author: Brady, J. :

text:
    ISABELLA HAY, Respondent, v. THE STAR FIRE INSURANCE COMPANY, Appellant.

      Policy of inswrance — reformation of — limitation of time to bring action upon— whan the time commences to run in such, case.

    The plaintiff, in June, 1867, held a mortgage for $2,500 containing the usual insurance clause. On June twenty-eighth the defendants issued to the plaintiff a policy for $2,500 insuring her as mortgagee. In June, 1868, plaintiff took another mortgage for'$500 on the same property also containing the insurance clause. Plaintiff applied for a new policy to cover "both amounts. The policy was not delivered at the time of making the application, but was subsequently received by the plaintiff and accepted without examination. This new policy contained an additional clause, providing that the company should only be liable for any deficiency that might remain after the plaintiff had exhausted the primary security. The second policy was renewed from time to time until October, 1873, when the property wars destroyed by fire, and plaintiff then, for the first time, discovered that the additional clause had been inserted.
    In an action by the plaintiff to reform the policy by striking out this clause, held, that the insertion of this clause by the defendant without notice to the plaintiff was, in legal contemplation, a fraud, and that the same should be stricken therefrom.
    The policy provided that no suit or action for the recovery of any claim by virtue of the policy should be sustainable in any court, unless it was brought within twelve months after the loss had occurred.

      Held, that the clause in the policy as Written, requiring the-primary security to he first exhausted, was inconsistent with such a provision and that it did not, therefore, apply to the case of insurance of the interest of a mortgagee; that under the contract, as it was claimed to he hy plaintiff, the cause of action did not accrue until the entry of the judgment reforming the policy.
    ' Appear from a judgment in favor of the plaintiff, entered upon the trial of this action by the court without a jury.
    Plaintiff, in the month of June, 1867, was the holder of a mortgage for $2,500, made by Nathan Smith and Jane, his wife, covering premises in Westchester county. The mortgage contained the usual insurance clause. On the 28th of June, 1867, defendants insured the plaintiff in the sum of $2,500 on “ her interest as mortgagee ” in the premises in question.
    In June, 1868, the plaintiff loaned the mortgagors the further sum of $500 taking a new mortgage therefor, -which also contained an insurance clause, and applied to defendants for a renewal of the policy of insurance, then about to expire, and for an increase of the risk to the sum of $3,000 in order to cover the additional mortgage indebtedness.
    The new policy was not made out or delivered at the time of the agreement of renewal but subsequently thereto, and plaintiff received the same without examination supposing it to be in conformity with the agreement. The new policy did not, however, conform to, and was not a renewal of the first policy. The essential feature of difference consisted in the insertion in the new policy of the clause, i. e.:

      “ In all cases of loss the assured shall assign to this company all his right to receive satisfaction therefor from any other person or persons, town or corporation, with a power of attorney to sue for and recover the same at the expense of this company. When insured as a mortgagee the loss shall not be payable until payment of such portion of the debt shall have been enforced, as can be collected put of the original security to which this policy may be held as collateral, and this company shall then only be liable to pay such sum, not exceeding the amount insured, as cannot be collected out of such primary security.”
    The plaintiff did not examine the policy when delivered, and had no notice or knowledge of the existence of the clause in question or that the policy was not made out in conformity with defendants’ agreement, until subsequent to the destruction of the premises by fire in October, 1873, when her attention was for' the first time called to the fact by the refusal of the company to pay.
    The insurance had been renewed from time to time, such renewals being effected by means of receipts for the annual premiums and not by the making and issuing of new policies.
    On the 9th of October, 1873, the premises were destroyed by fire. The plaintiff gave due notice of the fire and furnished proofs of loss and applied to the defendants for payment of the insurance, which being refused this action was, in January, 1875, commenced for a reformation of the policy to conform to the agreement made by defendants and for the recovery of the amount of loss.
    It appeared in evidence on the trial that the premiums of insurance were uniformly and in all cases paid by the mortgagors. No question was raised on the trial either as to the amount of the loss or the form or sufficiency of the proofs. The policy contained the following provision as to the bringing of actions thereon :
    “It is furthermore hereby expressly provided and mutually agreed that no suit or action against this company for the recovery of any claim, by virtue of this policy, shall be sustainable in any court of law or chancery, until after an award shall have been obtained fixing the amount of such claim in the manner above provided, nor unless such suit or action shall be commenced within twelve months next after the loss shall occur; and should any suit or action be commenced against the company after the expiration of the aforesaid twelve months, the lapse of time shall be taken and deemed as conclusive evidence against the validity of such claim, any statute of limitation to the contrary notwithstanding.”
    The court found that the policy was not in conformity with the agreement made by the company, and adjudged that the same should be reformed in conformity with the prayer of the complaint, and that plaintiff should recover from the defendants the amount of the insurance.

      Osborne E. Bright, for the appellant.

      Charles A. Davison, for the respondent.
   Brady, J. :

The plaintiff, in June, 1867, held a mortgage as mortgagee, for the sum of $2,500. It was made by Nathan Smith and Jane, his wife.

It contained the usual insurance clause. On the 28th of June, 1867, the defendants insured the plaintiff in the sum of $2,500, on her interest as mortgagee. In the following June, the plaintiff loaned the further sum of $500 and took a new mortgage, which also contained the insurance clause; she then applied through her agent for a renewal of the policy from the defendants, then about to expire, for the sum of $3,000, to cover the two sums of $500 and $2,500, loaned as stated. The new policy was not delivered when applied for but was subsequently received without examination. It did not conform to the policy first secured and for $2,500, inasmuch as it contained the following clause which was not found in the old policy.

“ In all cases of loss, the assured shall assign to this company all his right to receive satisfaction therefor from any other person or persons, town or corporation, with the power of attorney to sue for and to recover the same at the expense of this company. When insured as a mortgagee, the loss shall not be payable until payment of the debt shall have been enforced, as can be collected out of the original security to which this policy may be held as collateral, and this company shall then only be liable to pay such sum, not exceeding the amount insured, as cannot be collected out of such primary security.”

The plaintiff did not examine the new policy and had no knowledge or notice of the new clause, or that the policy was not made out in conformity to the application for a renewal, until after the destruction of the premises by fire. Upon these, which are the material facts, the plaintiff sought a reformation of the contract and succeeded on the trial in obtaining the relief asked. The testimony clearly warrants the conclusion that the policy for $3,000, was to be such a policy as had previously been given, and that no notice of the addition or intended addition of the clause mentioned had been given to the plaintiff or to her agent. There can be no doubt, either, that the new policy accomplished an entirely different relation between the parties to that which had previously existed, and there can be no doubt, either, that if the policy for $2,500 had been retained the demand made upon it could not be answ.ered by the text of the clause mentioned, because it was not contained in the agreement. (Excelsior Insurance Co. v. The Royal Ins. Co., 55 N. Y., 343.)

The clause itself is open to the objection, that it is an insurance of the debt and not of the property, and is not only not the agreement the plaintiff sought, but, so far as defendants are concerned, was ultra vires. They could not take such risks. (Case, supra.) The insertion of the new clause without notice, was, under the circumstances disclosed, in legal contemplation, a fraud. The plaintiff did not ask for it. It was not spoken of and was unauthorized. The reformation of a contract upon such facts and such legal conclusion of fraud is almost matter of course. When the plaintiff applied for a renewal and it was agreed upon, it meant the repetition of the policy in terms which had been agreed upon. The rules which govern applications of this kind have been elaborately discussed, in many cases, and it may be supposed that some of them are settled so as to be securely applied.

It can be said, it seems with certainty, that fraud need not be expressly charged. It is sufficient if it is fairly deducible from the facts established. And further, that where it exists the relief sought will be granted and the contract reformed. The insertion of such a clause as mentioned, without an agreement therefor or notice, was as already suggested, a fraud in legal contemplation. (Story’s Equity Jur., §§ 154, 155; Lyman v. The United Ins. Co., 17 Johns., 373; Bidwell v. The Astor Mutual Ins. Co., 16 N. Y., 263; Rider v. Powell, 28 id., 310; Welles v. Yates, 44 id., 525.)

A careful examination of the case has not revealed error in the findings or the validity of any exception taken. The testimony on the part of the defense in some respects corroborates that given on behalf of the plaintiff. It is true that neither the plaintiff’s agent nor herself read the first policy, but it is also true that both supposed they had secured immunity from loss if the property was destroyed to which the policy applied. This was the object they had in view and this was accomplished by the first policy. The fact of their not having read it, did not justify the defendant in substituting one differing from it in an important respect without notice, which, as already suggested, was not given in this ease. Th'e testimony with regard to this new policy leads to the conclusion that the plaintiff’s agent wanted and supposed that he would obtain insurance upon the property and not of the debt, and that if the property were destroyed by fire the plaintiff would be paid.

It is said, however, assuming that the policy should be reformed, the plaintiff cannot succeed because this action was not commenced within twelve months after the- loss occurred, but there are answers to the proposition which seem to be conclusive. The policy issued contained the following clause: When insured as a mortgagee, the loss shall not be payable until payment of such portion of the debt shall have been enforced as can be collected out of the original security to which this policy may be held as collateral, and this company shall then only he liable to pay such sum, not exceeding the amount insured, as cannot be collected out of such primary security.” It will be perceived, however, that it contemplates the adoption of all the proceedings necessary to obtain from the original security the payment of . the debt to which the policy relates, and that the defendant shall be called upon to pay only such sum as cannot be thus collected. It is, perhaps, not necessary to say that this is wholly inconsistent with the covenant requiring the commencement of an action within twelve months, because the enforcement of the demand secured by the mortgage might involve years of litigation which must be exhausted before the defendant’s liability would accrue. The provision does not, therefore, apply. It is designed to cover only the claims which originate in the loss of property insured, and as to which the defendants are primarily liable. This is our conclusion on the policy, as it exists. If, however, we consider the proposition with reference to the contract as the plaintiff avers it to have been made, then the answer is that the action, to be commenced under the provisions of the policy for the loss, does not accrue until the judgment reforming it is pronounced.

. The effect of changing the policy, is, therefore, substantially to render nugatory the limitation under consideration.

We think the judgment should be affirmed, with costs.

Davis, P. J., and Ingalls, J., concurred.

Judgment affirmed, with costs.


source: Caselaw Access Project

author: Brady, J.:

license: Public Domain

text:
    ISAAC V. FRENCH, as Receiver of THE CENTRAL PARK SAVINGS BANK IN THE CITY OF NEW YORK, Appellant, v. JOSEPH E. REDMAN and others, Respondents.

      Trustees of sewings bank — purchase of reed estate by — when unauthorized.

    A savings bafik in New York was incorporated in 1867. During tbe years 186i, 1868 and 1869 tbe expenditures exceeded tbe receipts; in 1870 and 1871 the receipts were in excess of the expenditures, and m 1873 and 1878 the expendi tures again exceeded the receipts. In the latter year the trustees of the bank purchased four lots, three of which were sold, and on the fourth a banking house was erected. This, action was brought by a receiver of the bank against the trustees to recover damages alleged to have been sustained by the bank-from such purchase, on the ground that, as the charter limited the power of the trustees to purchase real estate to a lot and banking-house, that the purchase of the four lots by the trustees when they needed hut one, and the purchase of even one lot in the then condition of the bank, was an abuse of discretion, and illegal and unauthorized.

      Held, that the question as to whether or not the purchase of the land, considering the financial condition of the bank, was a reasonable exercise of the discretion vested in the trustees, was a question for the jury, and that it was error for the court to withdraw that question from them. "
    Appeal from a judgment dismissing tbe complaint entered at tbe Circuit, and from an order allowing separate bills of costs to each of tbe defendants.
    Tbe action was brought by tbe plaintiff, as receiver of tbe Central Park Savings Bank, against ten of its trustees to recover some $15,000 claimed to bave been lost by reason of an illegal purchase of real estate. Tbe power of tbe trustees to purchase real estate was liim ited by tbe amended charter to “ a lot and banking-house requisite for tbe transaction of its business, and for an income from such parts of tbe same as are not required for its own use.” By deed dated May 1, 1873, tbe bank bought of Anson Backus a piece of land at tbe north-west corner of Third avenue and Forty-eighth street, in tbe city of New York, for $74,500. Tbe premises embraced four lots, three fronting on Third avenue, and one in tbe rear, fronting' on Forty-eighth street. Tbe conveyance was not made directly to tbe bank, but was made to Gearty, Cary and Redman, three of tbe trustees, who afterwards conveyed as tbe bank directed. The trustees, however, bought for the bank, aud the consideration was paid by the bank’s money. Subsequently they conveyed lot No. 1 to the bank and a banking-house was erected thereon. The other three lots they conveyed to different individuals. Counsel for plaintiff claimed, taking the transaction as a whole, and charging the cash paid out, with broker’s fees, interest, taxes, etc., down to the time the receiver was appointed, and crediting the prices received for the parts sold, with interest, and estimating the lot on hand (as distinguished from the lot and building), there was, in round numbers, a loss of $15,205.55. It was also claimed by him that the bank was insolvent at the time of the purchase. It appeared that the bank was incorporated in 1867; that during the years 1867, 1868 and 1869 the expenditures exceeded the receipts; that during the years 1870 and 1871 the receipts were in excess of the expenditures, and that in 1872 and 1873 the expenditures again exceeded the receipts.
    Plaintiff on the trial claimed : First, that the purchase of four lots, when one only was requisite for, and intended for, a banking-house, was illegal, and subjected the trustees concerned in it to all the loss sustained thereby. The defendants claimed that the loss, if any, in the transaction was on the corner lot, No. 1, the purchase of which, if it had been made alone, was authorized by the charter. The plaintiff claimed that the purchase being in gross, it was impossible to distinguish or apportion the loss, and that the defendants were liable for the whole. Secondly, the plaintiff claimed that in the then condition of the bank, which was insolvent, and had been running behind for several years, it was an act of gross negligence and mismanagement (even if the purchase of all the lots were legal) to invest all the available assets in a bank building. And the plaintiff asked to go to the jury on this question.
    The court disposed of the first point by holding that the evidence showed that the three lots, Nos. 2, 3 and 4, did not cause a loss. On the second point, the court held that there was no evidence of a want of due care, skill and judgment sufficient to go to the jury on.

      F. O. Bcvrlow, for the appellant.
    As to the gross negligence of the trustees in making the purchase in view of the financial condition of the bank, the counsel cited: Pontohartrain Railroad Company v.
      Paulding (11 Louis [O. S.], 41; 6 Louis Oond. R., 30); Percy v. Millondon (3 Louis [O. S.], 568 ; 2 Louis Cond. R., 364); Attorney-General v. Sutton (1 Craig & Phil., 1); Morse on Ranking [ed. of 1870); 116 et seq. Some point was made that certain of tbe trustees were not present at the meetings at wbicb tbe purchase was made, and hence are not liable. Trustees are not beard to say that they did not know tbe acts of their corporations. (See Palmier v. Yates, 3 Sand., 127, and at pp. 159, 160 ; Osgood v. Zaytin, 5 Abb. [N. S.], 1, and at p. 9 ; Morse on Banking [ed. of 1870], at foot of p. 118; Bank Gomrs. v. Bk. of Buffalo, 6 Paige, 497.)

      E. Ellery Anderson, for tbe respondents.
    Trustees are not liable for losses resulting from mistake either of fact or of law. (Scott v. De Peyster, 1 Edw. Ch., 513; Miller v. Proctor, 20 Ohio St., 442; Gobold v. Branch Bk. of Mobile, 11 Ala., 191; Hodges v. AT. E. Screw Go., 1 R. I., 312; Ha/rman v. Tappenden, 1 East, 555 ; Overend v. Gu/rney, 4 Cb. Ap., 701; Green’s Brice’s Ultra Yires, note, 407, 408.)
   Brady, J.:

Assuming that tbe purchase of four plots of land were necessary for tbe banking-house contemplated by tbe resolution to build, it appears that three of tbe plots were sold, and as tbe result tbe plot left cost $29,250. This, it would seem from the evidence, was a fair price for it when purchased, although by tbe depreciation in real estate it was not worth more than $22,000 when this action was tried. If it was fairly worth tbe sum wbicb it cost when it was bought, then no charge of improvidence or wrong can be sustained unless tbe purchase itself, under tbe then existing circumstances, was wholly unwarranted. It is a notorious fact that real estate has, during tbe period of five years last past, depreciated in all tbe States and in Europe, a result from causes to wbicb it is not necessary to refer. It is equally notorious that loans made upon real estate in this county, and elsewhere situate, and by corporations exercising care, have not been realized by tbe sale of tbe securities pledged, owing to tbe depreciation mentioned.

Tbe difference between tbe values of 1873, 1875, 1876 and 1877 are easily accounted for, therefore, and readily understood. Tbe mere fact of the depreciation is consequently insufficient to sustain any charge of wrong done, and suggests the inquiry, as already intimated, whether the purchase was unjustifiable. The bank was not at the time the land was selected a success, and nothing in the case revealed warrants the conclusion that it would be. During its existence, except for the years 1870 and 1871, its outlays were more than its receipts; and in 1872, the year succeeding the last prosperous year, the amounts paid out exceeded the sums received by more than $2,000. The land was purchased in 1873, and in the year succeeding that in which as' just stated the outlays exceeded the receipts. How could it, then, be possible that any new building was necessary for the business of the bank beyond what it occupied, and if it was not, how can the purchase of the excessive plots be construed as other than an intention to speculate, and thus, if successful, increase the assets of the bank ? It is true that the right to the exercise of their judgment and discretion may protect its officers, but. these elements of human action must rest upon something other than mere caprice, and upon something which has substance, some thing which business men would estimate as of value, and sufficient for operations connected with the subject to which it related. For these reasons, without any extended examination of the authorities kindred to the subject, it is quite apparent that whether the discretion was abused is a question for determination. The learned justice presiding at the trial so treated the issues presented. He proclaimed that there was nothing in the case to show that at the time the purchase was made it was such an excess of authority on their part or such a want of judgment as to make them personally liable for the result. In this we think he may have been mistaken, and that under’ the circumstances the question was a proper one for the jury to consider and decide. The facts detailed are sufficient to demonstrate that a jury might regard the purchase as one which the financial condition of the bank did not at all warrant, and draw thence the conclusion of wrong intended or liability incurred by unjustifiable expenditure.

The defendants would have the benefit on the investigation of the charge against them of such evidence as they might present in defense, and of the doctrines of ignorance of the facts, of innocence and of good faith so far as they could be applied, and might clearly exculpate themselves from all imputation. The evidence given called upon them to respond. There was a prima facie case against them, which demanded consideration at the hands of the jury. The respondents placed great confidence in the case of Scott v. De Peyster (1 Edw. Ch., 513), and with some plausibility, as an authority for the proposition that on the facts disclosed the defendants are relieved from all liability, there being no charge of dishonesty or willful wrong established against them.

A careful examination of that, case dissipates the thought of its advantage to them, as assumed. So far as it bears analogy to this case, the result is that the conduct of the trustees was regarded as an innocent mistake or error of judgment.

The circumstances were peculiar, but fully sustained the conclusion expressed. Whether the conduct of the defendants complained of was an innocent mistake or a mere error of judgment, it was the province of the jury to determine, and from which they were prevented- by the dismissal of the complaint. We think the case should have been submitted to the jury, and that the omission to allow it to be done was error.

Judgment reversed, with costs to abide event.

Davis, P. J., and Daniels, J., concurred.

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


text:
    THE BERKSHIRE WOOLEN COMPANY, Plaintiff, v. AUGUSTUS D. JUILLARD, Receiver, and others, Defendants.

      Bond signed by pan'tners individually — when it constitutes a firm obligation ■ — • Bemedy against the individuals and also against the receives- of the fi'm.

    In April, 1873, two mills in tlie State of Connecticut were indebted to the firm of Hoyt, Spragues & Co., in the sum of $1,000,000, the payment of which was guaranteed to them by one Chapin; one of the members of the firm, acting in behalf of the firm and of Chapin, applied to certain banks for the purpose of procuring a loan of $600,000, which loan was made upon the execution of a joint and several bond for that sum by Chapin as principal, and by the individual members of the firm of Hoyt, Spragues & Co., as sureties, and of a mortgage as collateral thereto, given by Chapin. The money arising from the loan was applied upon the debt guaranteed by Chapin. Subsequently the firm of Hoyt, Spragues & Co. became insolvent, and default having been made in payment of the interest, the mortgage was foreclosed. In this proceeding it was sought to recover from the receiver of the firm assets, the deficiency arising upon the sale.

      Held, that as the bond, although signed by the members of the firm, as individuals, was in fact given to secure the payment of a debt due to the firm, and was for its benefit, it was, therefore, a firm obligation, and was j>ayable out of its assets.

      Held, further, that the fact that actions had already been commenced in this court against the surviving sureties, and the execuors of those who were dead, did not prevent its enforcement against the firm.
    -Apreal from an order made at tbe Special Term overruling exceptions to tbe report of a referee.
    By tbe decree in this action, dated January 6, 1876, it was adjudged that tbe firm of Hoyt, Spragues & Co. was insolvent, and that tbe estate, assets and effects of said firm in tbe bands of tbe defendant Juillard, receiver, constituted a fund, out of wbicb tbe plaintiff, a creditor of said firm, and other creditors, upon proof of tbeir claims, were entitled to be paid in accordance with tbeir respective rights.
    William P. Dixon, Esq., was by said decree appointed referee, to take proof of tbe claims of the creditors of Hoyt, Spragues & Co., filed with him, and of any objection thereto, and to determine tbe validity of such claims so presented to him.
    Five savings banks in Providence, viz.: Tbe People’s Savings Bank, tbe Franklin Institution for Savings, tbe City Savings Bank, tbe Union Savings Bank, and tbe Cranston Savings Bank, accordingly filed with tbe referee a claim (No. 499) against tbe assets of tbe firm of Hoyt, Spragues & Co. Proof was taken in support of said claim, and when tbe claimant rested tbe counsel for tbe receiver moved to dismiss tbe claim. The motion was granted by tbe referee. Before tbe filing of tbe referee’s report tbe claimants requested tbe referee to make certain findings of fact. He declined to do so, and the claimants duly excepted. Tbe referee thereupon filed bis report, to which exceptions were duly filed by tbe claimants. Tbe claim filed with tbe referee is based upon a bond made by Josiab Chapin, as principal, and tbe several members of tbe firm of Hoyt, Spragues & Co., viz.: Edwin Hoyt, William Brenton Green, Amasa Sprague, William Sprague, Nehemiah Knight and Albert S. Gallup, as sureties, to the banks above named. The bond in terms bound the obligors in the sum of $1,200,000, and for the payment of that sum the obligors “bind themselves and each of them, and any six, five, four, three or two of them, their and each of their and any six, five, four, three or two of their heirs, executors and administrators, jointly, severally and respectively, firmly by these presents.”
    The receiver’s counsel and the counsel for plaintiff in the above-entitled action filed objections to the claim being entertained by the referee, which may be briefly stated as follows, viz.: The claim as presented is not a claim against the assets of the firm of Hoyt, Spragues & Co. It is, at best, a claim against the several estates of the members of said firm and against their joint estates, bat not against their partnership estate.
    Evidence was offered by the claimants and appellants before the referee tending to establish that for some time prior to the 4th of April, 1873 (the date of the bond), the Riverside Mills and the City Woolen Company had had business relations with the firm of Hoyt, Spragues & Co., and were then indebted to that firm in an amount exceeding $1,000,000. Josiah Chapin, of Providence, the principal obligor of the aboveunentioned bond, had duly guaranteed the indebtedness of the Riverside Mills and the City Woolen Company to Hoyt, Spragues & Co. Mr. Gallup, one of the above-named sureties, and a member of said firm of Hoyt, Spragues & Co., acting on behalf of such firm, negotiated a loan from the above-named banks, the claimants, of $600,000 for the purpose of enabling Mr. Josiah Chapin to réduce the indebtedness of the respective mills above named to the firm of Hoyt, Spragues & Co., which the mills were unable to pay, and for which he (Chapin) had become guarantor. Eor the purpose of accomplishing this object and loan, Mr. Gallup, acting on behalf of the firm of Hoyt, Spragues & Co., visited the banks in Providence, and accordingly arranged the matter, as hereinafter stated. The banks acceded to the proposition on the following terms: A bond to be executed for the sum of $1,200,000 by Mr. Josiah Chapin, as principal, and the members of the firm of Hoyt, Spragues & Co., as sureties, the bond to bind the joint and several estates of tlie members of the said firm. As additional security for said bond, Josiah Chapin was to execute and deliver to certain trustees a mortgage upon certain real estate situated in Providence. The sureties named in the bond were to covenant with Josiah Chapin that they, and not the said Josiah Chapin, should pay the interest on the bond and the taxes, etc., on the real estate so mortgaged. The money was to be paid on the order of Chapin directly to IToyt, Spragues & Co. The agreement so entered into was carried out. The first six months’ interest was deducted from the loan. The second six months’ interest was paid by the firm of Hoyt, Spragues & Co. The banks not having advanced, inter sese, an equal amount of money towards the loan, in order to designate, as between themselves, the exact amount which each had advanced to the common pool, required Mr. Chapin to deliver simultaneously with the execution of the bond and mortgage to each of them his promissory note, “ for the sake of convenience,” for the several sums of money which each bank advanced to the common loan. The notes were so executed and delivered for the purpose designated, i. e., “ for the sake of convenience,” and it was so expressed in the bond. Default was made in the payment of the principal, and thereupon the trustees named in the mortgage duly disposed of all the real estate, and after accounting for all the net proceeds of the sale, a deficiency exists on the bond to an amount exceeding $325,000. The claim of the claimants and appellants consists of such deficiency.

      Chas. Traey, Chas. M. Da Costa and L. M. Arnold, Jr., for The People’s Savings Bank and others, claimants and appellants.
    The fact of the firm name not having been signed to the bond, though executed by all the members of the firm, does not prevent its being regarded as a firm obligation. [Ex parte ttmter, 1 Atk. Ch., 223, p. 225; Galway v. Matthew, 1 Campb., 403; Filley v. Phelps, 18 Conn., 295; Agawam Blc. v. Morris, 4 Cush., 99; De JarnetSs Executors, 31 Ala., 232, 233; Burnley v. Bice, 18 Texas, 481; Morrison v. Jackson, 1 T. R., 203.) The doctrine of election'which prevailed in England at one time, as applied to cases like the present, has long since been exploded there. [Ex parte Stone [Law Rep.], 8 Ch. App., 914.) It never obtained a foothold in this country, for it is well settled by both State and national authorities that where a valid claim exists against a joint and several fund in bankruptcy or in insolvency, it can be enforced against both, although, of course, it can only be collected once. {In re Fa/rnierer, 6 Law R., 21; In re Bigelovc, 2 N. B. R., 371, 373; id., 3 Ben., 146; 7 N. B. R., 217; Mead v. Mat. B7c. of Fayetteville, 6 Blatch., 180 ; Story’s Eq. Jur., § 645; In re Bradley, 2 Bis., 517.)

      Thomas M. Hubbard, for the plaintiff, respondent.
    A joint and several obligation in writing executed by partners in their individual names, and not in the name or style of the partnership, is not a partnership obligation. Nor can the holders, in case of insolvency,.claim from the partnership funds. (Parsons on Part., 125, 126, 215; 1 Bindley on Part., 355 ; Turner v. Jayeox, 40 N. Y., 470; Mat. Bh. of Salem v. Thomas, 47 id., 15 ; Forsyth v. Woods, 11 Wal.,484; Perring v. Hone, 4 Bing., 32; Grouch v. Bowman, 3 Humph., 209; Marshall v. Oolman, 2 Jac. & W., 266.) The parol testimony offered by the claimants to show that the bond was intended to create a partnership liability was wholly incompetent and immaterial, and the referee was right in not basing any finding upon it. {Belloni v. Freeborn, 63 N. Y.,383, 389 ; Gates v. MeKee, 3 Kern., 232,235; Green! onEvi., §§ 277, 282; Brown v. Curtiss, 1 Comst., 321; Goodell v. Smith, 9 Oush., 592, 594; Poyyenhusen v. Seeley, 3 Keyes, 150, 153. Although at law the partners might be sued and the property of the firm as the joint property of six of the parties taken under execution, this has no bearing upon the distribution of partnership assets in equity after the firm has become insolvent. A bond signed by the members of a firm in their individual names, as sureties, is not a claim against the firm in bankruptcy or insolvency proceedings, even when the consideration passed to the firm. (Bump on Bankruptcy [9 ed.], 245; In re F. F. HoTbrooh <&, Go., 2 Lowell’s Dec., 259 ; In re Webb v. Joh/ruson, 2 Bank. Reg., 614; In re Bueyrus Machine Go., 5 Bank. Reg., 303; In re Miller, 1 N. Y. Leg. Obs., 38 ; In re Herriclc, 13 Bank. Reg., 312; In re Weston, 12 Hete., 1; Harmon v. Glarh, 13 Gray, 114, 122; Gay & Co. v. Jolmson, 45 N. H, 587; Maynard v. Fellows, 43 id., 258 ; Forsyth v. Woods, 11 WaL, 484; In re Bodcbim c& Hamilton, 6 Bis., 377.) The claimants have elected to proceed against the separate estates of the individuals who executed the bond, and would thereby have waived their right to proceed against the joint estate had such a right ever existed. (Lindley on Part., 1013-1025 ; Collyer on Part., §§ 910-918 ; Foe parrte Hill, 2 Dea., 219 ; Burge on Suretyship, 500 ; Avery & Ilobbs on Bankruptcy, 308 ; Mead v. Hat. JBlc., 2 Bank. Beg., 1YY; In re F. F. HoTbroole (& Co., 2 Lowell’s Dec., 262, H. S. Dist. Ct. for Mass., 18YY; In re Howard, Gole & Co., 1 Bank. Reg., 5YY ; Mead v. Nat. Ble., sivpra.)

   Brady, J.:

It is, to my appreciation of the facts developed in this proceeding, quite apparent that the engagement of the members of the firm of Hoyt, Spragues & Co. as sureties for Chapin was directly connected with the interest, and therefore for the benefit, of the firm as such. The facts seem to leave no room to doubt this deduction. They were the creditors of Mr. Chapin, and one of them acting on behalf of the firm, and for Mr. Chapin as well, negotiated a loan from the claimants, the amount of which was to be applied to reduce the indebtedness of Mr. Chapin. The loan was made to him, and he was therefore the principal, but the members of the firm for considerations expressed in the instrument became sureties for the payment of the loan, which, through the instrumentality of one of its members, was accomplished and for the benefit of the firm. In other words, the money was thus obtained to pay a part of the indebtedness of Chapin to the firm, and in order to secure it they guaranteed its payment. The transaction was in effect a qtoasi loan to the firm, which they might or might not be called upon to refund, that incident depending upon the value of the pledge made by Chapin and his ability to meet the obligation imposed by the loan. The money having been thus received and used by the firm, their joint and several obligation was in legal effect, though not in precise terms, the undertaking of the firm for its benefit and advantage. The members of the firm by it assumed an obligation for their joint advantage as a copartnership, the whole transaction having no other object in view. When a joint obligation is executed by the individual members of a copartnership for a consideration passing to it, although it be not in the name of the firm, the liability incurred becomes one of the partnership, and when matured is entitied to priority of payment out of the assets over the private debts of the copartners. There is no distinction in favor of debts directly contracted in the firm name. If the debt exists as one of the firm, its status is instantly determined. (Ex parte Hunter, 1 Atk. Ch., 225, and cases cited; Galway v. Matthews, 1 Campb., 403; Filley v. Phelps, 18 Conn., 295; Agawan Bk. v. Morris, 4 Cush., 99; Turner v. Jaycox, 40 N. Y., 470; Forsyth v. Woods, 11 Wal., 484.)

In the last case Mr. Justice Strong said: “ If a firm be composed of two persons associated for the conduct of a particular branch of business, it can hardly be maintained that the joint contract of the two partners made in their individual names, in respect to a matter which has no coivnecüon with the fii-m, business, creates a liability of the firm as such.” (See, also, Franklin v. Fairchild, 64 N. Y., 471.)

The reporter’s note in Turner v. Jaycox (supra) does not seem to be warranted by the case. One of the questions therein considered was whether a note made by the members of a firm, though not in the firm name, and given for money used by the firm, was a partnership debt, and it was declared to be of that character. The doctrine that a joint note of individual partners was not,per se, a partnership debt was doubtless appended to prevent any misunderstanding of the opinion delivered. If such was not its object, then the reporter’s note seems to have been unnecessary.

If the question be considered in reference to the intention of the contracting parties, there is little opportunity for discussion as to the intent. No other surety, than those composing the firm was called upon to unite in the obligation given, and no one was interested in the consummation of the transaction but Chapin and the firm, but more particularly the latter, to whom the proceeds all went, and whose obligations to each other when the money was received immediately became those of jiartners inter sese. The money became assets at once, and becoming thus amalgamated, continues to be represented by what is left either in whole or pro tanto.

The counsel for the receiver seems to think that the claimants having commenced an action against the surviving obligors and the executors of IToyt and Knight, they have waived any right to proceed against the joint estate, if such ever existed. This is an erroneous view of the effect of the procedure mentioned. In several cases it has been held that the creditor had the right in bankruptcy, to prove his debt against the firm and an individual member signing the obligation, and was not obliged to elect. (In re Bigelow, 2 N. B. R., 371, 373; Emery et al. Assignees v. The Canal Nat. Bk., 7 id., 217; In re Bradley, 2 Bis., 517.)

The opinion of Justice Clifford, in Emery v. The Canal National Bank, is elaborate and exhaustive, and the conclusion is in accord with what is stated. The assignee applied in that case to compel the claimant to elect, but the court declared he could proceed against both estates, namely, that of the firm and that of the individual partner. In In re Bradley, Justice Mullin said: “I think the court has no judicial power to restrict the right of the creditor to pursue the joint and several debtors for the collection of his debt in the manner known to.the law.” If there be any restraint tolerable in such cases, there seems to be more propriety in requiring the creditor to pursue the joint property and to exhaust it before resorting to the individual estate, because the joint fund is primarily liable to the payment of joint obligations. Here the effort is to obtain payment out of the joint estate, and the effect, if payment be made, would be to increase the personal or individual property, and in that way to enlarge the security for the individual creditors. Although it may be justly said that there is some conflict of authority in regard to it, and which to some extent is discussed in the cases cited, nevertheless considering the organization of courts and the object of their creation, the dictates of reason result in the proposition that the creditor may seek the property of his debtor in whatever form it may be found, unless exempt by law, and the authorities cited sustain such a doctrine. Whatever estate may be applied, the debt can be collected but once, and until collected the creditor is by law entitled to his remedy.

Bor these reasons the exceptions to the referee’s report should be sustained, the order ajipealed from reversed, and an order entered directing the referee to allow the claim of the appellants.

Davis, P. J., and Daniels, J., concurred in the result.

Order reversed and order entered as directed in opinion.


author: Brady, J. : Daniels, J.:

text:
    DUDLEY G. GAUTIER and JOSIAH H. GAUTIER, Respondents, v. THE DOUGLASS MANUFACTURING COMPANY, THE RUSSELL & ERWIN MANUFACTURING COMPANY and THOMAS J. S. FLINT, Impleaded, etc., Appellants.

      Purchaser of trust estate with knowledge of the trust— liabilities of— Sale of goods — i/m/plied warranty — notice of defects.

    A purchaser of a trust estate, with knowledge of the trust, is subject to all the duties in respect to the same which rested upon the trustee from whom he purchased.
    In an action to recover the price of certain steel sold to be used in the manufacture of edged tools, the defense was that the steel was defective and of poor quality. It was admitted that the quality of the steel could not be ascertained without “working it up,” and that an inspection and examination of it would not reveal its defects. Held, that the implied warranty that it was fit for the purpose for which it was sold in order to take advantage of the purchaser was not bound to test it at once and give notice of the defects, but that he was entitled to deduct the damages, sustained by reason of its imperfection, from the price, in an action brought to recover the latter.
    Appeal from a judgment in favor of tbe plaintiff rendered at Special Term, and from an order denying a motion for a new trial made on tbe ground of surprise, etc.

      L. P. Mtwsh, for tbe appellants.

      John E. Pa/rsons, for tbe respondents.
   Brady, J. :

Tbe plaintiffs are copartners in tbe business of manufacturing steel under tbe firm name of D. G. Gautier & Co.

Tbe Russell & Erwin Manufacturing Company, one of tbe defendants, is a corporation established under tbe laws of Connecticut and located at New Britain, Connecticut, where its office and factories are situated. Tbe company is engaged in tbe business of manufacturing and dealing in hardware, having its principal warehouse for tbe sale of goods in Chambers street, in tbe city of New York.

During the year 1813, and previous thereto and until April, 1814, Richard P. Bruff, also named as defendant in the complaint, was the managing agent of the Russell & Erwin Manufacturing Com pany’s said warehouse in New York and held a written power of attorney from that company for the performance of certain acts in the execution and prosecution of its business at the city of New York, the nature and contents of which power of attorney are set forth in the answer of the company.

Previous to the year 1813 one Frederick L. Ames held the title of two certain factories for the manufacturing of mechanics’ tools, one of the factories being known as the “ F. L. Ames Chisel Works,” situated at Arlington, Yermont, and the other as the “F. L. Ames Auger Works,” situated at Seymour, Connecticut.

Said Ames carried on the business of these factories under the name of the “Douglass Manufacturing Company,” and Thomas Douglass, also named in the complaint as defendant, claimed to have some equitable interest in said works and business. The goods manufactured at said works were consigned to the Russell & Erwin Manufacturing Company for sale upon commission and sent to the store of that company, in the city of New York, where said Bruff was stationed as manager as aforesaid. In January, 1813, by an arrangement on the part of Douglass and Bruff a purchase was made from said F. L. Ames of the said factories and the machinery, goods and materials there situated, and certain patent rights, and the same were conveyed to said Richard P. Bruff.

The price paid for this purchase was $183,000, of which $61,290.08 was paid to said Ames in cash and the remainder in four notes signed by Thomas Douglass, two of which, amounting to $61,290.08, were indorsed by the defendant Thompson J. S. Flint, and two others, amounting to the like sum of $61,290.08, were indorsed by said Bruff in the name and behalf of the Russell & Erwin Manufacturing Company. The cash paid as aforesaid was borrowed of said Thompson J. S. Flint, and the note of Thomas Douglass was given him for the same, as well as a note for a certain other amount given to him for commissions, for indorsing.

Richard P. Bruff, after receiving conveyance of said property, thereupon made and executed a written declaration of trust, dated January 30, 1813, in which, after reciting the conveyance of said property to Mm, lie also recites that the Russell & Erwin. Manufacturing Company had agreed “ to contribute and add thereto all the steel which might be required for the term of one year at said works, and then agrees that he will hold and manage said property, and conduct the business of said works, and the sale of the product thereof, under the name of the “Douglass Manufacturing Company,” upon the trusts and for the benefits of the persons, firms and corporations thereinafter named, which were:

First. To pay the expenses of the business. Then to pay Barney» Butler & Parsons certain promissory notes of Thomas Douglass, therein named. Then to pay Thompson J. S. Flint four certain promissory notes therein named, payable twelve months after date.

The instrument then provides that the business shall be wound up in case of default in the payment of any of the said notes to the said Flint, and for the sale of the property and the application of the proceeds to the payments provided for therein, but that otherwise the trust shall be continued for the following purposes:

First. To reimburse the “ Russell & Erwin Manufacturing Company ” for all sums expended by them for steel delivered by them to the trustee in the prosecution of said business.

Second. To pay to the Russell & Erwin Manufacturing Company two notes of Thomas Douglass, amounting to $61,290.08, payable twenty-four months from date. These were the two notes before mentioned which had been indorsed by said Bruff in the name of the Russell & Erwin Maiiufacturing Company and delivered to said Ames.

The instrument then goes on to provide for the winding up of the business and sale of the property in case of default in the payment of any of said sums, and also for the transfer or payment to Thomas Douglass of any residue or balance of said property, or the proceeds thereof, that might remain after the payment of all the sums aforementioned.

The said Richard P. Bruff accordingly entered upon the execution of said trust and conducted said business from the date of said instrument until about July 2J, 18DL

The goods manufactured at said works during said time were consigned to “ The Russell & Erwin Manufacturing Company ” for sale upon commission, and sales were made therefrom as well as from the stock of goods which had been manufactured and sent to said store previous to Bruff’s trusteeship, and which were, held for sale in said store in manner as stated below.

In the meantime Bruff had paid out of the proceeds of said business the cv/rrent expenses thereof, and had also paid in full the notes held by the said Barney, Butler & Parsons,’ and one of the notes held by the said T. J. S. Flint, and also had made the payment mentioned below.

At the time of the conveyance of the said real estate and factories and their contents to Bruff the Bussell & Erwin Manufacturing Company held in their warehouse, in New York, a stock of manufactured mechanics’ tools of the value of about $100,000, which had been consigned to them for sale from said factories by F. L. Ames.

This stock of goods was at that time purchased by Douglass of Ames for $100,000, Douglass giving Ames his promissory notes for that amount. By vote of the board of directors of the Bussell & Erwin Manufacturing Company, Bruff, as the agent and attorney of that company, was authorized to guarantee the payment of those notes, taking said stock as security to indemnify the Bussell & Erwin Manufacturing Company therefor. Under this authority Bruff indorsed said notes in the name of the Bussell & Erwin Manufacturing Company and the stock of goods was held in the store of the Bussell & Erwin Manufacturing Company, and sales were made therefrom by Bruff during the time of his continuance in said trust, and he paid out of the proceeds a portion of said notes, amounting to some $60,000. The balance of said notes has since been paid by the Bussell & Erwin Manufacturing Company.

The last-mentioned transaction, viz., the purchase of said stock of manufactured goods by Douglass and the guarantee of his notes therefor and the holding of the stock as security, was the only part of the arrangement at that time known to, or contemplated by, the board of directors of the Bussell & Erwin Manufacturing Company, excepting that the understanding was that they were to continue to receive consignments of goods from the factories as before.

The fact of the conveyance of the real estate and factories, or any of the property, to Bruff, and of his making the declaration of trust, was unknown to the board of directors of the Bussell & Erwin Manufacturing Company, or to any other of the officers of that company, excepting Bruff himself, for more than a year after the date of the declaration of trust. Bruff states that it became known to them in February or March, 1874, and other witnesses state that it became known to them for the first time in May, 1874. The declaration of trust was not recorded.

There is no evidence in the case of any application by said Bruff for or refusal by the Russell & Erwin Manufacturing Company, or its board of directors or any of its officers, to furnish the steel necessary for carrying on the business of said trust as provided for by the declaration of trust. Bruff did, however, apply to the plaintiffs to furnish steel upon a credit of nine months and agreed to give them the indorsement of the Russell & Erwin Manufacturing Company upon the notes to be given for said steel, which notes were to be made by him on behalf of the Douglass Manufacturing Company. The complainants thereupon from time to time furnished steel to said works to the amount, in the aggregate, of about $70,000. Notes were from time to time given therefor, and some of these notes, upon becoming due, were renewed.

At the time of the commencement of the action the plaintiffs’ claim was represented by nine promissory notes, amounting to $29,709.15, and an open account amounting to $7,205.92. The notes were indorsed by Bruff in the name of the Russell & Erwin Manufacturing Company. There is no evidence in the case showing distinctly what portion of this steel was furnished within one year from the date of the trust deed and what portion was furnished after that time.

The fact of the indorsement of notes of the Douglass Manufac. turing Company by Bruff in the name of the Russell & Erwin Manufacturing Company was not known to the board of directors or to the other officers of said latter company until the spring of 1874. The officers of the Russell & Erwin Manufacturing Company then for the first time also ascertained that payments from their funds to a large amount had been made by Mr. Bruff on account of the Douglass Manufacturing Company, so that a large debt from that Company to the Russell & Erwin Manufacturing Company had accumulated. As this had been done by Bruff without authority he was liable thereupon to the company. It was also found that Bruff was liable to the Russell and Erwin Manufacturing Company upon certain matters outside of the Douglass Manufacturing Company transactions and not connected with this case.

The Russell & Erwin Manufacturing Company being thus aroused, at least partially, to a sense of their situation an examination was commenced, and Bruff, in order to bridge over the difficulty and assure the Russell & Erwin Manufacturing Company, made the conveyance to that company referred to in the complaint.

It recites that Bruff was indebted to the Russell & Erwin Manufacturing Company for moneys of that corporation advanced to the Douglass Manufacturing Company by him without authority while acting for certain purposes as the attorney of said corporation, and also on account of divers other acts and matters performed by him in connection with its affairs in excess of his authority or without authority, or without due care in the management of its business, and that he might thereafter become indebted to said corporation on account of said matters and other matters, and, also, that he had with out authority, indorsed certain negotiable paper in the name of said corporation. The instrument then proceeds to transfer to said corporation 448 shares of the capital stock of the Russell & Erwin Manufacturing Company, and his right, title and interest in 400 other shares of such stock then held by the Middletown Savings Bank as collateral secmity for a loan, and also 210 shares in the Hudson River Iron Company. This stock the Russell & Erwin Manufacturing Company agreed.to apply to the payment of said indebtedness and liability of said Bruff to them and to indemnify them against any loss or damages which might accrue to them by reason of the premises, matters and things aforesaid, and to pay over the balance to said Bruff.

Thomas Douglass also executed the instrument referred to in the complaint whereby he transferred to the Russell & Erwin Manufacturing Company all his interest in the property held by Bruff, as trustee, which the Russell & Erwin Manufacturing Company agreed to apply to the payment of the indebtedness of said Douglass, and of the said Douglass Manufacturing Company to the Russell & Erwin Manufacturing Company, then existing, or which might thereafter arise, and to the indemnification of the Russell & Erwin Manufacturing Company for any liability on their part, for or on account of said Douglass or said Douglass Manufacturing Company, so far as the same should be sufficient, and to transfer any balance thereof, if any, to said Douglass.

The officers of the Russell & Erwin Manufacturing Company having now heard that the title to the. factories and property of the Douglass Manufacturing Company actually stood in the name of their agent, R. P. Bruff, and having, by information received from Thomas Douglass, heard of the existence of some instrument of trust which had been executed by Bruff, prosecuted their inquiries still further and endeavored to ascertain its nature and contents.

Bruff presented to them, on the twentieth of May, a rough draft of an instrument which he said was substantially the same as the trust deed. The officers of the Russell' & Erwin Manufacturing Company, not being satisfied with this, continued to press Bruff for the original declaration of trust or a copy of it. They did not, however, succeed in getting any thing further in answer to their inquiries until July 11, 1874, when, in answer to a letter written to Bruff by the assistant treasurer of the company, again demanding a copy of the declaration of trust, they received by mail from Bruff, who was then in Saratoga, a paper purporting to be a copy of the instrument.

This was not, however, a true copy of the trust deed, and the provision relating to the notes of Thomas Douglass for $61,290.08, indorsed by Bruff in the name of the Russell & Erwin Manufacturing Company, was entirely omitted, and the corporation were up to this time ignorant of the existence of any such notes. They finally, however, about the 23d of July, 1874, succeeded in obtaining a copy of the declaration of trust. And now, having become aware of the large indebtedness of the Douglass Manufacturing Company to Thompson J. S. Flint, a conference ensued between them and Mr. Flint and Mr. Douglass upon the subject of the affairs of the Douglass Manufacturing Company, the condition of its property, and the fact that default had been made in the payment of certain-notes mentioned in the declaration of trust.

It was found that the property was' indebted to Mr. Flint in the sum of about $113,00Q, and to the Russell & Erwin Manufacturing Company, for advances, etc., in the sum of about $147,000, and that these sums could not probably be satisfied and paid by continuing the provisions' of the trust deed, under Mr. Bruff, as trustee. Mr. Douglass also claimed that the property was indebted to him in the sum of $2,000 for money advanced, and Mr. Bruff claimed a similar indebtedness to him of $16,000. It was therefore decided that the parties interested under the trust deed should call upon Bruff, as trustee, to transfer all the trust property in his hands to T. J. S. Flint and the Bussell & Erwin Manufacturing Company for the consideration of the said debts due to them respectively. ■ A written request to that effect was accordingly made to Bruff, and signed by the Bussell & Erwin Manufacturing Company, T. J. S. Flint and Thomas Douglass. In compliance with this request Mr. Bruff transferred the trust property to Mr. Flint and the Bussell & Erwin Manufacturing Company, by deed, dated July 24, 1874.

On July 28, 1874, a corporation by the name of the Douglass Manufacturing Company was formed, under the laws of the State of Connecticut, and was located at Seymour, Connecticut.

T. J. S. Flint and the Bussell & Erwin Manufacturing Company, by their deed, dated July 31,1874, conveyed to the newly-established corporation all the property, real and personal, which had been conveyed to them by Bruff,'as trustee aforesaid.

The capital stock of the new corporation was fixed at $280,000, which was subscribed for and taken by the defendants in proportion to their respective claims against the property.' The plaintiffs, under the facts disclosed, claim to have a lien upon the trust estate for the amount of their debt; and judgment was rendered in their favor and for the amount of then demand. It appeared, in addition to these facts, that prior to the execution of the deed or assignment of July 24,1874, the indebtedness arising from the execution of the trust was discussed, and it was understood 'and agreed that all legal or legitimate claims should be adjusted.

The evidence leading to this fact was objected to, it is true, and overruled. It is not important here, however, to pass upon the admissibility of that proof, although it is. apparent that in an action like this it would not be declared objectionable, taken in connection with the whole scope of the issues, the nature of the claim, the defense and evidence given. But assuming that it was improperly received, it is quite clear that it could in no way prejudice the defendants in the result, because the obligation assumed by the acceptance of the trust estate was that it should be appropriated in the manner directed by the trust, and it passed, therefore, charged with all matters justly affecting it. Tbe authorities are numerous, if not uniform, to sustain the proposition that the purchase of the trust estate, with knowledge of the trust, imposes upon the purchaser the same duties in respect to the property which rested upon the trustee from whom he purchased. (Perry on Trusts, §§ 217, 328, and cases cited; Tiffany & Ballard on Trusts, p. 197 and cases cited.)

The rule holds even when the purchase is for a valuable consideration, as the text of these writers, and cases cited, show. The defendants named, however, paid nothing for the property they received and accepted by the transfer. It was, ostensibly, to secure them against loss that the assignment was made. If the question were res nova the courts would so decide as matter of justice and equity, if there be any distinction between such terms.

The defendants mentioned knew of the trust; they sought for and- obtained a copy of the deed. The conduct of Bruff, the agent of the defendant the Russell & Erwin Manufacturing Company, has no relevancy to the issue, whether, under the circumstances, the defendants named are. not bound to pay the plaintiff’s claim. The first duty imposed by the trust was to pay the expenses of the business, and the steel supplied was the very basis of the business, and without which it could not proceed. The learned justice presiding at the trial, found that the estate was worth $400,000 and upwards, including the goods manufactured and in process of manufacture, from the steel purchased, and the proceeds of such as had been sold out but not paid for; and further, that the whole trust property was more than sufficient to pay the entire indebtedness created by Bruff in carrying on the business of the trust. There may be some conflict as to the value of the trust estate, but it is not serious, and does not demand any interference with the finding mentioned.

It thus appears that the assets which went into the hands of the Russell & Erwin Manufacturing Company and Flint, and were appropriated by them, were not only applicable to the plaintiffs’ debt, but charged with it, and were sufficient to pay it. "When these conclusions were reached, the personal liability of the defendants named was established, and the first issue was determined in favor of the plaintiffs, namely, whether, under the trust created and the subsequent events by which the defendants named succeeded to and assumed it, they were liable for tbe plaintiffs’ claim for steel sold and delivered and used in the business of tbe trust. None of tbe facts set foi’tb in tbe statement made, wbicb precedes tbis opinion, and which are most favorably stated for tbe defendants named, affects tbe view thus expressed; and none of the exceptions taken are such as to require a new trial on tbis branch of the inquiry, namely, as to tbe liability of tbe defendants named.

When tbis conclusion was arrived at, the next and remaining issue was, what amount was justly due to tbe plaintiffs for tbe steel furnished ?

Tbe defendants interposed, as a defense, that if the steel was furnished by tbe plaintiffs their claim was unreasonable and excessive in this, that tbe steel -was defective and of bad quality and was not worth tbe amount claimed for it, and was of very little benefit, if any, in tbe manufacture of tbe goods. In regard to tbis defense, it appears that a motion was made for a reference, wbicb was denied, because it was asserted that an important question of law was involved, and that unless under and by virtue of tbe construction given to the trust, referred to herein, a lien resulted in their favor, tbe plaintiffs could not succeed. It was conceded then that if tbe lien was declared to exist, a reference to take an account would become necessary, in order to dispose of tbe case. Tbis proceeding is not referred to as affecting tbe plaintiffs’ status, but incidentally. During tbe trial it was mentioned, and the attention of tbe justice presiding was called to it at an early stage.

Tbe defendants’ counsel subsequently objected to a question, because tbe subject of it did not arise on tbe bearing then proceeding. Tbe learned justice said: “ It is merely general; ” and tbe counsel for tbe defendants then observed : “ Tour honor limits tbe effect of tbis testimony to its bearing on tbe trust and the rights on that paper;” and tbe answer was, “yes.” Tbis, it is apparent, related to tbe proposition, that in tbe case tbe issue then under consideration was as to tbe lien of tbe plaintiffs, or their right to recover without regard to tbe amount. Subsequently, and while tbe defendants’ witness was on tbe stand, an answer was made to tbe question : “ What is tbe quality of tbe goods ? ” and tbe plaintiffs’ counsel objected to it so far as it concerned tbe quality of tbe steel. Tbe learned justice then said : “I have ruled that tbe question of the quality of the steel does not come up now,” .and proceeded to strike out a part of the answer bearing upon that subject. Again, the defendants’ counsel asked the witness to state what the complaints were which were made of the goods manufactured of the plaintiffs’ steel; and the question was objected to. The ruling was as follows : The Court — So far as the value of thé goods are concerned, to show the value of them, I will admit it; but so far as showing the character of the steel, that is a question to be determined hereafter. If the court determines that it is a question in the case, that goes to a reference ; at present I exclude every thing going to the quality of the steel to reduce the price.” And the defendants excepted.

When the decision of the learned justice was filed, in the opinion was found as follows: “ The first question on the trial was the right to attack the value of the steel furnished, to reduce the amount due. It seems to me, in the absence of fraud, and none such appeared, the defendants are estopped from questioning the amount. The steel was regularly furnished on orders received by the trustee; when objected to returned; accounts regularly rendered, and notes given for them, and the steel used without objection.” <

This is in harmony with the ruling made, namely : “ If the court determines that it is a question (referring to the character of the steel) in the case, that goes to a reference.”

The proposition upon which the defense mentioned, and thus treated, was ultimately disposed of is now presented for consideration. Were the defendants estopped, by the circumstances, from assailing the quality of the steel, and claiming such a deduction on account of its bad quality, if established, as would be just ? It was proved upon the trial, and not gainsaid, that the quality of the steel could not be ascertained without “ working it up,” as the witness said, and therefore the inspection and examination of it would not reveal its defects or imperfections. The implied warranty, that it was fit for the purpose for which it was sold, did not under such circumstances, impose upon the defendants or their predecessor the trustee, the duty of an immediate scrutiny of the steel and of giving notice of the defects discovered. They had a right to claim a deduction from the price when that was demanded. When the contract of sale is executory the right of the purchaser to recover damages, on the ground that the article furnished does not correspond with the contract, will not survive an acceptance and retention of the property after am, opportunity to ascertain the defeat, without notifying the vendor. (Reed v. Randall, 29 N. Y., 363.) If, in the case of an executed contract, there can be an express warranty or undertaking accompanying the sale and delivery of the goods, that they are of a certain quality or condition, this agreement is obligatory upon the parties and is not merged in the act of delivery and acceptance. (Muller v. Eno, 14 N. Y., 597; Waring v. Mason, 18 Wend., 425; Day et al. v. Pool et al., 52 N. Y., 416.) In either view, therefore, the defendants had the right to 'assail the claim of the plaintiffs in the manner indicated, and the learned justice was in error in- excluding the defense thus presented.

The test of the steel involved its use, and it could not be rejected or returned. The circumstances detailed, such as the presentation of bills and settlement by notes, while they did not create an estoppel, were very important upon the issue, and would perhaps have been sufficient to demonstrate the want of good faith in making the defense interposed; but that does not meet the emergency. The defendants were entitled to their day in court on the subject, and could not be deprived of it. All that they can ask, however, is that there shall be a modification of the judgment, and that in regard to the amount due there shall be a reference, thus changing the judgment from an absolute to an interlocutory one. Their theory of the trial was, that if the lien were declared to exist, the amount to be paid would become the subject of another examination before a referee. The result is, that the judgment should be modified, as suggested; for which ample power is conferred by section 1317 of the Code of Civil Procedure.

We think the disposition made of the motion for a new trial was correct. " The opinion of Justice Lawrence is an able exposition of the law of the application made to him, and satisfactorily demonstrates the propriety of denying the motion made.

Daniels, J.:

The case of Gurney v. Atlantic and Great Western Railroad Company (58 N. Y., 358) seems to entitle the defendants to give the evidence, which was rejected, concerning the quality of the steel. I concur.

Davts, P. J., concurred.

Judgment modified as directed in opinion, and order denying motion for new trial, on the ground of newly-discovered evidence, affirmed.


author: Beady, J.:

text:
    J. G. SMITH, ARCHIBALD TAYLOR and CHARLES R. SCRIBNER, Plaintiffs, v. ABRAHAM KRAUSKOPF and JOSEPH A. GUNSEN, Defendants.

      Compromise under bankrupt aet — contingent liabilities not discharged by.

    The defendants were indorsers of a promissory note held by the plaintiffs. After the giving of the note, but before its maturity, the defendants instituted proceedings under the bankrupt act to procure a discharge from their debts by a compromise proposed to, and accepted by the creditors. They set forth in the statement of their debts this note, and tendered to the plaintiffs the twenty-five per cent accepted by the other creditors, but the same was rejected. After defendants’ discharge this action was brought upon the note.

      Held, that their liability thereon was not affected by the proceedings in bankruptcy; that the compromise only released them from those debts or liabilities which had then become fixed and due, and not from debts on which they were only contingently liable.
    Controversy submitted without aotiou upon a geueral statement of facts.
    Smith and Taylor, the plaintiffs, are the holders of a note for $500 that matured February 29, 1876. Krauskopf and Gunsen, the defendants, are indorsers thereon, and this controversy is for the purpose of determining how much they are required to pay to satisfy and discharge their liability thereon. After the indorsement of the note and before its maturity, Krauskopf and Gunsen effected a compromise with their creditors, under the provisions of the bankrupt law, at twenty-five cents on the dollar. Those proceedings were terminated and the composition paid before the maturing of the note in question. The plaintiffs claim that the liability of tbe defendants upon this note was not affected by tbe composition proceedings, and tbat they are entitled to tbe full amount. Tbe defendants insist tbat they are only required to pay $125 in satisfaction of tbeir liability, being twenty-five per cent of tbe amount of tbe note.

      Bwnne, Adams & Ocurr, for tbe plaintiffs.
    Tbe liability of the indorsers upon this note could not become fixed so tbat it might be enforced by ordinary legal proceedings, until tbe maturing of tbe note and default of tbe maker. (Musson v. Lake, 4 How., 262; In re Loder, 4 N. B. R. R., 190.) Neither was tbe liabibty of the' indorsers upon this note, before it matured and tbe maker made default, such, tbat it was provable against tbeir estate in bankruptcy. (§§ 5067-5072, both inclusive, of U. S. Rev. Statutes; In re Loder, 4 N. B. R. R., 190 ; In re Nicodemus, 3 id.,- 230; In re Orcmford, 5 id., 301.) Claims against an insolvent’s estate under insolvent laws are, 'to some extent at least, analogous to those against a bankrupt’s estate. Such a liability as is here tbe subject of consideration has been repeatedly held not provable under tbe insolvent law. (Frost v. Garter, 1 Jobnson’s Cases, 73; Meehcmies arad Farmers’ Bk. v. Oarpron, 15 John., 467; Stowell v. Richardson, 3 Allen [Mass.], 64.) Neither is a claim of this character discharged by a discharge in bankruptcy -when it is granted prior to tbe maturity of tbe note upon which tbe bankrupt is an indorser. (U. S. Rev. Stats., §§ 5117, 5118, 5119 ; Pieree v. Wilcox, 40 Ind., 70; Robinson v. Pesant, 53 N. Y., 419; In re GdlUson, 5 N. B. R. R., 353; In re Murdoch, 3 id., 146; Ogden v. Saunders, 12 Wheat., 366.) Discharges granted under State insolvent laws are analogous to those in bankruptcy, and decisions with reference to tbe effect of such discharges, aid in tbe determination of this question. (.Frost v. Garter, 1 Johnson’s Cases, 73 ; Mechanics and Farmers’ Bk. v. Ccypron, 15 Johns., 467; Lansing v. Prendergast, 9 id., 127; Ford v. Andrews, 9 Wend., 312; Buelv. Gordon, 6 Johns., 125; The Rome Fxch. Bk. v. Fames, 1 Keyes, 588; § 4 Abb. Ct. App. Dee., 83, 92; Berry v. McLean, 11 Md., 92 ; Paxsont v. Harter, 11 N. J. L. [Hals.], 410; Stowell v. Richardson, 3 Allen [Mass.], 64.)

      Mel/oille H. Regensburger, for tbe defendants.
   Beady, J.:

The question presented by tbis appeal and decisive of the plaintiffs’ right to recover is whether the defendants could anticipate a contingent liability as indorsers; convert it into an existing debt or liability and secure a discharge from it by proceedings under the bankrupt law. (Section 5103, A. 22, June, 1874, § 17, known as a composition, proposed and accepted.) The defendants were indorsers of a promissory note, and before the note matured the proceedings were accomplished. They set forth the note in their statement of debts, and tendered the twenty-five per cent accepted to the plaintiffs in due time, but it was rejected.-

The plaintiffs neither proved nor offered to prove any claim in bankruptcy against the defendants, and did not, so far as revealed, in any way participate in the proceedings mentioned. The defendants were not bound as indorsers until the failure of the maker to pay. They could waive notice of presentation and of non-payment and all other ceremonies which should be observed to make their contingent liability absolute, but the maker must fail to pay before their obligation matures. He is primarily liable, and if he pays, the indorsers are discharged, no matter what they have said or done in regard to the claim. It may be that the insolvency of the maker would have some effect upon the determination of the question discussed, but that fact does not appear, and we cannot assume it to have been the ease. For aught that appears the assumption 0f the note by the defendants was entirely gratuitous, and took away from legitimate creditors whose debts were due some portion of the defendants’ estate, which, being left, would have increased the sum to be paid in composition. There is no statement that the maker could not pay. Section 5069 contemplates the obstacle from contingent liabilities.

It provides as follows: “ When the bankrupt is bound as drawer, indorser, surety or bail, or guarantor upon any bill, bond, note or any other specialty or contract, or for any debt of another person, but his liability does not become absolute until after the adjudication of bankruptcy, the creditor may prove the same after such liability becomes fixed and before the final dividend.” The reason for this is apparent, and is what has been .suggested, namely, the primary debtor may pay the debt, and thus absolve the surety, guarantor or indorser. It is further provided (§ 5072) that no other debts than those specified in the five preceding sections shall be proved or allowed against the estate. The defendants’ contingent liability was not one of the debts specified which could be proved or allowed against the estate, and could not be discharged by the composition for the same reason. It was not a debt or liability which had “ become fixed ” at the time the decree in favor of the defendants was rendered. The State insolvent laws being analogous to those in bankruptcy, may be invoked m determining whether such a liability would be discharged. Our statute provided that a discharge under the insolvent laws should be a bar to all debts of the insolvent, whether due or to become due, which existed at the time of the insolvent’s assignment. Tet it was held that when the insolvent was indorser on a note not due when his petition was filed his discharge was no bar to an action on the indorsement after he had been properly charged as indorser, per Wbi&ht, J. (Rome Exch. Bk. v. Eames, 1 Keyes, 597; see, also, Mechanics and Farmers' Bk. v. Capron, 17 Johns., 467; Ford v. Andrews, 9 Wendell, 312.) In illustration of this doctrine the section referred to declares only, that the provisions of a composition accepted shall be binding on all the creditors whose names and addresses and the amounts of the debts due to whom are shown in the statement of the debtor produced, etc. The contingent debt of the defendants incurred by the indorsement had not become due from the defendants. The note had not matured when the proceeding was consummated.

It may be that the defendants, by analogy to the mode in which bankrupts are relieved as to contingent obligations (§ 5069, swpr<£) could apply upon the maturity of their indorsement to have it included in the composition in accordance with the provision made for it by the resolution of the. creditors, but of that it is not necessary for this court to declare its views. Without, however, pursuing the subject further, it is quite clear that the plaintiffs are entitled to judgment.

Davis, P. J., and DaNiels, J., concurred.

Ordered accordingly.


text:
    MARGARET C. WHEELER, Individually and as Executrix etc., Appellant, v. JAMES H. RUTHVEN, Executor, etc., and others, Respondents.

      Legacy — when payable.

    Where a legacy is payable out of a particular fund which is not available for that purpose until a certain contingency happens, e. g., the death of a tenant for life, such legacy will, in the absence of special circumstances or of a provision of the will prescribing a different time of payment, be payable at, and will bear interest from the happening of the contingency, and not from the death of the testator.
    Appeal from a decree of the surrogate of New York in the matter of the final accounting of the respondent.
    Clementina Ruthven died October 28, 1862, leaving a will dated August 20, 1862. Letters testamentary were granted to J. J. Owen, June 15,1866. Owen died April 18,1869, and letters testamentary •were thereafter granted to James A. Ruthven, another executor, May 15, 1874.
    By her will she bequeathed to Emma Ruthven Lord (now Ludlum) the sum of $5,000, and made various other bequests of specific sums, amounting in all to twenty-one specific bequests of sums of money.
    The only estate which the said Clementina Ruthven had to be disposed of by will was real and personal property devised to her by her father prior to the date of her will, subject, however, to a life estate in the whole to the mother of said Clementina who survived her and died April 7, 1874. The accounts of James A. Ruthven were filed, and no objections made to the same, showing assets in his hands, of personal property, of $38,358.67, received after the death of the tenant for life, and some real estate.
    The decree of the surrogate on said accounts was made May 18, 1877, by which the said accounts were settled and allowed, as filed and adjusted, and interest on the several legacies at the rate of seven per centum per annum allowed only from the 7th day of April, 1874, the date of the death of the life tenant.
    The appellants object to so much of the decree as allows interest from April 7, 1874, and claim that interest should be allowed from October 28, 1863, viz., from and after the expiration of one year after the death of the testatrix.

      J. Edgar, for the appellant.
    Interest on each legacy should commence to run at the time it became due and payable, viz., at and from the expiration of one year from the death of the testatrix. (WilUtxmson v. Williamson, 6 Paige, 300; Dayton on Surrogates, 465; Williams on Executors [5th ed.], 1284, 1285, 1286; Willard on Executors. 355, 390; 2 Roper on Legacies, 1251; Mepbtvrn v. Hepburn, 2 Brad., 74; Icmrenee v. Imbree, 3 id., 364; Brad/ner v. Fcmllmer, 12 N. V., 472; Oampbell v. Qowd/rey, 31 How., 172.)

      Wm. Yenwill and Olías. F. Souther, for the respondents.
   Beady, J.:

In this matter the decree of the surrogate is well sustained by the able opinion which accompanies it. As shown by him the rule is recognized and repeated in the cases cited, that interest upon a legacy will not be allowed, unless special circumstances or the provisions of the will require it to be done, until it is payable. The legacies given by the testatrix were subordinate to her estate, which consisted solely of a residuary interest in certain property left her by her father and in which her mother had a life interest. Up to the time of the death of the mother, therefore, no assets came to the hands of the executor out of which the legacies could be paid. The time for the payment of them until such death could not arrive, and the presumption that one year after the death of the testatrix was sufficient to enable the executor to gather in the assets and to make payment consequently falls to the ground. The assets were then appropriated to another purpose and so were the rents, issues and profits of them, and they continued to be so after the death of the testatrix, because they were subjected to the life estate of the mother who survived her daughter.

It must be presumed that the testatrix was aware that they would not be available for the payment of the legacies given, until the death of her mother, and that she intended, therefore, to defer such payment until the fund existed for that purpose. (See Dodge v. Manning, 1 Coms. Rep., 298.)

She designed, in other words, that tbe gift should follow the estate out of which it was to be paid,-and that it should be available in no respect until such estate could be applied to its payment. This is a just view of the subject, springing from her silence as to the time when the legacies should be paid, taken in connection with the nature of the property out of which they were to be satisfied. When the fund is not available for the payment of the legacy until a contingency happens, there seems to be no reason why it should bear interest from the death of the testator before the happening of the contingency, in the absence of special circumstances requiring it to be done, or a provision in the will indicating an intention that it should be paid for a different period.

If the interest be given in this case from a time one' year after the death of the testatrix, and therefore prior to the acquisition of the assets by her executor, the fund would be weighted with a burden for years before it could be applied to the objects named in the will.

For these reasons and the reasons assigned by him the decree of the surrogate should be sustained.

Davis, P. J., and Ingalls, J., concurred.

Decree affirmed.


author: Davis, P. J.;

text:
    THE PEOPLE OF THE STATE OF NEW YORK ex rel. JOHN MURRAY v. THE JUSTICES OF THE COURT OF SPECIAL SESSIONS OF THE PEACE IN AND FOR THE CITY AND COUNTY OF NEW YORK.

      Qomt of Special Sessions — jm'isdiction of— Mai by jury in.

    Ceetioeaex to the Court of Special Sessions to review a conviction of tbe relator.
    Tbe return showed that tbe relator was arrested upon a complaint made in due form, before one of tbe police justices of tbe city, upon a charge of assault and battery, and that on being brought before such magistrate, be elected to be tried for such alleged offense by tbe Court of Special Sessions of tbe Peace, and was committed to await such trial, and required to find bail, in tbe sum of $500, for bis appearance at tbe Court of Special Sessions, to answer to tbe complaint preferred against him for said offense.
    Subsequently, but in what manner it does not appear, be was brought before Mr. Justice DoNOhue, of tbe Supreme Court, and there entered into a bond or recognizance for bis appearance at tbe next term of tbe Special Sessions. Tbe recognizance recited tbe above facts. Tbe complaint and papers were then transmitted to tbe clerk of tbe Court of Special Sessions, for trial at said court. After-wards, and on tbe 25th of September, 1877, tbe Court of Special Sessions was duly organized at tbe balls of justice, in tbe city, and tbe relator was brought before tbe court for trial upon said complaint. Tbe complaint was read to him, and be was called upon to plead thereto, and thereupon be pleaded not guilty. Such plea was duly entered in tbe minutes of tbe court. Tbe court thereupon then proceeded to try tbe issue, and witnesses were produced by the complainant and the relator; and upon such trial the relator was found guilty and sentenced to imprisonment for the term of four months.
    The court, at General Term, said: “ The only questions raised here relate to the jurisdiction oi^the Court of Special Sessions. By section 5 of chapter 331 of the Laws of 1855 (which may be found cited in third Revised Statutes [Banks’ 6th ed.], 242), jurisdiction is given to the Court of Special Sessions over all complaints for misdemeanors, made before police justices, unless the court shall send the case to the General Sessions, or unless the accused, when brought before the committing magistrate, shall elect to have his case tried in the General Sessions.
    The relator, in this case,' elected to be tried at the Special Sessions, and he entered into a recognizance'reciting such election and conditioned for his appearance before such Court of Special Sessions. On his appearing for trial1 he made no objection that the case was not properly before the court, and no claim that it should be sent to the General Sessions, but entered the plea of not guilty, and submitted himself to trial before that court, as though all preliminary steps had been in all respects regular and proper. It is too late for him to object to any want of formality in any proceeding antecedent to his trial, for all matters of form must be deemed to be waived by his appearing before the Court of Special Sessions, joining issue and proceeding to trial, without the suggestion of any objection to the regularity of any proceeding or the jurisdiction of the court.
    The Court of Sessions existed prior to the first Constitution of the State, which was adopted in 1777. It was first created by the Colonial legislature in 1744, and has ever since, with various changes and modifications made by the legislature, existed in this State.
    Trial by jury was wholly unknown m that court until it was created sub modo, by the act of 1824. The common-law jury however, has never existed in that tribunal. {In the Matter of Sweatmcm, 1 Cow., 144, 151, note <?; Murphy v. People, 2 id., 815, 818, note b / People v. Riley, 5 Parker Crim., 401; People ex rel. Walker v. Special Sessions, 4 Hun, 442.)

      We do not think that there is any force in the position urged by the learned counsel for the relator, that the relator was entitled to a trial by jury, because he had given bail for his appearance before the Court of Special Sessions. Undoubtedly that right would have existed if he had entered into a recognizance for his appearance at the General Sessions, and had appeared in person, pursuant to such recognizance, for trial at the General Sessions. It is clear, in such case, that his right to trial by common-law jury would have been complete and could not have been waived even by himself. {Ocmeemi v. The 'People, 18 N. Y., 128 ; Qribger v. Hudson Rrner R. R. Go., 2 Kern., 19S; People v. Kewnedry, 2 Parker, 312.)
    If the recognizance, or bond, given for his appearance at the Special Sessions were altogether irregular or extra judicial, it nevertheless could not have the effect to transfer the case, which, by the election of the relator, was to be tried in the Court of Special Sessions, to another tribunal. But if it were regularly and properly taken, the appearance of the relator before the Sessions was in accordance with its exigency and requirement, and therefore it cannot be held to have taken away the jurisdiction of that court.
    Under the statutes creating the Court of Special Sessions of this State, trials are had before three police justices without a jury. No provision is made either for the common-law jury or the statutory jury provided for Courts of Special Sessions in other counties of the State. We are unable to see any error in the jiroceedings or any want of jurisdiction in the court.
    The writ should be dismissed and the proceedings of the Special Sessions affirmed.”

      Wm. F. Kintzmg, for the relator. B. K. Phelps, for the respondent.
   •Opinion by

Davis, P. J.;

Beady and IN&alls, JJ., concurred.

Writ dismissed, proceedings affirmed.


author: Bbadt, J.;

text:
    DEVELIA L. BRADBURY, Appellant, v. JAMES WINTERBOTTOM, Respondent.

      Severance of causes of action— offer to allow judgment to be taken for one of sevei'al claims — effect of, on right to sever.

    Appeal from an order denying plaintiff’s motion to sever the action in reference to the claims alleged therein.
    The plaintiff alleged two canses of action separately. 'The defendant denied by answer his liability upon the second canse of action, and served an offer to permit judgment to be taken against him for the amonnt claimed under the first canse of action. The answer interposed admitted the demand to which the offer related, by failing to refer to it in any way.
    The court at General Term said: “ The offer was made under section 158 of the Code of Civil Procedure, and within the ten days allowed for its acceptance the plaintiff served notice of a motion for liberty to sever the action and for judgment for the first cause of action admitted, as suggested by the answer, and further that the action continue as to the second claim set out in the complaint. This proceeding was under section 511 of the Code, which provides that where a part of the plaintiff’s claim which may be severed from the remainder is admitted upon, the pleadings, the court, upon the plaintiff’s motion, may, in its discretion, order that the action be severed; that a judgment be entered for the plaintiff for the part admitted, and if the plaintiff so elect, that the action be continued with like effect as to the subsequent proceedings, as if it had been originally brought for the remainder of the claim. The application thus made was denied, and the plaintiff appealed. The denial must have resulted from a misapprehension of the effect of granting the relief sought, occasioned by the offer which it was doubtless supposed must be retained to prevent the plaintiff from recovering costs, and to secure them to the defendant if successful in resisting the second cause of action.
    This was an erroneous view of the issue presented. When a severance is made, if an offer covering the separate claim has been accepted, the costs allowed in granting judgment for the sum would be to tbe time of sucb acceptance, and if no acceptance were given, tben to tbe time of tbe motion granted. If tbe plaintiff, proceeding as to tbe severed claim, did not succeed, tbe defendant would be entitled to costs, because as to it tbe action proceeds as if it had been brought only to recover sucb claim, and tbe offer would not give tbe defendant more protection from, or right to costs than tbe statute confers. Tbe offer, therefore, in sucb a case accomplishes nothing. If tbe granting of sucb a motion as that considered occasioned no prejudice to tbe defendant, it should not have been refused. It was right under provisions of tbe Code that tbe application should be favorably received, because tbe claim was distinct and as sucb admitted to be due. Tbe offer doubtless, as already suggested, created tbe doubt which led to tbe denial of tbe motion, but that paper duly considered furnished no reason why tbe motion should not have been granted, as indicated herein.”
    Tbe order appealed from should, for these reasons, be reversed, and tbe motion granted; but, as tbe question is novel, without costs to either party.

      Moody B. Smith, for tbe appellant. George Stevenson, for tbe respondent.
   Opinion by

Bbadt, J.;

Davis, P. J., and Ingalls, J., concurred.

Order reversed and motion granted, without costs to either party.


author: Ingalls, J;

text:
    JOHN H. HARDT and others, Appellants, v. HERMAN SCHULTING, Respondent.

      Evidence — Intent—False representations— when questions as to, material.

    Appeal from a judgment in favor of tbe defendant, entered upon tbe trial of this action by tbe court without a jury.
    This action was brought to set aside a release given by tbe plaintiff to tbe defendant on tbe ground that tbe same was procured by false and fraudulent representations made by tbe defendant. Tbe case is in all respects similar to that of Dambmcm v. Sehulting (12 Hun, 1). Hpon tbe trial tbe following questions were asked by tbe plaintiff of tbe witness, Frederick A. Yon Bernutb: “Did you sign that release in consequence of representations made in August “ Did be at the time you signed this release say any thing to vary his previous statements as to his property ? ” They were objected to by the defendant’s counsel and excluded by the court, and the plaintiff excepted to the ruling.
    The court at G-eneral Term said : “We think the learned justice erred in not allowing the witness to answer the questions. The questions did not call for a bare opinion of the witness or a mere mental operation. They called for a fact material to the issue upon trial. It has been repeatedly held that in a proper case the intention which prompted an act or the belief entertained in regard to the truth of a statement upon which a witness acted, may be proved by asking the direct question without resorting to conversations or circumstances. (Thorn v. Hel/mer, 2 Keyes, 27, 30; Berrian v. Scmford, 1 Hun, 626 ; Caspar v. O’Brien, 15 Abb. [N. S.], 402; Raynor v. Page, 2 Hun, 652; Thurston v. Cornell, 38 N. Y., 281; MeKown v. Hu/nter, 30 id., 625.”

      W. Watson, for the appellants. C. B. Smith, for the respondent.
   0]iinion by

Ingalls, J;

Davis, P. J., and BRAdy, J., concurred.

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