text:
    In the Matter of the Final Accounting of Andrew G. Washbon, Deceased.

      (Supreme Court, General Term, Fourth Department,

      Filed May 8, 1891.)

    1. Executors and administrators—May allow beneficiary to occupy TRUST ESTATE.
    The will of a testator devised a farm, implements and live stock to his executors as trustees for the use of his son. Held, that they might allow the beneficiary to occupy, and were not accountable to the remaindermen for the personal property on the farm.
    2. Same—Expenses of contesting a proceeding to construe a will.
    Such executors and trustees should be allowed their expenses incurred in contesting a proceeding brought by one named in the will for a construction of a provision thereon for his benefit, especially where-their right to recover such expenses is saved by the decree.
    3. Same—Commissions on rents when beneficiary occupies.
    They arc entitled to commissions upon the income, e. g., rents and profits of a beneficiary, although they allow him to occupy the premises held in trust.

      4. Same—Chargeable only with what they receive.
    They are not chargeable with more than they receive of a trust estate unless there is some evidence of negligence amounting to a wilful default.
    Appeal from a decree made in the surrogate’s court of Otsegocounty, on the 4th day of August, 1890, amended by a supplemental decree, entered on the 12th of September, 1890. The surviving trustees presented a petition for a judicial settlement of their accounts to the surrogate of Otsego county, who issued a citation returnable October 10, 1889, directed to John G-. Washbon, Andrew Gr. Washbon, Anne W. Lee and Nathan Bridges, as executors of the last will and testament of Henry R. Washbon, a deceased trustee; on the return of the citation, proceedings were-adjourned to November 15, 1889, and they were again adjourned to the 9th of December, 1889. The statements and accounts presented by the trustees were verified in November, 1889. Anne W. Lee and Andrew Gr. Washbon, for themselves, in behalf of their father, John Gr. Washbon, filed certain objections to the account. Andrew Gr. Washbon, of the town of Morris, Otsegocounty, made and published his last will and testament, bearing date the 31st day of January, 1865. Robert Washbon, Henry R. Washbon and John Cope, Jr., were named as executors in said will. Henry R. Washbon, one of the executors, died on the 1st day of April, 1884. No inventory having been filed, Andrew Gr. Washbon and Anne W. Lee, on the 23d of November, 1887, filed a petition in the surrogate’s court, asking for an order that a citation issue directed to Robert Washbon and John Cope, Jr., and Nathan Bridges, as executor of Henry R. Washbon, requiring them to return and file an inventory of the estate of the testator, and in pursuance of the proceedings thus instituted an inventory was, on the 28th day of February, 1888, filed, “ and an account of their proceedings as such executors and trustees and the surviving executors made application for a voluntary accounting and proceedings were had thereon, in connection with the compulsory proceedings; proofs were taken before the surrogate, and he “ adjudged and decreed that the said accounts be and the same are hereby finally and judicially séttled, and allowed as so found, adjudged and recorded as aforesaidand Robert Washbon and John Cope, Jr., were “directed to retain in their hands, as surviving testamentary trustees, under the will of said testator, subject to modifications for charges and allowances for interest, and all proper payments and expenses to be adjusted upon a future accounting of said trustees,” the sum of $9,617.54, as appears by the decree entered in the surrogate’s court on the 26th day of July, 1889. The stipulation was filed and that decree was amended on the 2d day of September, 1889, nunc pro tunc. The decree of the 26th of July, 1889, and the 2d of September, 1889, remained in full force and virtue. Before the decree appealed from was pronounced John Gr. Washbon died intestate on the 9th day of March, 1890, and subsequent thereto Andrew Gr. Washbon was appointed administrator of his estate, and on the 18th of April, 1890, he was substituted as a party in place of the deceased, and the proceedings were continued by a stipulation “as a final judicial accounting.”

      Carver, Deyo & Jenkins, for app’lts; O. F. Matterson, Nathan Bridges and W. H. Johnson, for resp'ts.
   Hardin, P. J.

In addition to the usual duties imposed upon the persons named as executors in the will of Andrew Gr. Washbon certain duties and liabilities arose by reason of the second provision contained in said will, which was as follows:

“ Secondly. I give and bequeath to my executors hereinafter named the farm in the town of Morris aforesaid, containing about two hundred and fifty (250) acres more or less, upon which my son, John Gr. Washbon, now resides, and which is now occupied and worked by Levi Reddington, together with the farming utensils and live stock thereon belonging to me at the time of my decease, and also the sum of four thousand ($4,000) dollars, and also-the equal one-fourth part of the residue of my estate as hereinafter mentioned, and also any other’s share or interest which may be hereinafter devised or given to them as trustees, in trust to receive the income, rents, interests and profits thereof and to apply the same to the use of my said son, John Gr. Washbon, during his life, and at his decease to grant, convey, transfer and pay over the same to the descendants of my said son, John Gr, Washbon, who shall be living at his decease, to whom I devise and bequeath the same, so that the descendants of each deceased child, if any, of my said son, John Gr. Washbon, shall take together and per stirpes one such share as said deceased child, their parent, would have taken if living, and for the benefit of said descendants of said son, John Gr. Washbon.
“ Item: I desire and request my executors and trustees to keep said farm in as good condition, repair and supply as they may be at the time of my decease.”

Under this provision of the will the trustees had the power, and they exercised their discretion to allow the beneficiary John Gr. Washbon, to occupy the farm and the property mentioned in the provision of the will which we have just quoted; that such occupation should take place seems to have been in accord with the intention of the testator. The trustees should not suffer by reason of permitting the beneficiary to enjoy the property mentioned in the provision of the will just quoted. In the Matter of Brewer, 43 Hun, 597; 6 N. Y. State Rep., 625.

By the clause of the will, the farming utensils and live stock ” were given to the trustees “in trust to receive the income, rents, interests and profits thereof and to apply the same to the use of ” John G. Washbon, during his life, and the trustees were authorized to “ grant, convey, transfer and pay over the same to the use of John &. Washbon during his life and at his decease to the descendants of my said son John Gr. Washbon, who shall be living at his decease.” As already stated the trustees were warranted in allowing the beneficiary to have the “ use of the farm, utensils and stock,” and it seems the same were used by John G. Washbon and by his family in his lifetime, and the trustees at no time have received any beneficial effect from the same. We think the acquiescence of the beneficiary and of the children of John Gr., in the use made of the personal property upon the farm were such that no liability by reason thereof should be imposed upon the trustees. Sherman v. Parish, 53 N. Y., 492, and cases there cited ; Butterfield v. Cowing, 21 N. Y. State Rep., 500. In the course of the opinion in that case it was said: “ It is quite clear that no cestui que trust can allege that to be a breach of trust which has been done under his own sanction, whether by previous consent or subsequent ratification. The general rule is that either concurrence in the act, or acquiescence without original concurrence, will release the trustees.” The evidence seems to be sufficient to warrant the finding of the surrogate as a matter of fact that all the matters between the trustees and the beneficiary were settled and accounted for down to April 1, 1881, and subsequently as fast as they accrued.

(2) Inasmuch as the beneficiary had the use of the stock and utensils on the farm it was proper to refuse to charge the trustees any value thereof.

(3) Nor were the trustees chargeable with any interest upon the $200 as the value of the testator’s interest in the Hill lot; the beneficiary seems to have had the use of it, and the trustees were not shown to be negligent in respect thereto, or to have received any interests thereon for which they should be held to account.

(4) In March, 1885, Manda Fairchild, who is mentioned in the ninth provision of the will, instituted proceedings against the trustees to compel them to reimburse her the sum of $405.53, which she alleged had been expended in procuring necessary fuel for her use, and for the construction of the ninth provision of the will favorable to her interests. The proceedings were instituted before the surrogate; a contest was had and finally resulted in the determination of the rights of the petitioner and the liabilities and duties of the trustees, and the proceedings were dismissed, “ but without prejudice to the rights of said trustees to recover their costs and expenses of such proceeding, out of and from the said estate.” In the case now before us the surrogate has found “ that said trustees were compelled to, and did pay for witnesses’ fees and other expenses in and about defending said proceedings on or about September 11, 1885, the sum of $57.60, and the further sum of $70.00 ¡November 18, 1885, to B. J. Scofield, Esq., their counsel, for his reasonable charges, both of which items are included among the expenditures enumerated in the above twenty-fourth finding of facts, that the said expenditures were necessary and proper, and had in relation to said trust fund and estate.” We think upon the evidence found that the surrogate properly exercised his judgment and discretion in allowing the disbursements so made by the trustees. Code of Civil Procedure, § 2562; Valentine v. Valentine, 3 Dem., 597; McCabe v. Fowler et al., 84 N. Y., 320.

(5.) We think no error was committed by the surrogate in allowing commissions to the trustees. In Matter of Selleck, 1 N. Y.

State Rep., 575, it was said: “ It is proper to allow a percentage as executor and trustee when the fund is the same, but is changed by will or by decree of a competent court into a trust fund.” See also Blake v. Blake, 30 Hun, 469 ; Matter of Mason, 98 N. Y., 527.

Our attention is called to Cook v. Lowry, 95 N. Y., 114, upon the question of commissions; in that case the special term had exercised its discretion and denied commissions and based its. decision upon a finding that there had been a gross neglect or unfaithfulness on the part of the trustee ; in sustaining the action of the special term, Andrews, J., says: “ The trust in that case was never executed ; the trustee in substance converted the securities to his own use.” We think the case is distinguishable from the one now before us.

(6.) In the sixteenth finding of facts the surrogate states the dividend received upon the shares of the bank stock of the Second National Bank from 1867 to and inclusive of May, 1889 ; in such finding there is an omission of the sum of eighty dollars; which was received on the 1st day of November, 1889. Cope, one of the trustees, testifies, folio 244, that he received the eighty dollars on the 1st day of November, 1889. As we understand the accounts, that eighty dollars has not been charged to the trustees. The error probably crept into the account by reason of the fact that the sum was received pending the proceedings, We can perceive of no reason why the trustees should not be charged with the sum of eighty dollars and the interest thereon from the 1st day of November, 1889. A large amount of evidence was taken before the surrogate in respect to the manner in which the trustees had discharged their duties and some confusion doubtless arose by reason of the circumstance that no inventory was filed of the estate until many years after the probate of the will. The surrogate, upon all the evidence before him was called upon to exercise his judgment and discretion in respect to the sundry items involved in the accounting, and he was authorized to apply the rule that trustees are not chargeable with more than they receive of trust estate unless there is some evidence of negligence amounting to a wilful default. Shuttleworth v. Winter, 55 N. Y., 624; Osgood v. Franklin, 2 Johns. Ch., 1.

However, we are of the opinion that a further hearing should be had before the surrogate’s court, and that in the further statement of the accounts, the surrogate’s court should, (1), allow the commissions on the income, and direct them to be payable by and out of the income only. (2) The surrogate should further investigate and pass upon the question made as to the forty dollars claimed to have been paid out December 13, 1889, which does not appear to be credited to the trustees. (3)- The claim of $448, amount of John E. Washbon notes, should be chargeable only to the income; that seems to be the disposition of July 26, 1889, which seems to be operative upon the parties. The evidence seems to be meager as to the claim of thirty dollars, paid November 23, 1887, for which the trustees produced a receipt, which does not clearly indicate why or how they were justified in making the disbursement.

The income account should be adjusted to the date of the death of the life tenant, who died March 9, 1890. The interest subsequent to that time should be allowed and accounted for to the remaindermen. The decree in respect thereto seems to be incomplete and defective.

The surrogate having found that the remaindermen received $2,900 under an agreement to allow or pay interest thereon, it is not apparent why he did not, in adjusting the accounts, take the interest into consideration.

Costs of the proceedings before the surrogate should be equally apportioned between the income and the principal, as indicated by the surrogate when the costs were adjusted. The decree does not seem to have-been so formulated.

We think the decree should be reversed, and the proceedings remitted to the surrogate’s court

Decree of the surrogate of surrogate’s court of Otsego county reversed, without costs of this appeal to either party, and proceedings remitted to the surrogate’s court.

Martin and Merwin, JJ., concur.


source: Caselaw Access Project

author: Hardin, P. J.

license: Public Domain

text:
    Jarvis Dinsmoor, Pl'ff, v. The Commercial Travelers’ Association of the State of New York, Resp’t. M. M. Waters, App’lt.

      (Supreme Court, General Term, Fourth Department,

      Filed May 8, 1891.)

    1. Contempt—Attorney.
    In a proceeding to punish an attorney for contempt in prosecuting an action in a federal court, notwithstanding an order restraining the plaintiff and his attorneys, the attorney’s affidavit stated that he was not and never had been attorney or counsel for the plaintiff in this case, and that he never knew of the restraining order until the order to show cause was served upon him. There was no endorsement of his name upon the summons and complaint and it did not occur in the restraining order. Held, that the order fining him was not justified.
    2. Same.
    The order fining him contained this recital: “By the commencement of this action in the said circuit (federal) court the interest and rights of the defendant in this action * * * were endangered and * * * damaged thereby.” Held, that within §§ 14, 2266 and 2281, Code Civ. Pro., there was no sufficient adjudication that the misconduct complained of did damage or prejudice the right or remedy of the party affected by it.
    Appeal from an order made at the Onondaga special term November 15, 1890, imposing a fine of $250 upon the appellant for alleged violation of an order made by the special term held in Onondaga county on the 5th day of April, 1890. Jarvis Dins-moor commenced an action in this court against the Commercial Travelers’ Association to recover $5,000 loss alleged to have been sustained by Mary F. Curran under the terms of the policy issued by the Commercial Travelers’ Association, payable to her upon the death of her husband, Daniel C. Curran, who died on the "9th of July, 1889 ; she having assigned her claim under the policy to Jarvis Dinsmoor, her brother-in-law; and his complaint was verified on the 26th day of December, 1889. After the service of the summons and complaint, apparently, attorneys were employed for the association, who obtained orders for extensions of time to answer, but in fact never put in any answer, although the orders bore the endorsement of the names of the attorneys of the defendant. In the appeal book is found an order of the special term held in Onondaga county on April 4, 1890, containing the title of this action, and reciting that upon reading and filing an affidavit of the plaintiff’s attorneys, it is “ Ordered, that the within action be and the same is hereby discontinued upon payment to the defendant any costs to which he is entitled to be taxed.” The case contains a statement that the order from which the quotation has just been made was obtained upon the affidavit of one of the plaintiff's attorneys, folio 46, and the affidavit contained a statement “ That no answer has been served herein and that there has been no formal notice of appearance served herein. * * * That deponent has tendered to said attorneys a stipulation of discontinuance herein, and offered to pay the costs which have accrued, if any, to them as such attorneys.”
    The appeal book contains an affidavit that the order and affidavit were served on the defendant’s attorneys at their office on the 4th of April, 1890, and at the same time a tender of ten dollars costs was made, which the defendant’s attorneys refused to accept. The appeal book contains an order granted at the Onondaga special term held on the 5th day of April, 1890, which contained a provision as follows: “It is ordered, that the above named plaintiff, Jarvis Dinsmoor, and his attorneys, agents, servants and employes be, and they and each of them hereby are, enjoined and restrained during the pendency and until the final determination of the action heretofore brought and now pending in this court, wherein Hector B. Johnson, as sheriff of the county of Onondaga, is plaintiff, and said Jarvis Dinsmoor, Mary F. Curran and The Commercial Travelers’ Association of the State of Hew York are defendants, from commencing, instituting or prosecuting any action or actions in this or any other court against the defendants herein, otherwise known as the Commercial Travelers’ Association of the State of Hew York, for the purpose of enforcing, prosecuting, suing or collecting a certain claim or demand of $5,000 alleged to be due and owing to said Dinsmoor from said Commercial Travelers’ Association of the State of Hew York, and assigned, as alleged, by said Mary F. Curran to said Dinsmoor. It is further ordered, that the said Dinsmoor and his attorneys, agents, servants and employes be, and they are and each of them is hereby, enjoined and restrained from the further prosecution, and from taking any other or further proceedings in this action during the pendency, and until the final determination of said action brought by said Hector B. Johnson as sheriff as aforesaid, and until the further order of the court herein.” In the affidavit used to obtain the order to show cause why the alleged violation of the order of the 5th of April should not be followed with punishment, it was said: “And deponent further says that, notwithstanding the terms and provisions of said order of April 5th, the plaintiff, Dinsmoor, herein, by and through his attorney, M. M. Waters, Esq., has commenced an action or suit in equity against the defendant herein in the circuit court of the United States for the northern district of Rew York, which suit or action, deponent alleges on information and belief, is brought for the recovery of the said $5,000 demand hereinbefore mentioned; that process in said suit or action was served upon the defendant herein Rovember 6, 1890.” The order to show cause was granted on the 10th of Rovember, 1890.

      M. M. Waters, app’lt, in person; George Doheny, for resp’t.
   Hardin, P. J.

(1) Appellant in his affidavit used upon the return of the order to show cause, states positively: “ That he is-not an attorney or counsel for the plaintiff in this case, and never was employed by the plaintiff as such.” We do not find the endorsement of the appellant’s name upon the summons or complaint in this action; nor do we find his name recited in the order of the 5th of April, 1890.

(2) In the appellant’s affidavit used upon the return of the - order to show cause, we also find the following positive statement made by him, to wit: “and that the original order specified in the moving papers herein as the foundation for the order to show cause, was never served on deponent, or in any way cáme to his knowledge before the order to show cause was served upon deponent.” Accepting the statement of the appellant in the fullest and broadest sense in which it is capable of being understood it may be said that the restraining provisions of the order of April 5th, did not rest upon the appellant at the time he acted as solicitor in the federal court.

(3) The appeal book does not contain an order vacating the order of discontinuance made on the 4th day of April, 1890. In Wilder v. Boynton, 68 Barb., 549, it was said: “ The court has a right to control its own orders, and may exercise its discretion in respect to the terms upon which parties shall be permitted to discontinue actions." That case was affirmed in this department January 7, 1873. In the Matter of Petition of Butler, 101 N. Y. 309, it was said, viz.: “ Ordinarily, a suitor has a right to discontinue any action or proceeding commenced by him, and his reasons for so doing are of no concern to the court. A party should no more be compelled to continue a litigation than to commence one, except where substantial rights of other parties have accrued, and injustice will be done to them by permitting the discontinuance. In such a case, through the control which the court-exercises over the entry of its orders, there is discretion to refuse,, but where there are no such facts, and nothing appears to show a violation of the right or interest of the adverse party, the plaintiff may discontinue, and a refusal of leave becomes merely arbitrary and without any basis upon which discretion can exist.”

(4) In the order appealed from there is found the following phrase: “ By the commencement of this action in the said circuit court, the interest and rights of the defendant in this action and of the sheriff in the action prosecuted by him were endangered and they each were damaged thereby." Sections 14 and 2266 of the Code of Civil Procedure confer power to punish for contempt in cases where “ a right or remedy of a party to a civil action or special proceeding pending in the court may be defeated, impaired, impeded or prejudiced there by and § 2281 of the Code provides as follows, viz.: “If it is determined that the accused lias committed the offense charged, and that it was calculated to, or actually did defeat, impair, impede or prejudice the rights or remedies of a party to an action or special proceeding brought in the court, or before the judge or referee; the court, judge or referee must make a final, order accordingly, and directing that he be punished by fine or imprisonment, or both, as the nature of the case requires.” In Matter of Swenarton v. Shupe, 40 Hun, 42, it was held that an order was void because no adjudication was made that the misconduct complained of was calculated to or actually did defeat, impair, impede or prejudice the rights or remedies of the petitioner, or that the latter had sustained any loss or damage therebyand in Sandford v. Sandford, 40 Hun, 540; 2 N. Y. State Rep., 133, it was held that to punish a party for contempt in a civil proceeding, his conduct must be su-ch as to defeat, impair, impede or prejudice a right or remedy of the party affected by it, and that fact must be ascertained and adjudged by the court directing the punishment which is to be imposed.” In Fischer v. Langbein, 103 N. Y., 85; 2 N. Y. State Rep., 768, it was said that the commitment and the order and the affidavit upon which it was founded, “ stated in detail the proceedings which it was claimed the disobedience affected;” and it was there held that such a statement was a full compliance with the requirements of the rule in respect to the contents of a commitment. In the case in hand there was no express adjudication within the exact language of the provisions of the statute to which we have referred. From the foregoing features of the case before us, we deduce the conclusion that the order should be reversed.

Order reversed, with ten dollars costs and disbursements, payable by the respondent.

Martin and Merwin, JJ., concur.


text:
    Charles M. Titus, Resp’t, v. Charles F. Poole et al., App’lts.

      (Supreme Court, General Term, Fourth Department,

      Filed May 8 1891.)

    Executors and administrators—Limitation—Effect of nonsuit.
    On May 7th plaintiff presented a claim to executors, based on certain stock, and in June brought an action to recover its value, in which he was nonsuited in October; whereupon, on November 29th, he brought a new action, the gravamen of which was the same as that of the first action. Held, that as the first action was concededly brought in time, the second brought within one year from the nonsuit, was saved by § 405, Code Civ. Pro.
    Appeal from a judgment entered upon the verdict of a jury, taken in the Tompkins circuit in favor of the plaintiff; also an appeal from an order denying a motion for a new trial made upon a case and exceptions.

      Edward V. Poole died on the 1st of October, 1887, and on the 12th of October, 1887, his will was admitted to probate by the surrogate of Tioga county, and the defendants were appointed executors. In the complaint it is alleged that on the 9 th day of February, 1883, the plaintiff sold and conveyed to defendants’ testator certain real estate situated in the city of Ithaca, at the agreed price of $9,000, “and accepted and received an assignment of what purported to be fifty shares of one hundred dollars each, of the stock of an alleged bank called. The Home Savings Bank of South Waverly,’ alleged to have been organized under an act, of the legislature of the state of Pennsylvania, as full payment of five thousand dollars balance due plaintiff on such purchase price, and that plaintiff received and agreed to receive said alleged stock by reason of and relying on the warranty, express and implied,, and on the statements and representations hereinafter set forth.”
    The complaint sets out a copy of the certificate. Endorsed thereon is a power of attorney to transfer the fifty shares of the capital stock of the Home Savings Bank of South Waverly,. standing in the name of the testator on the books of the said company, which was executed by the testator on the .9th day of February, 1883.
    It is alleged that the stock certificate '“was printed and engraved in the common form and on paper usually used in script, representing bank stock. ” It is further alleged that the testator “ by express words and by implication warranted and represented that said script or alleged certificate of stock so transferred was in all respects what it purported to be on its face, and that all the-statements and representations printed and written on it were true, and said testator further stated, represented and warranted that it. was a regular dividend paying stock; that it was a state bank regularly organized under the laws of the state of Pennsylvania that it was all right in every particular. * * * Whereas, in truth and fact, said script or alleged certificate of stock was not in any respect what it purported on its face to be. It was not regular bank stock. It was not organized under an act of the legislature of the state of Pennsylvania. * * * Hone of the statements and representations written or printed upon said script was true, and it was utterly worthless for any purpose whatever. It was not in any respect what plaintiff agreed to receive as payment of said $5,000, and the transfer to him of the above described piece of paper did not operate in whole or in part as a payment of the said balance, which has never been paid by defendants or their testator, and the same is still due and owing this plaintiff, together with interest from the 10th day of February, 1883.” It is also-alleged in the complaint: “ That said demand and claim was in writing, and was presented on or about the 29th day of Hovember,. 1888, and contained substantially the facts set forth in this complaint.” It is alleged that the executors refused to pay, arid that the plaintiff offered to refer, and that the defendants neglected and refused to refer the claim. In the answer the defendants allege that the claim was presented on the 7th of May, 1888, and by them rejected; and they allege: “ That the claim so presented May 7, 1888, arose out of and was founded upon the same transaction substantially set forth in the complaint in this action. That these defendants on or about June 12, 1888, disputed and rejected the aforesaid claim which the plaintiff presented to the defendants May 7, 1888.” They then set up that the action was not brought within six months after the claim was so rejected, and that it is barred by the short statute of "six months according to the language of § 1822 of the Code of Civil Procedure.
    The answer of the defendants contains several denials, as well as other matters, by way of defense. On the 28th of June, 1888, an action was brought in this court-claiming to recover $5,000 balance of the purchase money for the real estate by reason of alleged infirmities in the stock transferred in payment therefor. The complaint in that action alleged that the testator at the time of the transfer intended to “deceive and defraud the plaintiff in the transaction in question.” The issues in that action were brought to trial at a circuit on the 31st of October, 1888, and the plaintiff was nonsuited, as there was a failure to prove that the testator “knew the representations made by him were false.” Thereafter a fresh claim was presented to the executors and rejected, and on the 26th day of December, 1888, this action was commenced “ on contract only for unpaid balance of purchase money, containing no allegations of fraudulent representation or intent.” While the plaintiff held the stock he received a dividend thereon of $150. The verdict of the jury is for $6,922.67, being for $5,000 and the interest thereon from the 9th day of February, 1883, less the $150 which had been received by the plaintiff on the 10th day of February, 1884, with interest thereon from that date. The verdict as to amount seems to be in accordance with, an intimation made by the trial judge in the course of his charge. For further facts as to the defunct bank, see 29 H. Y. State Eep., 891.

      David M. Dean, for app’lts ; Frank E. Tibbitts and S. D. Halliday, for resp’t.
   Hardin, P. J.

Appellant insists that the short statute of limitations found in § 1822 of the Code applies, and bars the right of action because this suit was not commenced within six months from the rejection of the first claim presented. In Hoyt v. Bonnett, 50 N. Y., 538, it was held that the short statute of limitations in 2 E. S., 89, § 38, was penal in its character and should be strictly construed. Respondent maintains that as the first action was terminated by a nonsuit, he was entitled to “ commence a new action for the same cause after the expiration of the time so limited ” by the provisions of § 1822 of the Code, provided the new action be brought “ within one year after such termination ” of the nonsuit mentioned. Apparently the first action was brought by reason of the supposed misrepresentations, statements and assertions alleged to have been made by the testator. In the complaint in that action it was asserted that the testator knew that the representations made by him were false. In the present complaint no such allegation is contained. The gravamen of the first action was a failure of the plaintiff to receive and realize satisfaction for his real estate from and out of the balance of the stock transferred to him ; and the gist of the second action seems to be the same, or, in the language of § 405, it may be said the plaintiff has brought “ a new action for the same cause,” and, as it was brought within one year from the non-suit, it seems to be saved by § 405 of the Code of Civil Procedure.

Our attention has been called to Hill v. Board of Supervisors of Rensselaer County, 119 N. Y., 344; 29 N. Y. State Rep., 588; that was an action against the county under a statute creating liability for the acts of a mob, provided the action was brought within three months, and it was held that as the action was under a special law it was only maintainable by its authority; that the limitation was so incorporated with the remedy given as to make it an integral part of it, and was a condition precedent to the maintenance of the action at all, and therefore § 405 of the Code did not apply.

We think the case does not aid the appellants. It may be observed in passing that if it could be successfully maintained that the claim first presented, and upon which the first appeal was brought, was essentially different from the second claim presented and rejected, it might be said with force that this action was brought within the six months next preceding the rejection of the second claim, and it was not barred by the provisions of § 1822 of the Code of Civil Procedure. However, we prefer to uphold the plaintiff’s right to escape the force of § 1822 by resting the same upon the provisions of § 405 of the Code of Civil Procedure.

(2) After a careful perusal of the evidence found in the appeal book, we are of the opinion that the testator acted in good faith and without any intent to defraud the plaintiff when he transferred to him the shares represented by the certificate which he held and which are mentioned in the complaint.

Such seems to be the opinion and ruling of the trial judge. Hear the close of the same case he observed: “ How, as I understand it in this action, there is no claim here that Mr. Poole made these representations in bad faith, or that that question is here at all.” Again he observed: “I have no doubt but that Mr. Poole acted in good faith.” The defendants’ counsel took the position that under the evidence in the case “ the question as to whether there is a warranty is a question of law in this case. ”

Thereupon the court ruled, viz.: “I rule and hold it is a question of fact for the jury upon the whole of the evidence.” To that ruling the defendant took an exception. The case seems to have been submitted to the jury upon the theory that it was for them to find whether there was a warranty, and if so, whether there was a breach, and if so, to ascertain the damages sustained by reason of the breach; and the defendant’s counsel took an exception to that portion of the charge “which, in substance, submits to the jury to say whether the stock had any value at all, or represented anything at all,” and thereafter he took the position, by way of a request, as we understand the appeal book, “ That the rule of damages in this case is the difference in the value between the stock as warranted and its actual value in the market at the time of the tradeand the court so charged, adding this expression: “That is what I charge, if it had any value at all.” Thereupon the defendant’s counsel observed, viz.: “ Well, we except to that portion that leaves to them again whether it has any value at allthereupon the court observed: “ I have left it for the jury to say whether it had any valuethereupon the defendant’s counsel asked the court to charge : “ That the measure of damages is the market price of the stock about the time or soon after the purchase,” to which the court responded: “ That is so, if they find it had any market valuethereupon the defendant’s counsel observed: “ And that the market price at the time, or soon after the purchase, is strong evidence of its value;” to this request the court responded : “ That is so; I charge that, with this qualification, that if the price was based upon the fact that the persons who were dealing in it believed that it was a corporation, that fact would affect it, but if they were ignorant of the fact it was a corporation, that would be a different thing;” thereupon the defendant’s counsel excepted to the qualification. The defendant’s counsel then observed: “ That such market price will control, unless the real pecuniary condition of the stock is shown,” to which the court responded: “ That would be so within the rules' I have laid down;” thereupon the defendant’s counsel requested the court to charge: “ That the burden off proving the real pecuniary condition of the bank is upon the plaintiff ;” to which the court responded: “ In that form I decline to charge it; it is true the burden of proof is on the plaintiff to show that this stock was of less value than its face, or of no value at all, that is probably what you meanthereupon the defendant’s counsel took -an exception to the refusal to charge as requested. From the quotations already made, as well as from other expressions found in the charge, it may be assumed that the trial judge intended to instruct the jury that the rule of damages applicable was the difference in the value of the stock as represented and the actual value of it at the time the sale was made in February, 1883.

Witnesses were called in behalf of the defendant, who testified that sales were made subsequent to the transfer to the plaintiff at par. Dr. Cady testified that he knew of its being bought and sold in August, 1886, at par, and from the time the bank was organized down to the time of the sale made by him that the value of the stock was par, and that the market value of it from 1873 to 1887, was par; and the witness Brooks testified that he knew the bank from the time it was organized in 1873 until it closed, and that during that time the stock had a market value ; and in answer to the question as to what it was worth, he says, one hundred cents on a dollar; I bought some of it, and sold some of it and investigated as to its value. The witness Clark testified that he knew the Home Savings Bank from 1873 up to the time it closed its doors, and in speaking of the stock he added, “ I should say its market value on the 1st of February, 1883, was from eighty-five cents to a dollar on a dollar.” Besides the evidence given by the opinion of witnesses as to the value of the stock, it appeared in evidence that the bank was in operation from.' 1878 to 1887, and during that time it was a bank of deposit and discount; and a witness was called who testified as to the assets possessed by the bank in 1883. Considerable evidence was delivered also indirectly bearing upon the question of the actual condition of the bank as to the assets which it possessed in 1883, and the statement of February 3, 1883, showing the assets to be $226,174.88. William Kirby, who was the bookkeeper in the bank from March, 1881, until the time it closed in 1887, testified that he was familiar with the books and its assets in February, 1883 ; and he says that the value of the assets at the close of the business on the 9th of February, 1883, “was $171,-000, and something over. * * * It would make the assets about equal to the liabilities, including the capital stock." If the stock, at the time of the transfer in February, 1883, was worth par, or if the shares in the assets represented by the certificate were worth $5,000, it is difficult to see how the plaintiff sustained damages in the sum of $5,000 by reason of a breach of any warranty shown to have been given by the testator to the plaintiff.' It was incumbent on the plaintiff to show the value of the stock if as represented, and its actual .value as it was.

The plaintiff furnished no satisfactory evidence to indicate that the difference between the value of the stock as it was, if as represented, and the value of, the stock as it was, was equal to one hundred cents on the dollar; we are therefore inclined to think the verdict is not in accordance with the evidence, and that the jury did not follow the rule laid down by the trial judge upon that subject Undoubtedly the plaintiff when he took the certificate for the shares became in equity the owner of a proportionate share of the assets of the institution. If, when he thus acquired an ownership in the institution, capitalized at $100,000, his one-twentieth share thereof was worth $5,000 at the time ho received the certificate, it is difficult to see how he sustained $5,000 damages by reason of the breach of any representations shown to have been made by the testator. It does not follow that the plaintiff’s damages are $5,000 from the fact that the institution failed in 1887, four years after he acquired an ownership therein. It seems he used the certificate and by means of it he borrowed $4,500 from the institution pledging the certificate as security for the loan to that amount made to him by the institution. We think the verdict is not in accordance with the evidence; nor the charge of the learned trial judge as we understand it

Judgment and order reversed, and a new trial ordered, with costs to abide the event.

Martin and Merwin, JJ., concur.


text:
    Christian Cook, App’lt, v. Minor G. Bennett et al., Resp’ts.

      (Supreme Court, General Term, Fourth Department,

      Filed May 8, 1891.)

    Chattel mortgage—Fraudulent where mortgagor deals with property AS HIS OWN, WITH ASSENT OP MORTGAGEE.
    Plaintiff took a chattel mortgage upon a stock of goods belonging to one Theisen, which provided for the payment of $500 yearly, and the parties orally agreed that a new mortgage should be executed each year, and that at least $500 should be paid. Such mortgages were executed for several years. At the time of the giving of the first mortgage it was further agreed that Theisen might sell the stock for cash or on credit, use the proceeds in his business, pay $500 a year, by new purchases keep the stock in about the same condition, and, at the end of the year, give a new mortgage upon the balance of the stock left in the store. This plan was carried out. Held, that such an arrangement was fraudulent as to the creditors of the mortgagor, and that the original mortgage and those given subsequently were void.
    Appeal from a judgment entered in Onondaga county upon a decision made after a trial at the circuit before the court without a jury. Plaintiff in replevin seeks to recover the possession of a quantity of furniture, two bay horses, a set of double harness, one double sleigh and one double wagon which were mortgaged by one Matthias Theisen, which mortgage was dated May 1, 1884. On May 1, 1882, and several years prior thereto, the plaintiff was engaged in the furniture business at Mo. 71 South Salina street, Syracuse. He negotiated a sale for $8,000 to Theisen, receiving-in part payment $3,000 in cash and an agreement that the balance was to be secured by a chattel mortgage upon the property sold. Pursuant .to the arrangement then made, the plaintiff took a chattel mortgage of $5,000, covering the property sold, providing in express terms that $500 should be paid each year: and in the negotiation it was agreed that a new mortgage should be executed at the end of each year, and at least $500 paid. A new mortgage was executed on the 1st of May, 1883, to secure the payment of $4,500; and on the 1st day of May, 1884, a new mortgage was executed covering the goods then on hand to secure the payment of $4,000. This latter mortgage contained the usual “danger clause.” A fire took place and a portion of the goods were burned and the plaintiff received a portion of the insurance money, to wit: $800, which he applied toward the liquidation of his mortgage. On April 27, 1885, various cred-. itors of Theisen procured judgments against him and executions were issued thereon to the sheriff, and levies were made upon the stock of goods in Theisen’s store, including all the property in controversy in this action. After the levy was made, and on April 28, 1885, this action was commenced, and in virtue of the proceedings in this action the coroner took possession of the property, and no undertaking having been given in statutory time, possession of the property was delivered to the plaintiff. The circuit court found “ that at the time of said sale of May 1, 1882, and the giving of the mortgage, it was understood between the parties thereto that the said Theisen might go on and sell the stock in the ordinary way for cash, or on credit, and use the proceeds generally in his business, paying $500 of principal and the interest each year, and keeping, by new purchases, the stock in substantially as good condition as at the time of the sale, and at the end of each year give a new mortgage for the balance of the debt upon the property then in the store; that this understanding was carried out and continued in operation till the failure of Theisen in April, 1885, that during this time sales w-ere made for cash and on credit and the business conducted in the usual manner, all to the knowledge and consent of the plaintiff, and the stock kept up by new purchases, and the said mortgages of May 5, 1883, and May 2, 1884, were given in pursuance of said understanding, each covering the goods that were, at the time of the giving of such mortgage, in the store. That after the giving of said mortgage of May 2, 1884, and up to the time of said failure, said Theisen sold goods from said store to the amount of six or seven thousand dollars, and no part thereof was applied on said mortgage. * * * And I further find, as matter of fact, as a conclusion from the foregoing findings, that said mortgage of May 2, 1884, was given and received by the mortgagor' and mortgagee with intent to hinder, delay and defraud creditors of said Theisen.”
    The court also found, as matter of law: “ 1. That the mortgage of May 2, 1884, was and is fraudulent and void as to creditors of the mortgagor and as to these defendants. 2. That the defendants are entitled to recover of the plaintiff the possession of the property in controversy, or, in case possession is not delivered to the defendants, then the value found as aforesaid.'
    Before this action was commenced the plaintiff caused a demand for the possession of the goods to be made and there was a refusal to deliver them up. One of the debts represented by the defense accrued on the 29th of November, 1878, one February 2, 1885, and one March 9, 1885.

      Louis Marshall, for app’lt; Charles E. Ide, for resp’ts.
   Hardin, P. J.

If we were to assume that the plaintiff's mortgage was valid we might properly hold that this action could be maintained. Huggans v. Fryer, 1 Lansing, 276; Merchants & Traders' Bank v. Farmers & Mechanics' Bank, 60 N. Y., 47. The proofs disclose sufficient occasion for the plaintiff to deem himself insecure and to warrant him in exercising the privilege conferred by the “danger clause” found in the chattel mortgage. Whether the chattel mortgage in question was fraudulent or not was passed upon as a question of fact by the trial judge; it was proper that such conclusion should be stated among the findings of fact, Wallace v. Nodine, 32 N. Y. State Rep., 661, and cases there cited; and the burden of proof on that subject rested with the plaintiff. Wallace v. Nodine, supra, at page 663.

We think the findings of fact made by the trial judge are supported by the evidence. Theisen testifies, viz.: “ The mortgage was to be given on the stock of goods and payable $500 a year; I was to sell the goods and do whatever I had a mind to with the proceeds, I suppose, as long as he got his $500 a year and interest; he told me that I could make anywhere from three thousand to four thousand a year, and I could save so much; as far as the mortgage all he asked was $500 a year, and I told him if I could pay more I would; there was nothing said between myself and Cook, either at the store or in Hopkin’s presence that the proceeds of the sale of these goods was to be given to Cook entirely, either in money or goods; I say there was no such thing said ; there was no arrangement between myself and Cook by which the entire proceeds of the sale were to be turned over to him.” There was some evidence given tending to show that the arrangement between the mortgagor and mortgagee was to the effect that the mortgagor should go on and sell the goods for cash or on credit and use the proceeds generally in his business, being required to pay at least $500 of the principal at the end of each year, and to execute a new mortgage for the balance remaining unpaid at the end of each successive year. This seems to have been carried out. Theisen made sales for cash and made sales on credit and conducted the business in the usual manner prevailing in such establishments, and this seems to have been done with the knowledge and consent of Cook, the mortgagee, who, having an office in the store, a portion of the time assisted in the sales, making some sales as the agent or clerk of Theisen, for cash and some on credit; the store was rented of Cook, the plaintiff, by the mortgagor for an annual rental of $1,000, and the rent and expenses of operating the store were paid from the proceeds of the business carried on : the sales were apparently six or seven thousand dollars a year. In speaking upon this subject, the plaintiff, as a witness, testifies, “ It is a fact that Matt (Theisen) was to go on and do business there; he was to pay his expenses, pay his rent, and make just as much profit as he could on the sale of his goods and buy new goods and sell those that he had: if he sold the goods in one year he would pay me the whole of it. * * * I gave him ten years in which to pay it in the ordinary course of business, and gave him a lease for five years; it was agreed that he should replace all old goods sold with new ones; when he sold the old goods he was to replace them with new ones, and I gave him authority to sell the old ones.”

A somewhat similar transaction was under investigation in Griswold v. Sheldon, 4 Comstock, 582, and it was said: “The mortgage, besides permitting by its terms the mortgagor to retain possession of the goods, on its face conferred on him the power to sell and dispose of them as his own, and was, therefore, fraudulent and void in law as to creditors; and in an action brought by the mortgagee against a creditor who had levied on the goods, the court should have non-suited the plaintiff on the trial.”

In Edgell v. Hart, 5 Selden, 216, an arrangement very like the one now before us was under consideration and was condemned, and Judge Denio in delivering the opinion in that case, observed: The true question then is whether a person engaged in traffic and indebted can make a valid contract or conveyance in favor of one creditor, by which he shall possess a lien upon all the chattels which the debtor shall from time to time have on hand, allowing the latter to sell and purchase like an unqualified owner, the lien attaching only to what may be on hand at the time it is sought to be enforced. The proposition requires only to be stated to be refuted. The branch of it which professes to subject after-purchased property is void upon the most common principles. * * * But I am of opinion that the right to sell, if it stood alone, would vitiate the mortgage.

“In Griswold v. Sheldon, 4 Comst., 581-594, five judges of this court concurred in holding that such a provision would render the instrument void, and four were of opinion that where the mortgagor was allowed by the mortgagee to sell the mortgaged chattels, though notin pursuance of a provision in the instrument, the mortgage would be invalid in law, whatever a jury might think of it The invalidity of such a' transaction had been affirmed in the supreme court in Wood v. Lowry, 17 Wend., 492, and no case or dictum has been found to uphold it. * * * My own opinion is that the existence of such a provision out of the mortgage or in it would invalidate it as matter of law, and that where the facts are undisputed this court should so declare. The manifest tendency of such arrangements to defraud creditors by giving to the mortgagor a false credit, and their inconguity with the just and legal idea of a mortgage are in my mind sufficient to condemn them."

In Ford v. Williams, 24 N. Y., 359, it was held “An agreement, upon the mortgage of chattels, that the mortgagor shall keep possession and retail the goods for cash only, paying over the money to the mortgagee, is not fraudulent in law, hut presents a question of good faith for the jury.” In delivering the. opinion in that case, Denio, J., at p. 363, stated: “But if the debtor was permitted, not only to retain possession of the property mortgaged, but to sell it out by retail, on his own account, as he had been doing before the mortgage, we think, with the judge who tried the case, that the arrangement would be fraudulent and the security void.” In passing it may be observed that the case before us contains no such limitation that the sales should be for cash only and that all the proceeds of the sale should be turned over to the mortgagee, the mortgagor acting as agent in making such sales. The case in hand, therefore, differs from Ford v. Williams, supra.

In Conkling v. Shelley, 28 N. Y., 362, it was held that an agreement between the mortgagor and mortgagee to the effect that the mortgagor should remain in possession and sell the goods from time to time “ and pay over the proceeds to the latter, is not unlawful or fraudulent per se.” In delivering the opinion in that case Emott, J., said: “Where a mortgage contains a clause permitting the mortgagor not only to remain in possession, but to dispose of the mortgaged property at his discretion, and apply the proceeds to his own benefit, it will be void as a fraud upon creditors. Edgell v. Hart, 5 Seld., 213. Where such agreement is made between the parties, outside of the mortgage, but at the time of its execution, I should be inclined to agree with the idea expressed by Judge Denio in Edgell v. Hart, and in Gardner v. McEwen, that it would invalidate the instrument, in the same manner as if it were written in its provisions. At all events it would be irresistible evidence of a fraudulent purpose.”

A transaction somewhat like the one now before us was under consideration in City Bank of Rochester v. Westbury, 16 Hun, 458, and in delivering the opinion in that case, Smith, J., said: “By the agreement in this case, as we gather it from the testimony, the mortgagor was not restricted to sales for cash, but he was at liberty to sell on credit at his unlimited discretion.” The court reached the conclusion in that case that the mortgage was fraudulent as to creditors and void.

In Smith v. Cooper, 27 Hun, 565, an arrangement somewhat .similar to the one now before us was condemned; there it appeared “At the time of giving the mortgage it was orally agreed that the mortgagor, who was to remain in possession of the property until default, should be permitted to sell and dispose of the property either for money or in trade for other stock, the money received to be applied to the purchase of further stock, which was to be subjected to the lien of the mortgage, and that the grain should be used in feeding the stock ; ” and it was held that the agreement was fraudulent per se, and rendered the mortgage void.

In Southard v. Benner, 72 N. Y., 424, it was held that: “ Where, at the time of the execution of a chattel mortgage upon a stock of merchandise, it is understood and agreed between the parties that the mortgagor may go on and sell the stock and use the proceeds generally in his business, and the agreement is carried out by permitted sales, the transaction is fraudulent in law as against the creditors of the mortgagor.” Also held, “ Such an agreement outside of the mortgage and proved by parol, is equally fatal to the instrument, as if it had been made a part thereof; and it may be inferred from the fact that the mortgagee has permitted sales to be made as alleged.” In the course of the opinion delivered in that case, Judge Allen said: “ The difference in the modes of proving the instrument cannot take the sting out of the fact and render it harmless. If it is satisfactorily established, the result upon the security must be the same. It is the fact that such an agreement has been made and acted upon that in law condems the security, and not the fact that it is proved by the instrument of suretyship, instead of by parol or in some other way.”

In Potts v. Hart, 99 N. Y., 168, it was held, viz.: “A chattel mortgage is fraudulent and void as to creditors where it was given with a tacit or express understanding and arrangement that the mortgagee may sell and dispose of the mortgaged property, and apply the avails to his own use.” It was further held in that case “ Such an agreement may be inferred from the fact, that the mortgagor does, with the knowledge and assent of the mortgagee, so sell and dispose of the property and apply the avails.” We think the various doctrines of the cases to which we have already referred, are against the plaintiff and support the conclusion reached by the trial judge.

The learned counsel for the appellant upon the argument of this appeal in his usually vigorous mode contended that Brackett v. Harvey, 91 N. Y., 214, was an authority which would sustain the mortgage in this case. We think otherwise. In that case it was held that “ A chattel mortgage is not rendered void, as to creditors of the mortgagor, by a provision authorizing him to sell the mortgaged property and apply the proceeds of sale towards the payment of the mortgage debt.

“ 2. Nor does an authority to the mortgagor to sell on credit, taking good business paper, which the mortgagee agrees to accept and apply on the debt, affect the validity of the mortgage.

“ 3. So, also, permission to use a portion of the proceeds of sales to purchase other property does not vitiate the mortgage, where it is coupled with a condition that the property so purchased shall be brought in and subjected to the mortgage lien by a renewal of the mortgage.”

It was, however, held in that case that “ An agreement, although outside of the mortgage, and oral simply, that the mortgagor may use a portion of the proceeds of sales for his own benefit, avoids the mortgage.” The learned judge who delivered the opinion in that case conceded that if the finding that was made, to wit.: “It was understood and expected by all the parties thereto that the avails of the sales made in said business were to be used in the transaction of said business in paying the personal expenses of the said Frank E. Darrow and of the members of said firm, including their own and their families’ support and maintenance,” was sustained by the evidence that the same would necessarily be fatal; and he added, “ for such an agreement opens the door to fraud and permits the mortgagor to use the property for his own benefit, utilizing the mortgage as a shield against other creditors.” He then proceeds to examine the evidence and reaches the conclusion that the finding of fact was not supported by evidence in that case. We see nothing in the features of that case that warrants us in yielding our consent to the contention of the learned counsel for the appellant in the case in hand.

Nor does the case of Robinson v. Elliott, 22 Wall., 513, aid the contention of the appellant In that case the mortgage contained a stipulation that the mortgagors might remain in possession of the goods “ sell the same as heretofore, and supply their places with other goods, and the goods substituted by purchase for those sold shall, upon being put into said store, or any other store in said city, where the same may be put for sale by said parties of the first part, be subjected to a lien of this mortgage.” And it was held that the mortgage was void; and, in the course of the opinion, the court said, viz.: “ But these are features engrafted on this mortgage which are not only to the prejudice of creditors, but which show that other considerations than the security of the mortgagees, or their accommodation, even, entered into the contract. Both the possession and right of disposition remain with the mortgagors. They are to deal with the property as their own, sell it at retail, and use the money thus obtained to replenish their stock. There is no covenant to account with the mortgagees, nor any recognition that the property is sold for their benefit. Instead of the mortgage being directed solely to the bona fide security of the debts then existing, and their payment at maturity, it is based on the idea that they may be indefinitely prolonged. * * *" Manifestly it was executed to enable the mortgagors to continue their business and appear to the world as the absolute owners of the goods, and enjoy all the advantages resulting therefrom. * * * "Whatever may have been the motive which actuated the parties to this instrument, it is manifest that the necessary result of what they did do was to allow the mortgagors, under cover of the mortgage, to sell the goods as their own, and appropriate the proceeds to their own purposes; and this, too, for an indefinite length of time. A mortgage which, in its very terms, contemplates such results, besides being no security to the mortgagees, operates in the most effectual manner to ward off other creditors; and where the instrument, on its face, shows that the legal effect of it is to delay creditors, the law imputes to it a fraudulent purpose.”

In Yates v. Olmsted, 65 Barb., 43, a chattel mortgage made under circumstances somewhat like those presented in the case now before us was condemned as fraudulent, and it was said in that case, viz.: “Although no express agreement in words, between the parties, that the mortgagor shall continue to sell the goods mortgaged, and the business proceed as before the giving of the mortgage, is found by the referee, such an agreement or understanding may be implied.” The decision made at the general term was reversed by the court of appeals in Yates v. Olmsted, 56 N. Y., 632, upon an opinion to the effect that the clause in the mortgage did not as a matter of law render it fraudulent; and it appearing also that there was no authority reserved in the mortgagor to sell or deal with the stock while in his possession and that no such arrangement was made and that the mortgagee had no actual knowledge of any such sales. ,

In Russell v. Winne, 37 N. Y., 691, it appeared that the mortgagor was a dealer in stone and kept a small store, and although there was nothing in the mortgage authorizing a sale, the mortgagor continued after the mortgage to sell goods just as he bad done before that time, applying the proceeds to his own use; and there was some evidence that it was done with the knowledge and assent of the^ mortgagee, and that upon such evidence, if there was a finding by the jury that there was an agreement to allow such sale then the mortgage would be void. See, also, Divver v. McLaughlin, 2 Wend., 596; Wood v. Lowry, 17 id., 492.

In Ball v. Slafter, 26 Hun, 353, it was held that a chattel mortgage “ containing a provision* allowing the mortgagor to sell the property covered by it at retail for his own benefit, is fraudulent as to his creditors,” and that as the agreement in the case “ did not require the sales to be made for cash and as matter of fact they were on credit, and it did not necessarily require the proceeds to be paid on the notes when the sales were made,” that the mortgage was void.

In Sperry v. Baldwin, 46 Hun, 124 ; 11 N. Y. State Rep., 609, it was said that: “A tacit understanding and agreement between the parties to the mortgage entered into at the time of its execution that the mortgagor might continue the business and sell the property and apply the proceeds to his own use,” would render the transaction “ void and illegal.” The same doctrine seems to be held in Greenebaum v. Wheeler, 90 Ill., 296; and in Blakeslee v. Rossman, 43 Wis., 116.

In Marslon v. Vultee, 12 Abb., 144, it appeared that Marston was a gunsmith and kept a store; he mortgaged his stock in trade to the plaintiff, his mother; she left the property, after the mortgage to her, in his possession with directions to go on and sell and trade the property as he had done before the mortgage. Woodruff, J., in delivering the opinion of the court condemning-the transaction, said : “ Where the arrangement is made between the mortgagee and the mortgagor that the latter may do so and apply the proceeds to his own use, whether that arrangement is-shown by the face of the instrument or is proved otherwise to be a part of the terms or conditions on which the mortgage wan given, such arrangement makes the arrangement necessarily fraudulent, because it operates of necessity to hinder, delay and defraud creditors; it secures to the debtor the use and benefit of his property and its proceeds, while it protects it from levy and sale, for the payment of his debts.”

In Mittnacht v. Kelly, 3 Keyes, 407, a mortgage was condemned as fraudulent, as it was held that the intent “ was not to create an absolute lien, but a fluctuating one, and the mortgage was therefore void;” and it was further said in that case that although the horse, wagon and harness in question did not constitute a part of the stock in trade, yet “ as to the stock in trade, the mortgage was fraudulent as against creditors, that fraud infected the whole mortgage, and it is wholly void. Goodrich v. Downs, 6 Hill, 438; Mackie v. Cairns, 5 Cowen, 547-580; Grover v. Wakeman, 11 Wend., 187-225.” See also Thomas on Chattel Mortgages,, 263.

In the case in hand, evidently the mortgagor and the mortgagee-supposed at the time the instrument of 1882 was executed and the subsequent instruments, that it was competent for them to have an arrangement by which the mortgagor should sell in the usual way of retail stores, pay the rent, clerk hire, living expenses out of the proceeds of the business and carry forward the business in the manner in which it had been carried forward years before by the mortgagee, and that if at the end of each year the $500 was paid by the mortgagor to the mortgagee, that the instrument would be and remain valid.

We think such an arrangement tends to mislead, delay and hinder the creditors of the mortgagor, and that the views expressed in the opinion of the learned trial judge are correct. We think the conclusions of fact and the conclusions of law stated by the learned trial judge should be sustained.

Judgment affirmed, with costs.

Martin, J., concurs; Merwin, J., not sitting.


author: Merwin, J.

text:
    The Ball Electric Light Co., App’lt, v. The Sanderson Brothers Steel Co., Resp’t.

      (Supreme Court, General Term, Fourth Department,

      Filed May 8, 1891.)

    Sale—Goods to be satisfactory to vendee—Acceptance.
    An electric light plant was put in defendant’s mill to light the same and the office, but not to be paid for until it had worked successfully and to-defendant’s satisfaction for ninety days. In reply to a demand for a settlement, defendant wrote a letter claiming that the time was not up, and saying that the office lights were a failure, but that if the arc lights worked as well for the next thirty days as they had done before, it would waive the trouble of lighting the office and settle the account on certain concessions being made, which were not agreed to. Defendant continued to use the plant for more than the thirty days mentioned, and then refused to have it put in order and refused to keep it. There was evidence to show that the arc lights continued to work well for the thirty days. Held, that if such was the case, the continuance of the use by defendant would amount to an acceptance; that it was a question for the jury whether defendant in the final rejection acted in good faith, and that a nonsuit was improper.
    Appeal from a judgment entered in Onondaga county on the 15th March, 1889, upon a nonsuit ordered at the Onondaga circuit, March, 1889.
    Action to recover the price of an electric light plant put in the defendant’s works by the plaintiff. In defense, the defendant alleged that the plant failed to operate successfully for ninety-days, and to light its works to its satisfaction, which were conditions precedent to plaintiff’s right to receive payment.

      Charles E. Ide, for app’lt; E. Nottingham, for resp’t.
   Merwin, J.

The main question upon this appeal is whether the case should have been submitted to the jury. There is no particular dispute as to the form of the contract between the parties. On the 2d June, 1887, the defendant wrote the plaintiff offering to “ install a thirty-light apparatus, you furnishing fifteen horse power at the pulley of the dynamo, for the sum of $1,985, or, we will install a twenty-five light apparatus for the sum of $1,725; with either of these we will also install the necessary few incandescent lights required for your office without further charge, the entire installation being complete in every particular. Payment will not be required until after sixty days of successful operation.”

On the 3d June, 1887, the defendant in reply wrote the plaintiff that in addition to the terms offered it should require “ that the lighting should be entirely to our satisfaction in every particular before payment is made, and that payment shall not be required until after ninety days of successful operation, also that in case the result should not be satisfactory to us that the whole plant shall be taken out free of charge or cost whatever to ourselves.” The plaintiff modified its offer in accordance with the requirement of the defendant, and on the 16th June, 1887, the defendant wrote the plaintiff that the terms and conditions as amended were satisfactory, thus completing the contract. In this last letter, the defendant suggests that the plaintiff’s representative should come up and again look over the ground and see exactly what is wanted, “ and as we only stipulate that the lighting shall be satisfactory, we would leave the decision as to what lights and what kind of a machine are necessary entirely to him, so that in case of any failure the fault cannot possibly rest with us.” Thereupon the plaintiff proceeded to put in the plant. While it was being the defendant suggests that it will be to have some double lamps. This, the plaintiff advises against, but says that if the defendant prefers to have them, it will furnish them at a certain price extra. The defendant on the 1st July replies that it considers it will be absolutely necessary to have some, but before deciding will wait to see how the single lamps work. On the 28th July the defendant writes “that the electric light seems to be working well so far with the exception of the incandescent lights in the offices. But before we can accept it we shall have to have several double lights put in in place of the single lights as we have already written you, and then see how those work. We would like seventeen of these double lights which your man could put up when he comes next time. We shall be réady for him in about three weeks.” To this the plaintiff replied on the 29th July that the request would be complied with, and asking “ two or three days notice when you will require our man, who will make all the lights operate to your satisfaction.” The double lights were put in about the 22d August. On the 81st August the defendant notifies plaintiff of some trouble with sparks on the field magnet, and the plaintiff sends a man to remedy it. On the 11th October the plaintiff asks for payment, the account having been previously sent, and again on the 17th October it calls defendant’s attention to the account, and says that unless they hear from them by the 20th inst they will draw at sight for the amount. On the 19th the defendant writes that “ it is not three months since the lighting was completed, and again, it is not satisfactory, nor is the amount you demand correct, as we have already told you. The arc lights burn fairly well in the mill, but the office lights are a total failure." They refer specifically to some items of the account and say “we enclose statement showing correct amount we shall owe you.”

The letter closes as follows: “ If the arc lights work in the mill for the next thirty days as well as they have done, we will waive the trouble of incandescent lighting in the offices, as we have no confidence in the plan anyway, providing you make the requisite concession for the estimated cost of putting in the incandescent lights, and will then settle the account for the balance.” The plaintiff on the 20th October replied, waiving some of the items objected to in the account and sending a corrected statement, and stating in reference to the incandescent lamps that they made no charge for them in the original contract and did not see why a rebate should be made, and asking, if this settlement was satisfactory, for a remittance by the 1st of November. On the 8th November, the defendant replies, claiming that the incandscent lamps were not to go in without charge and were a failure, but saying nothing further about any rebate on their account, and asked what the cost would be of a certain other kind of lamps in their place. To this the plaintiff replied on the 11th November giving the information asked for. On the 21st November the defendant asked the plaintiff to send them by express a certain kind of screw and two pair brushes for their dynamo, saying nothing about the working of the plant or the incandescent lamps. On November 22d, the plaintiff again asked for pay and on the 29th telegraphed that unless they received a check the next day they should draw at sight. On the 30th November the defendant wrote plaintiff, acknowledging the receipt of the telegram and saying in substance that the light did not come up to their requisites, had been getting worse and worse for the past two months and they had decided not to spend any more money on it and should not use it after that date. No particular reference was made to the incandescent lamps. A few days after this, the agent of plaintiff called on defendant and as he testifies offered to put the tiring in perfect working order at any expense and the agent of the defendant replied that they didn’t want it put in order; they thought perhaps something in the mill, some gases or something, that the lamps wouldn’t work; that they didn’t want the machine at all, and declined to let him go on and put it in order. After that and on December 7th the defendant wrote the plaintiff that “ if you desire to spend more money in trying to make the lights satisfactory we shall not stand in your way, but we will not bind ourselves to accept it even then as we have been very much disappointed in the working of it” This action was commenced soon after.

On the 19th October, 1887, the defendant wrote that if the arc lights work in the mill for the next thirty days as well as they have done they would waive the trouble of incandescent lighting in the offices provided the plaintiff would make the requisite concession for the estimated cost of putting in the incandescent lights, and would then settle the account for the balance. There was evidence from which the jury would have had the right to say that the arc lights did for the next thirty days work as well as they had done, and that the matter of the concession referred to was arranged satisfactorily to defendant or waived. If so, the continuance of the use by defendant, after the expiration of the time for trial, would amount to an acceptance. Golden Gate Con. Co. v. Caplice, 55 Supr. Ct., 439; 18 N. Y. State Rep., 389; Prairie Farmer Co. v. Taylor, 69 Ill., 440; Brown v. Foster, 108 N. Y., 391; 13 N. Y. State Rep., 805. In this view the question of acceptance should have been submitted to the jury. Corning v. Colt, 5 Wend., 253. The defendant used the plant until November 30, and then, upon being pressed for payment, absolutely rejected it and declined to allow the plaintiff to make any further efforts to satify the defendant. The statement of the account rendered by plaintiff on the 20th October does not seem to have been objected to. On the 21st November, and after the expiration of the thirty days, the defendant orders materials for the dynamo, which was part of the plant. In the final rejection defendant made no reference to the incandescent lamps.

Under the contract as originally made the defendant was the party to be satisfied. Some changes were afterward made at the request of the defendant. The plaintiff, as it may be inferred, was at considerable expense in putting -the plant in. The plaintiff was entitled to have the defendant,in the exercise of its option, act in good faith. It had no right to reject for mere caprice. Singerly v. Thayer, 108 Penn., 291; Daggett v. Johnson, 49 Vt., 345. Whether in its final rejection the defendant acted in good faith was, under the circumstances of this case, a question of fact for the jury.

It follows that there should be a new trial.

Judgment reversed and new trial ordered, costs to abide the event.

Hardin, P. J., and Martin, J., concur.


text:
    William H. Everett, App’lt, v. Charles E. Jones et al., Resp’ts.

      (Supreme Court, General Term, Fourth Department,

      Filed May 8, 1891.)

    Partnership—Reformation op articles.
    The parties hereto formed a copartnership for the manufacture and sale of wood pulp upon premises the title to which were in J., who had made a contract for the sale of a half interest to H. Plaintiff paid to J. $3,000 in cash and notes for a similar amount, and J. conveyed one-third of the real estate to him and one-third to H., $1,500 of the money being applied on H.’s contract and the balance to pay a debt of the former firm. The articles of copartnership stated that the capital stock had been delivered by the payment of such money and notes by plaintiff and the turning in by defendants of the real estate, machinery, etc. Shortly after the formation of the partnership plaintiff joined with the others in raising money for the use of the firm, and did not claim until the following year that the money paid in by him was part of the capital or inquire where it had gone. He had charge of the books and entered the payments of capital but did not charge either of defendants with having received any of the capital. The articles were drawn by plaintiff or under his direction. Held, that the facts showed a case of mistake calling for a reformation of the articles; that the cash and notes furnished by plaintiff formed no part of the capital but belonged to defendants as the purchase money of a third of the property, which alone formed the capital of the business.
    Appeal from an interlocutory judgment, entered in Jefferson county, September 29, 1890, upon the decision of the Jefferson special term '¡November, 1889, directing the reformation of a partnership agreement between the plaintiff and defendants, and the dissolution of the partnership and an accounting. Also, motion by plaintiff for a new trial, under § 1001 of Code Civ. Pro.

      Watson M. Rogers, for app’lt; Porter & Walts, for resp’ts.
   Merwin, J.

On or about the 6th day of August, 1888, the plaintiff and the defendants formed a copartnership in the business of the manufacture and sale of mechanical wood pulp, at the village of Dexter, in Jefferson county, upon premises prior to that time owned and occupied by the defendants. The title to the premises was in the defendant Jones, but he had, on the 11th February, 1888, given a contract of sale of an undivided half thereof to the defendant Hunter, upon which there was unpaid $1,500. On the 6th August, 1888, the plaintiff paid to Jones the sum of $2,000 in cash, and executed and delivered to him two notes of $1,000 each, payable to the order of Jones, with interest, one being payable on April 1, 1889, and the other April 1, 1890. At about the same time a written agreement was prepared by the plaintiff, or under his direction, and was signed by all the parties, and the defendant Jones executed and delivered to plaintiff a deed of an undivided one-third of the property and a similar deed to the defendant Hunter. Thereupon, the parties commenced their business and continued until about the 1st of August, 1889, when differences arose as to the ownership of the $4,000, advanced in money and notes by the plaintiff, the plaintiff claiming that it was a part of the capital of the concern, and the defendants claiming that it belonged entirely to them as the purchase price of a one-third interest in the property. Thereupon the plaintiff commenced this action for a dissolution, alleging, among other things, that the $4,000 referred to was part of the capital and should be accounted for as such. The written contract was attached to the complaint and sustained this view. The defendants, in their answer, among other things, alleged that the agreement in fact between the parties was that the plaintiff should pay the defendants $4,000 for one-third interest in the property; that the property was considered to be of the value of $12,000, and was the capital of the concern, of which, upon the conveyance to plaintiff, the parties became equal owners, and that by mutual mistake the written articles did not state correctly the agreement, and a reformation was asked. The special term found with the defendants upon the facts and directed a reformation accordingly.

Upon this appeal, both parties are content to have a dissolution, and the struggle is over the reformation of the agreement and the ownership of the $4,000. The main question is, whether the evidence is sufficient to authorize reformation.

The clause of the agreement, over which the dispute is, is as follows:

First. The capital stock for carrying on said business has been furnished and delivered in as follows : Said Everett has paid in $2,000 cash and his two individual notes of $1,000 each, payable to the order of said Chs. E. Jones, one note payable April 1,1889, and the other April 1, 1890. Said Jones and Hunter have delivered in the real estate, fixtures, machinery and tools complete for the manufacture of mechanical wood pulp above mentioned and described, and also the stock and material accumulated by said firm of Jones & Hunter, with exception of one bill of spruce, amounting to $88.83. As a part of the consideration of this agreement, the said Jones hereby agrees to convey to each, said Everett and Hunter, an undivided third of the real estate above mentioned, and hereby transfers a one-third interest to each of them of the machinery, tools and fixtures of the saw mill on said premises, and the said Jones & Hunter hereby transfer to said Everett a one-third interest in all tools, fixtures and machinery used and connected with said real estate and pulp mill. Said Jones & Hunter agree to complete the bulkhead and flume on said premises at their own cost and expense, and hereby assume and agree to pay all debts and obligations of said firm of Jones & Hunter.”

The agreement also provided that none of the parties should “ withdraw from said business and firm more than his share of the profits which may be accrued, but each has privilege of drawing from said company and business ten dollars weekly.” The agreement also provided than an account of stock and liabilities should be taken on the first days of January, April, July and October, commencing January 1,1889, at which times there should be an adjustment of profits and losses and a division of the profits. The profits might be left in the business if the majority so determined, but no share of profits exceeding $500 should be retained without the agreement of all parties.

The money and notes advanced by the plaintiff were delivered by him to Jones. Of the money, $1,500 was applied in payment of the balance due from Hunter on his contract from Jones, and the balance was used to pay a debt of the firm of Jones & Hunter.

The plaintiff testified that he knew that the money was to go to pay debts of the defendants. The plaintiff kept the books of the new firm. In them he entered the capital at $12,000, and credited to each member $4,000 as paid in. There was no statement with regard to the notes and money delivered by plaintiff to Jones. The defendants were not charged with, having any of the capital. The defendant Jones testifies that when he received the $2,000 in money from plaintiff he gave him back a receipt stating that it was “in part payment for the property.” This plaintiff does not deny. In the fall of 1888, the firm being called upon to raise $600 for the purpose of repairing the dam connected with the water power of the property, each member raised from his individual means $200. At this time no suggestion was made by the plaintiff that the defendants had $2,000 of the capital, and the plaintiff testifies that he did not then make any inquiry as to where that money had gone. At other times, occasionally, as the plaintiff testifies, he and the defendant Jones advanced small sums for the use of the firm, and were repaid from the profits. Yery evidently the firm needed but" little capital aside from the property itself. Small loans were sometimes made at bank. There was apparently no occasion for a cash capital to the amount of $2,000. A provision was made ' in the agreement for the accumulation of the profits, which would not have been at all necessary had they supposed that they had surplus capital to the amount of $4,000. "When the first $1,000 note be-became due on April 1, 1889, the plaintiff gave in renewal thereof two $500 notes, one due August -7, 1889, and the other August 7, 1891, both payable to the order of Jones. This renewal, as the court finds, was at the request of plaintiff. The first time that plaintiff claimed the $2,000 was part of the capital was, as the plaintiff himself testifies, in April, 1889, at the the time his first note became due. He says that he then told Jones he shouldn’t put in any more money until they made the capital stock good on their part. Jones, however, testifies that the first he heard of plaintiff’s claim was about August 1, 1889, just before the $500 note, giA^en in part renewal of the $1,000 note, became due. At this time the business was not prosperous. The value of the property at the time of the formation of the partnership is found by the court, upon sufficient evidence, to have been from, ten to twelve thousand dollars. The profits at first were large, but in November, as the plaintiff testifies, they had stopped selling, and the mill was filled with pulp.

In Devereux v. Sun Fire Office, 51 Hun, 147; 20 N. Y. State Rep., 584, it was held by this court that to justify; a reformation of a written contract on the ground of mutual mistake, the evidence should be clear and convincing and such as to leave no reasonable doubt as to the existence of the mistake alleged. Does the evidence in this case come up to that standard ? The defendant Jones and Mr. Hunter, the husband and agent of the other defendant, testify in one way; the plaintiff the other. The plaintiff testifies that he said to Hunter: “ I will put in $4,000 into this business, $2,000 in cash and $2,000 in notes, and Mr. Jones must give each of us a title to the undivided third of the property.” The defendant Jones and Mr. Hunter testify that they offered to sell a thirdinterest to plaintiff for $4,000 and then become equal partners and that plaintiff accepted the offer. The theory of the defendants is strongly corroborated by the conduct of all the parties. The $4,000 did not go into the business and no one acted as if it was so expected. The plaintiff says Hunter was to have title to one-third and still there was no way for Hunter to pay Jones the $1,500 balance due on the contract, except by the use of a part of the $4,000. The agreement provided that none of the parties should withdraw from the business more than his share of the profits, except ten dollars a week and still if the theory of plaintiff is correct, the defendants had and used $2,000 of the capital to the knowledge of plaintiff without objection. The failure of plaintiff to charge the defendants with this upon the books of the firm which he kept, his acceptance of a receipt from Jones for the $2,000 to apply on the purchase of the property, his joining with defendants in raising the $600 needed in the fall of 1888, his failure to raise any question on the subject until the spring of 1889, when the business was less prosperous, his making the notes and renewals to the order of Jones, all indicate conduct on his part utterly inconsistent with his present theory and conclusively and beyond a reasonable doubt showing in connection with the other evidence that the $4,000 was not a part of the capital and was not so considered by the plaintiff until long after the agreement was made. That being so, the agreement failed to express the contract in fact made or the mind of either. party. It was, therefore, a case of mutual mistake.

But it is said that all parties knew the contents of the agreement and the mistake, if any, was as to the true construction or meaning of the paper as written and that, therefore, it was a mistake of law and the parties have no remedy.

In Pitcher v. Hennessey, 48 N. Y., 416, it was held that where parties, intending to reduce a parol agreement to writing and because they are ignorant of the force of language and misunderstand the meaning of the terms used, make a contract different from that designed, equity will grant relief by reforming the instrument and compelling the parties to execute and perform their agreement as they make it, and it matters not whether such a mistake "be called one of law or of fact. A similar doctrine is .laid down in 1 Story’s Eq., § 115; 2 Pomeroy Eq., § 845. So in Born v. Schrenkeisen, 110 N. Y., 59; 16 N. Y. State Rep., 412, it is said that where there is no mistake about the agreement and the only mistake is in the reduction of that agreement to writings such mistake of the scrivener, or of either party, no matter how it occurred, may be corrected.

Within the rule of the Pitcher case, the defendants are entitled to relief.

At the trial, the point was taken by the plaintiff that the answer did not contain any sufficient allegátions of facts showing a mistake. The court in its decision after finding the facts directed that the answer be deemed amended so as to conform with the facts as found. This is claimed to be error. There is no amended answer on the record. In the answer all the material facts are in substance alleged. It is stated that the agreement between the parties was that plaintiff should purchase of defendants a one-third interest for the price of $4,000, that the $4,000 paid by plaintiff in money and notes was for such price and belonged to the defendants and was not a part of the capital, that the capital was the real estate and plant in which upon the deed to plaintiff each were equally interested, and that “ any meaning from the construction or use of language contained in the said articles of copartnership, in the clause thereof designated therein as first, of a contrary meaning to the foregoing statement, is a misstatement and mistake mutually made, and a fraud upon the rights of the defendants, and which at the time was not discovered by defendants, and mutually overlooked by the parties to said agreement.” We think the answer is sufficiently broad to admit of the award to defendants of the relief given, which in substance was to reform the articles so as to show that the $4,000 furnished by plaintiff was not a part of the capital but belonged to defendants as the purchase money of a third of the property. In this view the direction for the amendment of the answer is not material.

There are no exceptions to rulings upon evidence that call for special consideration.

The judgment should be affirmed.

Motion for new trial denied and judgment affirmed, with costs.

Hardin, P. J., and Martin, J., concur.