author: Finch, J.

text:
    The American Bank Note Co., Resp’t, v. The New York Elevated R. R. Co. et al., App’lts.

      (Court of Appeals,

      Filed December 15, 1891.)

      1. Railroad—Elevated—Title by prescription—Adverse possession.
    Where the original entry by defendant upon the street in front of plaintiff’s premises was temporary and experimental, and even after the certificate of the commissioners remained such, in fact, while operated as a cable road and ended in practical failure, and the original possession was in ignorance of the right at a later period claimed on one side and denied on the other, and the only possession for twenty years was of an unseparated and inseparable fragment of two essentially different users; and after twenty years defendants instituted proceedings for the condemnation of the plaintiff’s street rights, the court is justified in refusing to find an adverse possession.
    2. Same —Measure of damages—Noise of passing trains.
    Although an elevated road is liable in an action at law for the wrong done to abutting owners by the noise of passing trains, where no trespass and no wrong is in any manner involved, and the sole inquiry respects the compensation to be awarded to an owner whose property is to be rightfully taken under due authority of law, the noise of the operation of the trains should not be taken into account as an element of fee damage. (Ruger, Oh. J., Peckham and O’Brien, JJ., dissent.)
    Appeal from judgment of the New York superior court, general term, affirming judgment in favor of plaintiff entered on decision .of judge at special term.

      Julien T. Davies, for app’lts; Peckham & Tyler, for resp’t.

       Modifying and affirming 37 St. Rep., 885.

   Finch, J.

This appeal is from a judgment awarding to the plaintiff compensation for the taking of its property by the construction and maintenance of the elevated railway in Greenwich street and in front of plaintiff’s premises abutting on that street ; and also assessing damages for past injuries occasioned by the same operative cause; and two principal questions are presented for our consideration.

The defendant asserts title by prescription to so much of the plaintiff’s property in the street as was originally taken by the West Side & Yonkers Patent Railway Company, to whose rights .and franchises the defendants have succeeded. If upon the trial a broader right by prescription was claimed, it had its sufficient answer in the remark of the court appended to the fifth request of the defendants’ proposed conclusions of law, that “ the defendants have not maintained and operated a road in the present condition for twenty years. They cannot by using a one track road for fifteen years and a four track road for five years obtain the right to run the four track road by prescription.”

That is so obviously true as to make needless any further reference to the broader claim, but a narrower and more plausible one was asserted and founded upon a distinct finding of fact “ that a part of the light, air and access of the premises Nos. 115 to 123 Greenwich street was taken for the use of defendants’ railroad when it was first constructed and put in operation July 2, 1868, and has been continuously used since for said railroad purposes.” There is no finding of fact that this continuous possession of tome undefined and undescribed part oí plaintiff’s property in the street, was adverse. On the contrary the court refused to make such finding and further refused the defendants’ proposed conclusion of law, “ that before this action was commenced, the presumption of a grant of the right to maintain and operate an elevated railroad on the east side of Greenwich street from the then owner of said property to the defendants’ predecessor’s company had become conclusive by lapse of time.’’ Exceptions were taken t» these refusals and raise the question to be discussed, for, without, criticising the manner of the requests or the form of the pleadings, we think it best to meet the claim in its full force and dispose of it on the merits. It was quite material to the defense interposed,, for, while the narrower and final claim does not justify the complete and entire infringement upon the rights of the abutting owner shown by the proof, since the present railway destroys-those rights to a much greater extent and in a more injurious-manner than resulted from the original structure, yet it is argued that the claim bears upon the question of permanent or fee damage, and that by rejecting the defendants’ prescriptive right on the east side of the street, if in fact it existed, compensation has been awarded to the plaintiff to some extent for property which in reality belonged to the defendants.

The question, therefore, is whether they obtained title to any part of the plaintiff’s incorporeal right in the street; and that again resolves itself into the inquiry whether the possession of the defendants and their predecessors was continuous and -was or was not adverse. Ordinarily, that is a question of fact. It may be conceded that where the undisputed proof shows that the party asserting title entered upon the premises under a claim of right adverse to the true owner and retained an open, exclusive and hostile occupation for twenty years, to the knowledge and palpable injury of such owner while not incapable of vindicating his right, and there are no other or contradictory facts, a presumption of title will arise and the court should find in accordance therewith. But the presumption is not conclusive as against other and further facts. It serves only to shift the burden of showing the true character of the possession to the owner. Hammond v. Zehner, 21 N. Y., 118. And where there are other facts, tending to justify a different inference and leading fairly to a contrary conclusion, they also are to be taken into the account, and the question becomes, if not wholly one of fact, at least a mixed question of law and fact, depending more or less upon the circumstances proved. Such I believe to be the situation in the case at bar; for, if not at the begining of the railway occupation, at least along the line of its continuance, and at the end of the twenty years, there were facts and incidents which challenge the adverse character of the possession, and even its continuity as unbroken or unchanged.

The West Side & Yonkers Railway Company became a corporation under the general act of 1850. By force of its provisions the company had the right of eminent domain, and could condemn such property of individuals as it needed for its corporate purposes. But in 1867, by chap. 489 of the Laws of that year, it was given special and peculiar rights in the streets of the city. The act was entitled “An act to provide for the construction of an experimental line of railway in the counties of New York and ¡Westchester,” and authorized the primary erection of an elevated railroad beginning at the southerly extremity of Greenwich street, and extending northerly for half a mile. The supporting columns were to be placed along the curb-stone lino, and to carry a track not more than five feet in width, the center of the track to be perpendicular to the center of the columns and not less than fourteen feet above the surface of the pavement. The road was required to be “ operated exclusively by means of propelling cables attached to stationary engines placed beneath or beyond the surface of any street through which said railway may pass, and shall be concealed from view so far as the same may be detrimental to the ordinary uses of said streets. The half mile of road was to be completed in one year, and its experimental character was shown by the provision that when ready for operation it should be inspected by commissioners appointed for that purpose, upon whose report that it could be operated with safety and dispatch its extension northerly was to. be permitted, but upon whose report to the contrary the structure was to be taken down and the street restored to its original condition.

Until the action of the commissioners, at least, the possession of the railway company was both temporary and experimental. The act, however, contained other provisions. By § 7 it was enacted that any private property used or acquired shall be compensated for by said company, under provisions of existing laws authorizing the formation of railroad companies and the acquisition of rights of way therefor.” The provision seems to have contemplated some possible user of private property for which compensation should be made. By § 11 it was provided: “ The said company shall be liable for and shall pay all damages which may result to private property or the owners thereof, by reason of the construction of said road,” and was required to give a bond in the penal sum of $500,000, conditioned for the payment of all such damages.

The entry and possession of the West Side & Yonkers Company was under this charter. That was the grant and the specific title under which it occupied and used the streets as it did occupy and use them. The entry was not under a general claim of right adverse to all others, but under a specific and definite legislative grant beyond and outside of which nothing was separately claimed. Neither the company nor individuals along the line kfiew that this title was imperfect because there were incorporeal rights in the street belonging not to the public, but to the abutting owners; and yet the property in fact existed and the company took it without right, but, it must be admitted, under color of title and claim of right, since the property taken was within the apparent and possible boundaries of the grant under which the entry was made, and for a time was supposed by both parties to be, in fact, within its actual and legal boundaries. We have described that entry as a trespass, as an invasion of the rights of the adjoining owners, and as an exclusive and injurious seizure of their incorporeal rights in the street. The possession which followed we have declared to be a continuous wrong for which, all the time and every day, damages accrued and should be awarded. That such an entry may be adverse and sufficient to initiate a possession which, at the end of twenty years, would ripen into a title, would seem to be quite clear were it not for the decision of the general term that the entry was in subordination to the rights of the abutters, and so not adverse to them. The authority relied on is the case of Broiestedt v. South Side R. R. Co., 55 N. Y., 220, which, I think, has no just application to the case in hand, as the learned counsel for the appellant elaborately explains. The action was by the owner of the soil of a highway to restrain the maintenance and operation of a railroad in front of his premises.

The answer was, among other things, that the plaintiff's deed was void because the locus in quo was held adversely by the defendant at the time of the conveyance. The court ruled to the contrary, using this language : “ The possession was not adverse, but was under license by act of the legislature which only extended to the rights of the public. The entry under this license is presumed to have been in subordination to the rights of the owner.” It must be observed of this decision that it related to the defense of champerty. A violation of the statute in that respect could only be shown by establishing a possession under some specific title which was itself adverse to the title of the plaintiff’s grantee. Crary v. Goodman, 22 N. Y., 170. There must be a specific adverse title before there can be an adverse holding under the statute against champerty. Sands v. Hughes, 53 N. Y., 387. Bearing in mind this distinction, it is easy to see what was, in truth, decided in the Broiestedt case. The specific title asserted was one which transferred the public right. That public right was consistent with the private right, and in no respect conflicted with it or assailed it. The legislative grant, therefore, neither conveyed, nor purported to convey, the fee in the soil, which was the title asserted, nor any right of the individual owner, and so it appeared that the defendant, required to show the specific title under which it claimed to hold, showed only one which was not adverse to that of the plaintiff, because it showed none at all to the right which was the basis of the plaintiff’s claim. Having, therefore, no adverse title, .the defendant’s possession could not be an adverse holding under the statute, and if not adverse it must necessarily be presumed to have been in subordination to the plaintiff’s title and right. That was the scope of the decision and its full and entire force. But in the present case and under the statute of limitations an actual adverse title is not necessary to an adverse possession. The latter may be asserted, and may exist without showing any specific title at all. A general assertion of ownership will suffice if there be color of title however groundless in fact, and in such a case the possession may be adverse, and therefore not presumptively in subordination to the rights of the true owner. As against a defense that the plaintiff’s deed was void because when taken the street right was adversely held, the Broiestedt case is decisive; but as against the defense of title by prescription derived from, a general adverse possession of 'the appurtenant rights under claim of right and color of title, that case is not available.

Nor can I sustain the doctrine of the general' term upon the ground that the charter under which the company entered recognized the abutter’s street rights through the provisions for compensation. The terms of section seven relate to the ordinary * acquisition of private property by condemnation, and undoubtedly had in view lands out of the street necessary for power stations or other incidental conveniences; and the provision of section eleven requiring the payment of consequential damages to any private property injured indicates a legislative understanding that the condition was necessary because without it the injured parties would have no redress. So far from recognizing street rights in the abutters, it inferentially assumes, as was then supposed, that they had no existence.

Indeed mere provisions for compensation in a charter have never been regarded as making the entry upon private property necessarily subordinate to the private right, and very numerous cases could be cited in which the entry was deemed adverse and such as could ripen into a prescriptive title, although made under an authority which provided for compensation. Baldwin v. Calkins, 10 Wend., 169; Lehigh Val. R. Co. v. McFarlan, 43 N. J., 605: Galway v. Met. El. R. R., 128 N. Y., 132; 40 St. Rep., 145.

The theory of the general term, therefore, cannot be sustained, while nevertheless it may very well be that two circumstances connected with the original entry should be taken into account as bearing upon the character of the possession, although not at all conclusive. The entry was temporary and experimental, asserting no permanent or absolute right, and neither party knew or supposed that any street rights of abutters existed. There was no conscious or intended adverse holding by the company, and no conscious or intended submission by the plaintiff. While that mutual ignorance may not legally change the situation, it is an element in the conduct of the parties which may be taken into the account

But there are further facts. The act of 1867 was followed by the supplemental act of 1868 (chap. 855). That extended the time of construction for six months ; authorized such form of application of the propelling cable or other motor as the commissioners should approve, dictated the payments to be made to the city, and permitted a change of the company’s name. In June of that year a favorable certificate of the commissioners was made and filed, and the road was put in operation propelled by a cable July 2d following. In 1871 steam dummies were substituted for the cable, and in 1879 the east track was taken down and, as it is said, reconstructed. That process, however, involved a removal of the columns from the curb-line, a distance therefrom and within the sidewalk of sixteen inches. I think these changes were material and substantial and injuriously affected the adjoining owners, and that the right now claimed and exercised is not identical with the original user. Nor am I able to concede that because some part of the plaintiff’s right to light and air and access taken by the experimental road is also taken by its successors, a title is made to that undefined and non-separable part. The user cannot in that manner be divided and separated, and never was so divided and separated. The part continuously used was so used as an integral element of two different users, and having no separate and severable existence or identity must share the fate of such different users, and cannot stand upon its own which never had a defined and independent existence. I think that truth must necessarily follow from two considerations. In all cases of rights by prescription the right acquired is measured by the extent of the use, and that in turn by the purpose of the user; and where essentially different purposes govern separate and successive users it is rarely, if ever, possible to deem the latter identical in any respect or degree. A right of way for one purpose gained by user cannot be turned into a right of way for another purpose if the latter adds materially to the burden of the servient estate, and the right derived from user can never outrun or exceed the user in which it had its origin.

It is also to be recalled that prescription pre-supposes a grant which conveys a definite right corresponding in all material respects with some equally definite .user, which has a distinct and tangible purpose. Now, it is possible to presume a grant for a track above the curb stone line and for the purpose of a cable road; and also to presume another and different grant for a right above the sidewalk and the purpose of a steam railway ; but how can we presume a grant of a fraction common to each, which never had a user of its own or a purpose of its own, and could not accomplish either one of the two existing purposes ? We are referred to the case of Baldwin v. Calkins, 10 Wend., 169, as showing that a separable excess of user, beyond that authorized, may be cut off, and leave the true right uninjured and intact. But that true right preserved was a definite and distinct right, capable of a separate user, and having a real and conceivable purpose, but nothing of that sort can be said of the fraction here claimed.

The new use of the west side is essentially different from the earlier one, even as it respects the single track, and cannot be saved or modified by tacking to it the use for a cable road on the curb-stone line. For, if we suppose that in 1867 the plaintiff had granted to the defendants the right to construct and operate a cable road supported by columns in the curb-stone line, and, thereafter, the latter had built and operated on the east side the present road, and were sued for so doing, the previous grant would certainly be no defense to an injunction for damages. In Davenport v. Lamson, 21 Pick., 74, the facts were that the defendant had a right of way to carry hay from a three acre lot across plaintiff’s close, and owning another lot of nine acres adjoining his three acres, threw down the fence between and began to carry across the produce of the twelve acres, and was sued in trespass quare clausum. The court held the action maintainable and that the case was not one for the apportionment of damages. The doctrine involved was very evidently that the trespass was such as a whole, though some inseparable lesser right might be mixed in with it And in another case it was ruled that where a town had enjoyed a drain to discharge water on another’s land for a period less than twenty years, and then deepened it and enlarged it and varied its course, but continued to use it, such change interrupted the use and prevented an acquisition of the easement short of twenty years enjoyment of it as it then was. Cotton v. Pocasset Mfg. Co., 13 Met., 429.

These illustrations show what changes are sufficient to interrupt the use and turn a right into a wrong, and that the latter is not affected or modified even as to damages because there is in it some inseparable or indivisible element of right. Such a mingling is wholly the act and the fault of the trespasser. His conduct is such as to make impossible any apportionment, and so where he claims title by user he cannot, upon the same principle, lessen that title to the indivisible and inseparable fragment in order to add together two radically different users that they may extend over twenty years. Indeed, that fragment itself was used differently by the successive companies, and so as to make utterly unjust any attempt to utilize the earlier silence and submission of the adjoining owner. While that fraction was used as incidental to a cable road on the curbstone line the plaintiff might have submitted to it because the inconvenience was no greater; but to add that submission to another and radically different use, which is resisted before it ripens into a title, in order to gain ownership of the fragment, is obviously unfair and unjust It may be said generally that one cannot prescribe for an indivisible fraction of two essentially different users having essentially different purposes because such fraction happens to be common to both. If the fraction is itself a complete and independent user, representing a complete and entire right, it may stand with the fractional and separable excess rejected. But if it be itself a mere fraction of two different users, which never could be used by itself for either of the two purposes, and never existed as an independent and practicable right, and is dependent in each case upon the users to which it belongs, it cannot be separately prescribed for.

The views thus expressed on this branch of the case appear to be equally supported by the authorities, if the construction and operation of the elevated road is treated as a nuisance, as we have sometimes declared it to be. The rule is stated in Wood on Nuisances, § 710, p. 727, that a prescription is entire, and cannot be split by either the party setting it up or the party opposing it And where the action was for polluting the air, and the defense a prescriptive right, the defendant was required to show that he had a right to do all that the declaration charged. He could not 'defend by setting up a prescriptive right to do less, and if he failed to show one to the extent of the user with which he- is charged his action was undefended. Rotheram v. Green, Noy, 67: Tapling v. Jones, 11 H. L. Cases, 290; Weld v. Hornby, 7 East, 195; Bailey v. Appleyard, 3 Nev. & P., 257.

But there is still another fact to be considered. After the expiration of twenty years from July 2, 1868, and during the pend-ency of the present action, the defendants instituted proceedings to condemn the plaintiff’s street rights. There is no question over the admissibility of the evidence, for the defendants themselves gave the proof. This proceeding was necessarily a solemn and formal admission of record of title in the plaintiff to the incorporeal rights in question. It is to be granted that such an admission, made after the prescriptive right had been acquired, would not serve to destroy it But the admission is evidence reflecting back upon what has occurred, and tending to show what the real character of the possession claimed to be adverse in truth was. Perrin v. Garfield, 37 Verm., 304. The company knew what its own possession and that of its predecessors had actually been, and it is hardly conceivable that if such possession had been adverse, either in fact or in intention, an admission would be formally made of ownership in the easements outstanding in the abutter.

We are thus enabled to see all the facts aggregated upon which the trial court acted in determining that there was no adverse possession. It was shown that the original entry was temporary and experimental, and even after the certificate of the commissioners remained such, in fact, while operated as a cable road and ended in practical failure; that the original possession was in ignorance of the right at a later period claimed on one side and denied on the other; that the only possession for twenty years was of an unseparated and inseparable fragment of the two essentially different users, and that after the twenty years the defendants instituted proceedings for the condemnation of the plaintiff’s street rights. Upon these facts it is quite apparent that the conclusion of the trial court denying an ’adverse possession was not only warranted by the evidence, but entirely justified by it.

Passing over some other questions raised by the appellants, which we have examined but do not think it necessary to discuss, we come to a final question relating to the measure of damages.

In awarding an injunction restraining the continuance of the elevated road in front of plaintiff’s premises, the court fixed as an alternative the payment by the defendants of $50,000 for the permanent or fee damage, and specifically awarded $1,000 of that amount as damages resulting from the noise of passing trains. We have already decided that in an action at law for the wrong done to abutters and in which past damages only are sought, the elevated roads- are liable for the noise of their trains, upon the ground that they, are trespassers and responsible for all injuries resulting from their wrongful act Kane v. N. Y. El. R. R. Co., 125 N. Y., 164; 34 St. Rep., 876. Probably the old technical action of trespass was inappropriate, as was the action of ejectment, to the redress of an injury to an incorporeal right, but the wrong done could have been reached by an action on the case, and may properly be called a trespass upon the property of the abutting owners, and the trespassers are liable for all the damages resulting from the wrong.

But the question is quite different when no trespass and no wrong is in any manner involved, and the sole inquiry respects the compensation to be awarded to an owner whose property is to be rightfully taken under the due authority of law. There is no doubt in this case, and I think no doubt in any case, that the injunction of a court of equity and its alternative damages are to be deemed a substitute for the ordinary proceeding for condemnation with the practical difference only that in the one case the company is the moving party, and in the other the owner. For this court does not in the least degree assent to the doctrine which has sometimes been advocated that the alternative damages are wholly in the unlimited discretion of the court, and so the elevated roads entirely at their mercy. We had supposed that every trace of a boundless and arbitrary discretion in a court of equity had wholly disappeared. There is no difficulty in assuming that the alternative damages are awarded to the same extent and for the same elements as the compensation given in a special proceeding for the condemnation of land under the law of eminent domain. Such a process in each case ends in the same substantial redress. The form is different, but the- result is identical. It follows, therefore, that the alternative damages of equity must be such, and only such, as would be given in a proceeding for the condemnation of lands for a railroad use, due regard being had to the different characteristics of the property to be taken. We must, as a consequence, recur to the legal rules which have been established in such cases.

They have their foundation in the constitutional provision that private property shall not be taken for public use without just compensation, and in the terms of the General Bailroad Act formulating the mode of procedure. Those provisions are made applicable to the present controversy both by the original West Side & Yonkers charter, and by a substantial repetition in the Bapid Transit Act of 1875, so that the rules governing the acquisition of private property by the elevated roads are identical with those controlling the similar acquisition by surface railroads, modified only by the character of the property acquired. What the elevated roads take from the abutter are his easements of light, air and access. The extent of that taking involved some things which, in the case of a surface road, would be merely incidental or consequential injuries for which the abutter could not recover, since it is well settled, both in this state and under even the broad English statute of 8 and 9 Viet., that where a public use authorized by law takes no land of an individual, but merely affects him by its proximity, the necessary annoyances of that perfectly lawful use furnish no basis for damages. Now, the elevated roads take no land from the abutter. They stand wholly upon the land owned by the municipality, and no consequential damages flowing from the lawful corporate user coúld be recovered but for the fact that some of them, though not all of them, have been by the Story case transformed from consequential injurles into invasions of property rights. To the extent of that transformation the rule of damages must feel the effects of the change, but beyond that the further consequential injuries have not lost or changed their character, and to allow them as elements of compensation is to transform them also into invasions of property and add a new brood of easements to those already awarded to the abutter, instead of leaving them, where the Story case left them, the mere incidents of a lawful use. In the Drucker case the full extent of the transformation bringing with it the liability for damages was sketched in these words: “ Smoke and gases, ashes and cinders affect and impair the easement of air; the structure itself and the passing of cars lessen the easement of light; the drippings of oil and water and possibly the frequent columns interfere with convenience of access; ” but there is no hint of any allowable recovery beyond what pro tanto constituted some element of the taking. In the Lahr case, Ruger, Ch. J., was equally guarded, saying that the incidental injuries could be recovered “provided the evidence established the fact that they were destructive of the easements of light, air and access; ” and these careful expressions were used, although neither case involved a question of fee damage. I am averse to adding to the abutter’s easements by changing their name and doing indirectly what I am sure none of us would do directly.

Even the ground upon which that effort is necessarily rested partakes of the uncertain qualities of a quicksand. It is said first that the taking of easements should be deemed the equivalent of the taking of land. That was held in the Duke of Buccleuch's case, L. R, 5 H. of L., 418, where the easement affected was a right of way, and so quite different from the quasi easements of abutters, as well as unaffected by the peculiar considerations which surround the new and unusual use. It is then said that, under the law affecting surface railroads, where the land of the owner is taken, he is entitled to the diminution in the value of the part not taken, occasioned by the use to which the part taken is to be put. The analogy relied on is, I think, not at all perfect, and the rule invoked is by no means settled, but on the contrary, most strongly held the other way. The current of authority in the supreme court, which has • been the final arbiter in this class of proceedings, is rather against than for the doctrine asserted.

In Troy & Boston R. R. Co. v. Lee, 13 Barb., 169, and more explicitly in Albany Northern R. R. Co. v. Lansing, 16 id., 69, it was said that the award should only be for the taking of the land and not for the use made of it by the railroad, and it was argued with great justice that since the statute excluded a consideration of the benefits resulting to the land from the railroad it was unfair to compensate the owner for the disadvantages of the new use and leave him to appropriate the advantages. The doctrine was followed in Canandaigua R. R. Co. v. Payne, 16 Barb., 273; Matter of Union Village R. R. Co., 53 id., 457; Black Riv. R. R. Co. v. Barnard, 9 Hun. 104; Albany & Susquehanna R. R. Co. v. Dayton, 10 Abb. Pr., N. S., 183; Matter of Boston Road, 27 Hun, 409, and the earlier cases were cited without a hint of disapproval in Henderson v. N. Y. Central R. R., 78 N. Y., 433. But there came a change in Matter of Utica R. R. Co., 56 Barb., 456. That case justified damages resulting from the use, founding its reasoning upon the language of the statute; a view which the last edition of Sedgwick on Damages controverts ■as based upon a misconception. That case and its changed rule was followed in two others, Matter of N. Y. C. & H. R. R. R., 15 Hun, 63; In re N. Y., L. & W. R. R., 29 id., 1, but was deliberately overruled in Matter of'JSlevated R. R. Co., 36 Hun, 427, which was a condemnation proceeding to take Story’s easements, the existence of which he had vindicated. On such a ■state of the authorities it is not possible to say that there is any such settled rule as that contended for, and if there should be in the future I think it ought at least to be somewhat limited. But whatever may be the ultimate rule in surface railroad cases, I think that as to the elevated roads, the noise of their operation should not be taken into account as an element of fee damage.

It follows that the judgment should be modified by striking ■out the sum of $1,000 allowed for noise, and as modified affirmed, without costs in this court to either party as against the other.

Andrews, Earl and Gray, JJ., concur; Huger, Oh. J., Beckham and O’Brien, JJ., concur to affirm, but dissent to the modification.


source: Caselaw Access Project

author: Gray, J.

license: Public Domain

text:
    Lawrence Lynch, Resp’t, v. The Metropolitan Elevated R. Co. et al., App’lts.

      (Court of Appeals,

      Filed December 15, 1891.)

    1. Railroad—Elevated—Trial by jury tor bast damages by.
    This action was brought in equity to restrain the maintenance and operation of the defendants’ roads in front of plaintiff's premises, and plaintiff’s complaint also demanded judgment for loss and damage which might be ascertained to have been already sustained by him. Upon the trial defendants’ motion for a trial by jury of the claim for past damages was denied, Held, no error; that the cause of action was single and constitutes a claim for equitable relief and there is not mixed up with it a cause of action for legal relief.
    2. Same.
    The demand for past damages included in the prayer for judgment did not have the effect to set up an independent cause of action. It was nothing more than a demand that the court, having adjudged the plaintiff entitled to the equitable relief prayed for and having acquired entire jurisdiction of the action, will assess the damages which appear to have been sustained down to the trial.
    (Earl and Peckham, JJ., dissent.)
    Appeal from judgment of the New York superior court, general term, affirming judgment in favor of plaintiff entered on findings and conclusions at special term.

      Samuel Blythe Rogers, for app’lts; Charles Gibson Bennett, for resp’t.

       Affirming 38 St. Rep., 1024.

   Gray, J.

This action was brought to restrain the maintenance and operation of the defendants’ roads in front of the plaintiff’s premises, and the prayer for such a judgment included also a demand for the amount of loss and damage which might be ascertained to have been already sustained by the plaintiff. The complaint sets out the title and ownership of the plaintiff and his rights in and to the street in front of his premises; the construction of the elevated railroad and the operation of trains over it and the annoying results therefrom; the illegal and unauthorized nature of the trespass upon the plaintiff’s premises and easements,, and the failure of the defendants to acquire or to make compen- ■ sation therefor; the injuries sustained and that they will be constant and continuous, and, finally, that to prevent a multiplicity of suits, to protect against irreparable damages and to afford complete relief, the plaintiff is compelled to seek the equitable interference of the court. When the action came on for trial the defendants’ counsel moved for atrial of the plaintiff’s claim for past damages by jury, and the exception to the denial of that motion raises the main question presented upon this appeal.

The clause of the constitution, upon which the demand for a jury trial was based, reads: “ The trial by jury, in all cases in which it has heretofore been used, shall remain inviolate forever.” The argument for the appellants is, in substance, that there were two independent causes of action stated in the complaint, of which one was for past damages, which, prior to the Constitution of 1846, was cognizable solely in a court of law,, and that under the Code it comes within the equity jurisdiction of the court only by reason of the permission to join in one complaint legal and equitable causes of action. By § 970 of the Code of Civil Procedure, which was a new enactment, it is provided that “ where a party is entitled by the constitution, or by express provision of law, to a trial by a jury of one or more issues of fact * * * he may apply upon notice to the court for an - order directing all the questions arising upon that issue to be distinctly and plainly stated for trial accordingly,” whereupon the court must so order, etc. If the defendants believed that they had a constitutional right to a jury trial of some issue of fact in this action, it would have been the natural and orderly way for them to make an application to the court under this section. The complaint appears to be but one consecutive narrative of the grounds upon which the equitable interference of the court is alleged to be necessary. The pretense that there is a separate cause of action rests only upon the demand of the complaint that, if he is entitled to the equitable relief of an injunction, the court shall adjudge to him such an amount for the loss sustained by the defendants’ acts as shall be ascertained.

Undoubtedly, the claim for past damages sustained by plaintiff in his property rights from the defendants’ acts could have been made the subject of an action at law; but that was not the cause of action which the plaintiff elected to assert in his complaint and to bring to trial. What he attempted by instituting his action was to restrain the continuance of acts, which were constantly injuring and would, to all appearances, constantly in the future continue to injure him in ways and in a manner which he described in his complaint. That was a form of relief demandable and cognizable only on the equity side of the court. Hence, as upon the face of the complaint the plaintiff alleged a cause of action for equitable relief, if the defendants conceived that they were entitled to a trial by jury of any issue of fact involved in the statements of the complaint, they might have •moved the court under § 970, and then the question could have 'been opportunely and properly met. Appellants cite upon this point 'the decision in Colman v. Dixon, 50 N. Y., 572; but that was made in 1872, and § 970 was a new provision and was enacted in 1877.

But, whatever the effect of the omission to take this course of procedure, we need not determine it now; inasmuch as the conclusion we have reached holds the right to a separate trial by jury as to the amount of past damages in such an action not to be within the purview of the constitutional guaranty. The action was one purely for a court of equity; for the main relief sought was an injunction against the defendants, restraining them from maintaining and operating their elevated railroad. To the assertion of this ground for the equitable interference of the court, the facts in the complaint were marshalled, and to the necessity for granting that species of relief every allegation of the complaint was framed and calculated to lead. There was but one cause of action stated in this complaint, and that was the claim for relief against the continued trespass upon the complainant’s properties. The demand for past damages, included in the prayer for judgment, does not have the effect to set up an independant cause of action. It is nothing more than a demand that the court, having adjudged the plaintiff entitled to the equitable relief prayed for, and having acquired entire jurisdiction of the action, will assess the damages which appear to have been sustained down to the trial.

It has always been a well-settled and familiar rule that when a court of equity gains jurisdiction of a cause before it for one purpose, it may retain it generally. To do complete justice between the parties, a court of equity will further retain the cause for the purpose of ascertaining and awarding the apparent damages, as something which is incidental to the main relief sought While this is done on the ground that the remedy for the damage done is deemed to be incidental to the relief of injunction, the principle is in perfect harmony with the theory of the jurisdiction of d' court of equity. Its power is invoked, and. it interferes to restrain a trespass, which is continuous in its nature, in order to prevent a multiplicity of suits, and taking jurisdiction of the cause for such a purpose, it may retain it to the end, and close up all matters for legal dispute between the parties by .assessing the loss sustained from the acts which it has restrained.

The power and practice of courts of equity were, as it was forcibly remarked by Judge Earl in the case of The Madison Avenue Baptist Church, 73 N. Y., 82, 95, “ When they have once obtained jurisdiction of a case, to administer all the relief which the nature of the case and the facts demand, and to bring such relief down to the close of the litigation between the parties.”

The fact that a money judgment is ordered against the defendant for the plaintiff’s loss affords no peculiar ground for attacking equity’s jurisdiction. That is frequently the case in actions of an unquestioned equitable nature. Quite recently, Judge Finch, in Van Rensselaer v. Van Rensselaer, 113 N. Y., 207; 22 St. Rep., 947, observed, with respect to an objection to the jurisdiction of a court of equity that the final relief would be a personal judgment,, that it would not in that manner lose its jurisdiction of an action of an equitable character. The jurisdiction “ once acquired,” he-said, “ it retains to the end, even though it may turn out that, adequate relief is reached by a merely personal judgment. This is-not an uncommon occurrence.”

Instances are frequent in which a court of equity decrees the-payment of money as an incident of the grant of equitable relief, and that feature does not suffice to qualify the jurisdiction. But I think we should consider the question to have been settled, upon the authority of several decisions of this court. In the case of Williams v. New York Central Railroad Company, 16 N. Y., 97, the opinion was delivered by Judge Samuel Selden. That was a suit in equity, brought to restrain the defendants from using the street with their railway and to recover damages for past use. The conclusion arrived at, as expressed in the opinion, was that it follows that the defendants in constructing their road. * * * were guilty of an unwarrantable intrusion and trespass upon plaintiff’sproperty, and that he is entitled to relief. Although he had a remedy at law for the trespass, yet, as the trespass was of a continuous nature, he had a right to come into a court of equity and to invoke its restraining power, to prevent a. multiplicity of suits, and can, of course, recover his damages as-incidental to this equitable relief. There may be doubt as to his-right to recover in this suit the damages upon the lots which have been sold; because as to those lots there was no occasion to ask any equitable relief, and to permit the damages to be assessed in this suit, in effect, deprives the defendants of the right to have them assessed by a jury. But, as this question has not been raised, it is unnecessary to consider it.”

There are two things to be noted in that opinion. In the first-place the damages already sustained were deemed within the power of a court of equity to award, as an incident of its jurisdiction over the action. This idea is, in fact, emphasized by the suggestion as to the lots which had been sold; because it is clear that the court regarded its right to award the damages as a matter connected with, or dependent upon, the ground for granting any equitable relief; that is to say, as to the property to be protected by the decree of the court against the defendants’ acts, the damages-caused to it could be assessed by the court; but as to that portion withdrawn by the sale it might be doubtful, because not the subject of, or entitled to, the equitable relief. It is very obvious that, the court had in mind the question as to the right of trial by jury. In the second place it may be noted that the opinion speaks of the assessing of the damages. This definition of an assessment of the damages seems to me to put the action of the court in line with just what courts of equity have always done in cases over 'which they have gained jurisdiction; that is to say, they proceed to inquire directly, or by reference, or otherwise, as to the damages sustained and assess them accordingly. When, later, the same case, entitled as Henderson et al., after a new trial, came up again, 78 N. Y., 423, the opinion of the court was delivered by Judge Dan-forth, who again upheld the plaintiff’s right to invoke the equitable power of the court, and held that he could, “of course, recover his damages as incidental to this equitable relief; ” and he stated it to be “ an elementary principle ” that “ when a court assumes jurisdiction in order to prevent a multiplicity of suits it will proceed to give full relief both for the tortious act and the resulting damages.” The opinion was carefully written and based upon the authority of many cases.

Eecently, again, in the case of Shepard v. The Elevated Railroad Company, 117 N. Y., 442 ; 27 St. Rep. 705, it was said of these actions that they were necessarily “on the equity side of the court, as the main relief sought was the injunction against the defendants,” and that in them the complainants could “ recover the damages they have sustained as incidental to the granting of the equitable relief.” This view, as stated in that .opinion, was expressly based upon the Williams and Henderson cases and upon the supposed equitable principles governing such actions.

The Shepard case, somewhat conspicuously, illustrates the powers a court of equity may arrogate to itself with the object of completely determining and quieting the questions before it when it has once acquired jurisdiction of the action. It follows, in that respect, a rule long established by authority. It is true that in these cases the right tp demand a jury trial as to past damages-was not precisely, or in terms, stated as the proposition advanced; but that, as it seems to me, would be a very narrow evasion of the effect of the opinions delivered. They did consider the nature of such actions and deliberately declared the power of the court in equity, as an incident of the main relief of injunction, to assess the damages sustained.

In Carpenter v. Osborn, 102 N. Y., 552; 2 St. Rep., 520, the court, in an action to set aside certain conveyances as fraudulent, granted the equitable relief prayed for, and, in addition, decreed the judgment a lien upon the land for some unpaid instalments of interest, to the payment of which the defendant had obligated himself in a certain agreement. Chief Judge Euger delivered the opinion of this court in affirmance of the judgment and said: “ This principle has been applied in many cases in awarding judgment for pecuniary damages, even when the party had an adequate remedy at law, if the damages were connected with a transaction over which the courts had jurisdiction for any purpose; although for the purpose of collecting damages merely they would not have had jurisdiction.” In support of the principle declared by him, the learned judge cited Pomeroy’s Equity Jurisprudence (§ 181), and various cases.

I think some confusion of thought concerning the constitutional guaranty of a trial by jury may arise in a misapprehension as to its proper application. That provision relates to the trial of issues •of fact in civil and criminal proceedings in the courts; as it was held by the chancellor in thee case of Beekman v. Saratoga R. R., 3 Paige, 45. Where the trial of a civil proceeding presents for determination a question of fact, the right of trial by jury is proper and can be invoked. But an action brought to restrain the commission of trespasses, which are continuous in their nature, is necessarily in equity, and the court interferes to prevent multiplicity of suits, and grants equitable relief by way of an injunction. The question presented for determination in such an action is one of law, whether, upon the facts to be established upon the trial, the plaintiff is entitled to such relief. Upon the proofs, showing the nature of the trespasses, and the consequent injury to the complainant’s property, the court decides the question of plaintiff’s right to an injunction. It does not seem to me that it can be said that any issue of fact as to damage remains. That was necessarily decided in the action, and all that remains is to fix its amount: and I do not think the constitutional provision was aimed at such a proceeding. As defined by the chancellor in the case above referred to, it seems difficult to rationally give it an application to what is simply an assessment of the damages.

I may extract, and may appositely quote here, a remark of Judge Andrews in his opinion in Cogswell v. The Railroad Company, 105 N. Y., 319 ; 7 St. Rep., 203: “We think,” he says, “ it is a reasonable rule, and one in consonance with the authorities, that where a plaintiff brings an action for both legal and equitable relief, in respect to the same cause of action, the case presented is not one of right triable by jury under the constitution.” The case was one wherein the plaintiff’s complaint demanded judgment for damages and an abatement of a nuisance, and also for an injunction against its continuance. The learned judge’s opinion is upon the •question of whether such an action was one for a nuisance, under § 968 of the Code, which must be tried by jury unless waived or referred, and he held that it differed from Hudson v. Caryl, 44 N. Y., 553, which was a common law action, in that equitable relief by way of injunction was asked, and not simply the relief obtainable by writ of nuisance for damages and an abatement. His remark upon the right to a jury trial in equitable actions is not out of place, however, here.

To carry this discussion backwards, and to a time anterior to decisions of this court, we find warrant in the opinions then held by our own and the English chancery courts for holding that a trial by jury was not usual in cases where equity had acquired jurisdiction, and that the court would administer all the relief which the facts warranted, including the assessment and awarding of compensation for injury sustained. In Watson v. Hunter, 5 Johns. Ch., 169, the bill was filed to enjoin the cutting of timber and to restrain the removal of that which had already been cut. Chancellor Kent confined the relief of injunction-to-the timber standing, and refused it as to the removal of the cut timber, on the ground that it would be an application to an “ incidental remedy.” He said that “ the practice of granting injunctions in cases of waste is to prevent or stay the future commission of waste; and the remedy for waste already committed is merely incidental to the jurisdiction in the other case, assumed to prevent multiplicity of suits and to save the party the necessity of resorting to trover at law.”

The chancellor’s exposition of the principle upon which equity acts in cases of waste, obviously, is as applicable to cases of trespass. If the action at law in trover was deemed unnecessary for the personal property already converted in that case, it seems unnecessary in such an action as this in order to recover the loss sustained from the trespass. The chancellor in the Watson case relied upon the practice followed by the English chancellors. Lord Hardwicke, in Garth v. Cotton, 1 Vesey, Sr., 528, had held that the decree for the waste already committed was an incident to the injunction to stay waste. Before that in Jesus College v. Bloom, 3 Atk., 262, where the bill was filed for an account and satisfaction for waste in cutting trees, and no injunction was prayed for, Lord Hardwicke said that the bill was improper and that an action of trover was the remedy. He established the rule, however, that where the bill was for an injunction to prevent waste, and for waste already committed, the court, to prevent a double suit, would award an injunction to prevent future waste and decree an account and satisfaction for what was past. He held that to prevent multiplicity of suits the court will, on bills for injunction, make a complete decree and give the injured party a satisfaction for what had been done, and not oblige him to bring another action at law. In the subsequent case of Smith v. Cooke, 3 Atk., 381, the same Lord Chancellor declared the same doctrine, as did also Lord Thurlow in Lee v. Alston, 1 Ves., Jr., 78. I quote a remark of Lord Nottingham in Parker v. Dee, 2 Ch. Cases, 201, that when a court of chancery has once gained possession of the cause, if it can determine the whole matter, it will not be the handmaid of other courts, “ nor beget a suit to be ended elsewhere.”

In our former court of errors Chancellor (then Judge) Kent held, in Armstrong v. Gilchrist, 2 Johns. Cases, 424, 431, decided in 1800, that “the court of chancery, having acquired cognizance of a suit, for the purpose of discovery or injunction, will, in most cases of account, whenever it is in full possession of the merits and has sufficient materials before it, retain the suit in order to do complete justice between the parties and to prevent useless litigation and expense.” That case was upon a bill for specific relief and to restrain an action at law brought to recover the value of certain bank stock, and it set up certain equitable considerations as against the justice of a recovery in the other action. The chancellor below decided against the whole relief sought by the bill, and decreed in favor of the defendants that the complainants should pay them the value of the stock and ordered a reference to state the account. This procedure the court of errors upheld as being right and the duty of the chancellor to follow.

I do not consider the cases cited by the appellants to be at all controlling upon the question. In Murray v. Hay, 1 Barb. Ch., 59, the bill was filed by two persons, who were owners of different dwelling-houses, in severalty, having no joint interest in either of them, to restrain a nuisance which was a common, but not a joint, injury to both complainants. The objection to the prayer for an account and compensation for their respective damages was upon the ground of multifariousness, and so considered. Another case, of Hudson v. Caryl, 44 N. Y., 553, was an action to recover damages for the overflowing of plaintiff’s lands and to compel the removal of the dam; and the decision turned upon the ancient right to a jury trial, in such an action of nuisance, which the Code had not affected. It was not an action in equity to restrain a nuisance, which, according to Judge Andrews’ opinion in the Cogswell case, supra, would not be an action for a nuisance directed by the Code to be tried by jury.

But the judge who delivered the opinion of the majority of the commission of appeals, in Hudson v. Caryl, spoke obiter in his remarks upon the general right of trial by jury, as his opinion indicates, for he says (p. 555): “ But whatever may be said or decided in regard to the trial of other actions, in which two causes of action, one exclusively of legal and another exclusively of equitable cognizance, arising out of the same transaction, are united, this action should, for an independent reason, have been tried by jury, and that is, that the action, when brought for the double object of removing the nuisance and recovering the damages occasioned by it, was always tried by jury;” and he proceeds to refer to Blackstone and to the old Revised Statutes. As, therefore, “a case is presented in which a trial by jury has been heretofore used,” the commissioner concluded it was error to refuse it.

It does not seem to me necessary to pursue further the consideration of authorities. The respondent’s counsel has cited others in this and the lower courts. In a note to Armstrong v. Gilchrist, supra, will be found reference to other early cases in this state, and in the United States supreme court, in support of the “settled rule, that when the court of chancery has gained jurisdiction of a cause for.one purpose, it may retain it generally for relief.” Underlying the system upon which courts of equity have practiced their powers, as I understand it, is the principle that when they have gained jurisdiction of a cause by reason of the infirmity of the courts of law to entertain it, or to give full relief, they will retain their control of the cause generally, and settle up the whole matter between the parties. ■

I have discussed the question here at considerable length, in order that a rule, long settled by careful judicial utterances, and, in itself, reasonable and commendable as promoting the public convenience in the disposition of litigated causes, might not, at this day, be shaken by doubts. The conclusion which, I think, we must reach is that, in this complaint, the cause of action is single, and constitutes a claim for equitable relief, and there is not mixed up with it a cause of action for legal relief.

The facts alleged as a basis for an appeal to the court to exert its equitable power may well have constituted a claim for legal relief, and might have been set up in an action at law; but that consideration cannot affect nor change the equitable nature of the action itself.

It was not error, therefore, to deny the motion for a trial by jury as to past damages, and the court could competently proceed with the trial of the cause in equity.

The only other point presented to us upon this appeal is that it was error to award damages for portions of the property which were in the possession of tenants. As to this question the case is controlled by the decision of the Kernochan case, at this term. 41 St. Rep., 110.

The judgment should be affirmed, with costs.

All concur, except Earl and Peckham, JJ., who dissent.


text:
    George Herold, Resp’t, v. The Metropolitan Elevated R. Co. et al., App’lts.

      (Court of Appeals,

      Filed December 15, 1891.)

       Affirming 37 St. Rep., 896.

   The disposition of the appeal in the case of Lynch against these same defendants, argued herewith, must control this appeal.

The judgment should be affirmed, with costs.

All concur, except Earl and Peckham, JJ., who dissent.


author: Peckham, J.

text:
    In the Matter of the Voluntary Dissolution of The Home Provident Safety Fund Association of New York.

      (Court of Appeals,

      Filed December 15, 1891.)

    1. Receiver—Dissolution op insurance company—Trust pund.
    The court has no power, upon the voluntary dissolution of an insurance company, to direct a trust company to turn over to the receiver appointed therein the funds and securities held by the trust company under an agreement between it and the insurance company, by which the former was to create therewith a safety fund, to be paid to the certificate holders in a specified manner.
    2. Same—Payment, when not voluntary.
    Where, in such a proceeding, the trust company, not having been made a party thereto, was served with an order to turn over the funds, etc., to the receiver, and did so, it is not such a voluntary payment as to preclude it from asking for the repayment of the money still in the hands of the Receiver.
    3. Same.
    The receiver, in good faith, paid out of such fund a large portion thereof to attorneys. Held, that the attorneys should be compelled to pay it back to him, and he directed to pay it over to the trustee, and that which he paid out in other matters under direction of the court should be allowed for in his accounting with the trust company.
    Proceedings by petition to the court were taken in behalf of the trustees of the company above named, to provide for its voluntary dissolution.- The matter was referred to a referee who reported that it would be unwise for the corporation to continue business and that it should be dissolved. A motion was made in behalf of the petitioners to confirm this report and for a final order for the dissolution of the company and the appointment of a receiver of its property, as provided by statute. The notice of this motion was served upon the attorney general, and the superintendent of the insurance department, and some others who had made themselves parties to the proceedings, but no notice of any application to the court was given The Farmers’ Loan & Trust Company, one of the appellants here.
    Upon the hearing of the application above noticed the report of the referee was confirmed, the corporation dissolved, and the temporary was appointed the permanent receiver of all the stock, property, things in action and assets of the corporation. The Farmers’ Loan & Trust Company was in the same order directed to turn over, transfer and assign to the receiver all funds, securities and property received by it from the corporation or held by it under or by virtue of any contract made between it and the corporation, in trust or otherwise, for the members of the corporation. The receiver served a copy of the order on one of the officers of the institution and demanded or requested payment by it to him of all the moneys or property it held of the dissolved corporation, in accordance with the provisions of such order. The officer of the institution upon whom the copy order was served, and of whom the démand was made, complied with its terms and delivered all the securities, amounting to about the sum of $11,000, which it held in trust for the members of the dissolved corporation who were holders of certain of its certificates. The receiver having taken possession of such securities (which were registered U. S. bonds), had them transferred to his name and subsequently they were sold under direction of the court and a portion of the proceeds paid out by the receiver under orders of the court and in good faith, in reliance upon such authority.
    A portion of the money was paid to the attorneys who had carried on the proceedings to obtain a dissolution of the corporation, for payment of their services therein, and to pay the referee’s fees in such proceeding, and other disbursements. Another portion was paid for counsel fees to receiver’s own counsel. The amount of money paid out by him under the orders of the court was $2,852.16, and the total amount received was $11,203.44, leaving a balance in his hands of the funds received by him from The Farmers’ Loan & Trust Company of $8,353.28.
    Subsequently the trust company applied on notice to the receiver, etc., for an order to compel the receiver to repay the moneys which he had obtained from the trust company, and the ground of the application was that the trust company had no notice of the application for the order made peremptorily requiring it to pay over such funds, and that it was not a voluntary payment, and that it was entitled to have the money repaid to it to the end that its rights, and those of the parties interested in the fund, might be protected.
    The court at special term ordered that the moneys should be repaid the trust company; regardless of what direction would have been made had the trust company or the beneficiaries under the trust agreement been notified and heard, and it also directed the attorneys and referees to repay to the receiver the amounts they had been respectively paid by him.
    The receiver and the attorneys and referees appealed to the general term from this order, where the provision directing the receiver to repay to the trust company was reversed, but that requiring the attorneys and referees to repay to the receiver was affirmed. The trust company and the attorneys and referees have appealed from the order of the general term to this court. Other facts appear in the opinion.

      David McClure, for Farmers’ Loan & Trust Co., app’lt; George S. Hastings, for Hastings & Gleason, app’lts; Charles A. Jackson for Jackson & Burrill, app’lts; Nelson Smith, for resp’t.

       Reversing 39 St. Rep., 437.

   Peckham, J.

It must be assumed that the insurance company which has been dissolved had the power to enter into the contract which it did execute with the Farmers’ Loan & Trust Company, for no party to this dispute questions that fact

In May, 1884, the trust company and the insurance company entered into an agreement by which the insurance company agreed to deposit with the trust company moneys under these circumstances: The insurance company proposed to issue to persons becoming members of its association certificates of membership, and in such certificates it would state that in consideration of the sum of ten dollars, to be received on each $1,000 of the amount of each certificate from the person holding the same, it would pay such sum to the trust company as trustee, for the purpose of creating a safety fund to be paid out by the trust company under the circumstances stated in the certificate. A like statement as to the payment of one dollar for a tontine pension fund was to be placed in each certificate and to be paid as stated.

These details were set out in full in the agreement with the trust company, as recitals of the obligations the insurance company was under to its members holding such certificates, and then the two companies agreed each with the other that the insurance company would pay to the trust company these moneys, and the trust company would keep and pay them in the manner and for the purposes stated in the agreement. It was understood that the funds belonged to the insurance company, subject to the trusts provided in the agreement. The trust company was to receive, hold, manage and deposit the funds paid to it in a manner provided for in detail. It was to invest the moneys as fast as it could in U. S. bonds, registered in its name as trustee, and accumulate the fund with the interest until it amounted to $300,000, when the further interest, in case no default was made by the insurance company, was to be paid to it. In case of failure on the part of the insurance company to perform the obligations entered into with its members who held these certificates, then the trust company was to convert the securities into money and divide the same .in accordance with the recited agreement contained in the certificates and reiterated between the insurance and trust companies in their agreemen

All payments required in the agreement to be made by the trust company to the certificate holders after default were by the terms of the agreement to be made at the office of the trustee or of its successor.

Sufficient has been set forth in regard to this agreement to show that the trust company was the trustee of a fund provided by the insurance company, which the former company agreed to dispose of in a particular way before the default of the insurance company, while after that event the trust company agreed to apply the fund in payment of the obligations of the insurance company to its certificate holders.

The first question which here arises is as to the power of the court upon proper notice and hearing, to take this fund out of the hands of the trust company and administer it through the instrumentality of its own receiver.

If it have that power, it would seem rather superfluous to send the fund back to the trust company for the purpose of going through the mere form of notifying that company of an intended application to compel it to pay'the same over to the receiver. The trust company gave notice to the receiver that it would apply for an order to repay the money to it, and in its papers the grounds of its application were set forth. The receiver appeared in obedience to the notice and set up facts which he claimed were sufficient to warrant the court in ordering the fund to be retained by him. The notice of the application and the papers used upon the hearing thereof might, therefore, be regarded as sufficient to constitute both a notice to all parties served and a hearing of them by the court, so that the court could make a final order for the retention of the fund by the receiver, if it had the power so to do, and if in its discretion it thought it best

It does not appear to us that the power exists. We do not question the right of the court, upon dissolution of the corporation, to decree distribution of its funds among those of its creditors or policy or certificate holders who may be entitled to them. This is a different power from the taking away by the court from a trustee the funds placed in his or its hands for a specific purpose by the dissolved corporation and itself distributing the fund through its receiver instead of through the trustee. The trustee is still entitled to the possession of the trust fund as provided for in the contract which has been made, and that contract is to be the measure of its liability and the guide for the discharge of its duties. When, by the dissolution of the corporation, a default has occurred in the payment of its liabilities to the holders of the certificates, the duty of the trustee under the contract still remains. The company having defaulted and dissolution having taken place, and so the authority of the court having come into play, that authority would seem to be confined to compelling the trustee to distribute the fund as provided for by the contract, and under the supervision and orders of the court. I see nowhere any authority in the court to itself take possession of the fund, with the payment of which the trustee was itself charged under and by virtue of a valid contract, the obligations of which still remained as against the trustee.

Certainly the right of the trustee to retain its possession is as strong where founded upon a valid contract, as in the case of a trustee created by statute. And yet, in the case of a statutory-trustee, it has been held by this court several times and after full argument, that it had no power to take the securities from the .statutory trustee and pass them over to its own receiver for the purpose of distribution according to the conditions of the trust among the creditors of the insolvent and dissolved corporation. The case of Ruggles, as receiver, v. Chapman, as superintendent of insurance, was the first of a series of cases tending in the direction above mentioned. It was first reported in 1 Hun, 324. The plaintiff was the receiver of the Eclectic Life Insurance Company, appointed by the court pursuant to the provisions •of the Revised Statutes, and in the exercise of its equitable jurisdiction and at the suit of a stockholder and creditor, to •establish the insolvency of the company and procure the distribution of its assets.

By § 6 of chapter 463, of the Laws of 1853, it was provided that no insurance company of the class of which the Eclectic was one should be organized with a less capital than $100,000, nor until it had .deposited with the comptroller' of the •state the sum of $100,000 in stocks or securities, and such stocks or securities were to be held by the comptroller as security for the stockholders in that company. But it was provided that as long as any company so depositing these securities should continue solvent, it might be permitted to collect the interest or ■dividends on the securities so deposited, and from time to time to withdraw any of such securities on depositing with the conptroller ■other securities of like character.

Upon the creation of the insurance department the powers of the comptroller were transferred to the superintendent of that department. The Eclectic Company had deposited $100,000 of securities in accordance with the section above mentioned. It became insolvent, and at the suit of a creditor a receiver was appointed, and he demanded these securities for the purpose of making distribution among the policyholders of the company. The superintendent refused to deliver the securities and an agreed case was submitted to the general term embodying these facts, and the court held that the superintendent was not bound to hand over these securities to a receiver appointed by a legal tribunal under the Revised Statutes, for the benefit of general creditors ; that the securities were deposited as a special fund for the security of the policyholders primarily, and that their rights could be protected by the superintendent in the manner pointed out by the act of 1853, which is the general insurance corporation act.

Upon appeal from that judgment to this court it was affirmed, and this court held that the receiver under the provisions of the Revised Statutes had no authority to require from the superintendent of tlie insurance department the securities deposited with him by the company as security for the policyholders, pursuant to the provisions of the act above mentioned for the incorporation uf insurance companies. It was held that the courts had no power to compel the superintendent to transfer the trust imposed upon him by that act. The opinion of the court was delivered by Johnson, J., who in the course of the argument put this very case, and setting aside the official character and tjie statutory sanction of the trust, he said that “ if it rested on contract alone it is difficult to see on what footing a court could assume into the hands of receivers property lawfully held in trust, in the absence of misconduct on the part of the trustee. Mortgagees in trust could not be compelled to yield to receivers representing creditors at large.” The learned judge then stated there was a difficulty in the way of harmonizing the two independent schemes of dealing with these insolvent insurance companies, such as a proceeding by a creditor to procure a distribution of the effects of such a company among its creditors, and that provided by the statute of an action by the attorney general for the purpose of a dissolution and such distribution. He said that the legislative power should be invoked to provide such harmony, as the court was unable to do it

Subsequent to that decision an act was passed in relation to the same company, known as chap. 337, of the Laws of 1875, and it was claimed on the part of the receiver of the company that power was given to him thereby to take, and that it was made the duty of the superintendent to deliver to him the securities in the hands of the superintendent for distribution by the receiver according to the conditions of the trusts. The special and general terms of the supreme court were of that way. of thinking, and directed that a mandamus should issue upon the application of the receiver against the superintendent, commanding him to deliver to the receiver the securities in question. An appeal was taken to this court, where the order for the mandamus was reversed, and it was held again that no power existed in the court to make such an order originally, and that the legislature did not confer it by the act of 1875. The position was reiterated that the superintendent was acting as a trustee, and that the good faith of the state was pledged that that officer should hold the fund for the benefit of policy holders, without its being subject to the hazard and expense of a transfer to a receiver. The case is reported as People ex rel. Ruggles, Receiver, v. Chapman, 64 N.Y., 557.

The question again came before the supreme court in The Matter of Guardian Mutual Life Ins. Co., and three others, reported in 13 Hun, 115. That was a case where a receiver had been appointed upon the application of the attorney general made pursuant to the provisions of the general act for the incorporation of insurance companies, passed in 1853, and its amendments. By the 17th section of that act, whenever the superintendent should think that the facts stated in that section existed in relation to any insurance company, it was provided that he should notify the attorney general, who should apply to the court, and if upon hearing the court decided in substance that the company was insolvent, it should direct a dissolution of the company and a distribution of its effects, “including the securities deposited in the hands of the Superintendent of the Insurance Department.” The receiver applied to the court and reported that he was ready to distribute the funds, including those in the hands of the superintendent, to the policy holders, and that he was unable to proceed further until they were delivered to him. He asked that an order for such delivery be made. The special term granted the order. The attorney general appealed and the general term reversed it on the ground the case could not be distinguished from that of the People ex rel. Ruggles v. Chapman, above referred to. It will be seen that this was a case where the proceeding was taken under the very act for the incorporation of insurance companies and which provided for the deposit of the securities and also provided for their distribution, and that the proceeding was by the law ■officer of the state. The 6th section of the act mentioned provided for the depositing of the securities with the superintendent as security for the policy holders, and the 17th section of the same act provided for the distribution of the funds of the company, including the securities in the hands of the superintendent; and yet even upon those facts the supreme court held that the superintendent was a trustee and that though the securities were undoubtedly to be distributed under the direction of the court, yet still it was not to be done by the receiver, but that it was to be done bv the superintendent as such trustee, and thus two separate and independent proceedings were held to be necessary in order to distribute the funds of the insolvent company. An appeal was taken from that determination to this court and an examination of the case here shows that all these questions were presented fully by the briefs of the respective counsel, and after argument, this court affirmed the order of the general term, and held in accordance with the line of decisions already quoted. The decision upon the appeal is reported in 74 N. Y., 617, in the memoranda, no opinion having been written.

It is unquestionable that the securities in the hands of the superintendent were always the property of the company, and liberty was given by the statute to change the securities, provided others were substituted of equal value. The provision in the agreement in question in the case at bar, that the funds belong to the party of the first part, viz., the insurance company, subject to the execution of the express trust provided in the agreement, does not alter the question as to whether a trust fund so situated passes to the receiver of the corporation, or remains with the trustee. In each case, that of the official trustee and that of the trustee by virtue of the. contract, the fund placed with such trustee as security was the property of the insurance company so depositing it, but in both cases it was subject to the trust "created, the one by statute and the other by agreement; and I do not see that the court has more power in the case of the trustee by contract than it has in the case of the official trustee, to take from the possession of the former securities placed with it by virtue of a valid agreement which it had entered into with an insurance company subsequently dissolved by the court.

The case of the Attorney- General v. The Guardian Mutual Life Ins. Co., 77 N. Y., 272, is not in point. The question there was as between the right of a receiver, appointed in a proceeding taken by the attorney-general to dissolve the corporation, to commence an action to recover the assets of such corporation alleged to have been fraudulently disposed of, and to enjoin the further prosecution of an action brought for the same purpose by a creditor or stockholder of such company before the appointment of a receiver. It was held that the receiver so far represented the creditors and stockholders of the corporation that he had a right to commence an action to recover these assets for the recovery of which the creditor had commenced his action, and that the receiver had the right, on motion in the suit of the attorney-general, to enjoin the creditor from the further prosecution of his action. No question arose there as to the right of the trustee of a fund placed in his or its hands to hold on to the fund and make distribution under the orders of the court, as is contended for herein by the trustee.

The other cases cited by the counsel for the receiver do not touch this point

We think, therefore, that the court was without power to make the order directing the transfer of the funds from the trustee-to this receiver, and that it should vacate such order and provide for the repayment to the trustee of the funds received by the receiver. Some ground is alleged for the refusal to make such an order on account of the alleged voluntary character of the payment by the trustee to the receiver. We think, upon the facts found, the payment was not voluntary so far as to preclude the trust company from asking for the repayment to it of the money still in the hands of the receiver.

Some embarrassment is created herein by the fact that the receiver has, while the fund was in his possession, in good faith paid out a portion of it under the direction of the court. We think he should be protected in these payments; but all the attorneys to whom any portion of the money was paid should be compelled to pay it back to him, and upon receipt thereof he should be directed to pay it to the trustee. That which he has paid out in other matters and under the direction of the court, he must be allowed for in his accounting with the trust company. There is some degree of loches existing on the part of the trust company itself. The order for the payment by it to the receiver of the fund in its hands had been in its possession quite a number of days before the great bulk of the fund was paid to the receiver in accordance with such order. It is possible that with reasonable diligence an examination of the papers by counsel would have resulted in the discovery of the fact that there was at least great doubt whether the order of the court, made without notice or hearing on the part of the trustee providing for the payment of this fund to the receiver was valid, and steps for a review of the order in some form might at once have been taken; instead of ■which, so far as appears, the trustee took no proceeding looking toward a review of the order and a repayment of the fund until the 3d of December, 1890, a period of ten or eleven months. Under these circumstances, the court will do its utmost to protect its own officer in the payment of moneys paid in good faith under its orders, although it turn out that the payment should not have been made out of this fund. It results from these views that the trustee must be a party to any proceeding which may be taken looking to a disposition of this fund and that it has the right to make distribution thereof, under the direction of the court.

The order of the general term must be reversed, and the order of the special term providing for the repayment of the whole fund by the receiver to the trustee should be modified, by protecting the receiver from a repayment of the funds he paid out by order of the court until repayment of the whole, or some part thereof, is made to him. No costs to any one are allowed in this court.

All concur.


author: Andrews, J.

text:
    In the Matter of the Estate of Jacob L. Ryder, Dec’d.

      (Court of Appeals,

      Filed December 15, 1891.)

    Surrogates’ court—Jurisdiction
    A surrogate has no jurisdiction to issue citations to attend a proceeding-instituted and conducted by an executor merely for the purpose of establishing his claim against the estate for services rendered testator during his life-time. Such debt may only be proven at his judicial settlement under § 2739 of the Code.
    Appeal from judgment of the supreme court, general term,, second department, affirming decree of surrogate awarding §1,000 for services rendered to decedent

      Abraham L. Fromme, for app’lt; Close & Robertson, for resp’t.

       Reversing 38 St. Rep., 29.

   Andrews, J.

The proceeding was instituted by petition of Anna F. Dromgoole, one of the executors, to the surrogate, setting forth the death of the testator, the probate of the will, the qualification of the executors, that the petitioner and Sarah E. Hall were the only children of the testator, and the claim of the petitioner against the testator, and praying that a citation issue to the co-executor and Sarah E. Hall to “ attend the proof of the said claim before the surrogate.” The citation was issued and served on the persons named, and on the return day Sarah E. Hall put in an answer denying the validity of the claim and objecting that the surrogate could not determine its validity, and that the claimant must bring her action. The co-executor made no answer.

The case was tried before the surrogate, who rendered a decree establishing the claim to the extent of §1,000, and directing that the co-executor pay to the petitioner out of the estate the sum awarded.

The petition was filed more than a year after the issuing of letters testamentary. There was no proceeding for a settlement pending at the time.- The matter was an isolated proceeding instituted and conducted solely for the purpose of establishing the claim of the petitioner. On the hearing the attorney of Mrs. Hall moved to dismiss the petition on the ground that the surrogate had no jurisdiction to pass on the claim, and at the conclusion of the case an exception was taken to the refusal of the court to rule that the surrogate had no jurisdiction upon the pleadings to entertain the application. The point we think was well taken.

Section 2739 of the Code of Civil Procedure provides that “ Upon the judicial settlement of the account of an executor or administrator, he may prove any debt owing to him by the decedent.” We find no other provision in the Code on the subject. Under the Revised Statutes an executor or administrator was prohibited from retaining any of the property of the decedent in satisfaction of his own debt until it should be proved and allowed by the Surrogate. 2 Rev. St., 88, § 33. The act of 1837, chap. 460, § 37, added a provision that the proof of the debt of an executor or administrator “ may be made on the service and return of a citation for that purpose, directed to the proper person, or on the final account of any such executor or administrator.”

Several cases were determined while these provisions were in force. Kyle v. Kyle, 67 N. Y., 408; Shakespeare v. Markham, 72 id., 400 ; Boughton v. Flint, 74 id., 476.

It will be noticed that § 2739 of the Code permits an executor or administrator to prove his claim upon a “ judicial settlement ” of his account, and does not contain the alternative provision contained in the act of 1837, that it may be done “ on the service and return of a citation,” or “on the final account.” The provisions •of the Revised Statutes and of the act of 1837 are repealed, and •§ 2739 of the, Code is a substituted provision on the same subject. .1 do not see how we can construe that section as including a general power that the surrogate may act at any time, and so make his power to cover the proceeding in question. The fact that the Code was to some extent a revision of prior statutes does not, we think, authorize the court to insert in a section which is adequate for the relief required an implied provision extending the right ■of the surrogate to exercise the power in another way, or at another time, simply because such a provision was contained in prior statutes.

The powers of surrogates’ courts are limited and statutory. Section 2472 of the Code, which defines the jurisdiction of surrogates, concludes with the declaration that the “jurisdiction must be exercised in the cases and in the manner prescribed by statute.” Section 2740 strengthens the construction that § 2739 was intended to confine the power of the surrogate to permit proof of the claim of an executor or administrator to the occasion of a judicial settlement. Section 2740 suspends the running of the statute bf limitations against such claim from the death of the decedent “ until the first judicial settlement” of the account of the executor or administrator. This provision would have been unnecessary if the executor or administrator could at any time have had his claim established. See Treat v. Fortune, 2 Brad., 116. In fixing the judicial settlement as the occasion when this proceeding should be taken, the legislature may have thought that creditors and all parties interested would then be most likely to have actual notice that a claim against the estate was made by the executor or administrator.

We regret to be obliged to reverse the judgment of affirmance,, but we see no other course. It is important that the construction of the statute be settled, as a guide in future cases.

Judgment and decree reversed, with costs to the appellant out . of the estate.

All concur.