author: O'Brien, J. Van Brunt, P. J. Follett, J.

text:
    Henry L. Herbert et al., Resp’ts, v. John Duryea, App’lt.

      (Supreme Court, General Term, First Department,

      Filed May 17, 1895.)

    Corporations — Stockholders—Liability.
    It is necessary, in an action to charge stockholders with the debts of the corporation upon the ground that the stock was not fully paid in and a certificate thereof filed, to allege that the stock held by the defendants was not issued'in payment for property.
    Appeal from a judgment, entered on a verdict in favor of plaintiffs, and from an order denying a motion for a new trial.

      Reuben L. Maynard, for app’lt; W. P. Knapp, for resp’ts.
   O'Brien, J.

This is an action against a stockholder of an insolvent corporation, based upon an alleged statutory liability for the debt of the corporation to the plaintiffs. The respect in which the corporation failed to comply with the statute, and Out of which plaintiff’s cause of action arose; is thus stated :

“ Upon information and belief that the whole amount of capital stock fixed and limited by such company has never been paid in, •and that no proper certificate stating the amount of the capital so fixed has ever been recorded in the office of the county clerk of the county wherein the business of said company was carried on.”

At the commencement of the trial, before any evidence was taken, the defendant moved for a dismissal of the complaint, on the ground that it did not state facts sufficient to constitute a cause of action, which motion was denied, and an exception duly taken.

The question thus presented, being as to the sufficiency of the complaint, is one of .pleading. In this court the question has been settled by the case of Rowell v. Lambert, 66 Hun, 4; 49 St. Rep. 197. There, as in this case, an action was brought by a creditor of a corporation organized under the general manufacturing act, to recover the amount of his claim from the defendant as a stockholder of such corporation, upon the- ground that no certificate of paid-up stock had been filed; and there, as here, a motion was -made to dismiss the complaint because there was no allegation in it that the stock was issued for cash, rather than for property. It was therein held that such an allegation was necessary and that the issuing of stock for property was not an affirmative defense. As therein said (wdiich is equally applicable to the complaint here):

“It is plain, from an examination of the complaint, that the theory upon which the action was brought was that because no certificate that the whole amount of the capital stock fixed and. limited by the articles of incorporation of said corporation had been paid in had been filed or recorded, as required by sections 10 and 11 of chapter 40 of the Laws of 1848, and their amendments, a liability existed upon the part of the defendant as a stockholder.”

Attention is then called to the amendment passed in 1853 (chapter 333, § 2) permitting trustees to purchase property necessary for their business, and issue stock to the amount of the value thereof in payment therefor, and providing that, “ the stock so issued shall be declared and taken to be full stock, and not liable to any further calls ; neither shall the holders thereof be liable for any further payments under the provisions of the tenth section of said act.” ' In construing the original act as thus amended, it was in that case held that “ it is necessary, in order to make out a complete cause of action against a stockholder, to show either that the stock was issued apparently for cash, and no certificate filed, or that it was issued for property at a fraudulent valuation for the purpose of evading the statute; ” and that a complaint simply alleging the failure to file such certificate did not state a cause of action, since a stockholder might hold stock issued for property; and if one seeks to attack an issue of stock for property, and thereby create in his favor a cause of action, he must allege that such issue was made for property acquired by the corporation at a fraudulent valuation, and that the burden of establishing fraud is upon the person asserting it.

It will thus be seen that in one aspect the question of whether a stockholder is liable depends upon the consideration given for the stock. If it is iásued for property at its value, that ends the matter so far as the stockholder’s liability is concerned; and this is true, whether the whole amount of the capital stock had been paid in or not. The filing of a certificate of full payment adds nothing to his advantage of protection, and failure to file the certificate creates no liability against him. In other words, he is relieved from the liability imposed by statute upon holders of stock issued for such. The stock is full paid, and subject to no further call of the corporation or of third parties; and the liability of a person holding stock issued for property is predicated upon allegations and proof that the stock so held by him was issued for property at a fraudulent valuation for the purpose of evading the statute.

Our attention is called to the case of Herbert v. Uhl, 20 N. Y. Supp. 743, handed down at the same term as the case of Rowell v. Lambert, which it is claimed contains something contrary to the views expressed in the latter case. An examination, however, will show that in this the respondents are mistaken. It may be true that the complaint in that case was similar to the one in the case at bar; but there the motion to dismiss the complaint was not made at the opening of the trial on the ground that the same was insufficient as not stating a good cause of action, but it was made at the conclusion of the testimony on the ground that the plaintiffs had not made out a cause of action the the claim being that the stockholders’ liability ceased immediately upon the filing of a certificate of the full payment of the capital stock, and that unless the plaintiffs could show that there was some falsity with reference thereto, that the property purchased for the use of the company was purchased at an exorbitant figure, and with fraudulent intent to evade the statute, they had not made out their case. To the granting of that motion the plaintiffs excepted, and this, upon appeal, was held to be error. Two of -the judges, however, in that case, concurred in the result, one having in mind the principle laid down in Rowell v. Lambert, saying: “The statute does not require filing certificate where stock is issued for property.” In Herbert v. Uhl, the question was whether the evidence was sufficient to make out & prima facie case for the jury, and the sufficiency of the complaint was not, as it is here involved ; and, testimony having been introduced sufficient to justify a submission of the question to the jury, it was. held error at that stage-to dismiss the complaint. The question of the sufficiency of the complaint does not appear to have been raised, but even though it had been, after all the testimony was in, the pleadings might have been made to conform to the proof. Here, however, the motion was made at the commencement of the trial, and it was practically a demurrer to the complaint, and therefore presented the question as to whether there was a good cause of action alleged. Under the authority of Rowell v. Lambert, we think that the trial judge should have granted the motion to dismiss, and that the exception taken to his refusal was good.

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

Van Brunt, P. J.

I concur. It is evident that the statute did not intend that a person receivipg stock in payment for property conveyed to a corporation in good faith should be held liable because of the failure of other stockholders to pay for the stock taken by them. The statute (Laws 1848, chap. 40) expressly provides that such stock shall be full paid, and not liable to any further calls, nor shall the holders thereof be liable for any other payments, -under the provisions of section 10 of said act; section 10 being the section under which liability for failure to file certificate, etc., can be predicated.

Follett, J.

(dissenting). — December 8, 1881, the Consumers’ Coal Company was incorporated, pursuant to chapter 40, Laws. 1848 (the manufacturing act), the acts amendatory thereof and supplementary thereto, with a capital stock of $500,000, divided, into 100,000 shares of $5 each. In 1890 it was dissolved for insolvency, and a receiver appointed. March 16 and May 25,1882, 250 shares of the stock were issued to the defendant; and it is alleged in the complaint, and admitted in the answer, that he was the owner of one hundred shares when (October, 1889) the liability of the corporation to the plaintiffs arose. The defendant alleges that $35,500 of the stock was paid for in cash, and $100,000’ was paid for in property and services of the president of the corporation, to whom 200,000 shares were issued. It is conceded that the remainder of the capital stock ($364,500) was neither paid for nor issued. The defendant sought to escape liability by showing that the capital stock of the corporation had been reduced to $135,-000, but he utterly failed to establish that it liad been red uced, pursuant to the statute. A good cause of action was alleged in the plaintiff’s complaint and proved on the trial.

The judgment and order should be affirmed, with costs.


source: Caselaw Access Project

author: Per Curiam. Follett, J.

license: Public Domain

text:
    Samuel W. Gastner et al., Resp’ts, v. John Duryea, App'lt.

      (Supreme Court, General Term, First Department,

      Filed May 17, 1895.)

    Appeal from a judgment, entered on a verdict in favor of plaintiffs, and from an order denying a motion for a new trial.

      Reuben L. Maynard, for app’lt; W. P. Knapp, for resp’ts.
   Per Curiam.

For the reasons stated in the opinion in Herbert v. Duryea (herewith handed down) 67 St. Rep.-, the judgment should be reversed, and a new trial ordered, with costs to appellant to abide the event.

Follett, J.

dissenting, on same grounds as in Herbert v. Duryea, supra.


author: Per Curiam.

text:
    Edward Wright, Resp’t, v. Robert W. Chapin App’lt.

      (Supreme Court. General Term, First Department,

      Filed May 17, 1895.)

    1. Contract — Promise to pat third person.
    A person who purchases land from a third person and sells it to another in consideration of the latter’s agreement to pay such third person the amount of purchase money due from the promise, may sue the promisor for such amount upon his breach of the contract.
    2. Same — Damages—Measure.
    In such case, the measure of a damage is the amount due from the promisee to such third person.
    Appeal from a judgment in favor of plaintiff.
    The opinion of Mr. Justice Ingraham at special term is as follows:
    On the appeal to the general term from the judgment sustaining the demurrer there was but one question considered, and that was upon the right of the plaintiff to recover upon the judgment pleaded; and it was held that, the complaint having alleged that the judgment of a Canadian court was a personal judgment authorizing a recovery by the plaintiff of a sum of money from the defendant, and that allegation having been admitted by the answer the action upon that judgment could be maintained. Nothing was said as to the right of the plaintiff to recover for the breach of the contract set up in the complaint. Upon the question of the necessity of making Goodwin a party defendant, although that question was not discussed, the court must have disagreed with the court below, as, if Goodwin was a necessary party, the judgment would necessarily have been affirmed. The plaintiff now claims the 'right now to recover for a breach of the original obligation. The complaint alleges the making of the agreement, and its breach by the defendant, and these allegations are admitted by the answer. 'The subsequent judgment of the Canadian court, adjudging that the defendant pay the amount due to Goodwin into the court, is also alleged. It does not appear that the learned j ustice who tried the original issue of law raised by the demurrer considered the question as to whether ór not the plaintiff was entitled to recover for a breach of the original obligation, as that case appears to have been submitted to him as an action upon the judgment only. If the only cause of action set up in the complaint was upon the judgment, the other allegation of the original obligation, and its breach by tile defendant, would have been unnecessary, as the judgment itself was all that was necessary to plead. In this complaint the making by the defendant of the agreement to pay is alleged, and I can see no reason why the plaintiff is not entitled to enforce that agreement. Here the plaintiff seeks for a money judgment against the defendant, and, if that cause of action was merged in the Canadian judgment, then it would follow that the plaintiff would be entitled to recover a money judgment upon the proof of the Canadian judgment, and yet the right to recover on that judgment in this action is strenuously denied by the detendant. Nor can it be said that the Canadian judgment is an adjudication that the plaintiff is not entitled to recover a money judgment against the defendant, for by the original obligation the agreement of the defendant was to pay Goodwin the amount due by plaintiff to him, and the Canadian court held that plaintiff was bound to pay Goodwin that amount. It did not pass upon the question as to whether or not this plaintiff was entitled to recover the amount that the defendant had agreed to pay Goodwin in the case of the defendant’s failure to comply with'his agreement. Nor does it appear that in the Canadian action plaintiff claimed his right to recover a money judgment against the defendant upon the defendant’s failure to comply with his agreement to pay Goodwin. That judgment simply held that the defendant was bound to pay Goodwin, and adjudged that he should pay him; and notwithstanding that adjudication, the defendant has refused to comply with his contract.
    The plaintiff now in this action asks that he be allowed to recover against the defendant by reason of the failure of the defendant to comply with his contract to pay Goodwin what he agreed to ■ ¡ray him ; and if, upon the conceded facts, plaintiff is entitled to such a judgment, I cannot see that an adjudication of the Canadian court defendant was bound to fullfill his contract to pay Goodwin was an adjudication that plaintiff was to entitled to rec-overfrom the defendant the damages that he sustained because defendant had refused to do what he was bound to do', namely, to pay Goodwin. The defendant having answered, and the case now coming on to be tried upon the pleadings and proofs, I think the plaintiff is entitled to a determination of the question whether or not, upon the facts as admitted and proved, he is entitled to judgment against the defendant. There can be, I think, no doubt but that when A. agrees with B. to pay C. a debt which B. owes C., and breaks his agreement, C. has an action against B. for a breach of that agreement. The material question is as to the measure of damages, and this is the precise cause of» action that plaintiff alleges and the defendant admits. It is true that under this contract defendant agreed with plaintiff that he would pay Goodwin; but the contract was between the plaintiff and the defendant, and the defendant has broken his contract. The question, therefore, is whether there was a valid contract between plaintiff and defendant, based upon a good consideration, by which the defendant agreed to pay Goodwin a sum of money ; whether that contract has been broken by the defendant; and whether the plaintiff has sustained any damage in consequence of that breach of the contract. It is first necessary to understand just what promise the defendant made to plaintiff, and whether there has been a breach of that pi’omise. The complaint alleges that by a certain indenture by him made, executed, and delivered, the plaintiff, for and in consideration of the covenants and agreements of the defendant in said indenture contained, and move particularly for and in consideration of his covenant and agreement to pay the purchase price of those lands in the indenture mentioned, and in the mode therein-after stated, and for and in consideration of other good and valuable considerations, duly granted, bargained, sold, ceded, and assigned unto the defendant the lands therein described, together with the buildings thereon situated, and the appurtenances thereto belonging subject to the lien or mortgage thereon existing in favor of the said Goodwin ; that the said defendant, for and in consideration of the said grant, bargain, sale, assignment, and conveyance, and the covenants and agreements of the said Wright in the said indenture contained, duly and expressly covenanted, undertook, and agreed faithfully and truly to pay to the said Goodwin, as a part of the purchase price of the said lands, the said sum of $52,500 mentioned in a certain indenture or agreement entered into between said Goodwin and this defendant on or about the 21st day of May, 1890, at the time and in the mode in the said indenture mentioned said payment to be in full satisfaction and discharge of all claims of the said Goodwin in, upon, or against the said property or against this plaintiff ; * * * and the said Bobert W. Chapin, defendant herein, for the said consideration, duly covenanted and agreed to relieve the said Edward Wright of and from, and to indemnify him against, all liability whatsoever to the said George Goodwin under or by virture of the covenants and agreements contained in the indenture executed by the said Goodwin on or about the 22d day of October, 1889, * * * and thereby the said Bobert W. Chapin, for the said considerations, further covenanted and agreeed to relieve the said lands mentioned and described in the said deed, of and from the said lien, mortgage, or hypothecation in favor of the said Goodwin, as above more particularly mentioned and described. This allegation is admitted by the answer.

      It thus appears that defendant purchased lands from plaintiff, and as consideration for such purchase agreed to pay Goodwin, the debt that plaintiff owed Goodwin, and agreed to relieve plaintiff of and from all liability to said Goodwin. The defendant, therefore, has the plaintiff’s property, and as the consideration of the conveyance of the property he agreed to pay a debt of plaintiff’s to Goodwin, and to relieve plaintiff from the liability which he was under to Goodwin; and that covenant the defendant has failed to perform by failing to pay <$22,429.38 of the said indebtedness of plaintiff to Goodwin. This covenant is not strictly a covenant for indemnity against loss, but an express covenant to do a particular act, namely, to pay Goodwin the money due him, and to relieve plaintiff from a liability to Goodwin; and the damage sustained by plaintiff by a breach of that covenant is the amount of the liability from plaintiff to Goodwin. I think this was determined in the case of Port v. Jaclcson, 17'Johns. 239. In that case it appeared that the plaintiff, being the owner of a certain indenture of lease, assigned the same to the defendant for the consideration therein mentioned, for the residue of the term demised then unexpired, and the defendant in and by the same indenture covenanted with the plaintiff, his executors, etc., that he, the defendant, would keep and perform all the covenants, payments, and agreements mentioned and contained in the indenture of demise which, on the part and behalf .of the plaintiff, were or ought thereafter to be paid, done, and performed; that the defendant had not paid the yearly rent for tAenty-four years and a half prior to the commencement of the action to the original lessdrs; and the plaintiff in that action sought to recover from the defendant the amount unpaid; and the question was presented whether the plaintiff ought to have averred that he had been damnified by a breach of the covenant on the part of the defendant in having either voluntarily or compulsorily paid the rents in arrears, and it was claimed on the part of the defendant that until the plaintiff had paid the rent he could not maintain an action at law; in other words, that the covenant is not broken until the plaintiff has satisfied the rent. And the court said. “This is a mistake. The covenant is that the defendant shall pay the rent to the lessor as it falls due, and the moment the day of payment is passed, and the rent is left unpaid, the covenant is broken as well according to its words as its spirit, and the action is, at all events, maintainable. Another question then arises, — what shall be recovered? Nominal damages only, or the amount of the rent due? My opinion is that the latter is recoverable. The covenant is not that the defendant shall indemnify the plaintiff against his own covenant in the lease, or against any damage which he may sustain, but it is express and positive that the defendant will pay the rent, for which the plaintiff continued to be liable, notwithstanding the assignment. ■ The sum to be paid is certain and liquidated, and the breach of the covenant consists in the nonpaj^ment of it, and a plea of non damnificatus would, therefore, be no answer to the declaration.” In arguing this question the court supposes this case: “Suppose a covenant is entered into by A. with B. that .he will pay B.’s bond to a third person when it falls <due. There cannot be a question that if A. makes a default he is liable for the amount of the bond, though B. has not paid it himself.” It seems to me that this supposed, case is the exact case here. The defendant has agreed that he will pay Goodwin the debt that plaintiff owes Goodwin. The time of the payment of "that debt has arrived, and defendant has made default. And it would seem that he is liable for the amount still due upon the plaintiff’s obligation to Goodwin, although plaintiff has not paid it to Goodwin himself. I do not find that this case has been at all questioned, but it has been reaffirmed by many cases in this state. In Kohler v. Matlage, 72 K. Y. 266, the action was to enforce a bond, the condition of which was that if one Chapman “ shall well and truly pay or cause to be paid unto the proper parties the balance of the debts of the concern for manufacturing a variety of bread known as ‘Kohler’s Cream Bread,’ remaining due and unpaid upon the delivery of this bond, and which is stated by said Chapman not to exceed $2,500, within nine months after the date of the bond, then it was to be void." The court held that this was an original obligation to pay the debts, and not an indemnity against loss or damage by reason of a liability to pay the debts,— in one case the covenantee is to be saved from the thing specified, and in the other from the consequences of it, — and held that the plaintiff was entitled to recover without allegation or proof that he had paid the debts. The question is discussed at some length in an opinion of Mr. Odell, as referee, in the case of Adams v. Symon, reported in 6 if. Y. Supp. 652, and I think that opinion very satisfactorily answers the objection taken by the defendant to the recovery upon the obligation sued on in this action. The ■allegation of the recovery of the Canadian judgment is entirely immaterial here. It is, however, conclusive evidence between the parties that the defendant was bound to carry out the agreement and to pay Goodwin, and that on the date of the entry of that judgment there was due this amount claimed. The covenant of the defendant here is quite different from that before the court in the case of Slauson v. Watkins, 86 K. Y. 597, for there, as part of the consideration of the sale of the puemises by Slauson to Watkins, the latter assumed a mortgage on the property, and that consideration of the conveyance was paid by assuming the mortgage, and there could be no recovery until it was ascertained that there would be a deficiency upon the foreclosure of the mortgage. Here the covenant was, not that the defendant would assume a mortgage, but that he would pay to Goodwin the amount that plaintiff owed him. I think, therefore, that on the conceded facts, under the authority stated, plaintiff is entitled to judgment against the defendant for the amount claimed with interest, and judgment is directed accordingly.

      H. C. Closson, for app'lt; Arthur G. Rounds, for resp’t.
   Per Curiam.

The defendant seems to be greatly distressed by the fear that, in case he pays this judgment, the plaintiff may decamp with the money, and the defendant left to pay the Canadian judgment of- a like amount. Should the defendant pay the Canadian judgment, and so relieve the plaintiff in this action from his liability on his covenant to George Goodwin, there might be a way found of reducing the present judgment by the amount paid on the Canadian judgment, without making double payment.

The judgment should be' affirmed, with costs, on the opinion of this court reported in 74 Hun, 521; 56 St. Rep. 718, and on the opinion of Mr. Justice Ingraham rendered' on the trial of this action.


author: Herrick, J.

text:
    Catharine Baker, as Administratrix, etc., Resp’t, v. John N. Sutton et al., App’lts.

      (Supreme Court, General Term, Third Department,

      Filed May 29, 1895.)

    Bill of Particulars — Sufficiency.
    A bill of particulars, in an action to recover damages for causing the death of plaintiff’s intestate, which, after stating certain particulars, alleges “that the defendants were negligent in other respects, whereby plaintiff’s intestate’s death was caused,” is insufficient.
    Appeal from an order denying a motion to require plaintiff to furnish a further bill of particulars.
    The allegations of the complaint as to the happening of the-accident and defendants’ negligence in regard thereto are as follows :
    “Second. That on or about tlioe 8th day of June, 1894, one Warren M. Baker was, and had been for 'some time previous thereto, in the employ of the said defendants as a teamster, engaged in drawing sand and clay on premises belonging to. said defendants in the town of Coeymans; that on said 8th day of June, 1894, while the said Warren M. Baker was engaged in the performance of his duty, and when'in the act of loading his wagon with sand or clay from a sand or clay bank on the premises hereinbefore mentioned, the said sand bank or clay bank at which the0 said Warren M. Baker was working slid or fell upon said Baker, covering said Baker, so that he suffocated and soon after died. Third. That said accident was caused wholly by the carelessness, reckless-, ness, and negligence of the said defendants, and without any fault, or negligence on the part of the said Warren M. Baker contributing thereto.”
    On defendants’ motion plaintiff was ordered to furnish a bill of particulars, showing what carelessness, recklessness, or negligence on the part of the defendants, 'or either of them, caused or contributed to the death of plaintiff’s intestate, as claimed by the plaintiff in this action. In compliance with the order plaintiff served a bill of particulars as follows:
    “First. That the said defeudants negligently permitted the plaintiff’s intestate to work in a dangerous and unsafe place, without notifying him of the unsafe condition of the same. Second. That said defendants did not provide and maintain a safe and suit- . able place for the plaintiff’s intestate to do the work in which he was engaged. Third. That the said defendants did not causea proper inspection of the place in which the plaintiff’s intestate was engaged at work, at the time of the accident, to be made, and when the plaintiff's intestate met his death, on the 8th day of June, 1894. Fourth. That the said defendants were negligent in other respects, whereby plaintiff’s intestate’s death was casued.”
    Thereupon defendants moved-for a further bill of particulars.

      Parker & Fiero (Amasa J. Parker, Jr., of counsel), for pl’ff ; Frank H. Osborn, for def’ts.
   Herrick, J.

The office of a bill of particulars is to apprise the adverse party of the specific charges made against him, so that he may know exactly what he must prepare to defend. It serves as an amplification of the pleading, and limits the party making it to proof of the things specified. The fourth clause of plaintiff’s bill, “that the said defendants were negligent in other respects, whereby plaintiff’s intestate’s death was caused,” obviously does not give the defendants any notice of what they must be prepared to meet, upon the trial. Under it no limitation can be imposed as to proof upon the trial. It simply apprises the defendants that, in addition to the matters set forth in the complaint, and in the preceding clauses of the bill, there are other acts of negligence, which she does not in any wise specify, which caused the intestate’s death. The little good there is in the proceeding clauses is absolutely destroyed by the fourth. If it is held good, then, when the trial is had, the plaintiff need not give any proof as to the particulars set forth in the preceding clauses .of the bill, but give evidence under the last clause, which gives no information to the defendants, and which is more general and indefinite than the complaint. The order should be reversed, and an order for a further bill of particulars granted, with $10 costs of motion, and costs and disbursements of this appeal.


author: Parker, J. Van Brunt, P. J.

text:
    Thomas H. O’Connor, Resp’t, v. Peter W. Felix et al., Def’ts. Michael H. Hagerty, App’lt.

      (Supreme Court, General Term, First Department,

      Filed May 17, 1895.)

    1. Judgment — Collateral attack.
    A judgment cannot be collaterally attacked by the defendant therein, on the ground that he was not served with the summons, but only by direct motion in the action.
    2. Mortgage — Foreclosure—Purchaser—Title.
    The purchaser at a foreclosure sale will not be relieved from his bid on the ground that the mortgagor was not served with the summons in such action, where there is no reasonable ground to believe that the mortgagor could succeed in setting aside the judgment by a direct proceeding.
    Appeal from an order, confirming the referee’s report and directing the purchaser at the foreclosure sale to complete his purchase.

      James A. Deering, for app’lt, Hagerty; Richard O' Gorman, for resp’t
   Parker, J.

The appellant, a purchaser at a foreclosure sale, insists that the order requiring him to complete his purchase should not have been granted, because the title téndered is not marketable. The judgment under which the sale was had was rendered in a suit to forclose a mortgage of $25,000, made by the ■defendants Peter W. Felix and wife to the plaintiff, covering eighteen lots of land in the city of New York. February 10,1893, judgment of foreclosure and sale was granted and entered on the usual affidavits, showing that all of the defendants had either been served or had appeared. At the sale had thereunder, Patrick Fox, one of the defendants, bid in two of the lots, and afterwards failed to complete his purchase. An order was made requiring him to complete, which was not complied with. Thereafter a third order for the sale of the lots was made, at which sale Michael H. Hagerty, this plaintiff, became the purchaser. Between the sale and the time fixed, by -the terms of sale, for'the completion of his purchase, there was served upon him an affidavit made by the mortgagor, Peter W. Felix, entitled as of the suit in foreclosure, in which the affiant stated that he had been informed that an affidavit was on file with the judgment roll in the action, alleging that he had been duly served with a summons and complaint, but that such complaint was never served upon him. For this reason Hagerty refused to complete his purchase, and thereafter a motion was made by the plaintiff to compel him to complete, which was opposed by Hagerty, who presented on the motion the affidavits of Felix and Fox, as well as his own affidavit; and the court in pursuance of the provisions of section 1015 of the Code of Civil Procedure, appointed a referee to hear and determine whether the amended summons and copy of amended complaint in the answer were personally served on Peter W. Felix. The referee took the proofs offered, and reported that service had been made upon Felix, as stated in the affidavit of service annexed to the judgment roll. This report was confirmed at special term, and an order made requiring the purchaser to complete the sale. Hpon the hearing, Felix testified that he had never been served with a summons and complaint. Having been informed by his brother-in-law Patrick Fox that papers were to be served-upon him, that he ought to avoid service, and, in order to do it, would have to keep out of the way, he took the advice, and acted accordingly. His testimony, with that of Thomas Colwell and Bernard Mulligan, was to the effect that, by a ruse, the process server, York, was led to serve the summons on anotherparty, supposing him to he Felix. Mr. York, who made the affidavit of service, testified that, before making the service, he had obtained a description of Felix, and was informed by the janitor of the building in which Felix was working who Felix was, and, when Felix was coming out, he served him with the summons, having first addressed him, “This is Peter W. Felix ?” and received the reply, “ If- it is, what do you want of me?” after which the man served, took the papers and put them in his pocket. When brought face to face with the defendant Felix on the reference, Mr. York swore positively that Felix was the man upon whom he had served the papers.

While in numbers Felix’s witnesses predominated, still our examination of the testimony satisfies us that this was a proper case in which to bear in mind the rule that testimony of witnesses is to be weighed, not counted; and we concur in the report that service was in fact made by York upon Felix, as stated in the affidavit annexed to the judgment roll. But the purchaser urges, however firmly convinced this court may be that the referee and the special term reached a correct conclusion in determining that the summons was served upon the defendant Felix, still the purchaser ought not to be compelled to take title, for the question of service is yet open to an attack by Felix. True, but it can only be attacked by a direct motion in this action, and from the evidence brought out on this motion it is apparent that the same result must follow. The assertion we have made that this judgment can only be attacked hereafter by direct motion is controverted by several authorities in this state ; still we regard it as accurately expressing the present state of the law.

In Ferguson v. Crawford, 70 N. Y. 253. it was held that a recital in a judgment roll in an action of foreclosure that the defendant was served with the process, and appeared therein, was not conclusive, and did not preclude such defendant, in an action brought by him to foreclose a junior mortgage, from showing that he was not in fact served, and that he did not appear. The question was elaborately discussed by the court, authorities of many jurisdictions being considered; and, in the course of the opinion, the court said:

“ After considerable research, I have been unable to find a single authoritative adjudication in this or any other state deciding that, in the case of a domestic judgment of a court of general jurisdiction, want of jurisdiction over the person may be shown by extrinsic evidence; while there are a great number of adjudications in neigboring states holding that, in the case of such judgments, parties and privies are estopped in collateral actions to deny the jurisdictions of the court over the person as well as the subject-matter, unless it appear on the face of the record that the court had not acquired jurisdiction, and that in such cases there is a conclusive presumption of law that jurisdiction was acquired by service of process or the appearance of the party.”

This assertion was not only borne out by the authorities in other jurisdictions, to some of which the learned judge referred, but there was at that time no authority in this state holding to the contrary in the case of a domestic judgment rendered by a court of general jurisdiction. Judge Marcy, however, in Starbuck v. Murray, 5 Wend. 148, which was an action for debt on a judgment rendered in a sister state, commenced by attachment of goods had, held that the defendant could plead, in bar of a recovery, that no process was ever served upon him in the suit in which the judgment was rendered, and that he never appeared therein in person or by attorney, notwithstanding the averments in the record to the contrary. This decision has been "followed in a few other cases at the time the opinion in Ferguson's Case, supra, was written, and to them reference was made, as establishing the law in this state to be that, in regard to judgments of sister states, the question of jurisdiction may be inquired into, and the want of jurisdiction over the person shown by evidence. Starting with that proposition, it was argued in Ferguson's Case that there was no basis upon which to rest a distinction between domestic judgments and judgments of sister states, in view of the provisions of the constitution of the United States requiring full faith and credit to be given in each state to the public acts, records, and judicial proceedings of every other state; and, as the court could find no-room for distinction between the two classes of judgments, it held that, so far as this state is concerned, the rule of Starbuck's Case, supra, must be held to apply to domestic judgments' as well. The-mistaken positions which sometimes result from so close an observance of the rule of stare decisis as overlooks the error involved in the decisions invoked rarely have a better illustration. Mr, Justice Marcy in his opinion said :

“ So long as the question of jurisdiction is an issue, the judgment of a court of another state is in its effect like that of a foreign judgment; it is aprima facie evidence; but, for all the purposes of sustaining that issue, it is examinable into, to the same extent as a judgment rendered by a foreign court.”

—Thus overlooking the constitutional provisions invoked in Ferguson's Case. In other words, the court said:

. “ The question of jurisdiction may be inquired into as to a foreign judgment. The judgment of a court of another state is in its effect like that of a foreign judgment. Therefore the question of jurisdiction as to the judgment of another state may be inquired into.”

In Ferguson’s Case, the court decided that it having been determined that judgments of sister states may be inquired into as to-the question of jurisdiction, and it being settled that under the provisions of the constitution of the United States, when the judgment of a court of a sister state is duly proved in a court of this state, it is entitled here to all the effect to which it is entitled in the courts of the state where rendered, therefore the jurisdiction of a court of general jurisdiction in this state to render a given judgment may be attacked collaterally. The proposition in Starbuck’s Case that “ it is a fundamental rule that no court can acquire jurisdiction by the mere assertion of it, or by deciding that' it has it,” is discussed in Van Fleet’s Collateral Attack (page 472) in these words :

It sounds plausible, but * * * the fallacy lies in confusing law with right. A judgment rendered after the utmost care, at the end of an important trial, may not be right, and it may unjustly sweep away the life, liberty, or property of the defendant ; yet it is lawful, and a just and rightful foundation for the titles of others; and, although wrong in itself, it is lawful and right collaterally. The question of service or appearance must be-decided by the court in each case, as a question of fact; and it is-the allegation of the plaintiff that he has caused service to be made,, or the defendant to appear, which gives the jurisdiction to hear his evidence on that point.”

Ferguson's Case came again before the court of appeals in 86 N. Y. 609, where it was held that the evidence adduced on the new trial, for the purpose of showing that the defendant was not served, was insufficient to rebut the presumption in favor of the regularity of the judgment. It was also cited with approval in People v. Warden of County Jail, 108 27. Y. 20, which was an appeal from an order of the general term affirming an order of the special term dismissing a writ of habeas corpus, and remanding relator to custody. It is again cited with other cases in Craig v. Toiua of Andes, 93 27. Y. 405, as authority for the proposition that it is “ now well established that the record, whether of a superior or inferior court, is never conclusive as to the existence of a j urisdictional fact, and that a defendant may show a want of jurisdiction, although the record avers to the contrary.”

Bolton v. Schriever, 135 N. Y. 65; 47 St. Rep. 870,was an action of ejectment to recover possession of a lot of land on Tenth.avenue, of which Theodore B. Talmadge died seized. Talmadge’s will was admitted to probate by the surrogate of the county of 27ew York. Plaintiffs’ position was that Talmadge was not an inhabitant of 27ew York county at the time of his death, and therefore the surrogate had no jurisdiction to take proofs of the will; and, as there was no other proof of the execution of the will, the defendants made out no title to the land, and the plaintiffs were entitled to recover it as heirs at law of Talmadge. It was held, as the surrogate has power and is bound to inquire and decide whether the testator was an inhabitant of the county at the time of his death, his decision that he was, upon legal evidence tending to support it, could not, in the absence of fraud or collusion, be questioned. For the same reason, it would seem that a judgment of a court of general jurisdiction should be protected from collateral attack, for, before the court can render the judgment, it must decide, upon evidence before it, that jurisdiction of the defendant has been acquired in the manner provided by statute.

In the recent case of Murphy v. Shea, 143 N. Y. 78; 60 St. Rep. 464, an action was brought to compel a purchaser to take title, which he had declined to accept on the ground that it was not marketable, it appeared that the seller had obtained his title under a judgment of foreclosure. One of the defendants was an infant, for whom a guardian ad litem had been appointed upon a verified petition presented by the father of the infant, in which it was stated that the summons and a copy of the complaint were served on the infant at a time stated. After the sale the purchaser procured an affidavit of the father, in which he stated that he was mistaken when he said that the summons and complaint had been served on the infant in the petition requesting his appointment as guardian ad litem, and denied that the infant had been served. On the affidavit he made a motion to be relieved from his purchase, and the motion was denied, and he compelled to take title. On the argument in the court of appeals it was insisted that this decision constituted another adjudication as to the jurisdiction of the court in foreclosure actions and therefore not the subject of collateral attack. This proposition the court did not pass upon. Instead it said: “ If we assume without in any manner deciding that the defendant is mistaken in that matter, the plaintiff is no better off.” And then, proceeding with the assertion that the burden rested upon the plaintiff to show that there was no service, it demonstrated that the burden thus resting upon him had not been met.

The decision in Washbon v. Cope, 144 N. Y. 287; 63 St. Rep. 716, in which the opinion of the court was delivered by the learned judge who wrote the opinion in Murphy v. Shea, supra, persuades us that had it been necessary for the court to pass upon the question whether the judgment which was the subject of consideration in that case could have been attacked collaterally, on the ground that the court had not acquired jurisdiction by the service of the summons and complaint upon the infant defendant, it would have been answered in the negative. In Washbon's Case it was contended by Mrs. Cope, a defendant, that no effect could be given to a certain decree of the surrogate’s court, because she was not served with a citation in the proceeding, and the alleged appearance of the attorney therein for her was wholly unauthorized, by reason of which the surrogate failed to acquire jurisdiction. This position ' the court held to be untenable. It said.

“It has been settled by an unbroken line of decisions in this state," running many years back, that unless under some peculiar and extraordinary circumstances, not existing in this case, the objection that a party was not served, and an appearance by an attorney in a court of record for such party was unauthorized, and hence that the judgment was without jurisdiction, cannot be taken in a collateral proceeding or action, and that the party is confined to a motion in the original action in order to obtain relief.”

As authority for this position, it cited, among other cases, Vilas v. Railroad Co., 123 N. Y. 440 ; 34 St. Rep. 67. In Vilas Case, it is true, it was not necessary to pass upon the question whether a domestic judgment of a court of general jurisdiction can be attacked collaterally for want of jurisdiction, owing to the failure of service of process or the nonappearance of attorney; for the question was raised by a motion to open the judgment, and to set aside and vacate an appearance in the action by an attorney. The authorities, however, bearing upon this general question, are quite fully considered ; the court holding that it has become tbe settled ' practice in this state that relief against á judgment rendered against a party upon an unauthorized appearance of an attorney in his name is to be sought in a direct application to the court by motion in the action in which the unauthorized appearance was entered, and that equity will not take jurisdiction to set aside a judgment unless the court can see that the circumstances are such that the right to or measure of relief cannot properly be determined on motion. Y7hile these later decisions do not in terms overthrow the rule of Ferguson's Case, they accomplish practically that result by restricting its operations to a limited class of cases in which relief cannot be had on a motion. They clearly deny the right of the defendant Felix to attack this judgment, which was rendered upon evidence of service of the summons upon him other than by direct motion, for he had full knowledge of the fact that the judgment roll contained an affidavit showing that service had been made upon him prior to the sale under which the defendant became the purchaser, and had full opportunity to obtain relief, if he was entitled to any, by a motion to open the judgment. Our conclusion, therefore, is that the title is marketable.

The order should be affirmed, with §10 costs and printing disbursements.

Van Brunt, P. J.

I concur, upon the gronnd that there is no reasonable ground to suppose that Felix could succeed in setting aside this judgment by a direct proceeding.

O’Brien, J., concurs.


text:
    Stanley H. Bevins, Resp't, v. Annie Albro, App’lt. (Two Cases.)

      (Supreme Court, General Term, Third Department,

      Filed May 29, 1895.)

    Attorney and client — Lien—Set off.
    The lien in favor of defendant’s attorney on judgment rendered in favor ' of defendant for costs attaches immediately upon its rendition, and a judgment against defendent in another action between the same parties cannot be set off against it.
    Appeal from an order, staying all proceeding on an execution issued bv defendant in the first action until the- determination of an appeal taken by defendant in the second action, arid directing that, in case the judgment in the second action is affirmed, the judgment in the first action be set off against, and complied towards the satisfaction of, the judgment in the second action.

      S. M. Richards (C. H. Sturgis, of counsel), for app’lt; Lyman Jenkins, for resp’t.
   Herrick, J.

We have heretofore held that the costs recovered in an action belong to the attorney, without any assignment; and that the claim of the attorney thereto is superior to the right of the adverse party in the action to set off claims against the successful party. Delaney v. Miller, 84 Hun, 224; 56 St. Rep. 834. A distinction is sought to be made between an attorney for a plaintiff and an attorney for a defendant, where no counterclaim is contained in the answer. And it is claimed that under section 66 of the Code of Procedure attorneys for defendant only have liens for costs, or are entitled thereto, when the answer contains a counterclaim. Section 66 was not intended as a limitation upon liens of attorneys for their costs, but as an extension ; it was intended as an additional security for them. By it the lien is made to attach to the cause of action, whether that cause of action is set forth in a complaint or in an action by way of counterclaim ; and it attaches just as soon as it is asserted,— in the case of a plaintiff’s attorney, when the summons is served ; in the case of a defendant’s attorney, when the answer is served, if it contains a counterclaim. The only change in the law affected by the section is to give attorneys liens upon causes of action before they are perfected into judgments. Obviously, an attorney fur a defendant who has no cause of action to assert gets no benefit under the section, and therein is the only difference between liens for plaintiffs’ and defendants’ attorneys; it is a difference that only obtains before judgment.

The cases of Pierson v. Safford, 30 Hun, 521, and Levis v. Burke, 51 Hun, 71; 20 St. Rep. 789, referred to to sustain the claim that attorneys for defendants, who have not pleaded counterclaims nave no liens for costs, are both cases arising upon settlements made before judgments obtained, without paying the attorneys for their services, and, there being no counterclaims, there was nothing to which the liens could attach;' and therefore the court held in each case that it did not come under the provisions of section 66, and the attorney could get no relief at its hands. Here a judgment has been obtained by the defendant for costs. The lien of his attorney attaches upon its rendition. Unlike the cases of Pierson v. Safford, and Levis v. Burke, there is here something in existence, upon which, or to obtain which, the attorney has exercised his skill and spent his labor, and upon which the court can act to protect him. “ It has long been settled that an attorney has a lien for his costs and compensation upon the judgment recovered by him.” Marshall v. Much, 51 N. Y. 140. It makes no difference whether the attorney is attorney for a plaintiff or for a defendant These views lead to a reversal of the order appealed from.

Order reversed, with costs and disbursements.


author: Green, J.

text:
    Delaware, Lackawanna and Western Railroad Company, Pl’ff, v. New York, Susquehanna and Western Railroad Company, Def’t.

      (Supreme Court, Erie Special Term,

      Filed April, 1895.)

    1. Corporation — Foreign—Jurisdiction.
    Whether a cause of action arose within the state, or within the boundaries of a foreign state, must be determined by the allegations of the pleadings exclusively, and no affidavits can be received in the consideration of that question.
    2. Same.
    The regular mode of raising the question of jurisdiction of the cause of action, or of the subject-matter of the action, or of the power of the court to grant the particular relief prayed for, is by the interposition of a demurrer or answer to the complaint, and not by motion to dismiss.
    3. Same — Comity.
    The courts of this state will decline, on the ground of comity, to enjoin, at the instance of a foreign railroad company, the breach of a contract by another foreign railroad company for transportation in a foreign state.
    4. Same.
    Such cause of action is not one arising in this state.
    Motion by "plaintiff to continue an injunction, and by defend- " ant to dismiss the action or set aside the service of summons and complaint.

      Sherman S. Rogers (John George Milburn and M. E. Olmsted, of counsel), for pl’ff; James C. Carter (E. Carlton Sprague and George E. Brownell, of counsel), for deft.
   Green, J.

This-matter comes before the court upon the order to show cause why the preliminary injunction granted plaintiff should not be continued in force. Anu also upon an order to show cause, obtained by the defendant, “ why this action should not be dismissed, or the service of the summons and complaint herein vacated and set aside.”

We will consider the last motion first. As there is nothing in the affidavit showing that service was not regularly made in conformity with the provisions of the Code, we must assume that the defendant is properly brought into court, and that jurisdiction of the “ person ” of the corporation has been acquired. Consequently the motion to dismiss the action or to vacate the service of the •summons cannot be maintained on the ground that the court has no jurisdiction of the “person” of the defendant.

But the court is also asked to dismiss the action upon the ground that, as both parties are foreign corporations, the court has no jurisdiction of the cause of action alleged in the complaint, and possesses no power to grant the relief demanded. Whether the alleged cause of action arose within the state, or within the boundaries of a foreign state, must be determined by the allegations of the pleadings exclusively, and no affidavits can be received in the consideration of that question. Therefore, we hold that affidavits presented have no relevancy to the matters to be determined, and are not properly before the court. The regular mode of raising the question of jurisdiction of the cause of action or of the subject-matter of the action, or of the power of the court to grant the particular relief prayed for, is by the interposition of a demurrer or answer to the complaint. A mere motion to dismiss the action on that ground is not the proper method of procedure, and it' ought not to be entertained. Atlantic & P. Telegraph Co. v. Baltimore & O. R. Co., 87 N. Y. 357; Toronto General Trust Co. v. Chicago, etc. R. Co., 32 Hun, 192. This objection is raised by defendant’s answer and may be determined on the trial of the action, and we doubt the propriety of entertaining the motion at special term. It follows that the motion to dismiss the action on this ground must be denied.

But the defendant also prays for such other and further relief as may be just in the premises. It appears that the preliminary injunction granted was vacated upon defendant’s giving an undertaking as provided by section 629, Code Civil Procedure, but previous thereto leave was granted plaintiff to move to continue such injunction, and a motion for that purpose is now made. The question is now presented whether the courts of this state have or possess jurisdiction of the cause of action alleged in the complaint, and that depends upon the determination of the question whether the cause of action arose within the state. It is also to be considered whether this court has to the particular relief prayed for, and whether a decree enjoining a foreign railroad corporation frorq doing, in the foreign domicile, the acts and things stated in the prayer for relief, would be there regarded as of any binding force, effect or validity; and, further, whether the court, sitting as a court of equity, might not properly decline to grant injunctive relief in the particular case, even though it. possessed jurisdiction of an action for damages. In the first place it should be observed that .in our opinion the statute of 1855 (chapter 244) has no important or material bearing upon the case. It does not confer upon the plaintiff any special power or authority, either in respect to the making of contracts in the prosecution of its lawful business, or in respect to its legal capacity to sue. By the common law, a foreign corporation could maintain a suit at law or in equity in the courts of this state. Bank v. North, 4 Johns. Ch. 372 ; Bank t. Thorp, 6 Cow. 47; Bank of Commerce v. Rutland, etc., R. Co., 10 How. Pr. 7. And legislative authority to sue at law upon filing security for costs was conferred by the Revised Statutes. 2 Rev. St. p. 457, § 1. And a foreign corporation may make and enforce in this state contracts which by its uharter it is competent to enter into, and which are not forbidden by law or contrary to the public policy of the state. Bard v. Poole, 12 N. Y. 495 ; 2 Rev. St. p. 457, § 2. The statute of 1855 also subjects the plaintiff to liability to be sued in any of our courts; but that provision must be taken with reference to the existing provisions of the law relating to suits against foreign corporations, and the subsequent amendments or alterations thereof, and with regard to the jurisdiction of the particular court.

But the question here is not as to the legal capacity of the plaintiff to sue nor its liability to be sued, nor as to its power to-make contracts to be performed in the foreign domicile, but as to the liability of defendant to be sued in our courts upon the cause of action alleged, and to be enjoined here from exercising some of its corporate powers andf ranchises in the foreign state; in other words, whether this court has jurisdiction of the cause of action, or any power to grant a decree, that would be effectual in the foreign state. The act of 1855 has no bearing whatever upon this question. By the rules of the common law, service of process on the president or principal officer of a corporation must be within the jurisdiction of the sovereignty where the artificial body exists. And, inasmuch as the corporation can have no legal existence out of the boundaries of sovereignty that created it, it follows that, if a foreign corporation can be brought into court, it must be by some statutory provision. “It may be conceded that before the Revised Statutes, a foreign corporation could not be sued at law in our courts.” Gibbs v. Insurance Co., 63 N. Y. 116. In other words, that our courts had no common-law jurisdiction of such corpora.tions, and could acquire none without'their consent. Whitehead v. Railway Co., 18 How. Pr. 230; Hann v. Improvement Co., 7 Civ. Proc. R. 223. We must look, therefore, to the statutes for authority or-jurisdiction to entertain this particular action. By the provisions of the Revised Statutes (2 Rev. St. p. 459, § 15, as amended by Laws 1849, chap. 107), relating to “proceedings by and against corporations in courts of law,” jurisdiction was conferred by actions for the recovery of any debt or damages arising on contract executed or delivered within this state, or upon any cause of action arising therein. The same legislature of 1849, later in the session, added section 427 to the Code of Procedure, by which an action was authorized to be maintained “by a plaintiff, not a resident of the state, when the cause of action shall have arisen or the subject of the action shall be situated within this state.” There is no limitation here to actions at law or actions for damages.

By section 1780, Code Civ. Proc., “an action against a foreign corporation may be maintained by another foreign corporation or by a nonresident, in one of the following cases only: (1) Where the action is brought to recover damages for the breach of a contract made within the state or relating to property situated within the state at the time of the making thereof. * * * (3) Where the cause of action arose within the state, except where the object of the action is to affect the title to real property situated without the state.” Did the cause of action arise within this state ? By the terms of the contract defendant was to deliver the coal in Pennsylvania, and to pay for its transportation in Hew York. “The breach of duty is substantially the cause of action.” 10 How. Pr. 9. “The cause of action arises when that is not done which ought to have been done, or that is done which ought not to have been done. But the time when the cause of action arises determines also the place where it arises, for when that occurs which is the cause of action the place where it occurs is the place where the cause of action arises." Bank v. Lacombe 84 N. Y. 385; Toronto General Trust. Co. v. Chicago, etc., R. Co , 32 Hun, 192.

The ground of action, the foundation upon which it is based, is not the refusal to pay in Hew York, but rather the refusal to deliver the coal in Pennsylvania, and that is the breach of the obligation complained of. In other words, this action is not brought to recover damages for the breach of the contract, but to enjoin and restrain the defendant from violating the terms of the contract in that state ; in substance and effect, to compel or enforce the performance of its provisions in the foreign jurisdiction. Hone of the matters and things that plaintiff seeks to enjoin the defendant from doing, or to enforce the performance of, are required by the agreement to be done in this state, nor could they be performed here. It is difficult, therefore, to perceive how it can be maintained that this cause of action arose here.

But there are broader grounds upon which the decision of this matter may be placed, and they afford insuperable objections to the exercise by the courts of this state of tire power to enforce, by injunction or in any other method of procedure, a contract made by two foreign railroad companies in respect to the business of transportation in the foreign state, and imposing restrictions upon one of them in the full exercise of the corporate rights, powers, and franchises conferred by the foreign sovereignty. These railroad companies are, in some sense, public corporations of Pennsylvania. Their roads are public highways in that state, and the extensive powers they exercise, and the duties and obligations imposed upon them by the law, are to a great extent public in their nature and character, and they peculiarly relate to the people of the state by which they were created. Any attempt to interfere by injunction with the business of railroad transporation in Pennsylvania, or to regulate or control the railroad company in the exercise of its corporate rights and powers, or to restrain it to the least extent in the full performance of its public duties, would undoubtedly be viewed by the courts of that state as an impertinent interference with its domestic affairs and the due administration of the local concerns of an independent sovereignty. As a matter of comity between the states, we are bound by every consideration of policy, expediency, and propriety to abstain from taking jurisdiction of a controversy of this character. “It is clear that no duty devolves upon this state to entertain jurisdiction of the controversy. Indeed, it might well be suggested that to do So, instead of comity, would savor somewhat of impertinent interference. * * * Even the domestic origin of the cause of action, although allowed by the Code, existing alone, might, and probably would, be disregarded by other states when called upon to give effect to the'judgment. * * * To say in such a case that the cause of action exists or has arisen in Mew York, or that the legislature contemplated assuming jurisdiction in such a case, would seem little short of preposterous" Cumberland Coal & Iron Co. v. Hoffman Steam Coal Co., 30 Barb. 171. The complaint implies a wrong, a breach of duty, done or suffered by the defendant, to the injury of the plaintiff, for which the relief asked, if obtained, will be a remedy. The cause of action is the right to that remedy, and that accrued and the cause of action arose when and where the wrong or breach of duty- was done or suffered. Id. 169. The whole controversy appropriately belongs to the tribunals of Pennsylvania, the creator of these artificial bodies and not to the tribunals of this "state; and this court may well decline to assume jurisdiction or to grant the equitable relief by injunction. To warrant the granting of such relief in any case against a foreign corporation, in respect to acts to be done or performed in the foreign domicile, “ there must be either a necessity or a fitness suggested by the peculiar circumstances.” Id. 171. Assuming that a suit in equity for an injunction may be maintained by one foreign corporation against another in some cases,— even though it may operate upon and affect its actions in'the common domicile, — it is very clear to us that this is not one of them; and, even assuming that the cause of action partly arose within the state, it by no means follows that the plaintiff is entitled to call into exercise the equitable powers of the court, and to obtain relief for the enforcement of the contract by ah injunction order.

The order restrains the defendant from “ in any wise” violating the agreement set forth in the complaint, and from transporting to market any anthracite coal whatsoever from lands in the Lackawanna valley over any other railroad or in any other manner than as specified in the agreement, and from delivering to the Wilkesbarre Railroad Company, or any other carrier, any of the anthracite coal mentioned in the complaint, and which by the agreement was to be transported by the plaintiff; and also from receiving from the Wilkesbarre Company any coal either^ belonging to or controlled by the defendant, and which under said agreement was to be transported by the plaintiff, and from diverting to said company, or to the railroad of any other company, any of the said coal, “or in any other respect violating or failing to perform the said agreement.” The effect of this injunction is not only to restrain the defendant from transporting the coal over its railroad as now constructed or as hereafter extended, but also from delivering it for transportation to any other railroad company or public carrier; and it thus operates on and affects other railroad corporations in Pennsylvania, and prevents them, to this extent, from exercising their corporate powers and performing their corporate duties as public carriers. And, as it attempts to enjoin the defendant from receiving the coal from the Wilkes-barre Company, it hinders and prevents that company from transporting and delivering it. Whether the provisions of such a contract are valid or not, and whether or not the defendant may be enjoined from violating it, and in what respects and to what extent it may be enjoined, are questions to be answered and determined by the laws of Pennsylvania, to be ascertained by an examination of the legislative acts and the adjudications of the courts, and by the judicial tribunals of that state must they be ultimately determined. The contract may be opposed to some doctrine of “ public policy” prevailing in that state, or it may violate some rule of the common law, or it may be in contravention of the “spirit,” is not the letter, of some provision of the charter of incorporation, or of some provision of the statutes relating to railroad companies, but the decision of these questions peculiarily and most appropriately belongs to the courts of the state by which these corporations were created’, and which are regulated and controlled by the legislative, executive or administrative, and judicial authorities or tribunals there existing. The validity, obligation, and interpretation of the contract must be determined by the laws and public policy of Pennsylvania.

This court should not intermeddle in a controversy of this nature, arising between two railroad corporations of a sister state, and to specifically enforce a contract of such a character, by enjoining the defendant from doing certain acts in the foreign domicile. How would the courts of Pennsylvania regard an injunction issued by this court if the controversy should be transferred there? Suppose either of these parties should institute a proceeding in the courts of that state, even after final judgment for the plaintiff rendered here, would the matters here determined be regarded as res adjudícala ? Would the judgment operate as a bar or an estoppel ? Suppose the courts there should be of the opinion that the contract was invalid for any reason, or upon any ground of public policy or statutory law, would they hold themselves bound by the adjudication here, give effect to the judgment, and enjoin the defendant from doing acts w'hich, in their opinion, it had a legal right to do ? No authority or precedent has been produced, and we believe none can be'found, in support of this injunction. By one of the provisions of this contract the defendant agrees not to build a line between the colleries and Gravel Place, and the language of the injunction is broad enough to cover this, but, of course, it would be regarded as a nullity in Pennsylvania.

Plaintiff’s counsel insists that the transportation part of the contract is severable from that pertaining to the relations of the parties as coal owners and coal sellers ; that the provisions relating to the production of coal, the area in which it might be sold, and the price at which it should be sold, were foreign to the actual transportation of the coal tendered for transportation. Conceding this, it does not follow that the court should sustain an injunction pendente lite. The fact that there are grave questions of public policy involved in this controversy, which must ultimately be determined by the judicial tribunals of Pennsylvania, and these matters arise out of one and the same contract, and are intimately connected' with the traffic arrangement, is sufficient warrant for a court of equity to decline to issue an injunction before the trial of the whole matters in controversy. We are not called upon to make a decision upon the validity of this contract, or any part of it, nor do we intend that the views here expressed respecting the power and jurisdiction of the court to grant a final judgment shall conclude the court upon the final hearing, so as to preclude it from making a re-examination of the questions involved. It is sufficient for the present purpose to hold that, for the reasons given, the right of the plaintiff to maintain this action is one of great doubt, and in such cases a preliminary injunction is never granted. In the language of the court in Chase v. Vanderbilt, 37 N. Y. Supr. Ct. 356, “it seems to me that the examination into the question of the foundation of the plaintiff’s right to any judgment must inevitably extend beyond the jurisdiction of this court, and must have reference to the obligations and business of a foreign corporation in a foreign state. The examination of the questions involved relate to subjects beyond, and over which this court has no control.” And the court cannot obtain jurisdiction by acting on its directors. Affirmed in 62 N. Y. 307. In the case of Atlantic & P. Telegraph Co. v. Baltimore & O. R. Co., 46 N. Y. Supr. Ct. 377, where an action for injunction was brought by a domestic corporation against a foreign and domestic corporation, the court discusses the question of the power of the court to enjoin foreign corporations from doing certain acts in the foreign state. Id. 384, 386, 398, 416, 417. “The defendants are a corporation organized under the laws of New Jersey, and must be deemed nonresidents of this state. This judgment, therefore, cannot be enforced by process of attachment and proceedings as for a contempt as against citizehs of this state. Such an attempt and proceeding would obviously prove utterly abortive.” Id. 425, quoting People v. Central R. Co., 42 N. Y. 306.

The liabilities which the defendant is under, as well as those which the plaintiff has assumed, must be determined by the local laws of that state, where they were created as administered by its appropriate tribunals. At every step these must have the right to determine, as occasions for intervention arise, whether the duties imposed upon the defendant are being performed and the laws of the state observed. Its own rights in making contracts like that here presented must depend on the local laws which govern its creation, and whatever these may be, we have no such control over it that we could enforce any decree against it. Kansas & E. R. Const. Co. v. Topeka, S. S. & W. R. Co., 135 Mass. 38.

Aside from the question of power depending on the right of jurisdiction, we regard it as within the power of this court, sitting as a court of equity, to decline to exercise jurisdiction in such cases, referring parties to the tribunals of the state upon whose laws their relations and rights peculiarly depend, and where alone they can be effectually and properly administered. Smith v. Insurance Co., 14 Allen, 343. Where the cause of action arises abroad ; where it affects only the internal government of the corporation ; where the judgment, if rendered, cannot be in any way enforced against them, except by injunction against the individual members of the corporation, and the party has an ample remedy in the state where the corporation has a legal existence, — the courts here may well decline exercising an equitable jurisdiction in such a case. Howell v. Railway Co., 51 Barb. 379. The motion to dismiss the action or to set aside the service of the summons and complaint is denied. The motion to continue the inj unction is denied, and the same is vacated and set aside. Motion denied.


author: LANDON, J.

text:
    The People ex rel. Argus Company, Pl’ff, v. John Palmer et al., Def’ts.

      (Supreme Court, Albany Special Term,

      Filed May 15, 1895.)

    Public printing — Lowest bidder.
    Under sections 72 and 77, chap. 582 of 1892, the extra copies required by a concurrent resolution of the two houses of the legislature calling for the printing of extra copies of bills, cannot be considered in determining who is the lowest bidder for legislative printing.
    Application by the relator for a writ of mandamus to compel the board to award the contract of legislative printing, except session laws and slips.

      Amasa J. Parker, Jr., for relator; W. E. Kisselburgh, Jr., Dep. Atty. Gen., for.def’ts ; William M. Ivins and John J. Montignani, for John E. Milholland.
   LANDON, J.

The question presented is whether, under the statute authorizing the defendants, as the board to award the contract for certain public and legislative printing to the lowest bidder, they can adopt as a basis for computation, in order to determine who is the lowest bidder, extra copies of legislative bills, assumed by the board to be called for and ordered by the concurrent resolution of the senate and assembly in 1892, such extra copies being in excess of the number of the copies authorized to be printed by sectian 72 of the legislative act. Laws 1892, chap. 682. The board advertised for proposals, received several bids, and on the 10th of May, 1895, proceeded to consider said bids with the views of awarding the contract, and thereupon, as appears from the affidavit sub ■ mitted by them, adopted a resolution “to the effect that said board of state officers should include in the basis of computation of said bids for such legislative printing the extra copies of bills called for by the concurrent resolution at page 234 of the Senate Journal of 1892,” and thereupon adjourned. I assume (as was assumed by the counsel for the board for the sake of the argument), but without deciding and without prejudice to the decision of the matter by said board, that upon the basis of said resolution the relator is not the lowest bidder, but is the lowest bidder if the said resolution is unauthorized by law. Sections 72 and 77 of the “legislative law” (chapter 682, Laws 1892) prescribe the duties of the board in respect to the award of the contract for legislative printing. Unless the concurrent resolution mentioned in the resolution adopted as aforesaid by the defendants has, of itself, or by the aid of other statutes, the force of law, said sections of chapter 682 confer the sole power proposed by the defendants respecting the printing mentioned in their resolution of May 10th. Section 72 provides for including in the contract the printing of 640 copies of each senate and assembly bill, and “ also for each additional 100 copies thereof * * * when ordered by statute.” Section 77 provides that “ such contractor shall print any extra number of copies of bills * * * whenever ordered by law,” and that for this printing the contract shall provide the price. The contract now to be awarded is to be in force for two years from October, 1895. I have no doubt that “ provided by statute ” and “ provided by law,” as here used, mean the same thing. When there is a statute prescribing and covering the powers and duties of the board in respect to the contract, it is difficult to conceive how there can be any other law enlarging-their powers and duties. Indeed, this statute is called the “ legislative law,” and the “ law ” mentioned in section 77 is no other than this statute. A concurrent resolution of the two houses is not a statute. “ No law can be enacted except by bill ” (Canst, art. 3, § 14), and this, when passed by senate and assembly, must-be approved by the governor. The learned counsel for the relator has collected an interesting historical review of the legislation respecting legislative printing. The statutes in force in 1892 were revised and superseded by the “ legislative law ” of 1892. It appears from this review that the words “ ordered by statute were inserted in chapter 588 of the Laws of 1886, entitled “An act to provide for and define the public or legislative printing,” in place of the proposed words, “ ordered by concurrent resolution,” as the result of a very persistent effort on the part of Governor Hill and others to reduce and confine public printing within statutory bounds. The concurrent resolution of 1892, at page 234 of the-Senate Journal of that year, reads as follows :

“Resolved, that the contractor to do the public and legislative printing be, and he hereby is, ordered and directed to print for the use of the legislature, in addition to the number of bills required to be printed by the 17th joint rule, 500 extra copies of all general bills introduced in either hou'se.'1

As this resolution is not a statute or law, it can be nothing more than an order of the legislature of 1892 to the printing contractor to do the extra printing specified, and trust to the supply bill for his pay. The fact that the public printer has never been disappointed in the supply bill in this respect may forecast future happenings, but nevertheless a spent resolution and an expected clause in a future supply bill must not be mistaken for an existing statute or law. The defendants were, therefore, in error in including in the basis of computation of the bids for legislative printing the extra copies of bills called for by the said concurrent resolution. So long as the defendants keep within the terms of the statute which confers, defines and limits their duties, the court cannot interpose. But when they go outside those limits, to the prejudice of the public, or of an individual whose rights are thereby injuriously affected, they must be called back within them. What they may rightfully do within their prescribed powers affords us no test of their action outside of them. They can do nothing rightfully outside of them, and it is improbable that they will do anything improperly or wrongfully within them. My attention is called to the twenty-first section of the legislative act. It is not probable that tins section authorizes printing extra copies of the papers or documents of which the number to be printed is fixed by the statute itself. The writ of mandamus must issue commanding the defendants to exclude from their basis of computation the extra number of copies of bills mentioned in said concurrent resolution.


author: Ingraham, J.

text:
    Prescott Hall Butler, as Executor, etc., Pl’ff, v. Francis S. Weeks et al., Def’ts.

      (Supreme Court, New York Special Term,

      Filed April 23, 1895.)

    1. Trust — Declaration.
    If, before a declaration of trust, a party is a mere debtor, a subsequent agreement, recognizing the fund as already in his hands, and stipulating for its investment on the creditor’s account, will have the effect to create a trust.
    2. Same.
    The declaration of trust as to the mortgage in question was held to be sufficient to make it a part of the trust estate, though it was never in fact assigned, but remained in the individual name of the trustee.
    Action by the executor to procure an adjudication that a certain mortgage is a part of the assets of the estate of which plaintiff is executor.

      Thomas D. Sherman, for pl’ff; Alfred J. Taylor, for def’t Central Trust Co.; Francis C. Barlow, for def’t Zippel; George D. Mumford, for def’t Welling; J. McL. Nash, for def’t Walsh; Mr. Lyon, for def’t Folsom ; Henry D. Sedgwick, for def’t Sedgwick.
   Ingraham, J.

The plaintiff and Francis H. Weeks were executors and trustees under the last will and testament of William E. Sedgwick, deceased, and prior to November 1, 1882, had property of the estate in their hands to an amount exceeding $30,000. All the securities in which the estate was invested were in the possession of Weeks, who had the active management of the estate. Some time prior to the 1st of November, 1882, two of the mortgages in which the estate was invested had been paid to Weeks, and on that day he had uninvested in his hands money amounting to a sum slightly in excess of $8,500. About that time Weeks had an interview with the plaintiff, his co-trustee, at which he said that he had a mortgage (describing the mortgage in suit) which was satisfactory security, and that he would invest that $8,500, then held by him uninvested, in that mortgage. To that the plaintiff assented, and Weeks subsequently informed the plaintiff that he had assigned the mortgage to the executors. This mortgage in question had been executed by the mortgagor to Weeks individually. It was dated May 29, 1882, and was duly recorded, and at the time of this conversation between plaintiff and Weeks the mortgage was, so far as appears, the individual property of Weeks, over which he had full control. Subsequently, in the early part of 1884, the cestui que trust asked the plaintiff for the exact condition of her father’s estate. The plaintiff inquired of Weeks, and in answer to that inquiry Weeks sent' to plaintiff a letter, by which it appears that there was then a sum of $34,000 in his hands, and this letter contained the following statement: “This amount, $34,000, is invested as follows.” Then follows a list of securities, one of which is •described as follows:

Annual Principal. Income.
Bond and mortgage of John Gr. Folsom on
premises East Twelfth street at 5 per cent.
interest, payable April 29th and October 29th, $8,500 $425

In 1893, just before Weeks absconded, he gave to plaintiff a •statement of the accounts of the estate, which purported to show the condition of the estate from the beginning, in 1873, down to December, 1892. That statement does not show the.securities in which the estate was invested, but it shows a receipt of principal aggregating $41,639.26, expenditures of $4,494.94, and a statement of income showing a receipt of interest on May 2, 1883, from' John Gr. Folsom, of 212.50, and the receipt of a like amount' of interest on this bond and mortgage each six months down to and including November, 1892. It also appears that during this whole period, each six months, Weeks deposited in the bank account of the estate the like sum of money as interest received by him on this mortgage. After Weeks had absconded, this bond and mortgage was found among his papers, standing in his individual name. Weeks testified that he had an impression that he had executed an assignment of this mortgage to the estate of which he and the plaintiff were trustees, and plaintiff testifies that

Weeks told him in 1882, shortly after his interview with him, that he had transferred the mortgage to the estate. I hardly think, however, that this evidence would justify a finding that .any written assignment was ever executed.

The first question presented is whether or not, upon this state -of facts, this mortgage became the property of this estate as between the estate and Weeks individually. The defendant Welling, as the assignee of Weeks, could only take the interest that Weeks had in the mortgage at the time of the assignment; and if this mortgage, although standing in Weeks’ name individually, was impressed with a trust in favor of the estate, the legal title under Weeks’ assignment passed to the assignee, subject to such trust. Weeks and the plaintiff were trustees, and held the corpus of the estate as such trustees, and in November, 1882, Weeks had in his hands the sum of $8,500 uninvested. He also owned this mortgage, and there can be no doubt that, had he executed a written transfer of the mortgage, or had he delivered the bond and mortgage to his co-trustee, they would have become at once the property of the estate as a portion of the securities in which the estate was invested. It was also competent for Weeks at that time, by any other declaration clearly evincing an intention to hold this mortgage in trust for the estate, to create a valid trust, so that in equity the mortgage would become a part of the trust estate. It is well settled that no particular expressions are necessary to constitute a trust. Any language clearly showing the settlor’s intention is sufficient, if the property and disposition of it are definitely stated. “A person in legal possession oE money or property acknowledging a trust, with the assent of the cestui que trust, becomes from that time a trustee, if the acknowledgment be founded on a valuable consideration. His antecedent relation to the subject, whatever it may have been, no longer controls. If, before a declaration of trust, a party be a mere debtor, a subsequent agreement, recognizing the fund as already in his hands, and stipulating for its investment on the creditors’ account, will have the effect to create a trust.” Hamer v. Sidway, 124 N. Y. 550; 36 St. Rep. 888. Applying this rule, it seems to me dearth at Weeks agreed to hold this bond and mortgage in trust for this estate, and that thereby he held the bond and mortgage as trustee of the estate. He verbally informed his co-trustee that he had invested the $8,500 in this mortgage, and. that he had assigned the mortgage to the executors. He made a statement in writing to his co-trustee, which was communicated to the cestui que trust, that this particular bond and mortgage was a part of the estate, and that $8,500 of the money of the estate was herein invested. He accounted to the estate for the interest received by him upon this bond and mortgage for upward of ten years, and finally he rendered an account' to the estate admitting the receipt of the interest from the bond and mortgage during all the ten years, and actually paid such interest to the cestui que trust. No clearer declaration of an intention to constitue himself a trustee of this particular bond and mortgage could have been made except a written assignment of the bond and mortgage to the estate, and it was clearly sufficient to hold that he, and his assignee, merely standing in his shoes, can have no right to disaffirm this action. The right of the other defendants claiming any interest in this bond and mortgage depends merely upon the representations made by Weeks to them that this mortgage belonged to other estates, of which he was trustee. No facts appear that could justify me in finding that the plaintiff was estopped from claiming that the estate that he represented was the owner of this bond and mortgage. The most that can be said is that Weeks represented to the beneficiaries that he had invested the property of the estate in these securities, and that they relied upon his representations. There is no evidence that he actually did invest any of the money belonging to the special estate represented by the defendants in this bond and mortgage, and nothing appears to create an estoppel. 1 think, therefore, that there should be judgment in favor of the plaintiff, adjudging that the bond and mortgage in question are.the property of the estate of which plaintiff is executor and trustee, with cost to the plaintiff against the assignee. Ordered accordingly.


text:
    Bertie D. Warfield, Pl'ff, v. Francis H. Weeks et al., Deft’s.

      (Supreme Court, New York Special Term,

      Filed May, 1895.)

    Pleadings — Counterclaim—Reply.
    Where the answer, in an action to compel a conveyance by a trustee of trust property, alleges, as a counterclaim, that plaintiff has borrowed money from the trustee and that the trustee has made certain expenditures-for plaintiff, a reply, which states that the trustee has money in his hands, belonging to plaintiff, which he pretends to have invested in securities-, which he holds for her, whereas he has converted it to his own use, and is indebted to plaintiff in a larger sum than the alleged counterclaim, does not set up a counterclaim to defendant’s counterclaim, hut simply states facts tending to defeat it.
    Action to compel a conveyance of trust property.

      Treadwell Cleveland and Philip S. Dean, for pl’ff; George D. Mumford, for def’t Welling.
   Ingraham, J.

The statement that Weeks made to the plaintiff as to her investments in 1885 was a sufficient declaration of trust, declaring that Weeks held this mortgage upon the property described in the complaint as trustee for the plaintiff, and that upon the foreclosure of the mortgage, and the purchase by Weeks oE the real estate secured thereby, .Weeks held that real estate in trust for the plaintiff; and this position is not seriously controverted by the defendants. The only serious question is as to whether the defendants are entitled to have the property conveyed to the plaintiff subject to two liens in favor of Weeks. It is quite important, in determining this question, that we should keep in-mind the fact that this defendant assignee stands in Weeks’ shoes,, having received the property subject to such trusts and obligations as were upon the property at the time Weeks made the assignment. Welling, as assignee, can make no other or greater claim to the property than Weeks could make, had he not made the .assignment, and had he been the sole defendant in this action. It is also quite important to keep in mind the fact that this is an action in equity to enforce equitable remedies, that the plaintiffs title to the property is an equitable title, and that the liens that the defendants seek to enforce are claimed to be equitable liens. These equitable liens are sought to be enforced by what are called “counterclaims” in the answer. The first of these alleged equitable liens arises out of the following facts : After the judgment had been entered foreclosing the mortgage upon the property described in the complaint, the plaintiff borrowed from Weeks $7,500, and gave a note by which she pledged this mortgage as collateral security for the money advanced to her. The second alleged equitable lien is based upon the fact that, after Weeks bought in the property in his own name, it was in an unfinished condition, and it became necessary for him, in order to complete the building on the property, so that it would be valuable, to expend upon it upwards of $12,000. This sum, the defendant alleges, should be repaid to him. In reply to these so-called counterclaims, the plaintiff alleges that Weeks had in his hands, as belonging to this plaintiff, a large sum of money which he had pretended he had invested for her in securities that he held for her, though in fact he had disposed of these securities, and converted the proceeds thereof to his own use, and was indebted to the plaintiff in a much larger sum of money than the aggregate amount of the alleged equitable liens that the defendants seek to foreclose. Some point has been made by the defendants claiming that this is a counterclaim set up in reply to defeat a counterclaim set up in the answer. It is obvious, -however, that this is not a counterclaim in reply, but it is a statement of facts, which directly tends to defeat the defendants’ counterclaim, or application for affirmative relief. The defendants apply to a court of equity to enforce what they allege to be an equitable lien for money advanced, as they claim, for the benefit of the plaintiff, and which should, in equity, be repaid to Weeks by the plaintiff, as a condition upon her being entitled to a conveyance ■of the property held in trust for her. As an answer to that application for the enforcement of that counterclaim, plaintiff alleges and it is conceded, that, at the time of the assignment, Weeks had applied to his own use a sum of money belonging to the plaintiff largely in excess of the amount that he had advanced to the plaintiff, or expended in improving her property. Under those circumstances, it would be extremely inequitable to compel her to pay Weeks, or a person standing in his shoes, any money on account of the advances that Weeks had made to her, or expended for her benefit. He had in fact reimbursed himself for expenditures on her account by appropriating her money for this purpose, and under such circumstances it would be most inequitable to compel the plaintiff to pay him again for the advances or expenditures he had. made for her.• The defendant, all through his brief, speaks of the “good faith ” of Weeks. It is a little difficult for me to understand what he means. I can see nothing but a deliberate and systematic attempt to rob and defraud every one who trusted him ; and his treatment of the plaintiff is not, so far as I can see, different from that of the others. It is unnecessary for \ me to consider whether or not Weeks would have been entitled to-enforce these equitable liens, if they had not been satisfied and discharged by his appropriating money of the plaintiff sufficient to pay them. Whatever obligation there was on the plaintiff to-discharge them, or to pay Weeks any money on account of them, has been satisfied and discharged by Weeks, in appropriating to> his own use sufficient money of the plaintiff to satisfy them.