author: Brown, J.

text:
    Benjamin Decker, Resp’t, v. G. Clinton Gardner, App’lt.

      (Court of Appeals, Second Division,

      Filed February 24, 1891.)

    Trespass—Parties—Receiver oe railroad.
    After an action has been begun .against a railroad corporation for a trespass committed by it, a receiver appointed in a subsequent action to foreclose mortgages upon the railroad property is not a proper party to the trespass action, and it is not maintainable against him.
    Appeal from a judgment of the general term of the fifth judicial department, which affirmed a judgment entered upon a verdict.
    This action was brought originally against the Buffalo, New York & Philadelphia Railroad Company to recover for a trespass alleged to have been committed by said company in May, 1884.
    After the case was at issue, and in May, 1885, the defendant was appointed receiver of the property of said railroad company by the circuit court of the United States for the western district of Pennsylvania in an action brought therein to foreclose general trust mortgages upon the railroad property. An action auxilliary to the aforesaid action was subsequently brought in the circuit court for the northern district of New York, and in such action said defendant was appointed receiver of said railroad in said district, and pursuant to such orders the 'defendant took possession of the mortgaged railroad property, and continued in possession until the sale thereof under judgment of foreclosure entered in said actions.
    By an order of the supreme court made in September, 1887, the receiver was substituted as defendant in this action in the place and stead of the railroad company, and it was provided that the action proceed with like effect as if originally commenced against him.
    An amended complaint was served which alleged the incorporation of the railroad company, the trespass, the appointment of the receiver, and the order substituting him as- defendant, and demanding judgment for damages.
    The receiver pleaded a general denial, and upon the trial moved that the complaint be dismissed on the ground that the action could not be maintained against him. The exception to the denial of that motion presents the question discussed in the opinion.

      John G. Milburn, for app’lt; F. B. March, for resp’t.

       Reversing 33 R T. State Rep., 541.

   Brown, J.

Jurisdiction to appoint receivers of corporations is wholly statutory.

The power to declare a forfeiture of corporate franchises was originally in England vested in the courts of law, and was exercised in" a proceeding brought by the attorney-general in the name of the sovereign.

The court of chancery never assumed jurisdiction in such cases until it was conferred by act of parliament

It declined until the power was conferred by statute to sequestrate corporate property through the medium of a receiver or to dissolve corporate bodies or to restrain the usurpation of corporate powers. Ang. & A. on Corp., § 777; Slee v. Bloom, 5 Johns. Ch., 366-381; Att'y-Gen. v. Utica Ins. Co., 2 id., 389.

The courts of this country followed the English system, Att’y-Gen. v. Utica Ins. Co., supra; Att'y-Gen. v. Bank of Niagara, Hopkins, 354, and the jurisdiction in such cases is now a subject of statutory regulation in most if not all the states.

In 1825 the legislature of this state authorized the court of chancery to sequestrate the property of corporations against whom judgment at law had been obtained and execution was returned unsatisfied, and to appoint receivers of the same, and to decree the dissolution thereof in cases of insolvency. Chap. 325, Laws of 1825. The system then inaugurated was continued by the Revised Statutes and subsequent legislation, and is known generally under the head of proceedings against corporations in equity. 2 R. S., 462 ; Code Civ. Pro., chap. 15, title 2. The receivers authorized by statute to be appointed upon the dissolution of the corporation are the representatives of the corporate body, and, generally, are vested with the title to the corporate property, and for the purpose of administering thereon and winding up the affairs of the corporation succeed to its powers and franchises.

In this state they are vested with all the real and personal es-fate of the corporation and are made trustees of such estate for the benefit of the creditors and stockholders and possess generally all the powers and authority conferred by law upon the assignees of insolvent debtors. 2 R. S., 464, § 42 ; 469, §§ 67, 68; Code Civ. Pro., § 1788.

Receivers appointed pendente lite are, however, mere temporary ■officers of the court, and do not possess the "powers of a permanent receiver unless specially conferred upon them by order of "the court. Code Civ. Pro., §§ 1788, 1789; Herring v. N. Y., L. E. & W. R. R. Co., 105 N. Y., 372, 375; 7 N. Y. State Rep., 547.

The court of chancery, however, possessed and exercised in many cases the power to appoint receivers pendente lite of property which was the subject matter of litigation before the court. Such receivers possessed no legal powers. They were officers of "the court merely and their functions were limited-to‘the care and preservation of the property committed to- their charge, and they possessed no authority except such as the orders of the court conferred. Pomeroy’s Eq., vol. 3, §§ 1331-1336; Herring v. N. Y, L. E. & W. R. R. Co., supra; Keeney v. Home Ins. Co., 71 N. Y., 396. This power of appointment of a receiver pendente lite was one incidental to the jurisdiction of the court It did not depend upon statute and was not affected by the character of the parties before it, whether an individual or a corporation, or by the nature of the property. Trust Co. v. N. Y., W. S. & B. Ry. Co., 101 N. Y., 478. Its most common exercise was in foreclosure suits whenever, by reason of the insufficiency of the security, it became necessary to impound the rents and profits of the mortgaged property during the litigation in order that they might, after the decree and sale, be applied upon the debt for the security of the mortgagee, Hollenbeck v. Donnell, 94 N. Y., 342; Jones on Mortgages, § 1516. This particular jurisdiction has been extended to and is frequently exercised upon the foreclosure of mortgages upon railroads, and receivers of such property are charged with the duty of the operation of the road pending the foreclosure suit, to the end that the value of the property, which necessarily depends largely upon the condition of its business and continued operation, may not be depreciated, and also to the end that its income may not be diverted to the payment and satisfaction of debts which are not liens upon the property.

While this class of receivers have many duties and powers peculiar to themselves, they are such only that flow from the nature and character of the property • committed to their charge, and in their legal character and relation to the mortgagor they differ in no respect "from the receiver of rents and profits of mortgaged property appointed in actions to foreclose mortgages against individuals.

They do not represent the corporation in its individual or personal character, nor supersede it in the .exercise of its corporate powers except so far as the mortgaged property is concerned. The corporation is not dissolved by the order appointing the receiver, Kincaid v. Dwinelle, 59 N. Y., 553 Pringle v. Woolworth, 90 id., 502, and it is clear that in an ordinary foreclosure suit no attack is made upon its corporate existence, and hence no judgment that can be entered in the action will affect its corporate life.

In every respect except the possession and management of the mortgaged property, the corporation is free and unfettered to exercise its franchise. Beach on Receivers, § 335. Accordingly it has been held that after the appointment of a receiver and the sale of mortgaged property it was competent and lawful for stockholders to elect directors. State v. Merchant, 37 Ohio, 251. That in an action under a statute against a corporation to recover for building a fence it was not a defense that at the time of doing the work the railroad was in the possession of a receiver appointed by a federal court in a foreclosure suit. O. & M. R. R. Co. v. Russell, 115 Ill., 52. That the fact that a railroad was in the possession 'of a receiver was no defense to the settlement of an account for taxes against the corporation. P. & R. R. R. Co. v. Commonwealth, 104 Pa., 80.

In U. S. Trust Co. v. N. Y., W. S. & B. Ry. Co., 101 N. Y., 478, the distinction between statutory receivers of corporations and receivers of mortgaged property was fully discussed, and it was held that § 2 o£ chap. 378, Laws of 1883, had no application to the latter class.

In Pringle v. Woolworth, 90 N. Y., 502, it was held that the plaintiff was not debarred from maintaining an action against an insurance company by the appointment of a receiver.

The question under discussion was substantially decided in Arnold v. The Suffolk Bank, 27 Barb., 424, and it was there held in accord with the view here stated that a receiver of a bank could not be joined as a defendant in an action against the bank on a money demand. In that case, as here, the cause of action arose before the receiver’s appointment, and it was said by the court “that the mere fact that A. is the receiver of B., whether they be natural or artificial persons, will not justify a creditor of B. in bringing A. as a party into every suit against B., when the rights and remedies of the plaintiff end with B.” A.similar ruling was made in Fleischauer v. Dittenhoefer, 49 Superior Court, 311. The respondent has cited but two cases to sustain the judgment. Pickersgill v. Meyers, 99 Pa., 602; Combs v. Smith, 78 Mo., 32.

In the Pennsylvania case the corporation was dissolved and the receiver appointed after dissolution. In the Missouri case while the facts in reference to the appointment of a receiver are not stated, enough appears in the opinion of the court to indicate that the defendant was a statutory receiver. In that view, the case is in harmony with the general current of authorities, but if the facts were otherwise it would not have our approval.

The defendant in this case was appointed by the circuit court in pursuance of its powers as a court of chancery. His functions were confined to the care and preservation of the mortgaged property, and his appointment gave him temporary management of the railroad under direction of the court; nothing more. The mortgage covered all the railroad property, real and personal, and hence all property of the corporation was placed in his possession. He was authorized to operate the road, protect his title and possession, to defend all suits brought against him or the railroad company, to intervene in any suits or proceedings then pending, and was invested with the authority and powers usually conferred upon receivers in like cases according to the bourse and practice of the courts of the United States sitting in equity. By the same order the corporation was enjoined from interfering with said receiver in the possession and management of the railroad property. He did not represent the corporation or supersede it in the exercise of its powers excejjt in relation to the possession and management of the property committed to his charge.

Notwithstanding his appointment, the corporation was clothed with its franchises and still existed. It could still éxercise its power so it did not interfere with the management of the railroad. It could do many corporate acts and it could do all things necessary to preserve its legal existence. It could sue and be sued and was liable for its acts and upon its contracts and covenants the .same as if the receiver had not been appointed.

With the particular cause of action set out in the complaint the defendant had no connection, and it could in no possible way be charged upon the property in the receiver’s possession. Met. Trust Co. v. Tonawanda R. R. Co., 103 N. Y., 245; 2 N. Y. State Rep., 69; Raht v. Attrill, 106 N. Y., 423; 11 N. Y. State Rep., 9. For it the corporation was alone liable and there was no legal obstacle to an action against it and a judgment, if recovered, was collectible out of its available assets.

It follows from these views that the defendant was not a proper party to the suit, and that the action was not maintainable against him.

The judgment should be reversed.

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


source: Caselaw Access Project

author: Vann, J.

license: Public Domain

text:
    Lemuel Coffin et al., App’lts, v. William H. Hollister, Jr., Resp’t.

      (Court of Appeals, Second Division,

      Filed February 24, 1891.)

    Appeal—Fnmnres op pact.
    Where the finding of a court or referee depends upon the credibility of witnesses, the facts found by the trial court and approved by the general term are final and unchangeable for the purpose of an appeal to this court.
    Appeal from a judgment of the general term of the supreme court, in the third judicial department, affirming a judgment in favor of the defendant, entered upon the report of a referee.
    Action of replevin to recover the possession of fifteen cases of muslin that had been sold by the plaintiffs to the firm of Toles & Pettit, manufacturers of shirts in the city of Troy. On the 3d of January, 1882, said firm made a general assignment of .all their property, including said muslins, to the defendant for the benefit of creditors.

      R. A. Parmenter, for app’lts; N. Davenport, for resp’t.

       Affirming 37 N. Y. State Rep., 637.

   Vann, J.

On the 31st of October, 1881, the plaintiffs sold the goods in question to the assignors of the defendant upon a credit of sixty days from December 1, 1881, and on the 17th of January, 1882, they commenced this action to replevy the same, upon the ground that they had been induced to sell and deliver their property by reason of certain false and fraudulent representations made by the purchasers. The burden of proof was upon the plaintiffs to establish that the alleged false representations were made by the vendees with intent to deceive and defraud. Nichols v. Pinner, 18 N. Y., 295, 299; Arthur v. Griswold, 55 id., 400, 410; Morris v. Talcott, 96 id., 100; Macullar v. McKinley, 99 id., 353, 358; Brackett v. Griswold, 112 id., 454, 467; 21 N. Y. State Rep., 791.

The learned referee before whom the action was tried found that certain material representations were made, but he did not find that they were made with intent to defraud, and he refused to find that they were false. On the other» hand, he found that the defendant, as assignee, was the actual owner of the goods when this action was commenced, and that no facts ever existed that authorized the plaintiffs to rescind the sale or to have the same declared fraudulent and void. These findings have been expressly approved by the general term, which states in its opinion that the referee’s report is justified by the evidence. The only ground upon which we are asked to reverse the judgment appealed from is that the referee erred in passing upon the facts.

We are unable, however, to review his conclusions in this regard, because the questions of fact rest upon a conflict of evidence and are thus protected from interference by us, even if we were of the opinion that they should have been otherwise determined. Healy v. Clark, 120 N. Y., 642; 30 N. Y. State Rep., 897; Code Civ. Pro., §§ 992, 993 and 1337. When the result depends, as it did in this case, upon the credibility ' of witnesses, the facts found by the trial court and approved by the general term are final and unchangeable for the purpose of an appeal to this court. This is often said, but oftener disregarded, and the result is many fruitless appeals.

The judgment must be affirmed, with costs.

All concur.


author: Parker, J.

text:
    Samuel Tucker, Adm’r, Resp’t, v. The New York Central & Hudson River R. R. Co., App’lt.

      (Court of Appeals, Second Division,

      Filed February 24, 1891.)

      1. Negligence—Contributory.
    Plaintiff’s intestate, a hoy twelve years old. arrived at defendant’s crossing with his brother, who passed over in safety. Deceased rested a bag on the bumper of a car standing eleven feet from the track on which a locomotive was approaching, and still having six tracks to cross, and after turning his face in the direction of its approach, passed on and was struck by the tender. Held, that the fact that his face was turned in the direction from whence the locomotive came would not justify a jury_ in finding that he did look and observe that measure of care and caution which the situation imposed.

      2. Same—Care required of boy of twelve years.
    In the absence of evidence tending to show that an injured infant twelve years old was not qualified to understand the danger and appreciate the necessity for observing that degree of caution in crossing a railroad track which an adult would, he must be deemed sui juris.

    . (Bradley and Vann, JJ., dissent.)
    Appeal from a judgment of the general term of the superior-court of Buffalo, affirming a judgment in favor of the plaintiff, entered upon the verdict of a jury.
    The plaintiff’s intestate, a boy twelve years of age, while crossing Smith street in the city of Buffalo on the 27th day of December, 1885, was run over by defendant’s locomotive and killed.
    It appears that plaintiff’s intestate and his brother were passing-southerly down Smith street, which was crossed between Oneida, and Bristol streets by four railroad tracks belonging to the defendant corporation, by three tracks of the West Shore railroad and two tracks of the Lake Shore & Michigan Southern railroad. They were on the westerly walk of the street, and after passing over the West Shore tracks came to a switch track belonging to the defendant. The switch track on each side of Smith street had cars standing upon it, but a passageway was open on Smith street to enable teams and individuals to cross. The plaintiff’s intestate was carrying upon his shoulder a bag partially filled. When he reached the center of the switch track he changed the bag from one shoulder to the other, resting it on the bumper of the car as he did so. While changing the bag he faced in the direction of the locomotive, which was then backing down at a high rate of' speed. Had he looked he could have seen down the track on which this locomotive was coming a distance of 186 feet From that point to the center of the track where he was struck and killed was a distance of fourteen feet. To the north rail of the track it was eleven feet, and between the southerly rail of the switch track-and such north rail it was eight feet and five juches. After changing the bag he started on, his brother being then about fifty feet ahead of him. After taking one step there was an unobstructed view down the track on which the locomotive-was coming for two streets, and' before reaching the north rail it was possible to see along it for the distance of nearly a mile. When he had reached about the center of the track he was struck and killed. The plaintiff introduced evidence tending to show that the flagman in charge of this crossing was not‘out when the plaintiff’s intestate passed and that the bell was not rung or the whistle of the engine blown until the moment when the accident occurred, but as the question of contributory negligence is alone considered in the opinion, further facts as to that branch of the-case need not be given.

      James Fraser Gluclc, for app’lt; Henry W. Hill, for resp’t.

       Reversing 38 N. Y. State Rep., 863.

   Parker, J.

Whether the complaint should have .been dismissed after the evidence was all in on the ground that the negligence of the plaintiff’s intestate contributed to the accident the which we shall discuss on this review,

In its disposition we shall consider first whether, assuming the intestate to have been sui juris, the evidence adduced authorizes the jury to find that plaintiff’s intestate was free from contributory negligence. If not, whether the fact that the intestate was only a little over twelve years of age, considered in connection with the other circumstances proven, could .be permitted to effect a different result.

The plaintiff in order to recover for the damages sustained by the killing of his intestate, which was occasioned by his being run over and killed by a locomotive on the defendant’s road while crossing its tracks on Smith street in the city of Buffalo, was burdened with the necessity of proving first, that the defendant was guilty of negligence, and second, that he was free from all fault contributing to that result.

The law requires a traveler before crossing a railroad track on a public highway to look and listen for the approach of trains.. If he omit to do so and suffers injury while crossing, he can not recover because of such omission. That which it is his duty to do, he, or in the case of death, his representative, must in an action to recover for damages sustained prove was done, or at least must prove facts from which the inference can reasonably be drawn that he performed his duty in that respect. It will not be presumed that he looked; it must be proven. The plaintiff attempted to meet this requirement by the evidence of a witness who testified that before the intestate crossed the track, in the doing of which he was struck by the locomotive and killed, he stopped in the center of the switch track eleven feet from the north rail of the track upon which the locomotive was running and shifted the bag which he was carrying from one shoulder to the other, resting it upon the bumper of a car standing on the track as he did so, and that at this time his face was turned in the direction of the approaching engine. He then passed, on in a southerly direction for the distant of about fourteen feet, when he was struck.

The witness further testified that after changing the bag from one shoulder to the other he did not again turn his head to the left, as it would have been necessary for him to do in order to see the approaching locomotive. It is urged that inasmuch as it appears that his face was turned in the direction from whence the locomotive came that a jury could be permitted to find that he did look and thus observed that measure of care and caution which the situation imposed. We are unable to agree with that contention, for it appears that from the place where he was standing it was possible to see along the track a distance of 186 feet; that when he reached the south rail of the switch track, a distance of eight feet and five inches from the north rail of the track upon which the locomotive was running, he could see for two streets away, and that before reaching such rail the view was unobstructed for nearly a mile. It seems to be clear, therefore, that the plaintiff did not meet the burden resting upon him by merely showing that his face was turned in that direction, for if he had looked he must have seen this engine approaching. But if the inference was permissible that he looked at the moment of chauging the bag, it does not meet the requirements of the case. He had still six tracks to cross and was then eleven feet from the south rail of the first track. To look then, and not again, to go on from that point without observing the further precaution of watching, for the approach of trains upon tracks almost constantly in use, was not a proper observance of the care which it was his duty to exercise. Cullen v. D. & H. C. Co., 113 N. Y., 668; 23 N. Y. State Rep., 719; Cordell v. N. Y. C. & H. R. R. R. Co., 70 N. Y., 119; Woodard v. N. Y., L. E. & W. R. R. Co., 106 id., 369; 11 N. Y. State Rep., 169; Young v. N. Y., L. E. & W. R. R. Co., 107 N. Y., 500; 12 N. Y. State Rep., 285.

And this the plaintiff’s intestate did according to the evidence of the witness Martin, who was called by the plaintiff to prove that at the moment of shifting the bag Tucker was facing in the direction of the approaching locomotive. Indeed, it must have been so, for had he looked at any moment before reaching the track he would have observed its coming.

It appears that the wind was blowing severely, and snow was falling rapidly, and it is suggested that by reason thereof he may have been prevented from seeing the approaching locomotive, but the evidence introduced on the part of the plaintiff shows that such was not the fact. There were two little girls on the cars at the crossing at the point where the boy stood when shifting the bag from one shoulder to the other, and they saw the locomotive coming. Frank Surrnes was on Smith street near the place of the accident at the time of its occurrence, and he testified that he saw it approaching when it was at Oneida street. The witness Martin also saw it when 350 feet distant. Ho witness pretends that it could not be seen," and no room exists for the inference that the plaintiff’s intestate could not have seen it had he looked.

We are thus led to the conclusion that there was no evidence authorizing the jury to find that the plaintiff observed that degree of care and caution which the law imposes on one while in the act of crossing railroad tracks on a public street. If he had been an adult, therefore, it would have been the duty of the court- to have dismissed the complaint. Does a different rule apply because the intestate was a boy only a little over twelve years of age ? An infant of tender years is not expected to exercise the same care and caution which is required of a person of more advanced age, so that it frequently becomes a question for the jury under proper instructions by the court whether a child exercised that measure of care and caution which should be required and expected from it

In the case of McGovern v. N. Y. C. & H. R. R. R. Co., 67 N. Y., 417, a boy eight years of age while crossing a railroad track was struck by a backing engine and killed. In that casé this court held that it was a question for the jury to determine whether he exercised that degree of care and circumspection which a child of his years and maturity of judgment would be expected to exercise.

In the case of Wendell v. N. Y. C. & H. R. R. R. Co., 91 N. Y., 420, the plaintiff’s intestate, a boy of seven years of age, was held to have been guilty of culpable negligence, it appearing that he was a bright, active boy, capable of understanding the peril of the situation which he recklessly encountered, resulting-in his death.

In Stone v. Dry Dock Railroad Co., 115 N. Y., 104; 23 N. Y. State Rep., 551, the plaintiff’s intestate, a child of seven years, was run over by a street car, and in that case it was held that he could not be deemed, as a matter of law, to be sui juris so as to be chargeable with negligence, but that it presented a question for the jury.

In the Reynolds case 58 N. Y., 248, a bright and intelligent boy, thirteen years of age, was killed while crossing a railroad track. The summer before he had worked on a farm and received $13 a month and board for his services, but at the time of the accident he was living at home attending school. The plaintiff was unable to show that his intestate observed that care which was required of persons crossing a railroad track, and the court, having under consideration the distinction which the law makes between those who are sui juris and non sui juris, held that the plaintiff should have been nonsuited.

The fact that the boy Tucker was twelve years old, intelligent, accustomed to attend school and assist the family by his labor, and lived near the railroad, seems to bring this case within the rule of the Reynolds case; indeed we see no opportunity to distinguish them.

In Nagle v. A. V. R. R., 88 Penn. St, 35, the court, in considering the age at which an infant should be presumed to be sui juris, say: “ The law fixes no arbitrary period when the immunity of childhood ceases and the responsibilities of life begin. For some purposes majority is the rule. It is not' so here. It would be irrational to hold that a man was responsible for his negligence at twenty-one years of age and not responsible a day or a week prior thereto. At what age, then, must an infant’s responsibility for negligence be presumed to commence ? This question cannot be answered by referring it to a jury. That would furnish us with no rule whatever. It would give us a mere shifting standard, affected by the sympathies or prejudices of the jury in each particular case. One jury would fix the period of responsibility at fourteen, another at twenty or twenty-one. This is not a question of fact for the jury; it is a question of law for the court Hor is its solution difficult The rights, •duties and responsibilities of infants are clearly defined by the text writers as well as by numerous decisions. We have seen that the law presumes that at fourteen years of age an infant has sufficient discretion and understanding to select a guardian and contract a marriage, is capable of harboring malice and of taking human life under circumstances that constitute the offense of murder. It, therefore, requires no strain to hold that at fourteen an infant is presumed to have sufficient capacity and understanding to be sensible of danger, and to have the power to avoid it And this presumption ought to stand until it is overthrown by clear proof of the absence of such discretion and intelligence as is usual with infants of fourteen years of age.”

• The Penal Code provides that when an infant is charged with crime, upon the prosecution rests the burden of showing that the defendant has sufficient intelligence and maturity of judgment to render him capable of harboring a criminal intent until the age of twelve years, at which time the presumption of incapacity ceases. How, while this statute does not undertake to prescribe and does not necessarily affect the rule to be applied in civil actions, it suggests, as asserted in the Nagle case, an age to which the courts can with safety limit the presumption of incapacity on the part of an infant to appreciate the perils incident to crossing railroad tracks. This presumption may in a proper case be so far overborne by evidence as to present a question for the jury. But in the absence of evidence tending to show that an injured infant twelve years old was not qualified to understand the danger and appreciate the necessity for observing, that degree of caution in crossing a railroad track which an adult would, he must be deemed sui juris.

Ho attempt was made to prove that the plaintiff’s intestate was not a boy of average intelligence and experience, or that for any reason he could not fully appreciate the risks to be encountered in making the crossing without looking and listening for the approach of trains. Under the evidence, therefore, he must be held to be sui juris and chargeable with the same measure of caution as an adult

The views expressed lead to the conclusion that the judgment should be reversed.

All concur, except Bradley and Vann, JJ., dissenting.


text:
    Charles E. O’Connor, Rec’r, Resp’t and App’lt, v. The Mechanics Bank ,App’lt and Resp’t.

      (Court of Appeals, Second Division,

      Filed February 24, 1891.)

    Banks—-Liability fob payment of check after demand by receiver of PAYEE.
    The executors of an estate made a distribution of the fund deposited in bank among the several heirs, and gave checks therefor. A receiver of one of the heirs, appointed in supplementary proceedings, demanded his share of the bank, before the check passed into the hands of a bona fide holder. Thereafter the bank paid the check. Held, that the receiver had no title to the debt against the defendant created by the deposits of the executors.
    Cross appeals from a judgment of the general term of the supreme court in the first judicial department, modifying, and affirming as modified, a judgment entered on the decision of the justice presiding at circuit, upon a trial without a jury.
    This was an action at law by a receiver, appointed in proceedings supplementary to execution, to recover a sum of money deposited by a third party with the defendant, and alleged to belong to the judgment debtor.
    The judgment, upon which plaintiff’s appointment as receiver is based, was recovered April 2, 1886, against Herbert F. Beecher. On the 8th of March, 1887, Henry Ward Beecher, father of the judgment debtor, died leaving a will, that was duly proved in April following, by which he gave his residuary estate to his executors in trust for the benefit of his children, four in number, with power to sell all or any part thereof, and directed that the same should be distributed “in such manner and form and at such time or times as shall in their judgment be for the best interests of my said children.” The estate consisted of both real and personal property of considerable value, and the executors, Henry B. and William 0. Beecher and Samuel Scoville, having sold a part of the personalty, deposited the proceeds in different banks, one of which was the defendant, the account being entitled “Estate of Henry Ward Beecher.” Checks were drawn upon this account in the due administration of the estate, each being signed either by Henry B. or William C. Beecher, as “executor.”
    The trial court found, in addition to the foregoing facts, “ that in the first part of January, 1888, said executors made a distribution among all the legatees under the said will of said fund so deposited by them, and apportioned about $5,000 thereof as the share of the said judgment debtor.” It does not appear how such apportionment and distribution was made, except that Henry B. Beecher, on January 30, 1888, drew a check on said account to the order of the judgment debtor for $2,286.92, being the balance due him after paying certain debts pursuant to his instructions, and mailed it to him at Port Townsend, Washington Territory, where he resided. He endorsed it' in blank, and after passing through several hands it was paid by the defendant March 10, 1888, in the usual course of business. It was never certified and had not been presented before. January 27, 1888, . a third-party order based upon said judgment was obtained for the examination of William C. Beecher, and the next day was served upon him, and on February 1st he appeared and was examined. A like order for the' examination of defendant’s cashier was granted and served on the day last named, and the next day an examination was had thereunder and further proceedings were adjourned until March 21, 1888. Each order contained the usual injunction clause. From December 19, 1887, to February 2, 1888, said account in the defendant bank was not less than $4,644.71, and thenceforward to February 11th it stood at $1,038.49, and after that date until March 10th at $2,428.54.
    February 3, 1888, the plaintiff was appointed receiver under the first of said orders and the next day the receivership was extended to the proceedings under the second order. On the 9th of February, and after the plaintiff had qualified, he demanded from the defendant that it should pay him “ the sum of $2,286.92, amount on deposit in said bank in the said account of the estate of Henry Ward Beecher,” and deliver all money or property in its custody or control belonging to the judgment debtor, or “ due him from it,” but the demand was refused, and February 27, 1888, this action was commenced. Herbert F. Beecher had no notice of the proceedings which resulted in the appointment of the plaintiff as receiver.

      As conclusions of law, the court found that all funds deposited by the executors were trust funds and that the bank had notice of the fact; that upon the apportionment and distribution by the executors the share of the judgment debtor became vested in him, and subsequently passed to the plaintiff as receiver, in whose'favor judgment was ordered for the sum of $1,300, which was fixed upon as the amount necessary to cover the judgment for $484, with interest thereon, together with the costs and receiver’s expenses.
    Upon appeal by both parties to the general term, the judgment was modified by reducing the recovery to $692.65, and, as thus modified, affirmed.
    Both parties now appeal to this court, the plaintiff claiming the right to recover the entire fund in controversy, while the defendant claims that there should be nc> recovery whatever against it.

      Fdwin B. Leavitt, for pl’ff; William C. Beecher, for def’t.

       Reversing 27 N. Y. State Rep., 1.

   Vann, J.

This is not a creditor’s bill to establish a lien, or to remove an obstacle to the collection of a debt, but a strict action at law to recover a definite sum of money from the defendant. It does not involve the right of the plaintiff to proceed against the executors, or to collect the- debt that he represents out of any interest which the judgment debtor may have in his father’s estate. In order to recover in this action the plaintiff was bound to show that when the third-party order was served upon the defendant it had in its possession, or under its control, certain personal property then belonging to the judgment debtor, or that it then owed him a debt exceeding ten dollars in amount. Code Civ. Pro., §§ 2441, 2468 and 2469; McCorkle, as rec'r, v. Herrman, 117 N. Y., 297; 27 N. Y. State Rep., 333. The real question, therefore, is whether the bank was owing the judgment debtor anything, or had any of his property in its possession or under its control. The deposit by the executors with the defendant of money received by them from the sale of the personalty, the apportionment thereof among the legatees and the mailing of the check form the basis upon which the plaintiff rests his claim that the bank either owed a debt to the judgment debtor or was possessed of some property belonging to him.

As the legal title to the personal property before it was sold was in the executors, so the legal title to the proceeds of the sale was in them. When they deposited the proceeds in the bank, however, the title to the money passed to the defendant, which impliedly promised to pay the debt thereby created by honoring the chedks of the depositor as they were presented. Thenceforward the relation of the bank and the executors was that of debtor and creditor only. In a legal sense the executors' had no money in the bank, but simply a debt against the bank for the amount of the deposit Ætna National Bank v. The Fourth National Bank, 46 N. Y., 82, 86; Viets v. The Union National Bank, 101 id., 563, 573; Lynch v. The First National Bank, 107 id., 179, 184; 11 N. Y. State Rep., 389. Therefore, unless this debt, which the executors held against the defendant, was in some way transferred, wholly or in part to Herbert F. Beecher, there can be no recovery by the plaintiff, who has simply the title of the judgment debtor. There was no transfer of the ' debt, unless the apportionment and distribution by the executors and the giving of the Aheck by them effected a change of title thereto. The apportionment and distribution was apparently a mere agreement by the executors among themselves, subject to revocation or change at any time before actual performance. No assignment was made either in writing or even by oral agreement, as was the fact in the case of Risley v. Phoenix Bank, 83 N. Y., 318. The mere determination of the executors to apportion and distribute among the legatees certain funds on hand, accompanied by no act of performance, transferred no title or interest therein to any one; and had no effect upon the debt against the bank, which had no notice that a distribution was intended or that any special fund was set apart for that purpose. No act either of apportionment or of distribution was shown, except the giving of the check, and that did not operate as a transfer to the holder of any right as against the bank. An ordinary, uncertified check upon a general account is neither a legal nor an equitable assignment of any part of the sum standing to the credit of the depositor and confers no right upon the payee that he can enforce against the bank. Attorney General v. The Continental Life Ins. Co., 71 N. Y., 325; Duncan v. Berlin, 60 id., 151; Ætna National Bank v. The Fourth National Bank, supra; Chapman v. White, 6 N. Y., 412; Carr v. National Security Bank, 107 Mass., 45, 48.

Such a check, as was said by the supreme court of the United States in a recent case, “ is simply an order which may be countermanded, and payment, forbidden by the drawer at any time before it is actually cashed.” Florence Mining Co. v. Brown, 124 U. S., 385, 391.

The rule is otherwise when the check or order is drawn upon a particular fund, which is specified, but that has no application to this case, because the check in question was in the ordinary form, and was drawn upon no particular or specified fund. There was no transfer, therefore, by the executors to the judgment debtor of any part of their claim against the bank, and the plaintiff had no title upon which to found this action unless it was derived from some source other than the executors. Even if the judgment debtor, after the delivery of the check to him, could have compelled the executors to pay it, still he could not have compelled the bank to pay it, because there was no contract between him and the bank, and no assignment of any'interest in the contract between the executors and the bank. • The bolder of an ordinary check, unaccepted and uncertified, cannot compel payment from the bank upon which it is drawn, even if the account of the drawer is sufficient to meet it when presented. Under such circumstances the right of action belongs to the drawer, or creditor of the bank, and not to the holder, who is merely a stranger. Viets v. The Union National Bank, 101 N. Y., 563, 572; Ætna National Bank v. Fourth National Bank, supra; Winter v. Drury, 5 N. Y., 525.

The courts below proceeded to judgment upon the theory that the moneys were deposited by the executors as the property of the estate, and upon the apportionment between the legatees became impressed with a trust in favor of the judgment debtor. In support of this position certain cases were relied upon which hold that a bank dealing with the agent of a disclosed principal, who not only owned the moneys deposited, but held the check of the agent therefor, could not refuse to pay such check. Van Alen v. American National Bank, 52 N. Y., 1; Baker v. The New York National Bank, 100 id., 31; Viets v. The Union National Bank, 101 id., 563. The principle underlying these authorities, as stated in the case first cited (p. 4), is “ that so long as money or property belonging to the principal, or the proceeds thereof, may be traced and distinguished in the hands of the agent, or his representatives -or assignees, the principal is entitled to recover it unless it has been transferred for value without notice.”

In other words, when the debt created by a deposit belongs to the principal, instead of the agent who made it in his own name, the bank, upon notice of the facts, must recognize the actual rather than the nominal depositor. This principle is frequently applied by courts of equity to prevent a misappropriation of trust funds, but it does not apply to the case in hand, because no attempt at misappropriation is claimed, and because this is an action at law where the judgment debtor was not the principal and the executors were not his agents in the sense required to change the relation between depositor and depository.

As was said in Fletcher v. Sharpe, 108 Ind., 276, “ when deposits •are received, unless they are special deposits, they belong to the bank as a part of its general funds and the relation of debtor and creditor arises between the bank and the depositor. This is equally so whether the deposit is of trust money or funds which are impressed with no trust, provided the act of depositing is no misappropriation of the fund.”

There had been no accounting by the executors when the receiver was appointed and it was not yet time for them to account, as less than a year had passed since the will was admitted to probate. All the property of the testator, by force of the will, vested in the executors in trust for the benefit of the legatees. While the judgment debtor had a general claim to one-fourth of the net residuary estate, he had no title to any specific part, nor to the proceeds of any specific part, and his claim could not be enforced until after the time for an accounting had arrived. Prior to a judicial determination that all the debts of a testator have been paid, made after proper notice, all payments to legatees are at the peril of the executors, for the assets of an estate are held by them primarily for the benefit of creditors. The apportionment and distribution made by the trustees, as already appears, conferred no right upon the legatees, except as checks were given in performance, and the checks conferred no right that was capable of enforcement against the bank.

Without considering any of the other points urged upon us, we ¡think that the plaintiff, according to" the record now presented, had no title to the debt against the defendant created by the deposits of the executors. It follows that the judgment should be reversed and a new trial granted, with costs to abide event.

All concur.


author: Martin, J. Kennedy, J. (dissenting).

text:
    The People v. E. Remington & Sons. In re claim of The Lee Arms Co.

      (Supreme Court, General Term, Fourth Department,

      Filed February 20, 1891.)

    1. Insolvency—Payment of clams.
    Where a corporation has been dissolved and permanent receivers appointed and the latter have in their hands sufficient assets, the claim of a creditor-should be paid although the time to prove debts against the estate had expired.
    2. Same—Royalties.
    Royalties upon an article manufactured under a license and subsequently-sold are not a lien upon such article; the claim for such royalty arises when the article is manufactured and sold; hence it is the claim of a general creditor against the estate and is not a debt contracted by the receivers as such.
    3. Same.
    Where however the receivers came into possession of some of the articles ' already manufactured and thereafter sold them, Feld, that the claim for the royalty was a debt against the receivers which must be paid in full.
    4. Same—Chattel mortgage.
    A bill of sale of goods to the cashier of a bank, stating that the goods were to be held by him as collateral security for a note of the vendors, and that the goods are stored in the warehouse of a third party, not accompanied by any delivery of the goods, is a mortgage and is not a pledge. (Kennedy, J., dissents.).
    5. Same.
    The owners of a patent licensed E. R &. Co. to manufacture arms under their patents, and E. R. & Co. agree to pay them a certain sum “ for each arm manufactured and sold.” Feld, that the giving by E. R. & Co. of a chattel mortgage upon amis manufactured, and the making default, in the payment thereof, was a sale within the meaning of the agreement and entitled the licensors to royalties. (Kennedy, J., dissents.)
    The Lee Arms Company made application to this court by petition for an order instructing the receivers in this action to pay to the petitioner in full certain royalties claimed by it The contract under which such royalties were claimed conveyed to E. Remington & Sons, or their successors, the sole and exclusive right or license to manufacture, use and vend to others certain firearms mentioned and described therein. E. Remington & Sons, in consideration thereof and for the right to manufacture, use and sell the same, agreed to pay 'to the Lee Arms Company the sum of $1.55 for each arm manufactured and sold, the same to be paid tri-monthly at the end of each and every three months. The claim was for arms manufactured by E. Remington & Sons upon which no royalties had been paid when the corporation was dissolved.
    Temporary receivers of E. Remington & Sons were appointed April 21, 1886. The corporation was dissolved and the temporary receivers were made' permanent receivers June 4, 1886. At the time the receivers were appointed the corporation had at

      its works 156 finished and nine unfinished Lee arms, making 165 in all. The Lee Arms Company has purchased some of these arms of the receivers and has been allowed royalties on thirty, leaving 135 upon which no royalties have been paid or allowed.
    At the time of the appointment of the temporary receivers, as well as when such corporation was dissolved, there were in the possession of certain creditors of the corporation 8,310 Lee arms. These arms were held by such creditors under bills of sale previously given by E. Remington & Sons to them as security for money loaned to E. Remington & Sons. The arms so held have been disposed of in some instances by the creditors who held them, and in other cases, after default, they have been redeemed by the receivers and disposed of by them.
    On the hearing of this motion the court denied the motion of the petitioner, but held that the Lee Arms Company was a creditor of the estate of E. Remington & Sons, to the amount of §11,990.80, for royalties on 7,736 arms; that the petitioner was entitled to have its claim for this amount and have the same rights and benefits thereon, so far as the assets of E. Remington & Sons remaining undistributed might render it possible, and that the receivers should pay the Lee Arms Company the same pro rata dividends on said claim that had been paid by them to general unpreferred creditors of the corporation, so far as the assets of the corporation then remaining undistributed might render it possible, and such further pro rata dividends as should thereafter be by them paid to general unpreferred creditors. From the order denying the prayer of its petition the Lee Arms Company appealed, and from the remainder of the order an appeal was taken by the receivers.

      Thomas Richardson, for receivers; Hornblower & Byrne, for Lee Arms Company.
   Martin, J.

We concur in the conclusion of the special term, that if there were assets in the hands of the receivers sufficient to pay the proper dividend upon the claim of the Lee Arms Company that it should be paid, although the time to prove debts against the estate had expired; and, therefore, are of the opinion that that part of the order which was appealed from by the receivers should be affirmed.

This leaves for consideration that portion of the order which denied the petition of the Lee Arms Company for a direction to the receivers to pay to the petitioner its royalties in full. The question presented at the outset is, whether the royalties which were due the Lee Arms Company constituted a debt against the estate in the hands of the receivers, to be paid by them as other debts against the estate were paid, or whether its claim for such royalties could properly be made against the receivers and should be paid by them in full.

By an examinatiou of the contract under which these royalties were claimed, it becomes quite obvious that it was not the intent or purpose of the contract to give the Lee Arms Company any lien upon the arms manufactured under the license therein for the royalties agreed to be paid. It contained, at most, a simple agreement by B. Remington & Sons to pay the royalties therein mentioned. The agreement was but the personal agreement of the corporation to pay, and no lien was given or intended. Mor do we find anything in this case as presented on this appeal which would justify the conclusion that the Lee Arms Company had any legal or equitable lien on the arms in question for such royalties which entitled it to its pay in full or in preference to other creditors.

In determining whether the petitioner’s claim for these royalties was against the estate, or against the receivers, it becomes material to ascertain when the claim first came into existence. If it came into existence before the receivers were appointed, then it seems to be admitted by all that it is against the estate only, and has no preference over claims of other creditors. If, however, it arose subsequent to their appointment, then it is claimed that the receivers should be directed to pay it in full.

The manifest purpose of the license contained in the "contract between these corporations was to convey to E. Remington & Sons the right to manufacture and sell aims under the Lee patents. The license given was not alone to manufacture, but to manufacture and sell. For the right to manufacture and sell, a royalty of $1.55 was to be paid on each arm manufactured and sold. These royalities were not to be paid until the arms were both manufactured and sold. The claim that the debt or liability arose when the arms were manufactured and that its payment only was postponed until after a sale cannot, we think, be sustained. We are of the opinion that no debt or liability existed until the arms were both manufactured and sold.

It appears by the papers read on this motion that 165 arms were on hand at the armory of B. Remington & Sons when the receivers in this action were appointed. Upon thirty of these, royalties have been paid or allowed by the receivers. On the remaining 185, no royalties have been paid. The royalties on that number amounted to the sum of $199.25. As it is not claimed that there was any sale of these arms until after the receivers were appointed, it follows, we think, that this sum should be paid by the receivers in full, if they have sufficient funds in their hands.

The appeal book also discloses that when this action was brought all the other arms in question had been transferred by bills of sale given by B. Remington & Sons as security for money borrowed by it, at the time, of the several persons, firms or corporations to which they were given. There had been a default in each case in the payment of the debt thus secured, or some portion thereof

It is, perhaps, proper, before proceeding further with the examination of this question, to determine the nature and character of the transactions between B. Remington & Sons and the several creditors to whom such transfers were made, and whether they were mere pledges of the arms in question, so that the title remained in B. Remington & Sons, or whether they were in the nature of chattel mortgages, by which the title passed to the several creditors subject to be defeated only by a payment of the debts which they were given to secure.

A pledge differs from a chattel m'ortgage in three essential characteristics: 1. It may be constituted without any contract in writing, merely by delivery of the thing pledged. 2. It is constituted by a delivery of the thing pledged and is continued only so long as the possession remains with the creditor. 3. It does not generally pass the title to the thing pledged, but gives only a lien to the creditor while the debtor retains the general property.” Jones on Pledges, § 4.

“ Whenever there, is a conveyance of the legal title to personal property upon an expressed condition subsequent, whether contained in the conveyance or in a separate instrument, the transaction is a mortgage.” Id., § 8. A delivery must always accompany a pledge, while a mortgage may be valid without a delivery. Jones on Chattel Mortgages, § 7. “A decisive test of a legal mortgage of personal property is the use of language which makes the instrument one of sale conveying the property to the creditor conditionally so that the sale is defeated by the debtor’s performance of his agreement.” Id., § 8.

Where A. gave a regular bill of sale of three horses to E. for the consideration of $210, and B. at the same time gave to A. a writing of defeasance engaging, on the payment of the $210 to him by A. in fourteen days, to deliver the horses to A., it was held that this was a mortgage of the property and not a technical pledge, and that A. not having paid nor tendered the $210 within the fourteen days, the condition became forfeited and the mortgagee had an absolute interest in the property, so that A on a subsequent tender of the money to B. and demand of the property and refusal could not maintain trover for it. Brown v. Bement, 8 Johns., 96. In Thompson v. Blanchard (4 N. Y., 303), A., a manufacturer, purchased wool to be paid for by his note endorsed by B. The note was made accordingly and endorsed by B. for A.’s accommodation. At the same time A. executed toB. a writing reciting that B. had endorsed the note to be used in purchasing the wool and declaring that the wool and the cloth to be manufactured therefrom should belong to B. until the note was paid. It was held that the writing was a mere mortgage.

In Wooster v. Sherwood (25 N. Y., 278), a brewer sold “ sufficient barley now in my brewery to make malt enough, to be made in the brewery, to pay ” a sum -then advanced by the plaintiff, to whom a delivery was made of a specific'mass of barley, more than enough for the payment. The plaintiff did not remove it, but it remained until the brewer sold his brewery and the contents, with notice of the facts and subject to the plaintiff’s claim. The purchaser sold the barley to the defendant, and by his direction put it upon a railroad for transportation to the latter. Held, the legal title and general ownership of the barley passed to the plaintiff. The transaction was an executed sale in the nature of a mortgage.

“A bill of sale absolute upon its face, transferring property to be held as security for the payment of a debt due the vendee, is in character and effect a mortgage, and is to be treated as such.” Smith v. Beattie, 31 N. Y., 542. See, also, Yenni v. McNamee, 45 id., 614; Farmers & Mechanics' Bank of Buffalo v. Lang, 87 id., 209; Siedenbach v. Riley, 111 id., 560; 20 N. Y. State Rep., 120.

The transfer by B. Remington & Sons to the National Mohawk Yalley Bank was as follows:

“ Ilion, N. Y., 9th April, 1885.
“5". D. Alexander, Cashier National MohawkValley Bank, Mohawk,
N Y:
“ Bought of E. Remington & Sons, 1,000 Lee rifles, 433 Cal. A. B., 4 boxes, $15,500. Above goods are sold to H. D. Alexander, cashier, and are held by him as collateral security, to and for the payment of our note C., No. 10,151, dated April 9, 1885, at three months from date, to order of and endorsed by P. Remington for $10,000, and all renewals of the same. Said rifles are stored in the warehouse at the N. Y. C. R. R. freight depot, Ilion, N. Y., contained in fifty cases, each case marked “ A ” and covered by receipt No. 163, signed by C. R. Mentz.
“ E. Remington & Sons.
“By E. Remington, Tr."

The transfers by E. Remington & Sons to their several creditors were all substantially alike except as to the name of the creditor, the amount of the debt, and the number of arms transferred. We think it is quite obvious that these transfers were in the nature of chattel mortgages and were not mere pledges of the property. It will be observed that by the express provisions of each of these transfers E. Remington & Sons sold to the creditor the arms mentioned therein, to be held as collateral security for the payment of its debt. The property was in no case delivered to the creditors, but it remained in the possession of the N. Y. C. R. R. Co. Such a transaction did not constitute a pledge, as there was no delivery of the property pledged, and there was a sale by which the title passed. We are of the opinion that within the doctrine of the authorities cited the transactions between E. Remington & Sons and their creditors were in effect chattel mortgages of the property.

If we assume, as we think we must, that they were chattel mort-' gages, then the question arises whether they constituted sales within the intent of the agreement between these corporations. A chattel mortgage is more than a mere security. It is a conditional sale of chattels, and operates to transfer the legal title to the mortgagee, to be defeated only by full performance of the condition contained in the mortgage. Upon default, the legal title in the mortgagee becomes absolute, and he may treat the property as his own, and dispose of it as he may see fit. After default, the only right which remains in the mortgagor is an equitable right to redeem; a mere right of action.

We think it must be held that the transactions between these parties in giving such bills of sale constituted the vendees mortgagees of the property in question; that, when the debts of the mortgagees became due, and the mortgagor made default, the absolute legal title to the property passed to the mortgagees; and that such transfer of title amounted to a sale within the intent and meaning of the contract under which the claim of the Lee Arms Company is made. If it be said that such a transfer does not amount to a technical sale, still the question is, whether they were sales within the intent and meaning of the contract. If E. Remington & Sons had exchanged the arms in question for other property, it may be that it would not have constituted a sale, if the word sale was used in a restricted or limited sense, and yet no one would doubt that under such circumstances the corporation would have been liable under the contract to pay the royalties mentioned. When E. Remington & Sons mortgaged this property, and made default, we think the Lee Arms Company could have required E. Remington & Sons to pay royalties on the property thus mortgaged, although it might still have had a right in equity to redeem. If this were not so, then E. Remington & Sons could have avoided the payment of the royalties provided for by the contract by mortgaging the arms manufactured by them for their full value, then suffering default, and not redeeming therefrom. We think the word “sale” in this contract was used in a broader sense, and was intended to include any transmutation of the legal title to the property from E. Remington & Sons to another.

If we are correct in our conclusion that these transfers amounted to sales, it follows that the right to the royalties on the arms thus-mortgaged came into existence when such mortgages or bills of sales were given, or at least when default was made by the mortgagor, and that the royalties claimed were due before the receivers in this action were appointed. We do not think that the fact that the receivers availed themselves of the equity which rested in E. Remington & Sons and redeemed a portion of the property mortgaged, in any way changes the question. It will be observed that this question does not arise between the mortgagor and mortgagee and is not a question whether as between them the title would be re-invested in the mortgagor by redemption or .the satisfaction of the mortgagor’s debt, but the only question here is, whether giving the mortgage and suffering default effected a sale of the arms in question so that the Lee Arms Company was entitled to the royalties thereon. If so, then the fact that the title again vested in the mortgagor or its representatives in no way affects the question. If the title passed, a sale was complete and the royalties became due at that time.

These considerations lead us to the conclusion that the royalties upon- the arms thus transferred by E. Remington & Sons to its creditors became due before the receivers were appointed and therefore the claim of the Lee Arms Company is against the estate, to be paid in the same proportion and in the same manner as the other debts against the estate are paid, and that it is not a claim against- the receivers which should be paid in full or in preference to the claims of other creditors,

We are of the opinion that that portion of the order from which the receivers appealed should be affirmed; but that the remain■der of the order should be modified by directing the receivers to pay the Lee Arms Company $199.25, the royalties in full on the 135 arms which came into their hands, instead of a dividend thereon, and that upon the remainder there should be paid a dividend as provided by the order of the special term; and that the order as modified should be affirmed, with ten dollars costs to the appellant payable out of the funds in the receivers’ hands.

Order modified and as modified affirmed, with ten dollars costs to the appellant, payable out of the fund in the receivers’ hands.

Merwin, J., concurs.

Kennedy, J. (dissenting).

By the agreement between the Lee Arms Company and E. Remington & Sons the $1.55 royalty to be paid by the latter to the former was only to be paid for each and every gun manufactured and sold, the same to be paid trimonthly, and at the end of each and every three months from the date of the contract. The actual sale of each gun by Remington & Sons was a necessary condition precedent to entitle the Lee Arms Company to be paid said royalty.

Among the arms not sold at the time the receivers were appointed. were the following, which Remington & Sons had pledged to the several persons named, and to the number mentioned, as collateral security for the payment of certain debts owing by them:

R. J. Dean & Co............................... 1,600 rifles.

Tradesman’s Bank............................. 2,000 rifles.

Hartley & Graham............................. 500 rifles.

Thomas Richardson............................ 220 rifles.

National Mohawk Valley Bank.................. 1,000 rifles.

Canajoharie National Bank...................... 10 rifles.

Were these arms so pledged by Remington & Sons as security for the payment of the several obligations the pledgees respectively held against said firm, and which had not been sold or disposed of by them at the time the receivers were appointed sold by Remington & Sons, within the intent and meaning of the contract for royalty between it and the Lee Arms Company ?

We think the disposition of the guns by Remington & Sons in the manner stated did not amount to a sale, and that the title to each remained in them, and passed to the receivers at the time of their appointment, subject only to the pledge.

This transfer of the guns was in effect a mortgage. The correct • definition of a chattel mortgage is that it is an instrument of sale, conveying the title of the property mortgaged to the mortgagee, with terms of defeasance, and if the terms of redemption are not complied with then at law the title, becomes absolute in the mortgagee. To make it a mortgage the effect of the agreement must be such that by the mere nonperformance of the conditions by the mortgagor the title will be transferred to the mo'rtgagee by force of the agreement. Story on Bailments, §§ 287, 288; 2d Kent’s Com., 582, 583; Brownell v. Hawkins, 4 Barb., 491; Langdon v. Buel, 9 Wend., 83; Brown v. Bement, 8 Johns., 96; 12 id., 146; 4 Denio, 227; 2 Caine’s Cases, 200.

On the other hand a pledge consists of a delivery of goods by a debtor to his creditor, to be held until the debtor’s obligation is discharged, and then to be delivered to the pledgor; ’ the title not being changed during the continuance of the pledge. Story on Bailments, § 286.

In case of a pledge as security for the payment of a debt, the only way the pledgee can avail himself of the pledge is to demand payment after default, and, if refused, to sell the property, after notice to the pledgor, at public sale, and apply the proceeds to discharge the obligation. Until this is done the title remains in the pledgor.

The 500 guns held by Hartley & Graham, and the ten by the Canajoharie National Bank, were subsequently returned by the respective pledgees to the receivers, without anything being paid to either of them, the debts for which they were pledged having been paid out of the proceeds of other securities held by the creditors. These guns were subsequently sold by the receivers, and the proceeds formed a part of the assets in their hands.

These 510 separate from the remainder of those pledged rifles were not, therefore, sold by Remington & Sons before the appointment of the receivers, and as to them no royalty had become due or owing to the Lee Arms Company at the time of their said appointment. We are, therefore, of the opinion that as to these the receivers contracted the debt for the royalties after their appointment, and that the same should be paid in full, provided the condition of the estate will permit the same to be made out of the assets remaining in their hands.

We are also of the opinion that the remaining arms which had been pledged as aforesaid by R. & Sons, as collateral security for the payment of debts owing by them, and which had not been actually sold by the pledgees, cannot he regarded as having been sold by R. & Sons, within the meaning of the contract, at the time the receivers were appointed; and said guns having either been returned by the pledgees to the receivers, or subsequently ■sold by the pledgees and the proceeds applied to discharge the •debts, the receivers became liable to pay the royalties, and that ■such royalties upon these other guns was an obligation contracted by the receivers after their appointment and for the benefit of the estate, and that the same should be paid in full upon the condition and in the manner provided for the payment of the royalties upon the 510 rifles mentioned.

If correct in the conclusions reached, it follows that the order made at special term should be so modified as to direct the receivers, out of any property or assets in their hands, to pay the Leé Arms Company the royalty of §1.55 upon the whole 8,410 rifles pledged by Remington & Sons to their creditors for the payment of debts owing by said firm, and remaining in the possession of the pledgees undisposed of at the time the receivers of Remington & Sons were appointed, if the assets in their hands remaining are sufficient for that purpose, with ten dollars costs and disbursements to the Lee Arms Company. ‘


author: Martin, J.

text:
    In the Matter of the Final Accounting of Humphrey Sisson, as Assignee.

      (Supreme Court, General Term, Fourth Department,

      Filed February 20, 1891.)

    Assignment fob creditors—Preferences.
    Where a debtor prefers creditors in the order of their classes, and the one-third in value applicable to preferred debts, chap. 503, Laws of 1887, is not sufficient to pay- creditors of the first class, they take the whole, although other preferred creditors thereby receive nothing.
    Appeal by B. B. & W. W. Taggart, second preferred creditors, from an order which directed full payment to creditors first preferred, such payment exhausting that part of the estate applicable to preferences.
    On the 13th day of December, 1888, William W. Herrick and Henry H. Ayres, who constituted the firm of Herrick & Ayres, executed a general assignment for the benefit of their creditors, whereby the assignee was directed : 1st. To pay the expenses of executing the trust; 2d. To pay out of their individual property all wages due employes of each of the assignors individually; 3d. To pay out of the individual assets the individual debts of the assignors; 4th. If any surplus of individual assets remain, to apply the same on the debts of the copartnership; 5th. Out of the proceeds of the copartnership property and the surplus of the individual property to pay all wages due the employes of the firm; 6th. Out of the said proceeds to pay three certain notes amounting to the sum of $2.644.63, which notes were made by the firm in their firm business and were intended to be preferred next to the employes of said firm; 7th. Mext to pay out of said proceeds the amount owing by the firm to Catharine P. Herrick and two notes mentioned amounting to $450, which were endorsed by the appellants; 8th. To' pay all the remaining liabilities of said firm, and, if the assets were insufficient, then to pay the same pro rata; 9th. After payment of said debts in full, to return the residue, if any, to the assignors. The assignment also contained the following statement: “It is not intended by the preference of firm obligations mentioned in this and the last preceding paragraph (being paragraphs five and six) to make preferences to an amount exceeding one-third in value of the assigned estate left after deducting wages or saláries owing by said firm and the costs and expenses of executing this trust.”
    The one-third of the estate dedicated to the payment of the preferred creditors was insufficient to pay the claims of the first preferred creditors mentioned in the sixth paragraph of the assignment-. The appellants were in the second class of the preferred creditors mentioned in the seventh paragraph. The court, by the order appealed from, directed that the amount designated for the payment of the preferred creditors should be distributed among the creditors mentioned in the first class and sixth paragraph of said assignment, and held that the second class of preferred creditors were not entitled to participate in said fund, but that because of the insufficiency of said fund to pay the first class in full, the second class should be paid dividends as common creditors without preference. From that portion of the order which held that the one-third applicable to preferred debts should be wholly applied to the first class of preferred creditors the appellants appeal.

      Hannibal Smith, for app’lts; Watson M. Rogers, for Humphrey Sisson ; Lansing & Lansing, for Jefferson County National Bank.
   Martin, J.

The only question presented upon this appeal is. whether the court properly ordered the one-third of the estate dedicated to the payment of the preferred creditors of the assignors to be paid to those mentioned in the first class or si^th paragraph of the assignment, or whether it should have directed its payment to those creditors mentioned in the sixth and seventh paragraphs of the assignment pro rata.

After the payment of the employes of • the assignors the creditors preferred were divided into two classes. Out of the one-third of the estate designated for that purpose .those belonging to the first class were to be paid. After they were paid in full those belonging to the second class were to be paid out of the remainder of that portion of the estate. The fund was insufficient to pay the first class in full, and hence, according to the terms of the assignment, there was nothing in the preferred creditors’ fund which, under the provisions of the assignment, was applicable to debts in the second class. Whether the distribution of this fund among the preferred creditors was to be governed by the provisions of the assignment is the real question in this case.

Anterior to the enactment of chap. 508 of Laws 1887, a failing debtor making a general assignment for the benefit of his creditors possessed the right to prefer such of his creditors as he saw fit to the full amount of his estate. While the right to thus prefer creditors was fully established and generally understood, the legislature passed the following statute: “In all general assignments of the estates of debtors for the benefit of creditors hereafter made, any preference created therein (other than for the wages or salaries of employes under chap. 328 of the Laws of 1884, and chap. 283 of the Laws of 1886,) shall not be valid except to the amount of one-third in value of the assigned estate left after deducting such wages or salaries and the costs and expenses of executing such - trust; and should said one-third of the assets of the assignor or assignors be insufficient to pay in full' the preferred claims to which under the provisions of this section the same are applicable, then said assets shall be applied to the payment of the same fro rata to the amount of each said preferred claims.”

The manifest purpose of this act was to prevent failing debtors from applying more than one-third of their property to the payment of friendly creditors. The mischief which the legislature sought to correct arose from the inclination of debtors to thus apply the whole of their property. We find nothing in this statute to indicate a legislative intent to provide how or in what manner the one-third which may be devoted to that purpose shall be divided between the creditors of the assignor. That right formerly rested in the assignor, and we think still remains with him as to the one-third of the estate which he is permitted to apply to the payment of preferred claims. The one-third he is permitted to have applied to the payment of preferred debts he may have applied to such debts as he shall designate and in any order of preference he may indicate by his assignment This right is in no way restricted by the act of 1887.

By the assignment in this case the assignors devoted the one-third applicable to the payment of preferred debts to the payment of the debts mentioned in class one. The whole fund was first, dedicated to that purpose. If it was not sufficient to pay more, then it was dedicated to that purpose alone, and the debts in the second class were not preferred. The preference of the second class was a provisional one, depending wholly upon the sufficiency of the fund to pay the first class, with a surplus. If there was no surplus, then there was no further preference. The fund was insufficient to pay the first class, and hence the contingency upon which a preference was to be extended to the second class did not arise, and the debts mentioned therein were not preferred claims.

The provisions of the statute, that if one-third of the assets should be insufficient to pay in full the preferred claims to which the same were applicable then they should be applied pro rata, obviously relates to such claims as are absolutely preferred by the provisions of the assignment, and to which, under the assignment, the assets are in fact applicable. As there were no assets that were by the terms of the assignment applicable to the payment of claims of the creditors named in the second class, the preference of the claims mentioned therein being conditional, and the condition upon which such preference was based not having ■existed, it follows, we think, that the claims mentioned in the second class were not preferred claims to which such fund was applicable, and the creditors named in that class were not entitled to participate in the fund with the creditors named in the first, class. •

The effect of the statute of 1887 was simply to limit the amount which should be applied to the payment of preferred claims, and an assignor still has the power to designate the manner in which that amount shall be applied. Matter of Tuller, 22 N. Y. State Rep., 242; Matter of Boyd, 35 id., 37.

We are of the opinion that the order appealed from was right and should be affirmed.

Order affirmed, with ten dollars costs and disbursements.

Hardin, P. J., and Merwin, J., concur.


author: Martin, J. Hardin, P. J.

text:
    In the Matter of the Probate of the Will of Ebenezer McArthur, Deceased.

      (Supreme Court, General Term, Fourth Department,

      Filed February 20, 1891.)

    1. Will—Probate—Evidence.
    On proof of a will a witness was permitted to state all that she knew or observed in relation to the mental and physical capacity of the testator, and further that she did not think he was in his right mind. Held, that it ■ was not error to refuse to permit the witness testify as to the competency of the testator to do business on the day before the will was executed.

      2. Same.
    A witness, who was an heir at law and a contestant, offered to show the appearance of the testator a day or two before the will was executed. Held, under Code Civ. Pro., § 829, that the evidence was improper.
    Appeal from a decree of the surrogate’s court of Tompkins county, admitting to probate the last will and testament of Ebenezer McArthur, deceased.

      A. P. Smith,, for app'lt; George B. Davis, for resp’ts.
   Martin, J.

The learned surrogate before whom this proceeding was instituted has found that the last will and testament of the testator, which was admitted to probate, was duly and properly executed; that the testator was at the time of its execution in all respects competent to make a last will and testament of real and personal property; and that he acted freely and without undue influence or restraint in making it. A careful examination of the proceedings as disclosed in the appeal book has led us to the conclusion that these findings are fully sustained, and in accordance with the weight of the evidence given on the trial, and that the decree appealed from should be affirmed, unless there was some error in the admission or rejection of evidence which requires a reversal.

The appellant contends that the court erred in excluding the evidence of Mrs. E. B. Jones as to the capacity of the testator to do business on the day before the will was executed. The claim is that she was qualified as • an expert and her opinion as such should have been received. The question of the competency of Mrs. Jones was in this case a question of fact to be determined by the surrogate. He held that she was incompetent to give an opinion, but permitted her to state very fully all she knew or observed in relation both to the mental and physical capacity of the testator. Indeed, she was permitted to go further and state that she did not think he was in his right mind. We do not think the refusal of the surrogate to permit her to testify further and give her opinion as to his condition to do business on that day was error which requires us to disturb the decree in this case. Matter of Arnold, 14 Hun, 525.

Uor do we think that the decree should be reversed because the surrogate excluded the contestant’s offer to prove by the witness Goodrich the signatures of the testator to_ the will of 1878 and codicil of 1885, or in excluding such will and codicil. If we assume that the evidence was admissible, and that the surrogate erred in rejecting it (which we do not decide), still the error was a harmless one, as the signature to both the will and codicil were subsequently proved by another witness and they were received in evidence. Moreover, the surrogate has found that such will and codicil were made as claimed by the contestant.

On the trial the contestant offered to prove by John McArthur the appearance of the testator on the Wednesday before the will was made, when he saw him and had a personal interview with Mm. This witness was an heir-at-law and the contestant in the proceeding before the surrogate. The surrogate excluded the evidence. The manifest purpose of this evidence was to show that the appearance of the testator was such as to indicate his incompetency to make the will in question.

In Holcomb v. Holcomb (95 N. Y., 316, 326), it was held that evidence of the appearance of a decedent, and that he did not speak, was within the prohibition of § 829. In that case the court said: “Transactions and communications embrace every variety of affairs which can form the subject of negotiations, interviews or communications between two persons, and include every method by which one person can derive impressions or information from the conduct, condition or language of another.”

In the Matter of Eysaman (113 N. Y., 62, 72; 22 N. Y. State Rep., 136), it was held that testimony as to the acts and condition of the testator observed by an interested witness tending to show mental capacity was within the prohibition of the statute and inadmissible. We think the ruling of the learned surrogate was within the spirit of the statute and the principle of the cases cited.

We find no other exceptions that require special consideration or that would justify a reversal of the decree appealed from. It therefore follows that the decree should be affirmed.

Decree affirmed with costs.

Merwin, J. concurs.

Hardin, P. J.

Since the decision made by this court of Steele v. Ward (30 Hun, 555), the court of appeals has passed upon the question involved in that case, In re Eysaman (113 N. Y., 62; 22 N. Y. State Rep., 136), and the foregoing opinion of Martin, J., accords with the rule laid down in the Eysaman case, and therefore I join in it, and vote to affirm.


text:
    Peter J. Lally, App’lt, v. Jonas A. Emery, Resp’t.

      (Supreme Court, General Term, Fourth Department,

      Filed February 20, 1891.)

    1. Slandeb—Intent.
    In an action for slander where the words spoken do not necessarily impute a crime or an attempt at a crime, the question of intent is for the jury.
    2. Same.
    In such an action where the plaintiff and defendant were United States soldiers and the words were spoken to a member of the same company, Meld, that the words were not absolutely privileged, and that the questions of good faith, belief in the truth of the statement and malice were for the jury.
    Appeal from a judgment, entered in Jefferson county, dismissing the plaintiff’s complaint, with costs, and from an order-denying a motion for a new trial made on the minutes of the trial judge. The action was for slander. The plaintiff alleged the speaking of certain words of and concerning him by the defendant which were alleged to have been intended to charge the plaintiff with having committed the crime of rape, or attempting to commit that crime. Both the plaintiff and defendant were soldiers in the United States army, and the person to whom the words were spoken was a member of the same company with the defendant. On the trial the court held that the words alleged and proved were privileged, and dismissed the plaintiffs complaint.

      Hannibal Smith, for app’lt; F. H. Peck, for resp’t
   Martin, J.

Whether the words alleged and proved to have been uttered by the defendant of and concerning the plaintiff were spoken with the intent to charge the plaintiff with the crime of rape, or of an attempt to commit a rape, was, we think, for the jury. Weed v. Bibbins, 32 Barb., 315; Upton v. Upton, 4 N. Y. Supp., 936; 21 N. Y. State Rep., 559.

We think the court erred in holding that the words alleged and proved were absolutely privileged, and in dismissing the complaint on that ground. Under the circumstances developed by the evidence in this case, the questions whether the defendant uttered the words proved in good faith, and without actual malice, were for the jury. If it were assumed that the words spoken were privileged, still the privilege, if any, was a qualified one, and if they were not spoken in good faith, or were uttered with actual malice, it would constitute no defense to the action.

Admitting that the court might properly have held that prima facie the speaking was privileged, yet the question of the defendant’s good faith, his belief in the truth of the statements made, and whether actual malice existed, were all questions for the jury.

In Klinch v. Colby (46 N. Y., 427), Judge Eolger, in speaking of the question of privileged communications, says: “ As a general proposition, it may be said that the question of whether a publication is a privileged communication is one for the jury. That is to say, the court may determine. whether the subject matter to which the alleged libel relates, the interest- in it of the defendant, or his relations to it, are such as to furnish the excuse. But the question of good faith, belief in the truth of the statement, and the existence of actual malice remains; although the court should hold that, prima fobcie, the communication was privileged. And this question is one for the jury.” The same doctrine was held in Hamilton v. Eno, 81 N. Y., 122; Byam v. Collins, 111 id., 143; 19 N. Y. State Rep., 581.

We are of the opinion that the case should have been submitted to the jury, and that the court erred in dismissing the complaint.

Judgment and order reversed on the exceptions and a new trial granted, with costs to abide the event.

Merwin, J., concurs.

Hardin, P. J.

In the opinion delivered in this case, when it was here on a former appeal (28 N. Y. State Rep., 127), it was assumed that the motive and intent of the defendant in using the' words proved were for the jury to ascertain upon all the evidence; that assumption is still applicable to the case, and, therefore, I join in a reversal.