author: Maynard, J. Earl, Ch. J.

text:
    The People ex rel. Joseph Cauffman et al., Resp’ts, v. John Van Buren et al., App’lts.

      (Court of Appeals,

      Filed December 20, 1892.)

    1. Contempt—Injunction.
    Plaintiffs were attachment creditors and the defendants are the attorneys for other creditors and the sheriff who made the levy on the debtors’ property prior to the levy of the attachment. The debtors were insolvent and had confessed judgment to the other creditors. Plaintiffs began suit and issued a warrant of attachment, on the ground of fraud, and procured from the county judge of Monroe county an injunction to restrain the sale of the property by tlíe sheriff. Defendant Hopkins, as attorney for one of the other creditors, procured from the special surrogate of Oswego county an order ex parte setting aside the injunction, and purchased the property at the sale for the amount of the judgment. The only paper presented to the county judge was an affidavit entitled in the action setting forth the fraud; that an attachment had been issued, etc. The action had not been commenced or the attachment in fact served. Held, that defendants were guilty of contempt in disobeying the injunction, as the order was not void upon its face for an utter lack of jurisdiction on the part of the judge who granted it.
    2. Same.
    The county judge did not fail 1 o obtain juri- diction by reason of the summons not having been served when the order was signed.
    (Earl, Oh. J., Pinch and Peckham, JJ., dissenting.)
    Appeal from judgment of the supreme court, general term, fifth department, affirming order of special term adjudging defendants guilty of a contempt of court in violating an injunction order.

      M. M. Waters, for app’lts; Wm. F. Cogswell, for resp’ts.

       Affirming 44 St. Rep., 820.

   Maynard, J.

The defendants were properly adjudged guilty of contempt in disobeying the preliminary injunction order granted by the county judge of Monroe county, unless'the order was void upon its face for an utter lack of jurisdiction on the part of the judge who granted it. People v. Sturtevant, 9 N.Y., 263.

No matter how erroneous the action of the court may have been in taking cognizance of the suit and awarding a mandatory process, unless there was an entire absence of judicial authority to act in the premises, it was the duty of the defendants to obey its commands until they had been revoked by an order made in the action in which they had been issued either upon motion or appeal, or by some other method of direct review. It is not denied that the court acquired jurisdiction of the person of the defendants in this case, and its power to act was unquestionable, provided it had jurisdiction of the subject matter of the action.

For the purpose of determining this question, all the averments contained in the complaint and in the plaintiffs’ moving papers upon the application for the injunction order must be taken as unqualifiedly true. The plaintiffs were creditors at large of the defendants Klock & Tiffany, who a few days before the commencement of this action, it is alleged, fraudulently confessed judgments to three of the defendants to the amount of $17,000, and about the same time fraudulently mortgaged or conveyed their real property to two of the other defendants. The defendant debtors were insolvent when these transactions occurred, and, as it must be assumed upon this appeal, they were entered into by the various parties to them with the intent and for the purpose of defrauding the other creditors of Klock & Tiffany, and in order to secure preferences to themselves not obtainable under the general assignment laws of the state. Immediately upon the ■confession of these judgments executions were issued to the sheriff of Oswego county, where the debtors resided, and a levy was made by him upon all their tangible property, and, it is to he inferred, upon all the property which they then owned which was subject to seizure, and the sheriff had advertised the property to be sold to satisfy the executions. Upon the discovery of these facts the plaintiffs at once began suit against their debtors to recover the amount of their debt and obtained and issued a warrant of attachment upon the ground that their debtors had assigned or disposed of, or were about to assign, or dispose of, their property with intent to defraud creditors. It does not appear whether the attachment was delivered to the sheriff or the coroner, and it is perhaps immaterial, but it is claimed it was levied on the same property upon which the sheriff had levied under the executions issued upon the fraudulent judgments. But such levy would, prima facie, be subject to the levy made under the prior executions, and the proceeds of the personal property if sold by the officer, must be first applied to the satisfaction of the elder process. This, we think, correctly states the legal relations of the parties to this property when the present action was commenced upon the equity side of the court, to which the fraudulent judgment creditors and grantees, the sheriff and the defendants in the .attachment suit, were made defendants, and the plaintiffs demand as a part of the relief to which they claim to be entitled that the lien of the fraudulent judgment creditors under the excutions which they have procured to be issued upon their judgments shall be postponed to the lien which the plaintiffs have acquired by virtue of their attachment.

The question whether the facts alleged constitute a cause of action and afford sufficient grounds for the equitable interference of the supreme court, is one which has never been authoritatively determined by this court, and the decisions in the courts below have been far from harmonious upon the subject. There has also been a great diversity of judicial opinion upon this point in other states, and it is stated in the American and English Encyclopedia of Law (vol. 4, p. 575) that “ whether an equitable suit analogous to the creditor’s suit will be allowed in aid of the lien created by an attachment, before the recovery of judgment, is a question to which the American courts have given directly conflicting answers.”

In the cases of Hall v. Stryker, 27 N. Y., 596, and Rinchey v. Stryker, 28 id., 45, it was held that under a warrant of attachment any property of the debtor, transferred in fraud of his creditors, could be seized, and that after service of the warrant the party procuring it is no longer to be deemed a creditor at large, but a creditor having a specific lien upon the goods attached, and that, for the purpose of upholding the attachment and the lien acquired under it, the decision of the judge granting the warrant is to be deemed an adjudication of the existence of the debt, which is conclusive upon the fraudulent transferee of the debtor’s property. In both cases suit was brought against the attaching creditor by a party claiming title from the debtor by a transfer anterjor to the attachment, and the creditorwas permitted to show by way of defense to the action that the alleged transfer was fraudulent and, hence, void as to him. It has, therefore, been contended, and perhaps correctly, that they are not authority for the proposition that a party suing out an attachment can take affirmative action before the recovery of judgment to set aside a fraudulent conveyance of his debtor’s property. He may use_ his process, it is claimed, for defensive purposes, but not for offensive warfare. Still the cases may be regarded as decisive of the general question that an attaching creditor ceases to occupy the defenseless position of a creditor at large, and becomes, in a certain-sense, invested with the privileges of a creditor whose debt has. been adjudged valid, and who finds himself embarrassed in its collection by the fraudulent conduct of the debtor.

In Hall v. Stryker, Chief Judge Denio, at page 601, says:. “ When the creditor has procured legal process, such as the law allows a creditor to have against the property of his debtor, he has acquired the standing of a creditor in respect to all the property of his debtor, and that which he has conveyed with the intent forbidden by the law, the conveyance being void, is as much his in the judgment of the law and as fully subject to the process as if the conveyance had not been made. Under certain circumstances the law has, upon motives of policy, allowed an ex partedetermination as to the existence of the debt, and permitted process to issue against the debtor’s property upon such determinatian, providing, however, for sufficient security to the debtor if upon a regular trial the alleged creditor shall fail to establish the existence of the demand.”

These cases 'were followed in Frost v. Mott, 34 N. Y., 253, where Porter, J., states the doctrine without qualification that “ a creditor, by attaching property in the possession of his debtor, acquires a specific lien upon his interest, and is entitled, like a judgment creditor, to impeach the colorable title of a fraudulent mortgagee.’’ But this was also a case where the attaching creditor had been made a defendant in an action of trespass for the taking of the property, and nothing was, therefore, necessarily decided, except that, under such circumstances, he could defend his possession by showing the fraud which would defeat the claimant’s title.

In Thurber v. Blanck, 50 N. Y, 80, it was held that an attaching creditor had no standing in court to reach equitable assets until his remedy at law was exhausted, nor to attack a fraudulent transfer of the property of his debtor until after judgment, and in the Mechanics & Traders' Bank v. Dakin, 51 N. Y, 519, the commission of appeals held that an attaching creditor after the recovery of judgment and the issuing of execution may maintain an equitable action in his own name to set aside a fraudulent transfer of the property which had been seized under the attachment. The impression seems to have prevailed that there was an irreconcilable conflict between these two cases, and the reporter in a foot note in the 51 N. Y., says: “ This case, it will be perceived, was argued prior to the decision of the case of Thurber v. Blanck. 50 N. Y., 80, with which it is in conflict That case had not been brought to the attention of the commission at the time of the decision herein.” But we fail to discover any real ground of antagonism between them.

In Thurber v. Blanck, the court was dealing with an attempt on the part of an attaching creditor to reach equitable assets, which it has been uniformly held can not be done until judgment has been recovered, execution issued and returned unsatisfied, and an action or proceeding in the nature of a creditor’s bill instituted.

The provisions of the Revised Statutes (now §§ 1871-9 of the Code) which authorized a judgment creditor’s action imperatively required the recovery of a judgment and the issue and return of an execution unsatisfied as an indispensable condition of the creditor’s right to bring the action.

In Bank v. Dakin, the attaching creditor had, by the recovery of judgment, and the issue of execution, acquired the right to have the attached property applied to the satisfaction of the execution, but in the assertion of this right he found the way obstructed by the interposition of a conveyance of the property by his debtor, which was apparently valid, but which was in fact void. In such cases it has always been held that while the process for the collection of the debt was outstanding, the equitable jurisdiction of the court could be invoked to remove the fraudulent obstruction to the legal process, and permit it to be effectually enforced. The subsequent decisions bearing upon the question in this court have all been in line with the principles enunciated in these two typical cases, but none of them involved the point here presented of the right of an attaching creditor to prevent the application of the attached property to the payment of a prior lien. It must be apparent that unless such a right exists, the remedy by attachment will be lost in many cases. The sheriff must sell the property under the prior executions and apply the proceeds to their payment, and the plaintiff would be in no better condition than if his attachment had not issued.

It would seem to be illogical to accord to the plaintiff the right to attach property fraudulently transferred, as he concededly may, under the decisions in Hall v. Stryker, and the other cases cited above, and yet deny him the right to have the lien preserved until he can merge his claim in a judgment and issue final process for its collection. No adequate remedy at law can be suggested in such a case. The jurisdiction of a court of equity to reach the property of a debtor justly applicable to the payment of his debts, even where there is no specific lien, is undoubted. It is a very ancient jurisdiction, but will be exercised only when special circumstances exist requiring the interposition of the court to obtain possession of and apply the property. Such circumstances, we think, are shown to exist here. The case would be different if executions had not been issued upon the fraudulent judgments. The mere existence of a fraudulent transfer would not be sufficient to authorize a court of equity to entertain an action at the suit of an attaching creditor to set it aside. But when it is sought to make use of such a transfer for the purpose of removing the attached property from the jurisdiction of the officer who has it in his custody, it is evident that nothing but the equitable arm of the court can prevent the consummation of the wrong.

In the case of Falconer v. Freeman, 4 Sand. Ch., 565, the precise point here involved was decided in favor of the plaintiff’s contention, and the vice-chancellor held that a court of chancery will aid an attaching creditor to enforce the lien of the attachment by injunction and otherwise, on the same principle that it aids an execution creditor similarly obstructed. There are some cases in the supreme court to the same effect. Bates v. Plonsky, 28 Hun, 112; Keller v. Payne, 22 Abb. N. C., 352; 16 St. Rep., 245; Tannenbaum v. Rosswog, 22 Abb. N. C., 352.

The objection is urged that the creditor may be unsuccessful in establishing Ms debt in the attachment suit, and it thus may be found that there was no basis for the equitable action. But such a risk attends all litigation, and provision for full indemnity is made in the requirements of the statute for security, both upon the issue of the attachment and the granting of the preliminary injunction. Both actions are pending in the same tribunal, which can control the order in which they shall be tried, and if issue is joined in the action at law, the determination of the equitable action may be postponed until the former has been finally disposed of. The measure of relief to be granted in the equitable action is also discretionary with the court, and might be limited to a iecree enjoining interference with the attached property until the plaintiff’s right to follow the attachment with an execution has been adjudged.

The court, therefore, had jurisdiction of the action in which the injunction order was granted, and the violation of its provisions by the "defendants was inexcusable.

It is insisted that the attachment had not been levied when the injunction was obtained, and that it was, therefore, prematurely issued. That may be so. There is some ambiguity in the moving papers, and some expressions which may support such a finding, while the opposing affidavits upon this motion positively affirm that it was not served until the next day after the injunction order was made. The fact is not material here. If it possessed any weight, it did not affect the jurisdiction of the county judge. It may have tended to show that he had acted erroneously, and might have been available upon a motion to set aside his order, but it cannot be used for the purpose of impeaching its validity collaterally.

It is urged that the county judge had no jurisdiction, because the summons had not been served when the order was signed.

Section 608 expressly provides that the order may be granted to accompany the summons. This section cannot be construed to refer solely to an injunction granted Under § 603. It is not limited in terms. It is a substitute for that part of § 220 of the old Code, which provided that the injunction might be granted at the time of commencing the action, which was also held to apply to all kinds of preliminary injunction orders. This language was much more restrictive than in the present Code, and yet it was held that the order might be granted before the commencement of the action; but would not become operative until the service of the summons, which might be made at the same time with the order. Leffingwell v. Chave, 10 Abb., 472. In this case, Woodruff, J., says: “It imports that the injunction may be obtained so that it shall operate at the time when, and as soon as, the action is commenced, and not alone after it is commenced. This accords with good sense. It meets a very large class of cases, in which it is of vital importance to the plaintiff to enjoin the defendant at the very instant he is apprised that an action is commenced, and in which the defendant would, but for such injunction, defeat the very object of the suit. The section which declares that the court is deemed to have acquired jurisdiction in a civil action from the time of the allowance of a provisional remedy, is in harmony with this construction and sustains it.”

It is not seen how any different meaning can be attached to the phrase “during the pendency of the action,” when it occurs in § 604 than when used in § 603. It both cases it relates to the time when the threatened injury is likely to take place, and not to the time when the injunction order may be granted; and in order to judicially satisfy the judge that the defendant threatens to do some act during the pendency of the action that will impair or defeat the plaintiff’s remedy, it is not necessary to show that the action has been actually commenced. It is enough, if it appears that there is a cause of action which the plaintiff is about to prosecute and that defendant threatens to do an act which will render the judgment ineffectual, to confer jurisdiction upon the judge to grant the injunction, which, however, will not become operative unless served with or after the summons.

The amount of the fine was correctly fixed. When the order was made the plaintiffs’ debt in the attachment suit had become merged in a judgment, as appears from the record here. They had a valid lien by attachment upon property sufficient to secure its payment. That lien was destroyed by a sale which the injunction order prohibited. Presumably, the plaintiffs’ loss was the amount of their claim, as it is conceded the judgment debtors are insolvent.

The defendants made no proof in reduction of damages, and under the mandatory provision of § 2284 we do not think the special term had any discretion; but was required to fix the amount at the sum named.

The order must be affirmed, with costs.

Earl, Ch. J.

(dissenting.) — In the latter part of December, 1890, Hiram Klock and Edgar A. Tiffany confessed three judgments ; one to the First National Bank of Oswego for $2,525, another to the same bank for $131.56, and one to Jacob M. Mertens and Alexander Dissell for $14,296.33. The judgments were entered and docketed in Oswego county, and executions thereon were issued to the sheriff of that county and by him immediately levied upon the property of the defendants in that county. The sheriff advertised the property for sale on the 2d day of January, 1891, at ten o’clock A. M. On the 1st day of January, 1891, the above named respondents, constituting the firm of Cauffman, Dinklespiel & Có., doing business in Rochester, presented to the county judge of Monroe county an affidavit of Oauffman entitled in an action by the respondents against all the parties to. the judgments confessed, John Yan Burén, sheriff, and two other persons, and applied to him for an injunction against the defendants. The affidavit stated that in August, September and October, 1890, Klock & Tiffany purchased of the plaintiffs in that action merchandise at the agreed price oí $1,346.75, which they had not paid; that at the time of such purchases they made certain false and fraudulent representations as to their financial ability; that the judgments above specified were fraudulently confessed, and were irregular, fraudulent and void, as w'ere also the executions issued thereon; that on the 31st day of December, 1890, in an action brought by the plaintiffs against Klock & Tiffany, for the recovery of the purchase price of the goods sold to them, “ a warrant of attachment was duly granted and issued, which has been, or will be, levied upon tangible property of said defendants, Klock A Tiffany;’’ that the action in which the affidavit was made was, brought for the purpose of obtaining the judgment of the court, that the judgments by confession were void; that the plaintiff’s lien under the attachment was superior to the lien of the judgments ; that they were entitled to an injunction restraining the defendants from any interference with the property of Klock & Tiffany, and restraining all proceedings under the judgments and executions; that the defendants threatened and intended to sell the property levied upon on the 2d day of January, unless restrained, and that' if the sale took place great and irreparable damage would be done to the plaintiffs, and their attachment would be unavailing, and their claim against Klock & Tiffany would be lost and useless. No other papers were presented to the county judge. Upon this affidavit he granted to the plaintiffs an injunction order restraining the defendants - from interfering with or selling any of the property of Klock & Tiffany. At the time of granting the injunction, the action had not been commenced, and the attachment had not in fact been served.

It is undisputed that the attachment was served in the forenoon of January 2d, and the summons and injunction in the equitable action were served together in the afternoon of the same day. After the service of the attachment and injunction the sale under the executions was postponed until January 3d, when the sheriff sold the property to Frank Hopkins, one of these appellants, who was at the time one of the attorneys for the sheriff and some of the other defendants in the equitable action. Thereafter the plaintiffs in the equitable action, these respondents, instituted this proceeding to punish these appellants, the sheriff and his attorney, for contempt in violating the injunction. The proceeding was instituted by a petition of the respondents addressed to the supreme court, verified on the 21st day of January, 1891. Upon the presentation of the petition to a judge of the supreme court he made an order requiring these appellants to show cause at a special term of the court to be held in Rochester on the 28th day-of January, 1891, why they should not be punished for the alleged contempt. Such proceedings were taken upon that order that the court adjudged these appellants to be guilty of contempt, and it fined them for the purpose of indemnifying the respondents for the loss occasioned to them by the disregard of the injunction-the sum of $1,470.32, the full amount of the claim of the respondents against Klock & Tiffany. The order imposing the fine is brought under review by this appeal.

If the county judge had jurisdiction upon the facts presented to him to grant the injunction,-the defendants in the action were bound to obey it, although the exercise of the jurisdiction was plainly erroneous. Erie Railway Company v. Ramsey, 45 N. Y., 637. If, however, it was granted without jurisdiction, it was a nullity and bound no one. I propose now to confine my attention to the question of jurisdiction.

There is no general power in the equity courts of this state to grant injunctions. They have only such powers in that respect as are given to them by the Code, and to its provisions we must look for its jurisdiction. Spears v. Mathews, 66 N. Y, 127. Section 603 of the Code provides that “ where it appears from the complaint that the plaintiff demands and is entitled to a judgment against the defendant restraining the commission or continuance of an act, the commission or continuance of which during the pendency of the action would produce injury to the plaintiff, an injunction order may be granted to restrain it.” The right of a plaintiff to an injunction order under this section depends upon the nature of the action as disclosed by the complaint; and the facts authorizing the injunction must exist at and before the commencement of the action, and relief by injunction must be demanded in the complaint. That section provides for every case where the plaintiff is entitled to an injunction on account of facts existing at and prior to the commencement of his action. Under that section the injunction may be granted to accompany the summons and complaint, and tobe served with them and at the same time ; and it may also be granted and served at any time after the commencement of the action. If properly granted under that section it may even be served before the commencement of the action, and the party against whom it was granted would be bound to obey it, as he might also be bound to obey an injunction before it has been served upon him, if he has notice that it had been granted. Daly v. Amberg, 126 N. Y., 490; 38 St. Rep., 513. This is so because the court or officer having jurisdiction to grant the injunction, it became a valid, binding process.

This injunction was not granted, and could not have been granted under that section, because at the time it was granted there was no complaint in the action, and none came into existence until February 11, 1892, more than two weeks after this proceeding was instituted. And further, if we look at the complaint, we find that it contains no demand for relief by injunction, and no mention whatever of an injunction or any restraint.

The only other section of the Code under which the respondents can claim to uphold the injunction is § 604, which provides as follows : “ In either of the following cases an injunction order may also be granted in an action: 1. When it appears by affidavit that the defendant during the pendency of the action is doing or procuring or suffering to be done, or threatens or is about to do or to procure or suffer to be done, an act in violation of the plaintiff’s rights respecting the subject of the action, and tending to render the judgment ineffectual, an injunction order may be granted to restrain him therefrom. 2. When it appears by affidavit that the defendant during the pendency of the action threatens or is about to remove or dispose of his property with intent to defraud the plaintiff, an injunction order may be granted to restrain the removal or disposition.” Under that section an injunction can be granted only for acts being done or threatened after the action has been commenced and during its pendency ; and unless the action be pending there is no jurisdiction to grant the injunction. Such is the plain language and import of the section; and so the scheme of the Code as to injunctions is complete. The one section provides for the cases where the facts existing at the commencement of the action entitle the plaintiff to relief by injunction, and the other section provides for cases where facts subsequently occurring entitle the plaintiff to such relief, and the two sections provide generally for all the cases.

Here, as I have stated, this injunction was granted under § 604 when no action was pending. There was not, therefore, a case in which an injunction could be granted, and the county judge was absolutely without jurisdiction to grant it There was no evidence before him of any kind that the action was pending or tending in any degree to show that it was pending, and thus there was nothing to call for the exercise of his jurisdiction. It is of no importance that the action was subsequently commenced by the service of the summons, and that the injunction was served at the same time. The validity of the injunction must be tested by the facts existing when it was granted and properly placed before the county judge.

This injunction was, therefore, a nullity, and the appellants could not be legally punished for disobeying it.

I have not overlooked § 608 of the Code, which provides that the injunction order “maybe granted to accompany the summons, or at any time after the commencement of the action and before final judgment.” All these sections must be construed together, and harmonized. Clearly every injunction order cannot accompany the summons into the hands of the person who is to serve them. An injunction order which cannot be granted until after the action has been commenced cannot accompany the summons. Manifestly the provision means that every injunction order which has been validly granted may accompany the summons, not that an injunction older granted without jurisdiction, which is a nullity, may accompany the summons. Any injunction order granted under § 603 may accompany the summons, and never one granted under § 604, which can have no existence until after the action has been commenced.

If these respondents, not being judgment creditors, could, upon any theory, maintain their equitable action to set aside the judgments and executions as fraudulent and void, they could do so only by showing that they had, by the levy of their attachment, obtained a lien upon the property of Klock & Tiffany at the time they applied for the injunction. Such an action, if maintainable, would be in aid of the attachment to remove the fraudulent obstacles and obstructions placed in its way. But here, at the time the injunction was applied for and granted, the attachment had not been levied, and the respondents had no lien upon the property of Klock & Tiffany. There was, therefore, at that time absolutely no ground for the maintenance of the equitable action, or for the granting of the injunction, even if it be assumed that the action had been commenced. The respondents had no right whatever to the injunction, and it was manifestly erroneous to grant it. Although erroneous, we may assume that the injunction was not granted without jurisdiction on the ground here stated, and that the court, to maintain its dignity and authority, could punish the parties enjoined for contempt in violating it by a fine not exceeding $250, under the latter part of § 2284 of the Code. But could the court impose a fine under the earlier part of that section on the parties enjoined lor the purpose of indemnifying the respondents ? Could the respondents wrongfully obtain" an illegal injunction to which, on the papers presented to the county judge, they had no legal right whatever, and thus commit an outrage on the rights of the defendants in the action, and then claim that they were aggrieved by a violation of the injunction, and ask for indemnity on account of such violation? In other words, could they be aggrieved and legally damnified by the violation of an injunction to which they had on the papers presented to the county judge no shadow of right? I leave these questions unanswered. The discussion of them would be quite interesting, but is unnecessary now, as the order imposing the fine must be reversed upon the ground before stated.

The orders of the general and special terms should be reversed, and the petition of the respondents dismissed, with costs in all the courts.

Order affirmed, with costs.

Andrews, Gray and O’Brien, JJ., concur; Earl, Ch. J., reads for reversal; Finoi-i and Beckham, JJ., concur.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    In the Matter of the Application of John W. Flynn et al., to Open Decree Settling Account of Guardian.

      (Court of Appeals,

      Filed December 20, 1892.)

    Surrogate—Opening decree—Appeal.
    The power of a surrogate to open his decree for fraud is within the power confeired upon that officer by § 2481 of the Code of Civil Procedure, and the exercise of this power is not subject to the limitation of time prescribed by §§ 1282 and 1290. And if there is any evidence presented to the suri agate tending to show fraud in an accounting, and his decision finding its existence is affirmed by the general term, this court is concluded from re-examining the question of fact.
    Appeal from judgment of the supreme court, general term, third department, affirming order of surrogate, setting aside and vacating his former decree, settling the accounts of Charles Leach, as the guardian of Lettie Leach Brown and the accounting upon which said account was granted on the ground of fraud in said accounting on the part of said guardian and ward.

      Winsor B. French, for app’lt; Edgar T. Brackett, for resp’ts.

       Affirming 48 St. Rep., 816.

   Per Curiam.

The order of the surrogate opening the decree of March 25, 1890, settling the accounts of the general guardian (father) of Lettie Leach Brown, was made on the petition of the respondents, purchasers on a partition sale of real estate of Gleason, one of the sureties on the guardian’s bond, without notice of any claim on the part of the ward, and the land so purchased can be reached to satisfy the surrogate’s decree against the guardian if the decree stands.

The order opening the decree was made, as expressed therein, “ on the ground of fraud in said accounting,” and the general term affirmed the order generally. The power of a surrogate to open his decree for fraud is within the power conferred upon that officer by § 2481 of the Code of Civil Procedure, and the exercise of this power is not subject to the limitations of time prescribed by §§ 1282 and 1290. Matter of Tilden, 98 N. Y., 434-444.

The petitioners had a standing to make the application. The bondsman Wood is insolvent, and the land owned by the deceased surety Gleason being the only available resource for the collection of the decree, the petitioners are the persons aggrieved, and could properly initiate the proceedings to set it aside. The surrogate has the power of a court of general jurisdiction to vacate his decrees (§ 2481, subd. 6), and relief may be granted as in the supreme court “ upon the application of any one for sufficient reason in furtherance of justice.” Ladd v. Stevenson, 112 N. Y., 325 ; 20 St. Rep., 746.

If there was any evidence presented to the surrogate tending to show fraud in the accounting, his decision finding its existence having been affirmed by the general term, this court is concluded from re-examining the question of fact. Our examination of the record has satisfied us that there was evidence presented to the surrogate which might properly be considered tending to support the conclusion that the accounting of the general guardian was collusive, and that the account rendered by the guardian and accepted by the ward, upon which the decree was based, adjudging the liability of the guardian and fixing the amount at the sum of $2,353, omitted credits to which the guardian was entitled, and that this omission was for the purpose of swelling his liability to his ward so as to charge the sureties on their bond in excess of the just amount.

The case under the order will involve a new accounting and a re-examination of the items which make up the guardian’s account. We refrain from expressing an opinion as to what charges or credits should enter into it. It is better to leave these questions unembarrassed by an opinion based on imperfect evidence.

Our duty is performed when we reach the conclusion that the charge of fraud was not wholly unsupported by evidence.

Order affirmed, with costs.

All concur.


author: Finch, J.

text:
    In the Matter of The Atlantic Avenue Elevated R. R. Co. for appointment of commissioners.

      (Court of Appeals,

      Filed December 20, 1892.)

    Railroads—Elevated.
    In proceedings to determine whether an elevated railroad should be constructed in certain streets in Brooklyn, it appeared that Atlantic avenue, a main thoroughfare, was obstructed by a surface railroad with fences along its sides and gates at the street crossings; that such crossings are dangerous; that such obstructions can be removed only by consent of the company if an elevated road is built; that most of the buildings are inferior and a large part of the property unimproved. Held, that the report of the commissioners in favor of an elevated road through said street, conditional upon a harmonious action with the surface road corporation by which the latter should be transformed into a street railway, and its operation by steam transferred to the elevated tracks, was proper, and their report should be confirmed.
    Appeal from judgment of the supreme court, general term, second department, affirming report of commissioners appointed to determine whether an elevated railroad should be constructed in certain streets in Brooklyn.

      Geo. F. Danforth, for app’lts; Wingate & Cullen, for resp’ts.

       Affirming 35 St. Rep., 37'.

   Finch, J.

Some of the property owners along the line of Atlantic avenue in the city of Brooklyn have refused their consent to the construction of an elevated railway passing in front of their premises, and have appealed from the order appointing commissioners to determine whether the proposed railway ought to be constructed, and also from the order confirming their favorable report. The company applying was formed under the rapid transit act of 1875, chap. 606, the requirements of which have been formally observed, but the plan dictated and to accomplish which the company was organized contains a condition which it is now argued is fatal to the enterprise, and renders the organization so illegal and defective as to destroy the powers sought to be conferred.

That condition grew out of the prior occupation and rights of a steam surface railroad operating upon the same avenue, and with whose consent alone the proposed elevated road was possible. That fact appears to be conceded on all sides, and it is quite apparent that such express consent was essential to the scheme formulated. In recognition of that necessity and to meet the consequent emergency the plan prepared contained the condition upon the asserted effect of which the objectors rely. That was in substance that the elevated road should not be authorized or permitted to be constructed, and should have no power to do the work, until it should first enter into an agreement with the surface companies transforming their road into a mere street railway and transferring its operation by steam to the elevated tracks. What' is now explicitly claimed is that the presence of this condition in the formulated plan or scheme prevented the elevated company from acquiring any franchise or capacity as a corporation, if that be true there is no foundation for the orders in question, but the objection must go to that full extent or fail in* the result at which it aims.

I think the contention is unsound and not warranted by a consideration of the terms and purpose of the statute. Obviously, the condition is a condition subsequent, and not one precedent, to the acquisition of the corporate life and vitality. The agreement directed is to precede construction, and not corporate existence. The company is to make the agreement, and it must exist first in order to agree at all. When it has acquired corporate life, and so is capable of acting, it is endowed, not with an absolute, but a conditional franchise, to become absolute upon the performance of one or more imposed conditions. Nothing, therefore, in the form of its creation makes its corporate life depend for its origin upon the execution of the prescribed contract.

Necessarily, the objection takes another form and becomes a contention that the enabling statute does not contemplate or permit the formation of a company whose franchise is conditional upon its own voluntary act But that phase of the objection is equally unsound. Always, and in every such case, the franchise granted is more or less qualified by conditions subsequent, the very office and purpose of which is the thorough protection of the public interests, and a failure to perform which will either prevent the absolute acquisition of the particular franchise granted, or forfeit it for non-compliance. Every requirement for construction within a specified period is of that natura It is a condition subsequent, which qualifies the franchise bestowed, and practically ordains that the company shall begin, as well as end, its work within the specified period, or have no power to do it at all. Sometimes, for the safety of property owners, the company has been required to deposit a guarantee fund before beginning its actual work of construction. It is quije certain, therefore, that neither the act of 1875, nor those like it, are violated or rendered ineffective by the grant of a conditional, instead of a complete and absolute franchise, or by the imposition of conditions subsequent upon the constructing corporations.

The objection, therefore, must be further narrowed, and end in an allegation that this particular condition carries the company formed outside of the purpose and scope of the act, and beyond its intended permission. But the condition here was necessary and inevitable. Without it no elevated road could exist on Atlantic avenue, and the danger and inconvenience of a steam surface road with its perilous and obstructed crossings would always be remediless, unless through the agreement required.

Nothing on the face of the rapid transit act purports to except from its operation Atlantic avenue or a street already occupied by a steam surface road. It makes no such discrimination, but applies to all. Its palpable purpose was to give rapid transit and yet secure the safety of the people and the normal use of the street by putting the steam trains above grade, and in no case could that purpose be more necessary and wise than where through its operation a steam road on the surface could be dislodged and lifted into the air. Shall we say that such purpose must fail because difficulties are encountered which make some unusual conditions necessary ? The act itself answers us. It authorizes the commissioners in terms to impose such conditions as to them shall seem expedient and to embody those conditions in the articles' of association tendered for acceptance. Doubtless those conditions should be such as leave the company within the reasonable scope and contemplation of the act, and those before us are such, because necessary and inevitable as applied to the construction and operation of an elevated road upon a street like Atlantic avenue. Nobody has ever supposed that the requirement of the law which makes the right to construct conditional upon the consent of the abutters or the equivalent approval of commissioners and the court renders the franchise inoperative or the corporate life impossible, and I can see no reason why consent of the abutters may be required, but that of rightful occupants of the roadway may not be. It should be remembered also, that if the condition had been omitted the law would have written it into the elevated charter and the company have been compelled to negotiate, as they are now compelled, for the consent of the surface roads. Plainly, therefore, we must say that the rapid transit act, in spite of its broad terms and purpose, cannot apply to streets already traversed by steam on the surface and the mischief must remain, or that, so applying, the necessary and inevitable conditions may be imposed.

What remains is the further criticism, founded upon that clause in the proposed agreement which forbids the maintenance of its road by the elevated company if the contract of the parties should be terminated. We are bound to assume that the stipulation was inserted by the commissioners from a conviction of both its necessity and wisdom. The surface roads would hesitate to part with their vested rights in exchange for trackage on the elevated road unless in case of the failure from any cause of the substituted right they should be at liberty to resume their original position, and some stipulation covering that contingency was evidently necessary to induce them to contract at all; and on the other hand, in the same emergency the interest of the people required that there should not be two steam roads, one elevated and one on the surface; operating on the avenue at the same time, and so the only one which could be stopped was to be discontinued. When it is considered that under the agreement the elevated road is to be constructed at very great expense, that the abutters will receive full compensation not only for injury resulting from the structure, but for most of the inconveniences flowing from its operation, that they will not be harmed by its discontinuance, that the. worst possible result will be a return to the old state of things, and that such result after the surface rails have been removed and the grooved rail substituted, after the fences have been taken down and the gates carried away and the steam traffic lifted to the tracks above, is little likely to occur, we ought not to denounce the condition as unreasonable and fatal to the scheme.

That scheme, as a whole, gives to Atlantic avenue the exact elevated railway which the rapid transit act authorized and contemplated so far as the inevitable necessities of the situation permit, and whatever there is about it that is unusual and peculiar springs from those necessities and is needed to surmount them.

The orders should be affirmed, with costs.

All concur.


author: Earl, Ch. J.

text:
    Frank M. Hayes, Rec’r, App’lt, v. Nelson Beardsley, Resp’t.

      (Court of Appeals,

      Filed December 23, 1892.)

    1. National banks—Preferential payments.
    Ten months prior to the closing of its doors the cashier of a national hank

      paid defendant two certificates of deposits held by him, saying that the directors did not like to pay such large interest, as they bore, and six weeks before the failure paid another certificate in the usual course of i's exchanges. During this time the bank was insolvent, but none of the officers, except the cashier, knew of this fact, and he fraudulently concealed it from them. Held, that these payments were not void as being made in contemplation of insolvency, and that the complaint in an action by the receiver-of the bank to recover the money paid plaintiff was properly dismissed.
    2. Same.
    In order to uphold a recovery in an action like this there should be some satisfactory evidence that the cashier or other officer actually paid the money of the bank in contemplation of insolvency for the purpose of giving a preference to the payee, and with a view to prevent the application of the assets of the bank to the creditors generally, as provided in the National Banking Act.
    Appeal from judgment of the supreme court, general term, fifth department, affirming judgment by court without a jury, dismissing complaint upon the merits.

      S. E. Payne, for app’lt; Wm. Nathaniel Cogswell, for resp’t.

       Affirming 43 St. Rep., 744.

   Earl, Ch. J.

In December, 1883, the defendant deposited in the First National Bank of Auburn $15,000 and took two certificates of deposit for the same payable with six per cent interest, and in January, 1884, he made another deposit of $10,000 and took a similar certificate. On the 23rd day of March, 1887, the bank through its cashier paid and took up the first two certificates by transferring to the defendant negotiable paper running a' short time and paying to him in cash the sum of $506.60, the dif-j ference between the value of the negotiable paper and the two' certificates. The defendant did not request the payment of the certificates, but payment was voluntarily made by the cashier for the reason assigned by him to the defendant, “ that his directors did not like his paying so large a rate of interest.” The third and last certificate was paid on the 3d day of December, 1887, to the Cayuga County National Bank of Auburn, which then held it. Beardsley had endorsed and transferred it to that bank, and the amount thereof was by it credited to him in his account. It was, without his procurement, on the same day presented by that bank to the First National Bank for payment and was paid by the paying teller thereof in the settlement of exchanges between the banks in the usual course of business.

At the time of these payments the First National Bank was in fact insolvent, and had been so for some years ; but its insolvency was known only to its cashier, was unknown to its directors and other officers, and the bank was in good credit with the public and continued to do business in the ordinary way without any suspicion as to its insolvency on the part of the persons dealing with it, until the 21st day of January, 1888. On that day, which was Saturday, it continued to do business until it was closed at the usual hour, when the cashier and one of the book-keepers absconded and the financial condition of the bank first became public. Thereafter the plaintiff was appointed receiver of the bank, and he brought this action to recover the amount of the deposits thus paid to the defendant on the ground that the payments were void under § 5242 of the Revised Statutes of the United States, which provides as follows: “All transfers of the notes, bonds, bills of exchange, or other evidences of debt owing to any national banking association, or of deposits to its credit; all assignments of mortgages, sureties on real estate, or of judgments or decrees in its favor; all deposits of money, bullion or other valuable thing for its use, or for the use of any of its shareholders or creditors; and all payments of money to either, made after the commission of an act of insolvency, or in contemplation thereof, made with a view to prevent the application of its assets in the manner prescribed by this chapter, or with a view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void.” The action was brought to trial at a special term of the supreme court, and upon the findings of fact and law there made the complaint was dismissed, and the judgment then rendered having been affirmed by the general term is now brought under review here.

We have carefully read the findings of fact and the evidence upon which they are based, and we cannot say that the findings have not a sufficient support in the evidence. The essential facts which it was necessary for the plaintiff to establish under the section quoted in order to recover in this action w.ere found against him. The bank had not committed any act of insolvency, as it met all its obligations as they_ became due or were demanded during more than six weeks after the last certificate was paid. While its cashier knew that the bank was insolvent and must have expected that it would ultimately fail to meet its obligations and be obliged to go into liquidation, yet it cannot be said to have been an undisputed fact in the case that the financial collapse of the bank was impending or imminent, and there is little if any ground for saying that these payments were made in contemplation of insolvency.

The cashier paid these certificates as he did all other demands upon the bank, as they were from time to time presented by its numerous customers. The first two certificates were paid, as we must assume, for the reason assigned by the cashier at the time, because they were bearing interest at a larger rate than the directors of the bank were willing longer to pay; and the last certificate was paid to the Cayuga County National Bank in the ordidary course of business in the settlement of exchanges between the two banks. There was no satisfactory evidence that these payments were made by the bank to prevent the application of its assets in the manner prescribed in the National Banking Act, or with a view to a preference of the defendant over the other creditors of the bank. The circumstances under which the payments were máde, and the condition and credit of the bank at the time, forbid the inference that the payments were made for such a purpose. The defendant was not selected as a favored creditor. During all the years of the insolvency of the bank all creditors were treated alike, and there was no preference of one over another. All its demands were met at maturity. There does not appear from the facts found to be any better ground for claiming that these payments made to the defendant were void than there is for making the same claim in reference to the numerous payments made in the regular course of business by this bank to its customers during many months prior to the closing of its doors.

In order to uphold a recovery in an action like this, there should be some satisfactory evidence that the cashier or other officer actually paid the money of the bank in contemplation of insolvency for the purpose of giving a preference to the payee, and with a view to prevent the application of the assets of the bank to the creditors generally as provided in the national banking act. We think all the circumstances surrounding these deposits and payments forbid such an inference.

The facts of this case, as found by the trial judge, fail to bring it within any of the authorities cited by the learned counsel for the appellant.

The insolvency of this bank seems to have been covered up and concealed by the cashier with great skill and ingenuity. It was not even discovered by the bank examiners in making their examination of the bank, and no one of the directors had the least suspicion of it. The fact that the defendant, entirely ignorant of the insolvency of the bank, was a director, does nor under such circumstances, as matter of law, charge him with liability for the payments made to him.

In the trial of the case, and in weighing and balancing the evidence, that fact might have weight, in some cases controlling weight, with the trial court. But when, after all the evidence is given, it is found that the director acted in good faith, was ignorant of any wrong doing, or of the insolvency of the bank, then a payment made to him must be tested under § 5242, like payments made to any other creditor of the bank.

We have not deemed it important to review the evidence for the purpose of showing that it was sufficient to sustain the findings of fact, for that was sufficiently done by the general term.

The judgment should be affirmed, with costs.

All concur.


author: O’Brien, J.

text:
    Michael McNamara, Adm’r, App’lt, v. The New York Central & Hudson River Railroad Co., Resp’t.

      (Court of Appeals,

      Filed December 23, 1892.)

    Negligence—Contributory—Crossing track enveloped in smoke.
    Plaintiff’s intestate, a young woman, while crossing defendant’s track, was killed by an engine backing at a high rate of speed. The bell was not rung or the whistle sounded, and the flagman was absent from his post. Intestate was prevented from seeing approaching objects by a volume of smoke from an engine, which had just passed. Aid, that it could not be said as a matter of law that deceased was guilty of contributory negligence.

      (Heaney v. Long Island B. B. Co., 113 N. Y., 133; 30 St. Rep., 396, distinguished.)

      Appeal from judgment of the supreme court, general term, fifth department, reversing j udgment in favor of plaintiff entered on verdict of jury.

      John Laughlin, for app’lt; Daniel H. McMillan, for resp’t.

       Reversing 46 St. Rep., 439.

   O’Brien, J.

The plaintiff's intestate, a young woman about twenty-seven years of age, was injured at a street crossing in Buffalo by one of the defendant’s engines on the morning of the 14th of June, 1887, from which injuries death resulted. On the trial of this action he recovered a verdict against the defendant, but the judgment entered thereon has been reversed by the general term. It is not disputed that there was evidence given which tended to establish negligence on the part of the defendant, and which was proper and competent for the-consideration of the jury. The judgment of reversal rests entirely upon the ground that the deceased in attempting to cross the defendant’s track was, as matter of law, guilty of contributory negligence which precludes a recovery in this action. It, therefore, becomes necessary to refer briefly to the testimony which was submitted to the jury, in order to determine whether the question was one of law or fact. The deceased was residing with her parents, and on the morning of the accident left the house as usual to proceed to the place where she had been and was then employed, and in order to reach her place of destination she had to cross the defendant’s track at or near the corner of Hamburg and Carroll streets.

On approaching the crossing from the south atrain of the Rochester & Pittsburgh road was going west on the defendant’s track, and the deceased waited till it had passed the crossing and" then resumed her journey. While crossing the railroad one of the defendant’s engines backed up from the west and struck the deceased before she could get out of its way. The evidence tended to show that she waited on the south of the crossing for the Rochester & Pittsburgh train to get out of the way, and that then she looked both east and west before attempting to cross. That there was a curve in the road just west of the crossing, around which the engine came with the tender first, which prevented a full view of the track in the direction from which the danger came. The proof also tended to show that the engine was running at a high rate of speed, some of the calculations putting it as high as thirty or forty miles an hour, and that the bell was not rung or the whistle sounded, and that, although there was a flagman stationed at the crossing whose duty it was to warn persons approaching of danger, he was, at the time the deceased attempted to cross, absent from his post. But the principal witness for the plaintiff, who saw the deceased when she started to cross and had noticed her for some time as she walked towards the crossing, testified that as the Rochester & Pittsburgh train passed a volume of smoke was emitted from the engine which settled down upon the crossing, where the deceased was waiting for the train to pass, and prevented her from seeing objects approaching from the east or the west. As the deceased did attempt to cross, however, under the circumstances disclosed in the testimony of this witness, the general term has held that she was chargeable, as matter of law, with negligence contributing to the injury. The court below deduced this result from the doctrine in the case of Heaney v. Long Island R. R. Co., 112 N. Y., 122; 20 St Rep., 296. We think that there is such a marked and material difference in the facts between that case and the" one at bar that it is inapplicable as authority. Before pointing out the distinction to be made, it may' be well to observe that even if it has to be regarded as controlling in this case it is by no means certain that the testimony of the witness referred to with respect to the ability of the deceased to see on account of the smoke was conclusive upon the jury.

It is true that he was called by the plaintiff, but that would not render his testimony in regard to the effect of the smoke, which was little more than an opinion, absolutely conclusive upon the jury. He found no difficulty himself in seeing the approach of the engine, and he does not swear that he was prevented from see- . ing objects either to the east or the west or across the track. The deceased was nearer the track than he was, and aside from the curve in the road her opportunities of seeing what was approaching from the right or the left, or any danger in front, were as good, apparently as his. In this state of the testimony the jury was not precluded from considering the question as to how far the smoke obstructed the vision of the deceased at the time she attempted to cross. What the witness said upon that point was not the result of any actual test or experiment from which the fact could be ascertained, but a mere expression of opinion as to the effect of the smoke upon the girl’s vision, which the jury was not necessarily bound to accept. While the case of Heaney v. Long Island R. R. Co., supra, was well decided upon the facts as they appeared in the record, it is not controlling here. In that case there was no evidence whatever of any negligence on the part of the defendant, and the decision might well rest upon that ground alone. Here it is not denied that there was evidence from which negligence on the part of the defendant could have been, and presumptively was, found by the jury. In the former case an old man sixty-six years of age, with defective hearing, attempted to cross a railroad at a private crossing where there was no obligation to ring the bell or sound the whistle, where no flagman was stationed, and where trains might properly run at any rate of speed. It is obvious that he had no safeguards to rely upon except such as were furnished by his senses, which were imperfect even for a person of his age and condition. The day was dark and his vision was obscured by smoke which had settled upon the track. Here the facts are wholly different. A young woman in full possession of all her faculties, on a clear, bright morning, attempted to walk across a public street where she had passed many times before.

She had the right to rely upon the presence of the flagman to warn her of any danger, and she had a right to assume that trains would not be operated at such a place with such an unusual rate of speed, and that proper signals would be given to persons using the street of the -approach of a train by ringing the bell and sounding the whistle. It is obvious that the conduct of the deceased in attempting to cross under such circumstances must be judged by a different rule than was applied to an aged person crossing at a private way without any assurance of safety except his ability to hear and to see, which, it appears, was much impaired. It cannot, we think, be said as matter of law that the deceased failed to observe ordinary care and prudence in attempting to cross funder the circumstances disclosed by this record. It was possible for the jury to find upon the evidence that she used reasonable care and caution, and this made the question one of fact which has been determined by the verdict in favor of the plaintiff.

It follows that the judgment of the general term should be reversed and judgment for the plaintiff on the verdict affirmed, with costs.

All concur, except Gray, J., not voting.


author: Gray, J.

text:
    Gideon F. Smith, Assignee, Resp’t, v. W. Frank Smith, App’lt.

      (Court of Appeals,

      Filed December 23, 1892.)

    Assignment bob cbeditobs—Fictitious debt.
    The firm of M. & N. were successors to M. & H. H. sold out his interest in the property and business to N. The firm of M. & H. then owed one M. $500, which the new firm assumed, and to secure which the new firm gave a note to H. M. & N. afterwards made an assignment for the benefit of creditors, and preferred H. for the amount of the note given, and in the inventory the debt was specified to be on the note held by H. Held, that the pi eference was not fraudulent, as M. had the right in equity to be subrogated to the rights of H., and so the insolvents were really preferring the debt of all to M.
    Appeal from judgment of the supreme court, general term, second department, affirming a judgment for plaintiff, rendered on report of referee.

      Nathan D. Petty, for app’lt; John M. Perry, for resp’t.

       Affirming 39 St. Rep., 46.

   Gray, J.

The plaintiff was the assignee of the members of the copartnership of Mosbacher & Rewey, insolvent debtors, and the defendant, as deputy sheriff, under an execution issued upon a judgment against that firm, seized upon the assigned property and sold it, whereupon plaintiff sued as for a conversion.

The defendant, who is the appellant here, presents but one-question deserving of our consideration. It seems that a preference was given in the instrument of assignment to -Arthur G. Howell, which, upon reference to the inventory and schedules-filed, is described as being on a promissory note made by Mosbacher & Rewey to Howell. The evidence showed that, originally, Howell was a partner with Mosbacher, and upon the dissolution of their firm, by the retirement of Howell, a new firm was formed by Mosbacher with Rewey. There was, at that time, an existing indebtedness from the original firm to Masury, for $500, and the new firm agreed by a writing to assume its payment. According to Mosbacher’s evidence, the note/ for $500, for which Howell was preferred in the assignment papers, was given by him and Uewey as security to Howell for the note held by Masury against Howell & Mosbacher (the former firm).

It is true Howell swore he never received a note, but the referee -chose to believe in the making of the note, found it as a fact, and we must so accept it. The appellant contends that this preference to Howell was fraudulent as to the creditors of the assignors, inasmuch as no debt was in fact owing from the assignors to Howell.

It is undoubtedly true that a provision in an assignment for the benefit of creditors for the payment of a fictitious debt is a sufficient indication of fraud to warrant the avoidance of the assignment, for such a provision operates to deprive the creditors of property which should go towards paying their claims. But in the present case, while no debt was actually due to Howell by the assignors, nevertheless, it cannot be said that the provision was for the payment of some fictitious demand.

The assignors owed a debt to Masury, which the note to Howell in fact represented, and which was given to secure Howell against. Howell, as a member of the former firm, was, of course, also liable for the payment of that debt I think that Masury would have the right in equity to demand to be subrogated to the rights of Howell in the insolvent proceedings, and to stand in his place under the assignment upon the distribution of "the assignor’s property, Under these circumstances, in preferring the payment of Howell’s note, the insolvent assignors were really preferring the debt of all to Masury. If, pending the proceedings, Howell discharged that debt, he would be entitled to claim reimbursement through the provision in the instrument of assignment; while if he had not done so before the distribution of the assets, Masury would be entitled to be substituted in his stead for payment. Thus a debt which was honestly due from the insolvents would be discharged and no property of the debtors would have been withdrawn from distribution among their creditors.

For these reasons, I think the judgment appealed from was right and should be affirmed, with costs to the respondent to be paid by the appellant.

All concur.


author: Andrews, J.

text:
    The Prentiss Tool & Supply Co., Resp’t. v. Frank G. Schirmer, Sheriff, App’lt.

      (Court of Appeals,

      Filed December 23, 1892.)

    1. Fraud—When a question for the jury.
    Plaintiff owned certain property included in a conditional sale to F., embraced in a written instrument, by which the title was to remain in plaintiff until the purchase price was fully paid. There was a verbal agreement that F. might manufacture and sell part of the property, applying the amount received upon the debt, The property was attached and sold by defendant in an action against F. Upon the trial of an action for conversion, the judge refused to submit the question of fraud to the jury, jWeld, no error.
    3. Same—Bill of sale—Chattel mortgage.
    Plaintiff also claimed to recover certain brass castings of which F. had

      given it an absolute bill of sale in payment for money due it, although F. still had possession of the castings to do a small amount of work upon them to finish them up. Held, that although the word “ security” was used by plaintiff’s witnesses in describing the transaction, the circumstances surrounding showed that it was intended as an absolute transfer.
    Appeal from judgment of the supreme court, general term, second department, affirming a judgment in favor of plaintiff, .entered on verdict. .
    ' The contest in this action relates to the title to certain machinery and brass castings which were in the possession of Cora B. Florence on the 17th day of September, 1890, on which day they were levied upon by the defendant, sheriff of the county of Westchester, under an attachment issued in an action commenced by Donnelly & Co., to recover a debt owing to that firm by Cora B. Florence, and subsequently sold by the sheriff under execution upon a judgment recovered in that action.
    The plaintiff, claiming the title to the property, sued the sheriff in this action for a conversion. The facts in respect to the plaintiff’s title are undisputed.
    Prior to November, 1889, Charles Florence and two other persons established a business known as the “ Yonkers Brass Works-,’’ and purchased the machinery used in the business from the plaintiff on credit. . The premises on which the business was carried on were situated in Yonkers, and a fire took place therein and the business of the company was suspended, it being indebted to the plaintiff in the sum of $1,700 or $1,800. The company seems to have become embarrassed, and it sold back the machinery and property remaining after the fire to the plaintiff. In November, 1889, the plaintiff sold the plant, embracing machinery and some brass and materials used in the brass business, to Cora B. Florence conditionally for the sum of $1,123.45, on credit, the condition being that the title to the machinery should remain in the plaintiff until the purchase price was fully paid, and an instrument was executed in writing between the parties expressing the agreement
    There were embraced in the articles sold brass and other material of the- value as fixed in the agreement of about $390, which it was contemplated would be used in the manufacture of brass articles by the purchaser, Cora B. Florence, and would be sold by her in the course of the business, and it was verbally arranged between her and the plaintiff that she might sell the articles so to be produced from such materials and apply the proceeds of the sale on the plaintiff’s debt, which was done, and the plaintiff received about $340 from this source, and this took place before she had become indebted to Donnelly & Co.
    The machinery embraced in the salé of November, 1889, was attached and sold by the defendant under the process in the action of Donnelly & Co., heretofore referred to. There was due to the plaintiff from Cora B. Florence at the time of the attachment and levy in the suit of Donnelly & Co., under the instrument of November, 1889, and for other machinery sold on the same conditions, the sum of $1,123. The value of this machinery constitutes one of the items for which a recovery was had in this action.
    The plaintiff also claimed to recover the value of certain brass castings to which it claims title under a bill of sale executed by Cora E. Florence September 15, 1890, which had been manufactured by her for the Rand Drill Company, and for which the latter company were to pay her when finished the sum of $240. On the day mentioned (Sept. 15, 1890) the plaintiff also had a debt on open account against Cora E. Florence of $310.
    The bill of sale referred to was absolute in form and purported to transfer the unfinished castings to the plaintiff. There was no-actual change of possession of this property prior to the levy of the attachment of Donnelly & Co. on the morning of September 17, 1890. But it appears that work to the amount of $10 or $12 in value was required to finish the castings, and they were left on the premises for the purpose of having this work done, and an employee of Mrs. Florence was engaged in finishing them for the plaintiff at the time of the levy.
    There was no controversy as to the fact that the indebtedness claimed by the plaintiff was justly due and owing, nor as to the Iona fides of the transactions between the plaintiff and Mrs. Florence, except that the defendant claimed that the conditional sale of machinery embraced by the instrument of November, 1889, was fraudulent as to the creditors of Mrs. Florence by reason of the verbal permission given her to sell the articles to be manufactured from the brass and materials embraced in that instrument, and in respect to the sale of castings under the bill of sale of September 15, 1890, it was claimed that it was a mortgage, and not having been filed was void, or if intended as an absolute sale, the sale was fraudulent under the statute by reason of the fact that there was no change of possession of the goods sold.
    The judge refused to permit the defendant to go to the jury on the question of fraud, but confined the jury to the question of the value only of the goods levied upon and sold by the defendant
    Other facts appear in the opinion.

      Ralph E. Prime, for app’lt; John M. Perry, for resp’t.

       Affirming 45 St. Rep., 20.

   Andrews, J.

The sole point presented by this appeal is whether the question of fraud in respect to the title claimed by the plaintiff to the machinery embraced in the conditional sale of November, 1889, and to the castings embraced in the bill of sale of September 15, 1890, should have been submitted to the jury.

The fact that the plaintiff owned the property embraced in the conditional sale to Cora E. Florence in November, 1889, at the time of that sale, is undisputed; nor is there any question that a large part of the purchase money of the machinery was unpaid at the time of the levy of the attachment, September 17, 1890. The title to the machinery was, by the terms of the instrument of November, 1889, to remain in the plaintiff until paid for. This was a valid arrangement, and constituted no fraud upon the creditors of Cora E. Florence. Cole v. Mann, 62 N. Y., 1. The in. strument seems to have been filed in the clerk’s office of the city of Yonkers, November 30, 1889, but no filing was necessary under chapter 315 of the Laws of 1884 as against creditors of the vendee. It is not important, therefore, to inquire whether the instrument was filed in the proper office, under the terms and for the purposes of that statute. The fact that the vendee was permitted to manufacture the materials embraced in the instrument, and sell the manufactured articles, upon condition that the proceeds of the sale should be accounted for and paid to the vendors to apply upon the purchase price of the property, did not impair the rights of the vendor under the instrument of November, 1889, or render it void as to creditors of the vendee. Cole v. Mann, supra ; Brackett v. Harvey, 91 N. Y, 214. The proceeds of the sale were, in fact, applied as provided in the oral arrangement, and this had been done before the debt to Donnelly & Co. had been contracted.

We are unable to find that any fact was proved, or was infer-able from the evidence, which raised any question for the jury as to the title of the plaintiff to the machinery levied upon by the sheriff.

The instrument of September 15,1890, if a mortgage, was void as against the attachment creditor, because not filed before the levy of the attachment. Laws of 1833, chap. 279, § 1. There was no change of possession of the property embraced therein, and if that instrument was intended as a mortgage, and not as an absolute transfer of the property, the defendant was entitled to an absolute direction in his favor as to the part of the goods taken by him included therein. So, also, if the evidence created a doubt whether the instrument was intended as a security merely, and not as an absolute transfer, that question should have been submitted to the jury. But while the word “security” was used by the plaintiff’s witnesses in describing the transaction which was evidenced by the instrument, a perusal of the whole evidence leaves no doubt of its actual character. The instrument purported to be an absolute transfer. The castings embraced therein, then in the course of manufacture, were being made to fill an order given to Cora E. Florence by the Rand Drill Company, for which she was to receive the sum of $240. The work upon them was nearly completed, and their completion would require an expenditure of $10 to $12 only. The unsecured debt to the plaintiff from Cora E. Florence on open account was $310. There could be no surplus coming to her out of the property after payment of this debt. The circumstances leave no doubt that the instrument of September 15, 1890, was intended as an absolute transfer to the plaintiff of the castings to apply on the plaintiff’s debt.

Treating it as an absolute transfer, the sale was nevertheless presumptively fraudulent as against the attaching creditors by force of the statute, by reason of the fact that there was no delivery of the goods to the vendee, and no actual change of possession, 2 Rev. St., 136, § 5, which presumption was conclusive, unless it was made to appear on the part of the plaintiff that the sale was made in good faith, and without any intent to defraud creditors or purchasers.

The defendant insists that the question of fraud, based upon the absence of delivery or change of possession of the goods sold, should have been left to the jury. The presumption which the statute creates may be overcome by evidence of the fairness of the transaction. The evidence to establish the bona fides in such a case may be weak or strong, and it may be of such a persuasive character, resting upon uncontradicted evidence, that a court could say that the presumption was overcome, and direct a verdict. Where the evidence is such that, admitting the presumption raised by the statute, it is so completely rebutted that a verdict finding the fraud would be set aside, then the statute “ does not, as now interpreted, interfere with the jurisdiction of the court to direct a verdict” Bulger v. Rosa, 119 N. Y., 459; 29 St Rep., 678.

The evidence in this case fully repelled the statutory presumption. The debt to the plaintiff was unquestioned. The value of the property was considerably less than the debt The castings were being finished up, and required an expenditure of a few dollars to make them deliverable upon the contract with the Rand Drill Company, and would be presumably of little value for any other purpose. They were left on the premises and in the possession of Cora E. Florence to enable a workman to complete them, and were attached within two days after the bill of sale was executed and while the workman was engaged in finishing them. None of these facts were disputed on the trial, and on the whole-evidence a case was furnished which, we think, justified the court in refusing to submit the question of fraud to the jury.

It is claimed, however, that some of the material facts were proved only by the testimony of the plaintiff’s manager, and that his credibility could not be assumed by the court because of his interest, and that of his credibility the jury was the sole tribunal authorized to pass upon it. There is not the slightest ground of suspicion of the truth of any of the material facts in the case. The only fact relied upon by the defendant to impeach the instrument of November, 1889, was disclosed by the testimony of the manager, and related to his permission to Cora E. Florence to use the materials embraced in that conditional sale and sell the manufactured articles, and render the proceeds to be applied on the purchase money. If this testimony is stricken out, nothing whatever is left upon which any claim could be made affecting the title of the plaintiff to the machinery which constitutes the main item in the judgment.

Taking the whole proceedings as disclosed by this record, the just inference is that no question was raised as to the credibility of the plaintiff’s manager, and that the,truth of his testimony was assured.

The point upon which the request to go to the jury as to the bill of sale of September 15, 1890, was based, was the statutory presumption of fraud, by reason of non-delivery and retention of possession of the property embraced therein, and as to the property embraced in the instrument of November, 1889, that the permission given to the vendee to sell made the title to the other property therein void as to creditors, or that the jury might so find.

We think the trial judge was justified in directing a verdict, and the judgment should, therefore, be affirmed.

Judgment affirmed, with costs.

All concur.


author: O’Brien, J. Van Brunt, P. J. Lawrence, J.

text:
    Julia A. Shaw, Resp’t, v. Agnes G. Grant et al., App’lts.

      (Supreme Court, General Term, First Department,

      Filed November 18, 1892.)

    Pleading—Amendment—Service. .
    A judgment in favor of plaintiff was reversed upon the ground that an amendment to the complaint allowed by the referee radically changed the issues raised. Thereafter, on motion of plaintiff at special term, an identical amendment to that permitted by the referee was granted, and the complaint as amended by the referee, together with the answers and replies thereto, were directed to stand as the pleadings, unless the defendants should elect to have new pleadings served and give notice of such election, then the plaintiff might serve a second amended complaint as proposed in the motion papers. Held, that the order should be modified to the extent of requiring the plaintiff to serve a copy of the amended complaint as allowed.
    Appeal from order allowing an amendment of the complaint.

      George Norris, for app’lts; J. A. Shoudy, for resp’t.
   O’Brien, J.

The action was brought to recover the balance due for board, lodging and necessaries furnished to the defendants. At the time the bill was contracted certain of the defendants were infants, but it is claimed that the other defendant, Carolan O’Brien Bryant, the father of the infants, secured for them, upon the faith -of their estate, by representing himself to be their guardian, the •credit upon which the necessaries were furnished to them. During the progress of the cause before a referee the plaintiff applied to the referee and obtained leave to amend her complaint. The judgment subsequently entered in favor of the plaintiff was appealed from and reversed by this court, upon the ground, among others, as stated in the opinion, that “ there are two fatal errors pointed out by the appellant The first consists in the allowance by the referee of an amendment which radically changed the issues raised by the pleadings, and allowed a new' cause of action to be set up in the amended complaint.’’ As a result of this intimation in the opinion the plaintiff made a formal motion at special term for an amendment of the complaint in the respects identical, as claimed, with those permitted by the referee, which was granted; and the first amended complaint, as allowed by the referee at the trial of the action, together with the answers and replies thereto, were directed to stand as the pleadings in the cause, with the proviso that, in case the attorney for the defendants Bryant shall elect, within ten days after the service of this order, and shall give notice of such election, to have new pleadings served, then the plaintiff may serve a second amended complaint, as proposed in the motion papers. The appellants appeal from so much of the order as allowed the amendment without imposing costs as terms, and from the proviso compelling their attorney to elect whether he should require new pleadings to be served. As to the power of the court to allow the amendment and fix the conditions thereof there can be little or no question.

We think, however, that under,the circumstances of this case the defendants have a just cause of complaint with respect to the proviso compelling their attorney to elect whether he should require new pleadings to be served. The defects in the original complaint, and the scope of the amendment as allowed by the referee upon the former trial, were subjects of contention between the parties; and the case to a great extent turned upon the question as to whether or not two inconsistent causes of action were improperly joined. The same contention is presented upon this appeal, and a voluminous record, containing many hundred pages, is submitted for the purpose of supporting the various contentions made as to the effect of the amendment as now allowed. The result is to introduce confusion and uncertainty. While it is true the appellants had it in their power to elect under the permission given, we think that the better and more orderly practice should be in all cases of this kind to require, upon motions for the amendment of pleadings, or in cases where amendments are allowed, the one moving for such an amendment to serve a copy of the proposed amended pleading with the motion papers, or, if this for any reason can be dispensed with, the condition should be imposed that a copy of the amended pleading as allowed be served. This will give the defendant, as he is entitled to have, an opportunity of answering, and will remove all uncertainty as to what are the issues to be tried, and place the burden where it rightly belongs, upon the one asking the favor of serving his adversary with a copy of the amended pleading. We think, therefore, that the order should be modified to the extent of requiring the plaintiff to serve a copy of the amended complaint as allowed, and, as so modified, the order should be affirmed, without costs.

Van Brunt, P. J.

I agree that the court had the power to allow the complaint to be amended, but the defendants had a right to have that complaint as amended served upon them, and the court was bound so to direct without any notice being given by them. I think, also, that the defendants were entitled to costs as a condition of amendment, and I should have been in favor of reversing the order appealed from had the appellant not needlessly presented a record upon this appeal consisting of hundreds of pages of matter absolutely useless. I therefore concur in the result.

Lawrence, J.

I am in favor of modifying the order so as to compel the respondent to pay costs as a condition of the amendment, and with that modification I concur in result


text:
    The People, Resp’ts, v. Charles C. Hearne, App’lt.

      (Supreme Court, General Term, First Department,

      Filed November 18, 1892.)

    1. Larceny—Embezzlement—Indictment.
    It is sufficient, in an indictment for embezzlement, to state the sum and fix the value of the money taken, and an allegation as to whether it was lawful money of the United States, or other money, is immaterial, and need not be proved, if made.
    2. Same.
    Upon the trial of an indictment for embezzlement, it appeared that the complainant, lately from Ireland, to obtain employment, agreed to purchase of defendant some stock of the company of which defendant was treasurer; he paid part down, and gave to defendant a foreign draft, which he was to have cashed through his bankers, and retain a portion as payment on the stock, and return the balance to complainant. The bankers, when they realized on the draft, placed it to defendant’s account, by whom it was all withdrawn. The prosecution offered in evidence .a receipt, made by the cashier of the bankers, of the draft from defendant, for collection for account of complainant, but a witness, called by defendant, testified that the name of complainant, written in the receipt, was a clerical error for that of defendant. The complainant testified that he never authorized the amount to be placed to defendant’s credit, or used by him in his business,, as testified to by defendant. Reid, that the verdict of guilty would not be disturbed.
    Appeal from judgment of the court of general sessions of New York, convicting defendant of the crime of grand larceny.

      John J. Crawford, for app’lt; De Lancey Nicoll (Henry B. B. Stapler, of counsel), for resp’ts.
   O’Brien, J.

The indictment contains two counts. The first count charges that the defendant with force and arms took and carried away certain money, the property of one Patrick J. Coen. This count is in the usual form for larceny of money at common law. The second count charges the statutory larceny or embezzlement The prosecution elected to go to the jury on the second count, which charged the defendant, as the agent of the said Patrick J. Coen, with the felonious appropriation of the sum of seven hundred dollars in lawful money of the United States of America, and of the value of seven hundred dollars.”

The grounds urged for a reversal of the judgment are: First, that there is a fatal variance between the allegations of the second count of the indictment and the evidence; second, that the verdict was against the weight of evidence; and, third, that, as the evidence showed that the banker to whom the complainant’s draft was delivered had no authority to pay out the money on the prisoner’s checks, there was no larceny by defendant .In disposing of these grounds a brief reference to the facts becomes necessary.

The complainant, a young Irishman, then recently landed, had applied to the defendant for employment. He was informed by the defendant that he, the complainant, as a condition of being employed, must purchase some stock in the Dorcas Publishing Company, of which the defendant was secretary and treasurer. This the complainant agreed to do. He paid the defendant seventy-five dollars on account of such stock, and delivered to defendant a draft for £140 on a bank in Ireland, to have cashed through defendant’s bankers, Hotchkiss & Go.; and it was agreed that out of the proceeds of such draft forty-five dollars should be applied to the balance due on the stock purchased by the complainant. The draft was endorsed over to the defendant by the complainant, and together they went down with it to the bankers. The draft was left with Hotchkiss & Go., who in a few days thereafter realized the money thereon. This amount was placed to Hearne’s account, and against such credit Hearne drew checks until all was withdrawn.

The prosecution offered in evidence a receipt made out by one Leeds, the cashier of Hotchkiss & Go., acknowledging to have received from 0. 0. Hearne draft, ¿£140, on First National Bank of Tuam, Ireland, for collection for account of P. J. Coen.” A witness called by defendant testified that the words “P. J. Ooen” in the receipt were a clerical error for “0. 0- Hearne.” The complainant also testified rhat he never authorized the amount to be placed to defendant’s credit, and that he never authorized defendant to use it in his business. The defendant, on the other hand, testified that complainant did authorize him to use the money in his business, and the testimony of Hotchkiss, the banker, and Leeds, the cashier, was to the same effect This bare outline of the facts by no means represents the full force of the testimony presented by the prosecution ; for when these facts are colored and characterized by the means employed to obtain the money and the draft from a young and defenseless immigrant, no doubt of the deliberate scheme to defraud is present; but, for the purposes of disposing of the questions raised, the brief summary given is sufficient. The fatal variance between the indictment and proof claimed is in that the money was described to be lawful money of the United States; and the proof not going to the extent of showing that it was lawful money of the United States, although no question arose but that it was money and of the value as charged in the indictment, that, therefore, the prisoner is entitled to a reversal of the judgment, and should be allowed to go free. It is to the credit of our present system of procedure in the criminal law that the nice distinctions existing at common law, which on any such technical plea would have enabled a scoundrel such as the defendant has been shown to be to escape the just penalty of his crime, are swept away. All that was required in the indictment was to state the sum and fix the value of the money taken, and an allegation as to whether it was lawful money of the United States or other money was entirely immaterial and unnecessary. It is insisted, however, that admitting it to have been unnecessary, having been alleged, it was essential for the prosecution to prove it in the form as alleged, and that the failure to so prove it is fatal to the' conviction. In support of this contention we are referred to a long line of authorities where the fine distinctions that existed at common law, or under statutes different from our own, were under consideration. As we have stated, we are glad that no such plea can prevail. As has been well pointed out in the case of People v. Reavey, 4 N. Y. Crim., 14, the sufficiency of this indictment is not to be determined by such authorities, “ considering and applying the technical principles of the common law, for they have been in a great measure superseded by the enactmént of the Code of Criminal Procedure.” This is an instructive case, and a direct authority against the position for which the appellant, upon the ground stated, contends.

His second point, that the verdict is against the weight of evidence, is equally untenable. It was entirely competent for the jury, taking all the facts and circumstances surrounding the obtaining of the draft and money from the complainant, to accept his version, supported, as it was, by the written agreement, in preference to the improbable story attempted to be palmed off on the jury by the prisoner, though supported by other witnesses. It may well be that the unenviable position occupied by these bankers may have rendered them liable to respond to the complainant for the amount of the draft But this in no way detracts from the force and effect of the facts convicting the defendant of an intention to embezzle an immigrant’s money, in which, through the carelessness or connivance of the bankers, he was successful. We do not deem it necessary to further discuss the arguments upon the prisoner’s behalf, because we regard the contentions as entirely devoid of merit, and the conviction itself as manifestly just We are of opinion, therefore, that the judgment of conviction should be affirmed.

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