text:
    The Columbus Watch Co. et al., App’lts, v. Anthony I. G. Hodenpyl et al., Resp’ts.

      (Supreme Court, General Term, First Department,

      Filed November 13, 1891.)

    1. Execution—Executobs—Leave op subbogate.
    The rule requiring leave of the surrogate to issue execution against an executor has no application to the case of an execution against a firm composed of a surviving partner and the executors of a deceased partner to collect a debt due from such firm.
    2. Executobs and administbatobs—Oppeb op judgment.
    The rule prohibiting executors from confessing judgment applies only to-cases where an executor attempts to give a preference against an estate. It does not apply to an offer of judgment made by a firm of which the executors are members as such.

      3. Judgment—Fraud.
    The burden of showing that judgments were entered fraudulently is upon him who asserts such fact; it does not lie upon the defendant to prove that an indebtedness existed.
    4. Same.
    The mere fact that the note upon which a judgement was obtained had never been delivered does not necessarily render fraudulent the judgment where it appears that the debt was due. A mere mistake as to the legal effect of a note made out but not delivered does not show a fraudulent intent.
    Appeal from judgment at special term dismissing complaint. F. Fien, for app’lts; Hays & Oreenbaum, for resp’ts.
   Van Brunt, P. J.

The defendant Simon Stern and one Joseph Stern were, prior to May, 1886, carrying on business in the city of New York as copartners under the firm name of Stern & Stern.

On the 20th of May, 1886, said Joseph Stern died, leaving a will and codicil thereto which were duly admitted to probate by the surrogate of the city and county of New York in June, 1886, And letters testamentary were issued thereon to the defendants Dinah Stern and Simon Stem. Among other provisions contained in said will was a clause whereby he authorized his executrix to •continue his interest in the business then carried on by him under the firm name of Stern & Stern in conjunction with his brother, the defendant Simon Stem, in such manner as they should deem proper, and for such time as they should deem for the best interest of his estate. Thereafter the said business of Stem & Stern was carried on by said defendant Simon Stern, and by the defendants Dinah Stern and Simon Stern, executrix and executor of the last will and testament of Joseph Stern, deceased, down to the 29th of November, 1890. On said 29th of November, 1890, certain judgments were recovered against the firm of Stern & Stem by various persons claiming to be creditors of said firm upon offers to allow judgment. Executions on the same day were issued to the sheriff upon said judgments, and levies made upon all the tangible property of said firm.

The plaintiffs herein having brought actions against said firm of Stern & Stem upon debts owing by said firm to them, procured Attachments against said firm upon the ground that the defendants' had disposed of their propety with intent to cheat and defraud creditors, and said attachments were levied upon the same property levied upon by the sheriff by virtue of the executions issued upon the judgment hereinbefore referred to.

This action was thereupon commenced to set aside the said judgments upon the ground that they were fraudulent and collusive, and the executions issued thereon null and void.

It is claimed that the executions are null and void because they are issued against Simon Stern, as executor, and Dinah Stem, as executrix, and no leave of the surrogate was obtained. It is to Be observed in considering this proposition that no executions were issued against Simon Stern and Simon Stern as executor and Dinah Stern as executrix; that Simon Stern and Simon Stern, executor, and Dinah Stem, executrix, were the parties who were carrying on this business, represented by the firm of Stern & Stern, and the debts to secure which the judgments were obtained were not debts of the estate of Joseph Stern, but of the firm of Stern & Stern, of which his executor and executrix were members.

It is undoubtedly true that a creditor of the estate of a deceased party cannot issue an execution without leave of the surrogate, but as the plaintiffs in those executions were not seeking to enforce any claim against the estate, the provisions of the Code in respect thereto are entirely inapplicable.

This is the view which appears to have been taken by the surrogate upon the application to revoke the letters testamentary issued under the will of Joseph Stern, deceased, upon which application it was held that the petitioners, being only creditors of this firm, were not creditors or persons interested in the estate of the decedent and consequently had no standing in court This view seems to be established (as is shown by the opinion of the justice who tried the case in the court below) by the case of Willis v. Sharp, 113 N. Y., 586; 23 St. Rep., 670, in which the court say: “A power simpliciter to carry on the testator’s trade or to continue his business in the firm of which he was a member, without anything more, will be construed as an authority simply to carry on the trade or business with the fund already invested in it at the time of the testator’s death, and to subject that fund only to the hazards of the trade and not the general assets of the estate. The property already embarked in the business 'is the trade fund, unless it appears from the will that the executors were authorized to use the general assets in his business.”

It would seem, therefore, that the creditors of a firm constituted as the one under consideration was have the ordinary rights of creditors and are not subjected to the restrictions applicable to the creditors of the estate of a deceased, which restrictions are intended to promote equality of distribution.

But if this were not so, the very defects which it is claimed by the appellants render the executions issued null and void affect equally the attachment under which the plaintiff seeks its recovery. The defendants Stern are described exactly in the same way, and when motions were made to set aside the attachment on this ground, it was held very properly by the court that these words were mere words of description, and that the executors as representing the general estate were in no way interested in this firm. It was only as they represented this particular fund which was placed at the hazards of this business that they were interested therein.

The claim upon the part of the appellant that an attachment can issue against an executor although an execution cannot is clearly unfounded. In the Matter of Hurd, 9 Wend., 465, referred to, it is held that an attachment against an executor does not lie for a demand against his testator, but lies against him for a debt contracted by him in his representative capacity, and this is because of the individual responsibility of the executor for debts contracted in the administration of the estate.

Certainly an attachment against an executor for claims against the estate would he as great an anomaly as the issuing of an execution whereby priority of lien would be given to a creditor.

The criticism passed by the appellant’s counsel upon the application of the case of Willis v. Sharp is entirely unfounded. All that that part of the case which is referred to holds is that creditors having unsatisfied claims against an estate are not required to allow any portion of the estate to be used in the carrying on of the business, but have the right to have the estate applied as soon as the forms of law will permit upon their debts; and unless they have in some way consented to the carrying on of the business by the executors they have the right to insist that the estate as it existed at death shall be used for the payment of their debts and of the expenses of administration to the exclusion of debts subsequently created by the executors.

The case of Hooley v. Gieve, 9 Daly, 104, affirmed, 73 N. Y., 599, illustrates, in a marked manner, the enforcement of this right.

But the plaintiffs in this action were not creditors of the estate. They are creditors of the firm in which a portion of this estate had been left, and consequently have no interest whatever in the estate as such or in the payment of claims against the estate.

The suggestion that some of the judgment creditors whose judgments are sought to be set aside were creditors of this firm in the lifetime of Joseph Stem, deceased, and that they at the time of the death of Stern had a right to insist upon the payment of their debts from the executor or executrix, and therefore could not pursue the firm, cannot prevail They were creditors of the firm all the time;and as such creditors of the firm they had a right to pursue the assets of the firm in the manner prescribed by law, and it may be that by their assent to the carrying on of the firm as empowered by the will they had lost their rights against the estate.

They certainly stand in as good a position to collect their debts as the plaintiffs, who are also merely creditors of the firm.

The claim that it is well settled that executors have no power to confess judgment, and that knowing this the defendants resorted to offers and acceptances to evade the law relative to confessions of judgment, and that therefore the judgments in question should be set aside, has no application to the case at bar. This role applies only to those cases where an executor attempts to give a preference against an estate. As the counsel states in his points: “An estate can give no preferences.” But the court of appeals has held that creditors of a firm composed as this was are not creditors of the estate of the deceased partner. Therefore, the estate gives no preferences.

The next question presented is the claim that the evidence in this case shows that the judgments were fraudulent and collusive, and not founded upon bona fide debts.

It seems to be claimed that because some of the judgment creditors were relatives of the members composing the firm of Stern & Stern, therefore any judgment allowed to be taken by them must necessarily be fraudulent and collusive. We do not understand how a judgment entered by confession or upon offer can be otherwise than collusive.

If a man owes a debt, his creditor has the right to sue him, and he has the right to offer to allow judgment even for the purpose of giving this creditor a preference and even though the creditor may be a relative. All judgments by confession or upon offers are necessarily collusive, each of the parties does all he can in order to have that judgment entered and he has a right so to do, provided the debt is honest and provided that the object is to secure the payment of that debt and that only. If, however, the judgment is obtained for any purpose other than securing the payment of the debt, whether such purpose is that of the debtor or creditor, then the judgment becomes fraudulent as against the creditors of the firm.

It is claimed in the case at bar that there is no sufficient proof that the debts upon which these judgments were obtained were bona fide debts of the firm of Stern & Stern. The learned counsel for the appellant, in the consideration of the evidence in this case, all of which was produced by himself, fails to recognize upon which side lies the burden of proof. There is never any presumption of fraud. It must always be proved, and if the plaintiffs in this action desire to succeed upon the ground that these judgments were entered fraudulently because there was no bona fide indebtedness, the burden lies upon the plaintiffs to prove that proposition. It does not lie upon the defendants to prove that the indebtedness existed. The plaintiffs have wholly failed to establish the proposition that the debts sought to be preferred by the entry of these judgments were not bona fide and owing.

Whatever evidence there has been upon that subject tends to establish the existence of those debts. He calls attention to the testimony, and asks why the firm did not produce its books for the purpose of establishing the existence of this indebtedness. It might well have been asked upon the other side, why did not the plaintiffs cause the books of the firm to be produced and show that the indebtedness did not exist. It was no part of the defendants’ duty to establish the existence of the indebtedness until it had been impeached on the part of the plaintiffs.

The case of Bernheimer v. Rindskopf, 116 N. Y., 428 ; 27 St. Rep., 648, illustrates this principle in respect to the burden of proof.

But, it is said, in respect to the judgment of Sophia Stern, that the evidence shows that the note upon which the alleged judgment was obtained had never been delivered, and, consequently, the judgment was fraudulent.

Even if the proposition was true that the note never having been delivered, it therefore never existed as an instrument to be enforced against the firm, and consequently the judgment had no foundation in fact, that of itself does not necessarily render fraudulent either the judgment rendered in that case or in the others. The evidence shows that the debt was due. The witness says that her uncle, Simon Stern, showed her the note and told her she could draw the interest on it whenever she wished. There was a note made out for her but it was never handed to her. It was to pay the amount which became due from the estate when she became of age. Now, Sophia Stem had a claim against the estate for this $2,000 ; and. if she chose to allow it to remain with this firm, she became a creditor of the firm, and the question as to whether there had been an accounting of the estate or not was entirely, immaterial.

It is claimed that it was not shown that the estate was solvent or in a condition to pay this legacy. But in order to show a fraudulent intent upon the part of these parties, it was the duty of the plaintiffs to show that the estate was insolvent, and that Sophia Stern had no claim, therefore, upon it. A mere mistake in regard to the legal effect of a note made out and not delivered, does not by any means show a fraudulent intent

But it is by no means to be admitted, if Sophia Stern’s statement of the transaction is true, that the note was not a valid obligation which belonged to her, and which she had a right to enforce. And this testimony, evidently, the court below believed.

The whole case of the appellants, as was said by the learned judge who tried the case below, rests upon suspicion argumenta- - lively founded in the main upon the absence of explicit proof to support the judgments.

More than this is requisite to impeach their validity.

The point made in reference to the refusal of the motion to adjourn the trial of the case until the plaintiff in this action might procure judgments, is certainly novel, but does not address itself with much force to our judgment The trial of causes is not postponed in order that by lapse of time a right to maintain an action may arise at some subsequent time.

The judgment should be affirmed, with costs.

Daniels and Ingraham, JJ., concur.


source: Caselaw Access Project

author: Van Brunt, P. J.

license: Public Domain

text:
    Thomas G. Frothingham et al., App’lts, v. Anthony I. G. Hodenpyl et al., Resp’ts.

      (Supreme Court, General Term, First Department,

      Filed November 13, 1891.)

    1. Creditors’ action—Parties.
    A mere creditor at large, having no lien by attachment or execution levied, or judgment obtained and execution returned unsatisfied, cannot attack the validity of judgments entered against his debtor on an offer.
    2. Executors and administrators—Accounting.
    A creditor of a firm in which executors are partners as such cannot call the executors to account in respect to the estate of which they are executors.
    Appeal from judgment of special term dismissing complaint. F. Bien, for app’lts; Hays & Greenbaum, for resp’te.
   Van Brunt, P. J.

This is an action brought by a general creditor of the firm of Stern & Stern to have the judgments referred to in the case of Columbus Watch Co. v. Hodenpyl, decided herewith, declared null and void as against the plaintiff, and to have the executions issued thereon set aside, and for a preliminary injunction restraining the defendants from receiving any portion of the money arising upon the executions, and calling upon the defendants Dinah Stern as executrix and Simon Stern as executor of Joseph Stern, deceased, to render an account of their trust in the manner provided by law, etc.

It is perfectly clear that the plaintiffs in this action, being merely creditors at large, having no lien either by attachment or execution levied or judgment obtained and execution returned unsatisfied, cannot attack the validity of these judgments.

Neither are they in a position to call the defendants Dinah Stern and Simon Stern as executrix and executor of the last will and testament of Joseph Stern, deceased, to an account. They are not creditors of the estate of Joseph Stern; they are simply creditors of the firm of Stern & Stern, in which the estate of Joseph Stern has an interest. As well might the creditor at large of a firm call upon a copartnership to account in regard to the administration of their trust, as for the plaintiffs to attempt to call two of the partners of the firm of Stern & Stern to account in respect of the estate of which they are executors.

It is only creditors of an estate that may call the executors to an account.

The judgment should be affirmed, with costs.

Daniels and Ingraham, JJ., concur.


author: Ingraham, J.

text:
    Constance B. Price, Resp’t, v. Walter J. Price et al., App’lts.

      (Supreme Court, General Term, First Department,

      Filed November 13, 1891.)

    1. Costs—Appeal.
    In an action for dower judgment was entered on the referee’s report dismissing the complaint, but the judgment was reversed on appeal, and a reference ordered to admeasure the dower. The referee’s report was confirmed and the judgment affirmed by the general term, but on appeal to the court of appeals the judgment and orders were reversed and judgment dismissing the complaint affirmed. Held, that the defendants were entitled to costs as respondents on the first appeal to general term, to costs as appellants on the second appeal and to costs as appellants to the court of appeals.
    2. Same—Trial fee.
    Defendants are entitled to but one trial fee, as but one trial took place; the proceeding to admeasure the dower not constituting a trial.
    Appeal from an order affirming taxation of costs by the clerk.

      James R. Marvin, for app’lts; George H. Starr, for resp’t
   Ingraham, J.

This action was brought to recover dower. The issues were referred to a referee to hear and determine, who reported in favor of the defendants dismissing the complaint Upon an appeal from the judgment entered on such report the judgment was reversed and judgment absolute ordered for the plaintiff, whereby it was referred to a referee to admeasure the plaintiff’s dower.

The report of the referee was finally confirmed and judgment ordered against all the defendants, awarding plaintiff dower, damages and costs. This judgment was affirmed by the court, whereupon both parties appealed to the court of appeals,the judgment and orders subsequent to the judgment entered on the report of the referee who tried the issues in the action were reversed, and the judgment.entered upon the report of the referee dismissing the complaint with costs was affirmed, with costs to each of the defendants appearing by separate attorneys, and we have to determine the costs to which defendants are entitled.

This is an action specified in § 3228 of the Code, and upon an • appeal from a final judgment, if the judgment is affirmed, the respondent is entitled to costs as a matter of right. The defendants were the, respondents on the appeal to the general term from the judgment' dismissing the complaint, and as that judgment has been affirmed they are entitled to costs of the appeal from that judgment to the general term as well as to the court of appeals.

We think, also, that the defendants should have been allowed the costs to which an appellant is entitled on the appeal from the judgment entered on the decision of the general term. On that appeal the defendants were the appellants, and as the judgment was reversed, under § 3238 the appellants were entitled to costs. We think, therefore, that defendants were entitled to the costs of respondents on the first appeal to the general term e id to the costs as appellants on the appeal to the court of appeals. .

This ruling is in accordance with the decision of the cor rt of appeals in the case of Murtha v. Curley, 92 N. Y., 360. Neither party is entitled to costs on the appeal of the plaintiff from the judgment entered on the decision of the general term,, because that judgment has never been either affirmed or reversed. On that appeal the defendants, who now ask to tax their costs as respondents, could only be entitled to costs in case the judgment on the appeal of the plaintiff was affirmed. Section 3238. As the judgment on that appeal was not affirmed, the judgment having been entirely reversed on the appeal of the defendants, there was no decision of that appeal, and neither party is entitled to costs thereon.

The defendants also ask the court to tax ten dollars costs for each of the motions where costs were allowed to the plaintiff by the orders which were reversed.

Motion costs are in the discretion of the court that decides the motion. It does not follow that the court in the exercise of that discretion would have granted costs of motion to defendant if the motion had been denied because it granted costs to plaintiff when the motion was granted. A party is not entitled to be allowed motion costa unless he can present an order in which such costs are allowed by the court making the order.

In this case no such order is produced.

So far as the allowance of costs are discretionary in the supreme court, a general award of “ costs ” by the court of appeals applied only to costs on the appeal to that court In re Protestant E. Public School, 86 N. Y., 397.

The clerk therefore was correct in refusing to allow defendants the costs of the motions.

The defendants also asked to be allowed costs as upon a trial for each of the two proceedings before the referee under the interlocutory judgment entered upon the decision of the general term.

It is clear however that there was but one trial of the action. That was the trial before the referee to hear and determine, and in the judgment dismissing the complaint entered upon the report of that referee the costs for that trial were allowed. The proceedings on the subsequent proceedings were not trials of the action; the case had been tried and a judgment entered by the general term in favor of the plaintiff. The referee was ordered to ascertain the specific interest of the parties to the action in the property described in the complaint and to set apart to the plaintiff the portion of said property to which she was entitled, and to state an account between certain of the parties so as to ascertain the amount that plaintiff was entitled to recover. Such a reference is interlocutory in its character and is not a trial within § 3251 of the Code.

We think therefore that defendants were entitled to costs as respondents on the first appeal to the general term, to costs as appellants on the second appeal to the general term and to costs as appellants on the appeal to the court of appeals.

The order should be reversed and a re-taxation ordered in accordance with the views here expressed, with ten dollars costs and disbursements of this appeal to the appellants.

Van Brunt, P. J., and Daniels, J., concur.


author: Daniels, J.

text:
    Jenny Nelson, Pl’ff, v. James Russell et al., Def’ts.

      (Supreme Court, General Term, First Department,

      Filed November 13, 1891.)

    Will—Vesting op estates.
    By the will of one B. he gave to his daughters certain real estate and the rents, issues and profits thereof for their natural lives and “after the decease of my said daughters * * * and each of them,” he gave the same to the defendants, “to be divided equally between them and their heirs, share and share alike, the child or children of a deceased child taking the share which his, her or their parent would have taken if living ” The will contained no other provision as to the time of the vesting of the remainder. Held, that under this will the remainder did not vest until the death of the testator’s daughters, to whom the life estates were given, and would only then become vested in the children of the life tenants by their surviving those individuals, and if either should then be deceased it would vest in his or her children, or if there be none, it would pass under the residuary clause, and hence that defendants could not give a good title to the property during the life of one of the life tenants.
    Case agreed upon and submitted under § 1279 of the Code of Civil Procedure.

      Drachman Nelson, for pl’ff; Thomas F. Magner, for def’ts.
   Daniels, J.

The defendants on the 7th of March, 1890, entered into an agreement with the plaintiff, by which they agreed to convey to her two parcels of land, with the buildings and improvements thereon, situated on the north side of Cherry street, known as numbers 356 and 358, in the city of New York, for the contract price of $15,250. They tendered to the plaintiff a deed in form conveying the premises, which she refused to accept for the reason that the title was regarded as defective. By the terms; of the contract she became bound to pay the sum of $500 in cash on its execution, and that sum was in fact paid. She also paid the sum of $100 for commissions on the purchase and examination of the title to the property. And the claim on her part is that she is entitled to recover these sums of money from the vendors in the contract, together with the interest thereon.

They have derived whatever title they may have in the property proposed to be conveyed under the will of David Barry. And whether this will has vested them with the title to these two parcels of land is the point upon which the rights of the parties have been made to depend. By this will, the testator, after having provided for the payment of his debts and a legacy of $500, gave and devised unto his daughter Ellen Magner all his property situated in the city of Brooklyn, for and during the term of her natural life. And after her decease he gave and bequeathed the property to her surviving children, to be divided equally between them and their heirs, share and share alike, the child or children of the deceased child taking the share which his, her or their parents would have taken if living. This devise was followed by the devise of the property whose title is now in controversy. It was made by the third sub-division of the testator’s will. And this subdivision is in the following language :

“I give and devise unto my beloved daughters, Catherine Barry and Bridget Bussell, all my real property in the city of New York, and known as Nos. 856 and 858 Cherry street, and the rents, issues and profits thereof for and during the term of their natural lives, and. from and after the decease of my said daughters Catherine Barry and Bridget Bussell, and each of them, I give and bequeath the said premises No. 856 Cherry street to James Bussell, the son of my said daughter Bridget Bussell, and upon the like events I give and bequeath the said premises No. 858 Cherry street, to James Barry and Ellen Barry, the children of my son Michael Barry, now deceased, to be divided equally between them and their heirs, share and share alike, the child or children of a deceased child taking the share which his, her or their parent would have taken if living.”

By the next paragraph of the will he gave the rest, residue and remainder of his estate to his daughter Catherine, subject to the payment of the legacy mentioned of $500. There is no provision, therefore, in the will affecting the title to this real estate except the directions contained in the third paragraph, which has already been extracted. And the question arises whether under that paragraph of the will the defendants in this case were in a position in which they could convey to the plaintiff the title to these lots. Catherine Barry, one of the devisees for life, is deceased. But Bridget Bussell, the other of the testator’s daughters, is still living. And so are James Barry and Ellen Barry, the children of the son of the testator, Michael Barry. If the remainder created bv this part of the will vested in James Russell and James and Ellen Barry at the time of the decease of the testator, then a legal title to the property was capable of being conveyed by the deed tendered to the plaintiff. But if the remainders in these parcels of land will not vest until the decease of the life tenants, then it is conceded that such a title would not be conveyed by the deed as the plaintiff was entitled to receive under the contract

There was no devise of these remainders by the will expressly or impliedly required to take effect upon the decease of the testator. But the devise which was made was from and after the decease of the testator’s two daughters, Catherine Barry and Bridget Russell, who were made the life tenants <5f the property. Then, for the first time, was any interest, or estate, given to these persons in remainder in these parcels of land. But it has been insisted on behalf of the defendants, notwithstanding this language creating the estates in remainder only from and after the decease of the testator’s daughters, that these remainders vested in their children at the decease of the testator. And the case of Livingston v. Greene, 52 N. Y., 118, is relied upon as requiring that construction to be given to this portion of the testator’s will. And to a certain extent, at least, it sustains this position. But there the will contained other provisions indicating the purpose of the testator to be that the estate created and then in controversy should vest at the time of the decease of the testator.

But the present case contains no other or further provision than the devise from and after the decease of the daughters, the life tenants. That is the event upon which the devise was made and intended to take effect. In this respect a very clear distinction also exists between this devise and the will which was in controversy in Freeman v. Coit, 96 N. Y., 63. And this distinguishing circumstance appears to require a different construction to be placed upon the will from that which is supported by these two authorities. The rule undoubtedly is, where a present devise is unqualifiedly made by the testator depending upon the decease of the devisee, that the decease contemplated is to take place in the lifetime of the testator. But in Vanderzee v. Slingerland, 103 N. Y., 47; 2 St. Rep., 732, it was said that this rule “ applies only where the context of the will is silent, and affords no indication of intention other than that disclosed by words of absolute gift, followed by a gift over in case of death, or of death without issue, or other specified event” 103 N. Y., 55, 56.

The present case is not within this rule, for no gift or devise of the property has been made in remainder, other than from and after the decease of the testator’s daughters. And in the case just referred to it was added that: “ The tendency is to lay hold of slight circumstances in the will to vary the construction and to give effect to the language according to its natural import.” Id., 56. And the manner in which this devise has been made is a circumstance excluding this case from the general principle which has already been mentioned. Similar language was considered and construed in Delafield v. Shipman, 103 N. Y., 463; 4 St. Rep., 247. There the testator directed, upon the decease of his wife, that his executors and trustees should make an equal division of his whole estate, not specifically otherwise disposed of, among his children then living. And this was held to be sufficient to exclude the case from the application of the principle already stated, which would otherwise have been accepted as controlling.

The same conclusions substantially were maintained in Matter of N. Y., Lackawanna, etc., Railway Co., 105 N. Y., 89; 6 St. Rep., 851, where the language was still broader than that contained in this paragraph of the testator's will. And in Shipman v. Rollins, 98 N. Y., 311, the vesting of the remainder contingently given was held to be postponed to the time of the decease of the life tenant. The language there in its import and effect was very similar to that contained in this will. It was “ then,” upon the decease of the life tenant, that the testator directed the division of his property to be made, while here the remainder is. to take effect, from and after the decease of the daughters. And Nellis v. Nellis, 99 N. Y., 505, and Buel v. Southwick, 70 N. Y., 581, are authorities proceeding in the same direction. And so also is the case of Matter of Maben, 32 St. Rep., 790. Still more similar language was considered in Plymouth Society, etc., v. Hepburn, 57 Hun, 161; 32 St. Rep., 943, where it was concluded that a bequest made in this manner did not vest until the time of the-decease of the persons upon whose lives its disposition depended. And Camp v. Cronkright, 36 St. Rep., 795, is directly to the same effect.

A large number of other authorities have been cited in the case-which are riot required to be considered, for these are decisive of the question at issue between these parties. And they require this paragraph of the testator’s will to be so construed as to withhold the-vesting of the remainder in these parcels of land to the time of the decease of the testator’s daughters, to whom the life estates were given. And then only to become vested in the son and daughters, of the life tenants, by their surviving those individuals. And in case either shall then be deceased, the remainder will vest in the children of the deceased child, or if there be no such child or children, then by the residuary clause of the will the estate must pass to the testator’s daughter therein mentioned. And the result therefore is, that the deed which was tendered to the-plaintiff would not convey to her such a title as she was entitled to receive by way of performing the contract.

Judgment should accordingly be directed in her favor for the-recovery of the sum of $500 paid by her upon the contract, with interest thereon, and the additional sum of $100 paid for commissions, with interest from the 7th of March, 1891, and for the-costs of this proceeding.

Lambert, J., concurs.


author: Van Brunt, P. J. Daniels, J. Ingraham, J.

text:
    Frank Phelps, Resp’t, v. The Mayor, etc., of New York, App’lt.

      (Supreme Court, General Term, First Department,

      Filed November 13, 1891.)

    Municipal coefokations—Lease—Repairs.
    Plaintiff leased a wharf from the city for a term of years, the lease containing covenants that the city would prior to its commencement or as soon after as practicable make such repairs to the wharf as the dock commissioners should consider necessary to put it in suitable condition for use, but that no claim that it was not in suitable condition should at any time be made or allowed, and also that plaintiff would keep the wharf in repair. At the conclusion of the term plaintiff took a new lease containing the same covenants. He had kept the premises in repair, but at the commencement of the second term they had, by reason of age, become unsuitable for service. A dispute arose between plaintiff and the dock commissioners as to who should make the repairs, the commissioners expressly stating that they were necessary. Held, that the second lease was a new grant and its covenants are to be read as though it was the first inception of the relation between the parties, and that plaintiff was entitled to recover for a breach of the covenant to make such necessary repairs as to put the wharf in condition for use.
    (IrreBAHAM, J., dissents.)
    Appeal from judgment of the special term.

      S. J. Cowen, for app’lt; T. E. Rochfort, for resp’t.
   Van Brunt, P. J.

This action was brought by the plaintiff to recover damages for an alleged breach of a covenant upon the part of the defendant to repair the pier which the defendant had leased to plaintiff and to reform the lease by striking out the stipulation which seemed to prevent the plaintiff from raising the question of its breach.

The action has been heretofore tried and judgment entered denying plaintiff’s prayer to reform the lease but awarding damages for the defendant’s breach of the covenant to repair. Upon appeal to the general term, the general term reversed that part of the judgment awarding damages and ordered a new trial. The same issues were retried and the court below held that the additional evidence offered supplied the deficiency which the general term had declared to be fatal to the first judgment, and judgment was again awarded to the plaintiff for the full amount of the claim.

It appeared that the plaintiff was a lessee of a pier of the defendant under a written lease running from May 1, 1882, to 1887. This lease contained a covenant upon the part of the city as follows:

“ And the parties of the first part promise and agree that they will, prior to the commencement of the aforesaid term of years, or as soon after such commencement as shall be found practicable, make such repairs to the above described wharf property as the said board of commissioners may consider necessary to put such wharf property in a 'suitable condition for service during the aforesaid term. And the parties hereto promise, agree and understand that no claim that the said wharf property is not, or was not at the time of the commencement of said term, in a suitable condition for the uses and purposes hereinbefore mentioned, shall or will, at any time, be made or allowed.”

And a covenant upon the part of the plaintiff as follows :

“ And the said party of the second part does further covenant, promise and agree that he will at' all times during said term, except as hereinbefore agreed, put, keep, and maintain all the said wharf property and every part thereof and the structures thereon in good and sufficient repair and condition, and will well and snffi. ciently dredge, and keep dredged, the slip or slips adjacent thereto; and that all such repairs, rebuilding and dredging during said term shall be made and done at the sole cost, charge and expense of the said party of the second part. And in case the said party of the second part shall make default herein, and shall neglect or refuse to make such repairs, or do such dredging, for the space of ten days after notice so to do shall have been given by the said department of docks, or any proper officer, agent or employee thereof, or of said parties of the first part, then this grant and everything herein contained shall be forfeited, and the party of the second part will pay to the parties of the first part such damages as they may have sustained ;"or at their or its option, the said parties of the first part, or the said department, may make such repairs, or do such dredging, and the full cost and expense thereof shall and will be paid on demand by the said party of the second part to the said parties of the first part.”

And the covenant for renewal, as follows:

“ It is further understood and agreed that if, at any time, not less than ninety days before the expiration of the abovementioned term of five years, the party of the second part shall give the parties of the first part, their proper department or officer, notice in writing of his desire to have the present grant renewed, then, and in that case, the said parties of the first part will again grant unto the said party of the second part, for a further term of five years, commencing at the expiration of the present term, all the wharf-age which may become due for the use and occupation of said pier, such renewed grant to contain like covenants as this present one, except the covenant of renewal and except that the rent or compensation shall be eleven thousand dollars per annum, and the said wharf property is to be used and occupied during said term only for the purposes of mooring thereto vessels engaged in commerce and loading and discharging the same.”

Prior to' the expiration of the term contained in this lease, in pursuance of the covenant for renewal, the plaintiff gave the notice entitling him thereto, and subsequently a renewal lease was executed and delivered, containing the same covenants in respect to repairs which were contained in the original lease.

It was admitted upon the trial that during the first term the plaintiff put, kept and maintained the premises and every part thereof in good and sufficient repair and condition, but that notwithstanding such repairs, the pier and bulkhead, being old, were not, on the 1st of May, 1887, in suitable condition for service for the second term; and that such a claim was made by the plaintiff at the time of the execution of the renewal lease and has ever since been made. It was further admitted that the plaintiff had expended the amount recovered for repairs in and by which said wharf was placed in a suitable condition for service during the second term; and that said sum was a fair and reasonable amount to be so expended.

Upon the hearing before the general term upon the previous appeal, it was held that the defendant could not be made liable for the amount thus expended, because it did not appear what the board of dock commissioners considered necessary repairs to put such wharf property in suitable condition for service during the term; and the question presented upon this appeal is whether upon the new trial this objection was obviated.

Various other points are raised which it is necessary only briefly to consider, and they are as follows: That because only monetary damages were given, the court should have dismissed the complaint, the action having been brought in equity for a reformation of the lease and for damages.

This point is clearly not well taken. The plaintiff having shown himself entitled to common law relief the court sent him to the circuit to have such right tried before a jury; and a jury trial being waived, the issues were tried before the conrt without a jury and the defendant, therefore, sustained no injury thereby.

The next claim presented is that there was but one lease, and that the first lease and the option read together constituted the wliole agreement, and that the covenant in regard to repairs by the defendant related only to the commencement of the original lease. We think there is clear error in this proposition. It certainly was not so considered by the parties, because a renewal lease was executed, and the option to be exercised in pursuance of the covenant contained in the original lease was an option to demand a new grant commencing at the expiration of the term of the first lease, and the provision for renewal contained a statement in detail as to what covenants the renewal lease should contain. It was clearly a new grant, and all the covenants are to be read as though it was the first inception of the relation between the parties.

The only question, therefore, remaining to be considered is whether the evidence showed that the dock commissioners determined that certain repairs were necessary to put the wharf property in suitable condition for service at the commencement of the terya.

It appears from the stipulation- entered into between the parties that on the 1st of May, 1887, said pier and bulkhead were not in a suitable condition for service for the second five years, notwithstanding the repairs put upon them by the plaintiff, because of its old and infirm condition.

It further appears from the evidence that a controversy sprang up prior to the 1st May, 1887, the time of the commencement of the new lease between the dock commissioners and the plaintiff, as to who should make the repairs necessary to put the wharf property in suitable condition for use, the dock commissioners claiming that such liability rested upon the plaintiff and the plaintiff claiming that it rested upon the dock department, and in this correspondence the dock department expressly stated these repairs to be necessary and as recommended by the engineer in chief of their department.

These facts, taken in connection with the stipulation that these repairs were necessary to put the wharf in a suitable condition for service, would seem to show that the dock commissioners determined that these repairs were necessary, and supplied the omission which existed in the case when it was before the general term on the previous occasion.

We are, therefore, of opinion that the judgment should be .affirmed, with costs.

Daniels, J.

It is clearly proved that the board of dock commissioners did consider the repairs to be necessary which were made by the plaintiff. It is agreed that he had made all the repairs which he became bound to make under the first lease. And it therefore follows that the repairs in controversy had become necessary to put the wharf property in a suitable condition for service during the term created by the second leasa These repairs the dock commissioners bound themselves to make, which they refused to do, and directed the plaintiff to make them. In making them after that, he did no more than to perform the obligation of the commissioners, for which he became entitled to compensation from the defendant. He did no more than the commissioners concluded should be done, and by which the obligation was created that the commissioners should dox it. He performed their obligation under their direction. And that entitled him to the compensation for doing their work which has been secured by the verdict.

I therefore conclude that the judgment should be affirmed.

Ingraham, J.

(dissenting.)—The liability of the city for the amount expended by plaintiff in repairs to the pier leased by him depends upon the obligation binding the city, contained in the lease.

It is settled that if there is no such covenant in the lease that the defendant is not liable for the repairs made by plaintiff. See Hartford & N. Y. Steamboat Co. v. The Mayor, 78 N. Y., 1.

By the lease the parties of the first part (the defendant) agreed that they would prior to the commencement of the term demised or as soon after such commencement as should be found practicable, make such repairs to the wharf property as the board of commissioners should consider necessary to put such property in. suitable condition for service during the term demised.

If that covenant stood alone, undoubtedly the plaintiff would be entitled to recover for any damage sustained by reason of the failure of the city or the commissioners to make such repairs.

There is however added to this covenant a provision that the “ parties hereto promise, agree and understand that no claim that the said wharf property is not or was not at the time of the commencement of said term in a suitable condition for the use and purposes mentioned in the lease, shall or will at any time be made or allowed.’’

Tile only construction that can be given to this covenant is that the repairs to be made were to rest entirely within the discretion of the dock commissioners, and that the plaintiff was to make no ' claim against them, or against the city, for any failure on their part to observe the covenant that they had made.

The commissioners were public officers acting on behalf of the municipal corporation, and it is not improbable that the plaintiff was willing to depend upon them to have the repairs made without insisting upon a covenant on behalf of the city that he could enforce, and thus agree that no claim should be made for a failure to make any repairs or to put the wharf property in a suitable condition for use during the term.

This seems to be the only construction that will give any effect to the provision in question.

If the city was to be liable for the failure of the dock commissioners to make such repairs, this proviso is absolutely meaningless.

We should not consider whether or not such covenant was a provident one for the plaintiff to make. All that we have to do is to enforce the agreement that was actually made, and the defendant can only be liable for a breach of some express obligation made on its behalf by officers acting under authority to bind them. Here the commissioners agree that they would put the wharf properly in repair, but the plaintiff agreed that he would make no claim that said wharf property was not put in repair, and it seems to me that having made such agreement, he is now precluded from suing the city because the wharf property was not put in such repair.

I do not understand that this question was passed on by this court on the former appeal.

There the judgment was reversed because it did not appear that the dock commissioners considered the repairs made by plaintiff as necessary, and the question of liability of the defendant under the covenant does not seem to have been discussed in the opinion.

I think, therefore, the judgment should be reversed and a new trial ordered, with costs to abide the event.

Judgment affirmed, with costs.


author: Finch, J.

text:
    Theresa Wells, Resp’t, v. Edward H. Monihan et al., App’lts.

      (Court of Appeals,

      Filed December 1, 1891.)

    1. Statute op fbauds—How made available.
    Unless the defense of the statute of frauds is pleaded or is raised by the averments of the complaint, it cannot he made available.
    2. Knights op labob—Action by, whebe chabteb eevoked.
    The charter of Excelsior Assembly, 4120, composed of women, was revoked for “insubordination.” field, that this could not destroy their rights as individuals or as an unincorporated association, and they could choose officers, such as a treasurer, in whose name they could sue and enforce the collection of notes given to the assembly.
    Appeal from judgment of the supreme court, general term, third department, affirming judgment in favor of plaintiff.

      Edward J. Meegan, for app’lts; Charles S. Nisbet, for resp’t

       Affirming 35 St. Rep., 494.

   Finch, J.

So far as the defense in this case rests upon the statute of frauds it must fail, for two reasons. No such defense has been pleaded, and it is not raised by the averments of the complaint, and without one or the other of these conditions the defense, if existing, cannot be made available. Porter v. Wormser, 94 N. Y., 450. And then there is the further difficulty that the referee has found as a fact that the consideration of the note was advanced to the defendants and refused to find that the loan was made to the local executive board. The evidence was contradictory, but clearly sufficient to justify the finding; and so we must hold the defendants’ promise to have been original, since there was no primary debt established to which' it could have been collateral.

The effect of the revocation of the charter by the superior authorities of the “ Knights of Labor ” was not to destroy the property rights of the association as between itself and its debtors, because these sprang from the law of the state and not from the rules and regulations of the order. The latter are, therefore, not here in question. It is not claimed that they operated in any manner to vest the property of a local assembly in any superior officer or body upon the revocation of a charter. This claim was made in the answer and repeated upon the trial, but is disavowed here.

As a reply to the case of Austin v. Searing, 16 N. Y., 112, which denied the power of confiscation in organizations like the present, the learned counsel for the defendants explicitly admits in his brief that “the General Executive Board did- not assume to divest the title to the property of No. 4120,” and speaking of its order issued by the general secretary, adds: “ This order did not claim to give a title to property to any one.” The only effect asserted is that the general secretary was entitled to become, not the owner, but the custodian of the property “ subject of course to the legal rights of the parties.” There is no question of custody in the case. The note is in the possession of the association, and there is no party before the court entitled to dispute that custody, and it is conceded that nothing has occurred to transfer elsewhere the ownership of the obligation. The whole defense of failure of title and of an outstanding and different ownership, therefore, disappears, and the only question left is the further contention that the revocation of the charter destroyed the association and the right of the plaintiff to represent it in this action.

Excelsior Assembly 4120 was composed of women. Their charter was revoked for “ insubordination,” of which very likely they were guilty. The offense and its punishment ended their powers and privileges so far and so far only as they were derived from the rules and regulations of the Knights of Labor, but could not destroy their rights as individuals or as an unincoraported association derived from the law of the state. Under that law they could, as they did, associate for a common purpose and choose officers in whose name they could sue. These powers they had when their charter from the Knights was given, and retained when it was taken away. That event broke off their relations with the order, but not with tbeir own treasury. That treasury they could control in their collective capacity until some superior power took it away, or it disappeared in a final distribution among the members. The defendants have nothing to do with that question. They owe their debt to the association of whom they borrowed the money and which through its treasurer seeks to recover it.

It may be true that by their “ insubordination ” and consequent expulsion from the society and protection of the “ Knights ” the members of the association have no longer the common purpose which brought them together. That may prove to be a reason for dissolving the association, but until dissolved it can exist to collect its debts and pay its creditors and make distribution of its surplus. Even where the state destroys a corporation for violation of its charter it does not free the debtors from the payment of their honest debts. What shall be done with the money when restored is sometimes a serious question, but it must first be collected. It does not belong to the debtors in any event, and no rule of the “ Knights ” or law of the state allows them to confiscate it.

The defendants do not assert any conflicting claim to the money If they did they would still be obliged to pay to the true owner, and could not escape liability. That true owner is the association which the “Knights” have not utterly destroyed. There has been a divorce, but that is quite different from a death.

We can see no good reason why the plaintiff should not recover, and the judgment should be affirmed, with costs.

All concur.


author: Ruger, Ch. J.

text:
    John D. Demarest, App’lt, v. William Koch, Impl’d, Resp’t.

      (Court of Appeals,

      Filed December 1 1891.)

    Partnership—Building contract.
    An agreement by which one party is to purenase property, obtain $50,000 on abuilder’s loan, erect buildings thereon, the other party to advance one-half the money needed above the builder’s loan, and on the completion of the houses one of them to be conveyed to the latter, or at his option one-half the net proceeds of sale of the houses and lots to be paid him in case a sale is determined upon, “ it being the intent of the parties to equally divide any profits which may be realized by the sale of said buildings," is merely an executory contract of sale and docs not make the parties partners.
    Appeal from judgment of the New York superior court, general term, affirming judgment dismissing the complaint on the merits as to defendant Koch and directing judgment in his favor.

      S. V. R. Cooper, for app’lt; William H. Ford, for resp’t

       Affirming 31 St. Rep., 399.

   Ruger, Ch. J.

The question presented in this case is, whether William Koch was a partner with Rosanna Spaulding, his co-defendant, in the business of building certain houses in New York. The referee having found, as a question of fact, that he was not such partner, and the general term having refused to interfere with this finding, we are concluded thereby, unless some error of law committed by the trial court appears in the case.

It is claimed by the appellant that the terms of the contract between Mrs. Spaulding and Koch necessarily created a partnership between the parties and show an error of law. It, therefore, becomes necessary to consider the provisions of that contract As by the terms of a contract made by her with Koch, Mrs. Spaulding became bound to the performance of a previous contract in relation to the same matter between her husband and Koch, and made that contract her contract, it will be convenient hereafter to avoid reference to the husband and speak of the contracts between Koch and Mrs. Spaulding as being contained in one instrument executed by them respectively. By these contracts Mrs. Spaulding agreed to secure the title to a certain piece of land seventy-five feet front and one hundred feet and five inches deep, on Fifteenth street, in New York, subject to a purchase money mortgage of $72,000; and also to procure a builder’s loan of $50,000 on such property and erect two houses thereon, to be finished by a specified day. Koch agreed to furnish one-half of all the money, in excess of the $50,000, which was necessary to construct and finish the buildings, and all of such moneys were to be devoted, unconditionally, to the construction of such buildings. In consideration of this undertaking, Mrs. Spaulding agreed to complete the buildings at the time specified and after their completion to convey to Koch that one of such houses that he should elect to take, by warranty deed, subject to the lien of an equal half of the two mortgages; or, in case the parties should elect to sell the land and buildings, that she would pay Koch one-half of the net price received on such sale; “it being (as is stated in said contract) the intent of the parties to equally divide any profits which may be realized by the sale of said buildings.”

The performance of this agreement by Mrs. Spaulding was secured to Koch by a mortgage on the property executed by her. The plaintiff, under a contract with Mrs. Spaulding, did some work on the buildings, for the payment of which services he now seeks to hold Koch responsible as a partner. No sale of the houses was ever made. The claim that they were partners is sought to be inferred from the effect of the clause in the agreement relating to a division of profits alone. If this agreement had stopped with the provision that, in consideration of the money to be advanced by Koch, Mrs. Spaulding was, on the completion of the buildings, to convey to him one of the houses, I do not think any one would claim that Koch had been made a partner. Is this agreement, when analytically considered, anything more than the one supposed, and does Koch secure anything under one that he would not get under the other?

It will be observed that the only binding obligations resting upon the parties were that Koch should advance half the money necessary to build the houses, and that Mrs. Spaulding should» erect and complete them at her own expense and convey one of them to Koch. Beyond this no obligation is assumed by either party. All that is said in relation to a sale of the property, or a division of the price received, is conditional upon the further agreement of the parties. If they both thereafter agreed, a sale of the houses might be made and a division had of the price received. The right to make this disposition they had independently of the provisions in the contract, and its insertion therein added nothing to the force or effect of the agreement. It is obvious, therefore, that the whole scope and effect of the agreement is to secure to Koch the right to a conveyance of one of the houses, upon making the stipulated advances. He can acquire nothing more from the force of the contract, and Mrs. Spaulding is discharged from all her legal obligations under the contract by conveying to Koch a completed house and lot.

In a certain sense the transaction may be considered a loan of money to enable Mrs. Spaulding to complete the erection of two houses; but in a strict sense it is the purchase by Koch of a house, under an executory contract of sale. We can see in such a contract none of the elements of a partnership. Koch certainly had no idea of forming a partnership to build houses, for, by the express terms of the contract, Mrs. Spaulding was to build and complete the houses at her own expense and convey one of them to Koch by warranty deed. There was no community of property or profits provided for by this agreement, except such as would follow any executory agreement to purchase a house for a specified price of a builder which was yet to be built.

But, even if this should be considered an agreement to build the houses and divide the profits, we think it does not of itself establish a partnership within the case of Curry v. Fowler, 87 N. Y., 33. The circumstance that in that case there was a contract to repay the money loaned does not make any difference in the jirinciple which is to govern the transaction. Here, the lender of the money was to look to the property alone for the reimbursement of his advances, and in that case he had not only a lien on the property, but also the personal security of the borrowers. In that case the lenders were to have one-half of the profits of the business, but were also secured by the personal guaranty of the borrowers that they should amount to a certain sum. The differences in the case do not, we think, create any distinction in principle, and both cases should be governed by the same rule. The judgment should be affirmed.

Judgment affirmed, with costs.

All concur.


text:
    Fannie J. Byrnes, Assignee, App’lt, v. James A. Byrnes, Resp’t.

      (Court of Appeals,

      Filed December 1, 1891.)

    Bankruptcy—Discharge—Debt contracted in fiduciary capacity— TJ. S. Ret. St , § 6117.
    A husband who acts as his wife’s agent and collects her rents, does not act in a fiduciary character in transacting such business within the meaning of the Bankrupt Act, U. S. Rev. St., § 6117.
    Appeal from judgment of the supreme court, general term, first department, affirming order stajdng enforcement of a judgment because of a bankruptcy discharge.

      A. C. Fransioli, for app’lt; Samuel J. Crooks, for resp’t

       Affirming 36 St. Rep., 551.

   Ruger, Ch. J.

The defendant, upon showing a discharge from his debts, made August 25, 1890, in proceedings in bankruptcy commenced in 1878, moved for a perpetual stay of proceedings against Fannie J. Byrnes, as assignee, from collecting a judgment rendered against him on August 8, 1877, in the supreme court of this state in favor of Maria Mulock. The judgment purported to have been rendered in an action commenced in September, 1873, upon a promissory note for §2,500 executed by the defendant June 1, 1870, and payable to the order of Fannie J. Byrnes one year after date, with interest. This note, soon after its delivery, was transferred to Mrs. Mulock and she recovered judgment. In March, 1879, Mrs. Mulock assigned the judgment to Fannie J. Byrnes and she. as assignee thereof, opposed the motion upon proof that the note, upon which such judgment was rendered, was given to her by the defendant upon an indebtedness alleged to have been incurred by the defendant while acting in a fiduciary character, as an agent in the collection of rents prior to June, 1870.

The opposition to the motion was based upon § 5117 of the Bevised Statutes of the United States, providing that: “ Ho debt created by the fraud or embezzlement of the bankrupt, or by his defalcation as a public officer, or while acting in a fiduciary character, shall be discharged by proceedings in bankruptcy; but the debt may be proved and the dividend thereon shall be a payment on account of such debt”

The first question that presents itself on this state of facts is, whether the creditor has shown the case of a debt incurred by the defendant while acting in a fiduciary character, within the meaning of the bankrupt law. The creditor here has attempted to show that the relation of principal and agent existed between her and her husband, and that he collected her rents, as her agent, and she argues, from that fact, that he was acting in a fiduciary character in transacting such business.

It has been frequently held in cases of controlling authority, that the language of the bankrupt law does not apply to cases of implied trusts; but only to those technical trusts which are actually and expressly constituted by the parties. Chapman v. Forsyth, 2 How., U. S., 202; Neal v. Clark, 95 U. S., 709 ; Cronan v. Cotting, 104 Mass., 245; Hennequin v. Clews, 77 N. Y., 427; Palmer v. Hussey, 87 id., 303.

It was held in the Chapman case, under the bankrupt law of 1841, that a factor who receives the goods of another to sell and remit proceeds was not acting in a fiduciary character, within the meaning of that act; Justice McLean, delivering the opinion of the court, saying: “The cases enumerated, ‘the defalcation of a public officer,’ ‘executor,’ ‘administrator,’ ‘guardian,’ ‘trustee,’ are not cases of implied but special trusts, and the ‘ other fiduciary capacity’ mentioned must mean the same class of trusts. The act speaks of technical trusts and not those which the law implies from the contract.”

In Neal v. Clark, the court adopted the same construction and applied it to the act of 1867.

It was held in Hennequin v. Clews, 77 N. Y., 427, that the bankrupt law of 1867, although differing somewhat in language from that of 1841, was not changed in meaning and was subject to the same construction, and the definition given to the words “ fiduciary character ” in that act were adopted and applied in construing the similiar provision in the act of 1867. Judge Church, in writing the opinion in that case, adopts the language of Justice McLean and says the same view has been taken in the cases of Cronan v. Cotting, 104 Mass., 245; Grover v. Clinton, 8 Nat’l Bk. Reg., 312 ; Owsley v. Cobin, 15 id., 489; In re Smith, 18 id., 24.

Judge Finch said in Palmer v. Hussey, 87 N. Y., 307, that: “ It is settled in this court, in supposed accordance with the doctrine of the federal courts, that the ‘ fiduciary capacity ’ intended by the bankrupt act, relates to technical trusts; not merely such as the law implies from the contract, but actual and expressly constituted,” citing Hennequin v. Clews; and further that the evidence and the affidavits in the case under consideration “ show no other or different trust or fiduciary relation than such as may be said always to exist in a case of agency. In every such case there is an element of trust and confidence, so that a breach of duty may be said to be a breach of trust; but the agent is, nevertheless, not a fiduciary within the meaning of the bankrupt act.”

There are other questions involved in the case which we think are fatal to the appeal; but the point considered is so clearly settled by authority that it is unnecessary to spend time in further discussion.

The order should be affirmed, with costs.

All concur. .


author: Earl, J.

text:
    John McDowall, Resp’t, v. Cornelius Sheehan, App’lt.

      (Court of Appeals,

      Filed December 1, 1891.)

    1. Mantxfactubino companies — Laws 1848, chap. 40, § 10 — Who abe CBEDITORS.
    The “creditors” to whom the stockholders of a manufacturing corporation are liable until the whole amount of the capital stock is paid in and a certificate made and recorded, are the outside creditors dealing with it'and trusting it and generally ignorant of its precise financial condition.
    2. Same.
    The statute should not be so construed that the directors of a moribund corporation could constitute themselves creditors for salaries or wages and thus impose liabilities upon confiding and innocent stockholders.
    Appeal from judgment of the supreme court, general term, third department, affirming judgment in favor of plaintiff.

      J. W. Crane, for app’lt; Charles S. Lester, for resp’t.

       Reversing 36 St. Rep., 104.

   Earl, J.

In May, 1887, a corporation called the Saratoga Union was organized under the general manufacturing act of 1848 and the acts amending the same, for the purpose of publishing a newspaper in Saratoga Springs. The certificate of incorporation was signed and acknowledged by Benjamin F. Judson, Edmund J. Huling,■ John W. Howe, E. F. Knapp and the plaintiff, who thus became the incorporators, and they were named in the certificate as the trustees for the first year. On the tenth day of June thereafter, at the first meeting of the incorporators, Huling was chosen president of the" corporation, the plaintiff vice-president and Judson treasurer and general manager, neither of such persons at the time being stockholders or subscribers for stock. Prior to the incorporation the plaintiff and Judson, who were-relatives, were engaged in business together. They were the chief promoters of the incorporation and one of the purposes-for forming the corporation was to give them employment. Immediately after the corporation was launched, the plaintiff was employed as the editor of the newspaper and he assisted, in carrying on and managing the same, and his compensation, fixed by Judson and himself, was twenty dollars per week. The business of the corporation was carried on until October, 1888,, when it became insolvent, and it thereafter ceased to do any business. During all that time, seventy-three weeks, the plaintiff continued in the employment of the corporation, and received to apply upon his stipulated compensation only twenty dollars, the payment for one week’s service. During that time he continued vice-president and a director of the corporation and he attended all the meetings of the directors and was active in the management of the corporation. In July, 1887, he was present at a meeting of the directors at which it was resolved to mortgage all the property of the corporation to secure a person for endorsing a note for it. In February, 1888, he was present at a meeting of the directors at which it was resolved that the corporation should execute to Mrs. Judson a mortgage covering “ the franchises, property, rights, liberties, presses, engine and boiler, folder, type, type-cases, furniture and all property owned by the corporation, except paper and ink,” to secure her for $7,000. At the same meeting it was resolved that the secretary be authorized and directed to execute to Mrs. Judson an assignment or conveyance of the Associated Press franchise-owned by the corporation as additional security for the same-sum. In July, 1888, at another meeting of the directors at which plaintiff was present, it was resolved that the corporation hire from Mrs. Judson the presses, material and type comprising its-job office department, at the rate of $100 a year.

The capital stock of the corporation specified in the certificate filed was $10,000, divided into shares of $100 each. The capital was never all subscribed for or paid in, and no certificate was made as required by §§ 10 and 11 of the act of 1848. The plaintiff brought an action against the corporation to recover the amount due him as a creditor thereof, and he recovered judgment and issued execution thereon which was returned wholly unsatisfied. He then commenced this action to enforce the liability of the defendant as a stockholder, under § 10 of the act, which provides that all the stockholders of such a corporation shall be severally individually liable to the creditors thereof, to an amount equal to the amount of stock held by them respeclively for all debts and contracts made by the corporation, “ until the whole amount of capital stock fixed and limited by such company shall have been paid in and a certificate thereof shall have been made and recorded as prescribed in the following section.”

The defendant’s relation to the company grows out of the following facts : Before the corporation was formed he was solicited to take stock therein, and he promised to aid the enterprise. In May, 1887, before the certificate of incorporation was filed, he went to Judge Putnam and made his check payable to his order for the sum of $1,000, stating to him that he designed it as a gift to help the enterprise, and directing him not to pay the amount to the corporation until he, the defendant, would not incur any further liability. The defendant did not part with the check with any other or different intention than that expressed in his directions to Putnam, and Putnam intended to aid the enterprise in a similar manner by advancing the sum of $500 on the same or similar terms. Previous to the 7th day of July, 1887, Judson, the director above named, went to Putnam and stated and represented to him that eighty-five shares of the capital stock had been subscribed, or paid for, whereas there had not then been any of it subscribed or paid for. Putnam believed the statement to be true and communicated it to the defendant, and thereafter on the 7th day of July he made his check, with the assent of the defendant, to the order of the plaintiff for the sum of $1,500, which check included the check left with him by the defendant as above stated. Putnam then received two certificates of stock which had on that day been made out to the plaintiff, one for $1,000 and the other for $500, each of which contained on the back thereof a blank assignment signed by the plaintiff. Putnam would not have parted with the check if he had not believed the statements made to him by Judson to have been true. The defendant did not learn of the falsity of the statements upon which the check was procured until after the commencement of this action. The-plaintiff voted on the stock the same after as before the blank assignment thereof, and continued to act as such stockholder so long as the corporation existed; and the certificate of stock continued in his name on the stock book of the corporation the same after as before the assignment, and the defendant’s name never was entered on the book in any manner. It does not appear that the plaintiff personally had the benefit of the $1,500 paid by Putnam, and he never held the certificates of stock made out to him except to sign his name to the blank assignment on the back thereof, and he never had any other stock in the corporation. After the certificate for the ten shares was delivered to Putnam, he sent or delivered it to the defendant, by whom it was laid away. The defendant never attended any meeting of the stockholders, and never acted as a stockholder and never received any notice of a meeting of the stockholders.

It is apparent from these facts that the plaintiff’s recovery against-the defendant is very inequitable,and we believe the law will not uphold it. While the language of § 10 of the act of 1848 is broad and general that all stockholders of such a corporation shall be liable to creditors thereof to the amount of the stock held by them respectively, for all debts and contracts made by the corporation, until the whole amount of its capital stock shall have been paid in, and the proper certificate shall have been made and recorded, who are meant by “ the creditors of the company ?’’ That is the question now to be answered.

It is provided in § 2 of art. 8 of our state constitution that dues from corporations shall be secured by such individual liability of the corporators and other means, as may be prescribed by law.” Can it be supposed that the framers of the constitution in drafting this section had in mind “ dues ” to the directors of corporations, and that the directors were objects of their solicitude whose protection should be guaranteed by the fundamental law ? In 1846 private corporations for all kinds of ends were rapidly increasing in this state, and the statesmen of that day thought it wise and sound public policy that the creditors of ■such corporations should in some cases and to some extent have, besides the corporate responsibility, some security in the individual liability of the corporators. But that public policy plainly had reference to outside creditors of a corporation dealing with and trusting it and generally ignorant of its precise financial condition. It could have no relation to the creditors of a corporation who manage its affairs and can generally know its condition, who create the debts and can generally protect themselves if creditors before disaster overtakes them. The constitutional provision and the laws enacted to give effect to the policy embodied therein were not intended for the protection of the debt makers, directors, who constitute themselves creditors of the corporation and then attempt to unload their burden upon stockholders whose interests were committed to their hands. We think by the fair construction of the language used in § 10 the debt makers are excluded from its scope, as well as from the policy which it was intended to promote. Suppose the whole capital stock of this corporation had been paid in, but the certificate had not been made and recorded,the plaintiff would still have been a creditor,but would it be contended that he would still be entitled to the protection intended by the section to be secured to the creditors of the corporation? If not, why would it not? We answer, simply because the word “ creditors,” as there used, does not include a creditor thus situated. Even if such a creditor can be fairly said to be within the general language used, he is clearly without the policy of the law, and so plainly not within the intention of the law makers that the law should be held not to cover his case; and for this view of the statute the case of Riggs v. Palmer, 115 N. Y., 506 ; 26 St. Rep., 198, is ample authority.

The statute should not be so construed that the directors of a moribund corporation could constitute themselves creditors for salaries or wages and thus impose liabilities upon confiding and innocent stockholders.

The plaintiff having been named as a trustee in the certificate of incorporation, could legally act as trustee, although he did not, in fact, own any stock. Davidson v. Westchester Gas Light Company, 99 N. Y., 558. But, in any event, having acted as a director and enjoyed all the privileges and advantages of that position, and wielded its powers for the purpose now in hand, he must be held a director.

We have assumed, as we ought, upon the findings of the trial term, that the defendant, under all the circumstances, holding the certificate of stock, became the legal and equitable owner thereof, and that thus he would have been liable to what we have termed the outside creditors of the corporation. Johnson v. Underhill, 52 N. Y., 203.

Our conclusion, therefore, is that the plaintiff must be defeated in his action solely because he was a director of the corporation and thus not entitled to the protection which the law intends to secure to the creditors of such a corporation; and as this ground of defense is fundamental and cannot be obviated by any proof which it seems possible for Mm to furnish, we can perceive no purpose to be served by a new trial.

The judgment should, therefore, be reversed and the complaint-dismissed, with costs.

Finch, Peckham and Gray, JJ., concur; Ruger, Ch. J., Andrews and O’Brien, JJ., not voting.