffectual, if injury would occur to the innocent party who has acted in full faith in its truth or validity. (2 Parsons on Con. [6th ed.], 793-798, and cases cited in notes; Muller v. Pondir, 55 N. Y., 325-334, 335; Payne v. Burnham, 62 id., 69; Blair v. Wait, 69 id., 113, 116.) And in Carpenter v. O'Dougherty (2 T. & C., 427; Kelly v. Scott, 49 N. Y., 595), it was deemed to be properly invoked and applied under circumstances very much of the legal nature of those appearing in this case. After inducing the plaintiff to purchase this bond and mortgage, and advance his money upon it as he did, as a security existing against and endangering the property described in it, the defendants should not now be permitted to gainsay the effect of their conduct by defeating the expectations and belief which it was naturally calculated to create. The complaint should not, under the circumstances which were shown, have been dismissed, but the action on the contrary should have been sustained. The judgment, therefore, should be reversed, and a new trial ordered, with costs to abide the event.

Davis, P. J., and Brady, J., concurred.

Judgment reversed and new trial ordered, costs to abide event.


author: Brady, J.:

text:
    CORNELIUS SAVAGE and JOHN COCKLE, Respondents, v. HENRY SHERMAN and others, Appellants.

      Trustees — right of, to commissions — 1863, chap. 362 — does not apply to accumulations of income — When the fees of a trustee are, fixed, by an implied agreement —Decree—purchaser from a pa/rty to the action is bound by— When one beneficiary cannot prevent the trustee from executing a power of sale.

    Trustees appointed prior to the passage of chapter 362 of 1863, giving not to exceed three commissions to executors when the personal estate amounts to not less than $100,000, are within the equity of that statute, and are entitled, upon an accounting, had subsequent to the passage thereof, to the commissions given by it when the value of the estate vested in them, whether it consists of real or personal estate, or both, amounts to the sum therein named.
    Three sets of commissions can be allowed only upon the value of the property received by the trustees from the, creator of the trust; they cannot be allowed upon the. rents and profits thereof received by them, though such rents and profits exceed in amount $100,000, especially when the said rents and profits have been paid over from time to time in amounts smaller than that' named.
    The entire management of an estate vested in four trustees was committed to one of them, who charged, in the accounts rendered by him from time to time to the beneficiaries, for his services the sum of five per cent upon the moneys collected and disbursed by him. No objection to this proceeding was made by the beneficiaries or the co-trustees.

      Held, that upon an accounting the referee properly adopted the amounts so charged as the full measure of compensation to be allowed to the trustees for their services.
    After the death of the trustee who had managed the estate, the survivors committed the care and management thereof to the son of one of them, upon the agreement that he was to receive the same compensation as had been received by the former trustee, there being no agreement between the trustees that any further charge was-to be made on account of their services:

      Held, that the referee properly, refused to allow the trustees any compensation for their services in addition to the amount allowed to the person so intrusted with . the care of the estate.
    One who purchases an interest in a trust estate from the heirs of one who was a party to an action brought to determine the validity of the trust, is bound by the decree entered in such action.
    Although where a power to sell real estate is given to a trustee, the persons entitled to the proceeds thereof may all elect to take the property itself, and so prevent the execution of the power, the owner of an undivided interest therein cannot prevent'a sale when that is desired by the other parties in interest, and is essential to the due division of the property.

      Appeal from an order made at Special Term, confirming the .report of a referee on the settlement of the accounts of the trustees of Michael Burnham, deceased.
    Cornelius Savage (the elder), John Cockle, Henry Sherman and Harriet Buss were, by a decree made in the above entitled action June 17,1859, appointed trustees under the will of Michael Burn-ham, deceased. At that time the trust estate consisted of certain real estate on Pine and William streets, in the city of New York, and the interests of the various beneficiaries were as follows:
    Pour-tenths of the estate was held in trust for the benefit of Anna A. Sherman, Harriet Buss, Elizabeth Cockle and Ellen Savage, each having a life interest in one-tenth (-¿¶), with remainder over to her children. The remaining six-tenths of the estate had vested and belonged to the following persons, either as purchasers, heirs-at-law, or Otherwise, in the following proportions, viz.: Anna A. Sherman, Harriet Buss, Elizabeth Cockle and Ellen Savage were each entitled to nineteen two hundred and tenths of the entire estate; James M. and Thomas Burnham were together entitled to four twenty-firsts (^T) of the entire estate, and the children of Michael Burn-ham, the younger, were entitled to the remaining one twenty-first (¥V) of said estate.
    These vested interests were owned subject to the trusts and powers set forth and established by the decree of June 17, 1859. In 1873 the said James M. and Thomas Burnham sold and conveyed their interest to John M. Pinkney. Upon the appointment of said trustees, Mr. Savage (the elder), upon consent- of all parties and upon the express authorization of his co-trustees, took sole charge of the whole trust estate, attended to the leasing of the property, collected the rents, made up and rendered the quarterly accounts to each beneficiary, and attended to the quarterly distribution of the income, and continued to so manage the estate down to February, 1869, the time of his death. During this period Mr. Savage was paid by the trustees five per cent of the rents collected and disbursed for his services in managing the estate. This charge was made with the approval and consent of all parties.
    After the death of Mr. Savage, Mr. Washington Cockle managed the estate as agent of the trustees, charging for his services five per cent on the rents received and disbursed.

      The trustees, Sherman and Eoss, died in the early part of 1879, leaving Mr. Cockle the sole surviving trustee.
    In October, 1879, several of the parties interested desiring a distribution of the vested portions of the estate, the surviving trustee, under the power conferred by the decree of June 17, 1859, entered into a contract for the sale of the property for $175,000. Thereafter, on the application of the said trustee to have the accounts of all the trustees examined, and their right to commissions determined, the court appointed a referee to examine and settle the accounts of all the trustees and ascertain their right to commissions. This was done, and the referee, among other things, found and reported:
    1. That the trustee, Cornelius Savage, faithfully discharged his duty, and that during the ten years of his management the trustee rendered quarterly accounts to each party in interest.
    2. That in his opinion the allowance of five per cent to Cornelius Savage during his management of the estate should be held to cover all trustees’ commissions on income during that period.
    3. That after the death of Cornelius Savage the surviving trustees were entitled to commissions on the income of the four-tenths of the estate received and paid to the life beneficiaries.
    4. As to commissions on principal, that each of the four trustees, or their estates, were each entitled to one-fourth of three half commissions for receiving the estate, and that the surviving trustee was entitled to one-half commission for paying over the estate.
    5. That John M. Pinkney was entitled to four twenty-firsts of the estate, and should be charged with his proportion of commissions on principal and the expenses of this proceeding.
    The court at Special Term confirmed said findings, and a decree was entered in accordance therewith, from which the petitioner Anna A. Sherman and the said John M. Pinkney have taken this appeal.

      William Fullerton, for the appellant Pinkney.

      Edward M. Shepard, for the appellant Sherman.

      Thomas H. Rodman, Jr., for the respondent John Cockle.

      W. G. De Witt, for the respondent Savage.
   Brady, J.:

The respondent Cockle, together with Cornelius • Savage, Henry Sherman and Harriet Russ, were appointed trustees of the estate, concerning which the accounting was had under the judgment recovered on or about the 17th of June, 1859.

The estate at that time consisted of a property known as 47 and 49 William street and 41 and 43 Pine street, in the city of New York, and it appears to have been then of the value of, or about, $125,000.

The accounting took place under an order made on the 18th November, 1879. Before that time three of the trustees so appointed had departed this life. Savage died in 1869, Sherman and Russ in 1879/ At the time when the accounting took place the property, which still remained the same, was of the value of, or about, $175,000. On the accounting the referee allowed one-half of three commissions to the trustees for taking charge-of the estate left by the testator. This allowance has been objected to as erroneous, for the reason that the trustees became vested with no more than a naked power of sale over the property, and for the further reason that the act authorizing three commissions to be charged upon an estate of this value, was not enacted until after the trustees became vested with their authority over the property.

The first objection is opposed to the judgment under which the trustees were appointed, and which became binding upon all the parties to the present controversy. Before that was entered the will of the testator was made the subject of judicial consideration by the Court of Appeals, and it was there held .in terms that a trust, as that was provided for by the statutes of the State, had been created and vested in the trustees, in addition to the general power given for the disposition of the property. (Savage v. Burnham, 17 N. Y., 561.) And when the judgment which was deemed to be authorized by that decision was entered, a provision of the same nature was inserted in it. By that it was adjudged that the will did create a trust of the whole of the testator’s real estate, and that such trust, as well as the general power of sale, would devolve upon the trustees' to he appointed under the judgment. The four persons who have been mentioned were appointed trustees under this judgment and by force of its provisions. Not only the power of sale but the title to the estate seems to have been vested in them, and that, under the rule which has been applied to the determination of the commissions which trustees should receive, was sufficient to entitle them to one-half commission upon the value of this property. (Wagstaff v. Lowerre, 23 Barb., 209, 226, 227.)

The title as well as the -power of the trustees over the property continued in this manner until chapter 362 of the Laws of 1863 was enacted; and by one of the provisions which were then adopted executors and administrators were allowed to charge for their management of the personal estate not exceeding three commissions, where three or more persons were empowered -to act in either of those capacities. (Id., pp. 608, 609, § 8.)

While it is true that this act in terms included only executors and administrators, still the statutes which have been enacted for the purpose of z’egulating their compensation have been so construed as to include within the equity created by their terms, services of a similar nature rendered by trustees in the discharge of their duties. These trustees, at the time when this statute was enacted, wez’e still vested with the same right over this property as they had at the time when they were appointed. No accounting or settlement of their affairs had taken place, but they still continued to discharge the duties which devolved upon them under the appointment made pursuant to the terms of the judgment already mentioned. For that reasozz they may properly be held to be within the equity of this act and to be entitled to one-half of three commissions for receiving this property, although their rights to it had been acquiz’ed before the law was' enacted. An act of a somewhat similar nature was passed in 1817 (chap. 251, vol. 4, Laws of New York, 292), and in the construction in the case of Dakin v. Demming (6 Paige, 95) it was stated as the judgment of the chancellor that it would be proper to apply it to- the settlement of accounts made after its enactment, although the services of the personal representative had been performed prior to-that. time.. (Id., 101.)

The same principle was acted upozz in the case of Supervisors v. Briggs (3 Denio, 173), where it was held that the compensation for legal services' was - that which was provided -for by the statute existing at the time when the right to demand it -arose.-

These authorities and the principle which they sanction appear to settle the right of the .trustees to demand the compensation provided for by the act of 1863, for the reason that it took effect while the property was in their charge, and remained unchanged down to .the time of the accounting.' So far, therefore, as this appeal questions the allowance of three half commissions to the four trustees, it cannot be sustained. They were properly computed upon the value of the estate at the time when it was sold, for the reason • that such value entered into the accounting which was had in the case.

, It appeared in the case that after the four trustees were appointed the entire management of the-business of the estate was committed to Cornelius Savage, one of their number. It continued in that manner until the time of his death in the year 1869. For his services he was allowed the sum of five per cent upon the moneys collected and disbursed by; him as one of the trustees. Accounts were rendered to the beneficiaries who were entitled to the proceeds received by him, .arid in those accounts this charge of five per cent for receiving and disbursing the moneys was always made. No objection was made to it' on the part of either of the parties affected by it, and no further claim was made against them or against the funds on account of commissions to the trustees. For these reasons the referee held that the trustees and the parties entitled to receive the moneys had acquiesced in the propriety of this charge, and that it should • therefore be made the full measure of the trustees’ compensation for those services. For that reason no further compensation was made for commissions for the collection and disbursement of these moneys by the referee in his decision upon this point, and he appears to have been well sustained by these circumstances.

. At the time of the decease of Cornelius Savage,- the surviving trastees selected Washington Cockle, who was the son of one of their number, to take the place of the deceased trustee.

• It appears by the testimony that he - did so by the ¡agreement of the parties. His services were to be, and were, performed for the same sum of five per cent that had been, reserved by Savage previous to that time, and no understanding existed between the trustees that any further charge was to be made on .account of their performance. Thé property to be managed continued to be the same, and the attention bestowed upon it was simply that which it had previously received from the deceased trustee. Statements of a similar nature to those which he had made and rendered were made and rendered by this individual, and this charge of five per cent was made and deducted in the same manner for the services which had been performed. They included the entire care and management of the estate, the collection and payment of the rents received from the tenants who were in its occupancy.

All that was done by the deceased trustee was done by this appointee, who was the son of one of the survivors.

The services, care and the responsibility continued to be precisely what it had been while the property was in the hands and management of Savage. In the accounts which were rendered no charge was made for commissions beyond this sum of five per cent, and no intimation whatever was given that any such commissions would be either claimed or expected. The accounts, on the other hand, were-made in such a form as to import a complete statement of all the affairs of the estate mentioned in-them, and they seem to have been accepted and adjusted upon the basis of the existence of such an understanding. These circumstances are consistent with no other conclusion than that it was the expectation of both parties that the expenses of the management of the trust by Mr. Cockle would remain the same as they had been while it was in the hands of Mr. Savage, and they deprive the charge allowed by the referee for commissions, beyond this sum of five per cent, to the trustees themselves of all rational ground of support. The conduct and acts of the parties indicate no other understanding than that this trust was to be managed for this sum of five per cent, in full of all other claims or commissions. It is true that the services were performed by a person specially selected for that purpose, and in that respect the case differs from the management of the trust made by Mr. Savage. But as the services continued to be the same, the responsibility certainly no greater, and the accounts were rendered in such a form as to indicate it to be the intention to continue the preceding understanding, no difference should be made in the determination as to the commissions on account of this circumstance. So far, therefore, as commissions have been allowed upon the sums collected and disbursed by Cockle, beyond the sum of five per cent charged in his accounts, the decision made by the referee was not warranted and should be reversed-.

Even if he had been right in holding that additional commissions might be awarded, the treble commissions allowed by him would not be supported even by the equity of the act of 1863, for they were calculated upon the rents and profits of the estate, which constituted no part of the property left by the testator; they simply resulted from its management and use under the terms of his will, and at no one time amounted to the sum mentioned in the statute. The fact that all the sums collected and disbursed, as rents received, exceeded that amount did not entitle the trustees to treble their commissions. The amounts from time to time received and disbursed were far below the sum required for the purpose of justifying additional commissions, and those only could be charged upon them which were legally apportioned to the amounts at the time collected and disbursed. (Matter of Kellogg, 7 Paige, 265.)

If commissions beyond five per cent reserved under the authority of the trustees could be charged, clearly they could not be so extended as to include the Commissions allowed by the referee. For the reasons already stated the five per cent allowed both to Savage and Cockle must be regarded as a legal and proper charge for the services which were rendered. It was so long acquiesced in by the trustees, as well as persons who were the recipients of the money, as to constitute satisfactory evidence that they all assented to the propriety of the arrangements which had been made, and the determination of the referee as to commissions upon rents collected and disbursed should be modified so as to conform to the requirements of the understanding which it is fair to presume existed upon this subject.

The appellant Pinkney has objected that he should not be affected by any of the proceedings had upon this accounting for the reason that he was not a party to the original action, and that the power of the trustees over the interest conveyed to him had been determined by means of that conveyance.

He took this title from the two children of one of the sons of the testator. This son was a party to the action in which the judgment was recovered declaring the construction of the will. By acquiring his title to a portion of the estate in this manner he became subject to the judgment so far as it affected that title; for he stood in privity with the person who himself-was a party to the action and had been concluded by its determination. Upon that subject it has been held that judgments, decrees, and awards are binding' not only upon the parties to them, but also upon those who stand in privity with them, and the grantee sustaining that relation to a party is equally estopped by the judgment or decree recovered against him, and qualifying or affecting the nature of his title. The reason of that is, that he holds by a derivative title and cannot be in a better situation than the party from whom he obtained his right. (Campbell v. Hall, 16 N. Y., 575, 578, 579; 1 Greenl. on Ev. [12th ed.], § 523; Smith v. Smith, 79 N. Y., 634; Campbell v. Rankin, 99 U. S. Sup. Ct., 261.)

•. As he had become bound in this manner by the judgment to the extent of the interest acquired by him from one of the parties to the action, it was proper that he should be made a party to the accounting, for the power of sale which had been given to the trastees by the terms of the will included the interest which had been conveyed to him. The order requiring the parties to appear was served upon him, and he appeared in the proceeding. So far as the referee can be sustained in his determination he was bound by what took place.

The fact that the interest in the property which was conveyed to him was included within the terms of the power given to the trustees, entitled them to sell it in the proper exercise of their authority over the property. Where a mere power of this description over, property exists, no doubt is entertained as to the right of the persons entitled to the proceeds to elect to take the property itself, and in that manner to prevent the execution of the power. But the facts do not present a ease within the operation of this rule, for the conveyance to Pinckney included but a small part of the estate affected by the power. He acquired- by his deed the right only to four twenty-first parts of the property. The residue was owned by other persons who made no objection to the sale by the surviving trustee so long as they did not consent to take the property itself instead of its proceeds. The purchaser of this relatively small proportionate interest could not by means of his determination alone oblige them to do so. It is clear that upon a sale of property of this description the price would be enhanced by selling it as a whole, and the persons entitled to be benefited by the exercise of the power providing for such a sale cannot be deprived of their right to insist upon it, because the owner of another undivided interest may be better satisfied to hold it, relieved of the power created for its sale. (Reed v. Underhill, 12 Barb., 117; Garvey v. McDevitt, 72 N. Y., 556, 563; Prentice v. Janssen, 79 id., 479, 485.)

As the sale was required to be made for the purpose of properly dividing the property between those who were entitled to participate in its division, it could not be prevented simply because it was not attended with the approbation of Pinckney. The power of sale included the interest conveyed to him, and it was properly executed by a disposition of the entire property. Out of its proceeds the sum of $33,333.33 were paid to him as the equivalent of the interest conveyed to him by his deed. But in the settlement with him no charge was made for the proportion of the commissions which should have been borne by the sum received on his account. The referee in his adjustment has now made such a charge, and Pinckney has been ordered to repay the proper amount for the purpose of discharging this obligation, so far as commissions were properly chargeable to his interest, under the considerations already mentioned on this subject. The report and the order so far were certainly right.

The case is not to be disposed of under the authorities relating to the recovery of money which has been paid by mistake. This is not a proceeding of that nature, but one the object of which is to secure an equitable adjustment of the rights of the parties to it, and it would certainly be inequitable to allow him to retain in his hands the moneys which have been inadvertently paid to him and which should have been appropriated to the discharge of a different obligation. •

No other objections have been presented which require to be considered for the purpose of disposing of these- appeals.

The order made should be modified so as to reject the commissions allowed upon the rents collected by Cockle as the appointee of the trustees, and as so modified it should be affirmed.

Davis, P. J., concurred.

Present — Davis, P. J., and Brady, J.

Order modified as directed in opinion.


text:
    SACKETT L. DURYEE, Plaintiff, v. THOMAS BOTSFORD Defendant.

      Mveeution — right to issue it after the death of the plaintiff — right of his assignee to issue it — who may move to vacate it, if irregularly issued, — Bight to attack a conveyance as fraudulent as to creditors.

    June 15, 1860, the plaintiff’s attorney, issued an execution upon a judgment recovered on that day against the defendant, which was on August 5, 1860, returned unsatisfied. On April 16, 1877, the same attorney, without any application to the court, issued a second execution upon the judgment, indorsed by him as the -plaintiff’s 'attorney, under which certain premises ' belonging to the defendant were, on June 8, 1877, sold, and thereafter, and in September, 1878, conveyed to the purchasers. The plaintiff died in February} 18.70, and letters of administration were duly issued upon his estate. Prior to his death he had assigned the judgment to his attorney as security for certain costs owing to him.
    Upon an application, made by persons who had purchased the premises from the defendant shortly before the issuing of the second execution, to vacate and set it aside, together with all the proceedings had thereunder:

      Held, that the execution was irregularily issued and that the.application should be granted.
    That the question as to whether or not the conveyance to the applicants was made with the intent to defraud the creditors of the judgment debtor could not be determined upon this application.
    Appeal from an order made at Special Term denying a motion to set aside an execution issued in this case and all the proceedings had under it.

      William J. Groo, for the appellant.

      Benjamin Low, for the respondent.
   Brady, J.:

It appears that on the 15th of June, 1860, the plaintiff recovered a judgment against the defendant for the sum of ninety-seven dollars and fourteen cents. On that day, namely, June 15,1860, the plaintiff’s attorney, John Henry Hull, issued an execution, which was returned nulla iona on the 5th of August, 1860. On the 16th of April, 1877, the same attorney issued a second execution, indorsing that process with his own name, but as the plaintiff’s attorney.

The plaintiff was dead at the time this second execution was issued, having died in February, 1870, and John H. Bird and Julia B. Duryee were appointed administrator and administratrix of his personal estate by the surrogate of this county.

The execution lastly issued was not founded upon any. authority from any court or judge, no application for leave to issue it having been made. It further appears that the plaintiff, before his death and after the recovery of the judgment, transferred to John Henry Hull his right, title and interest in and to the judgment, as security for certain costs owing to the latter. It appears, also, that on the 8th of June, 1877, the sheriff of Ulster county sold certain premises described in the papers upon which this application was made, and that in September, 1878, she received in due form from him a deed for the purchase.

The question presented on this state of facts is, whether the execution was authorized and valid. The objection that no application was made for leave to issue the second execution is not good, because it has been held that an execution may be issued after the expiration of five years without leave, provided a former execution has been issued and returned within five years from the docketing of the judgment. (Sec. 284 of old Code; Wilgus v. Bloodgood, 33 How. Pr., 289.) The Cod'e prevailing at the time the second execution was issued, by amendment in 1866 to section 283, declared that in the case of the death of a person in whose favor a judgment had been given or might be given, his personal representatives duly appointed might, at any time within five years after the entry, of the judgment, proceed to enforce the same.

The present Code of Civil Procedure (§ 1376) has the same provision, and in addition thereto gives authority to the assignee- of the judgment, if it has been assigned, to issue the execution, declaring,. however, that that process must be indorsed with the name and residence of the person issuing the same.

Under the Code, prior to the amendment of 1866 (supra)),, if a. plaintiff died after judgment in his favor and before execution, issued, no such process could be employed until proceedings in the nature of a scire facias were adopted, under section 428, by his-personal representatives. (4 Wait’s Pr., 7, and cases cited.) An assignee of a judgment, the judgment creditor having died, was then required to apply for leave- to issue an execution in -his favor. This was the rule, it seems, if the assignor were living, prior to the provisions in the Code of Civil Procedure (supra; Betts v. Garr, 26 N. Y., 383; Bellinger v. Ford, 21 Barb., 311; S. C., 14 id., 250); and is the more commendable when the judgment creditor and assignor is dead, as a protection to his estate as well as to the judgment- debtor.

It will have been perceived that the execution issued in this case, and which it is now sought to set aside, appears to have been issued on behalf of the plaintiff, and not of an assignee, because it is indorsed “John Henry Hull, plaintiff’s attorney,” and is in form, therefore, an execution issued in favor of the plaintiff, and not one issued by the assignee or anybody on his behalf. We do not see, therefore, how, under such circumstances, the execution can be maintained.

The administrator and administratrix upon whom the papers were, served in this matter are silent, whether because they desire that the execution shall be set aside or because they are cognizant of the fact that the judgment was assigned, as alleged, is a mere matter of inference. Mr. Hull having become the assignee and having the title to the judgment, if he had issued it as an assignee, and if it appeared after proper investigation that his title was good, it may be that there would be no well founded reason for setting it aside, notwithstanding the rules to which reference has been made, the design of legislation affecting such subjects and the object of the courts now being to avoid circuity of action or proceeding. Mr. Hull appears to have proceeded as the plaintiff’s.attorney only, however, long after the plaintiff’s decease and long after his authority as an attorney, from aught that appears in this case, had ceased to exist.

Without invading a well settled practice and, indeed, without enlarging the statute so as to embrace the assignee of a judgment, it would seem to be impossible to sustain the execution. It must therefore be declared to be void.

It is not thought that the parties applying to set aside the execution are destitute of interest in the subject. They claim under a deed executed by the judgment debtor before the second exec was issued, and this is not an application in which the corn consider whether that deed was void because made with an ini tion to defraud creditors; that is a question which requires a gravt mode of investigation and determination.

For these reasons we think the order appealed from must be reversed, with costs.

Davis, P. J., concurred.

Present — Davis, P. J., and Beady, J.

Order reversed, with costs.