author: Van Brunt, P. J.;

text:
    JOHN M. HAYWARD, Appellant, v. MARIA L. HOOD, as Executrix, etc., of ANDREW HOOD, Deceased, and Others, Respondents.

      Supplemental complaint— a demurrer, upon the ground that it does not state facts sufficient to constitute a cause of action, will not lie to a supplemental complaint which only alleges certain facts in addition to those alleged in the original complaint

    Appeal from a judgment dismissing the complaint, and from an order sustaining a demurrer interposed by the defendants herein to a supplemental complaint.
    The court, at General Term, said: “ By an order of this court the defendants were granted leave to file a supplemental complaint, and by the order granting such leave the defendants were permitted to answer or demur. In pursuance of such leave, the plaintiff, in addition to the former complaint theretofore served, made his supplemental complaint, alleging certain additional facts to those which were contained in the original complaint. The defendants demurred to this supplemental complaint upon the ground that it did not state facts sufficient to constitute a cause of action, which demurrer was sustained, and this appeal was taken from the order entered thereon.
    “It is undoubtedly true that the supplemental complaint did not set up a cause of action as against the defendants. It was not intended so to do. It was the mere allegation of additional facts to those which had been alleged in the original complaint for the purpose of supplementing that complaint. It is also true that the order gave the defendants the right to answer or demur to said supplemental complaint. But as the supplemental complaint did not pretend to set out an independent or different cause of action from that contained in the original complaint, it was to be read as part and parcel of the complaint, and if the two contained a cause of action which was not demurrable an answer upon the part of the defendants was required. It would seem, therefore, that no issue whatever was raised by the demurrer to the supplemental complaint, that not being a complete complaint within itself, and that it was error to entertain such demurrer.
    “The order and judgment appealed from.must, therefore, be reversed and the defendant allowed to withdraw said demurrer and to answer upon payment of the costs of demurrer and of the appeal from the order sustaining the same.” ' •

      A. J. Dittenhoefer, for the appellant.

      John J. Macldin, for the respondents.
   Opinion by

Van Brunt, P. J.;

Brady and Daniels, JJ., concurred.

Judgment reversed, with leave to defendant to withdraw demurrer and answer on payment of costs of demurrer, and of the appeal from the order sustaining the same.


source: Caselaw Access Project

author: Smith, P. J. :

license: Public Domain

text:
    HENRY MARTIN, as President of the Manufacturers and Traders’ Bank, Respondent, v. THE NIAGARA FALLS PAPER MANUFACTURING COMPANY and THOMAS WELCH, as Receiver of the Property of said Company, Appellants, Impleaded, etc.

      Manufacturing corporation-power of, to give mortgages to secure past debts — to secure future advances — power of the president to borrow money and give the company’s paper — power of the stockholders to pi-ovide that the company shall be bound by papar so issued by the president — their power to ratify his unauthorized acts — when an abstract of the contents of books wiU be stricken out because of a failure of the party offering it to produce the books themselves.

    Shis action was brought in November, 1884, by the plaintiff, a hanking association organized under the laws of the State of New York, to foreclose a .mortgage, dated November 18,1882, which purported to have been executed by the defendant company, which was incorporated under the general manufacturing act of 1848, as a collateral and continuing security for the payment of all promissory notes or hills of exchange which then had been, or should be -thereafter, made, drawn, indorsed or accepted by said company and discounted by said bank, and all sums of money which should at any time he due .and owing by said company to said hank, upon any account whatever, to the .amount of $60,000. Upon an appeal from a judgment declaring the mortgage ■to he a valid and subsisting security for the payment of notes to the amount .of $60,000, the defendants contended that the mortgage was void because the .company had no power to give a mortgage to secure the payment of debts to .be contracted in the future.

      Held, that the claim was properly overruled as it appeared that the notes in suit were the outcome of successive renewals of a debt of over $60,000 which existed at the time when the mortgage was executed.

      It seems, that the mortgage could be enforced as a security for any notes given by the company, in the course of its business, for debts contracted subsequent to the execution of the mortgage.

      Lord v. The Yonkers Fuel Gas Company (99 N. Y., 547) followed.

      It seems, that the company has power to give a mortgage to secure future advances, and that if such mortgage were ultra vires, no one but the State could take advantage of the defect of power.

      Jones v. Guaranty and Indemnity Company (11 Otto, 632); The Union National Bank v. Matthews (8 id., 621) followed, and Carpenter v. Black Hawk Gold Mining Company (65 N. Y., 43) criticised.
    The notes were signed in the name of the company by L. C. Woodruff, its president, payable to the order of himself and indorsed by him. The defendants claimed that during all the time of the transactions, evidenced by these notes, Woodruff was the debtor of the company and not its creditor, and that the notes were made and discounted for his accommodation, and that these facts were known to the plaintiff. After the execution of the mortgage, and in December, 1883, the company, by its president, entered into a contract with the plaintiff adjusting the amount due to the plaintiff on certain specified notes at $80,409.17, which amount the plaintiff agreed to lend the company for at least thirty days. The contract also recognized the authority of Woodruff, as president, to bind the company in future transactions, and expressly stipulated that when the name of the company should be used by him as president, as the maker of any promissory note, or the drawer of any draft or bill of exchange, it should be held and conclusively deemed to be for the benefit of the company and in the transaction of its business and binding upon said company. This contract was entered into in pursuance of a resolution adopted by the entire board of trustees of the company, which then consisted of but two members, Woodruff and his daughter, Mrs. Winslow, who were also the sole stockholders.

      Held, that the authority of Woodruff to borrow money for the use of the company, and to give its paper therefor, might be inferred from the evidence, which showed that, for a period sufficiently long to establish a settled course of business, he was allowed, without interference, to conduct the entire business of the company.

      Kraftv. Freeman Publishing Company (87 N. Y., 628); Martin v. 'Webb (110 TJ. S., 7), followed.
    That the contract of December, 1883, which was founded upon a new and valuable consideration, expressly recognized his authority and ratified his giving of notes.
    That the burden of showing that the notes were accommodation notes, and that the bank had notice of this fact, rested on the defendants.
    That an objection that when the notes in suit and the agreement were made the company was incapable of acting, as it had but two trustees, was not maintainable as the previous assent of all the stockholders was as effective, as a ratification of tlie unauthorized act of the president, as a subsequent ratification thereof would have been, and that this would have cured the defect is well settled.

      Kent v. Quicksilver Mining Company {IQ N. Y., 159); Sheldon Eat Blocking Company v. Eickemeyer Eat Blocking Company (90 id., 607) followed.
    A by-law of the company required the notes and mortgage to be signed by the secretary.

      Eeld, that as it had never been followed, and as it did not prohibit the president from, signing, or provide that the lack of the signature of the secretary should render the instrument void, the signature- of the secretary was not essential to the validity cf the note.
    Upon the trial a witness, called by the defendants, stated that he had examined certain books of the company, and also stated the result of this examination as to the state of the accounts. Having stated, in his cross-examination, that the books were then in the court-house, and the defendants’ counsel having admitted that he could produce them, but declined to do so, the plaintiff moved that the evidence given from the abstract of the books be struck out on the ground that the books were not produced from which such abstract could be verified.

      Eeld, that the court did not err in granting the motion.
    Appeal from a judgment entered upon the decision of the court, rendered at the Erie Circuit, on a trial by the court without a jury.

      George Wadsworth, for Welch, receiver, appellant.

      Lucius M. Bangs, for manufacturing company, appellant.

      Sherman S. Bogers, for the respondent.
   Smith, P. J. :

The plaintiff is a banking association organized under the laws of the State of New York, doing business at the city of Buffalo. The company, defendant, was organized under the general manufacturing law of said State in the year 1856, or thereabouts, doing business at Niagara Falls. The action is brought to foreclose a real estate mortgage purporting to have been executed by said company, dated the 18th of November, 1882, as a collateral and continuing security for the payment of all prommissory notes or bills of exchange which then had been or should be thereafter made, drawn, indorsed or accepted by said company and discounted by said bank, and all sums of money which should at any time be due and owing by said company to said bank upon any account whatever, to the amount of $60,000. In November, 1884, certain promissory notes, amounting in the aggregate to over $80,000, which purported to have been made by the company and were discounted by the bank, having become due and not having been paid, this action was brought, and the defendants, who now appeal, appeared and answered. The trial court adjudged that certain of said promissory notes, amounting to the sum of $67,000, were the valid notes of said company, and that the mortgage is a valid and subsisting security for the payment of said notes to the amount of $60,000, with interest thereon from the 20th of January, 1884, and judgment of foreclosure was ordered accordingly. From that judgment this appeal is taken.

In behalf of the appellants it is contended that the mortgage is void because the company had no power to make it. The original act under which the company was organized provided that a corporation formed under it should not mortgage its property or give any lien thereon. (Laws 1848, chap. 40, § 2.) Subsequently that provision was modified so as to permit the mortgaging of the real or personal property of the corporation to secure the payment of any debt ‘£ heretofore contracted or which may be contracted by it in the business for which it was incorporated, by mortgaging all or any part of the real or personal estate of such corportion ; and every mortgage so made shall be as valid, to all intents and purposes, as if executed by an individual owning such real or personal estate, provided that the written assent of the stockholders owning at least two-thirds of the capital stock of such corporation shall first be filed” as specified in the act. (Laws 1864, chap. 517, as amended by Laws 1871, chap. 481.)

Those statutes, the appellants contend, do not authorize a mortgage to secure the payment of debts to be contracted in the future, and consequently the mortgage in suit cannot be resorted to as a security for the payment of the promissory notes above referred to, which were made after the mortgage was executed. There are some adjudications bearing more or less directly upon the point. In Carpenter v. Blank Hawk Gold Mining Company (65 N. Y., 43) Commissioner Earl, in considering the statutes above referred to, said: A mortgage upon real estate is allowed only to secure the payment of debts. It cannot be made to raise money merely to carry on the operations of the company.” But each, of his associates declined, in terms, to express an opinion on that point. (P. 53.) In the case of Greenpoint Sugar Co. v. Whitin (69 N. Y., 328), Ch. J. Church, in delivering an opinion in which a majority of the court seem to have concurred, said that the purpose of the statute as amended was in the interest of stockholders only, it being designed to protect them from improvident or corrupt acts of the officers of the company; that the act of mortgaging is not to be deemed illegal or improper, per se, but the principal must assent in writing (pp. 333, 334.); and see Coman v Lakey (80 N. Y., 345; opinion of Church, Ch. J., p. 349). In Crocker v. Whitney (71 N Y., 161), cited by the appellants’ counsel as giving construction to an analogous statute, it was held that under the national bank act of 1864 a national bank is prohibited from taking a mortgage upon real estate, except for debts contracted prior to the giving of the mortgage, and that a mortgage given to secure future indebtedness is void. The eighth section of that act authorized banks formed under it to loan money on “personal security,” and the twenty-eighth section permitted them to take and hold real estate mortgaged to it in good faith, by way of security for debts “ previously contracted.” But the Supreme Court of the United States held, in the Union National Bank v. Matthews, that a security of that nature is not void, but may be enforced by the bank (19 Alb. L. J., 132; S. C., 8 Otto, 621); and in Jones v. Guaranty and Indemnity Company, the same court construed the statutes now under consideration, and held that a corporation formed under them has power to give a mortgage for future advances. (11 Otto, 632.) It also held that if the mortgage be ulhra vires, no one but the State can take advantage of the defect of power.. The reasoning of Judge Swayne in that case is very cogent and convincing. The case of Carpenter (supra) was brought to the attention of the court in that case, it having been cited in the briefs of counsel (L. C. P. Co.’s Ed , U. S. Sup. Ct, Rep., Book 25, p. 1033), and it must be regarded as having been disapproved so far as it is in conflict with the decision. We might properly dispose of this point upon the authority of that case, since there is no adjudication of this court or of the Court of Appeals in conflict with it. But it is needless to do so. In the later case of Lord v. The Yonkers Fuel Gas Company (99 N. Y., 547) a trust mortgage was given by a corporation formed under the act of 1818, to secure the payment of its negotiable bonds to be thereafter issued, and the proceeds of the bonds, when issued, were used in paying debts of the company contracted in carrying on its business after the execution of the mortgage. It was held that the mortgage was valid, the court being of the opinion that the statute was- complied with if the bonds were negotiated only for the purpose of securing or paying debts contracted before the negotiation; the security for the creditors then for the first time comes into being, and is as effectual as if the mortgage was executed ac the same time with the delivery of the bonds. Mr. Justice Rapal-lo, in delivering the opinion of the court, referred to each of the- cases above cited-, in which the acts of 1818 and 1861 Were considered.- That case seems to be analogous to- this, so far as the mortgage- under consideration is sought to be enforced as a security for notes given by the paper company in the course of its business for debts- contracted subsequently to the execution of the mortgage, and if it were necessary, we think the decision of the trial court upon this point might be upheld on the authority of that case. But it appears that the notes in suit are the outcome of successive renewals' of a debt of over' $60,000, which existed at the time when the mortgage was executed, so that the mortgage does not exceed even the limit suggested in the Carpenter case1. We think the1 contention under consideration was properly overruled by the trial court.

It is also contended that the debt which the mortgage was intended to secure was not a debt contracted by the corporation in the business for which it Was incorporated, and that for that reason the mortgage is not authorized by the statute and is void. The several notes in suit were signed in- the name of the company by L. C. Woodruff, its president,- payable- to the order of himself and indorsed by him. Upon their face, therefore, they represented a debt owing by the company to Woodruff, primarily, which, by his indorsement and the discount, was transferred to the bank. But the contention of the appellants is understood to be that the evidence shows that during all the time of the transactions evidenced by the notes, Woodruff was the debtor of the company and not its creditor, and that the notes were made and discounted for his accommodation and benefit, and that those facts were known to the plaintiff. The facts bearing upon that branch of the case, as shown by the findings or uncontradicted evidence, are substantially as follows: The paper company was organized, as has been said, in or about the year 1856. Woodruff was one of its original organizers. At all times after 1858,. he was the president of the company and its principal stockholder, and had the general management of its affairs, and he and his daughter, Mrs. Winslow, owned all the stock when the mortgage in question was given, except one share standing in the name of H. G. Cordley, to qualify him to act as a trustee, but which really belonged to Woodruff. For twenty-five years and more no new election of officers had been made by the stockholders; and it is apparent from the testimony, and especially that given by Woodruff himself, that during all that time the affairs of the company were, practically, under his exclusive control, and were managed by him as if they were a part of his personal and private concerns. The paper company received and paid out large sums of money in its business, but it kept no bank account in its own name, except' for a short time, when it had a small account with a bank in the village of Niagara Falls. Woodruff lived in Buffalo, and opened an account there with the plaintiff, which was continued for many years in his individual name, and subsequently to October, 1883, in the name of L. O. Woodruff & Go. During all that time he was engaged in business of his own as well as in the management of- that of the paper company, and all the money deposited or drawn out by him; whether in the name and for the benefit of the company, or of himself individually, was entered in one and the same account at the bank, without anything to designate to whom it belonged or for whose benefit it was used, as between him and the company. A large portion of the earnings of the company -from its business, and of the proceeds of the paper of the company, discounted by the plaintiff, was deposited there, and carried -into such account. For some time Woodruff gave the bank -monthly statements, showing how much money the company would need during the month, and, as he testified, he very frequently drew from the account at the bank to pay the expenses of the mill. A similar account was kept in the name of L. O. Woodruff, at a bank in the city of New York, into which a portion of the earnings of the company entered, and from which moneys were drawn, from time to time, to meet its expenses. It also 'appears that at the mill an account was kept with Woodruff, individually, in which he was charged with all the earnings of the mill taken by him, and credited with what he paid out for the mill, and there is evidence on the part of the defendants tending to show that the mill made money, and that every year, except one or two, Woodruff, received more from the mill than he paid out for it. The president of the bank was told by Woodruff that the paper company was making money, but he testified that he did not know the state of the accounts between Woodruff and the company, or that any of the notes of the company were accommodation paper, or were not made in the course of its business.

The mortgage in suit was executed in November, 1882. In December, 1883, the paper company, by its president, made a contract with the bank, which is set out in the case, by' which the amount due the bank from the company on certain specified notes was adjusted at $80,409.17, and the bank agreed to lend the company that amount for at least thirty days. The contract also recognized the authority of Woodruff, as president, to bind the company in future transactions, and expressly stipulated that when the name of the company should be used by him, as president, as the maker of any promissory note, or the drawer of any draft or bill of exchange, it should be held and conclusively deemed to be for the benefit of said company and in the transaction of its business, and binding upon said company. The contract was entered into in pursuance of a resolution adopted by the entire board of trustees of the company, which then consisted of but two members, Woodruff and Mrs. Winslow, and who were also the sole stockholders. Pursuant to such contract the notes in suit were executed. The trial court found that each of said notes was discounted by the plaintiff, for the benefit of said company, and that the avails thereof were paid by it to said company upon the faith of the security afforded by said mortgage. We think the finding is supported by the evidence.

In view of the circumstances disclosed by the evidence, Wood-ruff, as the president of the company, and its general manager and financial agent, may be regarded as having had authority to borrow money for the use of the company in its business, and to give the paper of the company therefor. (Kraft v. Freeman Pub. Company, 87 N. Y., 628.) Such authority may be inferred from the general manner in which for a period sufficiently long to establish a settled course of business he was allowed, without interference, to conduct the affairs of the company. (Martin v. Webb, 110 U. S. Sup. Ct. R., 7.) His authority does not rest on such inference alone. The contract of December, 1883, expressly recognized his authority and ratified his giving of notes. Furthermore, without reference to his actual authority, the notes were in form the notes of the company and within the scope of his apparent authority, and the burden of showing that they were accommodation notes, and that the bank had notice of it, is on the defendants. That burden has not been met. There is nothing in the case to show that any one of said notes was made when the money was not needed by and used for the mill. The fact that from year to year Woodruff received from the mill more than he paid out for it does not show that the notes were not made for the use of the mill. Some of the notes appear to have been for balances of account, or overdrafts, but for aught that appears those overdrafts may have arisen from the payment of money for the purposes of the mill. So that the presumption arising from the form of the paper, that it was made and used for the benefit of the company, is not overcome.

Again, if any of the notes were made for the accommodation of Woodruff, there is no evidence that the plaintiff had notice of the fact. Notice that the company was doing a profitable business, and that Woodruff was depositing a portion of its earnings, from time to time, in a common account, with his own money (and that is the extent to which notice was shown), was not even notice that he was indebted to the company, much less that the notes were made for his accommodation. Besides, the agreement of December, 1883, if binding upon the company, concludes the question of its liability on the notes then existing. And out of that agreement arose a new consideration, to wit, the surrender of the old notes and the extension of the time of payment of the debt evidenced by them, for which Woodruff was liable if the company was not, so that the transaction put it out of the power of the bank to proceed at once, even against Woodruff. There is no evidence that, as between Woodruff and the company, the adjustment of December, 1883, was not warranted by the accounts between them, and, if there were, there is no evidence that the bank knew it. On the assumption that the agreement and the notes thereafter executed were binding upon the company, those instruments were representations by the company to the bank that the debt was its own, relying upon which the bank extended the credit; discounted the new notes and surrendered the old ones.

The appellant’s counsel invokes the rule that no person can act as agent in regard to a contract to which he is a party on the side opposite to his principal, and he contends that such rule avoids the notes made by Woodruff, as the president and agent of the company, in the name of his principal, payable to his own order. The rule is for the protection of the principal, and may be waived by him. The waiver may be effected by a previous authorization of the agent, or by a subsequent adoption of his act. The case is like that of a purchase by a trustee of trust property, which, although voidable at the election of the cestui que trust, may be validated by his ratification. The agreement of December, 1883, executed in the name of the company, pursuant to a resolution signed by all the trustees and stockholders, was an express ratification of the act of Woodruff in making the notes described m the schedule attached thereto. The agreement provided, in terms, for the renewal of those notes, and the retention, by proper indorsement upon the paper to be given in renewal, of all claims then existing against any indorser of the notes so described. The notes in suit were made and indorsed in accordance with those stipulations, and in view of the circumstances, the company and its stockholders must be regarded as having waived the protection of the rule above referred to. But in view of that rule what foundation is there for the claim set up by the appellants, that the earnings of the mill, from time to time, became the individual property of Woodruff ! There was nothing to effect or indicate a transfer of ownership in such earnings except the mere act of his charging himself with them in the books of the company. Being the agent of the company, he could not make both sides of a contract transferring the money or other property of 'the company to himself, unless his act in so doing was expressly authorized or adopted by the company and its stockholders, of which we have failed to discover any proof; nor, even then, would the transfer be valid if its effect was to defraud the creditors of the company. But it is not necessary to put the decision of the point under consideration upon the ground last suggested; the reasons previously stated suffice for affirming the finding of the trial court that the notes in suit were discounted for the benefit of the company.

It is also contended by the appellants’ counsel that when the notes in suit were made the company was incapable of executing them or of transacting any business, as it had but two trustees and two stockholders, to wit, Woodruff and his daughter, who assumed to act as trustees and bind the company by a resolution authorizing the agreement. This contention rests upon the provision of the act of 1848, that the affairs of every corporation formed under said act shall be managed by not less than three nor more than nine trustees, who shall be stockholders. (See. 3.) According to what has been said already, the president had authority to make notes in the name of the company, and for its use, without a resolution of the board. We are inclined to the opinion that he had the like authority in respect to the agreement in question, so far, at least, as such agreement recognized the authority of the president to bind the company by executing new paper of the same character as that which he had long been accustomed to make in the name of the company. But however that may be, the resolution, if not valid as an act of the board for want of the number required by the statute, was an assent by all the stockholders, and that we think was enough. A previous assent is certainly as effective as a subsequent ratification, and that a ratification by all the stockholders of the unauthorized act of the president in making the notes of the company, or agreeing to make them would cure the defect, is well settled. (Kent v. Quicksilver Mining Co., 78 N. Y., 159; Sheldon Hat Bl. Co. v. Eickmeyer Hat Bl. Co., 90 id, 607.) The act of the president was not malum in se or malum prohibitum. We regard the statutory provisions for the management of the affairs of the corporation by a board of trustees as intended for the protection and benefit of the stockholders, which they may dispense with by unanimous consent, and it seem quite immaterial whether they do it by previous or cotemporaneous action or by subsequent ratification.

A reduction of tlie board of trustees to a less number than is authorized to act by the charter, may, in certain cases, work a suspension of the franchises of a corporation until its functions are restored by legislative action, or by filling the vacancies in the board; but that rule cannot be invoked, we apprehend, to relieve the corporation from the obligations of a contract beneficial to itself, entered into in its name by the authority of its acting trustees, with the consent of all the stockholders, and the repudiation of which would operate as a fraud upon other parties.

It is contended that the mortgage and notes are void because not signed by the secretary of the company, as provided by one of its by-laws. The by-law seems to have been adopted soon alter the organization of the company, but, so far as the case shows, it had never been followed, and the notes and other obligations of the company were signed by the president. The by-law does not provide that the lack of the signature of the secretary shall render the instrument void. Its design is, evidently, to prescribe the duties which the secretary may be called on to perform, but it does not prohibit the performance of the duty in question by the president or other officer to whom, by law or usage, it ordinarily pertains. We think the signature of the secretary was not essential to the validity of the instrument signed by the president in the name of the company.

The written assent of Woodruff, as a stockholder, to the giving of the mortgage, was sufficient. lie was then the owner of at least two-thirds of the stock, and his assent was enough without that of the other two stockholders. (Laws 1864, chap. 517, § 2.)

Several exceptions were taken to rulings of the trial court upon the admission or rejection of evidence., to findings of the court and to refusals to find as requested. Most of them have been met in what has already been said. The only exception to which it is necessary to advert particularly is that which relates to the striking out of the evidence of Cordley respecting the state of the account between the company and Woodruff, as shown by the books. The witness was called by the defendants, and he stated that he had examined certain books of- the company. He also testified to what he said was the result of his examination as to the state of the • accounts. He stated on cross-examination that the books which he examined were then in the court-house. The defendants’ counsel admitted that he could produce the books, but he declined to do so. The plaintiff’s counsel then moved that the evidence given from the abstract of the books be struck out on the ground that the books were not produced from which such absti'act could be verified. The motion was granted and the evidence was struck out. In that there was no error. The appellants’ counsel contends that it was erroneous to strike out without ordering the defendants to produce the books. Such order was unnecessary, since tho defendants refused to produce the books, although they were in their possession. The refusal was not put upon the ground that no order had been made by the court, nor did the counsel propose to produce the books if ordered to do so. The refusal was peremptory and unconditional.

We think the judgment should be affirmed, with costs.

Haight and Bradley, JJ., concurred; Lewis, J., not sitting.

Judgment affirmed, with costs.


text:
    AUBURN SAVINGS BANK, Plaintiff, v. JACOB BRINKERHOFF, Defendant.

      Savings banh — investment of funds —assignment of a bond and mortgage to secure the payment of a note — to constitute a discount there must be a reservation of interest— when an obligor cannot defend an action upon his boiid on the ground that the loan was unauthorized — evidence, when inadmissible as relating to a personal transaction with a deceased person — who is to be deemed an assignee of the deceased within section 829 of the Code of Civil Procedure — verbal stipulation, when enforced.

    This action was brought upon a bond executed by the defendant to David Brinkerhoff and Albert H. Goss, on or about December 16,1873, conditioned for the payment of the sum of $3,400 on June 1, 1875, with interest semi-annually. Upon the trial it appeared that the bond and a mortgage on real estate, collateral thereto, executed by the obligor to the obligees, were assigned to the plaintiff, a savings bank, as security for the payment of two promissory notes made by the assignors to the defendant, and indorsed by him, one for $ 1,000, dated December 1, 1873, the other for $2,400, dated December 20, 1873, each payable June 1, 1875, with interest semi-annually.

      Tlie defendant set up as a defense that the notes were discounted by the bank in violation of the provisions of the restraining act (1 R. S., COO, § 4; Id, 712,§ 3),and wmre, together with the bond and mortgage assigned as collateral thereto, void.

      Held, that as it was shown that the full face of the notes was advanced by the bank, and nothing was reserved, the notes were not discounted.

      City Bank of Columbu-s v. Bruce (17 N. Y., 507, 515); Rome Ravings Banky. Kramer (32 Hun, 270, 272) followed.
    It was shown that the real estate described in the mortgage was covered by eight prior mortgages, and it was not shown that any committee had made a report as to the value of the premises to be mortgaged as is required by the statute.

      Keld, that these facts were not available to the defendant, as a defense to this action, upon his bond.

      The Union Cold Mining Company v. The Rocky Mountain National Bank (96 U. S. R., 640); National Bank y. Matthews (98 id., 621), National Banky. Whitney (103 id., 99) followed.
    That a claim that the loan made was a violation of the statutes prohibiting savings banks from making loans on notes, bills of exchange or other personal security, could not be sustained as the loan was made upon the security of the bond and mortgage as well as upon the notes; and that as the loan was valid as to the bond and mortgage, it was not vitiated by the fact that the notes were also taken.
    The defendant, who claimed that he executed the bond and mortgage and indorsed the note for the accommodation of Goss and Brinkerhoff, alleged that he was a mere surety for Goss and Brinkerhoff, to the knowledge of the plaintiff, and that the plaintiff neglected to collect the debt from the principal debtors while it could, and after a request so to do by the defendant, and that thereafter the principal debtors became insolvent.
    The only evidence given upon the trial to show that the defendant was a surety for Goss was his own testimony, he being permitted, after the death of Goss, against the objection and exception of the plaintiff’s counsel, to answer the following questions, viz.: “ At the time you indorsed that note, or at the time you executed the bond and mortgage, did you receive anything for it? ” “ Did you ever receive any money upon this note, or mortgage or bond, from anybody ?’’

      Keld, that the question called for an answer which related to a personal transaction between the defendant and Goss, and that to receive it was error.

      Comstock v. Eier (73 N. Y., 280); Kale v. Elliott (18 Hun, 198) distinguished.
    That the plaintiff was an assignee of Goss within the meaning of that term as used m section 829 of the Code of Civil Procedure.

      Comstock v. Eier {supra) distinguished.
    That declarations made by the defendant to the treasurer of the plaintiff, orally and in writing, as to his relations to the debt, were not competent in his behalf to show that he was a surety.
    That, even if he was a surety for Goss, his defense would fail, as it appeared by his own stipulation that Goss was insolvent at the time the plaintiff was requested to prosecute him.
    When a party will be concluded upon the trial of an action by a stipulation as to the existence of a fact, although such stipulation is not in writing.

      Motion by the p’aintiff for a new trial on exceptions taken at the Cayuga Circuit and ordered to be heard at the General Term in first instance.

      W. E. da E E. Hughett, for the plaintiff.

      Wooden (& Warren, for the defendant.
   Smith, P. J. :

Action on a bond executed by the defendant to David Brinkerhoff and Albert II. Goss, on or about 10th December, 1873, and by them assigned to the plaintiff, conditioned for the payment of the sum of $3,400, on the 1st day of June, 1875, with interest semi-annually.

It appears that the bond was accompanied by a mortgage on real estate, of even date with the bond and collateral thereto, executed by the obligor to the obligees, to the plaintiff, as security for the payment of two promissory notes made by the assignors to the order of the defendant and indorsed by him, one for $1,000, dated 1st December, 1873, the other for $2,400, dated 20th December, 1873, each payable 1st June, 1875, with interest semi-annually. The notes and the bond and mortgage were transferred and delivered to the plaintiff in consideration of the loan of $3,400, in money, made by the plaintiff, and as security for the repayment thereof. The assignment of the bond and mortgage to the plaintiff contained a covenant that there was then to become due thereon the sum of $3,400, with interest from their date. The plaintiff is a savings bank, incorporated under chapter 92, Laws of 1849.

The defenses set up in the answer and relied upon at the trial are, first, that the defendant executed the bond and mortgage and indorsed the notes without consideration and for the accommodation of Goss and David Brinkerhoff, and that the notes were discounted by the plaintiff, a savings bank, in violation of the statute, and, consequently, the notes and the bond and mortgage which were assigned to the bank, solely as collateral security for the payment of the notes, are void; and, secondly, that the defendant was a mere surety of Goss and David Brinkerhoff, to the knowledge of the plaintiff, and the plaintiff neglected to collect of them while it could, after request by the defendant, and the principal debtors thereafter became insolvent.

In support of the first defense, it is contended by the defendant’s counsel, that the transaction on the part of the savings bank was a discounting of the notes, which by the provisions of the restraining act (1 R. S., 600, § 4; Id., 712, § 3) it was prohibited from doing. But it does not appear that the notes were discounted. Discounting of a note by a bank has been held to mean lending money upon the note and deducting the interest or premium in advance. (City Bank of Columbus v. Bruce, 17 N. Y., 507, 515; Rome Savings Bank v. Kramer, 32 Hun, 270, 272.) It appears by the uncontradicted testimony of the plaintiff’s-treasurer that the full face of the notes was advanced by the- bank and nothing was reserved. The defendant’s counsel also contends that the loan made by the plaintiff was a violation of the statutes' prohibiting savings banks from making loans on notes, bills of exchange, or other personal securities. (Laws 1875, chap. 371, § 30; Laws 1882, chap. 409, § 260.) That position is untenable, for the reason that it appears without contradiction that the loan was made upon the three securities, the notes, the bond and the mortgage The plaintiff was authorized to lend on bond and mortgage, and if the loan was in other respects valid, it was not vitiated by the fact that notes were taken in addition to the bond and mortgage. <•

Upon this branch of the case another question arisés. The charter of the plaintiff provides that its funds or deposits may be loaned * * * on improved, unincumbered real estate, in this State, worth, exclusive of buildings thereon, at least double the amount to be secured thereby. (Laws 1849, chap. 92, § 7.) The general statutes, relating to savings banks, also require that the real estate upon which loans might be made should be ‘' unincumbered.” (Laws 1875, chap. 371, § 26, sub. 5; Laws 1882, chap. 409, § 260, sub. 5.) It is proved that the mortgage in this case was upon real estate which was covered by eight prior' mortgages; and it is not shown that there was a compliance with the1'statutory requirement, that no investment in bond and mortgage shall be made by a savings bank, except upon the report of a committee, etc., who shall certify to the value of the premises mortgaged. (Id.) But are these facts available to the debtor as a defense to an action upon his bond % The bank has power, as we have seen, to make loans upon bond and mortgage. The provisions requiring the mortgage to be a first lien, and the value of the mortgaged premises to be certified, are intended for the protection of depositors and others whose funds are held and managed by the bank as trustee. The statute does not declare that non-compliance with those provisions shall render the bond and mortgage void. Nor is there anything in the statute to indicate that a result so hostile to the interests of cestuis que trust, creditors of the bank, was intended. In Davis Sewing Machine Company v. Best (30 Hun, 638), it was held that a security taken by a trust company, contrary to an implied prohibition in its charter, upon a loan made by it, could be enforced for the benefit of the depositors of the company, notwithstanding the prohibition. In The Union Cold Mining Company, etc., v. The Rocky Mountain National Bank, etc. (96 U. S. R., 640), it was held that a person who has borrowed money from a bank and failed to pay it.' cannot make the defense, when sued for it, that the bank had no right to loan the money. (See, also, National Bank v. Matthews, 98 U. S. R., 621; National Bank v. Whitney, 103 id., 99.) We think the irregularities, above pointed out, do not furnish a defense to the bond.

. In regard to the other defense we do not think it is shown that the defendant executed the bond as the surety of the obligees. On the contrary, the inference to be drawn from that instrument is that he was their debtor. If the form of the note raises the presumption of suretyship it is not conclusive, and is overcome by other evidence in the case. The defendant admitted on the stand that he was not a surety for David BrinkerhofE, and David testified that he never had a penny of the loan, and was surety for the defendant. lie also testified that he signed the $2,400 note at •the request of the defendant, who stated that he was in need of money and asked David to go security with Goss for $3,400, and promised to give them a bond and mortgage. David consented, and in pursuance of that arrangement the papers were drawn and executed. That testimony was not controverted by the defendant, although he was put upon the stand after it was given.

Upon the question whether the defendant was surety for Goss, the only oral testimony is that of the defendant. Its admissibility is questioned by the plaintiff’s counsel. It was proved that Goss was dead. Subsequently the following questions were put to the defendant, as a witness in his own behalf, to wit: “ At the time you indorsed that note, or at the time you executed the bond and mortgage, did you receive anything for it?” “Did you ever receive any money upon this note, or mortgage, or bond, from anybody? ” Each question was objected to, as incompetent, under section S29 of the Code; the objection was overruled, an exception was taken, and the witness answered, “ No.” The only legitimate tendency of the testimony thus elicited was to show that the defendant was not a principal debtor, and was a surety in the transaction. The questions being general, embraced, of course, his dealings with Goss, in respect to this transaction. To that extent, it seems.to us, they were within the prohibition of the section. The testimony related to a personal transaction between the defendant and Goss, then deceased, who was one of the assignors of the plaintiff, and its reception was error.

The learned counsel for the defendant invokes the rule declared in Comstock v. Hier (73 N. Y., 280) and Kale v. Elliott (18 Hun, 198), that the death of one of two persons jointly interested does not render a party incompetent to testify to transactions with the decedent, at which the survivor was present, or to transactions with the survivor. The questions objected to went beyond that rule,, they being so broad as to cover transactions with Goss, at-which no third person was present, and the defendant, by his answers to them, was permitted to say, in effect, that he never received any consideration for signing the papers from Goss, either alone nr jointly with David Brinkerhoff.

It is also contended by the defendant’s counsel that the plaintiff is not an assignee within the meaning of section 829. Comstock v. Hier (supra) is cited as authority for that position also. It was there said that a maker of a note, or acceptor of a bill,, negotiating his own paper, or procuring it to be discounted,, is. no,t an assignor of the note or bill, but by the transaction assumes; the ordinary obligations of a party to negotiable pap,er, as, maker of a note or acceptor of 'a bill. If this action,, were, upon the notes, and it appeared that they had their- inception when they were delivered to the bank, the rule referred to would be applicable. The action is on the bond, which, for aught that appears m the case by legitimate evidence, is presumed to have been a valid instrument in the hands of the obligees therein named, and which is admitted by the defendant, in his answer, to have been executed and delivei’ed to said obligees, and to have been assigned and transferred to the plaintiff.

As the testimony above considered was improperly received, there is no legitimate evidence in tlie case that the defendant was the surety of Goss, and as the defendant admitted on the stand that he was not the surety of David Brinkerhoff, the defense founded on the alleged suretyship fails. The declarations made by the defendant to the treasurer of the plaintiff, orally and in writing, as to his relations to the debt, are not competent in his behalf to show that he was a surety. If it be assumed that the defendant was a surety, yet as in view of his admission already referred to, he is to be regarded as the surety of Goss only, his defense fails for another’reason. The printed case shows that during the progress of the trial, the plaintiff’s counsel stated to the court that Mr. Cox, one of the counsel for the defendant, had stipulated orally, before the trial was begun, that at the time when the request to prosecute wa’s made, Goss was insolvent, and that consequently he, the plain tiff’s counsel, was not prepared with evidence upon that question, to which Mr. Cox assented. The case proceeds to state that consequently no further evidence was given on the subject of Goss’ insolvency. If this statement in the case has any practical significance (and it is to be presumed that if it had none it would have been struck out), it is equivalent to saying that before the trial the defendant’s counsel stipulated orally that Goss was insolvent when the request was made, and that the plaintiff’s counsel, relying on the stipulation, omitted to produce evidence of the fact which was within his reach, or went to trial supposing that the fact would not be questioned. And it does not appear that the fact was questioned by the defendant’s counsel. In those circumstances, we think, the defendant was bound by the stipulation, although it was not m writing (People v. Stephens, 52 N. Y., 306), and that for the present purpose the fact is to be assumed to be as stipulated. In that view of the case, the defendant suffered no harm from the plaintiff’s ’omission to sue.

For these reasons, we think a new trial should be ordered, costs to abide event.

Haight and Bradley, JJ., concurred; Barker, J., not voting.

Motion for new trial granted, costs to abide event.


author: Smith, P. J.:

text:
    STEPHEN HUNT, Respondent, v. IRA RAPLEE, Appellant.

      Deed — construction of the word “ tow-path ” when used as a boundm'y line-t? measure of damages for a breach of the covenants in a deed, stated.

    In November, 1880, the defendant conveyed to the plaintiff a house and lot in Penn Yan, lying between Lake street and what was formerly the Crooked Lake canal, the lot being described as bounded on the north by the “tow-path.” At the time of the conveyance the canal had been for several years abandoned, and the land owned by the State had been conveyed by it to a railroad company. Upon the trial of this action evidence was given tending to show that at the time the deed was executed a “ tow-path” was visible, and that the canal lands owned by the State extended some twenty-five feet south of the place where the tow-path ippeared to be. While the parties were in negotiation the defendant took the plaintiff and his wife on the premises and showed them the lot in the rear of the house, and the plaintiff then saw, but did not particularly notice, the tow-path. The plaintiff having been evicted from that portion of the premises described in the deed which belonged to the State, brought this action to recover damages for a breach of the covenants of warranty, seizin and quiet possession contained in the deed.

      Held, that he was entitled to maintain the action.
    That the contention of the defendant’s counsel that the word “ tow-path,” as used in the deed, was a general and not a particular designation of the north boundary of the premises, and that it. included not merely the beaten track, but also the adjacent lands, proper and necessary for its construction and maintenance, in other words, the strip of land owned by the State south of the canal, could not, under the circumstances of this case, be sustained.
    That as the State owned the land taken for canal purposes in fee, the general rule applicable to the case of a conveyance of land, bounded on an established highway, was not applicable to this case.
    Upon the trial the plaintiff was allowed to recover damages, based upon the idea that the measure of damages was the difference in value between the entire premises described in the deed and the portion remaining after the eviction.

      Held, that the court erred in so charging.
    That the measure of damages, in actions of this description, is such part of the original price as bears the same ratio to the whole consideration as the value of tlie land, to which the title has failed, bears to the value of the whole premises.
    Ordinarily the recovery does not include subsequent improvements or rise in ■market value, but it is limited to an aliquot part of the value of the entire premises, as fixed by the price paid, with interest not exceeding six years.
    Appeal from a judgment, entered on a verdict in favor of the plaintiif rendered at the Yates Circuit, and from an order denying a motion for a new trial on the minutes.

      Charles S. Baker, for the appellant.

      M. A. Leary, for the respondent.
   Smith, P. J.:

Action for breach of covenant of warranty, of seisin and quiet possession. The covenants were contained in a deed, executed in November, 1880, whereby the defendant and his wife, in consideration of the sum of $Y50, conveyed to the plaintiff a house and lot on the northerly side of Lake street, in the village of Penn Pan, lying between said street and what was formerly the Crooked Lake Canal. The deed described the lot as bounded on the north by the “ tow-path.” The canal had been abandoned several years before the deed was executed, and was not in use, and the State had conveyed the land to a railroad, company; but there was evidence given at the trial tending to show that the “tow-path” was visible at the time of the conveyance, and that the canal lands owned by the State extended some twenty feet south of the tow-path, or of the place where the tow-path appeared to be at the time of the execution of the deed. Prom that portion of the deeded premises, which belonged to the State, the, plaintiff was subsequently evicted bv the grantee of the State, and this action was brought in consequence. The answer denied certain allegations in the complaint, and alleged that at the time of the conveyance neither party knew exactly -where the north line .of the lot or the south line of the tow-path was located, but the intention of both parties was that the deed should convey so much as the defendant owned from Lake street northwardly towards the tow-path, and no more, and that if it should be held “ that the language employed in the deed covers any of the State lands on the northerly side of the premises described therein,” it was the result of a mutual mistake, and the answer demanded that the deed be reformed in that particular. The issue as to the alleged mistake was litigated and submitted to the jury, and upon that branch of the case no question is now presented.

The principal question in the case is presented by the contention of the learned counsel for the defendant, that the description in the deed, properly interpreted, carries the plaintiff no farther north than to the southerly line of the canal lands, the tow-path having been situated on the south side of the canal. His argument is understood to be that the word “ tow-path,” as used in the deed, is a general and not a particular designation of the north boundary of the premises, and that it includes, not merely the beaten path, but also the adjacent lands proper and necessary for its construction and maintenance; in other words, the entire strip of land, owned by the State, on the tow-path side of the canal. There may be cases in which the interpretation contended for should prevail; whether this is one of them depends, to a great extent, in our opinion, upon the particular circumstances. When the parties were in negotiation, the defendant took the plaintiff and his wife on to the premises and showed them the lot in the rear of the house. It is apparent from the testimony that the tow-path, or the beaten track was then visible, and that the plaintiff saw it, although, as he testified, he did not notice particularly its location with reference to where the railroad track was that had been built subsequently. The plaintiff testified that on that occasion “ nothing whatever was mentioned about any State line, or any land belonging to the State or tow-path. There was a tow-path there, and that was all I understood about it. The words ‘ State land,’ that he was going to deed me to the State land, was not mentioned at all. I had no idea where the State lands were, but I could see the towpath. When Raplee and I were over there talking there wasn’t any line located where the deed was to go, not a word ; and it was all open so that I could look down to the water, except a little fence on the north side. I most certainly want the jury to understand there wasn’t a word said about where the north line was when we were there ’ ” The fence spoken of was elsewhere described, by the same witness, as a length or two of an old fence standing about a foot and a half north of one of the outhouses, which was stated to be four or five feet from the main building. Soon after that interview the parties met at the office of Mr. Andrews, who drew the deed. The plaintiff's version of what then occurred is as follows : “My wife and I sat away back in the office, and Mr. Raplee and Andrews were talking together; I think Raplee went and got another deed ; we didn’t know what they were really talking about, until my wife and I heard Mr. Andrews say something about the tow-path, but we couldn’t understand what it was they were talking about; it was not stated in my heai’ing in the office by Mr. Andrews that he considered that the tow-path included all the land belonging to the State, and Raplee did not say he would only deed me what he himself owned ; that he would only deed to the State land ; I did not hear anything said by Raplee to Andrews upon the subject as to where the line was.” This testimony was controverted, but in view of the manner in which the case was disposed of by the court, we must regard the statement of the plaintiff as having been accepted as true. The court charged the jury that the plaintiff was entitled to recover, unless there was mutual mistake in drawing the deed, thus taking from the jury every question of fact except that of mistake and the amount of damages. To that charge there was no exception. The jury having found that the description was not the result of a mutual mistake, the only question is whether the parties intended by the use of the word “tow-path” to designate the south line of the State land as the boundary. "Whether that question is one of law, purely, or a mixed question of law and fact, it is obvious from the course,, of the trial, that it was left to the decision of the judge. If it was a question of fact, his decision is conclusive. If it was a question of law merely, arising upon a given state of facts, then the statement of those facts, given by the plaintiff’s witnesses, although controverted, must be regarded as having been adjudged to be true.

Now, as has been said, there may be cases where the construction contended for by the defendant’s counsel would apply. If in this case the limit of the canal land had been marked by a fence or other visible, boundary, to the knowledge of both parties, it might well be held that the parties, by the use of the word “ two-path,” meant the land inclosed within such boundary, and not the mere beaten path, as the term "highway ” would be held to include the entire width of the road as laid out and fenced, and not merely the traveled track. But here there was nothing to indicate the location of the boundary of the State land, or that the State owned any land south of the beaten track of the tow-path. The State map, which the defendant’s counsel put in evidence, and on which he relies very much in his argument, was not referred to in the deed, and does not appear to have been known to the parties. The fact that the location of the beaten track was changed to some extent from time to time when the canal was in use is immaterial, the question being whether the deed referred to the visible worn track as it appeared at the time of the conveyance.

The appellant’s counsel cites the case of Northrop v. Sumney (27 Barb., 196), which holds that when a grantor bounds the land which he conveys, by the land of another, he does not undertake that the visible division fence is upon the true line, but he leaves the true line to be ascertained. If Raplee, in deeding to Hunt, had bounded by the lands of the State, the case cited would have been an authority for saying that he conld not be held to have undertaken that the visible tow-path was the true line. But suppose, in the case cited, the land had been bounded by the fence, could it have been successfully claimed that the grant extended to the actual boundary line beyond the fence ?

The appellant’s counsel contends that the case is analogous to that. of a highway named as a boundary, and refers to the general rule that in such case the center of the highway, as laid out and established, is the boundary, unless the language excludes it and limits the grant to the exterior line. That rule is founded upon the presumption that the ground was originally taken from the adjoining owners, and for the sole purpose of being used as a thoroughfare. (Dunham v. Williams, 37 N. Y., 251.) But the State owns her canals im, fee (Rexford v. Knight, 15 Barb., 627; S. C. affirmed, 11 N. Y., 308, 314), so that in the case of a deed bounded by the “ canal ” or the “ tow-path ” there can be no presumption ordinarily that the grant extends beyond the exterior line of the canal or tow-path. The case of Dunham v. Williams (supra) is cited by the defendant’s counsel as an exception to the rule above stated as to the presumption that a grant bounded by a highway goes to the center. That was an action of ejectment to recover to the center line of lands that had been taken years before for a highway. The highway had been abandoned. The plaintiffs based their claim to recover upon the fact that the deed through which they deduced title bounded their land on the highway. But it appearing that the highway was laid out on land belonging to another, it was held that the presumption was repelled, and the plaintiffs could not recover. But that case, we conceive, has no application here, except as an authority for holding that Hunt, by his deed, acquired no title beyond the southerly limit of the lands of the State, and that fact constitutes his grievance. We are of the opinion that by the terms of the deed, interpreted in the light of the’ attendant circumstances, the northern boundary designated was the towpath or beaten track, as and where it existed at the date of the conveyance.

These views would lead to an affirmance of the judgment, but for a question presented by one of the exceptions. The plaintiff, testifying in his own behalf, was asked how much, in his judgment, the premises were worth, with the land in the rear taken off. What then occurred is stated in the printed case as follows: “ Mr. Baker ” (defendant’s counsel) “objected as incompetent and immaterial, and is not the proper measure of damages ; that the rule of damages is the value of the land taken.” “ By the court: My impression is, that the rule of damages in this case is the valúe of the property taken, or the value of the property from which there has been an eviction, considered as a portion of the whole lot conveyed.” “ By Mr. Leary ” (plaintiff’s counsel): “ I claim the rule of damages to be the difference in the value of these premises as they were with this land annexed and as they are without it.” “ By the court: That is my opinion. I think you should prove the value at the time of the purchase of the whole, and then the value of that which remains.” “ Mr. Baker excepted.” The question was then repeated in the following form: “ How much, in your judgment, are these premises worth with the land taken off ? What would it be worth in the market?” A. “It would only be worth half to me.” Q. “Not to you, but to any man wanting it as a place of residence.” A. “If I am allowed to say, the place has cost me with the improvements I have put on it, nine hundred dollars, and anybody can take it for half of that money, if they will take it now.” Q. “I would like to have you answer my question. IIow much less are the premises worth in consequence of this loss of the land fourteen inches soutli of the line?” A. “Three hundred dollars.”

It is obvious from this transcript of the case that the defendant’s objection was overruled and the testimony offered was received, upon the idea that the measure of damages is the difference in value between the entire premises described in the deed and the portion remaining after the eviction. That is not the rule. The measure of damages in actions of this description, we understand to be such part of the original price as bears the same ratio to the whole consideration, that the value of the land to which the title has failed bears to the value of the whole premises. (Morris v. Phelps, 5 Johns., 49, Giles v. Dugro, 1 Duer, 331.) Ordinarily, the recovery does not include subsequent improvements or rise in market value, but it is limited to an aliquot part of the value of the entire premises as fixed by the price paid, with interest for not exceeding six years. (Staats v. Ten Eyck's Exrs., 3 Cai., 111; Petcher v. Livingston, 4 Johns., 1; Kinney v. Watts, 14 Wend., 33, and cases there cited by Sutherland, J., p. 41; Kelly v. Dutch Church of Schenectady, 2 Hill, 105, 116; Rawle on Cov. [4th ed.] p. 235.) The reception of the testimony was error.

The error cannot be regarded as cured by what followed. The examination of the witnesses subsequently called on both sides, upon the subject of value, seems to have been conducted with a view to the rule above laid down as the true one, and the judge charged the jury in accordance with such rule. And there was unobjectionable testimony given winch warranted the amount of the verdict. But the improper testimony above pointed out was allowed to be considered by the jury. It is impossible to say that it did not influence the verdict. The error, therefore, was not cured. (Erben v Lorillard, 19 N. Y., 299.) Had the objectionable testimony been withdrawn, had the jury been directed by the court to disregaid it, the erior, perhaps, would have been cured. (Mandeville v. Guernsey, 51 Barb., 99, S. C. aff'd., 50 N. Y., 669.)

It was probably error to sustain the objection taken to the question put by the defendant’s counsel to the plaintiff, on cross-examination, as to whether, when he was looking at the premises, Baplee did not tell him that he did not know where the north line was. The question related to an interview and transaction upon which the plaintiff had given testimony in his own behalf, and the inquiry seems to have been within the strict limits of a cross-examination. But it is unnecessary to decide the point definitely, as there must be a new trial, and it may then be avoided.

For the error above pointed out, the judgment and order should be reversed and a new trial granted, costs to abide the event.

Haight and Bradley, JJ., concurred.

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


text:
    JULIUS SMITH, Respondent, v. THE CITY OF BUFFALO, Appellant.

      City — liability of, to a contractor for a failure to compel an assessment to be made to raise the amount required to pay for the work done by him for it.

    Upon the trial of this action, brought to recover for several pieces of work done by the plaintiff’s assignors, at defendant’s request, in and about certain local improvements in the defendant’s city, it appeared that the claims for work were duly presented to the common council of the city, who audited and allowed the same and ordered assessments to be made therefor at different times between the 2d of July, 1883, and the 15th of December, 1884; that no assessment was made up to March 27, 1886, at which time this suit was commenced.

      Held, that as no excuse was shown for the delay of the assessors or the neglect of the city authorities to proceed against them on account of such delay, the question as to whether the delay was unreasonable .was one for the court to decide.
    The defendant’s counsel claimed that the city was not liable for the neglect of the assessors, as they were not the agents of the city, but an independent board of public officers whose duties were prescribed by the legislature, and who acted not for the city but for the public at large.

      Held, that it was not necessary to decide that question in this case, as it was brought for a breach of the duty which the city owed to the plaintiff, not only to set in motion the machinery which the charter provided for raising the needed funds to pay for local improvements ordered by it, but also to see that such machinery was kept in motion, and to enforce its power in that respect with reasonable diligence until the end was accomplished.

      The defendant claimed that the plaintiff had failed to show that the claim upon which the action was brought was presented to the common council before this action was commenced, or, m other words, that as the plaintiff did not notify the common council that he claimed to recover the amount of the bills audited on the ground of the alleged neglect of the defendant, the provision of the charter, requiring all claims to be presented, prevented him from maintaining this action.

      Held, that the claim was untenable; that as the claims for the work were presented as the statute required nothing more was necessary.
    Appeal from a judgment of the Erie County Court, entered on a verdict in favor of the plaintiff directed by the court.

      W. F. Worthington and Frank G. Laughlin, for the appellant.

      Herma/n Henvng, for the respondent.
   Smith, P. J. :

Action to recover for several jobs of work done by plaintiff’s assignors, at defendant’s request, in and about certain local improvements in the defendant city. Claims for the work were duly presented to the common council of the city, who audited and allowed the same and ordered assessments to be made therefor, at different times between the 2d of July, 1883, and the 15th of December, 1881, inclusive. The gist of the action, as alleged in the complaint, is that the defendant neglected and refused to make or confirm the assessments ordered, or to pay for the work, or to make any provision whatever therefor, whereby the plaintiff suffered damage to the amount of said claims as audited, with interest on each from the date of its audit.

By the charter of the defendant, the expense of local improvements of the character of the work alleged in the complaint is to be defrayed by local assessments, and certain ordinances of the city provide that warrants in payment of work of that character shall not be drawn until the assessment- therefor shall have been confirmed by the common council, and such warrants shall be made payable out of the 'fund when collected, or when the money is actually realized by the city. The counsel for the appellant contend that in view of those provisions the only duty of the city, in the first instance, is to put the necessary machinery in motion to raise the money by assessment. That position, in its literal sense, may be conceded to be true, but if by it is meant that the city, by the discharge of the primary duty of ordering an assessment, is thereby relieved from its liability to pay the debt, the position cannot be maintained. It is not supported by the cases cited by the appellant’s counsel. In McCullough v. The Mayor (23 Wend., 458) Bronson, J., said: “If the common council has neglected that duty ” (of putting the necessary machinery in motion) “ or has been wanting in diligence, an action on the case would, perhaps, lie,” etc. (P. 461.) In Lake v. The Trustees, etc., of Williamsburgh (4 Den., 520) which was an action on a warrant drawn by the trustees of the village upon the treasurer, the same judge remarked that the question whether the plaintiff had a remedy on the case against the trustees for a neglect of duty, did not arise on the bill of exceptions. (P. 525.) In Buck v. City of Lockport (6 Lans., 251) the claim in suit was presented to the common council of the city, and by them referred to their committee on accounts, and nothing further having been done with it, the suit was begun between seven and eight months after the presentation of the claim. There was a neglect of the primary duty referred to, but the case plainly indorses the principle, that for the negligence or unreasonable delay of the common council, or other authorized agent of the corporation, in any stage of its duty, the corporation is liable. Said Johnson, J.: “ The corporation cannot thus ” (by neglect to act) “ keep its creditors at bay and then defend itself, on the ground that its own officers and agents have not done what it was their duty to do.” (P. 255.) In Richardson v. The City of Brooklyn (34 Barb., 569); Hunt v. The City of Utica (18 N.Y., 442), and Baker v. The Same (19 id., 326) no negligence whatever was shown.

It has been held repeatedly that if the failure of the Corporation to realize the fund is owing to its own neglect or unreasonable delay, it is liable presently. The case of Cumming v. The Mayor, etc., of Brooklyn (11 Paige, 596) is an authority in point for the present action. The corporation of Brooklyn contracted with the complainants to grade and regulate one of the avenues of that city, at a specified price, to be paid for out of the moneys which were to be collected from an assessment to be made for such improvement. The work was completed and approved, and in March, 1S37, the corporation ordered the assessors to make an assessment for the improvement. The assessors accordingly made an assessment of the expense of the improvement upon the several persons by name who were supposed to be owners of property benefited by the improvement. JBut in their return of the assessment they gave no description of the property which was benefited, and which they intended to assess. In October, 1837, a warrant was issued to the collector to collect the several assessments from the owners assessed. But only a small part of the assessments was collected and paid over to the complainants, and the residue of the assessments the collector returned as uncollectible from the goods and chattels of the persons assessed. In May, 1838, the corporation advertised the property intended to be assessed for sale, but could not obtain bids to the amount of the respective assessments, and the corporation subsequently advertised the property for sale, with a similar result. In August, 1839, the complainants filed their bill for relief, and it was held that it was the duty of the officers of the corporation to see that a proper assessment for the improvement was made, and that the money was collected thereon and paid over to the contractors within a reasonable time after the completion of the improvement, and that as the officers of the corporation had unreasonably neglected to compel a proper assessment to be made, the complainants were entitled to payment out of the general funds of the corporation, and that such general funds be reimbursed out of the proceeds of the assessment when made That case was approved and followed in Baldwin v. The City of Oswego (1 Abb. Ct. App. Dec., 62). Upon the same principle proceed the cases of Beard v. The City of Brooklyn (31 Barb., 142); Buck v. Lockport (supra), and Quin v. City of Buffalo (26 Hun, 235). The principle recognized by those authorities, we think, is applicable to the present case. It appears that the common council seasonably audited and liquidated the claims in suit, after they were presented, and adopted resolutions ordering the requisite assessments to be made; but the assessors made no assessment, and no further action was taken by the common council or other city authorities in respect to the matter.

The defendant’s counsel contend that the city is not liable for the neglect of the assessors; that the assessors are not the agents of the city in respect to making assessments, but are an independent board of public officers, whose duties are prescribed by the legislature, and who act not for the city but for the public at large. In support of that position they cite the well-known case of Maxmilian v. The Mayor (62 N. Y., 161) and many other analogous cases. To the cases cited may be added the recent one of Heiser v. The Mayor, etc., of New York (6 Cent. Rep., 35), in which it was held that the board of assessors of the city of New York did not act as the servants or officers cf the city in performing the duties enjoined upon it by chapter 729 of the Laws of 1872 in relation to the improvement of the Eighth avenue in said city, but, as was said in the case of The People ex rel. Negus v. Dwyer (90 N. Y., 402), “ the question in every case of such character depends largely upon its own peculiar facts, and is determined by considerations not usually common to them all.” (P. 408.)

We conceive it needless in this case to determine whether the assessors of the city of Buffalo are to be regarded as the agents of the city in respect to making assessments as required by the charter. The plaintiff’s action does not rest upon the theory that the negligence of the assessors is the negligence of the city. Its theory is, that it is the duty of the city, through its common council or other appropriate agency, not only to set in motion the machinery which the charter has provided for raising the needed funds to pay for local improvements ordered by it, but also to see that such machinery is kept in motion, and to enforce its power in that respect, with reasonable diligence, until the end is accomplished, and that for a breach of such duty the corporation is liable to a party injured thereby. That position, we think, finds support in cases already cited. In Cumming v. The Mayor (supra) Chancellor Walworth said: Although the common council may not have a control over the assessors, directly they were bound by their contract to have the assessment made, and if the assessors refused to do their duty the corporation should have applied to the Supreme Court for a mandamus to compel them to make a proper assessment, instead of confirming an invalid one.” In Baldwin v. The City of Oswego (supra) the defendant was held liable “ on account of the neglect of its officers to enforce the legal instrumentalities provided for enforcing payment against the parties primarily chargeable with such payment.”

By the charter of the city of Buffalo (chap. 519 of 1870), among the? officers of the city to be elected are three assessors (tit. 2, § 1), who. shall constitute a board of valuation and assessment, a majority being a quorum (Id. § 39), by whom all local assessments shall be made. (Tit. 6, § 2.) They are required to. publish notice of completed assessment rolls in their hands the first week of each month (tit. 6, § 5), and to give notice that such rolls will remain in their office open for inspection and revision for ten days. At the expiration of that time, they are to deliver a copy thereof to the city attorney, when the functions of the assessors in regard to such roll appear to cease. The general duties of the assessors are prescribed by the. charter. The details of their duties, where the charter is silent,may be prescribed by the common council, that body being vested with power to enact ordinances prescribing the duties of all officers or persons elected under the act. (Tit. 3, § 8.) The mayor is made the chief executive officer of the city (tit. 2, § 24); he is enjoined to see that the duties of the various city officers are faithfully performed (Id.); he has power to investigate their acts, to have access to all books and documents in their offices, to examine them and their subordinates on oath, and to suspend or remove such officers, whether they be elected or appointed, for misconduct in office or neglect of duty. (Id.) So that the agents of the corporation have ample power conferred by the charter to prevent the assessors from neglecting their duty, even if the latter are not to be regarded as the servants of the city. In addition, there is the authority suggested by the chancellor in the case of Cumming, to proceed against them by mandamus.

In respect to the negligence of the corporation there can be no question. The claims in suit W'ere all presented to the common council and audited before the 15th of December, 1884, and no assessment had been made up to the 27th of March, 1886, when this suit was commenced. No excuse is shown for the delay of the assessors or the neglect of the corporation authorities to proceed against them on account of such delay. There being no dispute about the facts, the question whether the delay was unreasonable was for the court. (Bowery National Bank v. Mayor, 8 Hun, 224, and cases cited by Brady, J., pp. 228, 229.)

The point is made that the plaintiff failed to show that the claim upon which, he seeks to recover was presented to the common council before the commencement of the action, or, in other words, that as the plaintiff did not notify the common council that he claimed to recover the amount of the bills audited, on the ground of the alleged neglect of the defendant, the provision of the charter requiring all claims to be presented, etc. (tit. 3, § 7), stands in his ■way. We think the position is untenable. The claims for the work were presented as the statute required, and nothing more was •necessary. A complete cause of action having been made out the plaintiff was entitled to recover as damages the amount of the bills ■as audited, with interest on each from the date of its audit, and we understand the recovery to be on that basis.

It is unnecessary to decide whether the appellant’s counsel are right in their contention that the testimony of the plaintiff’s witnesses, as to the time within which the assessors could have made the assessment-rolls was improperly received, inasmuch as, independently of that testimony, the court was justified in holding, as matter of law, that there had been a lack of reasonable diligence.

The appeal-book shows that a motion for a new trial was made by the defendant upon a case and denied, but the order denying such notice does not appear to have been annealed from and it, therefore, stands.

The judgment should be affirmed.

Haight and Bradley, J"J., concurred; Barker, J., not voting.

.Judgment and order affirmed.


text:
    THE PEOPLE OF THE STATE OF NEW YORK, Appellant, v. HANFORD WEST, Respondent.

      •Constitutional law — the legislature may prohibit the delivery of diluted milk to cheese or butter manufactories — 1884, chap. 2Q2, sec. 3, and chapter 183 of 1885 — an indictment need not negative facts which a/re matters of defense.

    ■.Section 3 of chapter 202 of 1884, as re-enacted by chapter 183 of 1885, providing that “no person or pei’sons shall sell, supply, or bring to be manufactured to .any butter or cheese manufactory, any milh .diluted with water, or any unclean, impure, unhealthy, adulterated or unwholesome milk,” is constitutional and valid.

      People v. Cipperly (37 Hun, 819; dissenting opinion, Learned, P. X, adopted by Ct. of App., 101 N. Y., 634); Powell v. Commonwealth (Sup. Ct. of Pa., 26 Am. Law Reg., 83 and note); Commonwealth v. Phans (132 Mass., 11); State v. Smyth (14 R. L, 100) followed, and In re Jacobs (98 N. Y., 98) distinguished.
    To an indictment which alleged all the facts necessary to constitute the offense, as defined by the statute, the defendant demurred for the reason that, for aught that was alleged therein, the factory to which the milk was brought was a private factory, used by the defendant alone, and that the cheese was not to be manufactured for the market, and that no third person could be injured by the act charged against the defendant.

      Held, that if any of these circumstances existed, they were matter of defense and need not be negatived by the indictment.
    Appeal from a judgment of the Court of Sessions of Erie county, sustaining a demurrer to the indictment herein.

      Oeorge T. Quiniy, district attorney, for the appellant.

      A. I. Knight, for the respondent.
   Smith, P. J. :

The indictment charges that at the town of Sardinia, Erie county, on the 8th day of July, 1886, the defendant “did wrongfully, unlawfully, and knowingly supply and bring, to be manufactured into cheese, to a cheese manufactory, then and there situate, a certain quantity of milk, to wit, ten gallons, which said milk was then and there diluted with water; the'said Hanford West then and there bringing the said milk, so diluted, to the factory, for the purpose of having the same manufactured into cheese, contrary to the form of the statute,” etc.

The third section of chapter 202 of the Laws of 1884, entitled “ An act to prevent deception in sales of dairy products,” provides, among other things, that “no person or persons shall sell, supply, or bring to be manufactured, to any butter or cheese manufactory, any milk diluted with water, or any unclean, impure, unhealthy, adulterated, or unwholesome milk,” etc. And it provides that whoever violates the provisions of said section shall be guilty of a misdemeanor.

The same provisions are contained in the third section of chapter 183 of the Laws of 1885, entitled “ An act to prevent deception in the sale of dairy products, and to preserve the public health,” being supplementary to and in aid of the act first above referred to.

If these statutes are a valid exercise of legislative power, the act charged in the indictment is a misdemeanor. The defendant’s counsel contends that the statutes violate the constitutional provision that no person shall be deprived of his property or liberty without due process of law, and are therefore void. One object of the statutes referred to is to protect the public health. Although that purpose is not specified in the title of the earlier act, it appears very clearly from many of its provisions, and it is specified in the title to the act of 1885, which is declared to be in aid of the former act, and which re-enacts most of its provisions, in /meo verba, including the section under which the indictment is framed. To that end, the legislature has power to prevent, by reasonable enactments, the sale, or the putting on the market of articles of food which are deleterious to public health, by reason of impurity, adulteration, or any -unwholesome quality or condition. It is for the legislature, and not for the courts, to decide whether the impure or adulterated article, the sale of which is prohibited, is or is not injurious to the public health. (People v. Cipperly, 37 Hun, 319; dissenting opinion of Learned, P. J. [p.327], adopted by the Court of Appeals, 101 N. Y., 634; Powell v. Commonwealth, Sup. Ct. of Pa., 26 Am. L. Reg., 83 and note.) The dilution of milk with water is an adulteration. One of the definitions of the term “ adulterate,” given by Worcester, is “ to corrupt by some foreign mixture, or by intermixing what is less valuable.” And section 13 of the act of 1884 clearly implies that the law makers regarded milk diluted with water as adulterated. Likewise, section 16 of the act of 1885. Another object intended to be accomplished by the statutes referred to, as is indicated by the title of each of them, is “ to prevent deception in sales of dairy products.” Both the objects of the statutes are had in view by the provision prohibiting the selling or furnishing of milk adulterated by dilution with water, to a cheese or butter factory, to be manufactured into cheese or butter. The difficulty of detecting the deception in the manufactured article undoubtedly led to the enactment. The case is not analagous to that of In re Jacobs (98 N. Y., 98), cited by the defendant’s counsel, where a statute passed ostensibly for

the public health, was declared unconstitutional on the ground that it had no relation to the subject.

In Commonwealth v. Waite (11 Allen, 261), where a similar enactment to the one in hand was upheld, the court said: “ It is notorious that the sale of milk adulterated with water is extensively practiced with a fraudulent intent. It is for the legislature to judge what reasonable laws ought to be enacted to protect the people against this fraud, and to adapt the protection to the nature of the case.” Similar statutes prohibiting the sale of milk reduced below a certain standard on account of the presence of water were held constitutional in Commonwealth v. Evans (132 Mass., 11) and State v. Smyth (14 R. I., 100); and see The People v. Cipperly (supra) and People v. Schaeffer (41 Hun, 24).

The defendant’s counsel contends that the indictment is demurrable for the reason that for aught that is alleged in it the factory to which the milk was brought was a private factory, used by the defendant alone, and the cheese was not to- be manufactured for the market, and no third person could be injured by the act charged against the defendant. We are of the opinion that if any of the circumstances suggested exist, they are matter of defense. They need not be negatived by the indictment. As that alleges all the facts necessary to constitute the offense, as defined by the statute, it is sufficient. Even if the cases supposed had been excepted from the operation of the statute by its own terms, it would have been incumbent on the defendant to show that his ease is within one of the exceptions. (People v. Walbridge, 6 Cow., 513; Fleming v. The People, 27 N. Y., 329.)

We think the judgment should be reversed and the case remitted to the Court of Sessions, with directions to overrule the demurrer and require the defendant to plead to the indictment.

Haight and Bradley, JJ., concurred; Barker, J., not voting.

So ordered.