author: AT)AMS, J.

text:
    Lawrence Seeley v. New York Central and Hudson River Railroad Co.
    (Supreme Court, Appellate Division, Fourth Department,
    July 30, 1896.)
    1. Evidence—Opinion.
    The question whether the witness could have heard from a certain place the bell on defendant’s locomotive, if it had been, rung on approaching a certain crossing, or the whistle, if it had been blown, does not call for a mere expression of opinion.
    2- Death by wrongful act—Excessive damages."
    A verdict for §6,000 for the death of plaintiff’s daughter is excessive, where the only evidence as to the. amount of damages is that plaintiff was about sixty-one years old, and his daughter nineteen years old; that plaintiff was a machinist, and his daughter was an industrious girl, earning seven dollars a- week, which she gave her mother to’be used in supporting the family.
    Appeal from trial term, Monroe county.
    Action by Lawrence Seeley, as administrator of Nellie Seeley, deceased, against tire New York Central & Hudson River Railroad Company, to recover damages for the death of plaintiff’s intestate. From an order denying a motion for a new trial, made on the minutes of the court, after a verdict in favor of plaintiff for §6,000, defendant appeals.
    This action was brought by the plaintiff to recover damages sustained in consequence of the death of his intestate, and a daughter, Nellie Seeley, who was struck and almost instantly killed by a locomotive upon the defendant’s road, about 9 o’clock in the evening of July 10, 1895. The intestate was a bright, healthy girl, 19 years of age, who was employed at the Hess Tobacco Factory, in Rochester, and resided with her father, upon Dengler street, in that city, upon the night in question, a young acquaintance by the name of Mamie Reichenberger, called at the house of the intestate, and shortly after 9 o’clock, they started together for the house of Miss Reichenberger. They passed along Dengler street until they came to Saxton street, which is a highAvay, running north and south, Avithin the corporate limits of the city of Rochester, and Avhich is crossed at right angles by the defendant’s four tracks, a short distance south of AArhich it is also crossed by the Iavo tracks of the Buffalo, Rochester & Pittsburg Railroad. Saxton street is 61 feet in Avidth, and the east sideAvalk is 4 feet 8 inches in Avidth. From the north rail of the Buffalo, Rochester & Pittsburg Railroad to the southerly track of the defendant (a distance of about 25 feet), there is practially an unobstructed ArieAv to the Avest as far as the eye can see, and likeAAu.se to the east for a distance of about 1,400 feet, although the vieAv in the latter direction is interrupted for a short space by a flagman’s shanty. The girls Avere Avalking north on the east sidewalk of Saxton street, Avith there arms locked, and,, as they approached the defendant’s tracks, a passenger train passed, going Avest upon track No. 2. They stopped Avhen within about 5 feet of track No. 1, and Avaited until this train had crossed the higlrway, and then, as testified to by Miss Reichenberger, they both looked to the Avest, and then to the east, and seeing and hearing no train approaching, they attempted to cross the track, Avhen they Avere struck by a passenger train going east upon track No. 1, with the result that Miss Reichenberger Avas slightly injured, and the plaintiff’s intestate Avas so seriously hurt that she died soon thereafter. The eAÚden'ce tended to shoAV that the train going east Avas running at a high rate of speed; that no Avhistle Avas bloAAm until just before the accident occurred; and there Avas the usual conflict of e\údence Avith regard to the ringing of the bell. It also appeared that the night Avas quite dark, but that the headlight of the locomotive was lighted, and that there Avere Tights inside of the cars attached to the train going west. At the close of the plaintiff’s case, a motion was made by the defendant for a nonsuit, upon the usual grounds, which was denied; and the case was finally submitted to the jury, which rendered a verdict in favor of the plaintiff for the sum of $6,000.
    Edward Harris, for appellant.
    P. Chamberlain, for respondent.
   AT)AMS, J.

That there was sufficient evidence of defendant’s negligence in its management of the train which caused the death of the plaintiff’s intestate to raise a question of fact for the jury is not seriously controverted, but it is nevertheless insisted that the plaintiff should fail in his action, for the reason that he omitted to show that his intestate was free from contributory negligence; and certainly the case, upon this branch of it, is lay no means free from embarrassment. In view of the undisputed fact that a person standing in Saxton street, at a 117/ point south of the defendant’s south track, and within twenty feet thereof, would have an unobstructed view of the track to the west as far as the eye could reach, it is scarcely conceivable 'that the intestate could have come into collision with the train which struck, her had she been at all mindful of the obligation which rested upon her of exercising some reasonable degree of care for her oAvn protection; and yet Ave have the evidence of her companion, Miss Reichenberger AArho testifies in the most unqualified manner that, when they reached a point about five feet south of track No. 1, they stopped; that she then looked to the Avest, and then to the east; that Nellie looked the same Avay she did; and that, not seeing or hearing the approaching train, they started to cross the track, and Avere struck. As Avas said by the learned trial justice, in his admirable charge to the jury, this evidence makes it necessary that one of íavo conclusions should be adopted: Either this girl’s statement Avas untrue, or else the train was approaching at such a rate of speed and under such conditions as to render its approach; to some extent at least, unnoticeable. The alternative Avhich Avas thus pre seated to the jury was by them resoRed in favor of the latter theory; and although Ave may think, from a reading of the case, that their conclusion is not in harmony with the one Ave should have reached had Ave been in their place, and although we may regard the question of contributory negligence presented by the facts of this case as one approaching very close to the border line which separates a question of fact from one of laAV, yet Ave are not prepared to say that error was committed in the treatment which it received the hands of the trial court.

It is to be borne in mind, as we consider this branch of the case, that the night was, as all, or nearly all, the witnesses testify, an extremely dark one; that the train was approaching at a high rate of speed; that, as the plaintiff’s witnesses testify, no bell was rung or whistle blown; that there were a number of switch and semaphore lights burning west of Sax-ton street; and that another passenger train was just passing west upon track No. 2, with the light of which shining through the car windows it was not impossible to have confused that which came from the headlight of the locomotive drawing the eastern train. But, whatever explanation may be adopted as regards the failure of the plaintiff’s intesate to avail herself of the opportunity which was afforded by the condition surrounding her to observe the approach of the train wliich struck her, the fact remains, uncontradicted by any oral proof, that the girls did look in both directions before stepping upon the track; and the rule seems now to be pretty well settled in this state, that, where this is-done, a question of fact is generally created, and that a recovery is not necessarily impossible because it can be shown that an approaching train might and ought to have been discovered by one who was upon the .lookout for it. Beckwith v. Railroad Co., 54 Hun, 446, 28 St. Rep. 130, 292, affirmed 125 N. Y. 759; 36 St. Rep. 1010; Miller v. Railroad Co., 82 Hun, 164, 63 St. Rep. 766, affirmed 146 N. Y. 367, 67 St. Rep. 899; Parsons v. Railroad Co. 113 N. Y. 364, 22 St. Rep. 697; Greany v. Railroad Co., 101 N. Y. 119, 5 N. E. 425.

In the case last cited, the learned judge who wrote the opinion uses this langxiage:

“The plaintiff is not bound to see. He is bound to make all reasonable efforts to see that a careful, prudent man would in like circumstances. He is not to provide against any certain result. He is to make an effort for a result that •will give safety,-such effort as caution and prudence will 1 know of no exception to the doctrine that where there is any evidence, direct or inferential, of care or caution on the part of the person injured, the question Avhether it is in compliance with that rule is for the jury ”

The only exception to the admission of evidence to Avhieh our attention has been directed resulted from the ruling of the trial court to a question put to the Avitness Ross, Avho lived in the vicinity of the crossing, and Avho, after stating his opportunity for hearing, testified that he heard no bell rung upon the locomotive which struck the intestate. Upon his redirect examination, he Avas asked by the court this question: “From Avhat distance Avest of your house have yon heard the boll ring or the whistle blow?” The question was objected to. The objection was overruled, and the witness answered: “Some trains, you would hear them from York| street; and then, again, you would not hear them until they l got right close to you,” We have recently had occasion to¡ hold, in a case similar to this, that a witness might testify; that he could have heard a bell ring from a certain dis-i tance; and we think the evidence sought to be obtained; from this witness Avas of the same character as that which we held proper in the case referred to. Stever v. Railroad Co. (not yet officially reported) 39 N. Y. Supp. 944. But, hoAvever that may be, no possible harm could have resulted from the answer Avhich the witness gave to the question objected to.

We come, therefore, to the consideration of the only remaining question in the case, which arises upon the defendant’s contention that the damages awarded to the plaintiff are excessive in amount. It is both a delicate and a difficult matter to determine the full measure of the plaintiff’s pecuniary loss, resulting from his daughter’s death, by any standard which is available for that purpose; and yet Ave knoAv that his recovery in this action must be limited by purely pecuniary considerations, and that it is the duty of both courts and juries to keep this fact in mind when attempting to solve a problem surrounded by such obvious difficulties. This duty is rendered even more imperative now that all statutory limitation has been removed by the recent change in our organic law, and therefore it is especially important that courts sitting in revieAV should carefully but rigidly, scan the verdicts of juries, to see that their conclusions in this particular are founded upon justice and reason, and not upon prejudice and sentiment.

The facts in this case, so far as they bear upon the question of damages, are that the plaintiff Avas about Cl years of age, and his daughter 19, at the same time of the accident. The former was following the occupation of a machinist, and the latter Avas a bright, vigorous, and industrious girl, whoAvas earning seven dollars a week, which she bestowed upon her mother, to be used by her in supporting the family. No-evidence is furnished of the age or physical condition of the mother, or that there were any other children than the decedent; nor does it appear that the decedent ever performed any services at home which were of any value from a domestic point of view. So far as we are advised by the record, she simply earned a certain amount of money, of which she, in common Avith her father and mother, had the benefit. The important question, therefore, Avhich the jury was called upon to determine, was, what reasonable expectation of pecuniary benefit to be derived from the life of the deceased did the facts above recited justify ? Their conclusion, as represented by their verdict, was that the actual money value of the deceased to the plaintiff was $6,000; and as has been seen the only basis which could jiroperly have justified this conclusion was that which the evidence furnished of her earning capacity. We have endeavored, by various calculations, which have been made in an atmosphere unaffected by appeals to passion, prejudice, or sympathy to reconcile the result reached by the jury with our sense <of justice; but, when we come to consider the expectancy of life which this plaintiff had a right to indulge in, we find that, even assuming that he would have received the entire amount of his daughter’s earnings during that period of time, the aggregate would fall short of the amount awarded by the verdict; and when we also consider that this source of income was quite likely to have been interrupted by loss of employment, or the marriage, death, or attainment of her mjority, by the daughter, we are unable to resist the conclusion that the jury were, unconsciously no doubt, swayed by some other considerations than those which ought to have governed them and we therefore feel constrained to revise their verdict. This determination is reached with some hesitation, but there can be no question as to either the power or the duty of the court to reduce a verdict which it deems clearly excessive, and the conceded facts of this ease seem to leave no other alternative. Coppins v. Railroad Co., 48 Hun, 292, affirmed 122 N. Y. 557, 34 St. Rep. 214; Bailey v. Railroad Co., 80 Hun, 4, 61 St. Rep. 490. We think that $4,000 would be a most liberal estimate for the pecuniary damages sustained by the plaintiff in consequence of the death of his intestate, and our conclusion is that the order appealed from should be reversed, unless the plaintiff stipulates to reduce the recovery to that amount, but that, in the event of his so stipulating, the order appealed from should be affirmed, without costs of this appeal to either party.

Judgment and order reversed, on the ground that the damages are excessive, and a new trial ordered upon payment of costs by the defendant, unless the plaintiff shall stipulate to reduce the verdict for damages to $4,000, in whch event the order and judgment, as so modified, are affirmed, without costs of this appeal to either party.

All concur.


source: Caselaw Access Project

author: ADAMS, J.

license: Public Domain

text:
    Shelby Steel-Tube Co. v. Burgess Gun Co.
    (Supreme Court, Appellate Division, Fourth Department,
    July 30, 1896.)
    1. Conflict of laws—Place where contract was made.
    A contract for the sale of goods shipped to the buyer in New York from another state pursuant to an order sent by mail is complete on acceptance of the order, and is therefore made in such other state.
    3. Foreign corporations—Actions between. "
    A foreign corporation doing business in New York purchased goods from another foreign corporation doing business at its domicile, where the contract of sale was made. Held, that on default of payment, the cause of action for the price of the goods arose at the place where the buyer was doing business, and therefore the seller could sue there, under Code Civil Procedure, section 1780, subdivision 3, providing that one foreign corporation may sue another in New York, “where the cause of action arose within the state.
    Appeal from special term, Erie county.

      1 Action by the Shelby Steel Tube Company against the Burgess Gun Company. From an order denying a motion to vacate an attachment, Frank B. Lefevre, a judgment creditor of defendant, appeals.
    The plaintiff is a foreign corporation organized under,the laws of the state of Ohio, and the defendant is likewise a foreign corporation organized under the laws of the state of West Virginia, having its manufactory and place of business at the city of Buffalo, in this state. On the 27th of July, 1895, the defendant sent to the plaintiff, at Shelby, in the state of Ohio, a written order for the goods, wares, and merchandise mentioned in the complaint. This order ivas sent by letter, which was mailed at Buffalo. It was subsequently received by the plaintiff, and accepted, and the goods ordered were thereafter sent to the defendant, and delivered to it at Buffalo, in the ordinary course of business, and upon a credit of 60 days. After the expiration of the term of credit, the plaintiff commenced an action against the defendant, upon which judgment was entered upon the 10th day of January, 1896, in the clerk’s office of Erie county, for $273.70. The judgment thereafter was vacated and set aside by an order of the supreme court. The plaintiff also obtained a warrant.of attachment from the county judge of Erie county, by" virtue of which it caused all the personal property of the defendant to be attached. Upon the 20th day of January, 1896, Frank B. Lefevre obtained a judgment against the defendant in the supreme court, and caused the same to be entered in the Erie county clerk’s office for the sum of $141.930.70 damages and costs. The plaintiff had no office or place of business within this state, and has failed to obtain the certificate and file the proof required by-sections 15 and 16 of the general corporation law. Upon the 3d of January, 1896, the above mentioned judgment creditor moved at a special term of the supreme court in the city of' Buffalo to vacate the attachment obtained by the plaintiff,, which motion ivas denied, and from the order denying the same this appeal was taken. After the decision of the above mentioned motion, the attorneys for the plaintiff and judgment creditor entered into a written stipulation as to the-facts of this case, which stipulation appears in the appeal, book, and contains, substantially, the facts above stated.
    Charles P. Tabor, for appellant.
    Sidney W. Petrie, for respondent.
   ADAMS, J.

It will be seen from a perusal of the acompanying summary of facts that this case comes into this-court under somewhat peculiar circumstances, for since the decision of the appellant’s motion at special term the attorneys have entered into a written stipulation with the-declared purpose of obviating what was, iip to the time of its execution, a rather loose and unsatisfactory statement of the facts relied upon by each of them. So far as we are able to discover, however, the stipulation simply renders concise and clear what was previously diffuse and vague,, and therefore we are disposed to entertain the appeal, although we certainly should not feel at liberty to do so if the facts established by such stipulation were essentially different from those which were made to appear when the order appealed from was granted. Both the parties to this action are foreign corporations, and the appellant, who-is seeking to vacate the attachment obtained by the plaintiff against the defendant, is a judgment ere litor of the latter, whose judgment lien was obtained subsequently to the attachment; and, consequently, he is in a position to attack the plaintiff’s warrant upon any ground which would render’ it nugatory. Code Civ. Proc. sec 682. The grounds relied upon by the appellant are specifically detailed in the notice of motion to vacate the attachment, and, relieved of all redundance, they may be regarded as two in number, viz.: (1) That the moving papers failed to show either that the contract was made or that the plaintiff’s cause of action arose within this state; and (2) that such papers likewise failed to show the plaintiff’s right to maintain its action, by a compliance with the requirements of sections fifteen and sixteen of the general corporation law of this state. In our review, therefore, of the decision of the special term, it becomes necessary to determine whether the appellant’s contention has any substantial foundation upon which to rest, or# in other words, whether the plaintiff has failed to establish clearly and satisfactorily its right to the extraordinary remedy to which it has resorted as it most assuredly was bound to do. Smith v. Union Milk Co., 70 Hun, 348, 53 St. Rep. 891, affirmed 143 N. Y. 622, 60 St. Rep. 873.

Con sideling these propositions, then, in the order in which they are stated, it is to be borne in mind that, inasmuch as the plaintiff and the defendant are foreign corporations, the former was called upon to establish affirmatively, as a pre requisite to obtaining its attachment, either that the contract sued upon was made, or else that its cause of action thereon arose within this state. And the first question to be determined is whether or not it has fulfilled these requirements. Tt appears that the plaintiff was organized as a corporation under the laws of the state of Ohio, and the defendant under those of the state of West Virginia. The former liad no place of business, and made no pretense' of doing business within this state; but the latter did have its manufactory and office for the transaction of business in the city of Buffalo. Upon the 27th day of July, 1895, the goods, wares and merchandise mentioned in the complaint were ordered by the defendant by a letter written at the city of Buffalo, and mailed to the plaintiff at Shelby, in the state of Ohio; and the goods so ordered were, in due time, shipped and delivered to the defendant at Buffalo, upon a credit of 60 days. The contract, therefore, was not completed, until the acceptance of the order; and, as this was done in the state of Ohio, there does not appear to be much room for doubt as to where the contract was actually made. Whart. Confl. Laws, sec. 421; 2 Pars Cont. 701; Varnish Co. v. Connell, 10 Misc. Rep. 553, 65 St. Rep. 817; Manufacturing Co. v. Connell, 88 Hun, 254, 68 St. Rep. 697. It does not follow, however, that because the contract was not made within this state, a cause of action could not arise here. Ho cause of action arose anywhere upon this contract until the defendant had made some default ‘in the payment of the contract price of the goods purchased, for, as was said in Durham v. Spence, I,. R. 6 Exch. 46, “a cause of action is that which produces the necessity for bringing the action.” And in this case no necessity for bringing an action existed until after the expiration of the term of credit given. Again, it was said by Cleasby, B., in the case just quoted from:

“The cause of action must have reference to some time as well as some place. Does, then, the expiration of the time when the cause of action arises give us any assistance in determining the place where it arises? I think it does. The «cause of action arises when that is done which ought not to have been done. But the time when a cause of action arises determines also the place where it arises, for, when that occurs which is the cause of the action, the place where it occurs is the place where the cause of action arises.”

These definitions haAre been approved and adopted by the courts of this state. Bank v. Lacombe, 84 N. Y. 367, 384; Toronto General Trust Co. v. Chicago, B. & Q. R. Co., 32 Hun 190.. Applying them, then, to the case in hand, it aaúII be seen that the thing to have been done Avhich Avas not done was the payment of the contract price of the goods purchased at the expiration of the term of credit alloAved. And it folloAvs that this payment ought to have been made at the place where the term of credit expired, which, as Ave have seen, Avasthe city of Buffalo. The cause of action, therefore, arose there, and the plaintiff, consequently, has brought its case within subdivision 3 of section 1780 of the Code of Civil Procedure, which provides that an action may be maintained by one foreign corporation against another, “where the cause of action arose within the state.”

We are then brought to a consideration of the remaining question, and which apparently is the one upon which the appellant places his main reliance. But the conclusion AAdrich Ave ha\7e reached respecting the place Avhere the plaintiff’s cause of action arose of necessity disposes of the contention that the plaintiff ivas preArented from maintaining its cause of action because of the omission to procure the certificate and file the proof required by sections 15 and 16 of the general corporation laAV. Section 16 of this laAV simply proArides that, before granting such certificate, the secretary of state shall require every such foreign corporation to file in his office a sworn copy of its charter, and a statement under its corporate seal, particularly setting forth the business or objects of the corporation AAdiieh it is engaged in carrying on, or which it proposes to carry on, within the «tate, and the place within the state which is to be its principal place of business, and designating in tturn;.'nner prescribed in the Code of Civil Procedure a person upon whom process against the corporation may be served within the state. And section 15, so far as it has any application to this case, reads as follows:

“No foreign stock corporation other than a monied corporation, shall do business in the state without having first procured from the secretary of state a certificate that it has complied with all the requirements of laAV to authorize it to do business in this state. * "* * The secretary of state shall deliver such certificate to every such corporation so complying AArith the requirements of laAV- ® * * No foreign stock corporation doing business in this state Avithout such certificate shall maintain any action in this state upon any contract made by it in this state until it shall have procured such certificate.”

All that we deem necessary, in order to dispose of this question, is to call attention to the fact that the inhibition contained in these sections, or either of them, resulting from a failure upon the part of the plaintiff to comply with their requirements, relates (1) to the conducting of business within this state, which, as we have already seen, the plaintiff was in no wise attempting; and (2) the maintaining of any action in this state upon any contract made therein. We have endeavored, in our discussion of the appellant’s first contention, to draw the distinction between a contract and a cause of action; and if we have succeeded in making such distinction clear, there will be no difficulty in making equally manifest the proposition that the second of the inhibitions above mentioned has no application to this case, for the reason that the plaintiff is not seeking to maintain its action upon “any contract made by it in this state,” but only upon a cause of action which arose therein. We conclude, therefore, that the plaintiff’s right of action is clearly established, as is also its right to a warrant of attachment, and that, consequently, the order appealed from should be affirmed.

Order affirmed, with $1.0 costs and disbursements.

All concur.


author: GREEN, J.

text:
    William W. Mumford v. George W. Crouch et al.

    (Supreme Court, Appellate Division, Fourth Department,
    July 30, 1896.)
    Estoppel—To deny validity op jiobtgage.
    A debtor gaye Ms creditor a chattel mortgage, and assigned to him the amount to be recovered in a pending action by the debtor against a third person. It was agreed that the mortgagor should continue in possession, of the property, and use the same, or its proceeds if sold. Afterwards other creditors recovered judgments against the debtor, and plaintiff was appointed receiver of the debtor’s property. The mortgagee foreclosed the mortgage, and bought the property at the foreclosure sale. An action was brought by the mortgagor against the mortgagee for an accounting, and the receiver was substituted as plaintiff therein. On the accounting the mortgagor was credited with the amount for which the mortgagee bought the property on foreclosure. Held, that crediting the mortgagor with the amount of such foreclosure sale was not a ratification of the sale, or an affirmation of the. validity of the mortgage, so as to preclude the receiver from suing to set the mortgage aside.
    Appeal from special term, Monroe county.
    Action by William W. Mumford. as receiver of the property of George N. Pon-ell and William J. Powell, against George W. Crouch and others. There was a judgment in favor- of defendants George H. PoAvell and William J. Powell, and plaintiff appeals.
    Elbridge L. Adams, for appellant.
    Horace G. Pierce, for respondents.
   GREEN, J.

This action AAras brought to set aside as fraudulent and void as against the plaintiff and the creditors whom he represents a chattel mortgage made by the defendants PoAvell to the defendants Crouch. The mortgage is challenged on the ground that the mortgagors were alloAved to remain in possession and to sell a portion of the goods and use the avails thereof, and also because- of the noufiling of the mortgage The plaintiff also charges (hat the mortgage was delivered conditionally, and was not to be used by the mortgagees in the event that the proceeds of a certain suit, brought by the Powells against one Cunningham, should be sufficient to pay debt OAving by the Powells to the mortgagees. Judgment is demanded declaring the mortgage fraudulent and void, and directing the defendants Crouch to deliver the property to plaintiff, or else pay him the value thereof, or for such other or further or different relief as plaintiff may be entitled to; There is set forth in the answer, among other things, a former judgment in bar and as an estoppel, and other acts are also alleged therein as constituting an estoppel.

The material facts are these; The defendants PoAvell Avere for some time previous to 1891, builders and contractors in the city of Rochester. On or about the 7th day of July, 1890; they made a chattel mortgage to the defendants Crouch, in and by which they transferred to the latter, as for a continuing security to the amount- of $10,000, their tools, machinery, moldings, lumber, horses, and wagons". At the time the mortgage was made there was pending a litigation in which the PoAvells were plaintiffs and one Cunningham and others were defendants, and the Powells had assigned their recovery in that action to the Crouches. The latter then demanded the chattel mortgage as security until the Cunningham case should be settled, saying that they Avould not record it. but would hold it until they received the money from the Cunningham case. It was further agreed betAveen the parties that the mortgagors should continue in possession of the property, as though no mortgage had been given, have the use of the same, and sell the chattels and use the avails thereof; and they did in fact, use the lumber, moldings, sash, doors, and such materials in buildings they were erecting, and also sold some of the property. The Cunning"ham case was determined in September, 1890, and §7,788.63 was paid to the Crouches, who, however, did not surrender the mortgage, but later, on the 15th of December, 1890, filed the same, and subsequently took possession of the property remaining. Defendants5 version of the transaction is that they agreed not to record the mortgage until the Cunningham claim was settled, and that then, if enough was realized from the claim, they would “turn it back to them55? but that said claim did not realize enough to pay the debt, and so they filed the mortgage. On the 6th of January, 1891, Robert Gay, one of the creditors of the Powells, recovered three judgments aeainst them, upon debts contracted beween July 7 and December 15 1890. On the 15th day of January following, the plaintiff was appointed receiver of the prop erty of the Powells in proceedings supplementary to execution issued upon these three judgments. On the 13th day of April, 1891, the receiver says he mailed a letter to the Crouches, in which he demanded of them that they surrender the property, but without stating any ground or reason therefor. On or about the same day the Crouches began a foreclosure of the mortgage, and upon the sale bought in the property for §411.50, and thereupon resumed possession thereof as purchasers. Plaintiff claims the property was worth several thousand dollars■. About the time of the sale one of the defendants was examined in supplementary proceedings, but it does not appear that any questions were asked in respect to the delay in not filing the mortgage or in regard to the retention of the possession of the property by the mortgagors being in fraud of creditors. In May following the sale under the mortgage, the receiver contemplated bringing an action to set aside the mortgage on the ground that it was filed, and a sale had thereunder, in breach of the agreement between the parties; but the summons in the action contemplated was never served. The attorney for the receiver testified that a short time after the complaint was verified the Powells began their action against the Crouches for an accounting, and he held Vue action in abeyance pending the determination of that suit. In October, 1891, an action was begun by the Powells against the Crouches for an accounting of money and real estate received by the latter from the former since 1887. In January, 1892, the receiver was substituted as plaintiff in that action at the request of the judgment creditor. The referee to whom the action was referred by the court filed his report in 1893, in and by which he found and stated an account nctween the parties, charging the Powells with various items, amounting in all to §59,155. 84, and crediting them with items amount ing in all to $32,917.17, one item of which was, “Proceeds chattel mortgage specified in subd. No. 22, $411.50,” leaving a balance due the Crouches of $26,238.67. As conclusions of law the referee found that the Powells owed the Crouches the sum of $26,238.67, and that the latter held title to several parcels of real estate which had been conveyed to them a¡? security for said indebtedness, and that the plaintiff, as receiver of the- Powells, was entitled to redeem said real estate. In November following, judgment was entered in accordance with the report of the referee. An appeal was taken therefrom, and that judgment was affirmed upon said appeal. 29 N. Y. Supp. 1147. No „ question relating to the validity of said mortgage was either pleaded or litigated in that action. Thereafter, in February, 1894, an action was brought by said Robert Gay, asa judgment creditor of the Powells, to set aside said mortgage as fraudulent and void as to him, but was dismissed on the ground that the plaintiff had no execution outstanding, and consequently no lien, without which he could not maintain the action. , This action was-commenced in January, 1895, plaintiff’s receivership being first extended by orders made January 4th and 5th, to cover a fourth judgment of said Gay, recovered March 16, 1891, and two judgments of Gledhill, recovered respectively March 7, 1891, and April 25, 1892.

The plaintiff offered evidence to show how the referee came to credit the Powells with the sum of $411.50, for the purpose of repelling any inference that the validity of the mortgage was involved in that litigation, or that it could be made the foundation of an estoppel, or amount to a ratification or affirmation of the defendants’ acts, or constitute a waiver of the right to attack the validity of the mortgage. It appears from the plaintiff’s offer to prove that on the trial of the accounting suit the plaintiff attempted to prove that the recording of the mortgage and the foreclosure and sale thereunder was a breach of the agreement made between the parties at the time the mortgage was executed, but the referee ruled that damages for such breach could not be recovered in that action; that he then asked for amendment of the complaint, so as to allege payments of personal property, as well as money, in order that proof might be given concerning the chattel mortgage transaction, and that the referee refused to allow sufih amendment, on the ground that it made a different cause of action; that thereupon defendants’ counsel admitted that on the sale of the chattels $411.50 was realized and that the Powells might be credited with that sum as of October 23, 1891. The court sustained the objection to the offer, but permitted the plaintiff to put in evidence the original requests, to find submitted to the referee, in which no mention is made of the mortgage, nor any claim to a credit on account thereof, nor any relief in respect to it. It appears from respon= dents’ brief that they have abandoned the position which they took on the trial that the judgment rendered in the suit for an accounting necessarily determined the validity of the mortgage, and that, therefore, the matter was res ad judicata. It is clear that the fraudulent character of the mortgage was not a fact in issue in that action, and it was not determined by the findings or judgment in any way, nor has the court here found as a conclusion of law that plaintiff is estopped by a former adjudication. But the respondents contend that, having sold the property to themselves on the foreclosure, and turned the proceeds of the sale over to the mortgagors, by giving them a credit on their account for that amount, and the judgment in the former action having allowed the receiver, as the legal representative of the mortgagors, to redeem their real estate held by the respondents, for $411.50 less than respondents’ claim against them (but for the credit of that amount), this constituted a ratification of the sale, and the receiver and the judgment creditors are estopped from attacking the validity of the mortgage. And the court finds that by receiving a credit for that sum this constituted an election to affirm the sale of the property, and the plaintiff is estopped from questioning the validity of the mortgage. The court also finds that it was plaintiff’s duty, if he intended to dispute the validity of the mortgage, to have that question adjudicated, which he did not do, but elected to treat it as a valid lien upon the property, and accepted the proceeds of the sale with full knowledge of the fact that the mortgage was void as to creditors. Evidently the plaintiff had notice of the nonfiling of the mortgage, and intended to waive that objection, but there is no affirmative proof that he had any knowledge of its fraudulent character arising from the permission to the mortgagors to sell and use the proceeds. The court also finds that no claim was made by the plaintiff in the other action that the defendant should account for the value of the property instead of the proceeds of the sale, or for any greater sum than it sold for. That is not so, for the plaintiff offered to prove that ,he endeavored to compel the defendants to account for the property taken, on the ground that the pay-, rnent of $7,788.63 recovered in the Cunningham suit discharged the mortgage by virtue of the prior agreement. There was no claim, however, to recover the value of the property upon the ground of its fraudulent character, because, as we have said, there is no proof that the plaintiff had notice of it.

The question, then, is, what is the legal effect or consequence of allowing to the mortgagors a credit for the proceeds of the mortgage sale in the hands of the mortgagees, upon the rights and interests of the judgment creditors of the mortgagors? In the accounting action it was found that the Powells (the mortgagors and judgment debtors) were indebted to respondents in the sum of $59,155.84, and were entitled to credit in the amount of $32,417.17, leaving a balance in favor of the respondents of $26,238.67. The latter were charged with $411.50, the proceeds of the mortgage sale,as so) much money in their hands, and the Powells were credited with that amount, and to that extent reducing their indebtedness. Upon the payment of the amount found due (subject to any deduction by a further accounting), the receiver was adjudged entitled to redeem the real estate held by the defendants as security for the indebtedness. If this sum of $411.50 had not been so charged to the defendants and credited on the Powells’ indebtedness, the balance in favor of the former would have been $26,650.17, and that would have been the price of redemption. Of course, the receiver had no funds with which to make such redemption and has received nothing in consequence of the suit. He has not accepted or received this item of credit or availed himself of this right of redemption and he will never be able to do só, unless he is supplied with funds by the judgment creditors; and that is an extreme improbability. The creditors have gained no benefit or advantage from that action and there is no expectation that they ever will. The result shows that the prosecution of the suit was continued by the receiver rather as the representative of the judgment debtors and for their benefit than as a represenatáve of the judgment creditors on their behalf and for their profit or advantage. The benefit of the credit will ultimately inure to the benefit of the judgment debtor himself. The judgment merely fixed the amount of the indebtedness • of the Powells to the defendants, and determined their equitable rights in the real estate; but- that adjudication is of no consequence to the judgment creditors, for they are in no position to avail themselves of it. It produced no valuable effect, nor answered any useful end.

The inquiry is suggested whether tlie allowance of this credit to the 'judgment debtors and the deduction of it from their indebtedness to the mortgagees amount to a waiver of the rights of the judgment creditors in respect of the mort- • gage property, or constitute a ratification of the sale, or an affirmation of the validity of the fraudulent mortgage, or create an estoppel against them in the assertion of their legal and equitable rights? Is it competent for a receiver appointed in supplementary proceedings, by crediting the proceeds of the sale of mortgaged property in the hands of a fraudulent mortgagee, upon a debt due the latter, to preclude himself, acting as a trustee for the creditors, from thereafter questioning the validity of the mortgage? In other words, may the receiver waive the rights, interests, and claims of the judgment creditors in and to the mortgaged property, and elect to ratify and confirm the sale thereof by the mortgagee, by allowing an application of the proceeds in reduction of the mortgagors’ indebtedness to the latter? May he purge the mortgage of the fraud, and make a void mortgage valid, to the prejudice of his cestuis que trustent, without receiving anything of value for their benefit? It is not pretended that the receiver is empowered, by virtue of his office, to agree with a fraudulent mortgagee that the proceeds of the sale may be applied in reduction of ■ the mortgagor’s indebtedness, but it is insisted that this result may be accomplished by means of an action for an . accounting, wherein the mortgagor is charged with a large indebtedness, and from which no benefit or advantage may accrue to the judgment creditors. Since the judgment creditors have received nothing under the judgment rendered, and it is very unlikely that they ever will, it is difficult to perceive any grounds or reasons upon which to. base an equitable estoppel. It is not competent for a trustee for creditors to waive their rights or claims in respect of the property of their debtors in that manner, and preclude them from asserting them. If the receiver had redeemed the land by paying therefor the sum fixed by the judgment, it might be claimed with some show of reason that this amounted to an acceptance of the item of credit, and that the judgment creditors would be estopped from afterwards claiming the mortgaged property or its value, upon the ground of th»z benefit that would, persumably, be reeived from a subsequent sale of the land. But here the receiver has done no act indicating such an acceptance, and has received nothing whatever even in partial satisfaction of the judgments. When the receiver has received or acquired any benefit from the judgment, by availing himself of its provisions, it will be time enough to claim title to the property under the fraudulent mortgage, upon the ground of estoppel or ratification. Until that event occurs the defendants are in no position to invoke the doctrine of estoppel against the claims of creditors. That the rights of creditors should be forfeited or frittered away in this manner by the acts or conduct of their trustee should not be permitted and ought not to be sanctioned. No doubt the prosecution of the accounting suit was continued by the receiver in expectation of recovering money or real "state from the defendants, but the result of it was that the mortgagors were found largely indebted to them, and the receiver. is .in no position to avail himself of the right to redeem. That being the result, the receiver has not recovered or received anything which he may apply to the payment of the judgments, and therefore no waiver or estoppel is created by the judgment. The duty of the receiver is to recover the property belonging to the judgment debtor, or property in which the judgment creditors have a paramount interest, and to collect the debts due him, and to apply the same in satisfaction of the claims of creditors. Surely, he is not empowered to consent, whether in a judicial proceeding or otherwise, that the proceeds of a sale under a fraudulent mortgage may be applied in reduction of the mortgagor’s indebtedness, and thus inure to the special benefit of the mortgagor, and in derogation of the lights and claims of his creditors. And very appropriate here is the language of Bradely, J., in a recent decision:

“There is a further reason why the doctrine of election is not applicable to this case. The plaintiff is a trustee for the creditors of his assignors, and he cannot, by pursuing a futile remedy, produce a forfeiture of the vested rights of his cestuis que trustent to have the property held by him in that relation available for their benefit, nor can he voluntarily relinquish his rights in that respect. His power and duty | in the execution of the trust are in harmony, and he can not effectually proceed in contravention of either.” Bowdish v. Page, 81 Hun, 176, 62 St. Rep. 676.

A receiver is clothed with no powers to waive the equitable rights of the judgment creditors, for the protection of whom he was appointed. Keiley v. Dusenbury, 42 N. Y. Super. Ct. 238. We are unable, therefore, to conceive any rule of law or principle of equity upon which it can be adjudged that these judgment creditors, represented by the receiver, are estopped from questioning the validity of the mortgage, and claiming it to be,void as to them. Nor do we deem it of any consequence lha t the receiver may have possessed knowledge of the fraudulent character of the mortgage, for it was not competent for a trustee to waive the rights of creditors to the property of their debtors, and affirm a sale by it by a fraudulent mortgagee, simply by allowing the application of the proceeds in diminution of the mortgagor’s indebtededness. Under such circumstances as these, the whole transaction being fraudulent, the doctrine of estoppel will not be ajqilied to aid the defendants. Royce v. Watrous, 73 N. Y. 697. We are of the opinion, therefore, that; the allowance of the item of credit to the morgagors in the! former suit cannot operate as a waiver of the rights and claims of the judgment creditors in respect of the mortgaged property, or constitute a ratification of the sale, or an ■affirmationof the validity of the mortgage, nor create an estoppel against the assertion of their rights.

In respect to the cases cited by the defendants, there is no ■such resemblance in their facts, circumstances, or relations as to warrant their application here by way of analogy; on the contrary, there is a marked difference The principle that, when a creditor recognizes a transfer by accepting the proceeds of it with full knowledge of all the facts, he is es-to])] ted from thereafter impeaching it as fraudulent, cannot be i nvoked in such a case as this. But the respondents further claim that tlié'y are entitled to a deduction of said sum •of 6411.50, because the judgment in the accounting suit gives the receiver the right to redeem the real estate for $26,238.77, whereas, but for this credit, the price of redemption would have been $26,650.17. The plaintiff, in his complaint, offers to allow this deduction, if the court should deem that to be equitable. The grounds and reasons before stated preclude the allowance of this deduction against the claim of the judgment creditors. The receiver has not availed himself of this credit, or of this right of redemption and he will never be able to do so, unless he is supplied with funds by the judgment creditors; and that is very improbable. The consequence is that those creditors have received no benefit or advantage from that accounting or the judgment rendered therein; and why, therefore, should that sum be set off against their claims? Some time in the future, it may be, the judgment debtors will avail themselves of the right of redemption, and thus receive the benefits that may accrue. But a recovery in this action will wipe out that item of credit from the judgment, and neither the receiver nor the mortgagors will have any right to redeem at the sum fixed therein. And, further, the judgment creditors, by their trustee, repudiate the credit conceded to the mortgagors, and, in effect, make an offer in their complaint to expunge it from the record. But the arguments and reasons heretofore advanced lead to the conclusion that this item credited to the debtors cannot be set off against the claims of their creditors. In effect, it would be. setting off an indebtedness of the mortgagors against the claims of their judgment creditors. Again, the judgment creditor Gledlull was not represented by the receiver in the accounting suit, and is therefore not estopped by it (2 Van Fleet, Former Adj. 999); and, of course, her claim is not subject to diminution by reason of that credit. And yet, if that credit was equivalent to a payment to the creditor Gay, the mortgagee would be entitled to reduce the claim of a subsequently pursuing creditor to that extent. This consequence shows the difficulty of holding that to be payment when nothing is parted with by the mortgagees, and nothing received by the judgment creditors.

The respondents make no argument in their brief that the receiver or the judgment creditors are estopped from asserting any rights or claims to the mortgaged property by reason of laches, lapse of time, silence, or acquiescence, as-intimated in the findings of the court, and therefore no discussion of these matters is required. We are unable to perceive, however, that the vested rights of the judgment creditors have been forfeited by the delay of the receiver, under all the circumstances existing in the case.

It is not necessary in the decision of this appeal to determine the liability of a fraudulent mortgagee for an accidental loss of the goods by fire, as the question has not been fairly presented and argued, and ample opportunity will be afforded upon the new trial.

Another thing: . It seems from the case that plaintiff was seeking on the trial to charge the respondents for the value of the property they never received; i. e. the materials that were either sold or used by the mortgagors, and consequently never delivered to the respondents. A new trial will rectify this erroneous assumption. The judgment should be reversed, and new trial granted, with costs to abide the event of the action.

Judgment reversed, and new trial granted, with costs to abide the event of the action

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


text:
    Matter of Charles H. Zimmer. Matter of John Clover.
    (Supreme Court, Appellate Division, Fourth Departmant,
    July 30, 1896.)
    Supplementary proceedings—Title oe receiver—Priority
    Code Civil Procedure, section 2469, which provides that the receiver’s-title to personal property extends back by rel ation in certain cases, but not so as to “affect the title of a purchaser in good faith without notice^ and fur a valuable consideration,” applies to the transfer of past-due negotiable instruments.
    Appeal from Lewis county court.
    Petition by Charles H. Zimmer, receiver of the property of John P. Zimmer, a creditor of the firm of Miller & Allen,, to compel John Clover, as assignee "for benefit of creditors of said firm of Miller & Allen, to render an account of his proceedings as such assignee. From part of the decree settling the accounts of the assignee, and directing the distribution of the estate among the respective parties adjudged entitled thereto, the receiver appeals.
    Jay A. Pase, for appellant.
    Walter Ballou, for respondent Charles A. Miller.
    E. M. Bagg, for respondent Clover.
   GREEN, J.

The main question in controversy in this matter arises between a receiver of the property of John P. Zimmer, a judgment debtor, appointed in proceedings supplementary to execution, and the assignee or transferee of negotiable promissory notes transferred to the claimant, Charles A. Miller, when past due, and subsequently to the service of an injunction order upon said judgment debtor, and also upon his debtors, Stephen T. Miller and Charles M. Allen, the assignors of the assigned estate, but prior to the appointment of the receiver. Charles A. Miller, the transferee of the notes, claims that he is creditor of the estate to the extent of the amount paid by him for the notes, and is entitled to priority over the receiver subsequently appointed. This is disputed by the receiver of said judgment debtor and transferror of said notes, upon the ground that an equitable lien attached to the notes upon the service of the order upon said debtor, in favor of the judgment creditor, and that the legal title of the receiver goes back by relation to that time, and is superior to an intervening assignment. The referee finds that Charles A. Miller purchased the notes, and took them in good faith, without notice of the supplementary proceedings then pending against the judgment debtor John P. Zimmer, and paid therefor a specified valuable consideration. The claimant, Miller, bases his contention upon the last clause of section 2469, Code Civ. Proc. The receiver insists that that clause can have no application to the transfer of negotiable paper past due; and that is the question we are called upon to determine. It must be assumed from the findings of the referee that Charles "A. Miller had no actual notice of those proceedings, nor any knowledge of such facts or circumstances equivalent to actual notice.

It has been repeatedly held that the commencement of a suit in chancery by a judgment creditor, to reach dioses in. action and equitable assets, creates a lien or charge thereon, and the subsequent assignee takes them subject to the creditor’s lien thus acquired. Upon filing the bill, an injunction was taken out and served with the subpcena to answer, restraining the debtor from parting with any of his property •or effects till the further order of the court. A receiver was a convenient and important, but not indispensable, part of the proceeding. The effects locked up, as it were, in the hands of the debtor by the injunction, might be decreed to be delivered to the complainant, or sold by a master, and applied in satisfaction of the debt and costs. No voluntary assignment of the debtor could impair the complainant’s light, nor any intervening claims of the oilier creditors. If he made an assignment to one ignorant of the injunction, the assignee would take the claim or demand subject to the prior right of the judgment creditor. The lien acquired by the creditor was defeasible only by a discharge of the debt, or by a successful defense of the suit in some one of the very restricted modes open to the defendant. Storm v. Waddell, 2 Sandf. Ch. 494, 510-519; Haydn v. Bucklin, 9 Paige, 512; Stewart v. Isidor, 5 Abb. Prac. (N. S.) 68-70; Becker v. Torrance, 31 N. Y. 631, 636-640; Lynch v. Johnson, 48 N. Y. 27, 33, 46 Barb. 56; Holbrook v. Zinc Co. 57 N. Y. 616; Clark v. Brockway, 1 Abb. Dec. 351, 354. But a service of the supoena upon the defendant, subsequent to the filing of the complainant’s bill, was necessary to create a lis pendens as against a bona fide purchaser of the subject-matter of litigation, who had not actual knowledge of the suit. Hayden v. Bucklin, 9 Paige, 512. “As soon as the judgment creditor’s suit was instituted, the plaintiffs in the suit obtained a lien on all the dioses in action of Rutter. All the title he had ivas subject to it. When the receiver ivas appointed, he acquired the title to those dioses in action Avhich Rutter had AA'hen the action was commenced. In contemplation of laiv,. the title vested in the court Avlien the action Avas commenced and passed, as from that date, to the receiver. The right of the complainant in a creditors’ bill is sometimes called a c lien,’but it gives an immediate right to have a transfer of the defendant’s property made to a receiver. So that, as betAveen the receiver and a subsequent assignee, the title to the property itself passes to the receiver, and from the judgment debtor. The judgment debtor may assign his title subject to the receiver’s title, but he cannot thus pass the title to the tiling assigned from the receiver, but only the right to any surplus <hat may remain after satisfying the claims represented by the receiver.” Roberts v. Railroad Co., 25 Barb. 662. But, of course, the doctrine of lis pendens is not applicable to the case of a bona fide purchaser of commercial paper not due. Holbrook v. Zine Co., 57 N. Y. 616, 631.

In regard to movable property liable to execution at law, although it is subject to the lien of the creditor, it may be seized on execution by any other creditor, until the order for a receiver is made, but not afterwards; such order being equivalent to an actual levy on the property. Storm v. Waddell, supra. The reason for this distinction between property not vendible on execution, such as moneys due the judgment debtor, stocks, dioses in action, and the like, and property that is subject to seizure on execution, is stated in Becker v. Torrance, supra. In respect to proceedings supplementary to execution, it is said that they were intended as a simple substitute for the creditors’ bill, as formerly used in chancery; that, “under sections 292 and 291 [Code Proc.], the services of the order takes the place of the commencement of the suit under the old system, and should give the judgment creditor the priority of a vigilant creditor, and a lien upon the equitable assets of his debtor. This lien was rendered effectual by the final order of the judge, directing the defendant to pay his debt to the plaintiff [Ryder] in the judgment against Acker; and payment, or a liability to pay, in pursuance of that order, is a defense to this action, the plaintiff not having shown himself a bona fide purchaser of the claim against the defendant for value.” Earl, J., in Lynch v. Johnson, 48 N. Y. 27, 33, affirming 46 Barb. 56. If it is to be understood from this expression of the learned judge that, if the plaintiff had shown himself to be a bona fide purchaser, he would be entitled to priority over an equitable lien upon the claim existing at the time of the assignment, it is not consistent with, but rather opposed to, the established doctrine governing creditors’ bills, and also contrary to the general rule that an assignee of a chose in action takes it subject to all equities existing between the assignor and other parties. In the report of the case in 46 Barb. 56, it appears that no injunction order had been issued, nor any order or notice served upon the judgment debtor, but merely an order served upon the third party for his examination. But the court of appeals held that the effect of the service of the order upon the third party was to create an equitable lien, without regard to the injunction order, or notice to or service upon the judgment debtor. If that be so, a bona fide assignee would take subject to such lien. In Becker v. Torrance, 31 N. Y. 631, it was held that, as regards chattels subject generally to seizure on execution, the service of an order for the examination of the debtor in proceedings supplementary to execution, accompanied by an injunction clause, has not any effect to preclude any other judgment creditor from levying his .execution on such chattels, and that such levy confers a right prior and superior to any acquired by the creditor obtaining that order; that, where a judgment creditor is pursuing his legal remedy by execution, something more than a notice or a lis pendens is required to prejudice his levy; that a receiver appointed after the goods have been levied upon holds subject to such levy. Denio, C. J., remarks that it was unnecessary to determine whether such an order has any effect to qualify the debtor’s own voluntary disposition of his chattels, for the reason that no such question was presented, and also because of an amendment of the Code, passed in 1862, which declares that the receiver shall in such cases be vested with the property and _ effectsnf the judgment debtor from the time of filing and-recording the order for his appointment. “This definite-provision for changing the title of the debtor’s property by a just intendment puts an end to the principle of relation by which an effect upon the property has been attributed to the-preliminary order.” Also, Davenport v. Kelly, 42 N. Y. 193.

The foregoing statement of the law upon the particular matter under consideration, as formulated before the Code of Civil Procedure, will suffice for our present purpose. We will now consider the effect of section 2469 of the Code. By that section it is provided that:

“Where the receiver’s title to personal property has become vested as prescribed in the last section, it also extends back, by relation, for the benefit of the judgment creditor in whose behalf the special proceeding was instituted, as follows: (1) Where an order, requiring the jugdment debtor to-attend and be examined, * e * has been served, before the appointment of the receiver, or the extension of receivership, the receiver’s title extends back, so as to include the personal property of the judgment debtor, at the time of the service of the order. (2) Where an order or warrant has not been served as specified in the foregoing subdivision, but an order has been made, requiring a person to attend and be examined, concerning property belonging, or a debt due, to the judgment debtor, the receiver’s title extends to the personal property, belonging to the judgment debtor, which was in the hands or under the control of the person or corporation thus required to attend, at the time of the service of the order, and to a debt then due to him from that person or corporation. * * * But this section does not affect the title of a purchaser in good faith, without notice, and for a valuable consideration; or the payment of a debt in good faith, and without notice.”

The words “personal property” include money, chattels, things in action, and evidences of debt. Code, sec. 3343, subd. 7.

In McCorkle v. Herrman, 117 N. Y. 302, 22 N. E. 949, Andrews, J., observed that section 2469 is a new provision, not found in the former Code, "and appears to have been inserted to change the rule declared in Becker v, Torrance, supra, to the effect,” etc.; and it was held that, by. the commencement of the proceedings, a creditor acquires an equitable lien on a debt owing to his debtor, which, on the appointment of a receiver, becomes a legal title in him, as of the date of the commencement of such proceedings. It is obvious that the last clause of the section quoted effects an important modification of the rule that an assignee or purchaser of a thing in action takes subject to the equitable lien of the judgment creditor created by the commencement of a creditors’ suit or the institution of supplementary proceedings. An exception is created in favor of a bona fide purchaser, without notice, and for a valuable consideration. The other provisions of the section work no alteration of the rule as it theretofore existed, in respect to the effect of the equitable lien acquired by the creditor upon the things in action and equitable assets, which are not subject to execution at law, but they are merely declaratory of the existing law. It is not disputed but that the bona fide assignee or purchaser of a thing in action or evidence of debt is now protected against the equitable lien or claim of the judgment creditor; but the counsel for the receiver attempts to draw a distinction between the assignment of a claim or a non-negotiable instrument, and the transfer of a negotiable paper past due. His contention is that the last clause of the section can have no application to the latter; that the purchaser takes the paper at his own risk, subject to all equities attaching thereto;that the fact that the paper was overdue charges him with notice, and puts him upon inquiry as to what, if any, defenses, liens or equities existed; that the transferee takes subject to all equities which third persons could enforce against his transferror. And the argument of counsel leads him to the conclusion that the transferee of negotiable paper past due is chargeable with notice of the proceedings against his assignor, and that, therefore, such transferee cannot be a bona fide purchaser without notice, within the meaning of this provision. This contention is clearly untenable, for it is neither supported by any authority, nor founded upon any legal or sensible reason. There is no substantial distinction between the assignment of nonnegotiable paper and commercial, paper past due. Why should the assignee in the one case be protected against the equitable lien of the creditor, and not in the other? Are they not governed by the same principles, and judged by the same rules? The general rule is that the assignee of a thing in action takes it subject to all the equities existing against it in the hands of his assignor, and can acquire no greater right or interest therein than belonged to his transferror. In other words, “a purchaser of a chose in action must always abide by the case of the person from whom he buys.’5” Fairbanks v. Sargent, 104 N. Y. 115, 116, 5 St. Rep. 531. At common law, it was non-assignable, and the assignee took by virtue of an assignment thereof an equitable interest only, which must be governed by equitable rules for its protection and enforcement. Id. And, in a conflict of equitable claims, the rule of law as well as in equity is, “Qui prior est tempore potior est jure.’5 As between different assignees of a chose in action, by express assignment from the same person, the one prior in point of time will be protected, though he has given no notice to either the subsequent assignee or the debtor. Muir v. Schenck, 3 Hill, 228. And the assignee is subject to the equities existing in favor of third persons. Owen v. Evans, 134 N. Y. 519, 47 St. Rep. 661.

The provisions of the Code make no distinction between non-negotiable things in action and evidences of debt and commercial paper overdue as regards the protection of a bona fide purchaser without notice; and why should we draw such a distinction, when no substantial distinction exists? More reason why the assignee of commercial paper should be protected. Prior to the Code provision, the equitable lien attached to all tilings in action and evidence of debt, without regard to the particular character of the instrument, whether negotiable in its inception or otherwise. The doctrine applied equally to both kinds of paper. So this exception in favor of bona fide purchasers must have application to all kinds of instruments or evidences of debt, excepting, of course, commercial paper negotiated before maturity to a bona fide purchaser, for a valuable consider • ation. The words “without notice55 mean without actual notice of the proceedings, or a knowledge of such proceedings as may be deemed equivalent to such notice. Wilson v. Marion, 147 N. Y. 589, 70 St. Rep. 349.

Several inquiries are suggested here in respect to actions in the nature of creditors5 bills under the Code. Is an equitable lien upon the things in action and evidences of debt created by the mere service of the summons and complaint, or is the serviceof an injunction order issued requisite to its1 creation? See Stewart v. Isidor, 5 Abb. Prac. (N. Y.) 68, 70; Clark v. Brockway, supra; Code, secs. 1871, 1876. When the lien attaches, is it superior to the claim of a bona fide assignee, as formerly, or is such as assignee protected? The Code makes no provision upon the matter. If the old rule in respect to creditors5 bills still prevails, we have this-anomaly: That, if the creditor institutes supplementary proceedings, no equitable lien attaches to the dioses in action and equitable assets of the debtor, as against a bona fide purchaser, without notice, and for a valuable consideration, but otherwise if he proceeds by action. But why should such a purchaser or assignee be protected in the one case, and not in the other? However, these are sinqfiy suggestions, and not matters presented here for judicial determination.

The conclusion of the court is that the claim of a bonañde assignee or purchaser, for value, and without notice of the proceedings supplementary to execution commenced against the assignor, is superior to the equitable lien of the judgment creditor, and to the title of the receiver appointed subsequent to the assignment or purchase. The referee allowed the purchaser (Charles A. Miller) the amount he paid for the notes, and no claim is made for a greater amount, but he acquiesces in the decision.

The referee finds that John P. Zimmer, the judgment ' debtor, transferred the notes to Charles A. Miller, at the request of the makers, Stephen T. Miller and Charles M. Allen, the assignors of the assigned estate, and that said Charles A. jrarcliased the notes at the latter’s request, and for their benefit; but he also finds that he paid his own individual money for the notes. Counsel for the receiver contends that this is equivalent to a finding that Miller purchased the note as agent for the makers, and consequently he was not a bona fide purchaser, without notice and for value. The finding does not warrant that construction, nor was it contemplated by the referee. In effect, the referee finds that Miller purchased for himself, and there is no finding of a purchase as-agent. That he purchased at the request and for the benefit of the makers of the note (one of whom was his brother) may be understood as meaning that he would return to them the excess over and above the amount that he paid for the notes that he might receive from the assignee of the estate; and it is only that amount he claims as against the receiver of John P. Zimmer.

The decree, so far as appealed from, is affirmed, with costs payable out of the fund.

All concur.


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    Marietta A. Older v. John Russell et al.

    (Supreme Court, Appellate Division, Fourth Department,
    July 30, 1896.)
    Pleading—Frivolous answer.
    The complaint in an action to foreclose a mortgage alleged that one of the defendants had or claimed an interest in or lien on the mortgaged premises, which interest, if any, had accrued subsequently to the mortgage. The answer denied such allegation, and alleged that defendant hail a lien on the mortgaged premises which was prior to plaintiff's mortgage, and stated the nature of the lien. Held, that it was error to give judgment on such answer as frivolous.

      Ü. Proper parties—Action to foreclose mortgage.
    A person who claims a lien on mortgaged premises is a proper party in an action to foreclose the mortgage.
    Appeal from special term, Wyoming county.
    Action by Marietta A. Older against John Russell and others. From an order directing judgment in favor of plaintiff on the answer of defendant John Russell as frivolous, and also appointing a referee to compute the amount due on the bond and mortgage in suit, defendant John Russell appeals.
    This action was brought to foreclose a mortgage executed the 30th day of December, 1885, by the defendant John B. Russell to the plaintiff; and the defendant John Russell was made a party upon the allegation in the complaint that he had, or claimed to have, some interest in the mortgaged premises, which interest, if any, had accrued subsequently to that of the mortgage. The defendant John Russell interposed an answer to the plaintiff’s complaint, which contains a specific denial of the allegation in the complaint which states that the interest which he claims in the mortgaged premises is subsequent to the lien of the plaintiff’s mortgage. Defendant further alleges in his answer that' he has and claims an interest in and lien upon the mortgaged premises, which is in the nature of an equitable lien of $500, which he avers was superior and prior to that of the plaintiff’s mortgage, and which was improperly discharged or released by his father, the defendant John B. Russell; and he further alleges in his answer that such discharge and release were fraudulent, and that the plaintiff knew the same to be so at the time of the commission of such fraudulent acts, which was just previous to the execution of plaintiff’s mortgage. The answer was stricken out as frivolous by order of the court, and from that order this appeal is brought.
    Bartlett & Tozier, for appellant.
    Brown & Coleman, for respondent.
   GREEN, J.

It appears from the allegations of the answer, which, for the purposes of this motion, must be taken as true, that the answering defendant had an equitable lien upon the premises described in the complaint, which is prior to the lien of the mortgage sought to be foreclosed. This the plaintiff knew when she brought the foreclosure action. She, however, alleges in the complaint that the lien or interest of defendant is subsequent and inferior to the lien of her mortgage» She has invited this defendant into court, and has alleged that any lien, claim or interest which he has is subordinate to the mortgage sought to be foreclosed. The defendant promptly answered, denying that allegation, and setting out his claim and alleging that it is prior to complainant’s mortgage; and praying, as he has a right to if it is prior, to have such relief as shall be just and proper under the circumstances. The plaintiff asks for judgment debarring and foreclosing this defendant from any and all ■claim and interest in the mortgage premises. Unless this defendant had some claim or interest, he should not have been made a party. If he had an interest, and was made a party, and desired to protect that interest, it was incumbent upon him to answer, and set out that interest in his own way. If, under the allegations of this complaint, he had remained silent, and suffered judgment by default, would not that judgment preclude him from asserting his interest and lien in a collateral action? “It is true that ordiarily, where, in an action for the foreclosure of a mortgage, a person whose title to the premises is superior and prior to that of the mortgagor is made a defendant, and it is alleged in the complaint that he has some claim to or interest in the mortgaged premises, which, if any, accrued subsequently to the execution of the mortgage, such person’s rights will hot be affected by the foreclosure judgment, nor will he be estopped thereby from afterwards asserting his title to the premises in question.” Payn v. Grant, 23 Hun, 134; Lee v. Parker, 43 Barb. 611. But it is otherwise if the defendant in a foreclosure action so made a party sets up by answer his prior right or claim to the premises, and stating the facts in regard to his interest therein, asks the court to determine as to his title thereto. Fletcher v. Barker, 82 Hun, 63 St. Rep 568.

In Goebel v. Iffia, 111 N. Y. 170-177; 19 St. Rep. 105, it was said:

“And moreover, if the facts upon which the plaintiff relies to defeat that prior title are stated, the defendant whose title is thus assailed may demur to the complaint upon the ground that the plaintiff has no right to bring him into court upon the foreclosure to try the validity of his title; yet, if the party so made a defendant should, instead of demurring, answer, and litigate the question, and then judgment should go against him, no case decides that the -judgment would not conclude him in a collateral action.”

In Jacobie v. Mickle, 144 N. Y. 240; 63 St. Rep. 102, Lt was held that:

“Where the complaint in the foreclosure action alleges the prior incumbrance, and prays for relief that the amount due thereon be ascertained, and that such amount be first paid out of the proceeds of the sale in foreclosure, and the judgment follows the prayer of the complaint, it has never been doubted in any case that the prior incumbrancer suffering' default in such an action is concluded by the judgment therein. In such an action the court has jurisdiction of the sub-, ject of the action and the parties, and it can not be doubted that it can render judgment against a defaulting defendant in precise accordance with the prayer for relief. If Mrs. Jacobie did not desire to have her rights, as prior mortgagee, adjudicated in the action brought by Guilford, she should have appeared, and demurred or answered in that action, and thus have .raised the question that he was-not a proper party thereto, and had it adjudicated therein. But having, by her default, consented that judgment comprehended within the prayer for relief might be rendered against her, she cannot attack that judgment collaterally, or successfully object that it does not conclude her as to everything therein contained or adjudicated.”

The opinion in the case of Kay v. Whitaker, 44 N. Y. 573, furnishes a negative authority in favor of this appellant. It appears that in one portion of the complaint .in that case there was an allegation that the appellant was in possession of the mortgaged premises as tenant, and that he claimed some interest therein by virtue of a lease from one of the other defendants. In another portion of the complaint was the general allegation that he and the other defendants have, or claim to have, some interest in or lien upon the mortgaged premises, which interest or lien, if any, has accrued subsequently to the lien of the mortgage. In his .answer the appellant admitted that he was in possession, but denied that he was in as tenant, or by virtue of any lease from one of the defendants, and alleged that he ivas the true and lawful owner of the premises; but in other parts of his answer he alleged facts showing clearly that his interest in the premises, if any, was clearly subsequent to the lien of the mortgage, and that he was in possession under an agreement between him and the other defendant, or that he was tenant only of such defendant, and that, in consequence thereof, the allegations in the answer as to the manner of the answering defendant’s occupancy and the nature of his title tendered no material issue. It appears from the opinion that, if the answer had not clearly shown that all the interest of the defendant was subsequent to the lien of the mortgage, the-answer could not have been stricken out as frivolous. In the-case at bar, this issue as to whether or not the interest or claim of defendant is subsequent and inferior to the mort^ gage was clearly presented by the answer herein; and whether defendant’s equities are prior and superior to the rights o£j the plaintiff under her mortgage, or junior and subordinate" thereto, must necessarily be determined in a judgment for the foreclosure of plaintiff’s mortgage. Brown v. Volkening, 64 N. Y. 84; Lanier v. Smith, 37 Hun, 530. If the proceedings ripen into judgment of foreclosure and sale, and the premises are sold thereunder, what protection would a purchaser have if it can be said that this appealing defendant may have a lien or claim upon the property superior to the mortgage under which the purchaser makes title, and, although made a defendant in the action, cannot assert his claim, but may retain it, and must enforce it, if at all, by a subsequent independent action? The purchaser, knowing that .the appealing defendant was a party to the action, knowing that it was alleged in the complaint that any lien or claim he might have was subsequent and inferior to the lien of the mortgage sought to be foreclosed, would have-a right to rely upon the proceedings had to preclude this-defendant from asserting after such sale and purchase, that he still had a lien prior and superior to the lien of the mortgage foreclosed, which existed at the time of the foreclosure and sale proceedings, and that he could, after such foreclosue and sale, enforce such lien against the premises. “The plaintiff was not bound to make a conceded prior incumbrancer a party, but he was bound to sell subject to the prior lien. To permit him to do otherwise would be a fraud upon the purchaser.” Moller v. Muller, 12 Hun, 675, In the case at bar a defendant claims a lien upon the premises prior to the mortgage in suit. There is no record of this lien, but the defendant claiming the lien asserts it in his answer, and thus notifies plaintiff of his lien. Under the doctrine of the Holler Case", the plaintiff must sell under her foreclosure subject to such prior lien, and if she does not she will commit a fraud upon the purchaser. If she does give notice that a prior lien is asserted against the premises, will not that preclude ¡purchasers from bidding upon this property when they are notified that such claim is still outstanding and undetermined? The title to real property is affected by this claim of defendant. He is therefore a proper party to the action, in order that the conflicting interests of the parties may be adjudicated. This is the policy of the law incorporated in the statue. It is provided by section 452 of the Code of Civil Procedure that:

“The court may determine the controversy, as between the parties before it, when it can do so without prejudice to the rights of others, or by saving their rights; but Avhere a complete determination of the controversy cannot be had without the presence of other parties the court must direct them to be brought in. And Avhere a person, not a party to the action, has an interest in the subject thereof or in real property, the title to which may in any manner be affected by the judgment, and makes application to the court to be made a party, it must direct him to be brought in by the proper amendment.”

The controversy in this action is between the plaintiff and this defendant, and can be determined Avithout prejudice to the rights of others. The title to real property is affected, and it is necessary that a complete determination of this controversy be had in this action, Avhere all who are interested have been made parties. The ansAver of the defendant must be tested by the complaint. It puts in issue a material allegation, and is sufficient for the purposes xof this action. The subject-matter of the action—the mortgage—is attacked, and defendant alleges that it is a lien subsequent and subordinate to the lien of this defendant, and not superior thereto, as alleged in the complaint. ' The answer, therefore,' should have been allowed to stand. A defense should not be stricken out and a judgment given upon an ansAver as frivo-1 lous unless it is palpably so. Kay v. Whitaker, 44 N. Y. 573. A material allegation of the complaint was denied by this defendant. A material issue was thus joined, and the rights of all concerned, and the rights of a purchaser under. such foreclosure proceedings, demand that such issue should be disposed by the trial court. We conclude, therefore, that this ansAver should be alloAved to stand, and that the case be sent to the trial court, where the whole matter may be disposed of upon the evidence and the law.

Order reversed, with $l(j costs and disbursements, and the motion for judgment upon the answer as frivolous denied, with $10 costs. All concur except WARD, J., not voting.


text:
    Henry Wittenberg v. John J. L. Friederichs et al.

    (Supreme Court, Appellate Division, Fourth Department,
    July 30, 1896.)
    Master and servant—Injury to servant—Negligence of subcontractor.
    A building contractor is not liable for injury to one of Ms employes caused by the negligence of a subcontractor, where the contractor had no control over the subcontractor.
    Appeal from trial term, Monroe county.

      Action by Henry Wittenberg against John J. L. Friedes'».. ichs & Sons and Frederick C. Seitz, for personal injuries. From a judgment dismissing the complaint as to defendants Friederichs, plaintiff appeals»
    John Desmond, for appellant.
    Joseph W. Taylor, for respondents.
   ADAMS, J.

—The respondents are co-partners carrying on the business of contractors and builders under the firm name of A. Friederichs & Sons. Upon the 4th day of August, 1894, they entered into" a contract with the people of the state of New York for the erection of certain buildings, and, among others, an annex to the Rochester State Hospital, which was to be constructed in accordance with plans and specifications furnished to them. Immediately upon the execution of this agreement, a subcontract was made between the respondents and their co-defendant Frederick C. Seitz, by which the latter undertook to ,do all the carpenter work upon the buildings. Seitz worked directly from the plans and specifications, and the respondents had no control over him, either in the selection of the material used, or in the performance of the work. ■ The east end of the upper story of the annex building was designed for a dining room, and its dimensions were'62x42 feet. The roof over this dining room was to be supported by four wooden trusses, the tie beams or bottom chords of which were to be formed of 10x12-inch yellow-pine timbers. At the time of the accident hereinafter mentioned, the annex building was nearing completion. The outside walls were laid to the level of the bottoms of the joists and the tie beams of the trusses; the tie beams running north and south, and the joists east and west. The east ends of those of the east span (resting upon, but in no manner fastened to, the east wall) were in place, and the attic floor had been laid. Each tie beam was supported by a post standing in the center, and consisting of three hemlock scantlings, each of which ivas 2x5 inches, and the three spiked together, thus forming a post 5x6 inches in size. Before the tie beams were put in place, they had been framed, and the holes bored through them to receive the iron truss rods. The masons were about to begin bricking in between the joists, and putting on the cornice of the wall. Two men were at work bricking in between the joists of the north wall of the north side of the annex building, which was the division wall between that building and the kitchen building. There were a few piles of bricks upon the attic floor,— mostly along the south wall,—and there was no tiling resting upon the tie beams except the joists and floor. The appelhint was in tlie employ of the respondents, and upon the 15th day of September, 1894, was directed by them to carry bricks up to the attic floor, and deposit them near the wall, to be used by the masons in finishing the same. While engaged in the performance of this duty, the attic floor, suddenly and without any warning of any kind, gave way and fell; and the plaintiff fell with it, and received serious personal injuries. After the accident it was discovered that the beam which was nearest to the east wall had broken about 14 feet from the north wall. The break in this timber covered a space of about 2 feet, and at the point of breakage there were several large knots. It was also found that a hole about 1 1-4 inches in size had been bored through it, and on the underside there was a mortise about 6 inches in diameter, and about 1 1-2 inches deep, for the purpose of giving place to the washer and nut for the bolt Avhich Avas to pass through it when completed. When the floor fell the east Avail of the building was shoved outAArard, and a considerable portion of this wall also fell. The action Avas brought to trial at the Monroe trial term, in January, 1896, and at the close of all the evidence a motion was made in behalf of all the defendants to nonsuit the plaintiff. The motion was granted as to the defendants Friederiehs, and denied as to the defendant Seitz, and as against the last-named defendant the jury subsequently rendered a Arerdict in favor of the plaintiff for $4,000. . i

We are persuaded that, in so far as these respondents are concerned, no error Avas committed by the learned trial court in the disposition Avhich Avas made of the case at the trial term. It will be seen, by a careful reading of the complaint in this action, that that pleading AAras framed upon the theory that the accident AA*as attributable solely to the defective, unsafe, and dangerous condition of the floor of this building; and no allegation will be found therein which, either directly or by implication, charges the respondents AA'ith any negligence in the construction of the brick AiTalls of the annex building. It is also quite apparent that the plaintiff, in bringing this action, assumed that the respondents, by reason of the fact that they were the contractors for the construction of the building, could in some way be made liable for Avhatever negligence or unskillfulness he might be able to establish in the construction of the floor, the giving Avay of Avhich caused the injury complained of.

Subsequently the plaintiff was required to furnish a bill of particulars, in which it Avas, for the first time, claimed that the AA’alls of this building, Avliich supported the floor, were defectively constructed, in that they did not contain a sufficient number of binding courses of bricks, as a part thereof; and upon the trial some evidence was given in support of this contention, and two witnesses were called who testified that after the accident they examined the walls' of the building, and found places where 14 courses of bricks were laid without a header or binder, which, it was claimed, was an improper method of construction. The difficulty with this claim upon the part of the plaintiff is that that portion of the wall which it is said was thus defectively con-drueied was in no way affected by the accident, whereas ¡hat portion of the wall which did fall out was, according to (he testimony of all the witnesses in the case, properly laid. And it was further made to appear, by satisfactory evidence ¡hat tiie falling of the east Avail was not a proximate cause, but, rather, one of the results, of the accident. In other words, the falling of the Trail did not cause the beam to break, but the breaking of the beam did cause the fall-' ing of the AA’all. It is very clear, therefore, that, if the plain tiff’s injuries Avere the result of negligence upon the part of any one, it AAras the negligence of the subcontractor, deitz, and not of the respondents; and it folloAvs that the respondents are under no liability to the plaintiff for the injuries sustained by him, unless in some way they can be made responsible for the failure of their co-defendant, Seitz, to properly perform his part of the contract. We are unable, hoAvever, to discover any principle upon which it may he held that any responsibility attaches to these respondents by reason of the negligence of a third party, over whose acts they had no control. It is true that, as between these respondents and the appellant, the relation of master and servant existed, and that by reason of this relation the former Avere required to exercise a proper degree of care in order to furnish the latter a reasonably safe place in which to perforin the duties demanded of him. But this requirement extended only to such places as the master has control over, and Avhere a master sends his servant to Avork upon premises or property controlled by another, without notice of any defect in construction, the rule just adverted to has no application; for it cannot be said, in such circumstances, that the place was in any manner pro Added, by the master. And in the case at bar we have seen that, so far as the carpenter work of this building Avas concerned, it Avas being performed under a separate and distinct contract, by a third party, •over Avhose actions the respondents had no control, and for whose conduct and workmanship they are in no sense responsible. Moreover, it appears that this subcontractor Avas a man of skill and experience, and the respondents were just i bed in assuming that he Avould perform his part of the contract in a satisfactory and proper manner. It seems that he laid, or caused to be laid, the floor of this attic, and for the-time being the same >vas used by the plaintiff, and probably other employes of the respondents, as a means or appliance for the performance of the duties required of them. In other words, in carrying bricks to be used by the masons in finishing up the walls of the building, they walked over this floor precisely as they would have walked over a platform or staging constructed for that particular purpose. And it is now well settled that, where such a contrivance or apjfliance has been constructed by a skillful and experienced builder, the master is not liable to his servant for injury resulting from negligence in its construction, and is at liberty to accept the same without inspection. Devlin v. Smith, 89 N. Y. 470; Butler v. Townsend, 126 N. Y. 105, 36 St. Rep. 508. We think these authorities are, in principle, decisive of this case; and it matters not whether the attic floor in question is. to be regarded as an “appliance” or a “place,” for in either-case the respondents—not having constructed it, and having no control over it—cannot be charged with responsibility for its defective construction. Whallon v. Elevator Co., 1 App. Div. 264. We conclude, therefore, that the judgment appealed from should be affirmed.

Judgment appealed from affirmed, with costs. All concur-