author: Barker, J. :

text:
    SARAH A. BRONSON, as Administratrix of MARGARET A. DOANE, Deceased, Appellant, v. HENRY S. MUNSON, Respondent.

      Statute of limitations — it does not begin to run %n favor of an attorney until he has notified, his client that the claim, has been collected.

    In 1864 the plaintiff’s intestate placed in the hands of the defendant, an attorney and counselor-at-law, for collection, a claim against the United States government for a pension, made by her as the widow of her late husband, who had died in its service. The defendant prosecuted the claim before the proper department of the government, and on or about February 17, 1865, a certificate was issued by the treasurer of the United States to the intestate for $347.33, which certificate was received, and the money due thereon collected, by the defendant. While the application was pending the defendant told the intestate that there was no law which would give her any bounty or back pay. For that reason all attempts to get it were given up, and the matter was not alluded to between the parties until the year 1879, when the intestate first learned that the certificate had been received and collected by the defendant. This action, to recover the amount so collected, was commenced in 1880.

      Held,, that the statute of limitations did not begin to run against her claim until she had been notified that the money had been received by the defendant, and that plaintiff was entitled to recover.
    The plaintiff was nonsuited at tlie Jefferson County Circuit, to which the plaintiff excepted, and the exception was directed to be heard at the General Term in the first instance.
    The action was originally commenced in the name of Margaret A. Doane, who. is now deceased, and the plaintiff has been substituted as her personal representative. The action was commenced February 9, 1880, and came on to be tried in December of the same year. It is stated in the complaint that in 1864 Margaret A. Doane, tbe plaintiff, made a claim against tbe United States government for a pension, as the widow of her late husband, Iiiram Doane, who died in the military service as a soldier in the United States army, and employed the defendant as her attorney to prosecute the claim; that the defendant was an attorney and counselor-at-law, practicing his profession, and after being engaged by the plaintiff, prosecuted the claim before the proper department of the United States government, and on or about February 17, 1865, a certificate was issued by the treasurer of the United States to the plaintiff for the sum of $317.33, and that such certificate was received by the defendant as attorney for the plaintiff. And thereafter, and on or about the 25th of March, 1865, the defendant, as such attorney, received the money on the certificate, and that the same belonged to the plaintiff. The complaint also avers that the plaintiff was wholly ignorant of the' receipt by the defendant of the said money, or any part thereof, until on or about June 7,1879, the defendant having, all the time from the receipt of said money up to said last-mentioned day, fraudulently concealed from the plaintiff the fact that he had received the said money, or any part thereof; that on tlie 15th of September, 1879, the plaintiff demanded of the defendant the said sum of money, and that he neglected and refused to pay over the same. The defendant admits that the plaintiff’s intestate engaged him to collect the money, as her attorney and agent, and that he received the certificate mentioned and collected the money thereon, as stated in the complaint, and pleads as a defense a payment over of the money to the plaintiff’s intes tate and the statute of limitations in bar of a recovery. Upon the trial, after a jury was impanneled, the counsel for the plaintiff made a statement to the jury of the facts which the plaintiff would be able to prove in support of her cause of action, and after stating the facts which were admitted by the answer, made the further statement that in the spring of 1865, the said application for bounty and back pay being pending, the defendant informed the plaintiff’s intestate (that is, Margaret Doane) that there was no law that would give her any bounty or back pay, and for that reason none could be obtained, and that thereupon all attempts to secure said bounty and back pay were given up, and the matter was not alluded to between the parties to the suit until the year 1879. That Mrs. Doane, in the year 1879, renewed her inquiries concerning her right to a pension, and with the assistance of another attorney renewed her application, and forwarded it to the department at Washington, and she was soon notified by communications from the government that the certificate which has been mentioned was issued to her in 1865, and sent to the defendant as her attorney. That she then made application to the defendant and asked him to pay over the money to her, and he insisted that he had paid over the money; that he had never refused to pay it over. There was no dispute but what the defendant did receive and collect the money in the .fore part of the year 1865. It was further stated in the opening that the plaintiff never knew or had the least idea that any of the said money had been collected or received by the defendant until one year prior to the commencement of the action. The plaintiff’s counsel offered to prove the facts as stated by him, and all the facts alleged in the complaint. The counsel for the defendant thereupon moved for a nonsuit, upon the ground that the claim of the plairtiff was barred by the statute of limitations, and the court granted the motion, upon the ground and for the reason that the statute of limitations was a defense and constituted a bar to a recovery.

      P. C. William’s and E. North, for the appellant.

      O'Brien cfi Emerson., for the respondent.
   Barker, J. :

This action is to recover moneys which the defendant admits he has collected and received, as an attorney-at-law, for and at the request of the plaintiff’s intestate. The defendant interposes the defense of payment and the statute of limitations as a bar to a recovery. Thé plaintiff was nonsuited at the trial, upon the statement of facts made to the court and jury in the opening, and the averments set forth in the complaint. The nonsuit was ordered for the reason that the statute' of limitations constituted a defense, no other ground being named by the court or suggested by the defendant’s counsel.

The provisions of the Code of Civil Procedure, now in force, on the subject of limitations of actions, are not applicable to this case, for the reason that if, upon the facts stated and offered to be proved by the plaintiff, a defense of this kind should prevail, it was complete and the statute had fully run before they were adopted.

No demand was made upon the defendant for payment over of the moneys which he collected, until just before this action was commenced. Then one was made in due form. The plaintiff's intestate was wholly ignorant of the fact that the defendant had received into his hands the moneys which he was authorized to collect until about the time the demand was made for their payment.

The question to be determined involves an inquiry into the professional behavior of the defendant, for the purpose of ascertaining whether he has done and performed all the duties which he owed his client, and in such time and manner that he is entitled to make the defense which prevailed on the trial.

It is the first duty of an attorney, on receiving money which comes to his hands for his client, to give him notice of the collection, that he may call on the attorney and receive the same or give directions how the same may be remitted. A neglect of this duty is a loss and injury to his principal. The law presumes the use of money to be of value to the owners. If the notice is delayed for an unreasonable length of time, it is reprehensible. If the omission is intentional, the suppression is a deceit, and may well be characterized as a cheat and a fraud. The relation between attorney and client is one of confidence, and so long as he remains unnotified that the demand placed in the hands of his attorney has been settled and paid, he is justified in acting and managing his business affairs upon the supposition that a portion of his estate is an uncollected debt due from his debtor, and not in money in the hands of his attorney.

These are not mere moral questions, but they are legal obligations imposed on the attorney, for a breach of which the injured party is entitled to damages to the extent of charging the attorney with interest on the money.

By our common law an action could not be maintained against an attorney to collect moneys which he had received for his client, until after a demand made upon him for payment and a refusal or neglect to comply with the same, unless it can be made to appear that he had applied the money to his own use, or otherwise wrongfully dealt with the same. (Taylor v. Bates, 5 Cowen, 376.) Such is the statute now. Section 410 of the Code of Civil Procedure which is a codification of the law upon the subject, making no change in this particular. The purpose and object of the law being to protect attorneys from the costs of suits and annoyances, so long as they act in good faith and honorably discharge all the duties which they owe to their clients. As an action cannot be maintained until after a demand made, the question arises whether the statute will commence to run in favor of the attorney, and against his client before the right to sue is complete. . The statute regulates the subject now. But in this suit it is to be determined by the rule existing before the adoption of the present Code

If the attorney notifies his client of the collection, then it is his duty to make a demand of the attorney for the money within a reasonable time thereafter. And if he fails so to do he puts the statute in motion against himseifj and if a suit is not brought within 'the statutory time; computing the time from the time when the money was received, an attorney may rely on the statute as a bar to a recovery. The reason why the principal should be notified thát the collection has been made before the statute can commence to run in favor of the party who has neglected a duty, is so manifest and reasonable that it needs no argument or illustration to sectíre an unhesitating approval of its wisdom and propriety. The very proposition has been approved in the courts of' this State. Lyle v. Murray (4 Sandf. Supr. Ct. Rep., 591) presents the point, and if not controlling the decision in that case, it was distinctly stated. This was an action against a collecting agent, as appears by the opinion of' the court, and it was held to be a general rule that it is the duty of such an agent to pay over money collected as soon as he receive it; that the law imposes on him that obligation, and that the contrary rule which applies to an attorney and a certain class of commercial factors is an exception to the rule. On the question of demand and the application of the statute in such cases the learned court remark, Judge Doer writing the opinion: Even where an agent, from the peculiar nature or circumstances of his agency, is only bound to pay upon demand, it by no means follows that until a demand no cause of action accrues, so that the statute does not begin to run. It by no means follows' that the principal by omitting to make the necessary demand may suspend the operation of the statute for an indefinite period. It is the duty in all cases of an agent who has collected money on account of his pi'incipal to give him immediate notice of the fact, and when the principal has received such notice he is bound to make the requisite demand within a reasonable time; and if he omit to do so he puts the statute in motion, and when he suffers the time which it limits to expire is concluded by his laches.” He then refers to the case of Stafford v. Richardson (15 Wend., 305) and further remarks: “ There was no demand in that case until the very day upon which the suit was commenced; but as it appeared in evidence that the plaintiff more than six years before that day had notice that the moneys which he claimed to recover had been received by the defendant, it was very reasonably and justly held that the expiration of the statutory time was an absolute bar. The replications in this case do not aver that notice was not given by the defendant until within six years previous to the commencement of the suit. They only aver that until within that period there was no demand, and therefore implied what is certainly not true, that until such demand the causes of action could not have accrued.”

The case upon which the defendant mostly relies in support of the defense is Stafford v. Richardson (supra), where it was held that a demand was necessary before a suit could be maintained, and that the statute time would also run in favor of the attorney, although no demand had been made upon him by his client for the money. In this case it did appear that the attorney had discharged his duty by giving his client notice of the collection, and that the money was at his disposal, and had in fact paid over a part. The very learned counsel who appeared for the defendant in that case based their arguments upon the fact that the client knew from information derived from his attorney that the money was in hand and at his disposal, and that he alone was guilty of laches, and the statute should apply. The court adopted the argument thus presented, and in the opinion of the court the same views are plainly expressed. The court remarked : “ Having received the plaintiff’s money, he should either have remitted it to him or given him notice of having received it, that the plaintiff might have called for it or ordered it to be remitted. The defendant had actually remitted fifty dollars, as appears in the case, without waiting orders for that purpose.” The court further remarks : “ But if an attorney may shield himself from responsibility, upon the ground that no demand has been made, it does not follow that the client can excuse his laches by a principle which is intended to protect from costs an agent who has acted honestly and intelligently in the business of his principal. * * * Although, therefore, an attorney may protect himself from suit by want of a demand, he is not, for that reason, to be subject all his lifetime to demands, however stale. If a demand was necessary in this case, the plaintiff should have made it in season to have brought Ins suit within six years after the defendant had converted the property received by him to his own use. * * * The plaintiff therefore should have brought his suit within six years from that time; and it is no excuse for him that he had made no demand. It was his own fault that he had not put himself in a condition to sue, and he can never take advantage of his own laches.” The case of Hickok v. Hickok (13 Barb., 632) has' no just application, for the court held that the defendant in that case was not an attorney-at-law, and was not within the reason of tlie rule which exempts them from an action without a previous demand. All the cases cited on the defendant’s brief have been carefully examined, and they are not in point, and do not conflict with the cases before mentioned.

By section 410 of the present Code it is provided, that where a right exists, but a demand is necessary to entitle a person to maintain an action, the time within which the action must be commenced must be computed from the time the right to make the demand is complete, except that where the right grows out of- the receipt or detention of money or property by an agent, trustee, attorney, or other person, acting in a fiduciary capacity, the time must be computed from the time when the person having the right to make the demand has actual knowledge of the facts upon which that right depends.

Our examination leads us to the conclusion that this provision of the statute is but a compilation of the law as it existed at the time of its adoption, and the codification was simply to clear away all doubts upon the subject, and to make a precise and accurate statement of the law on the subject.

Upon the statement of the facts made to the court and jury in this case, it is made to appear that the defendant received this money in 1865, and suppressed from his client the fact that he had received the same, and intentionally kept her in ignorance of the collection, until a demand was made upon him to pay the same over, in the year 1819, just before the commencement of this, action.

This case presents some exceptional features, which should have consideration in disposing of the defense that the plaintiff’s cause of action is barred. It was uncertain whether the claim presented for a pension would be allowed, and if so when. The mode and maimer of remittance by the government was also unknown to the claimant, or when it would be made. It would be a harsh and an unjust law, that a party under such circumstances is guilty of laches in omitting to make a demand upon his attorney for moneys which he had collected, until he was informed of the fact.

There is the additional circumstance that just before the money was paid over to the defendant he gave the deceased an opinion, in very positive terms, that there was no law which entitled her to a pension, and none would be allowed on her claim. This doubtless had effect upon her mind as she did not again call on the defendant in relation to the matter. If the deceased had been promptly informed by the defendant that the pension had been allowed and paid who can believe that she would have suffered this bounty from the government to remain unclaimed until it was outlawed. It is a satisfaction to the court to find sufficient legal ground for setting aside the nonsuit.

New trial granted, with costs to abide event.

Present — Smith, P. J., and Barker, J.; Hardin, J., not sitting.

New trial ordered, costs to abide event.


source: Caselaw Access Project

author: Barker, J.:

license: Public Domain

text:
    ELIAS A. MEAD, Appellant, v. CHARLES E. PARKER, Respondent.

      Guaranty ef collection — construction of— right of a pa/rty having several securities to elect which he will enforce — record, of a deed — to whom it m notice.

    September 1, I87¡>, tlie defendant, being the owner of a bond and mortgage given in 1869 by Lewis Paddock to Norman Parker, by an instrument in writing, sold, assigned and delivered the same to one Jennings, “and therein and thereby guaranteed the collection of the same.” Prior to such assignment and on January 3,1871, Paddock had sold the premises to one Carman, who, by the terms of the deed, assumed and agreed to pay the said mortgage. This deed was recorded January 31, 1871.
    Thereafter the plaintiff, having become the owner of the said mortgage by assignment from Jennings,/brought an action to foreclose it, to which neither Carman the grantee of the premises, nor this defendant, the assignor of the mortgage, was made a party. A deficiency having arisen upon the sale the plaintiff, after having obtained leave from the court so to do, brought this action upon the defendant’s (the assignor’s) guaranty to recover the amount of the said deficiency. It did not appear that Jennings, at the time of his purchase of the mortgage, knew of the deed to Carman, or of the latter’s agreement to pay the mortgage. Upon the trial the plaintiff, in offering-certain evidence, read in evidence the deed to Carman from the record thereof.

      Held, That the record of the deed was no notice to Jennings, the assignee of this defendant, of the existence of the deed or of the assumption clause therein contained.
    That its introduction in evidence by the plaintiff was no evidence that Jennings know of its existence at the .time he purchased the bond and mortgage from the defendant.
    That in view of the fact that there was no evidence that Jennings knew at the time the guaranty of collection was signed by the defendant that Carman had in his deed assumed payment of the mortgage, it was not to be inferred that it was a condition of the defendant’s* guaranty that Carman should be first prosecuted to judgment and execution upon his agreement in his deed to assume payment of the mortgage.
    That the plaintiff was entitled to recover; that he was not, under the circumstances of the case and the terms of the guaranty, bound to first procure a judgment against Carman and have an execution issued thereon and returned unsatisfied.
    Appeal from a judgment, entered upon a verdict in favor of tbe defendant, and from an order denying a motion for a new trial, made upon the judge’s minutes. The questions presented for the •consideration of the court arise- upon a bill of exceptions, from which it appears that in November,. 1869, one Lewis Paddock executed and delivered a bond to one Norman Parker for the payment of the sum of $1,700, and gave a mortgage upon real estate to secure its payment, which mortgage was recorded in the Cayuga county clerk’s office on the 7th of April, 1870. On the 10th of May, 1872,*the defendant in this action became the owner of such bond and mortgage, by an assignment from the obligee and mortgagee. Afterwards, and on the 1st day of September, 1875, the defendant, in consideration of $1,700, sold, assigned and transferred the bond and mortgage to one Cordial L. Jennings, and guaranteed the collection of the same. The plaintiff in this action became the owner of the same by an assignment from Jennings. Before the assignment of the bond and mortgage .by Norman Parker to the defendant, and on the 2d day of January, 1871, the mortgage debtor, Lewis Paddock, sold the premises to one Stephen Carman, and his deed was recorded on the 31st day of January, 1871, in Cayuga county clerk’s office. Carman assumed and agreed to pay the before-mentioned mortgage, and .this obligation on his part was-mentioned in the deed to himself. The plaintiff, as assigneé of the bond and mortgage, commenced an action in this court to foreclose the same, making Lewis Paddock and others defendants, but not making this defendant or Carman parties to the action. The usual decree of foreclosure was granted, and entered in the proper clerk’s office on the 28th of March, 1878, and the premises were sold under the decree to the defendant in this action for the sum cf $1,000, and afterwards a judgment for deficiency was entered against lewis Paddock for the sum of $934.69, and an execution against his property was issued thereon, and returned nulla boiia, and such deficiency now remains wholly unpaid and unsatisfied. The plaintiff now brings this action to collect from the defendant the deficiency before mentioned, claiming to recover the same by virtue of the defendant’s covenant of guaranty of collection contained in the assignment of the bond and mortgage to Jennings. Before commencing this suit, the plaintiff procured from this court an order granting him leave to bring and prosecute this action against the defendant. Upon the trial the court charged the jury that the plaintiff could not recover in this action, because it was not shown that his remedy against Stephen Carman, who, in the conveyance of the mortgaged premises to him, assumed and agreed to pay the mortgage, had been exhausted, to which charge the plaintiff excepted. The jury thereupon rendered 'a verdict of no cause of action, in favor of the defendant.. The judge before whom the cau'e was tried entertained a motion on the part of the plaintiff for a new trial, founded upon his minutes, and the same was denied.

      II. V. Howland, for the appellant.

      Parker & Greenfield, for the respondent.
   Barker, J.:

There is but one question presented for consideration by the bill of exceptions. It is this: Was it made one of the conditions of the defendant’s liability, on his agreement of guaranty, that he should not be called upon to pay the bond or any part thereof until after an effort had been made by the purchaser, or his assignees, to collect the same of Carman, who had at that time become the owner of the the mortgaged premises, and who had assumed the mortgage debt and agreed with his grantor, the bond debtor, that he would pay the same ?

The only defense interposed is that, by the terms of the guaranty, such is made one of the conditions of the defendant’s liability, and before any suit can be maintained on his covenant, the holder of the bond and mortgage must prosecute Carman, on his promise contained in the deed to himself, to judgment, and issue execution thereon, and have the same returned unsatisfied in whole or in part. As this has not been done, the point stated becomes the turning point of the case

The contract of guaranty is not set forth at large in the bill of exceptions, but it is stated to be in writing. It is alleged in the complaint that the defendant was the owner of the bond and mortgage by virtue of an assignment from the obligee and mortgagee therein to himself. And that afterwards he sold, assigned and set over the same to Jennings, and therein and thereby guaranteed the collection of the same, and delivered them to said Jennings.”

This averment is not denied in the answer. The nature and extent of the defendant’s liability, and the conditions of his agreement must be found in the force and meaning of the words above quoted.

The only words that import a promise may be readily transposed, without changing their meaning, so as to read as follows: “T hereby, for value received, guaranty the collection of the said bond and mortgage.” The legal import of these words is not disputed, when it is understood of whom the promise of collection is made and to whom they refer.

The assignment is an original agreement between the parties thereto, and it is to be construed and enforced according to the intention of the parties thereto, as the same can be ascertained from the language used by tlm parties and expressed in the written contract, the subject-matter of the agreement, and- the surrounding circumstances relating to the object and purpose of the agreement, which were known by the parties and presented during the negotiations to their consideration.

We are to inquire after the mind and purpose of the parties at the time of the consummation of this agreement. The nature and extent of the obligations assumed by them respectively were then fully determined, and nothing has since occurred to* change the contract in any particular. The limitations and conditions placed upon the defendant’s promise are such, and none other, as the parties mutually understood and agreed upon at the time of making the contract, and' as are expressed in the instrument. Words are used by contracting parties for the purpose of expressing their common ideas on the subject under consideration.

It must be conceded as a fair and reasonable view to take of the question presented for consideration, that if the parties were ignorant of 'the dealings which had been had between the mortgagee and Carman, his grantee, and were not aware of Carman’s promise and obligation to pay the bond debt, then it cannot be justly and fairly held that the defendant’s assignee on receiving the assignment of the bond and mortgage, in effect stipulated with the defendant and made it one of the conditions of the defendant’s promise, such as is now urged as a defense to this suit.

In terms the agreement is not broad enough to include Carman as one of the persons to be sued and prosecuted to judgment béfore resold could be had to the defendant’s contract of guaranty. It is manifest-onreadifrg the contract, that the assignee was to seek collection of the obligation.which he purchased of the maker thereof, before he could demand payment from his assignor, the defendant in this action. It would be altogether unreasonable and absurd to hold that the parties had in mind a suit upon a contract of which they were both in fact ignorant. If it was the intention of the •defendant to impose, upon his assignee the obligation to enforce all collateral securities which might exist, including those of which he was then ignorant,' before any resort could be had on his covenant as to the collectibility of the debt, it is reasonable to suppose that they would have expressed such intention more definitely and by language clearly indicating that purpose.

Upon the question whether the defendant’s assignee did know of Carman’s promise and obligation, the law does not indulge in any presumption one way or the other. It is a fact to be established by legal and sufficient evidence and by the party interested in maintaining the same. There is but an item or two of the evidence set forth in the bill of exceptions, which in the least bears on this subject. It is therein stated “that no evidence was given ¿ending to prove that the plaintiff or his assignor ever knew of the existence of said covenant or agreement in Carman’s •deed to assume and pay the mortgage, xxnless such knowledge or notice is legally to be presumed from the fact of the existence and record thereof before the defendant guaranteed the collection of the said mortgage, and from the fact that the plaintiff’s attorney put in evidence the record of said deed.” Thé record .of the deed from'Jennings to Carman was no notice to Jennings of the fact of the conveyance or of the promise made bythe grantee therein to pay the mortgage debt. The mortgage was recorded soon after it was executed and before the deed to Carman. The purchaser of ¡the moi'tgage debt was not interested to know who became the «owner of the premises after a record had been made of the mort.gage which he was aboxxt to purchase. No transfer of the real ¡estate after the'mortgage was recorded coxxld displace or impair the '¡lien created thereby. It is not suggested to our mind that there was any need on the part of the purchaser to inspect the record •subsequent to the time when the mortgage was recorded. The ■¡recoi’d of the deed was no notice to the defendant’s assignee of the existence of the same, and there is no provision in the recording act which makes it such. (King v. McVicker, 3 Sandf. Ch. Rep., 192; Truscott v. King, 6 Barb., 347; Wetmore v. Roberts, 10 How., 53; Reed v. Marble, 10 Paige, 407; Cheesebrough v. Millard., 1 Johns. Ch. Rep., 414; The Howard Ins. Co. v. Halsey, 4 Sandf. Sup. Ct. Rep., 565.)

It appears by the bill of exceptions that, after the defendant rested, the plaintiff read in evidence, from the record thereof, the deed conveying the mortgaged premises by Lewis Paddock to Stephen Carman, in and by which the grantee assumed and agreed to pay the mortgage which has been mentioned as a part of the consideration for the sale. It is not stated upon what issue or for what purpose this deed was given in evidence, and as what occurred upon the trial is not set forth in the bill, it is not apparent why the plaintiff should need to give it in evidence. It proved the existence of the conveyance, the land embraced, and all the terms and conditions of the same; but it does not prove anything beyond that. It cannot be inferred, because this proof was made, that Jennings, the defendant’s assignee, knew of its existence prior to-the moment it was introduced in evidence. It does not prove even that fact, for Jennings was not a party to the suit. If the deed had been produced by Mead, and there had been evidence from which it might be infe'rred that he received it from the hands of Jennings, then these facts would constitute some evidence going to prove that Jennings knew of the existence of the deed at the time he purchased the bond and mortgage. In the consideration of the proposition discussed it must be kept in mind that the rights of the parties to this suit depend upon the nature and character of the original agreement between the defendant and his assignee, under whom the plaintiff claims. If it had appeared upon the trial as an undisputed fact that the plaintiff, who took his title from Jennings, knew when he purchased, that Carman had agreed to pay this bond and mortgage, it would not in the least change the character of the defendant’s liability.

The respondent in his argument refers to the case of Cady v. Sheldon (38 Barb., 103) as an authority that the production of the record of the deed is some evidence that the defendant’s assignee knew of the existence of the deed and its contents when he purchased the'mortgage debt. In that case the defendants were sued upon a guaranty for the collection of a bond and mortgage of which they were the owners by purchase. Farrington, their assignor, had guaranteed the payment of the same as the several payments fell due, which guaranty was embraced in the instrument of assignment to themselves. Upon the trial the plaintiff produced and gave in evidence the assignment containing Farrington’s guaranty of payment, and the court held that as the guaranty was contained in the assignment, and that being one of the links in the chain of evidence essential to establish the plaintiff’s title to the bond, and being produced by him upon the trial, that it was some evidence that it was known to the plaintiff when he purchased the bond and mortgage of the defendants that there was outstanding an obligation on the part of Farrington to pay the same. The circumstances existing in that case, tending to show that the 'purchaser knew that there were other remedies for the collection of the debt, do not exist in the case before us. As Carman’s promise to pay the mortgage debt was in existence when'the bond and mortgage were transferred to the defendant, Carman’s obligation went along with it and became available to the defendant and his assignees as a remedy to which they cduld resort for ■ the purpose of securing a payment of the bond debt. But, as it was not known to J ennings, the defendant’s assignee, that • Carman’s obligation was in existence, it cannot be inferred that it was one of the conditions of the defendant’s guaranty that a resort should be made to Carman’s promise before he would be liable upon his agreement for the collection of the bond and mortgage. The defendant’s assignee might have been quite unwilling to have purchased this security with the defendant’s covenant' of collectibility, if he had known that, before he could resort to the defendant’s promise, he would have been compelled to hunt up Carman and prosecute his undertaking to judgment and execution. To impose that condition upon the present holder of the bond and mortgage, who is the assignee of the defendant’s covenant, would be, in our opinion, to make a new bargain for the parties — to insert a new condition to the defendant’s promise, of which there is no evidence that he or his assignee had it in mind at the time of the consummation of their agreement.

The respondent has sought to base an argument in support of his position npon the légal proposition, that Carman became the principal debtor for the payment of the mortgage debt upon receiving the deed of the premises and entering into a promise to pay and discharge the mortgage. As between his grantor, who was the mortgage debtor, and himself, hes did become the principal debtor, and the grantor his surety for the payment of the same. It is, however, erroneous to say, as between the owner and holder of the bond, that Carman is the principal debtor. "We do not see, however, how the relation in which Carman stood to his grantor, or to the holders and owners of the mortgage debt, has anything to do with the nature and character of the agreement which the defendant entered into between himself and his assignee. The original obligee in the bond remained liable upon his original promise, and the holder of the bond could at any time prosecute him in an action at law, for the purpose of securing payment of the debt. Carman’s promise to pay the debt of his grantor simply gave to the holder of the bond an additional remedy, it being the promise of a person, theretofore a stranger to the contract, to pay the debt of another, which the creditor could enforce.

As the bill of exceptions is prepared, and the case presented to us, the charge of the learned judge was in effect a direction to the jury to find a verdict for the defendant. As we have reached the conclusion that this ruling was erroneous, the judgment and the order denying a new trial are reversed, and a new trial granted with costs to abide the event.

Present — Smith, P. J., HardiN and Bariíer, JJ.

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


author: Macomber, J.:

text:
    THE TOWN OF WHEATLAND AND SIX OTHER TOWNS v. HENRY A. TAYLOR and Others.

      Municipalities cannot aid railroads — Constitution, art. 8, sec. 2, and a/rti 3, sec. 16 — 1876, chap. 66,s«c. 2 — a bond authorized by a statute must comply with, its terms — when a mm named in a bond is to be treated as a penalty, and not as liquidated • damages.

    Section 2 of chapter 66 of 1876 authorized and empowered the commissioners of any municipal corporation in this State holding bonds, given by the Rochester and State Line Railroad Company in exchange for the bonds of such municipality, to sell and dispose of such bonds, “ upon such terms and conditions as to said commissioners, or a majority of them, shall be deemed best for the interest of said municipal corporation they represent, whenever said railway company shall have entered into a written contract for the completion and equipment of said railroad from Rochester to Salamanca, and the contractor shall have given to the city of Rochester the guaranty required by the first section of this act, and said commissioners may, in their discretion, require a like guaranty, to be approved by them or a majority of them.” The first section required a guaranty to be given by the contractor, “ that said railroad shall be ready for operation and equipped by the 1st of January, 1877.”
    Under this act the plaintiffs exchanged with the railroad company the first mortgage bonds they held for an equal amount of its common stack. They also received from the defendants a bond, in the sum of $100,000, conditioned that the contractor- shouid complete and equip the road from R»chester to Salamanca by July 1, 1877.

      Held, that in so far as the act authorized the exchange of the bonds for the stock of the company, it was unconstitutional and void, as being in violation of section 2 of article 8 of the Constitution.
    That the portion of the act authorizing the taking of the guaranty could not be separated from the portion providing for the sale and disposition of the bonds.

      It seems, that even if it could be considered as separate and independent, it would bring the act in conflict with section 16 of article 3 of the Constitution, providing that no private or local bill shall embrace more than one subject, and that that shall be expressed in its title.
    It was recited in the bond that, "Whereas, if is of great value to the said towns and the citizens that such road should be finished and put in operation, and the damages resulting from a failure therein, and from the said towns having parted with their said bonds, would be very great, and it would be impossible t'o ascertain the amount of damages resulting from the non-completion of said road, or to accurately estimate and prove the elements thereof,” the sum of $100,000 was declared to be fixed as the liquidated damages which the towns might suffer from a breach of the condition of said bond, and not to be a penalty. The work was not finished by July 1, 1877, but the contractor, without the objection of any person, continued to work up to October, 1879, when only the sum of $4,787.46. was required to complete the road.

      In an action to recover tiie amount named in the bond :

      Held, that under the act the plaintifE could only take the guaranty therein-provided for, and had no authority to take a bond such as was now sued upon. That under the terms of the bond and the circumstances of the case, the sum named in the bond should be treated as a penalty and not as. liquidated damages.
    Cross-appeals from a judgment, entered upon the trial of this action at a Circuit and Special Term held in Wyoming county in October, 1881.
    The plaintiffs are towns lying along the line of what was formerly known as the Rochester and State Line Railroad, for the building of which railroad the towns had bonded themselves in the aggregate amount of $505,000. Under the act of the legislature (chapter 66 of th'e Laws of 1876), the plaintiffs exchanged with the railroad company the first mortgage bonds which they held, for an equal amount in the common stock of the railroad. The defendants, on the 30th of August, 1876, made and executed to the plaintiffs a bond in the sum of $100,000, the condition of which was that the contractor, the defendant Taylor, should complete and equip the road from Rochester to Salamanca by the first day of July, 1877, in conformity to his contract. Only a quarter of the work had been done, however, by the first day-of July, 1877, but, without objection on the part of any person, the contractor continued to work up to the "first day of October, 1879, when, as it is ascertained by the decision of the case, the sum only of $4,787.46 was necessary to complete the building and equipment of the road. This action was brought by all of the towns who were parties to such agreement, to recover the amount provided for by said bond upon a general-allegation of a breach thereof by the defendants.

      John B. Olmstead, Zuovus JZ. Bangs and L. W. Thayer, for the plaintiffs.

      William F. Cogswell and J.c&Q. Van Voorhis, for the defendants.
   Macomber, J.:

The act of the legislature authorized the railway commissioners of the several towns to take a guaranty for the faithful execution of the contract which the contractor for the building of the road had made. The contract, for the breach of which this action is brought, after reciting the contract of the defendant, Taylor, with the corporation and a reference to the act- of the legislature, by way of recital has the following provision, among others: “ Whereas, it is of great value to the said towns and the citizens that such road should be finished and put in operation, and the damages resulting from a failure therein and from the said towns having parted with their said bonds would be very great, aud it would he impossible to ascertain the amount of da/mages resulting from the non-completion of said road, or to accurately estimate and prove the elements thereofP The obligation thence binds the defendants to the plaintiffs in the sum of $100,000, which sum was declared to be fixed as the liquidated damages which the towns might suffer from a breach of it, and was declared not to be a penalty.

It was claimed by the plaintiffs ^ounsel upon the trial as well as upon the argument on appeal, that the measure of damages for a breach of the contract had been fixed and determined by the parties to the agreement at a liquidated sum of $100,000, and that the plaintiffs were entitled to recover that sum, although the actual damages to the plaintiffs, as found by the trial judge, were quite small in view of the magnitude of the undertaking. This contention cannot be acceded to and it was properly rejected by the trial court. Among the numerous authorities upon this precise question, perhaps the case of Shute v. Taylor (5 Metc., 61) is most' nearly in point. There, the court, by Chief Judge Shaw, says: It is not always the calling of a sum, to be paid for breach of contract, liquidated damages, which makes it so. In general, it is the tendency and preference of the law to regard a sum stated to be payable if a contract is not fulfilled, as a penalty and not as liquidated damages, because then it may be apportioned to the loss actually sustained. But without going at large into the subject, one consideration, we think, is decisive against recovering the sum in question as liquidated damages; namely, that there has been a part performance and an acceptance of such part performance. * * * It is like the case of an obligation to perform two or more independent acts with a provision for single liquidated damages for non-performance ; if one is performed and not the other, it is not a case for the recovery of the liquidated damages.”

Under the proofs in the case all of the commissioners of the several towns liad knowledge of the progress of the work from time to time, and they and other town officers at least acquiesced in the expenditure by the contractor of many hundred thousand dollars after the time of the occurrence of the breach complained of, without any suggestion or intimation that they should stand upon the letter of their bond; Under such circumstances and in view of the very slight sum which the court has found, was necessary to make good even a technical compliance with the agreement, it would be a step far in advance of the present judicial authorities for us to hold that the $100,000 could'be recovered simply because the language of the contract said it had been fixed upon by the parties. We therefore concur fully in the conclusion of the trial judge upon this branch of the case.

The learned judge below, however, has stated a measure of damages in thiS'Case.'to which we cannot give our assent. He has decided that the plaintiffs are entitled to recover a sum of money, which, on a given day, namely, the 1st day of October, 1879, after which date the contractor did no service and expended no money, was then necessary to complete the construction of the railroad according to his contract. The items which enter into this sum are four hand-cars, a sum to be expended on depots and the estimated cost of a water station, and a pumping engine at another station, the aggregate of which amounts to the sum of. $4,787.46. This doubtless would be the correct measure of damages provided the towns through which the railroad was constructed were, as the result of the execution of the contract, to receive the road and operate it for their own pecuniary advantage as the managers of a common carrier, but manifestly neither of these towns had any such proprietory rights in the railroad or in the contract for its construction; It is not necessary for us to determine upon, this appeal what evidence should be adduced to establish the facts that the plaintiffs had suffered any injury whatever from the failure to build the road. What advantage it would be to the towns, as separate political divisions of the State, to have a railroad running through them, doubtless is a difficult subject for a judicial investigation, yet the difficulties of the case ought not to lead us to accept any other measure of damages than the pecuniary interest which these towns had in the operation of the railroad.

We think, therefore (except for the statement made by the cpunsel for the defendants upon the argument, and which was also incorporated in his brief, that he did not ask a reversal upon this ground), that we ought to set aside the judgment and order a new trial for this error alone.

There are, however, other reasons for a reversal of the judgment, which go to the merits of the plaintiffs’ entire claim. By the act of the legislature, above referred to, upon surrendering the $505,000 of the first mortgage bonds of the corporation, and receiving in lieu thereof the common stock of the company, the commissioners, as has been stated, were authorized (not required) to receive, before making the same, a guaranty for the faithful execution of the contract for the construction of the railroad. The commissioners were not authorized by any law to insist upon a guaranty different in legal effect from the one which they were empowered to receive by the act; yet the document which furnishes the basis of this action is not a guaranty in the legal acceptation of that term. Indeed, it recites the difficulties which would attend the ascertainment of the actual damages by the towns in case a mere guaranty were executed. They have, therefore, apparently insisted that before this exchange should take place, a different instrument should be executed to them which should supply the defects in the legislation and secure them in obtaining the railroad. To recover upon a bond authorized by the statute, it must be made to appear that the paper is substantially in accordance with the terms of the authority from which it is to derive its validity. (Barnard v. Viele, 21 Wend., 88; Joslyn v. Dow, 19 Hun, 494; Town of Wayne v. Sherwood, 14 id., 423; S. C., 76 N. Y., 599.)

Still there is another and a more important reason why this action cannot be maintained, and that is, that the act of the legislature permitting the transfer, as well as the contract itself making the change of the first mortage bonds the stock of the company, was, and is unconstitutional, being in violation of section 2 of article 8 of the Constitution, which declares that “ no county, city, town or village shall hereafter give any money or property or loan its money or credit to or in aid of any individual, association or corporation, or become, directly or indirectly, the owner of stock in or bonds of any association or corporation,” and which was adopted in the year 1874, after plaintiffs had become the owners of the bonds and before they entered into the contract for exchanging them for stock. This was the subject of judicial decision in the case of the City of Rochester v. Taylor and others, which was an 'action to recover the value of the bonds of the same railroad company which had been exchanged for stock under the same act of the legislature. This case has not, so far as we are aware, been reported, but a copy of the opinion of Mr. Justice David Rumsey, delivered therein, has been furnished to. us. The court, in that case, pronounced the act of the legislature and all proceedings of ,the municipal corporation and of the railroad under it to be unconstitutional and void, and that neither party to the illegal agreement could maintain an action against the other for any cause arising under it. This decision was followed by the Circuit Court in Monroe county, in an action between the same parties for the recovery of the interest coupons which had been attached to t|he bonds which furnished the subject-matter of the first action. There has been no review of these decisions by appeal, and none has been attempted, so far as we are advised.

In regard to the decision of Mr. Justice Rumsey, referred to by the trial court in this case, an attempt is made to discriminate between the cause of action here involved and that portion of the agreement which manifestly, under the Constitution, could not be carried into effect; and the learned judge says, in his opinion, that other covenants of a separate and independent nature may be enforced. But the error of this reasoning, as it seems to us, is in the assumption that there were in fact or could, frpm the nature of the case, be separate and independent covenants which could afford a basis of an action, when the entire project contemplated by the act of the legislature was itself subject to the inhibition of the provision of the Constitution. There is but one subject stated in the title of the act, which is “ To authorize municipal corporations holding the first mortgage bonds of the Rochester and State Line Railway Company to sell and dispose of the same.” There is no separate and independent subject named in the title of the act. The body of the act, it is true, has a provision permitting the railway commissioners of the several towns to receive a guaranty, but that is only an incident to the general subject of the legislation and only one of the means and details pointed out for carrying the act into effect. Indeed, it might well be claimed that the contention for such a division of the act would be obnoxious to another section of the Constitution, which declares that no private or local bill which may be passed by the legislature.shall embrace more than one subject, and that shall be expressed in the title.” (Art. 3, sec. 16.)

It follows, therefore, that the judgment must be reversed and a new trial ordered.

Smith, P. J., and Hardin, J., concurred in the result.

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


author: M A COMBER, J. :

text:
    EDGAR MUNSON and Others, Respondents, v. THE SYRACUSE, GENEVA AND CORNING RAILWAY COMPANY and GEORGE J. MAGEE, Appellants.

      Corporation — the president or one of its directors cannot contract with it — sucha contn'act is void., as being against public policy.

    This action was brought to enforce an agreement between the plaintiffs and the defendant Magee, which had been subsequently assigned by Magee to the defendant The Railway Company under an agreement upon its part to carry its provisions into effect. At the time of the making of the agreement the plaintiff Munson was a director and president and the holder of a portion of the mortgage bonds of a certain railroad company (not this defendant) therein referred to. The agreement, after reciting that the company Was insolvent, provided that Munson (its director,'president and bondholder), should proceed at once to procure the foreclosure of the mortgage, securing the bonds issued by it, and obtain a sale of all the property, rights of. way and interests of the said company; that he should purchase the property on such sale or sales and convey the same to the defendant Magee or to a railroad company which it was then proposed to organize. Magee agreed, in consideration thereof, to deliver to the plaintiffs the first mortgage bonds of the new company to an amount equal to fifty per cent of the principal and interest of the bonds held or represented by the plaintiffs in the insolvent railroad company.

      Held, that the agreement was void, as being against public policy.
    Appeal from a judgment in favor of the plaintiffs, entered upon the report of a referee.
    This action is brought upon an agreement of August 13, 1875, executed by the plaintiffs of the one part and the defendant, George J. Magee, of the other. Magee, on the 31st of August, 1875, assigned in writing the contract to the defendant, the Syracuse, Geneva and Corning Railway Company,, which instrument recited as a fact that the Syracuse, Geneva and Corning Railway Company, by resolution of its board of directors, had assumed said contract, and agreed to carry all its provisions into effect, except a portion thereof relating to freight tonnage. The Sodus Bay, Corning and New York Railroad Company (not the defendant) was organized in 1870 for the building of a railroad to extend from Corning, Steuben county, through Savona, Bradford and Penn Yan, Geneva and Lyons, to Great Sodus Bay, in Wayne county, N. Y., a distance of eiglity-six miles, and in the year 1874 it became insolvent.
    At the time of the agreement of August thirteenth, the plaintiff, Munson, was a director and the president and a holder of the first mortgage bonds of the old railroad. The Syracuse, Geneva and Corning Railway Company, one of the defendants, was organized August 26, 1875, for the purpose of operating a railroad from the village of Geneva, in the county of Ontario, N. Y., through the counties of Yates and Schuyler, to the village of Corning, in the county of Steuben, being about sixty miles. Munson became a director of the new railroad and was its president from its organization down to May 10, 1877.
    This action is brought for the specific performance of the agreement of August 13, 1875, by which the defendant Magee agreed to deliver to the plaintiffs, for the property, rights of way, franchises and interests of the old railroad, bonds of the new railroad thereafter to be organized, amounting to fifty per cent and the unpaid interest on $241,000 of the bonds of the Sodus Bay and Corning Railroad • Company (to which name the original railroad had been changed), the old bonds being either owned or controlled by the plaintiffs. The action is also brought upon the agreement of the defendant, the Railway Corporation, to carry into' effect the prior contract of Magee.

      Spence^ <& Mills, Geo. T. Spencer and B. W. Huntington, for the respondents.
    ' Hiscock, Gifford cfo Dohemg and George F. Comstock, for the appellants.
   M A COMBER, J. :

The referee, by his report, has found very fully and accurately all of the facts appearing upon the trial of the action. There is not, as we understand it, any controversy over any of his conclusions of fact. ~We think that there is not any reasonable ground for a difference of opinion upon His conclusions of law as staled in his report and in his opinion, except the subject mentioned in the fifth subdivision of his opinion, relating to the question whether the contract furnishing the basis of this action was void as being against public policy.

The original agreement, after reciting the fact of the insolvency of the railroad company of which the plaintiff Munson was a director and its president, proceeded to declare that Munson should proceed at once to secure the foreclosure of the mortgage securing the bonds, and obtain a sale of all the property, rights^ of way and interests of the railroad company and of its successor, the Sodus Bay and Coming Railroad Company, and that he would purchase said property on such sale or sales and convey the same to the defendant Magee or to a railroad company which was then proposed to be organized. In turn, Magee agreed to., deliver to the plaintiffs the ■first mortgage bonds of the new railroad company to an amount equaling fifty per cent of the principal and interest of the bonds held or represented by the plaintiffs. Subsequently, upon an agreement dated September 14, 1875, between the plaintiffs of the one part and the defendants of the other, the original contract was renewed and certain details added thereto. This seems to have been attached to the original agreement between the plaintiffs and Magee. In this paper the signature of the new railroad company is made by Edgar Munson, its president.

It will be seen, therefore, that one of the plaintiffs, being president of an insolvent corporation, and before any legal proceedings had been instituted to wind up its affairs and to'dissolve it, entered into an agreement by which he and his associates bind themselves to procure legal proceedings to be instituted and to sell all of its property and franchises, and that a new corporation with a different name and, as the result proved, with a different line of railroad, should succeed the old company, by which arrangement the plaintiffs expected to secure themselves in part for the indebtedness to them of the old and defunct company. There is no claim made that the other stockholders and creditors of the old road consented to the execution of this enterprise, or that their rights were to be properly protected in any way.

Munson’s duty, as director and president of the old company, was to have the railroad sold, if it became necessary to sell it, by a fair and open proceeding upon which competition should not be rendered quite, if not wholly impossible, and by which the greatest amount might be realized for the liquidation of the debts of the corporation and the reimbursement of its stockholders. But as creditor of the old .railroad, and by the means in his hands as a potential director and president of the new railroad which was to be formed upon the wreck of the other, under an agreement securing himself and his associates measurably for their apparently worthless bonds, it washis personal and private interest to purchase at the lowest possible price. "We think, therefore, that the contract which forms the basis of this action was illegal, and cannot be upheld by the courts because it is clearly against public policy. It was, in point of fact, an agreement that the parties should not bid against each other at a judicial sale. (Howell v. Mills, 53 N. Y., 322; Atcheson v. Mallon, 43 id., 147; Bliss v. Matteson, 45 id., 22; Brackett v. Wyman, 48 id., 667.)

Nor are we able to see how the substituted contract of August 31, 1875, and the supplement thereto of September 14, 1875, render the plaintiffs’ case any the less obnoxious to the rules of law here invoked. The same legal objections pervade all of these instruments, for they all grow out of the original agreement of August 13, 1875, which was wholly vicious. And it is hardly necessary to say that the other plaintiffs, even though they had no fiduciary relations to the old and' new companies, which would prevent them from prosecuting any legal claim at arms length, or even combining for the organization of a new railroad, cannot maintain any action upon these instruments. They were bound to know, by the terms of these several contracts and the official character which one of their associates, Munson, bore to both the old and new company, that the whole project was illegal.

In the case of the Aberdeen Railway Company v. Blaikie & Brothers (2 Eq. Rep., 1281), it appeared that the plaintiffs who brought the suit were members of a manufacturing firm, and that one of them also was the manager of the railway corporation and chairman of its board. By resolution of the company, its engineer was authorized to contract for certain iron chairs, needed* by the company; the engineer made the contract with the plaintiffs. It did not appear that the member of the firm who was also the manager of the company intermeddled with the dealing on either side, further than the assumption was made that he was'present at the time of the authorization of the agent to contract. The plaintiffs brought the action to enforce specifically the performance of the contract. They succeeded in the lower courts; the defendants appealed to the House of Lords, where the ruling was unanimously reversed as being contrary to the rules of equity, because it was made between the company of which one of the plaintiffs was a manager and a private firm of which he was a member. (See, also, Thomas v. B. F. K. and Pacific R. R. Co., 2 Fed. Rep., 877; Hoyle v. P. and M. R. R. Co., 54 N. Y., 315; Farley v. The St. Paul, etc., R. R. Co., 14 Fed. Rep., 114.)

The facts found in the case now to be determined render it much more favorable for the invocation of the principle there decided, and here contended for by the learned counsel for the appellants, for it is quite clear that all of the contracting parties well understood that but very little work had been done upon the old railroad ;. that it was largely indebted outside of its mortgage obligations, and that consequently the plaintiffs’ bonds were worthless. By this arrangement, if valid and enforceable, a new debtor would take the-place of the old one, which would be the creature, or the handiwork of the contracting parties, whose obligations by one means and another, mainly, doubtless, by inviting new subscribers to the-stock and fresh buyers of the new bonds, would be sufficient to-reimburse the plaintiffs for one-half of the loss which they had made in the first misadventure.

We have examined the authorities cited by the counsel for the-defendants, and do not find in them anything to vary the conclusions above stated. The case more nearly resembling this than- any others cited to us by them, is that of Marie v. Garrison (83 N. Y., 14). That case, however, falls short of the particular evil and vice which we think exist in this easel That was a case where a number-of stockholders entered into an arrangement for the protection of their interests, which the court held not to be prohibited by law; The fiduciary relation of the parties to the corporation, and their obligations arising out of such relations, did not enter into the case of Marie v. Garrison. Hence, we say that that case fails wholly to possess the particular feature which, in this case, makes it so obnoxious to the well established principle of equity that the courts will not enforce an agreement which, either in substance or by reason of the relations which the contracting parties bear to the subject-matter, is deemed to be against public-policy.

We are constrained, therefore, to disagree with the learned referee upon this question, and consequently the judgment entered upon his report should be reversed.

Present — Smith, P. J., Hardin and Macomber, JJ.

Judgment reversed and new trial ordered before another referee, costs to abide event.


author: Hardin, J.:

text:
    THE CERBAT MINING COMPANY, Appellant, v. THE STATE OF NEW YORK, Respondent.

      Corporation — when it cam/not recover a tarn imposed, because of an error of law made by its officer, in valuing its capital stock —1880, chap. 543 — Appeals from decisions of the State board of audit — what rules are applicable to them.

    In pursuance of section 1 of chapter 543 of 1880, providing for the taxation of certain corporations, a report was filed with the comptroller by the proper officer of the plaintiff, estimating and appraising its capital stock at sixty cents per share. No appeal from or review of this report was had. Subsequently,
    . the company voluntarily paid the amount of the tax, which, under such report, was imposed upon it by the act. Thereafter it applied to the State board of audit to have a portion of the tax so paid refunded to it, upon the ground that, by reason of a mistake of law, the stock had been valued in the report at sixty cents a share, when it should have been valued at one cent per share.

      Held, that the application was properly refused..
    Appeals from the decisions of the State board of audit are to be considered and disposed of, by the application of the ordinary rules of law.
    Appeal from the decision of the State board of audit, dismissing the claim of the Cerbat Mining Company for excessive taxes alleged to have been paid-by-it in 1881jand by two other.companies, whose claims had been assigned to it.

      G. Z. Lvneoln, for the appellant.

      Leslie W. Russell, attorney-general, and J. A. Dennison, deputy attorney-general, for the respondent.
   Hardin, J.:

Under chapter 542 of the Laws of 1880, the assessments complained of were made.

Section 1 of that act declares, “ It shall be the duty of the presi dent or treasurer^ of every association, corporation or joint-stock company liable to be taxed on its capital stock, as provided in section 3 of this act, to make report in writing to the comptroller annually, * * * and to estimate and appraise the capital stock of such company * * * at its actual value in cash, * * * and when the same shall have been so truly estimated and appraised, they shall forthwith forward to the comptroller a certificate thereof, accompanied by a copy.of their said oath.” * * *

Such a report was made for the claimant and its two assignors and filed with the comptroller, and no appeal or review had thereof for the year 1880. It is now insisted that a mistake in the construction of. the law was made by the several officers of the claimant and its assignors, and that by reason of such “ pure mistake of law ” that the valuation was made too high and that the stock was valued at sixty cents per share, when it should have been valued at one cent per share. However, the report being made, the claimant and its assignors Voluntarily paid the amount of the tax which, under such reports, they were severally liable to pay.

■ It is now sought to overhaul the reports and recover back from the State supposed excessive taxes. Each corporation paid- voluntarily to the State and took a receipt therefor without any protest, and without any duress of person or property or fraud. Under ;such circumstances we are of the opinion the claimant cannot question its own appraisal and assessment, and cannot recover back any -part of the taxes paid by it or its assignors. (Drake v. Shurtliff, 24 Hun, 422.) The valuation having been adopted and acted upon by a voluntary payment is conclusive. (Albany and W. S. R. Co. v. Town of Caanan, 16 Barb., 245 ; Bailey v. Buell, 50 N. Y., 662; Lamborn v. County Commissioners., 97 U. S. R., 181; R. R. Co. v. Commissioners, 98 id., 541; Silliman v. Wing, 7 Hill, 159; Peyser v. Mayor, 70 N. Y., 497.)

We ought not to make a new assessment or valuation in order to give the claimants a position which would enable them to escape the action of the comptroller in reviewing any estimate of the value of the stock. The statute has prescribed a system for assessment, and so long as the assessment remained it was valid.

Upon it the claimants voluntarily paid, and it must now stand as a conclusive barrier to the claimants. It was said in Peyser v. Mayor (supra) that to warrant an action to recover back money paid by a coercion of law upon a judgment or tax levied or assessment paid, it must appear that the judgment or proceedings were prima facie regular so as not themselves to furnish evidence of their own invalidity. And it must also appear that the rights and positions of the parties have been changed since the payment was made, as by a reversal for error or a setting aside for irregularity or illegality. We ought not in this case to overhaul the assessment.

We suppose the parties are entitled to the application of ordinary rales of law in the disposition of eases like this coming to, us from the State board of audit. (Chap. 444 of Laws of 1876, and chap. 211 of Laws of 1881.)

We so held in Danolds v. The State (26 Hun, 241), MS. opinion, December, 1881, by Mullin, P. J., affirmed by Court of Appeals.

The judgment and award should be affirmed, with costs.

Smith, P. J., and Barker, J., concurred.

Award and judgment affirmed, with costs.


text:
    In the Matter of LEANDER HINE, Appellant, v. THE HOMESTEAD FIRE INSURANCE COMPANY and his Receiver, SMITH T. WOOLWORTH, Respondents.

      Policy of fire insurance — when avoided by the death of the insurer — right of rt receive/!' to consent to a change of interest — one to whom the loss is made payable has no greater rights than the insu/red.

    May 30, 1877, a policy of insurance was issued to one John Brouillet, insuring his dwelling-house and furniture against loss by fire for the term of three years. Brouillet died March 2, 1878, intestate, leaving a wife and children; the property was burned on the seventeenth of the following April. By the policy,the company promised and agreed “ to make good unto the said insured, 7iis hews, executors, administrators and, assigns, all such loss or damage,” etc., as should happen within the time specified. It also provided that, “ if the said property shall be sold or conveyed, or if the interest of the insured therein be changed in any manner, whether by act of the insured or by operation of law, * * * then and in every such case, and in either of said events, this policy shall be null and void until the written consent of the company at the home office is obtained. In case such consent is refused, the company will repay to the insured the unearned premium thereon.” No written consent of the company to the change in the interest of the insured was ever obtained.
    Upon an application to compel the defendant, who had been appointed a receiver, of the company January 6, 1878, to pay the loss :

      Held, that the policy was avoided by the death of. the insured and the failure to obtain the company’s consent to the change of interest resulting therefrom. That the appointment of the receiver did not excuse the failure to comply with the terms of the policy, as the receiver would have been authorized to give the required consent.
    The policy contained a clause making the “ loss, if any, first payable to Leander Hine, as his mortgage interest may appear.”

      jHeld, that this merely made the mortgagee the appointee of the insured, to receive what he himself was entitled to, and that whatever avoided the policy as to the insured avoided it as to the mortgagee.
    Appeal by Leander Hine from an order of the Onondaga Special Term, denying an application for an order directing the receiver to pay the amount of a loss arising under a policy of insurance issued May 30, 1877. The receiver was appointed January 6, 1878.
    March 2, 1878, the insured died intestate, leaving a widow and seven children. On April 17, 1878, the property was destroyed by fire. The policy contained among others the following provision: “ And the said company do hereby promise and agree to make good unto the said insured, his heirs, executors, administrators and assigns, all such loss or damage, not exceeding in amount the sum insured, as shall happen by lire or lightning to the property above specified,” from May 30, 1877, to May 30, 1880. “ If the interest of the insured therein be changed in any manner, whether by act of the insured or by operation of law * * * then, and in every such case, and in either of said events, this policy shall be null and void until the written consent of the company at the home office is obtained. In ease such consent is refused the company will repay to the insured the unearned premium thereon.”
    “ The following provision was indorsed upon the face of the policy : “Loss, if any, first payable to LeanderHine, as his mortgage interest may appear.”

      John 0. Hunt, for the appellant.

      John Lansing, for the receiver, respondents.
   Hardin, J.:

In the policy of insurance were the following words, viz.: “ If the interest of the insured therein be changed in any manner, whether by act of the insured or by operation of law * * * then, and in every such case, and in either of said events, this policy shall be null and void until the written consent of the company at the home office is obtained.”

And when John Brouilltt died, March 2, 1878, there was a change of the interest of the assured, which under the policy caused an avoidance of it, subject only to the right of. the parties interested in the property to apply for and receive the “ written consent of the company ” or its receiver. (Lappin v. Charter Oak-Fire Ins. Co., 58 Barb. 325; Sherwood v. The Agricultural Ins. Co., 73 N. Y., 448; S. C., 10 Hun, 593.)

It is urged that the company at the time of death of the insured “ could not consent ” to the change of interest, and that as the company was in the hands of the receiver it could not consent. We cannot agree with the learned counsel for the appellant, as we are of the opinion that had the receiver been applied to he would have possessed the power and had the right to consent to a continuation of the policy.

It would have been clearly his duty to give such consent or else to return the unearned premiums which the company or the receiver held. Nor can we disregard the language of the policy we have quoted, because in the early part of the policy are found the words, viz.: “ Said company do hereby promise and agree to make good unto the said assured, his heirs, executors, administrators and assigns, all such loss,’-’ etc.

Full effect may be given to all the language of the policy. In case the consent had been obtained after the death of the insured, then the policy and its promise would have been good to the heirs. If the loss had happened in the lifetime of the insured, and before its payment his property had passed to “ heirs, executors, or to administrators or assigns,” then the language would be called into requisition to effectuate the intent of the parties.

We cannot give such signification to the word “heirs” as the contention of the appellant demands, in order to nullify the stipulation we have quoted from the policy in respect to any change of interest. We do not find such intent of the parties from a careful consideration of all the language of the policy, nor can we hold the policy valid to the extent of the beneficial interest ■ of the mortgagee. He was merely the appointee of the insured, and it was intended that he should receive, instead of the insured, so much of any loss that should happen as would satisfy his mortgage.

Whatever avoided the policy as to the insured avoided it as to the appointee or mortgagee. (Grosvenor v. The Atlantic Ins. Co., 17 N. Y., 391; Buffalo Steam Engine Works v. Sun Mutual Ins. Co., 17 id., 401; Richmond v. The Niagara Fire Ins. Co., 15 Hun, 248; Van Alstyne v. Ætna Ins. Co., 14 id., 360; Bidwell v. Northwestern Ins. Co., 19 N. Y., 179; Perry v. Lorillard Fire Ins. Co., 61 id., 214; Hastings v. Westchester Fire Ins. Co., 73 id., 149.)

Question is new, and therefore we may withold costs. Order was right and must be affirmed.

Smith, P. J., concurred;

Present — Smith, P. J., and Hardin, J.

Order affirmed, without costs to either party.


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    ANGUS McDONALD, Receiver of THE MUTUAL BENEFIT ASSOCIATES, Plaintiff, v. WILLIAM H. ROSS-LEWIN, Defendant.

      Formation of mutual benefit associations under chap. 267 of 1875 — liabilities of the members thereof, for assessments — termination of membership — liability for unassessed losses — right of a receiver to assess and, recover them — the defendant cannot question the title of the receiver to the assets of the company.

    In April, 1877, “The Mutual Benefit Associates” was incorporated, under chapter 267 of 1875, providing for the organization of societies or clubs for certain lawful purposes. In March, 1881, the defendant filed an application to be made an associate, agreeing to accept and pay for a certificate “subject to all the conditions of the by laws and regulations of the association.” Section 3 of article 8 of the by-laws of the association provided that “ upon the death of any member of the association it shall be the duty of the secretary to notify the members of the same, and thereupon each member shall within thirty days after such notification pay to the secretary the amount required by the rules of the association.”

      Held, that the issuance and acceptance of the certificate furnished a sufficient consideration for the defendant’s agreement to pay any assessment made during the time he should continue a member of the association, and that, upon his failure to pay, an action would lie against him therefor.
    That he should be charged with interest on the amount of the assessments from the. time when, by the terms of the by-laws, he was required to pay them.
    Section 3 of the act of 1875, provides that “the membership of any person in said society or corporation shall be determined by his death or by his voluntary withdrawal therefrom, or by expulsion therefrom, and the manner of such withdrawal or expulsion of members shall be determined and provided by the by-laws of said corporation.” Section 1 of article 10 of the by-laws of the association provided that if any member should neglect to pay any dues or assessments required by the by-laws, “that then and in such case such membership shall cease and determine at once without notice and all claims be forfeited to the association.’’

      Held, that the neglect to pay an assessment for thirty days after notice thereof, ipso facto, determined the membership of the delinquent.
    That he was liable for the amount of all. assessments previously made, and also for all losses happening prior to the time when he ceased to be a member, though no assessment therefor had then been made.
    That a receiver of the company, appointed in an action brought by the people to procure its dissolution, might assess the members for unassessd losses and bring separate actions against each member to recover the assessments so made against him.

      That it was the duty of the receiver to distribute the amounts so received equitably among the several creditors of the company.
    That as the plaintiff had been duly appointed a receiver, his title to the assets of the company, including the liability of the defendant to make good the losses by the payment of proper assessments, could not be questioned by the defendant.
    Controversy submitted under sections 1279, 1280 and 1281 of Code of Civil Procedure. In an action brought by the attorney-general in the name of The People against “ The Mutual Benefit Associates,” the plaintiff was appointed by the Supreme Court the receiver of the property and effects of such corporation, and a judgment “dissolving said corporation, and forfeiting its rights and privileges and franchise,” was- granted, and the plaintiff duly qualified as such receiver and is now discharging the duties of such receivership.
    This action was brought to recover -amounts claimed to be due from the defendant for assessments laid and losses occurring while he was a member of the association.

      W. W. McDonald and A. McDonald, for the plaintiff.

      John 3. Morgan, for the defendant.
   Hardin, J.:

May 12, 1875, the legislature passed an act entitled “An act for the incorporation of societies or clubs for certain lawful purposes,” chapter 267 of Laws of 1875. In April, 1877, the corporation of which the plaintiff is receiver was organized and commenced its operations and' continued the same, having its principal place of business in the city of Rochester, until the suit brought by the attorney-general.

On the 29th of March, 1881, the defendant made and filed his application to the board of trustees of the corporation, in which he asked for a benefit of $2,000 in class A, and for k benefit of $2,000 in class B, and in the application for a “ certificate ” stated, viz.: “And in case a certificate is granted on the statements and good faith of the above declarations, I hereby agree to accept and pay for the same, subject to all the conditions of the by-laws and regulations of this association.”

The application was “ by reason of the representations of the soliciting agent of said association that the liability of said appellant to pay would cease at his option, and that when he failed to pay an assessment his liability and membership ceased.” Defendant’s application was accepted, and a certificate in class A was issued and delivered to him, and the certificate declared a benefit of $2,000 in the following terms, viz.: “ This membership entitles Mercy T. Ross-Lewin, his wife, if she survive him, otherwise his heirs or assigns, upon the death of said W. H. Ross-Lewin, to two thousand dollars, provided, however, that the aforesaid member continues so long to comply with the requirements of the charter and by-laws of said society, and the stipulations contained in application for membership. * * * In case the stipulations contained in said application for membership are not complied with, then and in every such case the said Mutual Benefit Associates * * * shall not be liable to the payment of the amount promised in this certifi-' cate, which certificate shall cease and determine, and the payments made thereon shall be forfeited to the said Mutual Benefit Associates.”

The ^certificate in class B was like the one in class A, mutatis mutandis.

June 28, 1881, defendant, pursuant to a notice served, paid an assessment in each class, and September 8, 1881, he also paid an assessment in each class. 1

On the 28th of September, 1881, the “Associates” duly made an assessment and duly served a notice thereof on the defendant, and on the same day likewise made an assessment in class B, and duly served him with notice thereof, and on the-8th day of November, 1881, another assessment was duly made in each class and notice given to the defendant. Defendant declined and refused to pay and did not pay any of the four last stated assessments, nor did he tender pay or offer to pay the same or tender his resignation as a member of said Associates, nor has he in any way ceased to be a member of said Associates unless by the facts hereinbefore stated.

1. The measure of the defendant’s liabilities is to be found in his agreement to conform to the conditions of the by-laws and regulations of the association. By that covenant he consented to be bound according to the spirit and tenor of the by-laws. One of the by-laws provided a mode of realizing money in case of the death of a member, to discharge the obligation created by the certificate issued tollina. In section 3 of article 8 of the by-laws, the mode is stated and defined. It was as follows: “ Section 3. Upon the death of any member of the association it shall be the duty of the secretary to notify the members of the same, and thereupon each member shall, within thirty days after such notification, pay to the secretary the amount required by the rules of the association.” This condition of the by-laws was expressly agreed to by the defendant, as we have seen by the quotations we have made from the application made by him for a “ certificate.” The issuance of and acceptance of the certificate furnish foundation sufficient to support the defendant’s agreement to pay any assessments made during the time he should continue a member of the association. The certificate delivered to him recited that he had paid a “ membership fee and bec.ome a member of said Mutual Benefit Associates.” In his application he agreed “ to accept and pay for the same, subject to all the conditions of the by-laws and regulations of this association.” The mutual obligations in the certificate and in his agreement furnished a consideration sufficient to support his agreement. (Deraismes v. The Merchants' M. Ins. Co., 1 Comst., 371.) The third section of article 3 of the by-laws declares the board of trustees shall have power “ to fix the rate or amount of fees, dues or assessments.” Section 3 of article 8 provides that “ upon the death of any member of this association it shall be the duty of the secretary to notify the members of the same, and thereupon each member shall, within thirty days after such notification, pay to the secretary the amount required by the miles of the association.” Article 3 declares that the plan of the society is “ to assess pro rata on a schedule of rates fixed by the board of trustees for the payment of its death benefits.” When an assessment was made and notice thereof given in the mode prescribed, then and from that time it became the duty of a member to pay in conformity to the by.-laws and regulations of the association. It follows, therefore, that the defendant was obligated to pay the assessments made under the by-laws and regulations, and of which he was given notice, September 28, 1881, in classes A and B. Those assessments were not paid by the defendant. They were respectively six dollars and ninety-eight cents and eight dollars and forty-six cents.

He ought to have paid October 28,1881, and therefore he should pay interest on those sums from that time. (Hyatt, Receiver, v. Wait, 37 Barb., 29.) We come next to the question made as to the right of the defendant to withdraw from the association, and whether his omission for thirty days to pay, after notice, caused a determination of his membership of the association. In section 3 of the act of 1875 a provision is inserted relating to a determination of membership. The section reads, viz.:

“ Sec. 3. The membership of any person in said society or corporation shall be determined by his death or by his voluntary withdrawal therefrom, or by expulsion therefrom,cmd the manner of such withdrawal or expulsion of members shall be determined and provided by the by-laws of.- said corporation, and upon such death, withdrawal or expulsion, all and every right, title and interest of the person whose membership is so determined in or to or by reason of the said corporation by reason of his former membership therein, or in or to its property or effects, shall at once cease and be forever at an end.”

The section is the warrant for the by-laws as to withdrawal from or cessation of membership. We have already seen that section 3 of article 8 of the by-laws makes it a duty to within thirty days next after noticd to the association to pay any assessment or “ amount required by the rules of the association.” Following that, in article 10 of by-laws, in section 1, is a “provision relating to ‘perfecting membership,’ and it in effect declares that if any member ‘ shall neglect ’ to pay any dues or assessments, as required by ‘ the bylaws,’ that then and in such case such membership shall cease and determine at once, without notice, and all claims be forfeited to the association.”

That the neglect to pay for thirty days after notice, ipso factoy works a cessation of membership, and was so understood by the persons adopting the by-laws, is quite apparent, if we consider the language found in section 2 of article 10. It is there declared, viz.:

“ Sec. 2. Provided, however, that board of trustees shall have power to reinstate such delinquent member upon written application, * * * accompanied by payment of all dues and assessments which have accrued to the time of reinstatement.”

Considering the section of this statute we have quoted and the ■by-laws, together with the language found in the certificate and the application, we are of the opinion that the neglect for thirty days -after notice of an assessment causes a determination of membership •or- a withdrawal, and that the effect of such neglect for thirty days is equivalent to a formal withdrawal or resignation at the expiration of the thirty days next after notice to pay an assessment. From the language of the statute, it is evident that such “ withdrawal,” or “ whose membership is so determined, has the effect of forfeiting all rights in the association or to its property or effects,” and that it was intended that his membership should “ at once cease and be forever at an end.” The by-laws are consistent with and their language fairly carried out the provisions of the statute. It was competent for the parties t'o-stipulate that “such neglect ” should cause a cessation of the membership, and they have acted upon that construction of the statute, and it meets with our approval. While forfeitures are not favored in the law and are not declared to result, except upon clear acts intended to work them, we see no reason why the parties to the contract before us might not stipulate that the neglect to pay should produce a determination of membership.

The case of Neely v. Onondaga C. M. Ins. Co. (7 Hill, 49) cited, has no application to the question before us. There the statute provided for a surrender of a policy and payment of the assessed’s portion of the losses, and thereupon he was entitled to his deposit note, and until such surrender he was not entitled to his note, and hence his note remained liable to be assessed.

Here the language both of the statute and the by-laws under it is explicit and unconditional, and evidently intended to work a withdrawal at the end of thirty days’ neglect to pay assessments after notice thereof. (See, also, Hyatt v. Waite, 37 Barb., 29.)

We are also of the opinion that at the expiration of thirty days from the notice of the assessments, to wit, on the 28th day of October, 1881, “the withdrawal” cessation of membership was complete, and that the defendant after that date was not liable to be assessed to make up losses happening after that date. Until his withdrawal was complete — until by the terms of his contract he “ ceased ” to be a member — he remained liable for losses which happened.

There' should be judgment in this case declaring such indebtedness as was represented by the assessments, of which notice was given September 28, 1881, and interest thereon, and for losses which happened during the time he was a member, and up to the 28th of October, 1881.

The plaintiff has been appointed, a receiver, and his title to the assets, including the liability of the defendant to make good the losses so happening by payment of proper assessments, cannot be questioned by the defendant. (Story v. Furman, 25 N. Y., 214; Calkins v. Atkinson, 2 Lansing, 12.) The latter is an authority for saying a separate action must be brought against each obligee or stockholder, and that it is the duty of the receiver, after a recovery,, to distribute equitably the fund among the several creditors.

"We entertain no doubt of the power of the receiver to make an assessment upon parties hable for unpaid and. unassessed losses. As Allen, J., said in Thomas v. Whallon (31 Barb., 178), the. assessment is the act of the receiver, and in and with him is the authority to act in the premises, and his authority depends upon the existence of the state of facts rendering the assessment necessary.”

Assessments made by receivers against delinquent members or stockholders of corporations of which they have been appointed receivers have been upheld in many cases. (Thomas v. Whallon, supra; Story v. Furman, supra; Sands v. Shoemaker, 2 Keyes, 268; Sands v. Sanders, 26 N. Y., 244.)

Judgment must be ordered for the plaintiff in accordance with the views expressed in this opinion.

- As the submission stipulated that ño costs shall be awarded to the plaintiff against the defendant, the judgment will provide that no costs be recovered.

Smith, P. J., and Macombee, J., concurred.

Judgment for the plaintiff in accordance with the opinion, to be settled by Mr. Justice Habdin upon notice of five days.


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    ELIZA C. HOLLENBECK and Others, Respondents, v. BARNARD DONELL and Others, Appellants.

      Iteceiver — the court may appoint one to receive renta and profits in a foreclosure action— Code of Civil Procedure, sea. 713.
    Where an action has been commenced to foreclose a mortgage the court has power, under section 713 of the Code of Civil Procedure, to appoint a receiver of the rents and profits of the mortgaged premises, when it appears that the premises are an inadequate security for the amount due and are deteriorating in value and that the mortgagor is insolvent.
    The mortgagee has an “ interest in ” the rents and profits of the mortgaged premises, within the meaning of that term as used in the first subdivision of the said section.
    Appeal from an order of the Onondaga Special Term appointing a receiver of the rents and profits of the mortgaged premises described in the complaint in this action, excepting two acres thereof conveyed to Sylvanus Snell.

      Franklin Pieroe, for the appellants.

      Laming <& Lymam, for the respondents.
   Hardin, J.:

Appellants’ counsel contends that “ the Code of Civil Procedure contains no provision which authorizes the appointment of a receiver in such a case, because of the inadequacy of the security and insolvency of the mortgagor.”

We are of the opinion that section 713 of the Code of Civil Procedure confers power upon the court to appoint a receiver in such a case. It expressly declares a receiver “ may be appointed by the court * * * before final judgment on the application of a party who establishes an apparent right to or interest in the property when it is in possession of ■ an adverse party and there is danger that it will be * * * lost, materially injured or destroyed.”

In the latter portion of the section is found, viz., “the word * property’ includes the rents, profits or other income and the increase of real or personal property.” It appears that the mortgaged premises are in the possession of the defendant Donell, the mortgagor. It appears that the plain tiffs have an apparent right to have the property, including the rents and profits,'to the extent needed to pay their mortgage. It appears that they have an “ interest in the property,” including the rents and profits, and that such rents and profits are in the possession of the defendant, and that they may be lost or materially injured or destroyed unless a receiver takes possession thereof pending the proceedings to foreclose the mortgage. The section applies to such a case. That it should so apply is made clear by the language, and the note of Mr. Throop sheds light upon the intent of the codifiers, and that light leads in the direction we have already taken in the interpretation of the statute. In this State the mortgagor retains the title to the land, to the rents and profits, until the same is cut off by a foreclosure. (Hubbell v. Moulson, 53 N. Y., 228.) However, prior to the actual sale in foreclosure by virtue of the mortgage the mortgagee has an interest “ in the land and to the rents, issues and profits thereof so far as is necessary to secure and satisfy the mortgage debt, and the use of the- words ‘ interest in ’ may be apt to express the right of the mortgagee in the pi-emises and the rents and profits; and we are told by Mr. Throop’s note that the words ‘ or interest5 have been inserted in subdivision 1, lest the words ‘ an apparent right ’ might be construed to mean an exclusive right and exclude mortgage and partnership cases,” etc.

It had been held in many cases before the section was adopted that the legal estate in the land and in the rents was in the mortgagor, and that the mortgagee had only an interest in, or an equitable title to, the lands and profits to the extent needed to satisfy the mortgage debt, (Packer v. The R. and S. R. R. Co. 17 N. Y., 295 ; Kortright v. Cady, 21 id., 366; Hubbell v. Moulson, supra; Syracuse City Bank v. Tallman, 31 Barb., 201; Sherman v. Willett, 42 N. Y., 146; Trimm v. Marsh, 54 id., 599.) The legislature in the light of these cases, used the language we have quoted, and thereby conferred a power upon the court to appoint a receiver in cases where the property was an inadequate security and the mortgagor was insolvent, and the law has been and remains such that the court has ample power to appoint a receiver pendente lite. (Nealis v. Bussing, 10 Weekly Dig., 289; Meigs v. Davis, 8 id., 381; Smith v. Tiffany, 13 Hun, 671; Rider v. Bagley, 84 N. Y., 461.) And when such a receiver is appointed, lie acquires a specific lien upon the rents and profits which may be enforced through- the instrumentality of the receivership by the courts. (Ranney v. Peyser, 83 N. Y., 1, 7.) Upon the proofs before the' Special Term, in the exercise of -its discretion it was held that a proper case had been made for the appointment of a receiver. While we may review the discretion there exercised, we find upon looking into the proofs that there was evidence that the debt was inadequately secured, and that the mortgagor had defaulted in the payment of interest, had received money paid for buildings burned from the mortgaged premises and failed to apply it upon the mortgage debt, and that the property was deteriorating.

Notwithstanding some of these facts were disputed, we are satisfied with the direction in which the discretion of the Special Term went, and believe it to be our duty to uphold the order appointing a receiver. (Smith v. Tiffany, supra)

Smith, P. J., and Haight, J., concurred.

Order affirmed, with ten dollars costs and disbursements.