author: Bockes, J.: - Learned, P. J.

text:
    THE NEW YORK STATE MONITOR MILK PAN COMPANY (Limited), Appellant, v. REMINGTON’S AGRICULTURAL WORKS, Respondent.

      Amendments — power of the court to strike out the name of a sole corporate defendant and substitute that of an individual not a party to the action —■ Code of Civil Procedure, sec. 723.
    This action was brought against the defendant Remington’s Agricultual Works, a corporation duly formed under the laws of this State, to recover for the breach of a contract alleged to have been made by it. The summons and complaint were served by delivering the same to Philo Remington, as one of the defendant’s officers. In fact the contract was not made by the defendant, but was made, if at all, by a partnership consisting of Philo Remington, Samuel Remington and Eliphalet Remington, which had bought out the business of the defendant and was carrying on business under the name of the Remington Agricultural Company. Upon learning these facts the plaintiff, after issue had been joined, applied for leave to amend the summons and complaint by striking out the defendant’s name and substituting therefor the names of the three partners.

      Held, that under section 723 of the Code of Civil Procedure the court had power in its discretion to grant the amendment. (Learned, P. J., dissenting.)
    Appeal from an order granted at the Delaware Special Term denying a motion on the part of the plaintiff to amend the summons and complaint herein by striking out the name of “ Remington’s Agricultural Works,” and substituting the names of Philo Remington, Samuel Remington and Eliphalet Remington as parties ■defendant in tins action, together with such fit averments as may be required by said change or amendment, and that plaintiff have leave to serve an amended summons and complaint upon said Samuel and Eliphalet Remington.
    The defendant “Remington’s Agricultural Works” is a manufacturing corporation organized under the laws of the State of New York. The contract, for the alleged non-performance of which this action was brought, was not executed by the said defendant “ Remington’s Agricultural Works,” but was executed by the “ Remington Agricultural Company,” which then was and is a general copartnership composed of Philo Remington, Samuel Remington and Eliphalet Remington. This firm had bought out the business of the defendant.
    The summons and complaint in this action were served upon the defendant the Remington’s Agricultural Works, by personal service being made upon Philo Remington as an officer thereof, and the ' said defendant corporation duly appeared and answered, admitting its incorporation as alleged in the complaint.

      F. Jacobs, Jr., for the appellant.

      George O. Rasbach, for the respondent.
   Bockes, J.: -

The motion to amend the summons and complaint was denied at Special Term because of the supposed want of power in the court to make the proposed amendment. It is so stated in the order. In this ruling I think the Special Term was very manifestly in error. The authority to allow the proposed amendment is conferred by section 723 of the Code of Civil Procedure fully and completely, as I think, and the cases so holding under the former Code, not materially differing from the present Code, are, as it seems to me, numerous and uniform. {McElwain v. Corning, 12 Abb., 16; Newton v. Milleville Mfg. Co., 17 id., 518, note; Fuller v. Webster Fire Ins. Co., 12 How., 293; Risley v. Wightman, 13 Hun, 164 ; Tighe v. Pope, 16 id., 180 ; Bank of Havana v. Magee, 20 N. Y., 359; Walsh v. Washington Ins. Co., 32 id., 439 ; Thompson v. Kessel, 30 id., 383; Ackley v. Tarbox, 31 id., 564.) It is urged by the respondent’s counsel, that the ground of motion admits that there-now exists no cause of action against the present defendant; that to grant the motion would be a substitution of an entire new party defendant. But it should be observed that it is not proposed to-change the cause of action laid in the complaint. It is intended to-stand upon the same contract set out at length therein; and the person already served with process is one of the defendants sought to be brought in by the amendment. This person, too, was personally interested both in the “ Remington’s Agricultural Works ” and in the “ Remington Agricultural Company,” in the former as-a member and to some extent manager of the incorporation, and in the latter as one of the partners, doing business in that partnership-name. This is not therefore the case of a proposed substitution of a person or of persons having no connection with the former defend-, ant- or defendants in the subject-matter of the action.

Without here particularly collating the facts in all the cases above-cited it will be found on examination that in several of them an entire change of party, in the strict sense of the term (the cause of action stated remaining as a ground of recovery), was made, as much as is desired in this case. In McElwain v. Corning (12 Abb., 16), the action was originally brought against the executors of B. An amendment was allowed by changing the action to one against the administ-rators of A. In Newton v. Milleville M. Co. (17 Abb., 318,. note), the action was originally brought, as alleged in the complaint, against a corporation by its corporate name. An amendment was allowed by changing the action to one against those persons named, who were subsequently found to be the true defendants. So in Fuller v. The Webster F. I. Co. (12 How., 292), it is laid down that the court would direct an amendment of the pleadings by substituting a party as defendant when it appears that such amendment ‘will further the ends of justice; and this too was a case where, as Davies, J., remarked, the plaintiffs could not succeed against the-then present defendants. In Tighe v. Pope (16 Hun, 180), the action was against the administratrix and judgment was asked for against the defendant as such. A motion to amend the summons- and complaint so as to change the action to one against the defendant personally was denied at Special Term; but on appeal the decision was reversed, and the motion was granted. The opinion of Mr. Justice Gilbert in this case is an instructive one on the points here under examination, and may be supplemented by the very just views of Judge Denio, on the same subject in Bank of Havana v. Magee (20 N. Y., 359, 360, 361). The learned judge there reaches the conclusion in substance and effect, that when the nature of the litigation is not ehcmged, and where the name used fails, for technical reasons only, adequately to represent the party in the litigation, an amendment such as is here asked for is in furtherance of justice and should be allowed. The other cases above cited recognize the power in the court to make the amendment here desired, and indeed go the length of holding that the court has the power and authority in its discretion to make almost any amendment that may be asked for in the process and pleadings in a given case, if made in due time at Special Term, and it be shown to be in furtherance of justice.

The case relied on by the respondent’s counsel (Bassett v. Fish, 75 N. Y., 303) is not in point, as there the amendment was sought in the Court of Appeals. But it should be noted that it was there intimated that the amendment sought and denied might have been allowed, had the application been made at Special Term in due time. That the Special Term possessed the power to allow the amendment sought in this ease, I cannot doubt. If right in this conclusion the order appealed from should be reversed and the question as to the propriety of granting this' application should be considered and determined by this court either here, now, or by the Special Term to which the motion might be remanded. For myself, however, I have no hesitation in saying that in my opinion the motion should be granted. It is very plainly a case of mistake on the part of the plaintiff and its attorney, and the facts presented show it to be a pardonable and well-excused mistake, induced by the manner in which the defendants had conducted their business. I think the amendment is shown to be manifestly in furtherance of justice. If it be considered that terms should be imposed as a penalty for the mistake, so be it. But there is here no question of bad faith in the proceedings on the part of the plaintiff or its attorney, and it may well be questioned whether the defense has not encouraged the plan tiff’s actions, at least to a considerable extent. If so, terms should not be imposed. In my judgment the order appealed from should be reversed and, as I think, the motion should be here granted.

Boardman, J., concurred.

Learned, P. J.

(dissenting):

The summons was against the defendant above named. The complaint averred that the defendant was a corporation and that it had made a certain written contract therein set out. The contract was made in the name of the Remington Agricultural Company, which name the complaint averred was used by the corporation defendant.

The summons and complaint were served by delivering the same to Philo Remington. (Code of Civil Pro., § 431.) The corporation defendant appeared and answered and the action is at issue.

It now appears by affidavit that it was not the corporation defendant which made the contract set forth in the complaint, but that the contract was made, if at all, by a partnership bearing the name of The Remington Agricultural Company, and composed of Philo Remington and two others. This partnership, before the time of making the alleged contract, had bought out the business of the corporation and had continued in business under the new name of the Remington Agricultural Compcmy. The corporation, however, has not been dissolved, and its corporate existence still continues. The plaintiff now moves to substitute Philo Remington for the corporation defendant, and to add the two other partners as defendants. The Special Term denied the motion and the plaintiff appeals.

It thus appears that the present action was regularly commenced and is regularly pending against the present defendant. It was not commenced against Philo Remington, and he is not and never has been a party defendant. In an action against a corporation the summons must be delivered to some officer, but such delivery does not make him a party. So the question comes up whether, when an action has been commenced against one person as defendant, the court can substitute another in his place. Of course this is not a case where since the commencement of the action there has been a devolution of liability ” on some person other than the original defendant. (Code of Civil Pro., § 756.) No change has taken place since this action was commenced.

Now, excepting the cases thus provided for in section 756, I am not aware that the court has any right, when an action has been commenced and is pending against one person as defendant, to substitute for that person, without consent and on the plaintiff’s motion, another person as defendant.

In McElwain v. Corning (12 Abb., 16) the proper defendants were sued. The only change allowed was a change in the summons of the description of the character in which they were sued, from “ administrators of TI.” to “ administrators with the will annexed of C.” No complaint had ever been served, and the court remarked that the plaintiff “had sued the right individuals.” In the present case he has not.

Newton v. Milleville Man. Co. (17 Abb., 318, note) is a Special Term case, briefly reported, where the plaintiff, in ignorance of the true name of defendants and supposing them to be a corporation, which they were not, had sued them by the name in which they transacted their business. Tie was allowed, on motion, to substitute their names as defendants, under section 175 of the old Code of Civil Procedure. If the plaintiff in the present case had made the Remington Agricultural Company defendant, supposing it to be a corporation, this case would have been like that cited. As it is, the analogy fails, because the plaintiff has not sued Philo Remington and his partners, but has sued an existing corporation which is entirely distinct from them. In the case cited there was no coiporation, but the name inserted in the summons as that of the' defendant was the partnership name of the very persons whose real names were afterwards substituted. No new person was brought in. The real defendants had been sued under their partnership name.

Fuller v. Webster 1. Co. (12 How., 293) was also a Special Term case. In that case the court allowed the name of a receiver of a defunct corporation, who had, in the name of the corporation, put in an answ'er, to be substituted for that of the corporation.

The case of Tighe v. Pope (16 Hun, 180) was one where an action was brought against one describing her as administratrix, and asking judgment against her as such. The motion was to strike out the words “ as administratrix.” The court held that it should be granted, remarking that, “ whether the amendment were allowed or not, the same person will be defendant.” That is the very point in which that case differs from the present. If the present motion were granted, another person would be defendant, and that is the reason why it should not be granted.

The case of Bank of Havana v. Magee (20 N. Y., 355) was one where the plaintiff miscalled himself by the name Bank of Havana ” instead'1 of using his true name, “ Charles Cook.” An amendment giving his true name brought in no new party. There was iio person, natural or artificial, called “ Bank of Havana,” but that name was one used by Cook, the real plaintiff, in his business. Like the case last cited, therefore, the amendment brought in no person who had not in fact been a party previously.

Ackley v. Tarbox (31 N. Y., 564) was a case where a husband had joined as plaintiff with his wife in respect to her property. It was held that his name might be stricken out. That does not touch the principle here involved.

Thompson v. Kessel (30 N. Y., 383) was a case where a firm was sued in its firm name, the plaintiff alleging his ignorance of their individual names. The defendants were allowed to amend by inserting the individual names. This was merely in accordance with section 175 of the old Code above cited. No new persons were brought in as parties without their consent.

The case of Walsh v. Washington Insurance Company (32 N. Y., 427) was not a change of parties at all.

These are all the cases cited as sustaining the appellant’s view. In no one of them has the court, when the action was pending against one person, substituted another' for him. Nor do I think any such power exists. Persons are made parties defendant by the service of a summons. In legal effect Philo Remington is a stranger to this action. He cannot be substituted in the place of the present defendant.

The case of Bassett v. Fish (75 N. Y., 315) supports this view.. That was an action for damages occasioned by the alleged negligence-of the defendants as trustees of a certain school district. They were in fact the trustees of a union free school district; and the-court held that they were a corporate body and that the alleged1 cause of action was against such corporate body. It was suggested that the complaint could be amended by striking out their names and inserting that of the corporation. The court say: This is not well conceived. To insert the corporate name would be to make the corporation the party and to dismiss the defendants, as persons or Officers, from the action. But we have not jurisdiction of the person of the corporation. It has not been brought into court. "We may not make it a party to this action by such an amendment.”

Conversely, in this present case, the court has not jurisdiction of Philo Remington and cannot make him a party by such amendment ; nor can it by such amendment dismiss the corporation, which is now the defendant.

In that case the court suggested that an amendment might be applied for to the Special Term. That amendment was to strike out all the names except that of Forbush, and to strike out his designation as trustee, leaving the action against him personally, for it was claimed that he was personally liable on account of his personal acts or neglect. Such an amendment would bring in no new party, and would, as to Forbush, be only a change of description and a change of the theory of the action. But I do not understand the court to intimate that at Special Term the existing defendants might be stricken out and a new defendant substituted for them. That is a thing which has never yet been done.

The order should be affirmed, with ten dollars costs and printing disbursements.

Order reversed, with ten dollars costs and printing disbursements, and motion granted, without costs to either party.


source: Caselaw Access Project

author: Learned, P. J.:

license: Public Domain

text:
    DELILAH COLE, Appellant, v. EZEKIEL TERPENNING, Surviving Executor, etc., Respondent. RACHAEL HOTALING, Appellant, v. THE SAME.

      Petition to compel am executor to account and pay over a legacy — when the claim • for the legacy is barred by the lapse of time — when no trust exists.

    A petition in tlie Surrogate’s Court to compel an executor to pay a legacy must he filed within the time in which actions of a similar character are required to he commenced in courts of common law or equity.

      A testator gave to liis daughter the sum of $400, to be paid to her when she came of age, or at her marriage if she married sooner, and directed that after the expiration of one year and one day from his death, the legacy should be invested and the interest accumulated until the time when the principal was to be paid over. The will was admitted to probate November 6, 1847. The daughter married January 21, 1847, and came of age January 1, 1849. March 4, 1880, the legatee filed a petition with the surrogate to compel the executor to account and pay over her legacy:

      Held, that as the direction to accumulate never took effect no trust was created, and that the application was properly denied.

      Robison, v. Robison (5 Lans., 165) distinguished.
    Appeals from orders made by tbe surrogate of Ulster county, denying petitions filed by tbe plaintiffs, by wbicb they sought to have the defendant compelled to appear and account as surviving executor of Solomon Terpenning, and to procure payment of the legacies due to tbe petitioners.
    The testator, by bis will, which was dated July 23, 1840, and to which a codicil had been added October 2, 1845, bequeathed to his “ daughter Delilah, the wife of Henry Cole, four hundred dollars, to be paid to her by my two sons John and Ezekiel, share and share alike, one year and one day after my decease. Sixthly. I give and bequeath unto my Rachael four hundred dollars, which money I order to be paid to her when she becomes of lawful age, and if she should be sooner married then the same is to be paid to her soon after her marriage. I order that, one year and one day after decease, the said four hundred dollars be put out at interest on good landed security, and the interest collected yearly and again put out until the principal is to be paid to her, which I order my executors faithfully to attend to for the benefit of the said Rachael, so that she may realize the whole principal and interest at the time of payment. I however order that if the said Rachael should decease before the time of payment to her, then I give and bequeath the said moneys, principal and interest, unto my surviving daughters or their children, if any should have deceased, in proportion, share and share alike.”

      lounsbery & Childs, for the appellant.

      F. L. & T. JB. Westbrook, for the respondent.
   Learned, P. J.:

The will of the testator was admitted to probate November 6, 1847, and letters testamentary thereon, issued that day to Terpenning, now the surviving executor, and another. The will gave to Delilah Cole $400, to be paid her by the testator’s two sons, John and Ezekiel (who were the executors), share and share alike, one year and one day after the testator’s decease. The will gave John and Ezekiel severally certain lands on condition that they paid the legacies, etc., and made them residuary legatees, charging them to pay the debts and legacies. Delilah Cole filed a petition October 2, 1879, for an accounting and for the payment of her legacy aforesaid. On the hearing it was admitted, in addition to the above facts, that the testator left a large personal estate sufficient to pay all debts, funeral expenses and legacies; that the executors accepted the trust and entered on their duties as executors; that Delilah Cole, after the expiration of eighteen months since their appointment, had applied for an account and that the executor had refused.

The surrogate denied the prayer of the petition on the ground of the lapse of time (more than thirty years), and Delilah Cole appeals.

In the case of House v. Agate (3 Redf., 307), it was decided that a petition in the surrogate’s court to compel an executor to pay a legacy, must be filed within the time in which actions of a similar character are required to^ be commenced in courts of common law or of equity.

The same doctrine is laid down in Clock v. Chadeagne (17 N. Y. Sup. Ct. [10 Hun], 97); in McCartee v. Camel (1 Barb. Ch., 455); in Clark v. Ford (1 Abb. Ct. App. Dec., 359), and in Smith v. Remington (42 Barb., 75).

These repeated decisions of recent date have settled the question, and it is unnecessary to discuss older authorities, or to examine the law of limitations between trustees and eestuis que trust, properly so called.

• The decree of the surrogate is affirmed, with costs against appellant.

The case of Hotaling v. Terpenning is similar to the preceding. The difference is that the legacy of $400 given after one year and one day from the decease of the testator to his daughter Rachael {now Rachael Iiotaling), was to be paid her when she came of age, or at her marriage if she married sooner, and meantime it was to accumulate. It was, however, absolutely to be paid when she came of age, unless she previously died. She married January 21,1841, and came of age January 1, 1849. Then, at all events, the legacy, with its accumulations, was to be paid by the executors. The legatee filed her petition for payment March 4, 1880, more than thirty years after the time when the legacy was payable. There was no trust, because she was married before the probate of the will, probably before the testator’s death, and certainly before the one year and one day after his decease provided for in the will, and therefore she was entitled to receive the legacy at once without any waiting for accumulation. The case of Robison v. Robison (5 Lans., 165), therefore does not apply.

The decree should be affirmed, with costs against appellant.

Present — Learned, P. J.; Bookes and Boardman, JJ.

Decree of surrogate affirmed in each case, with costs against appellant.


author: Boardman, J.: Bookes, J.: Learned, B. J.:

text:
    HARRIET S. DE LISLE, Respondent, v. FREDERICK HERBS and MAGNUS D. HERBS, Appellants.

      Merger — when a mortgage purchased by an owner of land to protect his title is not thereby extinguished — dower of wife is cut off by a purchase-money mortgage.

    In 1848 the plaintiff’s then husband purchased certain premises for $6,000, $1,000 of which was paid in cash, $1,000 in promissory notes and $4,000 by a purchase-money mortgage, executed by the husband alone. In January, 1840, the plaintiff, who was then an infant, united with her husband in con veying the property to one Van Dusen, subject to the $4,000 mortgage, which mortgage was, in April, 1850, purchased by and assigned to the said Van Dusen, he taking an assignment instead of a satisfaction of the mortgage, by advice of his counsel, in order to protect his title. Thereafter Van Dusen conveyed the premises by a full covenant deed to the defendants’ grantors. In 1874, the plaintiff’s husband died, and thereafter this action was brought by her to recover her dower in the said premises.
    The Special Term decided that the $4,000 mortgage was merged when purchased and assigned to Van Dusen, and that the plaintiff, being an infant when she executed the conveyance, was entitled to recover her dower in the whole premises.

      Held, that this was error.
    Appeal from a judgment in favor of the plaintiff, entered upon the trial of this action by the court without a jury.

      O. P. Collier, and S. L. Magoun, for the appellants.

      James M. Pisle, for the respondent.
   Boardman, J.:

This is an action in equity brought to set aside a conveyance by the plaintiff while she was an infant feme-covert, and for the assignment of her dower in the premises thus conveyed.

The plaintiff’s then husband in 1848 purchased the premises in which dower is now claimed for $6,000, of which $1,000 was paid in cash, $1,000 in promissory notes, and $4,000 in a purchase-money mortgage executed by her then husband only.

In January, 1849, the plaintiff and her husband united in the conveyance of said premises subject to said $4,000 mortgage to John Tan Dusen, Sr. The plaintiff was at that time under the age of twenty-one years. In April, 1850, said John Van Dusen, Sr., purchased said mortgage and took an assignment thereof to himself. The assignment, instead of a satisfaction, was taken by said Van Dusen by advice of counsel for the purpose of protecting his title. In 1858, Van Dusen, Sr., sold and conveyed said premises by a full covenant deed to defendants’ grantors through whom by mesne conveyances the defendants have acquired the title. The plaintiff’s former husband died in August, 1874, and she was again married in November, 1875, to Charles M. De Lisle.

Upon these facts the learned judge at Special Term held, and decided, that the plaintiff was entitled to dower in the whole of said premises, she being an infant when her conveyance was made; that the $4,000 mortgage was merged in the fee and was extinguished when John Van Dusen, Sr., purchased and took the assignment thereof; that the defendants are not entitled to deduct said mortgage from the value of the premises or to treat it as a lien or incumbrance as against the plaintiff or her claim of dower.

It is believed the authorities will not sustain these conclusions. By 1 Revised Statutes, 740, 741, § 5, the widow is not entitled to dower in lands as against the purchase-money mortgagee of such lands or those claiming under him. The plaintiff concedes this statute would deprive her of dower in the lands to the extent of the mortgage if it were still valid, subsisting and unjiaid. She in effect concedes that she had an inchoate right of dower only in the equity of redemption at the time she and her husband conveyed to John Yan Dusen, Sr., in 1849. But she claims that Yan Dusen by his subsequent purchase of the mortgage and taking the title to himself paid it. Ordinarily when the legal and equitable title unite in the same person, the equitable is merged in the legal estate. This result will not follow where it is against the express or implied purpose or intention of the person owning the two titles. So, where it is for the interest of such person to prevent the union of the two estates, the law will imply an intention to keep alive the equitable estate. These principles have been established by many eases. {Champney v. Coope, 32 N. Y., 543, 549, etc.; James v. Morey, 2 Cow., 248 ; Russell v. Austin, 1 Paige, 192 ; Barnes v. Mott, 64 N. Y., 397 ; Mechanics’ Bank v. Edwards, 1 Barb., 271; affirmed, 2 id., 545 ; Day v. Mooney, 4 Hun, 134.)

In Runyan v. Stewart (12 Barb., 537), it was held by a divided court that plaintiff, under somewhat similar circumstances, was entitled to dower in the whole premises at law where the purchase-money mortgage had been satisfied and discharged of record by the assignee of the husband. The prevailing opinion however says that if the mortgage had been assigned as in this case, the purchaser would have been regarded as holding under it. It is also suggested that the mortgage could have been revived in equity as against the widow. Mr. Justice Johnson, in an excellent dissenting opinion, maintains that the purchase-money mortgage is equally available-against the widow’s dower, though paid and canceled of record. When the owner of the legal estate takes an assignment of an outstanding mortgage, there will be no merger of .the two estates unless such was the intention. (Russell v. Austin, 1 Paige, 195; James v. Morey, and other cases above cited; Angel v. Boner, 38 Barb., 425.)

In the latter case it was held that a mortgage assigned to the owner of the equity of redemption whose duty íg was to satisfy it, could not by a new assignment be revived as a lien to the prejudice of a junior incumbrancer. But in the case then under consideration the mortgage so assigned was held to be a valid lien and not satisfied. In Ely v. McNight (30 How., 97) the contest wag between the mortgagor, who sold the equity of redemption, and the purchaser, who assumed and agreed to pay the mortgage. The latter, after taking an assignment of the bond and mortgage while he was the owner, undertook to assign the same and have the mortgagor sued upon his bond. The court held that the bond and mortgage were legally and equitably satisfied and they could not be revived for an unjust and illegal purpose. It does not apply to the case under consideration. Nicholson v. Halsey (1 Johns. Ch., 417) illustrates the doctrine of merger where no valid reason existed against its application. "What, was said by Judge Bronson in Cooper v. Whitney (3 Hill, 95) was obiter. There was no unity of the legal and equitable title in one person, and the learned judge says it is unnecessary to determine what would be the effect of the union of the two interests in the same individual. (See, also, Gibson v. Crehore, 3 Pick., 475; Gardner v. Astor, 3 Johns. Ch., 53).

Yan Dusen took the assignment of this mortgage for the protection of his title. It was necessary to do so by reason of the infancy of the plaintiff when she conveyed. That fact may or may not have been known to him. He thereby became a person holding under a purchase-money mortgage as against the plaintiff. It was just and right that Yan Dusen and his grantees slfbuld be protected against a claim of dower beyond the value of the equity of redemption when he purchased. At that time plaintiff had no inchoate dower right except in such equity of redemption. If she had been of 'full age that would have passed by her deed. Because she was an infant her act was voidable. As against all persons but the mortgagee and those holding under him she was entitled to dower. (1 Ti. S., *741, § 5.) It is not just that she should be endowed of an interest which her husband, for that purpose, never owned or was seized of.

It follows that the learned judge erred in holding that the plaintiff was entitled to dower in the whole of said premises irrespective of such purchase-money mortgage.

The appellant claims, first, that the plaintiff has waived her right to avoid her deed by the great lapse of time since she became of age, nearly twenty-five years; second, also that she could not maintain an action for dower, but only an action to redeem upon payment of an equitable portion of the mortgage debt; third, also that the $1,000 of the purchase-money secured by notes which Yan Dusen, senior, paid were an equitable lien upon the premises in favor of Yan Dusen and his grantees against plaintiff; fourth, also that plaintiff’s husband was never so seized of this property as to entitle plaintiff to dower therein.

These questions are not fairly presented to us by the exceptions in this case, and since a new trial will become necessary on the point first considered we decline to consider them.

The judgment is reversed and a new trial granted, costs to abide the event.

Bookes, J.:

I concur in the opinion. I think a new trial should be granted, as per opinion.

Learned, B. J.:

Nothing in the opinion should be construed as deciding that the dower should be one-third of the present value of the property instead of one-third of the value at the time of alienation. (Marble v. Lewis, 53 Barb., 432, and other cases; 4 Kent’s Com., 66.) Query: Is a new trial necessary ?

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


author: Bocees, J.:

text:
    THE MADISON UNIVERSITY, Respondent, v. JOHN L. WHITE, MARY E. WHITE, GEORGE C. WHITE and PHEBE A. KNIGHT, Appellants, Impleaded with Others.

      Verdict of a jury on special issues — the trial court may adopt it and decline to receive further evidence— The payment of a bonus by a person other than the borrower does not render a loan usurious.

    Where, in an action brought to foreclose a mortgage, issues involving the question of usury, which is interposed as a defense, have been framed and’ tried by a jury, the court may in its discretion, upon the case being brought on for trial before it, adopt the verdict and refuse to receive any further evidence as to the facts averred by it.
    Where a third person, who, for personal reasons, is interested in having a loan made, agrees to and does pay a bonus to the lender to induce him to make the loan, such payment, if made without the knowledge or consent of the borrower, does not render the loan usurious, provided the borrower receives the full amount of the loan and is not required to pay any part of the said bonus.
    Appeal from a judgment in favor of the plaintiff, entered upon the trial of this action by the court without a jury, and from orders made at a Special Term denying a motion for a new trial, made upon the minutes of the judge before whom certain issues had been tried; denying a new trial, on the ground of surprise, and denying a motion to amend an order settling issues in the action.

      8. D. White, for the appellants.
    27. 27. Keith and John K. Smith, for the respondent.
   Bocees, J.:

This action was brought to foreclose a mortgage given to secure the payment of $12,000 and interest, made by the defendants John L. White, Mary, his wife, and George C. White to the plaintiff, dated May 23, 1876. The mortgagors and the defendant Phebe A. Knight, a subsequent mortgagee, defended in the action, all interposing the defense of usury. The other defendants made no answer. Issue being joined the defendants who had answered moved for an order settling the issues to be tried by jury, and it was ordered that the following question should be tried, to wit:

First. Whether the said plaintiff and the said John L. White and George C. White made the usurious agreement that the plaintiff was to loan said mortgagors the sum of $12,000 upon the terms in said mortgage stated, and the said plaintiff was to receive therefor the sum of $250 in addition to the legal rate of interest as set forth in the first defense in defendant’s answer.

Second. Whether the said plaintiff did receive the said sum of $250 which was agreed to be paid in addition to the legal rate of interest.

Third. Whether the bond and mortgage referred to in the complaint were executed and delivered pursuant to the alleged usurious agreement.

On the trial of these questions the jury, by their verdict, answered each in the negative, thus finding that the defense of usury charged in the defendants’ answers were not sustained by the proof.

At a subsequent term of the court the plaintiff moved the further hearing and trial of the case, and also for final judgment; whereupon the verdict of the jury was adopted, and some evidence being given with a view to entire accuracy on uncontroverted points, formal findings of fact and law were made by the court, and judgment of foreclosure was directed.

At this term of the court — the term at which the final hearing and trial were had — the defendants moved (1) for a new trial on the .ground of surprise; (2) to set aside the verdict and for a new trial upon the minutes of the court and other papers then read, and (3) to amend the order awarding issues to be tried by jury nunc fro time. These motions were severally denied. Thereupon the defendants offered further evidence in the case, all which, however, except such as was entirely immaterial, related to the question of usury, already determined by the verdict of the jury. The court declined to hear the further evidence so offered. Judgment being entered, an appeal therefrom was taken to this court.

It is first urged that there was a mistrial of the case. This position is not well taken. The action was in equity, hence triable by the court or by a referee, unless ordered by the court to be tried by jury as to some or all of the questions of fact arising upon the issues in it. (Code of Civil Pro., § 971.) It seems that on the defendants’ motion the question of usury, the only question of fact raised by the answers, was ordered by the court to be tried by jury, and three questions covering the issue in its entirety were settled and ordered to be so tried. This was the defendants’ chosen mode of trial of the material and only issue in the case. A trial by jury was had upon those questions, resulting in a verdict for the plaintiff. Thereupon the final hearing and trial of the case was moved and had; findings of fact and law were made and judgment in due form was .awarded. This course of procedure was entirely regular. (Code of Civil Pro., §§ 823, 971; Birdsall v. Patterson, 51 N. Y., 43, 50; Moore v. Metropolitan N. Bank, 55 id., 41; Chapin v. Thompson, 50 id., 275.) There was consequently no mistrial by reason of the non-observance of the forms prescribed by law to be observed in the conduct of the case.

The motion for a new trial on the ground of surprise was prop- • erly denied. It was based on alleged surprise in this — that the counsel on the trial did not anticipate that the jury would be required to determine by whom the $250, the alleged bonus, was to be paid. This fact was involved in the question of the alleged usury, which question could not, in the nature of things, be solved by litigation without evidence bearing upon such fact. The agreement for the payment of the bonus — its payment — and by whom it was agreed to be paid, and by whom actually paid, were matters averred in the answers, and to which the evidence on the trial was in point of fact •directed. Evidence as to who agreed to pay the alleged bonus, and who in fact paid it, wras necessary to the case on the issue presented by the pleadings; It is difficult to see how there could have been any surprise in this regard. (The People v. Marks, 10 How., 261; The People v. Superior Court of New York, 5 Wend., 127 ; Taylor v. Harlow, 11 How., 285.) If it be suggested that the counsel were surprised because of the ruling of the court, the answer is, that this is not good ground for new trial on motion. That would become a subject for examination on appeal from the judgment under exception. We are of the opinion that the denial of the motion for a new trial on the ground of surprise was right.

Nor can error be predicated on the denial of the motion to amend the order awarding and settling the questions to be tried by jury. The defendants obtained this order on their own motion, they accepted and acted upon it down to the final hearing of the case, without objection to its form or sufficiency in so far as is disclosed by the record. The motion then came too late. (Brown v. Clifford, 7 Lans., 54.) Besides its denial was of no importance, as it in no way touched the merits of the controversy.

The next question is, whether the court was in error in declining to receive the further evidence offered by the defendants on the final hearing of the case. This evidence, save as it was immaterial, all related to the issue of usury raised by the pleadings, and the question is, whether the defendant was entitled, as matter of right, to put in further proof on that issue, notwithstanding it had already been tried before a jury and a verdict had been rendered, which in effect disposed of the question of usury in favor of the plaintiff. The trial on the questions determined by the jury took the place of a trial of feigned issue under the former equity practice, and the-proceedings on such trial, and the effect to be given the verdict are-the same as obtained under that practice. ( Vermilyea v. Palmer, 52 N. Y., 471, 475 ; Hatch v. Peugnet, 64 Barb., 195, 196, 197; Brinkley v. Brinkley, 2 S. C. [T. & C.], 503 ; Wallace v. Am. L. T. Co., 16 Hun, 405, 406 ; Clark v. Brooks, 2 Abb. [N. S.], 407.) The verdict in such case is not conclusive upon the parties it is obtained in aid of the court, and may be accepted and adopted, or rejected or disregarded in whole or in part, or in any way qualified, when brought before the court on the final hearing and trial of the case. (Hatch v. Peugnet, 64 Barb., 195 ; Vermilyea v. Palmer, 52 N. Y., 471, 475, and other cases above cited.) In this case the court on the final hearing and trial adopted the verdict. The question still remains whether it was bound on such hearing and trial to receive further evidence, if offered, on the issue or issues covered by the verdict. We think the-court was not so bound, that the reception or rejection of such further evidence at this time rested in the discretion of the court. The parties had been once fully heard on the questions and should not be allowed, as a matter of absolute right, to retry them. If good cause should be shown the case might be opened for further-evidence. According to the former equity practice a case on trial might be ordered to stand over for further proof, it being made to-appear that the ends of justice would be thereby subserved. But as was said in Brown v. Clifford (7 Lans., 46) the court may accept the verdict upon the facts found. In this ease Mulles, J., says: “ The court, as a general rule, accepts the verdict as conclusive on the-questions of fact, but it is not bound to do so.” In Vermilyea v. Palmer (52 N. Y., 415) Judge Church says: “The court may set the verdict aside and order a new trial or find the facts itself and discharge the order, or it may qualify and alter the finding,” implying that an acceptance of the verdict or its rejection or qualification, and as a necessary consequence the admission or rejection of further evidence on the questions tried and determined by the verdict of the jury, rested then in the discretion of the court. In Clark v. Brooks (2 Abb. [N. S.], 401) Judge Hunt says: “ The court to which the result is presented on the trial of the action is authorized to bestow upon it just that degree of attention to which it is entitled. It may rely upon it as satisfactory and conclusive.” In Birdsall v. Patterson (51 N. Y., 43) it is laid down as follows: The jury must find upon the issues, and their findings must be presented to the court upon the final hearing. If proof is necessary to establish facts not admitted in the pleadings or fownd by the jiw'y such proof must then be given, thus conveying the inference that the court may adhere to the verdict as to the facts certified by the jury. So in Brinkley v. Brinkley (2 Sup. Ct. [T. & C.], 501.) Barrett, J., says, the court “accepts or rejects it (the verdict) in whole or in part, or it takes further testimony and finally pronounces the judgment.” Again, the language of the Code is that if the questions directed to be tried by a jury do not embrace all the issues of fact in the action, the remaining issues of fact must be tried by the court or by a referee. (Code of. Civil Pro., § 921.) And by section 1225 it is provided that if, in actions tried by the court, all the issues of fact in the action are determined by the findings of the jury, an application for judgment upon the whole issue may be made as upon a motion. Such in fact was this case. The sole issue was as to the usury. The verdict as rendered was conclusive of this question in the plaintiff’s favor. We conclude therefore that the defendants were not entitled, as matter of absolute right, to put in further proof in this case on the question of usury. They had chosen a trial by jury. They had been heard in the mode selected by them and had put in their proof on such trial fully. Having been heard in the manner selected by them, they must be content to abide by the result, unless they could show that the ends of justice demanded that the case should be opened for further proof. This was not shown on this application. All that was proposed to be shown by the further evidence offered related to the subject tried by the jury or was wholly immaterial to the case; and in so far as it was material it was but cumulative, or so indecisive in character that if admitted it would not, in any fair intendment, have changed the result. This is quite apparent, as we think, on examining the proof given before the jury, which proof is very full and complete as to all things touching the arrangement on which the charge of usury was predicated. We are of the opinion that there was no abuse of discretion in the refusal to receive the further proof offered on the final hearing.

A question of law still remains to be considered. It appears that the personal representatives of the estate of Samuel White, through their agent Joseph Mason, subscribed and paid $250 to the plaintiff’s library fund, and the plaintiff accepted this sum for the benefit of that fund as an inducement to the loan of $12,000 made by the plaintiff to the defendants John L. and George O. White, payment of which was secured by the bond and mortgage in suit.

In addition to the findings of the jury, which findings were adopted by the court, and by emendation and amplification of them, it was found and certified, as the record shows, “ that the making of said subscription and the payment thereof and the offer to make the same, was without the knowledge or consent of either of the defendants, and was not made by them or either of them, nor by their agent, nor by any person acting in their interest or for them; and the said defendants did not, nor did either of them ever agree with the plaintiff or any of its officers or agents, or with the said Mason, the said administrators, or with any other person to pay any part of said $250 so subscribed for such library fund and paid the plaintiff as aforesaid, but the said subscription was made and the same was paid by said Mason as attorney for said administrators and estate of Samuel White, and out said estate, so that they might make a sale of said lauds and receive the money therefrom ; ” and further, that “the said John L. and George C. White had the full benefit of said $12,000 without paying or agreeing to pay any bonus or usury, or anything, except the interest as provided by law, and. at tlie time they * * * executed said bond and mortgage to the plaintiff they had no knowledge that the said administrators or their said attorney had offered, promised or agreed with the treasurer of the plaintiff, to make the aforesaid subscription, or to pay the same or any part thereof, or that any such payment was to be made, and that the same was not made or paid by them or either of them, either directly or indirectly, and that the plaintiff never at any time received from the said defendants, or either of them, directly or indirectly, any greater interest than seven per cent for the loan of said money.”

It was also proved and found, and the fact stands undisputed in the case, that the mortgagors actually received the full sum of ^$12,000, to secure the payment of which the bond and mortgage were made. It may be here stated that the findings of fact above given are fully sustained by the evidence. The question then is this, may the defendants, the mortgagors, insist that the bonus of $250 paid to the plaintiff, by a third party, as a condition of a loan, without their knowledge or consent, and which was never, first or ■last, paid or agreed to be paid by them, and was never charged to them, rendered the bond and mortgage void for usury ? There were reasons stated by Judge Mason and by the personal representatives of Samuel White’s estate, why they were interested to have the loan made to the mortgagors, and hence were willing to pay the $250 to secure that result. It is, however, sufficient here to say that those reasons were entirely personal to the parties who made the payment, and in no way affected or concerned the defendants, the borrowers of the $12,000. The latter received the entire amount of $12,000 loaned to them, under no agreement or understanding* with the plaintiff that they should pay or be charged with any sum whatever save the money advanced, with lawful interest, as a condition of the loan. They got the full sum they contracted for with no condition attached of any name or nature whatever, save what was expressed in the bond and mortgage given to secure its payment. Those instruments provided for the payment of the money actually loaned with lawful interest only. The arrangement for the payment of the bonus was entirely outside and independent of their agreement for the loan. How then could the former render the latter void ? Admit that the payment of the bonus was, as to the plaintiff, in the nature of usury, the defendants were not harmed by the transaction — they were not made the victims of an illegal agreement. The contract which they made with the plaintiff was not tainted with usury. It has been repeatedly held that the very foundation of an usurious contract is the corrupt agreement. Here there was no illegal or corrupt agreement between the borrower and lender. Their contract had the full sanction of the law. In giving construction to the statute against usury it must be held in mind, it has been often decided, that it was made *or the protection of the borrower — that it is only the victim of the usury, and those claiming under a party injuriously affected by it, who may insist upon the invalidity of the usurious agreement. (Williams v. Tilt, 36 N. Y., 319-325.) In this case the language of Judge BkoNsoN, in Dix v. Van Wyck (2 Hill, 522), is given with approval, where he says that one cannot take advantage of a statute not made for his benefit. So in Billihgton v. Wagoner (33 N. Y., 31) it was decided that the defense of usury could be set up only by the party bound by the original agreement to fay the sum borrowed, or, etc. The decision in Clarke v. Sheehan (47 N. Y., 188) seems quite conclusive of the question here presented. It was there held that “ to establish usury some consideration in addition to lawful interest must proceed from the borrower ; ” and further, It is not sufficient that the lender is moved by considerations of collateral benefits to himself which may indirectly result from the transaction, provided they are not a burden imposed upon the borrower, and to which he submits as the means of obtaining the loan, and which are intended as a compensation to the lender beyond the legal rate of interest for the use of the money.” In Smith v. Beach (2 Day [Conn.], 268) it was said by the court that there could be no corrupt agreement while either of the parties remained ignorant of the excessive reservation. In the .light of these authorities and on sound principle we must hold that inasmuch as the defendants, the borrowers, actually received the full $12,000 secured to be paid by the bond and mortgage without reservation, condition or understanding, by which they were to pay or be charged with more than that amount with lawful interest, their contract for the loan was not void for usury. On the whole, after careful consideration of the entire case on all the points raised by the appellants, we are of the opinion that it was properly disposed of by the court below. The judgment and orders brought u]3 by the notice of appeal must be affirmed.

Learned, R. J., and Boardman, J., concurred.

Judgment and orders appealed from affirmed, with costs


author: LeaRNed, P. J.:

text:
    LINUS WANDELL, Respondent, v. FREDERICK M. EDWARDS, APPELLANT.

      Action for seduction — facts tending to reduce the actual damages sustained by the plaintiff a/i'e admissible, though not specially pleaded — Gode of Civil Procedure, sec. 536.
    In this action, brought by the plaintiff to recover damages for the seduction and debauching of his daughter by the defendant, the latter answered by a general denial. No claim was made to recover punitive damages. Upon the trial the defendant offered to prove that before he had had connection with the daughter she had had connection with another man. This evidence was, upon the plaintiff’s objection, excluded on the ground that to be admissible the facts should have been specially pleaded.

      Held, that the court erred in rejecting the evidence; that the facts sought to be proved tended to reduce the actual damages sustained by the plaintiff in grief and in injury to his feelings, and were admissible though not specially pleaded. (Boardman, J., dissenting.)
    Under section 536 of the Code of Civil Procedure the defendant is only required to set forth in his answer the facts which he seeks to prove as “tending to mitigate or otherwise reduce the plaintiff’s damages,” when such facts tend to disprove malice, and so diminish or reduce the punitive or exemplary damages which the plaintiff may be entitled to recover.
    That section does not prevent him from proving, under a general denial, any facts which tend to diminish or reduce the actual damages which the plaintiff claims to have sustained.
    Appeal from a judgment in favor of the plaintiff, entered upon the verdict of a jury.
    The complaint set forth two causes of action. The first cause foi the seduction of the plaintiff’s daughter and the consequent injury; which seduction occurred about January 24, 1879. The second for debauching the daughter and servant of plaintiff, on account of which she became pregnant and the plaintiff lost her services. This is alleged to have occurred February 12, 1880. The jury found a verdict for the plaintiff for $400.
    Upon the trial plaintiff’s daughter was asked : “Did you tell your father at a time prior to February twelfth that Henry Earl had tried to have connection with you, and could not enter you because you were too small, or that in substance?” This question was objected to on the ground of immateriality, and because the facts sought to be proved were not pleaded, and it was rejected, to which ruling the defendant excepted. The witness afterwards testified that one Henry Earl had entered her body before the seduction at Greenfield, and that she did not know how many times such a connection had occurred.
    Thereafter the defendant in substance asked Henry Earl, a witness called by him, if prior to the seduction alleged he had had carnal intercourse with the plaintiff’s daughter? This was objected to as improper, immaterial and incompetent, and the objection was sustained, the defendant excepting.
    A motion was then made to strike out all evidence given in the case tending to show lascivious conduct of the daughter prior to January 24, 1879. The defendant opposed this motion, but the court granted it upon the ground that the facts should have been pleaded.

      L. B. Pike, for the appellant.

      W. B. French, for the respondent.
   LeaRNed, P. J.:

The phrase circumstances in mitigation of damages ” had been principally used in actions of slander or libel. It referred usually to such circumstances as tended to disprove malice. These circumstances, of course, did not tend to diminish the actual damages which the plaintiff had suffered. But they did tend to lessen the punitive or exemplary damages which might be recovered against the defendant, to punish him, or to serve as an example, in excess of the actual damages. (Sedg. Meas. Dam., 540.) So in actions for personal wrongs the defendant, who does not deny that the verdict must pass against him, may give evidence to show that the plaintiff in some degree brought the thing upon herself. (Fraser v. Berkeley, (7 Carr & Payne, 621.) And when the words “ in mitigation ” are used in cases other than those of slander and libel, I suppose that they still refer to such damages as are punitive or exemplary. In this sense I think the words are used in the Code of Civil Procedure. (Sec. 536.) Because, on a general denial, it always has been, and must necessarily be, proper to give evidence tending to reduce or mitigate (if that word is used) the actual damages suffered by a plaintiff. The language of that section is “ mitigate or otherwise reduce.” But the section certainly cannot mean that in actions for a personal injury the defendant must specially set up in Bis answer the circumstances which show that the plaintiff was not injured as much as he claims. For instance, in an action for assault and battery, if the plaintiff proved the assault and gave evidence tending to show that he was laid up six weeks, the defendant might show that the plaintiff was out the next day, without having pleaded this in the answer. For the reason that such evidence only goes to the actual damages suffered by the plaintiff. But if the case were one which, on the plaintiff’s showing, appeared to authorize a jury to give punitive damages beyond the plaintiff’s actual injury, then probably, under this section, the defendant could not give evidence in mitigation of those punitive damages unless he had pleaded specially.

In Willover v. Hill (72 N. Y., 36), where the couzt enforced the rule that circumstances in mitigation must be pleaded, we can see what such circumstances were. The action was for slander. The defendant offered to show that a third person had brought to her reports of a character similar to those which she had uttered. This evidence did not tend to reduce the actual damages of the plaintiff but it tended to reduce punitive damages. It was, therefore, “ a mitigation,” and, not having been pleaded specially, could not De admitted. Whether or not in an action for seduction punitive damages can be recovered, it is not necessary to examine, because thé learned judge who tried the case did not charge that there could be any recovery except for actual damages. Of course these actual damages under the first count included the grief and injury to the feelings, etc.

There were two counts, one for seduction, strictly so-called, alleged to have taken place January 24, 1879; tbe other for debauching in February, 1880, from which act the daughter became pregnant and gave birth to a child. The defendant had offered to prove that prior to January, 24, 1879, the plaintiff’s daughter had had connection with a person named, other than defendant. This was excluded on the ground that it had not been set up in the answer. And all evidence which had been previously given of lascivious conduct prior to January 24, 1879, was, on the same ground, stricken out on plaintiff’s motion.

The court charged that if the plaintiff had made out a case they were to make no reduction on the ground of lewd acts and lascivious conduct of plaintiff’s daughter prior to January 24, 1879.

Thus we have the question fairly presented, whether .prior want of chastity of the plaintiff’s daughter tended to reduce the actual damages which he suffered, in grief and injury to the feelings, by reason of the alleged seduction. In Ford v. Jones (62 Barb., 484), in an action by the woman herself for seduction, this kind of evidence was admitted. Judge Pottee says: Unless a distinction is permitted by the admission of evidence to this point the lascivious wanton is put upon an equality with her of personal chastity and virtue.” In Bracy v. Kibbe (31 Barb., 273) ’the court say: “One of the considerations entering into the question of damages is the supposed loss on the part of the parent of the society of a chaste and pure daughter. If, therefore, the daughter had already become impure, the loss in that respect would be much less.” Thus the court show that the previous unchastity of the daughter affects the question of the actual damages suffered by the parent. And in actions of tort the question of actual damages is raised by a general denial. What actual injury a plaintiff has received is a part of his proof, to be met by counter-proof, without any special pleading.

Thus in the ease of White v. Mortland (71 Ill., 250) it was held that the issue of not guilty involved the character of the daughter for chastity, and testimony might be given to show criminal intercourse of others with her prior to defendant’s alleged act. .

Nor does it affect the question that this is a wrong to the plaintiff’s servant. If the plaintiff had given evidence (as he did) that by reason of defendant’s wrongful act the plaintiff had lost three weeks of bis daughter’s service, the defendant could have given evidence that the plaintiff had lost only one, without specially pleading this. And so, when the plaintiff gives evidence of, 'or seeks to recover damages for, the injury to the feelings of which he had suffered by reason of the seduction, the defendant may show that this injury cannot be as great as the plaintiff claims, because of the previous impure character of the daughter. And he may show this, on a general denial, because it tends to show that the plaintiff did not suffer the actual damages which he claims. No exemplary damages were allowed in the case, and therefore that evidence was not given to mitigate them.'

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

Boakdman, J., dissented.

Present — Learned,P. J., Bocees and Boardhan, J J.

Judgment reversed, new tidal granted, costs to abide event.


text:
    EDGAR T. BRACKETT, as Assignee in Bankruptcy of FRANK E. DARROW and MARY J. DARROW, Respondent, v. GEORGE HARVEY, Appellant.

      Assignee in bankruptcy — right of, to maintain cm action to set aside a chattel mortgage given by the bankrupt — when a chattel mortgage is void as to the mortgagor’s creditors.

    An assignee in bankruptcy can maintain an action to set aside a chattel mortgage given by the bankrupt, even though as to him it is valid, if from the circumstances and agreement under which it was given, it is fraudulent as to his creditors.
    It seems he may maintain such an action, when the mortgage is void as to the creditors, only by reason of the failure of the mortgagee to file it. (Per Learned, P. X)
    Harvey and Darrow entered into an agreement whereby the former was to sell to the latter a stock of lumber and take back, to secure the purchase-money, a chattel mortgage thereon, which was to be renewed from time to time; the renewed mortgages to cover such stock as Darrow might then, at the time of such renewal, have. Darrow was to sell the lumber on sixty or ninetjr days' time, if he so desired, and turn over to Harvey business paper received upon such sales, indorsed hy himself, which was to be credited upon the debt when collected. He was also to pay over the moneys received on sales of the lumber after using so much thereof as was necessary to replenish his stock and support his family. The agreement was carried into effect, the original mortgage for $23,000 being filed in March, 1874. It was renewed by others down to September, 1875, when there remained due thereon about $7,000. During the first year Darrow sold about $57,000 worth of lumber and received about $50,000, and during the second year sold about $20,000 worth and received about $10,000.

      Held, that the agreement was fraudulent and void as to the creditors of the mortgagor.
    That if it could be construed as providing for' the application of all cash and notes as soon as received, whether collected or not, upon the debt, then the mortgagor received such cash and notes as the agent of the mortgagee; and having so received more than enough to satisfy the mortgage the same must, so far as the mortgagor’s creditors were concerned, be regarded as paid.
    That the last mortgage given could not be construed as intended to secure to the mortgagee the payment of the moneys so collected by, and due from the mortgagor as his agent, because it expressly purported to be given in pursuance of the original agreement and to secure a portion of the original debt.
    Appeal from a judgment in favor of tbe plaintiff, entered upon the trial of this action, at the Saratoga Special Term, setting aside certain assignments of accounts and two certain chattel mortgages, executed to the defendant Iiarvey by the firm of F. E. Darrow & Co., who were lumber dealers, composed of Frank E. Darrow and his mother, Mary J. Darrow, and doing business at Saratoga Springs, and directing the proceeds thereof, collected by Harvey, to be paid to the plaintiff on the ground that the said assignments and chattel mortgages were fraudulent as to;creditors and the plaintiff as such assignee.

      Harrington Putnam, for thd appellant.

      A. Pond, for the respondent.
   Learned, P. J.:

The defendant insists that the assignee in bankruptcy cannot set aside a chattel mortgage valid against the bankrupt. The contrary is decided in Southard v. Benner (72 N. Y., 424). But the defendant cites the remarks of Mr. Justice Harlan, in Stewart v. Platt (101 U. S., 738, et seq.). So far as these 'remarks sustain the defendant’s position, they seem to be overruled by the later cases of Trim ble v. Woodhead (102 U. S., 647), and Moyer v. Dewey (103 id., 301), which hold that the assignee in bankruptcy may sue to.set aside a fraudulent conveyance of property. Indeed, the language of the learned justice in Stewart v. Platt {ut supra, 739) shows that he did not quite appreciate the meaning of the New York law. He speaks as if the word “creditors” in the New York statute, requiring the filing of chattel mortgages, meant “ judgment creditors.” It had been held in Thompson v. Van Vechten (27 N. Y., 568), that an unfiled chattel mortgage is void as to a creditor at large; although he would not be in a position to raise the question until he should obtain judgment or process. And the same doctrine, viz., that a creditor at large is within the protection of the statute, is held under the statute requiring immediate delivery of goods sold or mortgaged. (2 R. S., m. p. 136, §§ 5, 6; Southard v. Benner, ut supra.) The two statutes are of similar intent and character, and the word “ creditors ” has a similar meaning in each. Since, then, á creditor at large is within the protection of the statute relative to the filing of chattel mortgages, it would follow that the assignee in bankruptcy representing such creditors might assert the invalidity of the mortgage on that ground. But in the present case the question of the invalidity of the mortgages does not rest upon a neglect to file them, but upon such an alleged contract in regard to the property as would be necessarily fraudulent. And if these mortgages were, as a matter of fact, fraudulent under all the circumstances as against the bankrupts creditors, it can hardly be doubted that the assignee might maintain this action.

The agreement made between Darrow and Harvey was to the effect that Harvey was to sell his stock of lumber to Darrow at a certain price. Darrow was to execute a chattel mortgage thereon for the purchase-money, and this chattel mortgage he was to renew monthly. Harvey was to receive from Darrow business notes to be indorsed by Darrow, and was to apply them on the debt. Harvey testifies- that he understood that Darrow was to go on and sell the lumber and to pay him the proceeds, except what he used in replenishing his stock. Harvey supposed that Darrow used a portion of the proceeds for his own and his family’s support. The original mortgage was for about $23,000, and was made in December, 1873. In September, 1875, the debt had been reduced to about $7,000 The original mortgage was “re-filed” in March, 1874, and in May, 1874. Successive mortgages were filed in August, 1874,November 1874, March, 1875, May, 1875, June, 1875, July, 1875, August, 1875, and September, 1875. These mortgages state that they are in pursuance of the original contract, and all but the first contain an agreement by the mortgagors that as the property is sold by them, they will apply the proceeds to the payment of the debt.

The mortgagors the first year sold about $57,000; the second, about $20,000. Their receipts were about $50,000 the first year, and $10,000 the second. During these years the mortgagors were purchasing lumber from other persons — more than $10,000 each year. These purchases were often on credit; and in August, 1875, there was owing for such debts about $12,000.

The mortgagors made a large amount of their payments to the mortgagee by assigning accounts and transferring business notes' to him.

Now it is quite plain from these and other facts that the plan of the parties was that the mortgagors should carry on the business, replenishing their stock by purchases on credit or otherwise; that they should sell the mortgaged property and the stock which they might purchase, and should pay the avails to the mortgagee, either in cash or in notes; and in order to keep him secured they should, at frequent intervals, execute new mortgages. The only object of such renewals could be to cover the new purchases which the mortgagors should make. The defendant testifies that he had sold the mortgagors nothing since July, 1875; whether he had sold them anything before that time and after the original sale does not appear.

It seems to us that these facts bring this case exactly under the decision in Southard v. Benner (72 N. Y., 424). It is found by the court, on abundant evidence, that there was an agreement made between the parties, at the time of the original contract, to the effect that the avails of the sales should be used in carrying on the business, in paying the personal expenses of the mortgagors and in payments to the mortgagee on his claim, and that the mortgagors had no other available means than these. A similar doctrine to that of Southard v. Benner, is laid down in Robinson v. Elliott (22 Wall., 513).

It is not merely tbe retaining of possession by the mortgagor, nor even is it the selling by him of the mortgaged property as the agent, and for the benefit of the mortgagee, which shows fraud. But it is the continuous dealing by the mortgagor with the mortgaged property as if it were his own, with the evident consent of the mortgagee ; the selling of tne same on credit by the consent of the mortgagee; the using the avails for the personal expenses of the mortgagor; the buying on credit of other goods and covering them speedily with new mortgages to the same mortgagee. These acts, done in pursuance of the original contract, fully justified the finding that the arrangement was a fraud on creditors. In City Bank v. Westbury (23 Sup. Ct. N. Y. [16 Hun], 458) it was said that where there was a chattel mortgage on a stock of goods, and the mortgagor was to sell for cash or on credit, and was to apply the accounts, when collected, on the debt, the arrangment was fraudulent. In Caring v. Richmond (29 Sup. Ct. N. Y. [22 Hun], 369) the same mortgage was again considered, and it ivas held that if these accounts were to be immediately assigned to the mortgagee and applied, the mortgage was not invalid as a matter of law. Now, in the present case, the mortgages state that the mortgagees -will apply the “ proceeds of sales ” to the payment of the mortgage debt. But the contract, under which all the mortgages are made, states that the mortgagee “ will take business notes running sixty or ninety days, to be indorsed by said F. E. D., and apply the same in payment of said Harrow’s notes as they fall due.” And it was testified to by one Walker, that in regard to the accounts that were turned out, the mortgagee was to apply what could be collected and return those not collected to the mortgagor. Thus from the agreement that the mortgagor was to indorse; from the limitation of the notes which the mortgagee was to take to those of sixty and ninety days, while the mortgagor was not forbidden to sell at longer time, and from the testimony of Walker, it appears that it was not understood that every sale on credit was at once applied to the reduction of the debt, as in the case last cited. The mortgage might well be considered fraudulent on that ground also.

But again, if the agreement was that the goods mortgaged should be sold by the mortgagor for the benefit of the mortgagee, and that the proceeds of sales ” should be applied on the mortgage debt, thep we have these facts: The mortgage was not given as a continuing security for liabilities assumed and to be assumed by the mortgagee. It was given to secure a certain debt of some $23,000. The mortgagors went on and sold the property thus mortgaged by virtue of the authority implied in the mortgage by the words “ as the said lumber and property is sold or disposed of by them.” In so doing they were selling as agents of the mortgagors, as was held in Conkling v. Shelley (28 N. Y., 360) And it was said in that case that the avails should have been applied in payment and satisfaction of the mortgage, whether the money was ever actually paid to the mortgagees or not. The receipts for the first year were about $50,000 ; for the second, about $10,000. Under that decision then, the mortgages had been fully paid before the last two were given.

The defendant insists, however, that this principle can be invoked only in the case of an actual adverse lien. In Conkling v. Shelley (ut supra) the action was one of replevin, brought by the mortgagees against a judgment creditor who had levied on the property. Such creditor had acquired the interests of the mortgagee, and the court said that the extent or amount of that interest depended on the amount due on the mortgage. The question there decided did not turn on the point of fraud in such a mortgage, actual or constructive, or as to the right of a creditor at large to set up such fraud. The only point was that, as a matter of fact, the mortgage had been paid. There the court say that the mortgagors were liable to the mortgagee “for the money received and misapplied by them? But the court distinctly hold that the mortgage had been paid, inasmuch as the mortgagors had received from these sales enough to pay it.

Now, if it be said that these present mortgagors were liable even to the mortgagee for the money thus received and misapplied, and that being thus liable they could lawfully mortgage their property for the same, then the answer is that, if they might, they did not. The last two mortgages being those under which the defendant claims and which are dated in August and September, 1875, purport to be given to secure notes made by the mortgagor and dated in December, 1873, the month when the contract was made, and purport to be given in pursuance of that contract. Thus the only indebtedness secured, or intended to be secured, by these last two mortgages was the amount claimed to remain due on the original debt. These mortgages were not given to secure an indebtedness arising out of a misapplication of money received by the mortgagors as agents for the mortgagee. That was a liability which arose subsequently and was of a different nature altogether. There is no reason why a mortgage given to secure a debt which in fact has been paid should be converted into a mortgage to secure another liability which arose subsequently and in a different manner. If this could be done in such cases then the decision in Conkling v. Shelley would have been different, for in that case the mortgagors were confessedly liable to the mortgagee for the money misapplied. But it was not held that this liability could be protected under the mortgage given to secure the debt which had been in fact paid.

The only recovery which the plaintiff was allowed, was for the net amount received from sales made by the mortgagee under the mortgage, and from the assigned accounts.

It may be said that fraudulent chattel mortgages can be attacked only on behalf of one who was a creditor at the time of the alleged fraud. To this the reply is, that even if that rule applies to a case of actual and not merely presumptive fraud, still it appeal's here that there were creditors of the mortgagors, at the time of executing these last mortgages, other than the mortgagee. These creditors the assignee represents.

"We have examined the objections to evidence, and find none which we think should be sustained.

On the question of interest, whether at six or seven per cent after January, 1880, without expressing our opinion, we follow the decision of the first department.

The judgment should be affirmed, with costs.

Present — LeaRNEd, P. J., BoaedmaN and Bocees, JJ.

Judgment affirmed, with costs.


author: Learned, P. J.: Boardman, J.:

text:
    HENRY Y. ATTRILL v. THE ROCKAWAY BEACH IMPROVEMENT COMPANY (Limited).

      Removal, on motion of the attorney-general, of the receiver of a coiporation— to what receivers chapters 537 of 1880 and 639 of 1881 apply — to whom notice of such a motion must he given.

    The proceedings authorized by chapter 537 oí 1880, as amended by chapter 639-of 1881, for the removal of receivers of insolvent corporations, only apply to-such receivers as are by statute required to make and file reports of their proceedings at certain definite and prescribed times.
    When any proceeding thereunder is instituted by the attorney-general it must be shown that the party of whose property a receiver has been appointed is a corporation and that it is insolvent.
    Where an action has been brought by a stockholder and creditor to close up the business of a corporation, and a receiver of its property has, with the consent of all its directors and stockholders and of many of its creditors, been appointed, notice of a motion by the attorney-general under the said acts for the removal of the said receiver should be served upon all the parties who have appeared in the action, and it is improper to remove such a receiver and appoint another in his place when notice of the motion has been served upon the receiver alone.
    Appeal from an order made at Special Term removing Mr. John A. Eice from his position as receiver and appointing James W. Hnsted a receiver in his place.
    Whether the defendant, the Bockaway Beach Improvement Company (limited), is a corporation or a parnership is not distinctly, shown. In July or August, 1880, the plaintiff, who is alleged to-be the largest stockholder of the defendant, commenced this action. It was brought in behalf of the plaintiff and all other stockholders who might come in, etc. The complaint is not in the present papers, but its object seems to have been to close up the business of the defendant, which was probably in an embarrassed condition. In this action Mr. John A. Eice was appointed receiver in the early part of August, 1880. This appointment was made on a petition in writing, signed by a majority of the directors, owning more than nine-tenths of the stock and a large majority of the unsecured debts. The complaint alleged that the capital was $Y00,000, and that it had all been expended, and that mortgage bonds to the amount of $700,000 had been issued. The papers and proceedings in the case were, in September, 1880, presented at a meeting of the board of directors, at which every director was present and voted, and were unanimously approved. They were, in the same month, laid before a stockholders’ meeting, at which every share of stock was represented and voted on by its owner in person, and were unanimously approved. About two-thirds of the unsecured debts were held by stockholders who were present and voted. The trustee of the first mortgage bonds was present and voted as director and stockholder.
    It would seem, therefore, that the directors, the stockholders, the trastee of the mortgage and a large majority of the unsecured debts approved of the appointment of Mr. Rice as receiver.
    In May, 1881, the attorney-general (who was not a party to' this action) applied to the Supreme Court for the removal of Mr. Rice and the appointment of another receiver. The facts alleged as a ground for this proceeding are, that the receiver was required to give bonds only in the sum of $25,000 ; that the receiver had taken no action to secure the completion of the hotel, or to convert the property into cash; that the plaintiff and others had formed a scheme for reorganization with intent to defeat smaller stockholders and creditors, and that the receiver was aiding or abetting; that the receiver had permitted creditors to take away large quantities of property; that he had paid out certificates to parties claiming to have ^been servants, and who in fact had rendered no services; that creditors and others could get no information from the receiver.
    On this application an order to show cause was granted. On the return of the order, the allegations being denied, a reference Avas ordered to pass the receiver’s accounts, and to summon and examine witnesses concerning the same and to report. The referee reported the evidence and the following facts and conclusions :
    1st. That the receiver has taken over $18,000 commissions; that this was at the rate of five per cent, and that as this was the highest rate it should receive the sanction of the court before being allowed.
    2d. That the charge for legal expenses was proper.
    3d. That the receiver had paid himself and his book-keeper in certificates at a discount of $2,770, and that this ought not to be allowed.

      4th. That the receiver borrowed money of one Wheeler on certificates as collateral; that the amount of the certificates over the loan was $3,320; that while these certificates were outstanding the receiver was liable, and that said amount should not be allowed on this accounting.
    5th. That- the receiver had issued certificates to himself for salary on his old contract to the amount of over $13,000; that he was under the impression that he had the right so to do, but on advice of counsel he had canceled such certificates.
    In other respects the referee reported that the receiver’s accounts were proper and should be allowed. None, therefore, of the charges made by the attorney-general were sustained; and the grounds on which the attorney general based his petition were found either to be incorrect or immaterial, as may be inferred from the silence of the report. On the report of the referee and the evidence taken before him, and on hearing the attorney-general for the motion, and the counsel for the receiver opposed, it was ordered that the receiver, John A. Rice, be removed, and James W. Husted be appointed in his place on giving a bond in the sum of $50,000.
    From this order the receiver Rice appeals.

      Ashley da Keener, -for John A. Rice, receiver, appellant.

      Hamilton Ward, attorney-general, etc., opposed.

      See ante, page 376.

   Learned, P. J.:

One of the most important questions on this appeal is as to the right of the attorney-general to apply to remove a receiver in an action to which he is not a party, and another is as to his right lo do this without notice to any of the parties to the action.

The only right which he has arises under chapter 537, Laws of 1880. For it is plain that, without some special legislation, the attorney-general would have no right to interfere in a private action.

The first section of that act requires all receivers of insolvent corporations, “ who are now required by law to make and file reports of their proceedings,” to serve a copy on the attorney-general. This section was amended by chapter 639, Laws of 1881, by requiring receivers of banks to report to the superintendent of the banking department. Section 2 gives power to the attorney-general, in case of the neglect of a receiver for thirty days to file his report, to move to compel him to do so, or to remove him. Section 3 gives the attorney-general power, if he shall believe the interests of stockholders, etc., will be subserved, to move in the Supreme Court “for an order removing such receiver or to compel him to account,” etc.

Now it is urged by the appellant that the right given to the attorney-general by this third section is limited to such receivers as are by law (that is by statute) required to file reports of their proceeding. The respondent insists that this is a general authority in the case of all receivers of insolvent corporations.

Receivers of corporations appointed after return of execution unsatisfied have the same duties as receivers in cases of voluntary dissolution. (Laws of 1852, chap. 71, § 1.) The same is true of receivers of banks and insurance companies. They are required to file written statements quarterly. (2 R. S., in. p. 464, §51 [42]; see, also; Laws 1867, chap. 709, § 2.) Receivers in cases of voluntary dissolution are under the same duties as trustees of insolvent debtors. (2 R. S., m. p. 470, § 85 [74].) And such trustees are required within ten days after making a dividend to file an account in writing of all their proceedings.” (2 R. S., m. p. 48, § 50 [45].) It is claimed by the appellant, and the contrary is not urged by the respondent, that no other receivers of insolvent corporations than those specified above are by statute required to file accounts of their proceedings. And it is evident that the receivers specified above are required to file accounts ten days after making a dividend. In the present case no dividend has been made.

It is plain that the first and second sections of the act under consideration refer to some definite time at which it is supposed some receivers of insolvent corporations are by law required to file accounts of their proceedings. Because the second section speaks of thirty days after the time, thus indicating that some positive regulation is referred to; and not ’any general principle by which courts may always call on receivers to report. Undoubtedly a court which had appointed a receiver might order him to report his pro ceedings. But that would not be a case of receivers “ now required by law.” And further, there is no evidence that in this present case the court had ever ordered Mr. Rice to report his proceedings. Coining then to the third section it would be a forced construction to separate it in its application from the first and second. It speaks of “ such insolvent corporations ” and such receivers ” with evident reference to the receiver mentioned in section 1, viz.: ■ a receiver of an insolvent corporation who is by law required to make and file reports of his proceedings. The section does not speak of any insolvent corporation or of any receiver, as it would have done if the authority given were general and applied to all receivers of all insolvent corporations.

• We have then the difficulty in the present case that it does not appear that Mr. Rice was such a receiver of an insolvent corporation as was then required by law to file reports of his proceedings, and ■therefore that he was not such a receiver as could be removed upon the interference of the attorney-general.

'■ Furthermore, a careful examination of the papers fails to show that the Roekaway Beach Improvement Company (limited) was a corporation. This is not alleged in the moving affidavits, and is not shown in the testimony. Nor is it alleged that the defendant is insolvent. It is alleged in one of the opposing affidavits that, when Mr. Rice was appointed receiver, the company was embarrassed and in imminent danger of insolvency. But it does not appear that the company has not property enough to pay its debts. Nor is it shown that Mr. Rice was appointed upon the ground of the insolvency of the company. The complaint is not before us to show the grounds of action. An action for a voluntary dissolution of the company, supposing it to be a corporation, might be brought, even if it were not insolvent. (2 R. S., m. p. 467, § 69 [58].) And it is only in case of insolvency that the attorney-general can interfere. There seem, then, to be several respects in whieh-the attorney-general has failed to make a case justifying his interference.

There is another consideration: Mr. Rice was appointed in- an action in which Mr. Attrill was plaintiff and the company defendant. The company appeared in the action. The appointment of Mr. Rice was made with the consent of all the directors and stockholders and of many creditors. The motion of the attorney-general was made on notice to no one but Mr. Rice, the receiver. This seems to us improper. The ordinary rules of practice entitle parties who have appeared to notice of motion in the cause. Especially when, a stranger, like the attorney-general, claiming authority under a special act, interferes and attempts to remove a receiver, all parties to the action should have notice. It is said by the respondent that the statute says that the attorney-general may make a motion, and does not expressly require notice. Nor does it expressly require that he should make a motion on written papers. Such things are matters ' of settled practice. He gave notice to the receiver, but the parties to the action were interested and were entitled to be heard. Any other rule would open the door to collusion. The receiver, already appointed with the consent of all parties, might make no opposition to the motion, and thus the rights of those who were interested might be entirely • disregarded. (Code of Civil Pro., §§. 714, 1810.) And generally the stockholders of a company and its creditors will look out as carefully for their interests as a public officer, who has heavy and laborious duties of his own. Certainly they ought to have an opportunity to be heard on the removal of one receiver and the appointment of another. Those who were thus interested could at any time -have come into court if they had thought that their interests vrere in danger or that Mr. Rice was conducting the business improperly. And we think it would be a dangerous principle that the attorney-general, even in a case within the • statute, could make a motion like this without notice to the parties.

• In this view of the matter we think it best to say nothing on the question as to the conduct of the receiver, Mr. Rice.

■ The order is reversed, with ten dollars costs and printing disbursements.

Boardman, J.:

I concur in the conclusion to which my brother Learned has come, for the following reasons :

1. That the case does not come within chapter 537, Laws of 1880.

2. That the attorney-general ought not to intervene except upon notice to all parties to the action who had appeared, if not to-all parties to the action who would have a right to appear and oppose his motion.

■ ■ 3.. That there was not satisfactory evidence that the interests of the stockholders and creditors of the defendant were suffering or in danger to justify the interference of the attorney-general.

4. That such interference ought not to be indulged when stockholders and creditors are substantially unanimous in favor of the existing state of affairs.

5. That the grounds of interference, as alleged by the attorney-general, were not sustained by the proofs.

I therefore concur in reversing the order.

Present — Learned, P. J., and Boardman, J.; Bockes, J., not acting.*

Order reversed, with ten dollars costs and printing disbursements, and motion of attorney-general denied, with ton dollars costs.