author: Davis, P. J.: 'Bradt, J.

text:
    THOMAS I. MADGE, Respondent, v. VICTOR PUIG, Impleaded, etc., Appellant.

      Action by one partner against another — when sustained.

    This action was brought by the plaintiff upon an agreement entered into betwoen him and the defendants for the transaction of certain business relating to the f ruit trade; the complaint, alleging the breach of several covenants of the defendants’ contained therein, each breach being separately numbered and sot out as a separate cause of action. An order of arrest was granted against the appellant on the complaint, and affidavits stating that the plaintiff had been induced to enter into the contract by the fraudulent representation of the appellant. On appeal from an order denying a motion to vacate the order, held

    (1) That the complaint stated but a single cause of action. (Brady, J., dissenting.)
    (2) That even if the relation of partners was created between the parties by the agreement, yet as the action was brought to recover for the breach of certain specific covenants of the appellant contained therein, it could be maintained; and as the agreement was procured through fraud, an order of arrest W'as properly granted therein. (Per Davis, P. J., and Daniels, J.)
    Appeal from an order of tlie Special Term denying a motion to racate an order of arrest.

      T. II. Coudert, for tlie appellant.
    Tbe agreement between the parties is clearly an agreement of copartnership. In actions between partners, neither can be arrested at the suit of the other. If the partnership capital be misappropriated, no remedy is furnished in an action at law, unless a balance be struck and a promise to pay given. {Smith v. Small, 54 Barb., 223; Cary v. Williams, 1 Duer, 667; Neville v. Neville, 22 ITow., 500; Rolfe v. Delmar, 7 Rob., 80; De Groot v. Van Duzer, 20 Wend., 390.)

      Stephen II. Olin, for the respondent.
    On the facts presented in the case at bar, one partner could maintain an action of assumpsit against his copartner. (Williams v. Ilenshaw, 11 Pick., 79 ; Coll-yer on Partnership, § 289 ; Venny v. Reekie, 13 East, 7; Gale v. Reekie, 2 Stark., 107; Rockwell v. Wilder, 4 Met., 556.) Whenever there is an express stipulation in the partnership articles which is violated by any partner, an action at law in covenant or assumpsit, as the case may require, will ordinarily lie to recover damages for the broach thereof. (Story on Partnership, §§ 218, 224; Leighton
      v. Wales, 3 M. & W., 545; Bagley v. Smith, 10 N. Y., 489; Mullany v. Keenan, 10 Iowa, 224.) Covenant, and not account, is tlxe proper action for tbe breach of a contract of partnership in wrongfully dissolving the partnership, and for wrongful acts tending thereto. (Addams v. Tutton, 39 Penn., 447; Holyolce- v. Mayo, 50 Me., 385; Parsons on Partnership, 275, note, and cases cited, 276, 277, and cases cited.) If no matter of account is involved, and the money will not, when recovered, belong to the firm, there is no objection to the action upon the ground of the partnership relation between the parties. (Howard v. France, 43 N. Y., 593-596; Crater v. Bininger, 45 id., 545.) The court has jurisdiction to entertain a suit'at law brought by one partner against one of his copartners for damages when the“ action involves an inquiry only with respect to the damages which the plaintiff has sustained because of an alleged breach of the partnership agreement by the defendant. ( Wills v. Simmonds, 8 Hun, 189.) And, generally, an action may be brought for damages sustained by any breach of an express stipulation with copartners, if it is so framed as to admit of an action by some, or one only of the partners against the partner complained of, and the damages, when recovered, will not belong so much to himself as to the plaintiff. (Lindley on Partnership, 908, 911; Brown v. Tcupscott, 6 M. & ~W., 119; Wills v. Simmonds, 8 Hun, 189; Gl'merv. Tuck, 24 Wend., 153; Townsend v. Goewey, 19 id., 424.) In an action on contract, an order of arrest will be granted for fraud in incurring the obligation. Orders of arrest are granted under this subdivision in actions on promissory notes (Brown v. AsJibough, 40 How. Pr., 226), in actions to recover price of bills of exchange (Morrison v. Gcmner, 7 Abb. Pr., 425), in actions on bills of exchange (Iloebling v. Duncan, 8 Hun, 582), actions for money had and received {Lowell v. Martin, 11 Abb. Pr., 126), and actions for goods sold and delivered. {Manning v. Solis, 50 Barb., 224; Scudder v. Barnes, 16 How. Pr., 534; Reid v. Martin, 4 Hun, 590; Evans v. Holmes, 46 How. Pr., 515 ; Hathaway v. Johnson, 59 N. Y., 93; Muklan v. Doty, 20 How. Pr., 236.)
   Davis, P. J.:

The affidavits upon which the order of arrest was granted establish that the plaintiff was induced to enter into the contract upon which the action was brought, by the fraudulent representations of the defendant Puig. The facts stated in these affidavits are not denied; they must, for the purposes of this motion, be assumed to be true. Subdivision 4 of section'119 of the Code of Procedure provides that a defendant may be arrested when he has been guilty of a fraud, in contracting a debt or incurring an obligation for which the action was brought. The fraud being established by which the plaintiff was induced to enter into the obligation on which this action is brought, the only remaining question is, whether the contract is of such a character that an action will lie at the suit of the plaintiff for its breach by the defendant.

It is claimed that the contract upon which, the action is brought, a copy of which is annexed to the complaint used on the motion below, is one which constitutes the plaintiff and defendant partners, and that because that relation existed between them, no action can be maintained by one against the other for any cause growing out of the partnership relation, or which requires an accounting to ascertain the respective rights and liabilities of the parties. It may be assumed, and w'e think correctly, that the contract made between these parties, constitutes them partners in respect of the business contemplated to be carried on under it, but it contains stipulations to be performed by the several parties for the benefit of the other for the breach of which an action will lie. For their proportion of what may be called the capital stock of the partnership, the defendants expressly stipulated by the instrument, to do and perform certain things, and not to do and perform certain other things, and the plaintiff on his part stipulated to do and perform certain things which he alleges he has fully performed. But he alleges also that the defendants have been guilty of various breaches of the contract on their part, in not doing and performing the several things stipulated to be done by them by the terms of the agreement, and in doing certain other things which they stipulated not to do.

In Glover v. Tuck (24 Wend., 153 and 158), Cowen, J., says “the objection that the articles of agreement between the plaintiff and defendant constitute a partnership, in consequence of which the plaintiff’s remedy lies in a court of equity, is thus answered by Collyer on Partnership, 132 (Amer. ed.), 139. One partner may maintain an action of covenant against his co-partner, whether the covenant be to pay any sum, or do any action for the purpose of only launching the partnership, or whether it be to perform any of the articles after the partnership has commenced. An action of covenant will lie, although there may be accounts between the parties which require unraveling in equity, and where the partnership covenants have not been infringed for any length of time, the action of covenant is the proper remedy.” * * *

“ I have examined,” says the learned judge, “ the leading cases cited by him (Collyer), and find that his doctrine is clearly sustained by the English authorities, and there is no case in this State, I apprehend, which trenches upon it in the least.” (See Townsend v. Goewey, 19 Wend., 424; Musier v. Trumpbour, 5 Wend., 274, and other cases cited in Glover v. Tuck.)

In Bagley v. Smith (10 N. Y., 489) it was held that an action would lie upon a covenant contained in partnership articles, and in Wills v. Simmonds (8 Hun, 189) this court held, that although the partnership relation may exist between the parties, the court has jurisdiction to entertain a suit at law, brought by one against another partner, where the action involved an inquiry only with respect to the damages that the plaintiffs sustained, because of an alleged breach of the copartnership agreement by the defendant.

In Paine v. Thatcher (25 Wend., 450) the court held that an action would lie by' one partner against another, upon an express promise to pay a certain share out of his partnership profits for extra services.

These cases establish, as we think, with clearness, the right of the plaintiff in this case to maintain an action for any breach, on the part of the defendant, of the contract, which it is claimed established the partnership relation, and if it be established satisfactorily that the plaintiff was induced to enter into the contract with the defendants by fraud, we see no reason why an order of arrest may not be granted in an action for such damage.

The only embarrassment in the case grows out of the form of pleading. The complaint is drawn in accordance with the modern nonsensical way of chopping the pleadings into paragraphs, and for some purpose, known only to the pleader numbering the paragraphs separately, either as separate causes of action, or as independent portions of the complaint. But when we look at this complain*, and read it, and construe it favorably to the plaintiff, as we are required to do, for the purpose of preventing a failure of justice, we find it to be substantially an action based upon a contract thereto annexed m, Tubo verba, averring, as though they were several and distinct causes of action, divers breaches alleged to have been committed by the defendants. For instance, in paragraph No. 4, which the pleader calls his first cause of action, the breach alleged is that the-defendants agreed to ship a certain quality of fruit, but in violation shipped small, inferior and unmerchantable fruit, for which the plaintiff was unable to find a profitable sale, to the damage of the plaintiff of $10,000. In paragraph 5, called the second cause of action, that the defendants, in violation of their agreement to charge only the actual cost of the fruit, and the expense of putting it on board, etc., actually charged a greater sum, and thereby induced the plaintiff to pay to the defendants a large amount, to his damage of $8,000. And the sixth paragraph, called the third cause of action, alleges that the defendants wholly failed and neglected to load certain vessels which they agreed by the contract to load and ship to the plaintiff, whereby the plaintiff was compelled to pay, and did pay for the service of such vessels, a large sum of money. All these allegations are several breaches of one contract upon which the action is brought, and although they are in some sense distinct causes of action, because they are for breaches of different portions of the contract, they nevertheless are to be regarded as mere specifications of the particulars in which the plaintiff alleges the defendants have broken the contract. Within the principle of the cases above cited, an action for such breaches will lie because they are violations of express contract of the defendants to do and perform certain specified things for the benefit of the plaintiff which formed the consideration of his undertaking, to do and perform certain other things for the benefit of the defendants.

It may be that some parts of these alleged breaches, or rather of the damages sustained by them, will be excluded upon the trial of this action, as being matters which can only be reached in the form of an equitable action for an accounting, but that fact, if it be one, does not prevent the maintaining of an action for the breach, and the recovery of legitimate damages growing out of such breach. We do not, therefore, see any difficulty in holding that the plaintiff lias a right to maintain this action for the damages sustained by the breach of the agreement, and to maintain his right to arrest the defendant Puig, because of the latter’s frauds, which induced the plaintiff to enter into the agreement.

Wq think the order of the court below should be affirmed, with ten dollars costs besides disbursements.

I concur, for the reason that the plaintiff was induced to enter into the contract by the defendant’s fraud, and the several claims made are simply losses originating in and proceeding from the fraud. For them he was liable to arrest, even if the relation of the parties under the agreement was that of partners.

CHARLES DANIELS.

'Bradt, J.

(dissenting):

Assuming that the defendant could be arrested for the fraudulent representations as to the price of the stock purchased for joint account, the order of arrest could not be maintained because the complaint contains causes of action, separately stated, and on which the plaintiff might recover, but upon which no order of arrest could be granted.

The first cause of action, set forth as follows, shows this to be a correct statement of this feature of the action as presented by the complainant:

“ IV. And for a first cause of action, the plaintiff, repeating all the allegations herein before contained, shows that at various times between the 14th day of March, 1876, and the 22d day of May, 1876, the defendant did send to the plaintiff, in accordance with the said agreement, sixteen cargoes of fruit, but the plaintiff shows and alleges that the said fruit was not as good fruit as any that was shipped from Baracoa, but, on the contrary, was small, inferior and unmerchantable fruit, for which the plaintiff was unable to find any profitable sale, to his damage $10,000.”

If there is a union of causes of action, for any one of which the defendant could not be arrested, the order of arrest cannot be sustained. It must relate to the whole of the causes of action set out. For this reason, without considering any of the other questions, we think the order appealed from should be reversed.

Order affirmed with ten dollars costs and disbursements.'


source: Caselaw Access Project

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

license: Public Domain

text:
    WILLIAM BATES and HUGH M. COMER, Respondents, v. JAMES B. CUNNINGHAM, Impleaded with FRANCIS R. MATHER, Appellant.

      Conditional sale — when title passes —Factors act — chap. 179 of 1830 — Construction of.

    On the 10th and 15th of November, 1870, the plaintiffs sold and delivered, at Savannah, Georgia, 115 bales of cotton to one Williams, who paid $1,000 of the. purchase-price and gave his check for the balance, $2,676.20, which was never paid. By the terms of the sale the title was not to pass to Williams until the price was paid. On November seventeenth, Williams shipped in his own name sixty bales of the cotton to New York, consigned to the defendants, and drew a draft for $4,500 upon them, to which he attached the bill of lading and invoice, indorsed by him, and procured it to be discounted by Bryant & Hunter, of Savannah, to whose order the draft was made. The defendants subsequently accepted the consignment and paid the draft in good faith, and with no notice of .plaintiffs’ title.
    In an action of replevin brought by the plaintiffs to recover the cotton from the defendants, held, that although as against Williams the title to the cotton remained in the plaintiffs, yet that the defendants were protected from all claims on their part by virtue of the provisions of the factor’s act. (Chap. 179 of 1830.)
    The farthest that the courts have gone in creating exceptions to that statute, is to hold that, where goods have been shipped in the name of a person who has obtained possession of them by theft, or by trespass, without any act or concurrence on the part of the owner by means of which the shipper was enabled to obtain the possession and the indicia of ownership, that then the case is not within the protection of the statute. (Per Davis, P. J.)
    Appeal from a judgment in favor of tbe plaintiffs, entered upon tbe verdict of a jury, and also from an order denying a motion for a new trial, made upon tbe minutes of tbe court.

      Benjamin G. Ilitehi/ngs, for tbe appellant.
    Tbe Georgia statute has no force out of tbat State, and tbe courts of this State will not, upon principles of comity, give effect to it as against the rights and claims of our own citizens, and in opposition to our own laws. {Hoyt v. Thompson, 5 N. Y. [1 Seld.], 320; Lem/mon v. The People, 20 N. Y., 562; 2 Kent’s Com. [6th ed.], 406; Wharton’s Conflict of Laws, §§ 335, 347, 348a, 349, 350, 351; Abrahams v. Fiestero, 3 Wend., 551; Hoyt v. Thompson, 23 Wend., 89; De Witt v. Barnet, 3 Barb., 89.) This principle bas been applied in a multitude of cases and to various subjects, but principally to cases where claims to property have been set up under the special laws of some other State or country against persons claiming under the laws of the State where the action is brought and the property is situated. The owner of a slave who had taken him into a State where slavery was not recognized, could not hold him. {Lemmon v. The People, 20 N. Y., 562.) Claims to property .under the insolvent or bankrupt laws of another State or country are not recognized in our courts. {Abrahams v. Fiestero, 3 Wend., 551; Hoyt v. Thompson, 1 Seld., 320; Harrison v. Story, 5 Cranch, 298, 302; Ogden v. Sanders, 12 Wheat., 361; Baker v. Wheaton, 5 Mass., 509.) Voluntary assignments, good by the laws of the State where the debtor resides and where made, are not recognized as giving title to property in another State, unless valid by the laws of that State. {Johnson v. Parker, 4 Bush [Ky.], 149; Rice v.- Daoienbaiwn, 32 Vt., 460; 11 Pick., 11; 50 Penn., 230.) Statutory liens upon personal property created by or under the laws of one State will not be enforced in another State into which the property has been taken. {De Witt v. Barnett, 3 Barb., 89; Donald v. Ilewell. 33 Ala., 534; Marsh?s Admr. v. Flsworth, 31 id., 85; Booth v. Clark, 11 How. [U. S.], 322; 1 Gray, 243.) Even with the aid of the Georgia statute, the plaintiffs are not entitled to recover in this action. {Rawles v. Deshler, 3 Keyes, 512; Dows v. Oreen, 24 N. Y., 638; Cartwright v. Wilmerdvng, 24 id., 521; Smith v. Dynes, 1 Seld., 41; Liakba/rrow v: Mason, 6 East, 21; 2 T. B., 63; Parker v. Patrick, 5 id., 1Y3; Pickering v. Bask, 15 East, 38; Chitty on Contracts [10th ed.], 430, and note; Williams v. Tilt, 36 N. Y., 319; Peabody v. Fenton, 3 Barb. Oh., 463; Mowry v. Walsh, 8 Cow., 238; Lewis v. Palmer and Hart, Denio & Hill’s Sup., 68.) It is the settled rule of law, and has been since the case of LicJcbarrow v. Mason (2 T. B., 63), that a consignee who advances upon a bill of lading in his favor, or indorsed to him, can hold the goods against an unpaid vendor. Upon the same principle it is entirely settled that a bona fide purchaser from a fraudulent vendee can hold goods against the vendor. {Dows v. Orcen, 24 N. Y., 638; Mowny v. Walsh, 8 Cow., 238.) Upon precisely tbe same principle, a bona fide purchaser from the vendee, upon a conditional sale and delivery, can hold the goods against the original owner. (Smith v. Dynes, 1 Seld., 41; Haggerty v. Palmer, 6 Johns. Cli., 487; 1 Paige, 312; 1 Edw. Oh., 140; Caldwell v. Bartlett, 3 Duer, 341, 352.)

      Erastus Coolce, for the respondents.
   Davis, P. J.:

This action was brought to recover possession of forty-five bales of cotton, alleged to be the property of the plaintiff, and wrongfully detained by the defendants. It arises upon the following facts: Bates & Comer were commission merchants and cotton factors, in the city of Savannah, in the State of Georgia. On the 10th and 15th of November 1870, they sold to one S. F. "Williams, at Savannah, 117 bales of cotton, of which the forty-five bales in question were part. Williams paid on the purchase-price $6,000, leaving unpaid $2,676.20, for which amount lie gave his check, which was afterwards dishonored, and never paid. The cotton was delivered to, and taken possession of, by Williams, with the understanding ” (as testified to by one of the plaintiffs) “ that it should be fully paid before it was disposed of by him; that is, that the cotton was sold for cash on delivery.” On the 17th of November, 1870, Williams shipped sixty bales of the cotton by steamer to New York, consigned to J. B. Cunningham & Co., the defendants’ firm. The bill of lading of such shipment was taken by Williams, in his own name, and he drew his hill of exchange on the defendants’ firm for $4,500, dated November 17, 1870, payable at sight, to the order of Messrs. Bryan & Hunter, and indorsed and delivered to Bryan & Hunter, who were bankers at Savannah, the bill of lading accompanied with such bill of exchange, together with an invoice of the sixty hales of cotton, describing them as shipped by S. F. Williams, by steamer San Salvador, to defendants’ firm at New York city, to be sold on account of the shipper. The bill of lading and the invoice were annexed to the bill of exchange, and indorsed by Messrs. Bryan & Hunter, to Ilenry Talmage, New York, and forwarded to him for acceptance and collection. The defendants’ firm accepted and paid the bill of exchange and received the same from Talmadge, with '•be bill of lading and invoice. They received tbe goods on their arrival at tlie city of New York in good faith, and without any notice, or knowledge of the plaintiffs’ claim for part of the unpaid purchase-price. The plaintiff put in evidence a statute of Georgia, •which is as follows : Cotton, corn, rice and other products sold by planters and commission merchants on cash sale, shall not be Considered as the property of the buyer, or the ownership given up, until the same shall be fully paid for, although it may have been delivered into the possession of the buyer.” Upon these facts and upon the finding of the jury, there can be no doubt that the sale made by plaintiff was a conditional one, and that, as between them and "Williams, they were owners of the cotton or its proceeds until the payment of the whole purchase-price. The delivery of the possession was subject to that condition, and these facts entitled the plaintiffs to pursue the cotton and recover possession thereof in the hands of the defendants’ firm, unless some other rights intervene for their protection. The statute of Georgia, does not strengthen the rights of the plaintiffs in this respect; because, at common-law as established in this State, their title to the property would remain good as against Williams, until the condition of payment was per’ formed, and because the statute does not operate extra territorially, so as to limit or affect the operation of our own statutes. The case, therefore, turns, as we think, altogether upon the application of the statute of this State, generally known as the factor’s act. (Laws of 1830, chap. 179 ; 2E.S. [6th ed.], 1168.)

That act provides that “ every person in whose name any merchandise shall be shipped, shall be deemed the true owner thereof so far as to entitle the consignee .of such merchandise to a lien thereon; first, for any money advanced or negotiable security given by such consignee to or for the use of the person in whose name such shipment shall have been made ; second, for any money or negotiable security received by the person in whose name such shipment shall have 'been made, to or for the use of such consignee.” And the second section of the act declares that “ the lien provided for in the preceding section, shall not exist where such consignee shall have notice, by the bill of lading or otherwise, at or before the advancing of any money or security by him, or at or before the receiving of such money or security by the person in whose name the shipment shall have been made, tbat such person is not tbe actual and bona fide owner thereof.”

There is no question in this case but that the cotton was shipped to the defendants’ firm by Williams, in his own name, by bill of lading in due form, accompanied by an invoice, in the name of Williams, as owner, and by his draft for the amount, which the defendants’ firm have advanced, nor is there any question but that the advances were made upon presentation and delivery of the bill of exchange, accompanied by the bill of lading and invoice and in entire good faith by the defendants. Nor is there any pretense that the defendants’ firm had notice by the bill of lading or otherwise, at or before advancing their moneys upon such bill of exchange, that Williams was not the actual owner of the cotton.

If, upon such a state of facts, the case is not within the factor’s act, then the act is of no value or benefit to the commercial dealings of the country, and ought to be swept from the statute-book.

The first section of the act declares, in the simplest possible language, that every person in whose name any merchandise shall bo shipped, shall be deemed the true owner thereof so far as to entitle the consignee to protect himself by a lien for his advances. The only exception made by the statute to the language 'Used in the first section, is that contained in section 6, of the act, which is in these words: “Nothing contained in this act shall authorize a common carrier, warehouse-keeper or other person to whom merchandise or other property may be committed for transportation or storage only, to sell or hypothecate the same.” The exception created by this section very clearly has no application to the present case. The cotton was not “ committed for transportation or storage only ” to Williams, either as common carrier, warehouse-keeper, or in any other capacity, but simply as a purchaser, having a right to perfect his title by payment of an unpaid balance of the purchase-price. It is supposed that the courts by their decisions construing the factor’s act, have interpolated language which makes’it apply only to cases in which the owner of property has shipped the same in the name of another. If the courts had attempted this, the effect, if any could follow from that kind of judicial legislation, would be to render the act itself merely declaratory of existing law, because there can be no doubt that under the common law an owner who shipped bis property in tbe name of another person, would not be beard to assert any title, as against a lien acquired by tbe consignee by advances made in good faitb to tbat person upon sucli a shipping bill. Tbe owner’s act would in such case be a complete estopjiel in pais for tbe protection of tbe dealer in good faitb. Tbe farthest tbat the courts by tlieir decisions can justly be said to have gone, is to bold that where goods have been shipped in tbe name of a person who lias obtained possession of them by theft, or by trespass without any act or concurrence on the part of the owner by means of which the shipper has been permitted to obtain such possession and the indicia of ownership, the case is not within tbe protection of the statute. Saltus v. Everett (20 Wend., 267) arose before the statute, and in tbat case the true owner was permitted to follow his goods as against the title derived through a thief or trespasser. The factor’s act was not retroactive and had of course no application to the case.

Stevens v. Wilson (3 Denio, 472) is a case where a factor pledged tbe goods of his principal for his own benefit to a,pledgee who knew tbat the factor was not tbe owner. Of course tbat case has nothing to do with any question under the first section .of the factor’s act.

Covell v. Hill (4 Denio, 323, and 2 Selden, 374), is a case where one Potter made a conditional contract for the purchase of lumber from the plaintiff, by which it was agreed that Potter should ship the same, in the name of tbe plaintiff, to the defendants, and pay the freight, and that the lumber should be sold by tbe defendants, as tbe property of the plaintiff, and tbe avails thereof accounted for and paid over to the plaintiff. Potter shipped the lumber by canal boat, and received from the master of the boat a bill of lading in the name of the plaintiff as the owner, which bill was delivered to the plaintiff and retained by him. Potter gave to the master of the boat a paper in these words: “ Elmira, July 2, 1842, shipped on boat Occidental II. Banks, 5,290 feet white pine boards and plank for Albany. (Signed) A. P. Potter.”

No bill of lading was sent to the defendants, but Potter gave the master of the boat an order on the consignee for the balance of freight on the lumber which the consignees paid. The consignees also advanced to Potter $250 on the lumber, and claimed to hold the same against tbe plaintiff Covel for the freight paid, the advances, and a considerable previous indebtedness of Potter to them. The plaintiff offered to pay the freight and other charges, and demanded the lumber. The consignee refused to deliver the same. The courts hold that so far as the case was governed by the principles of the common law it was clear that the plaintiff was entitled to recover. They also held that the lumber was not shipped in the name of Potter but of the plaintiff, in whose i ame the bill of lading was made out, and that the instrument sent by the captain of the hoat was not a bill of lading, nor did it possess the transferable quality of a bill of lading; and it was further held by the Court of Appeals, that the case was not within the first section of the factor’s act, “because the lumber was not shipped in the name of Potter, the regular bill of lading being made out to the order of Coveil, the plaintiff, and the defendant also had notice of the true ownership of the lumber.” There was, therefore, no occasion in that case for the construction of the first section of the factor’s act; but the Supreme Court, in commenting on that section, uses language which, it is supposed, establishes that the act is not applicable to the case at bar. It was said by BboNsoN, C. J., after stating the language of the section, “ although the words of the section are very broad, it must, I think, be confined to cases where the goods have been shipped by the owner or under his authority, in the name of another. It could not have been the intention of the legislature that one who has taken the property as a trespasser or a thief, and shipped it in his own name, should be deemed the true owner, so as to give the consignee a lien for advances. The leading object of the statute was to protect the consignee, when he had, in good faith, paid or become liable to pay money on the credit of appearances created by the owner of the property.” And again, speaking of the common law as applicable to the case, he says, But in the case of a conditional sale with a delivery of possession, it may be that a bona fide purchaser who parts with his money, or one who makes advances, to the vendee, on the property, trusting to the credit of appearances, will obtain a good title or lien; on the principle which is sometime applied, that when one of two innocent persons must suffer from the fraud of the third, the loss shall fall on him who has enabled such third person to do the wrong. But it is not now necessary to decide that question for there was no conditional sale nor a sale of amy Tcincl from, the plaintiff to Potter P

These quotations seem to show quite clearly that the learned judge did not intend to pass upon a case like the present; and that when he said although the words of the section are very broad, it must, I think, be confined to cases where the goods have been shipped by the owner or under his authority in the name of another,” the learned judge did not intend, we think, to declare that such authority must be any thing more than an apparent one, for he immediately proceeds to include within the objects of the statute a case where a consignee, in good faith, has paid or become liable to pay money on the credit of appearances created by the owner of the 'property P

In the present state of our law it is, probably, not true that in the case of a conditional sale with a delivery of possession, a bona fide purchaser, who parts with his money, trusting to the credit of appearances, will obtain a good title or lien, on the principle that where one of two innocent persons must suffer loss from the act of a third person, such loss shall be borne by him who has placed such person'in the position which enabled him to do the act causing the loss. But it seems to us very clear that that is the vital principle which the legislature intended to incorporate in and express by the factor’s áct. In the case at bar, by the delivery of possession upon their conditional sale to Williams, the plaintiffs clothed him with the apparent authority, and all the indicia of, ownership, which arise out of actual possession. The shipment of the cotton in his name as owner, the receiving of the bill of lading made in his name, the negotiation of the bill of exchange drawn on the consignees, and the presentation of that instrument and the acceptance and payment of the bill by the defendant’s firm, were all harmonious in every respect with the apparent authority given to Williams by the contract of sale and delivery of possession made to him by plaintiffs, and each one of them would have been a perfectly valid and effective act for all purposes, but for the failure of Williams to perform the condition of the sale, which was wholly latent as to the defendants. It is a case, therefore, where the plaintiffs had armed Williams, by their own voluntary act, with means to commit the fraud upon innocent third persons, in a form that bore every appearance of regular and actual ownership by enabling him to ship the cotton in his own name and send forward the bill of lading upon which innocent consignees paid their money; and this fact, unless the factor’s act is to be abrogated by the decisions of courts, fully protects the defendants in their advancements upon the bill of exchange and bill of lading.

In Cartwright v. Wilmerding (24 N. Y., 521) the court say, speaking of the factor’s act, “ The act was intended to modify and make certain, in its practical application to the current transactions of trade and commerce, the general common-law rule, that where one of two innocent persons must suffer loss from the act of a third person the loss shall be borne by him who has placed the person in the position which enabled him to do the act causing the loss.” And in commenting upon Stevens v. Wilson and Covell v. Hill (ubi supra), the learned judge who pronounced the opinion says: “ In both the pledgee had actual notice that the pledgor was not the owner.”

In Rawls v. Deshler (3 Keyes, 572) the defendants gave one Griffin an order on an elevator company for a quantity of corn, to be delivered “subject to my order until paid for.” Griffin took possession of and shipped the corn and took a bill of lading in his own name. lie then drew on the plaintiffs, the consignees in the bill of lading, and procured his draft to be discounted by a bank at Buffalo, who forwarded the same, with the bill of lading, to the plaintiffs, by whom the same were received and the draft paid. Griffin failed to pay the defendant, and the defendant got possession of the corn in transitu. The consignees brought replevin and recovered the corn. The Court of Appeals affirmed the judgment. In that case both the property and the right of control of the corn were to remain in the defendant until paid for.

In the later cases, to wit: The Mechanics and Traders’ Bank v. Farmers and Mechanics' Bank (60 N. Y., 40), Howland v. Woodruff (id., 74), and The First National Bank of Toledo v. Shaw (61 N. Y., 283) we see nothing which, of necessity, compels us to hold that the factor’s act is not a protection to the defendants in this case. An analysis of those cases only tends to leave in doubt what construction of the factor’s act' the Court of Appeals will ultimately adopt. It is enough to say that they do not hold that the first section of the factor’s act is not applicable to such a state of facts as clearly exist in this case. The demands of commerce plain]} require that the first section of that act should be construed according to the plain signification of its language and the manifest purpose of the legislature. The exceptions of the sixth section strongly fortify this construction, for where the legislature specify exceptions to a general provision of the same statute in which the exceptions are named, the expression of things excepted, is the exclusion of things not excepted. The courts may be justified in holding that the act does not embrace the shipment of stolen goods, but certainly not, in excluding cases where the voluntary action of an owner has enabled a party, to whom possession has been delivered, to do the very acts upon which the statute declares “ he- shall be deemed the owner ” for the protection of innocent parties.

"We are unable to see any good reason for denying that the defendants in this case are within the protection of the statute. The verdict should have been directed in their favor.

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

Daniels, J.:

The evidence showed that the cotton in dispute in this case was delivered by the plaintiffs to F. S. "Williams at Savannah in Georgia, under a contract for its sale, by the terms of which the title was not to become vested until its purchase-price was paid, and that was the effect also of the transaction under the terms of a statute of that State applicable to it. "When Williams received the cotton and before lie had wholly paid for it, he shipped it to New Tort, consigned by the bill of lading to his own order, and afterwards by an indorsement of the bill ordered it to be delivered to the defendant. On the day of the shipment and consignment of the cotton to them, he drew a sight draft upon them for the sum of $4,500, attached it to the bill of lading and procured the draft to be discounted. The defendants were notified of the transaction, accepted the consignment, and on the 21st of November, 1870, paid the draft upon the faith of it. The cotton was afterwards demanded for the plaintiffs, because of the non payment of the unpaid balance of the purchase-price and upon the refusal of the defendants to deliver it, this action was brought for its recovery. Upon the trial the court was requested to charge the jury: “ That if Cunningham & Co. received tlie cotton under tbe bill of lading and made advances to or for the use of "Williams on the faith of the bill of lading, without notice by the bill of lading or otherwise that "Williams was not the real owner of tlie cotton, then Cunningham & Co. are protected to the extent of the advances made in good faith and without notice.

“ 'That the cotton having been shipped in the name of "Williams, he is to be deemed the true owner thereof so far as to entitle Cunningham & Co. to a lien on the cotton for any money advanced to or for the use of Williams, if the money was advanced on the faith of the bill of lading, without any notice that "Williams was not the true owner.”

The plain object of these requests was to control the case by the following provisions of the statute enacted in 1830, known as the factors act :

“ Section 1. After this act shall take effect, every person in whose name any merchandise shall be shipped, shall be deemed the true owner thereof, so far as to entitle the consignee of such merchandise to a lien thereon:
“ First. For any money advanced, or negotiable security given by such consignee to or for the use of the person in whose name such shipment shall have been made ; and
“ Second. For any money or negotiable security received by the person in whose name such shipment shall have been made to or for the use of such consignee.” (3 K. S. [5th ed.], 'TO, § 1.)

Before the enactment of this statute an English act had been passed upon the same subject. The object of both, it has been aeld, was to increase “the facilities of trade by legalizing and explaining the cases in which a party could sell or pledge property at sea, in the ship at dock, or lying in the warehouse, subject to the payment of duties. Historically the necessities of trade and the custom of merchants had, in both countries, anticipated the statutes. And the benefits of the statutes and custom are too evident and too great to allow us to narrow the construction of the law. And there is no sound principle which would oppose a liberal view tending to enlarge the facilities of transfer, since these acts but follow out" the general rule that every man is bound to take care not to select an agent who will do acts to injure other persons.” (Cartwright v. Wilmerding, 24 N. Y., 521, 529.) The English act was more restricted in its terms than those made use of in the enactment of the first section of the statute of this State. But it made the shipment of merchandise controlling evidence that it had been intrusted to the person named as the shipper for the purpose of consignment or sale, and for that reason provided for the protection of the consignee, who advanced money or negotiable securities on tho faith of the shipment without notice of the existence of an adverse title, unless the contrary should be made to appear by bill of discovery or otherwise, or be shown in evidence by the person disputing *,lie fact. (46 English Statutes at Large [6 George IY], chap. 94, pages 527-8, § 1.)

For that reason, if the act of this State was enacted to maintain and promote the same policy, and should be subjected to the same construction as that in terms required by the English act, the defense made in this case ought to have been allowed to prevail. For upon the bill of lading showing that the cotton had been shipped in the name of Williams, it was to be assumed that it had been intrusted to him for consignment or sale at least; and, therefore, or money or negotiable securities advanced upon it by the consignees he should be legally protected against claims to it asserted by other persons. And n'o evidence was given tending to show that it had not been so intrusted. He had previously consigned cotton to the defendants in a similar manner, and that circumstance indicated him to be a shipper as well as dealer in it. When the plaintiffs delivered him the cotton, there was reason to believe that it was understood that he would endeavor to dispose of it as he did, notwithstanding the special agreement made concerning the title to it. Anil from the circumstances as well as the nature of the commodity, it could be inferred that a delivery for consignment was intended. If that was to be made in the plaintiffs’ name for the protection of their interest under the contract, the defendants could not be prejudiced by the departure made from that plan, by the shipment in the name of the vendee. If a shipment was contemplated at all, and tho cotton was intrusted to the vendee to make it in any form, the statute would protect the consignees in their advances, even though he made it afterwards in his own name without authority.

But the act of this State has not, in terms, imposed even this restriction upon commercial transactions affected by the provisions contained in its first section. They are broad and unlimited in tlieir effect, and apparently intended to include all cases where the person intrusted by the owner in the course of trade with the possession of merchandise, ships it in his own name, and the consignee in good.faith, and without notice that the appearances are not truthful, advances money or negotiable securities upon it for the use of the person in whose name the shipment has been made.

These are the plain terms of the law, and it should be construed and carried into effect by means of the same rules of construction that have been habitually applied to the interpretation of other statutes.

The provisions made have been frequently before the courts in other cases, but not under circumstances requiring their application to the decisions pronounced. In those cases it has been intimated that a more restricted construction than that indicated should be placed upon the broad language used by the legislature. (Covill v. Hill, 4 Denio, 323; First National Bank of Toledo v. Shaw, 61 N. Y., 283, 297.) In the decision of the last case, what was said in the case of Saltus v. Everett concerning the inability of a mere possessor of personal property to transfer the title to it was approvingly repeated. But as that case arose before this statute was enacted, its decision ought not to be allowed to control its application. The same observation is equally as applicable to the case' of the Mechanics and Traders' Bank v. Farmers and Mechanics’ Bank (60 N. Y., 40), for it was held by the decision that it was not brought within any provision of the statute, for the reason that the money had not been advanced by the consignee of the property. The succeeding case of Howland v. Woodruff (id., 74) was disposed of under the third section of the act. But still the theory, it maintains, sanctions the binding nature of advances made in good faith and without notice of any infirmity of title after the possession has been intrusted by its owner to the factor, or agent receiving the money.

The statute was evidently enacted as a regulation of trade to change the law as it was declared and applied at and before the time of its passage. That was considered to be the intention and effect of the English act, whose language was made much more restricted than the act of this State. (Hatfield v. Phillips, 9 Mees & Wels., 647, and references in the note at the end of the ease.) The evidence of that intent is much more cogent in the present instance, from the circumstance that the legislature has subjected the language used to no restriction whatsoever, beyond that which is to be implied from the transactions themselves, which it was the purpose of the law to regulate and define.

What seems to have been intended, was to impose upon the owner of merchandise intrusted by him in the course of trade to the possession of another person, the legal consequences of the violation of the confidence reposed by him in the person selected as its custodian. By that circumstance he places another in the position whore he may successfully deceive others acting bona fide, and without notice that the appearances exhibited are fallacious. And as to the class of cases mentioned in the statute, it was the object of the legislature so far to change the prevailing doctrine of the common law, as to place the responsibility for loss upon the party who should confidingly create such appearances. The requests to charge were based upon such a construction of the law of this State. And the fact that the title itself did not vest in the shipper, either by the terms of the contract of sale, or those of the statute of the State of Georgia, was not sufficient to justify their refusal. The money was advanced by the defendants, and the property was delivered to them under the shipment of it, within this State. And so far as their rights were concerned, they arose under its laws, and were not controlled by the statute of the State of Georgia. The judgment should be reversed and a new trial ordered, with costs to abide the event.

Brady, J., concurred in the reversal of the judgment.

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


author: Daniels, J.:

text:
    THE NEW YORK TRUST AND LOAN COMPANY, Respondent, v. JOSEPH W. HELMER, Impleaded with CHAUNCEY T. BOWEN, Appellant. THE SAME v. THE SAME.

      Promissory note — agreement to renew — what allegation of, in answer sufficient — • Banking business — what constitutes — who may set up invalidity of transaction.

    This action was brought upon two promissory notes, payable six months after date. The answer alleged that the notes were made to raise money ; that, at the time they were delivered to the plaintiff, it was agreed between the plaintiff and defendants, for a valuable consideration, that the defendants should retain, and pay interest upon the proceeds of the notes for the six months next following the maturity thereof, and should give new notes therefor; that they had tendered the new notes, and the plaintiff had refused to accept the same. Beld, that it was to be presumed, from the allegation, that the agreement to renew was in writing, and that the answer set up a good defense to the action.
    The plaintiff was a corporation created under a special act, by which it was authorized, among other things, “to grant, bargain, sell, buy or receive all kinds of property, real, personal or mixed, or to hold the same in trust or otherwise; * * * and to advance moneys * * * upon any property, real or personal, on such terms or commissions as may be established or approved by the directors.”
    The answer alleged that the plaintiff was engaged in the business of discounting commercial paper,- and crediting the proceeds in the accounts, and subject to the checks of its customers; that the notes in question were made to raise money upon, and were received and discounted in the course of that business by the plaintiff, and the proceeds placed in the account of the defendant Bowen. Upon appeal from a judgment entered upon an order sustaining a demurrer to the answer, on the ground that it did not stale facts sufficient to constitute a defense, held, that the acts of discounting commercial paper, for the purpose of raising money, and placing the proceeds to the credit, and subject to the checks of its customers, constituted the business of banking, within the meaning of section 4 of title 3 of chapter 8 of part 2 of the Revised Statutes, prohibiting any corporation not expressly incorporated for banking purposes from carrying on that business.
    That the charter of the plaintiff did not authorize it to carry on that business.
    That even if it did, it was in violation of section 4 of article 8 of the Constitution, declaring that the legislature shall have no power to pass any act granting any special charter for banking purposes.
    That the defendants were not estopped from setting up the invalidity of tha notes, as the transaction was one expressly forbidden by the laws of the State.

      Appeals by the defendant Helmer, in two actions, from orders made at the Special Term sustaining demurrers to answers, and from the judgments afterwards entered thereon.

      Geo. Bowen, for the appellants.
    The only authority by which plaintiff can claim to be able to discount these notes is by virtue of the following words : “ Shall have power, etc., to, etc., buy or receive all kinds of property, real, personal or mixed.” This only authorizes it to buy or receive something then having existence — propertyt It does not authorize it to breathe the breath of life into, to create property; and, until after the buying or receiving process has been fully complete, these notes were nothing, and there was nothing about which the parties could negotiate, or upon which the plaintiff could place its hands to receive. This body coiporate can only ac.t in the mode, and for the purpose, prescribed by the law creating it. (Beatty v. The Ma/rine Ins. Co., 2 Johns., 110, see 114; Jaclcson v. Hartwell, 8 id., 422, see 424; H. Y. F. Ins. Co. v. Fly, 2 Cow., G64, see 669; The People v. Ptica Ins. Co., 15 Johns., 383.) There is a plain distinction between purchasing or receiving, within the meaning of the charter of the plaintiff, and discounting, which was the method by which the plaintiff got the notes. What is a discount ? (Am. L. I. and T. Co. v. Dobbin, Sup. to Hill & Denio, 251; 1 Hilt., 98 ; City Blc. of Columbus v. Bruce <& Fox, 11N. Y., 501, 515.) The discounting of a note is the loan of money thereon, which, in the hands of the holder, must, or may previously, have had no vitality, while the purchase must be of a note valid in the hands of the holder at the time; so that the same elements must exist in the note to give the power to “ recei/ve ” as to “purchase,” all of which are wanting in our case. (Cases above cited ; Ptica Ins. Co. v. Scott, 19 Johns., 1; Talmage v. Pell, 3 Seld., 328 ; Leavitt v. Palmer, 3 Comst., 19 32, 33; The Peoples. The Ptica Ins. Co., 15 Johns., 358; Curtis et al. v. Lernitt, 15 N. Y., 58; H. Y. F. Ins. Co. v. Ely, 2 Cow., 678; Ptica Ins. Co. v. Cadwell, 3 Wend., 300, 369; Bissell v. The Mich. S. and N. I. P. Co., 22 N. Y., 259 ; Beach v. Fulton Blc., 3 Wend., 582, 583; In re John M. Jaycox and John A. Green, Banlcruj/ts, in Circuit Court of H. S., N. Dist. of N. Y., opin. of court, p. 5, fol. 18; Lticas et ad. v. The Goot Hat. Blc. of Potts: ville, decided Oct. 11, 1875, N. Y. Weekly Dig., 499; Abbott’s Digest, Law of Corporations, 56, 57, etc.; The Utiea Ins. Co. v. limit & BrooJcs, 1 Wend., 56; Be Qroot v. Van Duzer, 20 id., 390; jBT&. of California v. Collins, 7 Hun, 336.)

      Henry E. Davies and Win. P. Dixon, for the respondent.
    By the charter of the company, it was authorized to buy any personal property, and a promissory note is personal property. The plaintiff being authorized by its charter to buy ‘‘promissory notes,” wras elearly authorized to “ discount ” such notes, the latter being the equivalent or same thing as the former. It is not a good defense for these defendants, while retaining the fruits of the contract made with this plaintiff, to deny the validity of that contract. (Palmier v. Lawrence, 3 Sandf. S. C., 170; McCutchen v. The Steamboat Co., 13 Penn., 13; The Chester Glass Co. v. Dewey, 16 Mass., 102; State of Indiana v. Wora/rn, 6 Hill, 37; Moss v. The Rossie Lead Mining Go., 5 id., 137; The Steam Navigation Co. v. Weed et al., 19 Barb., 378.) But, supposing that plaintiff’s charter did not give them the right, in express terms, to make the contract in question, the contract is primia facie valid, and it lies on those who impeach it to make out that it is %dtra vires. (See Green’s Brice’s Ultra Vires, 40, 41.) The transaction between the plaintiff and defendants is not in violation of the restraining acts, and is not, on the part of the plaintiff, an exercise of banking powers. (Utica Ins. Co. v. Scott, 8 Cow., 709, reversing the same case reported in 19 Johns., 1; People v. Brewster, 4 Wend., 498; Mott v. The U. S. Ti'ust Co., 19 Barb., 568 ; Hope Mut. Ins. Co. v. Taylor, 2 Robt,, 278; N. V. Firemen?s Ins. Co. v. Ely, 2 Cow., 678; Parish v. Wheeler, 22 N. Y., 494, 509; Curtis v. Lernitt, 15 id., 9; Leavitt v. Blatchford, 17 id., 521.) The right to make loans by way of discount, and to lend upon bills, bonds, notes and mortgages, is conveyed to a savings institution by a clause in the charter conferring power to invest deposits made with it in public stocks or other securities. (10 G. & J. [Md.], 299; Lee v. Alabama L. and T. Go., 13 Ala., 579; Duncan v. Md. S. L, 10 G. & J., 299 ; Gee v. Ala. L. Ins. and T. Co., 13 Ala., 581.) In an action on a promissory note, a defense of an agreement, contemporaneous with the making of the note, to renew the note at maturity is frivolous, and maybe struck out on motion. {Baity v. Lane, 13 Abb., 359 ; Shoe

      <md Leather Bit. v. Ocmvp, 21 How., 443.) So, also, the allegation that plaintiff is not the lawful owner and holder of the note was stricken out as sham, but this allegation is admitted. (Seely v. JEngell, 17 Barb., 530; Butterfield v. MeConib, 22 How., 150.)
   Daniels, J.:

The first of these two actions was brought upon two promissory notes, made by Joseph W. Helmer and Chauncey T. Bowen, for the sum of $8,000 each, payable to their own order, and indorsed by them. One of these notes was dated on the 22d, and the other on the 25th of March, 1875, and both became due in six months after their respective dates. It was alleged in the complaint that they were transferred before they became due for value to the plaintiff. The defendant Helmer answered the complaint. Ilis first and second answers set forth that the plaintiff was a corporation created by an act of the legislature of the State of N'¿w York, enacted on the 6th of May, 1870, and that it had engaged in the business of banking in violation of the laws of the State, and discounted the notes in suit in the course of that business. By a third answer it was alleged that the notes were made and indorsed for the purpose of raising money upon them. And that when they were transferred and delivered to the plaintiff, it was agreed by and between the said plaintiff and said defendants, for a good and valuable consideration then and there paid by said defendants to said plaintiff, and then and there passing between them, that said defendants should and would retain the proceeds of said several notes for six months longer, and next following the six months in said notes mentioned, and should and would pay interest thereon to said plaintiff at the rate of seven per cent per annum, and that they should and would give new notes in like manner and form as said notes in said complaint mentioned immediately upon the same becoming due and payable. And that said plaintiff should and would, in consideration thereof, renew said notes in said complaint mentioned, when the same matured for the period of six months next following the six months in said notes in said complaint mentioned. It was also alleged that when the notes mentioned in the complaint became due, the defendants tendered and offered to the plaintiff two other notes, made and indorsed by themselves, and of the like tenor of tlie notes mentioned in tlie complaint, and due in six months thereafter, with interest, in renewal of the notes mentioned in the complaint. The demurrer was general to the three defenses, because the answer did not state facts sufficient to constitute a defense. And it was so held by the Special Term, before which the case was heard and decided. ,

"Without considering for the present the sufficiency of the first and second defenses, which are nearly, if not entirely identical in both actions, the third does seem to constitute a substantial defense. For the facts alleged as its foundation present a valid agreement for the extension of the notes. It was not stated that a verbal agreement merely was made, which would probably be bad, because of its inconsistency with the written terms of the notes. (Bailey v. Lane, 13 Abb., 354; Shoe and Leather Bank v. Camp, 21 How., 443; Bookstaver v. Jayne, 60 N. Y., 146, 150.) But that an agreement for a renewal and extension had for a good consideration been entered into between the parties. And that was equivalent to a direct allegation that it had been made in writing. For, as a rule of pleading, parties are not required in stating the making of an agreement to aver that it was made in writing, even when the writing has been rendered necessary to seeure its validity.

The wilting is the evidence which the law will require to sustain the allegation. But the party is not obliged to aver its existence, in order to show that a legal agreement has been made. "What the Code required was simply a statement of the new matter constituting the defense, in ordinary and concise language. And that was complied with in the statement of this defense, without the furthei averment that the agreement was made in writing. (Miller v. Drake, 1 Caines’ R., 45; Elting v. Vanderlyn, 4 Johns., 237; Livingston v. Smith, 14 How., 490; Stern v. Drinker, 2 E. D. Smith, 401; Horner v. Wood, 15 Barb., 371; Hilliard v. Austin, 17 id., 141.) It has been supposed that Rann v. Hughes (7 T. R., 346, note) held a different doctrine as to pleas, but the case itself contains nothing warranting even that distinction.

If it did, however, it would be inapplicable to the present system of pleading, which requires no greater particularity in the answer than it does in the complaint. "What has been required to constitute good pleading in either, is a statement of the cause of action or defense in ordinary and concise language. (Code §§ 141, 149.) And under that the statement which would be sufficient in a complaint, would be equally so in an answer. As this portion of the answer was framed,, it alleged all the elements of a binding agreement to renew the notes when they became due. And as the' renewal notes- were properly tendered at that time, the agreement was performed by the defendants. (Brisbane v. Beebe, 48 N. Y., 631.)

This defense was sufficiently alleged and judgment upon the demurrer to it should have been ordered in favor of the defendants.

The note in the other action was made by the defendant Ilelmer, to the order of and indorsed by the defendant Bowen.

It was dated on or about the 4th of June, 1875, and was due in four months from that time. To the complaint on that note the answers were substantially the same as the first and second answers in the other action.

The defenses which they interposed were, that long prior to the making of the notes, the plaintiff opened an office in the city of New York, for discounts and deposits, keeping a large number of mercantile and business accounts, and carried on a regular banking business. That it discounted a large number of drafts, bills, promissory notes and other commercial paper, bought and sold exchange, credited deposits and paid them out on the checks of the depositors, charging the checks in their respective accounts, did the ordinary business of a bank of discount and deposit, and used, and employed its capital or effects or some part of them in receiving deposits and making discounts.

That the notes set forth in the complaints were made for the purpose of raising money upon them, and were delivered to, and discounted by, the plaintiff while carrying on such business of a bank of discount and deposit, in the usual course of such business, and with a portion of its capital or effects.

It was also further alleged that the proceeds were credited by the plaintiff upon its books to the defendant Bowen, subject to his checks, according to the usual course and custom of bankers. And that, it was alleged, was in contravention of the Constitution and of the laws of the State, by reason of which the notes were claimed to be void in the hands of the plaintiff.

Tbe company was chartered by a special act of the legislature, enacted on the 6th of May, 1870, and its business and powers were defined and declared by the third section of the act. (Yol. 2, Laws of 1870,1621, chap. 685, § 3.) That section is in the following words: The said company shall have power to grant, bargain, sell, buy or receive all kinds of property, real, personal or mixed, or to hold the same in trust or otherwise; to guarantee the payment, punctual performance and collection of promissory notes, bills of exchange, contracts, bonds, accounts, claims, rents, annuities, mortgages, choses in action, evidences of debt and certificates of property or value, and the titles to property, real or personal, upon such terms or commissions as may be established by the directors of said company; to receive upon storage, deposit or otherwise, merchandise, bullion, specie, plate, stocks, bonds, promissory notes, certificates and evidences of debt, contracts or other property, and to take the management, custody and charge of real and personal estate and property, and to advance moneys, securities and credits upon any property, real or personal, on such terms or commissions as may be established or approved by the directors of said company; but no rate of interest to exceed seven per cent per annum shall be charged or received by said company in any transaction.”

In support of the demurrers, it has been urged that these notes were personal property, and that the plaintiff was authorized to receive and advance money upon them under the provisions empowering it to buy or receive all kinds of property, and to advance moneys, securities or credits upon any property. But even if all that it has been claimed could be done under these provisions be conceded, that will not sustain the plaintiff’s demurrers, for the answers do not admit or state that either of tbe notes was received in either of those modes.

But, on the contrary, they distinctly aver that the plaintiff was engaged in the business of discounting commercial paper, and crediting the proceeds in the accounts and subject to the checks of its customers ; that these notes were made to raise money upon them, and were received and discounted in the course of that business by the plaintiff, and the procéeds placed in the account of the defendant Bowen. The question presented by the answers and demurrers, therefore, is not whether the plaintiff might not lawfully buy and advance money on promissory notes, bnt whether it could discount notes made to raise money, by receiving them from the original parties to them before they have had any other inception, and place the proceeds in account, to be paid out on the checks of one of those parties. That is a very different thing- from merely buying or advancing money upon promissory notes as property. (Catlin v. Gunter, 1 Kernan, 368.) It is carrying on the business of banking, as that term has been ordinarily understood, and as it has been defined by the courts and the legislature. Webster defines the meaning of that term to include the business of establishing a common fund for lending money, discounting notes, issuing bills and receiving deposits, collecting the money on notes deposited, negotiating bills of exchange, etc. And substantially the same definition was, at an early period, given of this term in the charter of the Commercial Bank of Albany. (Laws of 1825, 198, chap. 117, § 1.)

It was then enacted that the institution should possess the necessary powers to carry on the business of banking, “ by discounting bills, notes, and other evidences of debt, by receiving deposits,” etc. And the restraining laws of the State were framed upon the theory that discounting notes and receiving deposits constitute the transaction of banking business, as the term banking was understood and employed. That is very evident from the provisions of title 3 of chapter 18, part 1 of the Revised Statutes, to which the power of the plaintiff was expressly subordinated. (Yol. 2, Laws of 1870, 1623, 1624, chap. 686, § 9.) By the fourth section of that title, it has been enacted, that :

“ § 4. No corporation created or to be created, and not expressly incorporated for banking purposes, shall, by any implication or construction, be deemed to possess the power of discounting bills, notes or other evidences of debt, of receiving deposits, of buying gold and silver, bullion or foreign coins, of - buying and selling bills of exchange, or of issuing bills, notes or other evidences of debt upon loans or for circulation, as money.”

The plaintiff was not incorporated to do the business of banking, and for that reason, by the express terms of this provision, which was a direct qualification of its charter, it had no power to discount notes, or receive deposits.

The courts in their decisions had also proceeded upon the same principle. It was said by Spencer, J., in tbe case of People v. Utica Insurance Company (15 Johns., 357, 390), that the principal attributes of a bank are the right to issue negotiable notes, discount notes, and receive deposits.

And the same thing was held in Maine Bank v. Butts (9 Mass., 49, 54.) It also received the sanction of the Supreme Court of this State, in the case of New York Fireman's Insurance Company v. Ely (2 Cowen, 678, 710.) And, as the plaintiff was not, by its charter, expressly incorporated for banking purposes, it could not do the business in the course of which it was alleged to have received the notes in suit.

Beyond that, it could not have been given any such authority by means of its charter, which was a special act passed for the sole purposes of its own incorporation. Bor, at the time of its enactment, the Constitution of the State declared that “ the legislature shall have no power to pass any act granting amy special cha/rter for banking purposes, but corporations or associations may be formed for such purposes, under general laws.” (1 R. S. [5th ed.], 68, art, 8, § 4.) There was no disposition to confer this power upon the plaintiff by means of its charter, and under this provision of the Constitution, which still remains in force, it could not have been done even if the legislature had entertained that design. (Laws of 1874, p. 932, § 4.) An entirely different intention was exhibited by the charter of the plaintiff.

Bor, by rendering it subject to the general statute of the State already quoted, it was expressly prohibited from carrying ■ on the business in the course of which these notes were received by it. The demurrers interposed to the defendant’s answers admitted all the facts properly alleged, and consequently conceled that these notes were received by the plaintiff as they were alleged to have been by the defendants, and the prohibitions of the statute referred to appear to have been violated by those acts. But notwithstanding that violation, it has been urged that the defendants could not hold and enjoy the avails of the notes and still be allowed to repudiate their liability, for payment. And cases have been referred to in which that principle has been applied to transactions appealing to be in excess of corporate authority. But they involved no violation of a plain statutory restraint, as the transactions now before tbe court appear to have done. If tbe position urged upon the consideration of the cotu’t should receive its “sanction,” the statute whose restraint has been violated would be practically repealed. For it would be held that what the legislature have declared the plaintiff should not do, might safely be carried on under the sanction of the courts. That would render the statute nugatory, which would violate the duty and authority vested in the court and rendered obligatory upon it. The notes could not be discounted and received in plain violation of the terms of the statute of the State, as they were, and still be made the foundation of legal actions, brought for the recovery. (Fireman's Ins. Co. v. Ely, 2 Cowen, 678; N. Y. Life Ins. and Trust Co. v. Beebe, 3 Seld., 364; Seneca County Bank v. Lamb, 26 Barb., 595 ; Barton v. Port Jackson Plank Road Co., 17 id., 397; Dewitt v. Brisbane, 16 N. Y., 508; Richie v. Ashbury Co., 7 Eng. and Irish Appeals, 653.) That also appears to have been the judgment of the legislature upon the effect of this statutory restraint as it was expressed in its legislation concerning foreign corporations, for it was in terms declared that “ where, by the laws of this State, any act is forbidden to be done by any corporation, or by any association of individuals, without express authority of law, and such act shall have been done by a foreign corporation, it shall not be authorized to maintain any action foxinded upon such act, or upon any liability or obligation, express or implied, arising out of, or made, or entered into, in consideration of such act.” (2 R. S. [Edm. ed.], 477, § 2.) While this section applies in terms only to foreign corporations, it is still expressive of the sense of the legislature as to the effect of its legislation upon domestic corporations. And it was evidently enacted in promotion of the purpose to place them all under the same legal disabilities.

Still further provisions have also been made to suppress the business of unauthorized banking. By them it has not only been declared that “ no incorporated company, without being authorized by law, shall employ any part of its effects, or be in any way interested in any fund that shall be employed, for the purpose of receiving deposits, making discounts, or issuing notes or other evidences of debt, to be loaned or put into circulation as money,” but beyond that it has been provided that “ all notes and other securities, for the payment of any money, or the delivery of any property, made or given to any such association, institution or company,”

* * * “to secure the payment of any money loaned, or discounted by any incorporated company or its officers, contrary to the provisi ms of the third section of this title shall be void.” (1 R. S. [Edm. ed.], 661, §§ 3, 5 ; 2 R. S. [6th ed.], 1007.) And they place the invalidity of these notes beyond all possible grounds of controversy. This is plainly the effect of the statutes of the State, and it is affirmed to have been so held by the General Term of the fourth department in deciding the case of Black River Insurance Company v. New York State Loan and Trust Company.

The policy inducing the imposition of these restraints upon corporations not formed to carry on the business of banking, requires no vindication from this court in the decision of the cases now before it. But it is well known as a part of the history of the times originating them that their object was to prevent the recurrence of a series of corporate usurpations which had deluged the State with illegal issues of mere paper obligations, never probably intended to be, as they certainly never were redeemed, resulting in groat derangements to business, and producing numerous cases of financial embarrassment and ruin. (Attorney-General v. Life and Fire Ins. Co., 9 Paige, 470 ; Cleaveland’s Introduction to Laws of Banking, 29, 33, 38.) These laws have generally secured the objects they were designed to advance, by closing the avenues through which the repetition of preceding abuses was afterwards rendered impracticable, but as it is the duty of courts of justice to enforce and maintain them, even though that may be attended with disaster to corporations violating them, the judgments and orders appealed from in these cases must be reversed, with leave to the plaintiff to withdraw its demurrers in twenty days on payment of costs.

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

Judgments and orders reversed, with leave to plaintiff to withdraw its demurrers in twenty days on payment of costs.


text:
    JOHN MARTIN and PATRICK REYNOLDS, Appellants, v. JAMES W. WALKER and FANNY, his Wife, Respondents.

      fraudulent convey anee— who may set aside —right of surety.

    On the 4th day of May, 1867, the defendant Janies Walker conveyed certain real estate to one W., who conveyed it to Walker’s wife on the same day. There was no consideration for the conveyance, and Walker had no other property than that so conveyed. At that time there was an action pending against him for an assault and battery, in which, subsequently, and on the twenty-seventh of that month, a judgment for $498.78 was recovered. Thereafter a fine of the amount of the judgment, and $250 counsel fee, was imposed upon Walker for disobeying an order issued in supplementary proceedings instituted upon such judgment.
    The plaintiffs herein became sureties upon an undertaking given to stay proceedings upon an appeal taken by Walker, from such order, were subsequently sued there«jn, and compelled to pay the amount of the judgment and fine. Subsequently, Aey recovered judgment for such amount against Walker, and an execution issued thereon was returned unsatisfied. In this action, brought by them to set aside the conveyance, held,

    That the conveyance was void, as to the judgment creditor, in the action for assault and battery, even though at the time it was made the amount of his claim was not defined.
    That plaintiffs were entitled to be subrogated to all the rights and remedies of the original judgment creditoi, and could maintain this action.

      Deld, further, that the fact that Waikor had told one or both of them of the fraud he had committed at the time they became his sureties, did not affect their right so to do.

      Semble, that W. was a proper party defendant to this action.
    Appeal from a judgment in favor of the defendant, entered upon tiie trial of tbis action by tlie court without a jury.
    The action was brought for the purpose of having certain real estate conveyed by the defendant James W. Walker to his wife declared subject to the lien of a judgment recovered against said James W.
    On May 4, 1867, the defendant James W. Walker was seized of certain real estate. On that day he conveyed it to one John Williamson, who, on the same day, conveyed the property to the defendant Eanny Walker, the wife of James W. There was no consideration for the conveyance, and James W. Walker appears to have had nc other property than that so conveyed.

      On May 4, 1867, an action to recover damages for an alleged assault and battery, brought by one Morrow, was pending against said James W. Walker; in which action a judgment was recovered for §498.78, on May 27, 1867. On this judgment supplementary proceedings were instituted, in which, for an alleged disobedience of an order, a fine was imposed upon said James W. Walker, of the amount of the judgment, and a §250 counsel fee in addition.
    On appeal from such order, the plaintiffs in this action became sureties on an undertaking given to stay proceedings thereon.
    The order was affirmed and a judgment recovered against ¿hese plaintiffs as sureties upon the undertaking. These plaintiffs thereupon sued the defendant James W. Walker, recovered judgment against him, and on return unsatisfied of an execution issued on such judgment, commenced this action.

      C. Cambridge Smith, for the appellants.
    A plaintiff in an action of tort is within the provisions of the statute declaring conveyances to defraud creditors void. (<Jaclcson v. Myers, 18 Johns., 425 ; Wilcox v. Fitch, 20 id., 472; Ford v. Johnston, 7 Ilun., 563 ; S. P. Pendleton v. Hughes, 65 Barb., 136.) If the conveyance of Walker was made wfith the intent to defraud John J. Morrow, it is fraudulent as to the plaintiffs ; for it is a well settled principle'of law that a conveyance made with such fraudulent intent is void, not only as to existing, but subsequent, creditors; and, consequently, the court erred in declining to pass upon the fraudulent intent of the defendant. (1 Story’s Eq. Jur., §. 360; King v. Wilcox, 11 Paige, 589; Jenlcs v. Alexander, id., 619; Srnage v. Murphy, 34 N. Y., 508; Case v. Phelps, 39 id., 164.) The cases establish that upon the principle of subrogation, the plaintiffs stand in the same position as Morrow, with all the rights he possessed. (Hayes v. Ward, 4 Johns. CL, 123; Lewis v. Palmer, 28 N. Y., 271 ; Henchly v. Kretz, 58 id., 583, 590 ; Odie v. Malcolm, 7 Hun, 31; overruled in the Court of Appeals, see 2 N. Y. Weekly Dig,, 476.)

      A. H. Peavy, for the respondents.
   Daniels, J.:

The object sought to be attained by the prosecution of this action was the sale of real estate conveyed to the defendant Fanny Walker for the purpose of paying a judgment recovered against her husband. The real estate was owned by the judgment debtor, who, on or about the 4th of May, 1867, conveyed it, by deed, to John Williamson, and he, on the same day, conveyed it to the debtor’s wife. At the time of such conveyances an action was pending and about to be tried against the defendant James Walker for an assault and battery. And it was tried on or about the 24th of May, 1867, and a recovery had in it amounting to the sum of $498.78 damages and costs. An order was. afterwards made in proceedings supplementary to execution, instituted to collect the judgment, by which the judgment debtor was lined the amount duo upon it with interest thereon, and a counsel fee of $250 for a contempt arising out of his disobedience of another order that had been previously made. lie took an appeal-from that order and the plaintiffs became his sureties in a bond given to stay proceedings upon the order during the pendency of the appeal. That was determined adversely to the appellant, and for the non-payment of the amount directed to be paid by the order, an action was instituted upon the bond executed by the plaintiffs. That action resulted in a judgment which they paid, and they then sued their principal in the bond executed by themselves, and recovered judgment for the amount they had been obliged to pay as his sureties. After an execution had been issued, and returned unsatisfied, upon that judgment, this action was brought to set aside the deeds of the debtor’s property as fraudulent against his creditors and the plaintiffs.

Upon the trial of that action, at Special Term, the complaint was dismissed because the case was not considered to have been sufficiently made out to entitle the plaintiffs to the relief sought by them.

It has been claimed that the plaintiff Reynolds was not a proper party to the action, for the reason that the'other plaintiff had agreed to indemify him against liability on the bond, and had nearly, if not entirely, paid him before this action was commenced. But the evidence showed that the matter had not been all settled when this action was commenced ; and if it had been, it would not have justified a dismissal of the complaint as to the plaintiff Martin.

If all that the defendants insisted on was true upon this subject, Martin could still maintain the action for his own protection, and it would be retained for that purpose, even though properly it should be dismissed as to Reynolds.

It was also objected that Williamson, through whom the judgment debtor conveyed his property to his wife, should have been made a party to the action to set the deeds aside as fraudulent, and strictly speaking the defendants were right in that position, but the objection was not properly taken, for it' appeared by the complaint that the conveyances had been made through his intervention, and that he was for that reason a proper party to the action brought to annul them. All the facts affecting him, and indicating the propriety of his being a party, appeared as fully from the complaint as from the evidence afterwards given in the case. The objection to the failure to make him a party could only be taken, therefore, by demurrer, and not having been taken in that manner it has been waived. (Code, § 144, sub 4, 147, 148; Zabriskie v. Smith, 3 Kernan, 322.)

A preceding action was commenced by the plaintiffs to sot aside these deeds which appeared to have been allowed to go by default, but what afterwards became of it was not shown. And that was urged as a defense to the present suit. But that was brought by the plaintiffs, as assignees of the judgment recovered on trial of the action for tlic assault and battery, and before the recovery of their judgment sought to be collected in the present action. It was, therefore, a different case from that now prosecuted. And as no judgment was shown to have been recovered in the other suit, and no satisfaction obtained for any part of the plaintiffs’ demand, its mere pendency was no defense in this action. It was not brought for the same cause, but only for a portion of the cause of action now prosecuted by the plaintiffs in tlieir own right. Besides that, they did not fail in their case because of the pendency of that suit, but solely because of the fact that the evidence was not deemed to be sufficient to support their allegations of fraud, and even should the defense of another action pending; in the end prove to be a more serious obstacle in the plaintiffs’ way than it now appears to be, the present judgment cannot be sustained on account of such a probability, because the case was not disposed of upon that ground by the Special Term.

The deeds which were assailed by the plaintiffs as fraudulent were executed on the 4th day of May, 1867, and on the twenty fourth day of the same month the action for the assault and battery was tried, and a verdict recovered in it. The evidence showed that the deeds from Walker, the judgment debtor, to Williamson, and from the latter to the debtor’s wife, were made without any pecuniary consideration, and those facts were found to have been proven by the court before which the trial was had. It did not appear that the debtor was then under any obligation to any person other than that arising out of the assault and battery, or that he had or owned any property beyond that conveyed by these deeds. The fact that an execution issued to collect the judgment recovered for the assault and battery was returned unsatisfied, and supplementary proceedings were for that reason taken against him, sustain the conclusion indicated generally in the case, that he did have no other property. The effect of the deeds, therefore, was to give all his tangible property to his wife, and in that manner prevent the collection of the judgment soon afterwards recovered against him.

It was stated by his wife, who is one of the defendants In the suit, that she earned some of the money paid for the property, and the learned judge found that to be the fact; but the amount was not mentioned which she earned, neither was it shown to have been paid under such circumstances, or in any manner that would entitle her to maintain any claim on account of it, either against her husband or the property he held. And if it bad been, that would not have protected the husband’s interest in the property against the lawful claims of his own creditors. The case w'as not disposed of adversely to the plaintiffs, because the debtor’s wife had any interest in the property which it would be inequitable to appropriate to the payment of his debts; but simply because he was not indebted at the time, and did not part with his title to defraud his creditors. That he owed no defined debt then, was true, but he had incurred an obligation by reason of his wrongful act, which in a few days afterwards matured into an actual, as well as a defined indebtedness. The judgment recovered established the fact that he was liable to recompense the party for the injury occasioned by the assault and battery at the time, as well as before the period, when the deeds were made. Anri to that extent the injured party was, in a general sense, his creditor, and entitled to be protected in his efforts to secure redress, lie had a lawful demand, and the party liable upon it could nol defeat its recovery by conveying his' property without consideration, for the purpose of placing it beyond, his reach. Conveyances made to defraud a party entitled to claim satisfaction for a liability arising out of the commission of a tort, can have no greater validity in law or equity, than they would have if made to defeat the payment of an unquestioned and acknowledged indebtedness. All obligations are alike to be protected against the fraudulent disposition of the property of the party liable to satisfy them. The intent which will vitiate them in the one case, must be equally as fatal to them in the other. There is no principle or authority which will avoid the.debtor’s act in one case, and sustain it in the other. (Ford v. Johnston, 14 N. Y. Sup. Ct. Repts., 562, 568; Pendleton v. Hughes, 65 Barb., 136.)

The evidence relating to these conveyances showed them to have been executed without any valuable consideration. They were what the law has denominated voluntary, constituting a mere gift of the debtor’s property. (Jackson v. Peek, 4 Wend., 301.) But they are not solely for that reason to be considered fraudulent. (3 E. S. [5th ed.], 225, § 4.)

The owner who is free from debt may give away his property, or convey it by mere voluntary conveyances in good faith, and subsequent creditors cannot legally question the validity of the transaction. But where such a disposition is made by a person so much indebted at the time as to render the payment of his debts dependent upon the right to resort to such property for satisfaction, there a voluntary disposition of it will not be sustained. (Carpenter v. Roe, 10 N. Y., 227; Babcock v. Eckler, 24 id., 623; Dygert v. Remerschnider, 32 id., 629.) And the same result must follow when the debtor makes such a disposition for the purpose of hindering, delaying or defrauding present or prospective creditors. (Savage v. Murphy, 34 N. Y., 508; Case v. Phelps, 39 id., 164.) The statute of this State has declared that every conveyance of any estate or interest in lands, or in goods or things in action, made with intent to hinder, delay or defraud creditors, or other persons of their lawful suits, damages, forfeitures, debts or demands shall be void. (3 R. S. [5th ed.], 224, § 1.) And the party prosecuting the grantor for the assault and battery, was within the protection which this provision was designed to afford. For if not, accurately speaking, a creditor, he was still within the class of “ other persons,” whose rights were intended to be maintained by the enactment, of this section. If, therefore, the conveyances were made with the intent to hinder, delay or defraud him, that was sufficient to render them invalid as to his demand, after it had matured by the recovery of the judgment. And that they were so made was, upon the evidence, reasonably free from doubt. No other demand was pressing the debtor, and none existed from which he had reason to fear interference with his continued enjoyment of his property. The case involving this demand was about to be tried, and he, probably, feared what the trial afterward established, that- he would be held liable for the damages which had been sustained, and under these circumstances he employed a person to draw the conveyances. On the day when that was done, or very shortly preceding it, that person, who was a witness on the trial; stated that the debtor told him that “ he had some trouble by being a policeman, he got into some trouble in New York, and he was afraid he would have some considerable trouble, and desired to put the property in his wife’s name.” And the evidence of the plaintiff Martin embodied a similar statement. They intelligibly referred to the subject-matter of the pending action, and the fact that he made them was not denied by the debtor. But he testified that he made the deed because he feared he might be subjected to personal harm on account of his position on the police, and desired to place his property where his wife and children \tould be benefited by it. This reason was not a credible one, for the conveyance of his property was not required for the protection of his wife or children, if it was in no danger from the claims of others while it was held by himself, and it could afford him no immunity against assaults asserted to have been feared from other persons. The more probable reason was that related by the witnesses Purdy and Martin, that it was done to render the result nugatory, which he feared from the trial of the action for the assault and battery. The existence of that probability was sufficiently established by the evidence to render it the duty of the court before which the trial was had to find it as a fact, and that would have shown that the conveyances were void as to the plaintiff in the other action. He might on that circumstance and the others made to appear in the case, have secured the satisfaction of his judgment out of the property conveyed, notwithstanding the existence of the con vej anees made of it. By the bond which they executed, the plaintiffs became sureties for the debtor to him for the payment of his judgment, and they were obliged by a valid judgment against tliemsel ves to perform that obligation. That, in equity, entitled them to the benefit of the creditors remedies to secure their own indemnity. (Lewis v. Palmer 28 N. Y., 271.) It was there held to be a well settled principle of law, that a surety who pays the debt for his principal is entitled to be put in the place of the creditor, and to all the means which the creditor possessed to enforce payment against the principal debtor. (Id., 275, 276; Hinckley v. Kreitz, 58 id., 583.) This aspect of the case, though not particularly alleged, was sufficiently set forth in the complaint to entitle the plaintiffs to maintain their action. The conveyances were alleged to have been fraudulently made, and that, with the payment of the judgment and costs recovered against the debtor, and the other well established facts, made out a plain case for their relief. And they were not deprived of their right to it, because the debtor disclosed the existence of the fraud to one or both of them, when he applied to them to become his sureties in the bond which they executed for him.

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

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

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