author: Barker, J.:

text:
    THE METROPOLITAN TRUST COMPANY OF THE CITY OF NEW YORK, Appellant, v. THE TONAWANDA VALLEY AND CUBA RAILROAD COMPANY and Others, Respondents.

      Receiver of railroad — poioer of fhe cowrt to authorize the issue of certificates of indebtedness — to give them priority over existing mortgage liens.

    In this action, brought by the trustee of a mortgage given by a railroad company to foreclose the same and procure the appointment of a receiver pendente lite, an order was made appointing a receiver to take possession of, preserve, manage, control and operate the road under the direction of the court, and authorizing him, as speedily as he could, without prejudice to the property in his hands, to pay all the debts and balances due to the laborers theretofore employed by the company for labor and services done, or due for supplies furnished in the operation of the road, and for which they had a lien, and also the necessary expenses of maintaining, keeping in repair and operating said road.

      The receiver, upon qualifying, entered, into possession of the road and operated, the same, retaining in his services the employees and laborers who had been engaged in running and operating the road for the company, to whom the company was, at the time of his appointment, indebted in the sum of $8,400.21 for wages earned during the three months immediately preceding the commencement of this action. Upon the petition of certain of these employees and of the receiver, an order was made authorizing him to issue certificates of indebtedness to the amount of the said debt due to the employees, and declaring that such certificates of indebtedness, with the interest thereon, be a lien and charge on all the property of the railroad company prior to the lien of the several mortgages or deeds of trust upon the said railroad, or upon any part thereof, and prior to the lien or claim of any of the defendants, and if, at the time of the final order or decree to .be made in the action, any of the said certificates should not have been previously paid by the receiver, provision should be made in such decree for their payment.
    Upon an appeal from said order taken by the plaintiff, and the trustee of a prior mortgage given by other companies from the consolidation of which the defendant’s company was formed:

      Held, that the order might be sustained as against the plaintiff, by reason of the fact that it assented to the insertion of the clause in the order appointing the receiver which provided for the payment of these claims, and that that order still remained in full force and effect.
    That as against the trustee of the prior mortgage who was not before the court at the time the order appointing the receiver was made, the order should be sustained as properly made by the court in view of all the circumstances, upon the ground that the debt for the wages of the laborers for services rendered prior to the placing the road in the hands of the receiver was properly allowed as an item of expense incurred by the receiver in running and operating the road.

      Miltenberger v. Logansport Sailway Company (106 U. S., 286) and Douglass v. Cline (12 Bush. [Ky.], 608) followed.
    Appeal by the plaintiff and the defendant, the Farmers’ Loan •and Trust Company, from an order of the Allegany Special Term, authorizing the receiver to issue certificates of indebtedness and making them a lien on the mortgaged property, prior to the lien secured by the mortgages thereon.
    The defendant, the Tonawanda Talley and Cuba Railroad Company, is a corporation created by and under the laws of this State, by and through the consolidation of the corporate property, rights of way and franchises of the Tonawanda Talley and Cuba Railroad Company, the Tonawanda Talley Railroad Company and the Tonawanda Talley Extension Railroad Company, corporations then existing under the laws of this State. Prior to this consolidation the Tonawanda Talley Railroad Company had issued its first mortgaged bonds to tbe amount of $100,000, and bad secured tbe payment thereof by a mortgage of all its property and franchises to tbe Farmers’ Loan and Trust Company, one of tbe above-named defendants; the length of this road was about twenty miles. By tbe terms of tbe agreement for tbe consolidation of tbe said corporations, it was provided that tbe consolidated company should assume the payment of the principal and interest of the unpaid bonds issued by the original company, which at that time amounted to about $79,000. The length of the Tonawanda Yalley Extension Railroad Company was about, seven miles, and at the time of the consolidation there was a. mortgage upon it to secure the bonds of the company in the amount of $34,000. After the consolidation the portion of the line known as the Tonawanda Yalley Extension Railroad Company, being a distance of about thirty-three miles, was completed, and the Consolidated company, on the 1st day of September, 1881, executed a. mortgage upon all the property of the consolidated company to the-plaintiff in this action to secure its bonds in the sum of $377,000. The 1st of September, 1884, default was made in the payment of the interest due on the last-mentioned bonds and this action was commenced by the plaintiff, as trustee, for tbte foreclosure of the-mortgage securing the same, and for the appointment of a receiver jaendente lite. The defendant, the Farmers’ Loan and Trust Company, appeared and answered the complaint, setting forth and describing the mortgage held by it, as ■ trustee, and claimed priority of lien on the mortgaged property. After the commencement of the action on tbe application of tbe plaintiff, and upon notice to tbe defendant, the railroad company, and on the 27th day of November, 1884, Burd W. Spencer was appointed receiver.
    At the time of the granting of the order appealed from, the action had been tried and the receiver was in the possession of the property running and operating the road. The other material facts appear in the opinion of the court.

      Thomas J. Hillhouse, for the appellant, The Metropolitan Trust Company.
    Turner, Lee c& Module, for the appellant, The Farmers’ Loan and Trust Company.

      McFarland db Platt, for tbe receiver.

      Carr & Randall, for the respondents.
   Barker, J.:

As tbe receiver was appointed on tbe application of tbe plaintiff, the trustee for tbe bondholders, the legal questions presented are to be considered and determined in view of tbe facts that both tbe mortgagor and mortgagee consented to all the terms and conditions contained in tbe order of bis appointment, which confers upon him tbe power and authority to take possession of, preserve, manage, control and operate tbe railroad and other mortgaged property under tbe direction of tbe court, and that he be vested with all tbe powers conferred upon him by law and tbe practice of tbe court in like cases. The order also contained a special provision, to wit, “ that tbe receiver, as speedily as tbe same can be done without prejudice to the property in his bands, may pay all tbe debts and balances due to the laborers heretofore employed by tbe said defendant for labor and services done, or due for supplies furnished in tbe operation of said railroad, and for which they have a lien, and also tbe necessary expenses of .maintaining, keeping in repair and operating said railroad.” After tbe receiver duly qualified, and in tbe early part of December, 1884, he took full possession of tbe road, its rolling stock and other property, and operated tbe same, carrying freight and passengers, retaining in bis service tbe employees and laborers who were engaged in running and operating tbe road for the railroad company. The entire length of tbe road is about sixty miles, and at each terminus, and also at intervening points on tbe line of the road, it makes connections with other railroads and exchanges traffic, both freight and passengers, and carries over its line the United States mail, receiving a compénsation therefor. At the time the receiver was appointed the company was indebted to its 1 employees and laborers, engaged in running and operating the road, in the sum of $8,421 for wages earned during the three months immediately preceding the commencement of this action, and also to various other parties for supplies furnished and used in operating the road during the same time, the exact amount of which does not appear in the papers now before the court, but in the aggregate such indebtedness did not exceed the sum of $3,000, being for coal, wood, oil and for current balances due tbe connecting railroads. In March, 1885, the gross earnings received by the receiver amounted to $1,260.58, which he had disbursed in payment of current expenses, less $253.80 then in his hands, leaving a deficiency in the current expense account. The taxes for the year 1884, amounting to $753.95, were unpaid; the board of railroad commissioners has caused the road to be inspected for the purpose of ascertaining its condition, and suggested to the receiver that certain repairs and improvements should be made on the bridges, trestle-work and road-bed, with a view of keeping the road in a condition of safety, the estimated cost of which amounted to several thousand dollars.

The laborers, upon affidavits setting forth the nature and character of their indebtedness, and-when the same accrued and upon notice to the receiver, applied at the Special Term for an order requiring the receiver to pay and discharge the indebtedness due them for their labor and services while in the employ of the company before the appointment of the receiver. At the same time the receiver presented a petition to the court for permission to issue certificates of indebtedness in the aggregate sum of $20,000, for the purpose of paying the debts due the employees and laborers, and to enable him to pay the taxes assessed upon the property, and to place the road in a proper state of repairs, and to pay the deficiencies as they then existed for running and operating the railroad after the same came into his hands, and that such certificates be declared a lien and charged upon all the property of the railroad company prior and superior to the lien of the several mortgages and the .bonds secured thereby, and that the receipts be applied in payment of the several debts and in making the repairs, as set forth in the petition. These motions were heard together on the 27th of April, 1885. In his petition the receiver sets forth in detail the financial condition of the company and the state of his accounts, also gives the reason why, in his judgment, the fund for the payment of its debts and demands should be raised by means of the certificates of indebtedness, and why they should be, in his opinion, made a lien on the property prior to the several mortgages. Neither of the appellants denied any of the allegations set forth in the petition.

The court ordered a reference to take proof of the matter set forth in the petition, and to report the same to the court with the opinion of the referee thereon. All the parties now before the court on this appeal attended before the referee, and' from the evidence he found as a fact, that during the months of September, October and November, 1884, the usual force of employees worked and labored on the said railroad, in the usual manner, repairing its road-bed, operating its trains and doing the general business of said road, and they have not been paid therefor, and there was due them on the 1st day of December, 1884, for such work and labor, the sum of $8,400.21; that the continuance of their services Try the receiver was important for the well bemg of the road. It is not necessary, for the purpose of disposing of the questions presented on this appeal, to make any detailed statement as to the other items of indebtedness which go to make up the amount directed to be paid out of the funds realized on the sale of these certificates, for the reason that the appellants assent to such allowance. As a conclusion, from the facts found by him, the referee recommended that the certificates of indebtedness be issued sufficient to cover the several amounts, and that the same should constitute a lien on the property of the railroad company in the hands of the receiver superior to any other claim or lien whatsoever. In the order affirming the report, certificates of indebtedness were authorized to be issued in the sum of $18,402.45, for which amount $8,400.21 was for the debt due the employees and servants of the road for their labor and services in operating the railroad prior to the appointment of the receiver, and the sum of $3,000 for a déficiency in the supply account, and it was declared that such certificates of indebtedness, with the interest thereon, be a lien and charge on all the property of the railroad company prior to the lien of the several mortgages or deeds of trust upon the said railroad, or upon any part thereof, and prior to the lien or claim of any of the defendants, and if, at the time of the final order or decree to be made herein, any of the said certificates shall not have been previously paid by the receiver provision shall be made in such decree for their payment.

The exceptions filed by the appellants relate to the last named items only. None of the earnings of the road, during the period of time for which the employees and laborers now remaining unpaid were earned, were applied toward the payment of the interest or principal of any of the mortgaged creditors. This chronological history of the ease will aid in disposing of the questions presented on this appeal.

It is not disputed but that the court possessed the authority and could confer on the receiver the power to continue the ordinary operations of the corporation, to run the trains of cars, to keep the tracks, bridges, cars and other property in repair so as to save them from destruction ; and if the net income of the road should prove insufficient to pay in full such expenses, they should be paid out of the income derived from the sale of the mortgaged property prior to the bond indebtedness secured by the several mortgages. The property of an insolvent corporation, when placed in the hands of the court at the instance of the mortgaged creditors, is treated as a trust fund to be protected and preserved for the benefit of incum-brancers as well as for the general creditors of the corporation. (Wallace v. Loomis, 97 U. S., 146; Barton v. Barbour, 104 id., 126; Fosdick v. Schall, 99 id., 252; Jones on Mortgages, vol. 11, chap. 33.)

But this rule, as stated, does not embrace the power on the part of the court to order, that a debt owing by the company to any of its creditors may be made a lien on the property prior to a valid mortgage duly recorded in compliance with the recording acts.

The lien of a mortgagee once legally established cannot be displaced without his consent or by the legal opeiations of some acts on his part, which estops him from asserting the superiority of his incumbrance. It is the duty of a court of equity when it has assumed the control and management of mortgaged property pendente lite, to protect the rights of all parties having liens thereon and to preserve the order of their priority as established by law. The governing principles upon which priority of lien on property is based and preserved are the vested rights of the creditor which he has acquired, and they are as sacred as any other right of property and cannot be invaded or displaced in favor of a subsequent creditor. Nor can the income of a railroad in the hands of a receiver for the benefit of mortgage creditors, who have a lien on such income under their mortgage, be divested and taken away from them or used to pay the general creditors of the company. (Fosdick v. Schall, supra ; Burnham v. Bowen, 111 U. S., 776.) It does not appear from the papers now before us, that in terms ■either of the mortgages covered the income derived bj the company in running and operating the road. A provision to that effect is sometimes embraced in mortgages on railroad property, and is made a controlling circumstance as to the disposition which should be made of the income derived from the earnings. As the claim of the employees and laborers cannot be paid out of the fund ■derived from a sale of the property, if they are to be regarded merely as general creditors of the mortgagor, we are to inquire whether the order directing the issue of certificates embracing their wages can be'sustained for other reasons. The bondholders, by the action of their trustee, have assented to all the terms and provisions of the order appointing the receiver, and by it he was authorized to hold, preserve and operate the railroad. All the necessary debts and obligations incurred by the receiver in carrying •out those provisions of the order, the court has the power to order paid out of the funds derived from a sale of the corpus of the property or from its income derived, pending the foreclosure proceedings, and in the absence of sufficient funds in hand to meet such obligations may authorize the receiver to borrow money for that purpose and to issue certificates of indebtedness payable out of the funds thereafter realized and in preference to the mortgage ■creditors.

Can it be reasonably and fairly said, in view of all the circumstances, that the debt for the wages of the laborers for services ■done prior to the placing of the road in the hands of the receiver, was properly allowed by the court as an item of expense incurred by the receiver in running and operating the road % The wages were ■earned within the period of three months prior to the instituting of the foreclosure proceedings. The receiver, with a view of continuing the operation of the road without interruption, did retain in his service for that purpose the men previously employed by the company, to enable him to discharge all the duties which the corporation owed the public and to private parties engaged in shipping goods over the line of the road. In this respect the case is similar in its important facts to those appearing in Miltenberger v. Logansport Railway Company (106 U. S., 286), where the court allowed items of indebtedness amounting to $ 10,000, incurred by the railroad company before the road came into the bands of a receiver, for materials and supplies used and consumed daily in running tbe road, and for ticket and freight balances due connecting roads during tlie three months immediately preceding the appointment of a receiver, as payments properly made to preserve the mortgaged property and maintaining the good will and integrity of the road. In his opinion Mr. Justice Blatciifoiid, speaking for the - court, said: It cannot be affirmed that no items which accrued before the appointment of a receiver can be allowed in any case. Many circumstances may exist which may make it necessary and indispensable to the business of the road and the preservation of the property for the receiver to pay preexisting debts of certain classes out of the earnings of the receivership, or even the corpus of the property, under the order of the court, with a priority of lien, yet the discretion to do so should be exercised with very great care. The payment of such debts stands prima facie on a different basis from the payment of claims arising under the receivership, while it may be brought within the principle of the latter by special circumstances. It is easy to see that the payment of unpaid debts for operating expenses, accrued within ninety days, due by a railroad company suddenly deprived of the control of its property, due to operatives in its employ, whose cessation from work simultaneously is to be dejrrecated, in the interest both of the property and of the public, and the payment of limited amounts due to other connecting lines of road for materials and repairs and for unpaid ticket and freight balances, the outcome of indispensable business relations, where a stoppage of the continuance of such business relations would be a probable result, in case of non-payment, the general consequence involving largely, also, the interests and accommodation of travel and traffic, may well place such payments in the category of payments to preserve the mortgaged property in a large sense, by maintaining the good will and integrity of the enterprise and entitle them to be made a first lien.” (See, also, Douglass v. Cline, 12 Bush. [Ky.], 608, where the same rule was adopted.)

These views seem to us to be sound, and we adopt them as fair and just and think that they can be applied to the facts of this case with safety and propriety, and not the least injustice be done to the bondholders. The running of a railroad is a continuous business, and a manager who is suddenly charged with the duty of operating a road must necessarily, at least for a time, adopt the plans of business and use the force and workmen which he finds engaged at the time he assumes control of the premises.

The allowance of the payment of these items may be upheld as against the plaintiff, for the reason that it consented to the provision in the order for the appointment of a receiver, requiring him to pay the same out of funds which should come under his control. The income of a railroad company is pledged to the payments of its current expenses and the use of any part of the earnings by the managers for the payment of the interest due mortgage creditors, or for making permanent improvements to the property, would be a diversion of the funds, ancl has been so held in several cases. The employees, as well as parties furnishing supplies used and consumed in the daily operations of a road, have an equitable lien for the payment of their wages, which the court will enforce on proper applications in foreclosure actions. The business of a railroad company is necessarily done more or less on credit, all parties understanding that the current expenses are to be paid out of the current earnings, consequently it almost always happens that the current income is incumbered to a, greater or less extent with current debts made in the prosecution of a business out of which the income is derived. (Burnham v. Bowen, 111 U. S., 776.)

In Fosdick v. Shall (supra), it was said : “ The income (of a railroad company) out of which the mortgagee is to be paid, is-the net income obtained by deducting from the gross earnings what is required for necessary operating and managing expenses, proper equipment and useful improvements. Every railroad mortgagee in accepting his security impliedly agrees that the current debts made in the ordinary course of business shall be paid from the current receipts before he has any claim upon the income.” Such being the case, when a Court of Chancery, in enforcing the rights of a mortgage creditor, takes possession of a mortgaged railroad and thus deprives the company of the power of receiving any further earnings, it ought to do what the company would have been bound to do if it had remained in possession, that is to say, pay out of what it receives from earnings all the debts which in equity and good conscience, considering the character of the business, are chargeable upon such earnings. (Burnham v. Bowen, supra.)

These claimants, therefore, had acquired an equitable lien on the earnings which the company received during the three months preceding the commencement of this action. It does not appear how much the earnings were during that period, nor how they were used by the managers of the road, except, perhaps, it may be inferred that the $1,400, which came to the hands of the receiver, was derived from that source.

As the payment of these claims has been provided for as required by the receiver in the order of his appointment, and the :same remains in full force and effect, the question was adjudicated as against the plaintiff. The proceedings now under review, so far as these claimants are concerned, are for the purpose of •carrying into effect a previous adjudication of the court. The provision of the order is, that the receiver pay all the debts •and balances due to the laborers heretofore employed by the company for labor done in operating the railroad, and for which they have a lien. The lien on the fund was established on making proof of the facts found by the referee. The court had the right to make it a condition to granting of an order for the appointment ■of a receiver that existing debts of this class have preference in payment out of any funds which might come under his control, ■derived from the income or from the sale of the corpus of the mortgaged property. If the trustee was unwilling to assent to -those terms, it should have withdrawn its consent to the appointment of a receiver, aud allowed the managers of the company to •continue in the possession and operation of the road. If they had remained in possession and received the earnings, it is fair to presume they would have applied the same in payment of the claims which the court directed to be paid by the receiver. (Fosdick v. Schall ; Burnham v. Bowen, supra.)

The defendant, the Farmers’ Loan and Trust Company, was not before the court at the time the order was granted appointing the receiver, and is not bound by its provisions, unless it has since acquiesced in the same. If the provisions of the order appealed from could only be upheld upon the ground that the order appointing a receiver gave a preference in payment to the debts due tbe laborers, then the exceptions taken by the Farmers’ Loan and Trust Company to the referee’s report should have prevailed. But the •other view which we have taken of the case, and which supports the priority of payment, is applicable to the mortgage in which it is named as mortgagee and trustee. No error occurred in declaring a preference as to these claims over all the mortgages.

The sum of $3,000 allowed was composed of items of indebtedness created for the preservation and management of the property by the receiver, within the rules which we have stated, as to the claims of the laborers, and was properly allowed by the Special Term, and needs no separate consideration.

As the questions presented by this appeal are novel in the courts of this State, the costs of the appellants and of the respondents should be paid by the receiver out of any funds which may come into his hands, derived from the earnings of the road or on a sale of the mortgaged property.

Haight and Bradley, JJ., concurred; Smith, P. J., not sitting.

Order affirmed, with ten dollars costs and disbursements, payable out of any funds in the hands of the receiver, subject to the order of the court.


source: Caselaw Access Project

author: Barker, J. :

license: Public Domain

text:
    LEAH ROSENBURG, as Administratrix, etc., of HENRY ROSENBURG, Deceased, Appellant, v. ABRAM ROSENBURG and PAULINE BEIR, Respondents.

      Assignment of property — when not valid as a gift inter vivos —• when valid as a trust — what testimony, as to aduice given try a counsel to one of the parties, is not inadmissible as a confidential communication — Code of Givil Procedure, sec. 835.
    On February 8, 1883, one Henry Rosenburg, by instruments in writing duly sealed and acknowledged, reciting a consideration of one dollar and other good and valuable consideration, lawful money, of the United States, the receipt of which was acknowledged, transferred to his son Abram all his personal property ; at the same time the son executed and delivered to his father written instruments, duly sealed and acknowledged, by which he acknowledged the receipt of the property, and that as part of the consideration it was to be in, all respects retransferred to the said Henry, if at any time he should so desire, without charge or expense to or against him, and also that the said Abram was, as a part of tlie consideration, to see that the said Henry was supplied with ample means for his support and maintenance, and for travel and otherwise as he might desire, aaid in case he did not desire a retransfer of said property, then at his death, or within eighteen months thereafter, the said Abram was to pay certain specified sums of money to the persons and institutions therein' named. Abram took possession of the property at the time of the transfer and still retains it.
    Upon the trial of this action brought after the death of Henry, which occurred in April, 1884, by the plaintiff, the widow and sole administratrix of Henry, to recover the property so transferred as belonging to his estate, the court held that the assignment vested in Abram the title to all the personal property, except as against the creditors of Henry, and that Abram should pay to the plaintiff, as administratrix, a sum sufficient to pay the debts and the costs and expenses of administration..

      Held, that the judgment should be affirmed.
    That the transfer, though not valid as a gift inter vims, by reason of the clause allowing the donor to revoke the gift at any time, was valid as a trust, and the property transferred was to be held by Abram in trust for the donor and, in case he died without revoking it, for the persons therein named. (Barker, J.)
    It seems that any property remaining after the persons named in the instrument had received the amount therein given to them, was intended by the donor to belong to Abram. (Barker, J.)
    Before the papers were prepared the deceased consulted with a lawyer, Mr. Davidson, and after the assignment was prepared, and before it was executed, Abram visited his office and the counterpart was there prepared and executed in the presence of both parties, the instrument being prepared by, acknowledged before, and delivered in the presence of, Davidson. Upon the trial Davidson was allowed to relate what occurred in the presence of both parties as to the delivery of the instrument.

      Held, that this testimony did not relate to a confidential communication within the meaning of section 835 of the Code of Civil Procedure.
    Appeal by the plaintiff from an interlocutory judgment, entered upon the decision of the Monroe Special Term.
    Henry Rosenburg died in April, 1884, intestate, leaving him surviving the plaintiff, his widow and the defendants, his children by a former wife. In February, 1883, the deceased and his brother David were copartners in business, as jewelers, at Rochester. At that time his personal property was valued at $100,000, and consisted of his one-half interest in the copartnership business, notes, bonds and mortgages, and stocks in business corporations. He was also the owner of a house and lot, and at the time of his death he held policies of insurance on his life which were payable to his said children. In 1879 he intermarried with the plaintiff, she at that time being in tlie possession of property in lier own right of considerable value. The plaintiff is the sole administratrix of his estate. On the 8th day of February,' 1883, the deceased, by instruments in writing, ti’ansferred to his son Abram all his personal property; these instruments were duly acknowledged and delivered, the formal words of transfer and conveyance were substantially alike, and as follows:
    ■ “ Know all men by these presents that I, Henry Rosenburg, of the city of Rochester, Monroe county, State of New York, of the first part, for and in consideration of one dollar and other good and value consideration, lawful money of the United States, to me in hand paid, at and before the ensealing and delivering of these presents, by my son, Abram Rosenburg, of the same city, of the second part, the receipt whereof is hereby acknowledged, has bargained and sold, and by these presents does grant and convey unto the said party of the second part, his executors, administrators and assigns, all the right and interest of the party of the first part in and to (here giving a description of the personal property and dioses in action) * * * to have and hold the same unto the said party of the second part, his executors, administrators and assigns forever. And I do covenant to and with the said party of the second part, that I am the owner and have the right to sell and transfer the said property.”
    ■ At the same time, and as a part of the same transaction, the defendant Abram Rosenburg executed and delivered to his father an instrument in writing, under seal, duly acknowledged and which was also then delivered, the terms of which are as follows: “ This is to certify that 1 have this day and concurrent herewith received from my father, Henry Rosenburg, of the city of Rochester, N. Y., an assignment and transfer of certain mortgages, with the bonds accompanying, of about the value and mentioned as follows (here follows a description of the bonds): And have and at the same time do receive an assignment and transfer in writing, made by the said Henry Rosenburg to me of even date herewith, of all liis interest in and to the store (here follows a description of the copartnership property, and also a list of the notes and accounts), * * * amounting in all to about the sum of $é0,000 outside of the store, and the store and the store interest of the said Henry to about tbe sum of §40,000. All of which several interests and claims so transferred to me are accepted by me as part consideration of the transfer, to be in all respects retransferred to said Henry Hosenburg, if at any time he shall desire, without charge or expense to or against him; also, as part consideration of the transfer, I am at all times to see that the said Henry Hosenburg is supplied with ample means for his support and maintenance, and for travel and otherwise as he may desire, from said transfers. And in case he does not desire a retransfer of said matters, things, claims «and demands so transferred to me, then at his death, or within eighteen months thereafter, I am, as part consideration of said transfers, to pay the following sums of money, and to the persons and institutions named, as follows, viz.: To my daughter Pauline, wife of Isaac Beir, §20,000; to her son, Isaac R. Beir, the sum of §1,000.”’ The instrument then makes provision for like payments of different sums of money varying from $1,000 to $200 to other relatives and friends, and some minor requests to religious, benevolent and educational institutions. On the same day, by deed, the deceased conveyed to his daughter, the defendant Pauline Beir, his house and lot.
    The plaintiff claims that the testator died the lawful owner of all the personal property mentioned in the aforesaid instruments,, and she brings this action to reach the same, or their avails, that they may be administered by her as the personal estate of the deceased and used in the payment of his debts, and the balance to-be distributed among his next of kin, as provided by statute in cases of intestacy.
    The trial court held, as a matter of law, that the assignment from the deceased to Abraham Hosenburg vested in the latter the title to all the personal property described therein; that at the time of his death the deceased was indebted to vai’ious persons, the exact amount of which did not appear, and that as against such persons the assignment was fraudulent and the same was declared void as against the creditors, and that the defendant Abram Hosenburg pay over to the plaintiff, as the administratrix of the deceased, whatever sum was necessary to pay the debts and the costs and expenses of administration, and it was referred to a referee to ascertain these sums. As to all other parties, the assignment was upheld as valid and effectual, and in that connection the court found, as a further fact, that’the assignment and transfer was not in fraud of tbe rights-of the plaintiff as the widow of the intestate.

      S. D. Bentley, for the appellant..

      J. A. Stull and Louis Marshall, for the respondents.
   Barker, J. :

The plaintiff, in her representative capacity, contends that the defendant Abram Rosenburg did not acquire any title to the personal property and choses in action under the said instruments of assignment, or by force of the arrangement and transactions between, himself and his father. Simultaneously with the execution and delivery of the assignment the deceased made an actual delivery of' the personal property and the choses in action to his son, the assignee* who immediately thereafter formed a copartnership with David Rosenburg, a former partner of the deceased, the stock of goods remaining in the business carried on by the new firib.

The trial court found as a fact, and the evidence supports the conclusion, that there was no other consideration for the transfer than as the. same is mentioned and expressed in the counterpart to the assignments executed by the defendant, the transferee. This fact fonnd in this form is equivalent to, and is in effect, a finding that the assignment was not based upon any pecuniary consideration, and that the only consideration therefor was the executory promises of the assignee set forth in the instrument executed on his part. This view as to the effect and meaning of the finding on the question of consideration was conceded by the respective counsel for the parties on the argument.

With this understanding as to the effect and meaning of the finding on that question, and all the other facts being substantially undisputed, the legal question is presented, did the absolute title to the property pass from the assignor to the assignee ?

The defendant defends his claim of title upon the ground that the transaction constituted a valid executed gift. All the property embraced in the assignment was the subject of a gift inter vivos, and the only inquiry is as to the legal effect of the arrangement between the parties. As a general rule, any person' competent to-transact business may give whatever he or she may own to any .other person without receiving any pecuniary consideration therefor. A voluntary transfer of property, without any consideration whatever being paid therefor, is legally valid if fully executed, and nothing remains to be done to complete the donee’s title. To constitute a gift inter vivos, it requires a full and unqualified renunciation of title by the donor, and the acquisition by the donee of an absolute title, accompanied by an actual delivery of the subject-matter ■ of 'the gift. The donor must .surrender all his title and interests, without making any conditions by means of which he may resume the possession and enjoy his former estate in the property. This, as a legal proposition, is well settled. (Curry v. Powers, 70 N. Y., 217; Irish v. Nutting, 47 Barb., 383; Jackson v. Twenty-third Street Ry. Co., 88 N. Y., 526; Warriner v. Rogers, 16 Eq., 340 ; S. C., reported in 6 Moak’s Eng. R., 781; Young v. Young, 80 N. Y., 423.)

. Any gift of chattels which expressly reserves the use of the property to the donor for a certain period, or as long as the donor should live, is ineffectual. (2 Schouler on Personal Prop., 118 ; Vass v. Hicks, 3 Murphy [N. C.], 494.) This rule has been applied .where the gift is made by a written instrument or deed purporting to transfer the title, but containing the reservation. (Sutton’s Exr. v. Hollowell, 2 Dev., 185 ; Lance v. Lance, 5 Jones L. Rep., 413.)

Whether the donor intended to vest in the donee an absolute and •unqualified title, renunciating all dominion over the same on his part, is, in this case, to be determined by the writings which are to be read together as constituting one instrument. They were executed at the same time, and between the same parties, and relate to the same subject-matter. (Rogers v. Smith, 47 N. Y., 324; Knowles v. Toone, 96 id., 534.)

In the paper executed by the donee it is expressly declared that the donor may, at any time during his lifetime, resume the possession of the property and enjoy his former title therein without paying to the donee any consideration therefor or assigning any reason for his action cancelling the agreement. This provision of the agreement is in the nature of a condition imposed on the title transferred to the donee, and applies to the identical’ property which was the subject of the gift, for the defendant’s promise is not simply to account to the donor for the proceeds-or to pay to him fixed snm of money in consideration of tbe transfer of an absolute title to tbe property. If it bad been tbe intention of tbe donor to make a perfect gift of tbe property to tbe donee, and vest in bim an absolute title, sucb intention has been defeated by tbe terms of tbe agreement, which must be observed in determining tbe legal rights of tbe parties. As tbe transfer was made without consideration, it is a mere nudum pactum, courts of equity never interfere to perfect a defective gift or voluntary settlement made without consideration. If a valid gift is made it will be upheld both at law and in equity, but it must stand as made or not at all. (Young v. Young, supra.)

It was unnecessary for tbe purpose of vesting an absolute title to tbe property in tbe donee, that tbe same should be transferred in writing, for sucb an intention on the part of tbe donor could have been carried out by delivery of tbe same to tbe donee, accompanied with an oral declaration that tbe same was intended as a gift. (Gilman v. McArdle, 99 N. Y., 452.)

Tbe gift is not made effective simply because tbe terms of tbe gift are reduced to writing. Tbe principles of law applicable to-tbe case are tbe same as if a transfer had been orally made, accompanied by an actual delivery. Suppose tbe donor bad delivered to tbe donee some one of tbe bonds, accompanied by tbe declaration: “ I give you this security, but you shall support and maintain me during my lifetime, and if, at any time before my death, I desire to renounce this gift, yon shall deliver the same to me.” It would not amount to a transfer of the title in presentí.

If no other view can be taken of tbe transaction than as an attempt to make a gift inter vivos, then as to the property transferred, or tbe avails of tbe same unused by tbe donee in support and maintenance of tbe donor, tbe plaintiff would be entitled to the property in her representative capacity for tbe purposes of administration. We do not concur in tbe argument made in behalf of tbe plaintiff, that tbe writing was testamentary in its character and void for that reason. But we are of tbe opinion that a valid trust was created and that tbe title to tbe property was vested in tbe assignee, in trust for tbe use and purposes therein set forth, and as tbe deceased in bis lifetime did not terminate tbe trust, tbe same was in force at bis death, and tbe trustee may be required by any of tbe interested parties to carry tbe same into effect. In terms tbe title of the property was transferred to Abram, and the instrument executed by him is a declaration of the trust, specifying the use. The essential requisites of a valid trust are : First. A sufficient expression of an intention to create a trust. Second. A beneficiary who is named or capable of being ascertained.

A power reserved in the creator of a trust to revoke the same during his lifetime, does not destroy its validity, nor prevent its being carried into effect after his death, if he fails to revoke the same during his lifetime. Here the deceased provided for his own support and maintenance during his lifetime out of the proceeds of the property transferred to his son, and in case the transfer was not revoked during his lifetime, then certain persons and charitable institutions, all of whom are designated, were to receive specific portions of the trust fund. The validity of trusts of this character are recognized in Gilman v. McArdle (supra). In that case one Gilman, in his lifetime, placed in the custody of McArdle a sum of money, and directed him to use the same for the support and maintenance of herself and her husband as long as they should live, and after the death of the survivor of them, to use the residue of said money to pay their respective funeral expenses and pay for the erecting of a suitable monument to their memories, and to spend the amount remaining in his hands after such payments for Roman Catholic masses, to be procured by him to be said for the repose of the souls of herself and husband, and McArdle, on receiving the money, promised to apply th.e same to such uses and purposes. Though not in writing, it was held to be a valid trust for all the uses and purposes mentioned, excepting the procuring of masses to be said. As to the validity of that portion of the trust no opinion was expressed by the court. The right of revocation was not reserved in that case, as it was by the creator of the trust in the case now before us. But reserving the right of revocation does not destroy the validity of the trust if it is in other respects valid.

In Stone v. Hackett (12 Gray., 227), it was held that a trust to pay the income to the settler during his lifetime, and at his death to transfer the shares to certain charitable objects was valid, and vested the title to the shares in the trustee, as against the widow of the settler and his personal representatives, notwithstanding that a power was reserved to the settler to modify the uses or to revoke tbe trust. Tbe court there remarked that it is now well established and universally acted on by Courts of Chancery, that a voluntary gift or conveyance of property in trust, when fully completed and executed, will be regarded as valid, and its provisions will be enforced and carried into effect against all persons except creditors or bona fide purchasers without notice. It is certainly true that a court of equity will lend no assistance towards perfecting a voluntary contract or agreement for the creation of a trust, nor regard it as binding so long as it remains executory, but it is equally true that if such an agreement or contract be executed by a conveyance of property in trust, so that nothing remains to be done by the grantor or donor to complete the transfer or title, tbe relation of trustee and cesfrui que trust is deemed to be established, and the equitable rights and interests arising out of the conveyance, though made without consideration, will be enforced in chancery.” The English cases are also to the same effect. (Ellison v. Ellison, 6 Vesey, 656.) In that case a decree was directed for the enforcement of a trust which, in its creation, was wholly voluntary and without consideration. To the same effect is the more recent case of Davis v. Ney (125 Mass., 590).

It was in the power of the deceased to make this disposition of his own property in his lifetime. The written transfers vested a title in his son for the purposes mentioned, all of which were lawful, and there is no rule of law that prevents the owner of property from making such a disposition of the same. Trusts may be created by will or inter vivos with the power in the trustee to pay and a right in the cestui que trust to receive, not merely the income but the principal of the fund, as needed or called for. It is true that all the funds may have been drawn for the support and maintenance of the creator of the trust, but that did not affect the legal title to the property in the hands of the trustee, and the surplus which now remains should take the course indicated by the instrument declaring the use. The beneficiaries specifically mentioned, of course, are first to be paid. If there is any surplus over, as it seems to be conceded there will be, the question will then be presented whether such surplus belongs to the trustee, as the intended beneficiary, or whether it reverts to and becomes a part of the estate of Mr. Rosenburg. When a trust has been fully executed, and tbe title of tbe trustee ceases by operation of law, no recon-veyance by tbe trustee to tbe party entitled to tbe fund is necessary. (Briggs v. Davis, 20 N. Y., 22; 11 Pomeroy’s Eq. Jur., § 1065.)

I am inclined to tbe opinion that it was tbe intention of tbe deceased in transferring this property to bis son in trust, if be did not revoke tbe same in bis lifetime, that be should out of bis property pay tbe cestui que trusts named the sums mentioned, and that be should retain the residue as in bis right as one of tbe intended beneficiaries. If tbe agreement is susceptible of such an interpretation, and fairlyand unmistakably indicates such an intention,then it may prevail ; otherwise it belongs to tbe estate of tbe deceased, and tbe plaintiff is entitled to receive tbe same for tbe purposes of administration.

Before tbe papers were prepared tbe deceased consulted with Mr. Davidson, a lawyer, and after tbe assignment was prepared, and before it was executed, Abram Rosenburg visited tbe office, and tbe counterpart was prepared and executed in tbe presence of both parties, and tbe instruments were acknowledged before Davidson as notary public, ánd the delivery of each was made in bis presence. We have examined tbe exception taken by tbe plaintiff to tbe ruling of tbe court permitting Mr. Davidson, who prepared tbe papers and acted as counsel for tbe senior Mr. Rosenburg, to testify as to the delivery of tbe papers. All that be relates upon that subject occurred in the presence of both parties, and was limited to tbe subject of delivery, and did not constitute a confidential communication which would be excluded under tbe provisions of section 835 of tbe Code of Civil Procedure. Both parties selected him as tbe person before whom they made their respective acknowledgments, and tbe fact of delivery could not be completed without tbe action of both parties, and any person who witnessed tbe same could prove tbe delivery, and tbe provisions of tbe said section are not applicable. (Westover v. Ins. Co., 99 N. Y., 56; Whiting v. Barney, 30 id., 330 ; Sherman v. Scott, 27 Hun, 331; Hebbard v. Haughian, 70 N. Y., 54; Coveney v. Tannahill, 1 Hill, 33.)

Tbe judgment should be affirmed, with costs.

Haight and Beadley, JJ., concurred in result; Smith, P. J. not voting.

Motion for new trial denied, with costs.


text:
    ANSON D. BROWN, Plaintiff, v. THE LONDON ASSURANCE CORPORATION, Defendant.

      Policy of insurance — when molded by a failure to serve proof of loss within the time required by. the policy — what acts of the company do not estop it from enforcing the forfeiture.

    An action, brought upon a policy of insurance issued by the defendant, was defended upon the ground of a violation of a condition contained therein, •which provided that “persons sustaining loss or damages by fire shall forthwith give notice of said loss to the corporation, and as soon thereafter as possible render a particular account of such loss; signed,” etc. The property was destroyed by fire on June 1, 1883, and the first notice of the loss was given on July eighteenth following, when papers purporting to be proofs of loss were forwarded to the defendant. The plaintiff offered no excuse for omitting to give an earlier notice of the loss or for the delay in sending the proofs.

      Held, that the court should have held, as a matter of law, that the notice of loss was not served within the time fixed by the policy; and that it erred in denying a motion for a nonsuit made upon that ground.
    To prove a waiver of this condition the plai ntiff introduced in evidence a letter from the defendant’s general manager, dated July 35, 1883, addressed to the person who had prepared and forwarded the proofs of loss, acknowledging the receipt of them, and stating that the matter was in the hands of one Adams, also a letter from Adams, dated July twenty-seventh, referring to the plaintiff’s loss, and adding that the building was unoccupied at the time of its destruction, and that for that reason he was not entitled to recover, and that he had violated another condition of the policy by erecting a building within the limits thereby prohibited, and concluded by saying that “although the company was under no legal obligation whatever to do so,” still under the circumstances he would advise it to return the amount of premiums paid in settlement of the case.

      Held, that these letters did not amount to a waiver of the condition or prevent the defendant from setting up the delay in giving notice of the loss as a defense to the action.
    Motion by the defendant for a new trial, based upon exceptions taken on the trial at the Allegany Circuit, ordered to be heard, in the first instance, at the General Term.
    The defendant, a foreign fire insurance company, with its chief office located in the city of New York, on the 16th of January, 1882, issued its policy to the plaintiff, insuring his dwelling-house, located in the village of Richburg, Allegany county, against loss by fire, in the sum of $250. The property was destroyed by fire the 1st day of June, 1882, and the defendant omitting to pay the loss, this action was brought to enforce payment of the amount thereof. At the close of the plaintiff’s evidence the defendant moved for a nonsuit, which was denied, and the defendant having no evidence to offer the court directed a verdict in the plaintiff’s favor for the sum of $286.24.

      Rufus Scott, for the plaintiff.

      Hamilton Ward, for the defendant.
   Barker, J.:

The policy contains this provision, which is found in the ninth clause“ Persons sustaining loss or damage by fire shall forthwith give notice of said loss to the corporation, and as soon thereafter as possible, render a particular account of such loss, signed and sworn to by them, stating whether any and what other insurance has been made on the same property, giving copies of the written portions of all such policies thereon, also the actual cash value of the property and their interest therein, * * * and when and how the fire originated.” A subsequent clause contains a mutual stipulation of the parties, namely: “ And it is hereby understood and agreed by and between this corporation and the assured, that this policy is made and accepted in reference to the foregoing terms and conditions * * * which are hereby declared to be a part of this contract, and are to be used and resorted to in order to determine the rights and obligations of the parties hereto in all cases not herein specially provided for in writing.” The fire occurred on the 1st day of June, 1882, and the first notice of the loss was given by the plaintiff on the eighteenth day of July, following, when papers purporting to be proofs of loss were forwarded to the defendant at its general office, located in the city of New Tort.

The defendant in its answer sets up as a defense, that the plaintiff failed to keep and perform the conditions of the policy on his part by omitting to give the notice of loss, and to make proofs of loss within the time as required by the terms of the policy. On the trial the plaintiff offered no excuse for omitting to give an earlier notice of the loss or for delaying the proofs of loss until the eighteenth of July. At the close of the plaintiff’s evidence, the defendant moved for a nonsuit on the ground that the plaintiff had failed to comply with the conditions of the policy by omitting forthwith to give notice of the loss, which motion was denied and the defendant excepted.

The provision requiring that the notice of the loss shall be forthwith given to the company, is in the nature of a condition precedent, and if not complied with by the assured or waived by the company defeats a recovery. The position of the defendant upon this point is sustained by an unbroken line of authorities in this country as well as in England. ( Worsley v. Wood, 6 T. R., 710; Inman v. Ins. Co., 12 Wend., 452; Underwood v. Farmers' J. s. Ins. Co., 57 N.Y., 505 ; Johnsons v. Phoenix Ins. Co., 112 Mass., 49.)

The condition of the policy quoted requires that the insured shall, in case the property is destroyed by fire, do two separate and distinct acts, that is, forthwith give notice of the loss, and also make a particular statement of how the same occurred, etc., duly verified as soon as possible. “ The particular account,” which is to be furnished, might serve for the notice contemplated by the agreement, if served forthwith after the loss occurred, for the proofs of loss could not well be full and complete without they contained the statement of the time of the fire. But the proofs of loss, although they might be served in due time as required by that condition, would not be a compliance with the conditions to furnish notice of the loss forthwith, unless they were in fact served forthwith within the meaning of that term of the policy. In this case no notice of the loss in any manner preceded the service of the proofs of loss, and it may be fairly held that the latter contained a statement of the fact which the notice of the fire was intended to' communicate. The question for our consideration then is, was a notice of the loss, served on the eighteenth of July, forty-eight days after the fire, a timely service and in compliance with the condition on that subject requiring such notice to be served forthwith ? The meaning of this term, when used in a policy of insurance for the purpose of limiting the time within which such notice must be given, has received frequent judicial construction, which will serve as a guide in this instance.

In Inman v. Insurance Company (12 Wend., supra) it was said, that the literal meaning of the word need not be observed by the insured, that is, the condition of the contract did not. require that the notice be served immediately, directly and without any delay, but that there must be -no unnecessary delay in the performance of this act, nothing which the law calls laches, and in giving a construction to a provision of a contract of insurance of this description, some regard should be given to the nature of the act or thing to be performed and the circumstances of the particular case.

In Bennett et al. v. Lycoming County Mutual Insurance Company (67 N. Y., 277) the court, in commenting on the meaning oi the phrase forthwith ” when used in a fire policy, said: It “ does not mean immediately or instantaneously rfter the fire. It means,, and has been held to mean, within a reasonable time, or with reasonable diligence after the fire.”

Did the plaintiff in this case use reasonable diligence in giving-notice, in view of the- circumstance, that he presented no reasons for delaying action in this respect for forty-eight days? As the defense is based mostly on this point, and a determination of the question practically decides the case for or against the plaintiff, it merits careful consideration. The question as to when the delay will constitute a breach of the condition precedent has often been the subject of consideration in this and other courts, and the rule has been applied in cases where the facts were not unlike those in the case now here. The time in which the notice of loss is to be served was of the essence of the contract, as the parties by their stipulation made it so, independent of the general rule of law on that subject. In Inman v. Insurance Company (supra) the policy required the insured to give notice of the loss forthwith, and it was held, as a matter of law, that a notice served thirty-eight days after the loss was not in compliance with the requirements of the condition. In Sherwood v. Agricultural Insurance Company (10 Hun, 593) the policy required the insured to give “ immediate notice ” of the loss, and it was held that a notice served five months after the-fire was not good and for that reason there could be no recovery. (Inman v. Insurance Co., supra, being cited with approval.)

In McEvers v. Lawrence (1 Hoff. Ch., 171) it was held that a notice given four months after the loss, the delay being unexplained,, and the policy requiring the notice forthwith after the fire, was too late,- and for that reason the plaintiff had no right of action upon, bis policy, and the case of Inman v. Insurance Company (supra) was referred to with approval.

In the case of Trash v. Insurance Company (29 Pa., 198), eleven days delay unexplained, was held to be fatal where the policy required immediate notice. To the same effect are numerous cases: Edwards v. Lycoming, etc., Insurance Company (75 Pa., 378); Cornell v. Insurance Company (18 Wis., 387); Whitehurst v. Insurance Company (7 Jones Law [N. Car.], 433); Roper v. Lendon (1 Ell. & Ell., 825).

In New York Central Insurance Company v. National Protection Insurance Company (20 Barb., 468) the opinion was expressed that it was a sufficient compliance with the condition of a policy which required notice of loss to be given forthwith when the fire occurred upon the fifteenth of June, of which the insured was notified on the eighteenth, and gave notice to the company by mail on the twenty-third, but it was remarked by the court that the question of timely service was not presented by the pleadings and the question was not necessarily passed upon.

In view of the authorities on the subject, which are all in one direction, as well as a matter of judgment, independent of the decisions, I think it should be held, as a matter of law, that the notice of the loss was not timely and that the plaintiff failed to-make out a cause of action for non-performance of the condition precedent. The act required to be done by the plaintiff immediately after the loss happened involved no deliberation or investigation as to any fact on his part; no time or labor was required to perform it. It is unreasonable to say that a delay of forty-eight days, in nowise excused, is either a literal or substantial compliance with the condition. There seems to be no apology for the plaintiff’s neglect to perform his promise in this respect.

The plaintiff seeks to avert the fatal consequences of his omissions,, on the ground that the company waived the performance of the condition. On the trial the learned judge was of that opinion and denied the nonsuit for that reason, and in his remarks expressing his judgment said, in subtance, referring to the correspondence which will be hereafter mentioned: “ I think all that evidence may be treated as a waiver of formal service of notice according to the requirements of the policy either in time or in other respects.”

Tbe facts on wbicb tbe claim of waiver is based are few and ■undisputed. Tbe plaintiff testified, in substance, that be prepared proofs of loss and employed John Fowler to send them forward to tbe company. The plaintiff then put in evidence a letter written by tbe general manager of tbe defendant’s business, dated at its office in tbe city of New York, on the 25th of July, 1882, addressed to Fowler, in wbicb be said: “I have to acknowledge receipt of your favor of the eighteenth instant, inclosing papers purporting to be proofs of loss by A. D. Brown for damages under our policy, 6,180.39. This matter is in tbe bands of .Mr. Adams of Meadville, who will communicate with you.”' On tbe twenty-seventh of July, Adams addressed a letter to Fowler, dated at Meadville, Pa., in wbicb be referred to Fowler’s letter sent to tbe general manager, dated the eighteenth, relative to tbe plaintiff’s loss, and then added that tbe building destroyed by fire was unoccupied at that time, and for that reason tbe plaintiff was not entitled to recover, and also that another condition of tbe policy bad been violated by tbe plaintiff by erecting a building within the limits prohibited by another term of tbe contract, and concluded bis letter as follows: Although tbe company are under no legal obligation whatever to do so, still, under tbe circumstances, I will advise them to return to Mr. Brown tbe amount of premiums paid for tbe risk, namely, twenty-five dollars in settlement of tbe case. If be shall see fit to accept this' proposition, please advise me.” No further negotiations were held and this action was commenced. Neither party produced tbe proofs of loss upon tbe trial, and no evidence was given as to their contents, and every item of evidence relative to tbe giving of notice of loss, and as to tbe nature and character of tbe proofs of loss, are fully set forth in tbe foregoing statement of tbe evidence. At tbe time the proofs were received by tbe company tbe time for serving notice of tbe loss bad expired. This was wholly tbe fault of the insured. He bad not been induced by any act or suggestion coming from tbe company to delay co?nplianco with tbe condition, and there is no fact or circumstance on wbicb a waiver can be predicated.

The argument made by the plaintiff, that as the agent Adams placed a refusal to pay on other grounds than that tbe notice of loss was not served in time, or that tbe proofs of loss came too late or' were defective in substance, constitutes a waiver, is not supported by tbe authorities. No reason bas been suggested, nor bas any occurred to my mind, wby tbe silence of tbe agent upon those subjects should be construed as a waiver. At tbe rime tbe matter was referred to Adams, tbe company had a perfect defense, because the notice bad not been served in season. If at tbe time this letter was received by Fowler, tbe plaintiff’s agents, timely notice could then have been served, tbe. question would be very different, and tbe plaintiff’s position would have some support in tbe authorities as well as in reason. But if the refusal of tbe company to pay bad then been put upon that ground, it was not then in tbe power of tbe plaintiff to comply with tbe condition precedent or to do anything to save himself from tbe consequences of bis own neglect.

The doctrine of waiver, when made as an answer or excuse for a non-compliance with a condition precedent, is placed upon tbe ground of estoppel. In Underwood v. The Farmers’ Joint-Stock Insurance Company (57 N. Y., 505) tbe court said: “Tbedoctrine of estoppel lays at tbe foundation of tbe law, as to waiver. While one party bas time and opportunity to comply with a condition precedent, if the other does or says anything to put him off from bis guard, and to induce him to believe that tbe condition is waived, or that a strict compliance with it will not be insisted on, be is afterward estopped from claiming non-performance of tbe .condition. Unless there is some consideration for a waiver or some valid modification of tbe agreement between tbe parties which contains tbe condition, I think there can be no waiver of a condition precedent, except there be in tbe case an element of estoppel. At tbe time when tbe affidavit was drawn tbe plaintiff bad forfeited bis rights under bis policy. Nothing that was then said or done induced him in any way to forego any of bis rights, or to omit tbe performance, on bis part, of anything required by bis policy; and, hence furnish no estoppel against tbe defendant.” When tbe plaintiff brought tbe attention of tbe company to this loss, and its agent deebned to pay, be distinctly informed tbe plaintiff that tbe company was under no legal obligations to respond to bis claim, and be was not called upon to state each and all tbe grounds of refusal upon which tbe company stood in declining to pay the demand. This question was distinctly presented in Brink v. The Hanover Fire Insurance Company (70 N. Y., 593); Devens v. Mechanics and Traders' Insurance Company (83 id., 173).

It is unnecessary to state tbe facts of that case as the remarks of Eael, J., in delivering the opinion of the court, clearly indicate the.point decided: “If proofs were not served in time and the insurer had done nothing to induce the omission, and so the insured had lost all his rights under the policy, the fact that thereafter defendant refused to pay, without assigning any reason, or only assigning one of many, did not amount to a waiver and did not estop it from insisting upon any other defenses. It was not bound' to specify all of its defenses on peril of losing those not specified’ In Bennett v. v. Lycoming, etc., Insurance Company (67 N. Y., 274) the same views are expressed by the same learned justice. The cases cited in the plaintiff’s brief on the question of waiver have been examined with attention. They do not bear on that question as presented in this case.

The defendant’s motion for a new trial granted, with costs to abide the event.

Smith, P. J., Haight and Bradley, JJ., concurred.

Motion for new trial granted, costs to abide event.


author: Barker, J.

text:
    EMORY W. GURNEE, LEVI GURNEE and FRANK S. GURNEE, Respondents, v. CHARLES W. BEACH and LEWIS JESSUP, Appellants.

      Pleading — action on a promissory note — title in the plaintiff must be alleged.

    In an action upon a promissory note by one not a party thereto the complaint must allege that the plaintifE has acquired title thereto, or other facts from which his ownership of the note can be legally inferred.
    This inference cannot be drawn from an allegation that the note was made by the defendants, who “ then and there delivered the same to the said payee, who thereupon indorsed the said note. ”
    Appeal from a judgment, entered in Wayne county overruling the defendants’ demurrer to the plaintiffs’ complaint.
    The complaint alleged that the plaintiffs were copartners doing business under the firm name of E. W. Gurnee & Co., and set up a cause of action founded upon three negotiable promissory notes, all made by tbe defendant Charles ~W. Beach, and each payable to the order of Lewis Jessup. Each note is set forth in the complaint as a separate and distinct cause of action, and in separate paragraphs numbered one, two and three. The question presented by the demurrer is whether the complaint states facts showing that the plaintiffs are the owners of the notes. The averments in each count are the same, except as to the description of the note, and the first is as follows: “ That the defendant Charles W. Beach, on the twenty-second day of October, in the year 18Y9, at Sodus, N. Y., made his promissory note in writing dated that day, whereby, by the- name of C. ~W. Beach, for the value received, he promised to pay to the order of Lewis J essup seventy-four dollars at E. "W. Gurnee & Co.’s banking-house, Sodus, N. Y., with interest, on the first day of January, 1880, and then and there delivered the same to the said payee, who thereupon duly indorsed the said note; that when the said note became due the same was duly presented at E. ~W. Gurnee & Co’s, banking-house, Sodus, N. Y., the place where the same was made payable, and payment thereon then and there duly demanded, which was refused, whereupon the said note was then and there duly protested for non-payment, of all of which the said Charles ’W. Beach and Lewis Jessup had due notice. That before the commencement of this action the said note became due and payable and remained wholly unpaid.” Both defendants joined in the demurrer, and it is based upon the ground that the complaint does not state facts sufficient to constitute a cause of action against the defendants in favor of the above-named plaintiffs.

      William Roe, for the appellants.

      B. B. Seaman, for the respondents.
   Barker, J.

It was necessary for the plaintiffs to set forth in their complaint every fact which they must prove to enable them to recover judgment against the defendants. As the plaintiffs were not original parties to the note they can have no right of action thereon unless they have acquired a title thereto subsequent to its delivery. It is not alleged in the complaint that they are the owners of the note, nor does it contain any averment of a fact from which the law infers-that they are the owners of the fame. The original payee was the defendant Jessup, in whom the title to the note and the right of action against the maker upon his promise vested, on the making and delivery of the note. The averment that Jessup duly indorsed the note after its delivery to him was doubtless sufficient' for the purpose of showing that he had parted with his title and possession,, but there is a failure to state that the plaintiffs were such indorsees, or that they are the owners of the note founded upon' a derivative title, and a title in them cannot be legally inferred from the mere fact that the payee has parted with his title. No case has been cited nor have we discovered any in our examination which goes so far as to hold that the averments. contained in this complaint are sufficient to show that these plaintiffs are the owners of the note.

The rule which is stated in some of the cases, that an averment that the payee has indorsed the note, imports a delivery by him of the note does not meet the specific objection made to the sufficiency of this complaint, that it does not aver a title to the note in the plaintiffs. The fact that the payee has parted with his title and made a delivery of the note does not justify the legal inference that the plaintiffs are the persons who have acquired such title. Any other person in an action in his name against these defendants,, could in his complaint allege all the facts which are set forth in this, and swear to the truth of the same by the usual affidavit of verification, and not be guilty of perjury. (Parker v. Totten, 10 How., 233.)

The complaint in the case of New York Marbled Iron Works v. Smith (4 Duer, 362), contained averments as to the making and indorsement of a note similiar to those set forth in the plaintiffs’ complaint, but they were followed by an allegation that the note was held and owned by the plaintiff, and the court held that the facts alleged were sufficient to show that the plaintiff had title to the note in suit.

In Burrall v. De Groot (5 Duer, 379), the averment was to the effect that the payee indorsed a note in blank and that the same, so indorsed, was delivered to the plaintiff, “ who now holds and owns the same.” Neither of these cases sustain the plaintiffs’ argument.

While tbe averments that tbe payee indorsed tbe note imports tbat be bas delivered it to another and parted with bis title, it cannot be inferred therefrom tbat the transfer was to tbe plaintiff, for that is another" and a distinct fact which must be set forth in the complaint, that it may appear that the plaintiff is interested in the cause of action. The plaintiffs’ claim of title is an issuable fact, and it must be set forth in such form that the samé can be met with a denial. In averring the fact of ownership no particular form is necessary, but the fact must be unequivocally stated.

The judgment is reversed, with costs of this appeal, and the demurrer sustained with costs, with leave to the plaintiffs to amend their complaint on the payment of .costs of the appeal and demurrer within twenty days after taxation and notice.

Smith, P. J., Haight and Bradley, JJ., concurred.

Interlocutory judgment and order reversed and demurrer sustained, with leave to the plaintiffs to amend complaint within twenty days on payment of costs of this appeal and this demurrer.


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    DUNCAN D. McCOLL, Appellant, v. JAMES FRASER, as Assignee, Respondent.
    , Equitable lien on funds misappropriated by an agent — am, action to enforce the lien must be brought by the principal or an agent as trustee for him.

    This action was brought by the plaintiff to charge the funds and property, which had passed into the hands of the defendant as the general assignee of the plaintiff, with an equitable lien in favor of parties for whom the plaintiff had, as agent, collected moneys which he had misappropriated and used in his own business. None of the moneys so received by the plaintiff were in his hands at the time of the assignment, and it was not clearly shown that any item of the property transferred to the assignee had been purchased with these moneys.

      Held, that the plaintiff could not, in his individual capacity, maintain the action.

      It seems, that the action might have been maintained by the plaintiff, as trustee for the persons for whom he acted as agent, or by such persons themselves.
    (Barker, J.)
    Appeal from a judgment, entered upon the decision of the Monroe Special Term, dismissing the plaintiff’s complaint. The plaintiff being insolvent, on the 2Yth day of March, 1884, made a general assignment, for tbe benefit of all his creditors, to the defendant, who received the assigned property into his possession, and proceeded to administer the same according to the terms of the trust. The plaintiff, with Hugh D. McColl and five others, as the heirs-at-law of Mary Hall, deceased, were tenants in common of a farm consisting of about eighty-six acres, of which he, as attorney in fact for the other owners, received the rents and profits for a period and then sold the said farm; prior to the making of the said assignment having received in his hands as such agent, between December 11, 1883, and March 14, 1884, the aggregate sum of $1,485. The plaintiff was a dealer in farm products, buying and selling the same on the ■market. The trial court found as a fact that before making the assignment the plaintiff had used and expended, in and about his business and in the payment of certain debts owing by him individually, and in purchases of certain personal property, the whole of the said sum of money, and that no part thereof remained in his hands unex-pended on the day of making the assignment. That the said sum of money was received by the plaintiff in his own behalf and as the agent and attorney in fact of the other heirs-at-law of Mary Hall, and that no other or different trust or trust relation in regard to such moneys existed in the said plaintiff, than as such agent and attorney in fact, to sell said land and to collect said rents; that the plaintiff failed to establish on the trial that any part of the said sum of $ 1,485 had actually come into the hands of said defendant as such assignee, or that said defendant as such assignee had received the proceeds of any material part of the avails thereof, or the property into which any part thereof had been converted by the said plaintiff before the making of said assignment. In the assignment the persons from whom the plaintiff collected the said moneys were named among the preferred creditors in the amount by him collected for them as their agent.

      George D. Forsyth, for the appellant.

      E. A. Nash, for the respondent.
   Barker, J.

The object of the action was to charge the funds and property which passed into the hands of thfe assignee with an equitable lien, in favor of the parties for whom the plaintiff had collected moneys as their agent and misappropriated by using the same in his business; and requiring tbe assignee, out of tbe moneys realized by bim from tbe assigned property, to refund to tbe plaintiff a sum equal to tbe trust fund by bim misappropriated,- before any of tbe avails are distributed to tbe creditors of tbe assignor under and in pursuance of tbe terms of the assignment. At tbe time tbe assignment was executed, none of tbe funds collected by the plaintiff, as agent for tbe parties named, remained in his hands unexpended as tbe proofs show, and tbe findings are that they bad been previously used in tbe business carried on by bim. Nor did it clearly appear that any item of tbe property transferred to the assignee bad been purchased with, those moneys.

Tbe equity existing in favor of tbe owners of misappropriated funds, if they have any superior to the other creditors, is in tbe nature of a general lien on all tbe property which passed into tbe bands of tbe assignee. Tbe title to the property was vested in tbe assignor and was transferred to tbe assignee subject to all the equities existing in favor of other parties as against tbe assignor. Tbe only witness who gave any evidence in regard to tbe collection and use of tbe money, and tbe capacity in which tbe same was received, was tbe plaintiff himself, and for tbe purposes of this appeal we shall regard bim as a creditable and truthful witness, and that bis evidence substantially establishes the facts upon which tbe claim for an equitable lien is founded in favor of tbe parties for whom tbe plaintiff acted as agent. All tbe money collected by tbe assignor, as agent, and used in bis business, was received within a period of three months preceding tbe assignment.

It is well established that where one person receives into'bis bands the funds of another, be is deemed to bold them in a fiduciary capacity, such as bailee or trustee, unless they were so received with tbe understanding, expressed or implied, that tbe same should be turned into a debt. This rule applies to moneys which come into tbe bands of an agent acting for bis principal. (Libby v. Hopkins, 104 U. S., 307; Ross v. Hart, 8 Taunt., 499; People v. City Bank of Rochester, 96 N. Y., 32.)

Another rule of equitable jurisprudence perfectly well settled and of universal application is that where money held upon any trust to keep, or use or invest in a particular way, is misapplied by tbe trustee’ and converted into different property, or is sold and tbe proceeds are thus invested, tbe property may be followed wherever it can be traced through its transformations, and will be subject, when found in its. new form, to the rights of the original owner or cestui que trust. (Cook v. Tullis, 18 Wall., 332; People v. Bank of Dansville, 39 Hun, 187.)

We think it quite clear, upon the facts as found by the trial court, in connection with the other facts and circumstances testified to by the plaintiff, that a case was made which gave the owners of the misapplied fund an equitable lien on the assets transferred to the assignee prior and superior to tne rights of the general creditors of the assignor. The assigned prc perty, while it remained in the hands of the agent, could have been reached by proper proceedings instituted by and in behalf of those for whom he acted in selling the farm. The defendant, as assignee, received the property subject to the same equities and impressed with the same trust under which they were held by the assignor. The estate of the insolvent debtor was enriched and enlarged to the extent of the moneys misappropriated and used in the business carried on by him. Our views on that subject are more fully expressed in the case of the People v. The Bank of Dansville (supra).

But we think that the complaint was properly dismissed for the reason that the action is prosecuted in the individual name of the plaintiff, and not in the character of a trustee of the funds which he collected as agent. He had a title to the property which passed into the hands of the assignee, charged with an equitable lien in favor of the cestui que trust. They could have enforced the lien by an acti'bn in their own name, and perhaps also in an action by the plaintiff as trustee for them. The defendant is in no sense a wrong-doer, and his act in receiving the assigned property under the assignment were lawful in every respect. If he had refused to return to the plaintiff the whole or any part of the assigned property upon a demand made therefor, he would not have been guilty of a conversion. He is in the rightful possession of the property, subject to such equities as the cestui que trust may have under the circumstances. The rule that a person in the actual possession of personal property in a fiduciary capacity, such as agent, bailee or trustee, may maintain an action in his own náme to regain possession, or for a, conversion thereof, as against a wrong-doer, does not aid tbe plaintiff in Ms efforts to maintain this action in his own name. In such cases the party in possession is entitled to the property as against a tort feasor. (Orr v. Mayor, etc., 64 Barb., 106; Faulkner v. Brown, 13 Wend., 63.)

If the action had been prosecuted by the plaintiff as trustee for and in behalf of those for whom he acted as agent, the question presented in such a case would be somewhat similar to those considered in Wetmore v. Porter (92 N. Y., 76), cited by the appellants’ counsel and upon which he relies in support of his contention. In that case the plaintiff sued in his representative capacity as executory and it was held that it was no defense in an action brought by an executor as such, to recover assets of the estate in the hands of the defendant or for the conversion thereof, that the plaintiff in his individual capacity had acted in collusion with the defendant in despoiling the estate, and it also was held that whoever received property, knowing that it is the subject - of a trust, and has been transferred by a trustee in violation of his duty or power, takes it subject to the right, not only of cestui que trust, but also of the trustee, to reclaim possession or to recover for its conversion. That case was in accordance with the familiar rule, that when the legal title to the property or to a cause in action is in the trustee, he may maintain an action in his own name without joining cestui que trust. (Mellen v. Hamilton Fire Ins. Co., 17 N. Y., 609-615; Western R. R. Co. v. Nolan et al., 48 id., 517.)

The judgment in this action, dismissing the plaintiff’s complaint upon the merits, will not be a bar in an action, if one should hereafter be brought, by the owners of the diverted funds in their own names, for the purpose of enforcing their equitable lien upon the property. Perhaps it would be otherwise if this action had been by the plaintiff as their trustee. This is one of the reasons why this action cannot be maintained by the plaintiff in his individual capacity.

In affirming the judgment, all we need to decide, and all we intend to decide, is that the plaintiff, in his individual capacity, cannot maintain this action.

Judgment affirmed, with costs of this appeal.

Haight and Beadley, JJ., concurred ; Smith, P. J., not sitting.

Judgment affirmed, with costs of this appeal to the respondent.


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    TRUMAN SYMSON, Respondent, v. HANNIBAL S. SILHEIMER and DWIGHT S. BECKWITH, Appellants.

      Judgment by confession —power of the court to amend a defective statement— when it should be without prejudice to the priority of subsequent incumbrances.

    On January 7,1885, a judgment was entered by confession in favor of the plaintiff against the defendants. Prior thereto and on December 15,1884, the defendants had made a general assignment for the benefit of creditors, which conveyed, among other property, several parcels of land then owned by the assignors. On ■ October 5,1885, the plaintiff moved for leave to amend the statement upon which the judgment had been entered, so as to make the same comply with the terms of the statute. After the entry and docket of the plaintiff’s judgment other judgmentswere recovered against the assignors, upon which executions were issued and returned unsatisfied. Thereafter a receiver, appointed in supplementary proceedings instituted upon such judgments, brought an action to set aside the assignment as fraudulent, and on August 4, 1885, procured a judgment to that effect., The court below granted the motion to amend the statement with leave Id file the amended statement nana pro tuna.

      Meld, that while the court had power to allow an amendment of the statement to be made nunapro tuna, and thus preserve a priority of lien over subsequent incumbrances, yet it erred in exercising it in this case, and that the order should ' be so amended as to defer the lien of the plaintiff’s judgment to that of the other judgment creditors as to all real estate embraced in the assignment.
    Appeal from an order of tbe Monroe Special Term granting tbe plaintiff leave to amend bis statement of a confession of judgment.
    On tbe 15th day of December, 1884, the defendants in this action made a general assignment of all their property, both real and personal, to Hiram Jerome, in trust for tbe benefit of tbeir creditors. Subsequently and on tbe 7th of January, 1885, the defendants confessed a judgment to tbe plaintiff, and judgment was on that day entered in tbe sum of $3,449.52. Subsequently thereto, and on tbe 24th day of January, 1885, Stephen Croak recovered a judgment against tbe defendants by default, after a personal service of process, for tbe sum of $2,113.65.
    Subsequent to tbe last mentioned judgment several other parties recovered judgments against tbe defendants, all of tbe said judgments being docketed in tbe Orleans county clerk’s office, in which ^county tbe real estate embraced in tbe assignment is situated. Execution on Croak’s judgment was issued against tbe property of tbe defendants, and was returned unsatisfied and proceedings supplemental to execution were instituted against the said judgment debtors,, and on the 13th day of February, 1885, the plaintiff in this action was appointed receiver of all the property and' effects of the said defendants. On the other judgments executions against the property of the defendant were issued and returned unsatisfied, and the receivership was extended in each of those actions over the debtors’ property. Thereupon the receiver commenced an action against the assignee and the judgment debtors and others, including Sym-son and the plaintiffs in each of the above mentioned judgments, for the purpose of setting aside the assignment as void as against the judgment creditors. Symson was personally served with process in that action, but did not answer. On the 4th day of August, 1885, a final decree was entered in the judgment creditors’ suit, setting aside the assignment as fraudulent and void, requiring the assignee to transfer to the receiver all the property, and directing the order in which the several judgment creditors should be paid out of the funds. At the time of the assignment the judgment debtors were the owners of several parcels of land, which were embraced in the assignment and conveyed to their assignee. The statement upon which the judgment was entered in favor of Symson was defective, because it omitted to state the facts out of which the indebtedness arose. After the entry of final judgment in the judgment creditors’ suit, and on the 5th day of October, 1885, Symson made a motion for leave to amend the statement, so as to comply with the requirements of the statute, serving notice upon the subsequent judgment creditors who appeared and opposed the motion, and the same was granted, with leave to file the amended statement nunc pro timo, and from that order the judgment creditors opposing the motion appeal.

      John H. White, Thompson and Spencer, Sawyer and Bullard, John Gunneen, for the appellants.

      Stull, Foote & Taylor, for the respondent.
   Barker, J.:

It was established upon the hearing that the plaintiff had a just and valid debt against the defendants for the amount of the judgment, and that the omission to prepare the statement in compliance with, the requirements of section 1274 of the Code of Civil Procedure, arose from the mistake and inadvertance of his attorney. The appellants made no claim that either party to that judgment was guilty of an intentional fraud in entering up the judgment.

The court had jurisdiction over the subject-matter and also the unquestioned power to authorize the amendment. (Mitchell v. Van Buren, 27 N. Y., 300 ; Ingram v. Robins, 33 id., 409 ; Union Bank v. Bush, 36 id., 631.) Such motions are frequent in practice and are addressed to the equitible power of the court, and the terms, if any are imposed as a condition of granting relief, by allowing the statement to be amended, are to be determined by the facts and circumstances as they are-made to appear in each instance. In. a proper case the validity of the judgment and its priority as a lien upon real estate, may be preserved as against subsequent incum-brances. It is, however, the more common practice to allow the amendment to be made without prejudice to the rights of intervening judgment creditors. (Wait’s Pr., vol. 3, p. 691.) The earliest reported case allowing a defective statement in a confession of judgment to be amended so as to comply with the requirements of a statute is Lawless v. Hackett (16 Johns., 149), where the judgment was deferred to the then existing liens upon the debtor’s real estate. Tha rule of that ease has been applied in subsequent ones arising under existing statutes authorizing the entry of judgments by confession on the written and verified statement of the debtor. (Dunham v. Waterman, 17 N. Y., 9 ; McKee v. Tyson, 10 Abb., 392; Johnston v. Fellerman, 13 How., 21.)

The case of Lawless v. Hackett (supra), arose under the act of 1818, which declared in terms, that if a confession was not in compliance with the provisions of the act, the judgment should be decreed and adjudged fraudulent.” The sections of the Code on the subject do not declare the effect of an omission to comply with the provision that the statement must state concisely the facts out of which the debt arose.” It was, however, held in Dunham v. Waterman, that the provisions of the present statute had the same meaning and effect as to subsequent judgment creditors, and as to them the judgment was deemed fraudulent and void. The head note in which the law of the case is correctly stated is, viz.: “ A judgment confessed under sections 282 and 283 of the Code for a just debt, is to be deemed fraudulent and void as to other judgment creditors of tbe debtor, when the statement upon which it is entered contains no further specification of the facts out of which the indebtedness arose, than that it was upon a promissory note {the date, amount and time of payment of which are described), given on a settlement of accounts on a specified day between the debtor and the plaintiff in such judgment.” There the question arose in an action brought by subsequent judgment creditors to set aside the confession of the judgment upon the ground that there was a failure to comply with the provisions of the statute.

"We are cited by the respondent’s counsel to the case of Ingram v. Robins (33 N. Y., 409), as an authority in support of his argument, that it is the duty of the court to preserve the priority of the plaintiff’s judgment and lien over the subsequent judgments in all cases where there is no intention to cheat and defraud. A careful examination of the case will disclose that the question of preserving the priority of lien was not considered by the court. The Supreme Court had declined to set aside a judgment on the motion of subsequent judgment creditors, on the ground that the verification was , defective, and on appeal to the Court of Appeals that court held that the verification was defective, but as the plaintiff in the prior judgment had shown that he had a just and valid debt, the Supreme Court should have given him permission to amend the statement so as to comply with the requirements of the statute, and on his failure to do so the judgment should be set aside. The question of priority of liens was not presented for consideration.

Nor does the case of the Union Bank v. Bush (36 N. Y., 631) attempt to establish any rule by which it is to be determined in any particular case, the terms upon which an amendment of the statement, as to the nature and character of the indebtedness, should be allowed. On the question now before us it is an authority that the court possesses the power to order the amendments, but it does not consider the question as the terms upon which the same should be granted.

"We are of the opinion that the court may allow an amendment of the statement to be made nunc pro tunc, and thus preserve a priority of lien over subsequent incumbrances, or it may impose as a condition of allowing the amendment that the lien of the judgment shall be subordinate to outstanding incumbrances. The facts and circumstances of each case, as they arise, should be considered in determining the terms and conditions upon which the amendment may be allowed. In view of the facts and circumstances of this case, we are of the opinion that the equities are with the subsequent judgment creditors, as by their action to set aside the assignment the real estate of the judgment debtors has become subject to the liens of their judgments, which would not have existed if the assignment had been permitted to stand. The plaintiff never questioned the validity of the assignment and acquiesced in the disposition of the property made by them. It is the general rule in courts of equity to reward the diligent creditor by giving him a preference in payment out of the debtor’s property. As to the personal property this was secured to the vigilant creditors by the judgment of the court declaring the assignment void.

By the force and operation of that judgment, all the valid judg ments entered up against the judgment debtors became a lien upon the real estate embraced within the assignment in the order of their docketing. (Chautauque Co. Bank v. Risley, 19 N. Y., 369; White's Bank of Buffalo v. Farthing, Ct. of App. Dec., reported in 4 Eastern Rep., 59.)

As bearing upon the question in dispute, the provisions of the assignment may be referred to, and by it the payment of the plaintiff’s debt was deferred until after the payment of a large portion of the debts in favor of the parties resisting the plaintiff’s application to amend the statement. It will be most in accord with the current of authorities, as well as in conformity with the rule of equity, to reward the diligent creditor by amending the order appealed from so as to defer the plaintiff’s judgment, as a lien, to that of the existing judgment creditors, as to all real estate of the judgment debtors embraced in the assignment.

No costs of this appeal allowed to either party. .

Smith, P. J., Haight and Bbadley, JJ., concurred.

Order modified so as to defer the plaintiff’s lien to that of the existing judgment creditors, as to all the real estate of the judgment debtors embraced in the assignment, without costs of this appeal-to either party.