author: Parker, J. O’Brien, J.

text:
    George F. Vietor et al., Resp’ts, v. David Levy et al., App’lts.

      (Supreme Court, General Term, First Department,

      Filed October 13, 1893.)

    Fraud—Transfers to creditors with intent to benefit debtor.
    A firm made transfers of book accounts to relatives and six days later confessed judgments to certain creditors, upon which executions were levied upon all its goods, which were bought in by said creditors for less than their claims, and the same were turned over to one of them, who continued the business in his own name, employing all the members of the firm but one. These creditors were all relatives of the members of the firm. Held, that the transaction was properly held to be fraudulent as to creditors.
    Appeal from a final judgment of the special term, entered on the 19th day of November, 1892, which confirmed a referee’s report, and also from an interlocutory judgment by which the referee was appointed.

      Rudd & Hunt (James M. Hunt, of counsel), for app’lts; Blumenstiel & Hirsch, for resp’ts.
   Parker, J.

The statute prevents a debtor, by a general assignment, from devoting more than one-third in value of his estate to the payment of preferred creditors. Chapter 503, Laws 1887. But he may accomplish that result by omitting to make a general assignment, and, instead, confessing judgment to the more highly favored creditors, in an amount sufficient to exhaust his entire estate. Manning v. Beck, 129 N. Y., 1; 41 St. Rep., 199. That method of securing creditors whom the firm of D. Levy & Sons regarded as having stronger equities appealing for protection than the others (and who happened to be relatives) was doubtless suggested by their legal adviser. Had they honestly devoted their property by this method to the payment of their creditor relatives, both the method and the result would have been unassailable. But the thought is suggested, from the reading of the record, that, when the firm found how easily they could prevent any otie of their creditors from receiving a single dollar on account of his demand, the idea was born of so using the power to pay or not to pay, as they should elect, as to secure a substantial benefit and advantage to themselves. Tire transaction of which complaint is made was intended by the insolvent firm to appear to the public and their inquisitive merchandise creditors as follows: Having been sued by an unrelenting creditor named Morris Batt, the firm exerted every effort to avoid failure, but success had not yet •crowned their efforts when the day arrived on which Batt could and did enter judgment. Failure then being certain, judgments were thereupon confessed to other creditors, who immediately issued executions and caused a levy to be made upon the property and assets of the firm. Thereafter a public sale was had, at which the various judgment creditors bought in the property for an amount - less than the aggregate of their judgments. The purchaser then sold the property to Louis M. Levy, who thereafter continued the business in his own name, employing as clerks the members of the late firm other than the senior members. This transaction, which upon a superficial examination would appear to be straightforward and legal, the learned trial judge has found to have been a fraudulent scheme, entered into and carried out by the several defendants with the intent to hinder, delay, cheat and defraud the creditors of D. Levy & Sons; and by the decree the judgments, as well as certain transfers of accounts made six days before the entry of the judgments, and all subsequent proceedings had under the judgments, including the appointment of Isaac Levy as receiver in proceedings supplemental to execution, are set aside. A personal judgment was also renderd against the several parties who obtained a benefit under the proceedings in the several amounts received by them. The statute which the judgment under review adjudges the defendants violated applies as well to a sale under an execution as to a transfer direct from the debtor. The judgment, execution and sale by the sheriff constitute the conveyance by which the title is transferred. Stimson v. Wrigley, 86 N. Y., 332.

Whether the conclusion reached by the trial court, that the proceedings taken, by which the property of the firm was transferred to Louis M. Levy, were in contravention of the statute, is well founded, will now be considered. In examining and weighing the evidence which induced the judgment we shall have in mind that he who alleges fraud must prove it; that the burden rests upon him to show affirmatively the facts and circumstances necessarily tending to establish the probability of guilt; and at the same time remember that those who attempt to perpetrate frauds take all the precautions that occur to them to make the transactions appear honest, and rarely confess their misconduct, whether under oath or otherwise; that, in such cases, proof of the fraud must be established, if at all, by facts and circumstances which deny the protestations of commercial virtue which nearly always fall from the lips of those who try to outwit the law. Examining more fully tire details of the several transactions which we have alluded to, in the manner in which it is natural to presume the defendants thought it would appear to inquirers, we find, in the first place, that Morris Batt, the apparently diligent creditor who pressed his claim to judgment, was a son-in-law of the senior member of the firm of D. Levjr & Sons, and a brother-in-law of the other members. That his conduct was not offensive to the firm is manifested by the fact that, on the same day on which he took judgment by default against them, they also confessed judgment for another sum in his favor. It likewise appears that Batt had no desire to be unreasonable with his relatives, for after the sale he not only turned over the goods which were purchased for him to another brother-in-law, Louis M. Levy, but he also turned over to him the money which he alleges he received in satisfaction of his judgment. Six days prior to the entry of the judgments the firm transferred certain book accounts to Matilda Levy, others to Isaac Levy, and still others to Cohen Bros. & Co., amounting in all to over $35,000. On the 26th of September, 1890, judgments were entered against them in favor of Morris Batt, Louis M. Levy, Cohen Bros. & Co., Matilda Levy, and Rachael Levy, aggregating $22,000. The firm was composed of David Levy and his three sons, Michael D., Henry J. and Morris M. Thé relationship existing between the several persons to whom accounts were assigned, or judgments confessed, and one or more members of the insolvent firm is as follows: Matilda Levy is the wife of Michael D.; Rachael Levy is the wife of David, and the mother of the other members of the firm; Isaac Levy is a brother of David; Morris Batt is a son-in-law ; while the members of Cohen Bros. & Co. are brothers of Matilda Levy. The fact that the parties associated with the firm of D. Levy & Sons in the alleged fraud are related to them is not, of course, in itself proof of fraud, but it Is a circumstance which may well be considered in connection with the other facts, to which allusion will be made.

Before proceeding with the examination of the steps taken subsequent to the confession of the judgment, we will consider, briefly, the claim of Matilda D. Levy for $12,000, to secure which accounts were assigned, aggregating $14,500, and a judgment confessed in a sum exceeding $10,000. The trial court found, and upon evidence warranting the finding, that the indebtedness for which judgment was confessed to her was not an obligation of the firm, but, instead, was the individual debt of her husband. Yet it appears that six days prior to the confession of judgment there were assigned to her firm accounts of a face value exceeding $14,500, from which there has been actually realized, after deducting expenses of collection, $10,374.39 ; and, notwithstanding this transfer of good accounts to her, a judgment was confessed in her favor for over $10,000. After the judgments were entered, executions were at once issued, and a levy made by the sheriff upon all the property and assets of the firm, excepting, of course, the good accounts, which had been transferred six days before ; and a sale thereunder had; Louis M. Levy, son of the senior member of the firm, and a brother of the others, purchasing the property for the judgment creditors, in pursuance of a previous arrangement with Butt, Cohen Bros. & Co., and Nathan Abraham, an uncle. While the property was struck down to the several parties mentioned, Levy made the bids, giving the names of the purchasers to the auctioneer, and specifying the amount chargeable to each purchaser. The persons in whose names the property was purchased at once turned over the property to Louis M. Levy. The individuals to whom the accounts had been transferred immediately retransferred such accounts to the same person. In a few instances, checks had been received in payment of accounts, and they were turned over in lieu of the accounts. Thus it happened that by the 18th of October, or within a period of about twenty-two days from the confession of judgments, all the property and accounts of the firm of D. Levy & Sons passed into the possession and apparent ownership of their kinsman, Louis M. Levy. He gave to the purchasers, as a consideration of the transfer to him, his individual demand notes, and it is an interesting, as well as important, fact, that these demand notes were given, not for the amount of the purchase, but for the amount of the alleged indebtedness of the insolvent firm as expressed in the judgments confessed.

If these apparent purchases had been real, this arrangement would have resulted rather fortunately for Levy as an investment To illustrate: Cohen Bros. & Co.’s claim was only $5,000, but the accounts assigned to them, and retransferred to Levy in consideration of his demand note, was $15,000, and at the time of the trial there had been actually realized thereon, after deducting expenses of collection, nearly $9,000. The accounts transferred to Isaac Levy for an alleged indebtedness of $2,500 amounted to over $6,500, on which had been realized at the time of the trial nearly $3,500. The result of these transactions was that all of the property of the firm had apparently become the property of Louis M. Levy, the relative creditors having ostensibly accepted him as their debtor in the place of the firm, with their position apparently improved, in this : that the substituted debtor was not burdened- with the obligations of the firm to the general creditors. Now, it appears that Louis M. Levy was a traveling salesman for one Schwab, whose business was that of a jeweler, and, as he understood that business, he concluded to remain in it, and has done so. But the new business had to be carried on, and so he employed, he says, his three brothers, who were members of the late firm of D. Levy & Sons, to conduct it. A power of attorney was given to Michael Levy to sign and indorse the name of Louis M. Levy at the bank, and thereafter Louis M.’s relations to his employer continued without embarrassment by reason of the new enterprise in which he had embarked on the capital of others, while the business which was of the late firm of D. Levy •& S.ons was continued at the same place, with the same persons in •charge, with one exception, but under a different name, and apparently beyond the reach of creditors,from some of whom portions ■of the property transferred, as has been described, had been pur•cbased. . One thing yet remained to be done to secure the transaction from being attacked by a hostile receiver, and so Isaac. Levy, to whom had been assigned accounts amounting to over $6,000 in payment of an alleged claim of $2,500, transferred these accounts to Louis M. Levy for $1,500, with the understanding, if more should be realized, he would be paid the $1,000. It may be remarked, in passing, that at the time of the trial of this action nearly $3,500 had been collected from these accounts. But the reason for accepting $1,500 for the accounts is explained by the record, which discloses that on the 30th day of October, twelve days after the property had all been transferred to Louis M. Levy, Isaac obtained a judgment against D. Levy & Sons for this $1,000. On it an execution was immediately issued, and returned unsatisfied the day following. With such diligence did the creditor Levy proceed against the debtor Levy that six days later a receiver was appointed, upon whose bond Michael Levy’s brothers-in-law, and judgment creditors as well, Samuel and Morris Oohen, became the sureties. Having given his bond, the receiver seems to have regarded his official labors as ended. During the progress of the trial the generosity • of' the relative creditors towards Louis M. Levy evidently came to be regarded as embarrassing, for several of them testified, in effect, that their action was induced by the desire to secure employment for Michael D. Levy. Mr. Cohen was asked : Q. Did you make a condition with reference to his employing Michael D. Levy ? A. I mentioned it. I mentioned that it would be a great help to him, and the fact that Michael D. Levy was my brother-in-law, and that he would be getting employment, would be an advantage, and, if he would give him employment, I would like it. Q. What was your purpose in buying goods at the sheriff’s sale ? A. The purpose was that Louis M. Levy would continue the business, and give my brother-in-law, Michael D. Levy, employment.”

Morris Batt testified to a conversation with Louis M. Levy in which it was said between us that he was to go on with the business himself. I told him I would like him to employ my brother-in-law in the business. He agreed to that, partly ; I presume he agreed to it. He did employ Michael D. Levy and the other two brothers in the business.” That the parties had it in mind, from the beginning, to help the firm, is evidenced by their conduct, and further assured by admissions such as we have quoted. To some of the witnesses it seemed important to deny that they had intended to secure, under cover of a third person, the business of the firm, and so they explained that their conduct was not for that purpose, and that they helped Louis M. Levy in order to insure employment to the brothers in the late firm. This, according to their own confession, was the purpose, and adding to it the circumstances, to some of which we have referred, the conelusion is irresistible that the parties thoughtfully planned a way by which they hoped and expected to secure to the members of the firm a livelihood out of a business, which, in the ordinary course, would have been taken from them by creditors.

We have thus called attention to some of the circumstances which lead us to the conclusion that the determination of the trial court that the scheme was a fraudulent one, intended to cheat and defraud the creditors of the firm, was well grounded. Necessarily, we have been obliged to refrain, because of the already unreasonable length of this discussion, from an allusion to the many important and pregnant facts with which this large record abounds. While no reference has been made to the evidence of strict legal procedure, and the protestations of good faith on the part of the defendants, upon which their counsel so strongly relies, it has been considered, and it may be said, that the steps do seem to have been carefully taken, indeed, almost too carefully, and the defendants have not failed to assert that their conduct was well meant and lawfully intended. But the circumstantial evidence overbears their denial of guilt. It is said that some of the judgments are not so attacked as to permit a finding that they are without consideration. True, but it matters not whether the firm was indebted in the sums confessed or not, if the object sought to be secured by a succession of steps, of which the confession was one, was to cheat and defraud the creditors of the debtor firm. Billings v. Russell, 101 N. Y., 226.

The appellants contend that the judgment, in so far as it directs Cohen Bros. & Co. to pay to the receiver upwards of $14,000, is erroneous, in that it requires them to pay nearly $8,500 more than they received. Cohen Bros. & Co. did not collect the money, it is true, but they did have the accounts. They saw fit to transfer them to Louis M. Levy. Having obtained the accounts through fraud, the court has properly charged them with their value. The exceptions to which our attention has been called do not merit discussion. The judgment should be affirmed, with costs.

O’Brien, J.

Although it be assumed that the judgments, transfers, etc., are valid because founded on a valuable consideration, and have not been successfully assailed for fraud, the question still remains, can these be used and employed as a shield so as to hold off all the other creditors, while practically returning the property to the possession, and subjecting it to the control, of the debtors? That this cannot be done has already been determined in the cases of Stimson v. Wrigley, 86 N. Y., 332; Abegg v. Schwab ; 31 St. Rep., 139; and Billings v. Russell, 101 N. Y., 226.

I, therefore ¡concur for affirmance.


source: Caselaw Access Project

author: O’Brien, J.

license: Public Domain

text:
    Michael P. Holland, Ex’r, Resp’t, v. Arthur Brown, App’lt.

      (Court of Appeals,

      Filed December 12, 1893.)

    1. Deed—Reformation—Fraud.
    An action to reform a deed on the ground that through fraud practiced on the grantor it was made to convey more land than was intended, can only be maintained as against a subsequent purchaser of the premises for a valuable consideration upon proof of actual notice to defendant of the facts, or such facts and circumstances as would put a prudent man on his guard, and from which actual notiee may he inferred and found.
    3. Same—Notice—Possession.
    The possession which will he equivalent to actual notice to a subsequent purchaser must be an actual, open and visible occupation, inconsistent with the title of the apparent owner by the record; not equivocal, occasional or for a special or temporary purpose, nor inconsistent with the title of the apparent owner by the record.
    Appeal from judgment of the supreme court, general term, second department, affirming judgment in favor of the plaintiff.

      John A. Deady, for app’lt; Henry A. Montfort, for resp’t.

      Reversing 44 St. Rep., 936.

   O’Brien, J.

This action was brought by the testatrix of the present plaintiff in her lifetime for the purpose of reforming a deed executed by her on the 9th day of June, 1869, of certain lands under water on the shores of Jamaica bay, at Rockaway Beach, to one Henry Eckert, which the defendant afterwards purchased at a sale upon judgment and execution against the Oceanus club. The following facts were found or proved upon the trial: About the time when the deed was made, Eckert, in behalf of o the club which was about to become incorporated, applied to the decedent to purchase a small piece of her water front off the northerly corner of her'property, adjoining lands which the club had purchased in order to build a dock for use in connection with the club house, and to furnish access to the channel of the waters of the bay. The parcel which the grantee desired to purchase was pointed -out and designated by stakes or marks upon the shore, and the owner agreed to sell it for fifty dollars. The grantee subsequently prepared a deed running to himself and presented it to the owner, representing that it conveyed the parcel designated and which she intended to sell, and she executed it without reading it or requiring it to be read, supposing that it embraced only the lands designated and intended by her to be conveyed. The deed in fact embraced a much larger tract of land, and included practically all of her water front, and the trial court found, upon sufficient evidence, that the conveyance was procured by fraud. She was ignorant of the fraud thus practised upon her until about two years before the commencement of the action, which was May 4, 1889. Eckert conveyed all the lands embraced in this deed to the club of which he was a member, or rather to another member, but for the use of the club, January 21," 1871, and on the 19th of May following this member conveyed to the club, and the latter entered into possession of the parcel designated and intended to be conveyed and built the dock thereon, and continued to enjoy it for the uses and purposes originally intended.

On the 4th of April, 1878, all the lands described in the deed were sold upon a judgment and execution against the club, and the defendant became the purchaser for $1,850, and on the 29th of November, 1879, he received the sheriff’s deed of the same. During the pendency of this action the owner and original plaintiff died, and the plaintiff, as executor, was substituted in her place as plaintiff. As already observed, there was proof given at the trial sufficient to warrant the finding that the deed was procured from the decedent by fraud, but in order to maintain the action it was necessary to go farther and show that the defendant when he purchased had either actual or constructive notice of the claim. It is not pretended that any proof was given which would warrant a finding that the defendant had actual knowledge, though it has been found that he acquired his interest in the premises with notice of the plaintiff’s rights. The only way that the learned counsel for the plaintiff attempted to sustain this finding on the argument in this court was upon the theory that when the defendant purchased the plaintiff’s testatrix was in possession of the lands improperly embraced in the deed, and her possession was notice to the defendant of her rights. It is quite true that actual possession of land is sufficient notice to all the world of the existence of any right which the person so in possession is or may be able to establish. Phelan v. Brady, 119 N. Y., 587 ; 30 St. Rep., 256.

The plaintiff, however, sought to establish a right to the lands in question in hostility to a recorded title, and, therefore, she was bound to show actual notice to the defendant of the facts upon which her claim was founded, or such facts and circumstances as ■would put a prudent man upon his guard, and from which actual notice may be inferred and found. The possession which will be equivalent to actual notice to a subsequent purchaser, must be an actual, open and visible occupation, inconsistent with the title of the apparent owner by the record; not equivocal, occasional or for a special or temporary purpose; neither can it be consistent with the title of the apparent owner by the record. Cook v. Travis, 20 N. Y., 400; Brown v. Volkening, 64 id., 76; Pope v. Allen, 90 id., 298.

The contention of the plaintiff is that, notwithstanding the deed to Eckert, and from him to the club, which were duly recorded, and embraced all the land claimed by the defendant under his purchase upon the sheriff’s sale, yet she remained in possession of all except the small parcel which she agreed and intended to convey, and was so in possession at the time of the sheriff’s sale, and, therefore, the defendant is chargeable with notice of all her rights. Seymour v McKinstry, 106 N. Y., 230; 8 St. Rep.. 580; 11 id., 760.

The difficulty is that there is no proof in the record to show that she was then in possession. It is claimed that she owned the uplands and was in possession of them by actual occupation, residing thereon. The map does not show where her house or uplands are, or what relation they bear to the lands in question, and there is no other proof in the record to show any actual possession by Mrs. Holland at the time of the sale on the execution of the lands in question. It may be that a person in possession of lands on the shores of navigable waters, which are fixed and designated by visible monuments, fences or other boundaries, is • also in possession of the shore and such portion of the land under water as is appurtenant to Ms uplands and the subject of private ownership, but there is no proof in the record that would permit the application of such a principle in this case, as it does-not appear how the uplands are related by their situation or boundaries to the lands in question. When a party proposes to purchase the water front of a farm on the shores of navigable waters, which farm is in the actual possession -of a third person, and is designated by visible boundaries or monuments at or near the shore, such possession is notice of his rights with respect to the whole farm including the water front appurtenant thereto and held by him as private property. He who is in the actual possession of a part of his farm and uses the rest, whether forest or waste land, or land under water, which is the other part, and connected therewith, as other men use such lands, is adjudged by the law to be in possession of the whole. Altemus v. Long, 4 Penn. St., 254.

Where a known farm or a single lot has been partly improved, the portion of the farm or lot that has been left not cleared or inclosed, according to the usual course and custom of the adjoining country, is deemed to have been occupied for the same length of time as the part improved and cultivated. Code, § 870. In the case of lands upon the banks of navigable waters, we know that portions of the farm or lot are not actually inclosed or cultivated, but. are so connected with the uplands that are, as to bring the whole under the possession of the person who actually occupies the inclosed and cultivated parts. The manner in which lands on the sea shore are inclosed or occupied may be of such a character as to render the question of possession one of fact. Trustees, etc., Town of East Hampton v. Kirk, 84 N. Y., 220 ; Jackson v. Halstead, 5 Cowen, 216; Becker v. Van Valkenburgh, 29 Barb., 319. It is possible that upon another trial the plaint-i£f may be able to give proof, either of actual notice to the defendant of her rights in the land, or actual possession by her of such a character as to charge the defendant with notice of her rights.

The judgment should be reversed and a new trial granted, costs to abide the event.

All concur.


author: Earl, J.

text:
    Katherine P. Chesebrough, Adm’rx, Resp’t, v. Daniel D. Conover, App’lt.

      (Court of Appeals,

      Filed December 12, 1893.)

    1. Contbact—Validity—Public policy.
    Every citizen who is interested in any proposed legislation has a right, to employ an agent for compensation payable to him to draft his bill and explain it to any committee or to any member of a committee, or of the legislature, fairly and openly, arid ask to have it introduced; and contracts which do not provide for more, and services which do not go'farther, violate no principle of law or rule of public policy.
    3. Appeal—Denial of motion to withdbaw jukob on account of imPBOPER EEMABKS BY COUNSEL.
    At the opening of the case a motion was made by defendant for judgment on the complaint, whereupon plaintiff’s attorney stated that on a former trial the plaintiff had a verdict. Defendant then moved for leave to withdraw a juror on account of this remark, which was denied, and the court in its charge instructed the jury that they had nothing to do with the former trial. Held, that defendant’s motion was one addressed to the discretion of the court, and its refusal was not a legal error reviewable in this court.
    3. Evidence—Contradiction op witness.
    Defendant alleged in the answer that the services in question were performed for one P., and on his cross examination testified that, in a conversation with P., he characterized plaintiff’s as a blackmailing one. P. was then called and allowed to deny this statement and give the entire conversation. Held, no error.
    Appeal from judgment of the supreme court, general term, first department, affirming judgment in favor of plaintiff.

      Austen G. Fox, for app’lt; Esek Cowen, for resp’t.

      Affirming 50 St. Rep., 463.

   Earl, J.

It appears from the complaint in this action that prior to 1879 the defendant had become interested in the construction of a railroad through Forty-second street in the city of New York, and that Mr. Chesebrough, who may be spoken of as the plaintiff, had rendered for him various services in and about the proposed road, and he alleges in the complaint that on the 7th day of March, 1879, the defendant agreed with him that if be would assist • him in obtaining the rights, privileges and franchises, and authority for the building of the proposed road, and draw for him certain papers, acts and resolutions “ to be presented to parties, to the legislature and to the common council, and write certain letters and see certain parties, and go to Albany and use arguments, he would give plaintiff, as soon as said extension of said railroad through Forty-second street was in operation, $10,000 of the bonds and $10,000 of the capital stock of the-company for the services to be rendered and the services already-rendered by him; that, at the request of the defendant, he drew certain proposed acts to authorize the construction and operation of the railroad through Forty-second street, and also drew various, other proposed acts of the legislature and other papers and rendered certain other services mentioned in the performance of the contract alleged for all of which services he demands judgment for $10,000 damages. The defendant, by his answer, put in issue the material allegations of the complaint as to the contract and the services claimed to have been rendered in pursuance thereof. Upon the trial, the plaintiff gave evidence tending to prove the contract and the rendition of the services as alleged. There the defendant claimed that the services consisted, in part at least, of personal and private interviews with members of the legislature for the purpose of affecting pending legislation in the interest of the defendant, and that, therefore, the contract was against public policy and void, and that the defendant could not recover for the services, and upon his request the trial judge charged the jury as follows :

“ That even if the jury find as a fact that there was a contract between the plaintiff and defendant, but that it was a part of such contract that the plaintiff, if requested, would go to Albany and see some member of the railway committee when one of the bills testified to was before such committee, and talk to him privately to further said bill so as to have the bill reported and passed along, or so that the bill could be passed; and. that the plaintiff did talk with one or more members of such committee privately for such purpose; then the defendant is entitled to a verdict.”
“ That even if the jury find as a fact that there was a contract between the plaintiff and defendant, but that it was a part of such contract that the plaintiff should, iE requested, have personal and private interviews with members of the "legislature, having in view as one of their objects the furthering of any bill pending in the legislature, or a committee thereof, so that the same could be .reported by such committee and passed, then the jury need consider no other question, but must render a verdict for the ■defendant.”

Notwithstanding the instructions thus given to the jury, they found a verdict in favor of the plaintiff, and it is now claimed by the learned counsel for the defendant that upon the undisputed evidence the verdict should have been in favor of his client.

It is conceded.by both parties that the judge properly instructed the jury, but they differ as to the force and effect of the ■evidence. It is not to be denied that upon the evidence the case was a very strong one for the defendant, and that the jury, with the power to weigh the evidence and draw inferences therefrom, •could, under the instructions given, have found a verdict in his favor. But we think the jury could take a different view of the evidence, and find that the contract between the parties was not condemned by the rules of law, and that no services were ren•dered by the plaintiff in violation of the public policy embodied in the instructions given by the judge to the jury. If the plaintiff was employed to render what are commonly called lobby services in procuring the legislation desired by the defendant, then he should have been defeated in his action. Such contracts are ■condemned as against public policy, and the rules applicable to them are laid down in many decisions. Chippewa, etc., R. R. Co. v. Chicago, etc., R. R. Co., 75 Wis., 248 ; Frost v. Inhabitants of Belmont, 6 Allen, 152; Harris v. Roof’s Ex'rs, 10 Barb., 489; Sedgwick v. Stanton, 14 N. Y., 289.

’ Here the jury could find that the plaintiff was not employed to render, and that he did not render, lobby services. He was not a lobbyist, and he had no acquaintance or influence with any member of the legislature, and it does not appear that he had any peculiar facilities for procuring legislation. The jury could find from the evidence that he was employed' by the defendant to •draw legislative bills and to explain them to members of the legislature, and to procure their introduction into the legislature, and nothing more. It does not appear that he asked or solicited any member of the legislature to vote for the bills, or that be did .anything except to explain them, and request their introduction; .and so much he could do without violating any public policy. It must be the right of every citizen who is interested in any proposed legislation to employ an agent for compensation payable to him, to draft his bill and explain it to any committee, or to any member of a committee, or of the legislature, fairly and openly, and ask to have it introduced; and contracts which do not provide for more, and services which do not go farther, in our judgment, violate no principle of law or rule of public policy.

Even if the verdict of the jury was against the decided weight of evidence, we cannot, on that ground, interfere with it here, and here we are bound to take the view of the evidence most favorable to the plaintiff.

The judgment must, therefore, be affirmed, unless we can find error in some of the minor points to which our attention has been called.

At the commencement of the trial the defendant moved for judgment upon the complaint, on the ground that the services therein alleged were against good morals and condemned by public policy. In resisting that motion the counsel for the plaintiff stated, among other things, that in the former trial of the action a verdict had been rendered for the plaintiff. The counsel for the defendant took exception to this remark, and asked the court to withdraw a juror or to discharge the jury in order that another jury could be impanelled that had not heard the prejudicial remark. This motion was resisted by the counsel for the plaintiff and denied by the judge, and the counsel for the defendant excepted to such denial. The trial then proceeded, and in the submission of the case to the jury, upon the request of the defendant’s counsel the judge instructed the jury that they had nothing to do with the former trial of the action, and that the case was to be decided in accordance with the evidence submitted to them on the pending trial, and with the rules of law laid down by the court. It is now claimed that the trial judge committed error in permitting the case to go to trial before the jury which had heard the objectionable remark. The remark was undoubtedly an improper one, but the refusal of the court to grant the defendant’s motion was not a legal error reviewable in this court. The motion was addressed entirely to the discretion of the court which could grant or refuse it, taking into consideration the circumstances surrounding the case. It must be assumed here that the jury obeyed the instructions of the judge in reference to that remark, and that it did not influence them in the rendition of their verdict. Where a case has been once tried it is not generally possible to keep from the jury the result of the former trial, and it would be an embarrassing and mischievous rule to lay down that if such result be brought out by statement or evidence a fatal and incurable error has been committed, and that although the jury may be instructed to wholly disregard it, yet the vice is not eliminated, and the judgment upon the second trial is necessarily to be reversed. The remark complained of comes under the head of misconduct of an attorney upon the trial of an action, which is generally, if not uniformallv, held to be matter to be dealt with in the court below, ■and as not presenting any legal error for the consideration of this court. It is also like the case -where upon the trial of an action the trial judge erroneously receives objectionable and damaging evidence, which he subsequently strikes out and directs the jury to disregard. In such cases we have uniformly held that the vice eliminated and that theoretically at least the erroneous evidence found no lodgment in the minds of the jury.

The defendant testified, in answer to questions put to him upon his cross-examination, that in an interview with Mr. Phelps he characterized the plaintiff’s claim as a blackmailing claim. Afterward the plaintiff called Mr. Phelps as a witness and asked him this question: “What was the interview between yourself and Mr. Conover? ” The defendant’s counsel objected to the question upon the ground that it related to a collateral matter brought out on cross-examination and not referred to in the direct examination. The objection was overruled and the witness answered that such a conversation took place. Then the examination proceeded as follows: “ Q. Did he say anything about blackmailing in that conversation? Objected to on the same grounds. Objection overruled and defendant excepted. A. No. Q. What part of the conversation that you have recited took place? Same objection and objection overruled. Defendant excepted. A. I met Mr. Conover in the hallway of the Equitable Building, and I stopped him and said: Mr. Conover, I wish you would stop this suit of Mr. Chesebrough and try and settle it: that it will only make trouble and annoyance to all parties, and bring out things that would not be pleasant for your family and friends to know about the passage of this railroad through the common council. I said, you ought to settle this up with Mr. Chesebrough. He said, I am not ready for that, or something of that kind, and in a pert way, and left me.” We do not perceive that this evidence was very material or important. The defendant testified that he characterized the plaintiff’s claim as a blackmailing claim. Mr. Phelps testified that he did not, and gave the language as he remembered it. What was said to the defendant about the claim,, and what he'said about it, and the fact that he did not tilaim in that conversation as he alleged in his answer, that the services of the plaintiff were rendered for Phelps, was competent evidence in chief—certainly was not objectionable, and we do not think that any prejudicial error was committed in overruling the objection thereto.

Our attention is called to some other rulings of the trial judge during the progress of the trial, but they do not point out any error, and we do not deem them of sufficient importance to require any particular attention now.

The judgment should be affirmed, with costs.

All concur.


author: Gray, J.

text:
    Robert Ernst, App’lt, v. Dartus G. Crosby, Ex’r., App’lt.

      (Court of Appeals,

      Filed December 12, 1893.)

    Lease—House oe prostitution.
    On reference of a claim against a decedent’s estate for rent under a lease executed by him by plaintiff's predecessor, it appeared that prior and subsequent to its execution the premises were occupied by other persons as a house of prostitution; that negotiations for the lease were had with such persons and a lease drawn to them, but subsequently altered so as to run to decedent; that the lessor was intimate with such persons and that he subsequently collected the rent from them. He!4, sufficient to warrant a finding that the premises were let for the purpose of being used as a houae of prostitution, notwithstanding a clause in the lease that they were to be used “fora dwelling house only,” and that the lessee should “obey all lawful requirements of the health department and all other departments of the city government.”
    Appeal from judgment of the supreme court, general term, first department, affirming judgment in favor of defendant, entered on the report of a referee.

      E. J. Spink, for app’lt; Theodore H. Silkman, for resp’t.

      Affirming 50 St. Rep., 429.

   Gray, J.

As a defense to the claim for rent against the estate in his hands, the executor asserted the invalidity of the lease, for having been made by the lessor for an unlawful purpose. The evidence showed that the house had been used and occupied by the Clarks for purposes of prostitution. Mowatt, the defendant’s testator, had, probably, been the lessee of the premises under a lease from the original owner, McGinn. It is true that the evidence does not absolutely show this ; but it is sufficient to justify the inference of the fact, and of the further fact that Mowatt sustained close relatians with the Clarks. McGinn sold to Morris, and the conveyance was made subject to the lease of the premises, but without mentioning the name of the lessee. Morris, before his purchase, lived near to, and frequented the house, and knew perfectly well the nature of the use to which it was put by the Clarks.

The existing lease was to expire a few days after the date fixed for Morris to take title under his contract of purchase. Mrs. Clark testified that Morris had promised to give them a new lease, and had negotiated with respect to it. She went to his lawyer’s office, as she says, by his direction, for the purpose of getting the new lease, but though one was drawn up at first to her and her husband, it was subsequently destroyed. Morris refused to give the lease to them, and executed one to Mowatt, which provided that the premises should be “ used as a dwelling house only,” and that the lessee should, “ obey all lawful orders of the health depart- - snent and all other departments of city government.” It does not appear affirmatively that Morris saw the lease existing at the time of his purchase, or knew that Mowatt was the lessee therein. There was abundant evidence to show his familiarity with the leased premises, his relations with the tenants, and his knowledge concerning the inmates of the house and its uses, and from his connection with Flanagan, who formerly collected the rent for the lessee, and from the testimony óf his lawyer, it is difficult to resist the inference that he knew enough about Mowatt. After owning the premises for some months, he sold them to the plaintiff, subject to the lease ; the Clarks remaining in possession, and continuing in their immoral practices. The referee found that the plaintiff bought in ignorance of the character of the occupation; and it is insisted for him, that the lease, being on its face for a lawful purpose, cannot be rendered void by mere inference from facts which do not conclusively show an unlawful purpose in Morris, the lessor, in making the lease to Mowatt. If the lessor of premises knows and intends that they will or may be used for unlawful purposes, the lease is void, and the obligations, of the parties will receive no aid from the courts for their enforcement, In such a case, it is perfectly competent to show that knowledge and intent by circumstantial evidence, for, otherwise, it might be impossible to prove the immoral purpose which underlay an apparently innocent contract of the parties. All that is required is that the evidence adduced shall be fairly susceptible of the inference that the agreement was in furtherance o f an unlawful purpose. In the present case, while the contract of lease, by its terms, restricted the use of the premises to an apparently lawful purpose, yet if there was any competent evidence which showed, or which tended to show, that it was but a cover for their continued use by the Clarks in their immoral business, it would support the decision of the referee. The evidence was purely circumstantial; but the circumstances were such as warrant the belief that Morris, plaintiffs grantor, was a party to a plan for continuing the Clarks in their use of the premises, through a new lease; but in such wise as not to imperil its validity.

Though it is not directly testified to that he had known his lessee, Mowatt, the facts tend strongly to show that Mowatt’s name was used as a mere cover in the further letting of the house after Morris became its purchaser. It may be because the character of Mrs. Clark was tainted, that her evidence was open to disbelief; but the referee was not bound to discredit her wholly. There were facts which tended to corroborate her evidence ; in Morris’ intimacy with her and her husband and with the inmates of their house and in his collecting the rent from the Clarks, notwithstanding his lease was to Mowatt. The intention with which a man enters into a transaction may be inferred from his acts. They may so characterize his purpose as to indelibly color the transaction, notwithstanding its innocent appearance. It is of no slight significance that Morris was not called as a witness. It would have been very easy through his evidence to lessen, if -not resolve, the doubt as to his purpose and as to his relations with Mowatt when this lease was made. The plaintiff, when he negotiated for the purchase and became the owner of the premises from Morris, had the opportunity to ascertain about the lease and the use by lessee, or tenants, and if he did not avail himself of them or have resort to the rights which the law gave him, he cannot have relief from the courts under the covenants of a contract, which, by reason of its unlawful purpose, came under the ban of the law.

We see no material errors committed by the referee upon the trial, and we are satisfied that his conclusions had support in the evidence.

The judgment appealed from should be affirmed, with costs.

All concur.


author: Maynard, J.

text:
    William E. T. Smith et al., Resp’ts, v. Lydia S. Floyd, App’lt.

      (Court of Appeals,

      Filed December 12, 1893.)

    Will—Construction.
    By the will of a testator he gave a sum of money to his daughter with a request that she keep it for the benefit of her children; gave certain lands to his son “during- the period of his natural life, with the right and privilege of disposing of the same by will or devise to his children, if any he should have, and in case he should die without leaving any children, lawfully begotten, then, and in that case, I give and devise the same to the children of my daughter.” He also gave the remainder of his personalty to his daughter. Held, that the authority given to the son to dispose of the estate in remainder to his children was a valid power in trust which was imperative, and that on the son’s death without a will leaving children, equity would regard the trust as executed and the children take the land in equal shares.
    Appeal from judgment of the supreme court, general term, second department, entered upon order overruling demurrer to an amended complaint, and also from such order.

      James C. Carter, for app’lt; Wilmot M. Smith, for resp’ts.

      Affirming 53 St. Rep., 858.

   Maynard, J.

By a will made December 27, 1852, the testator, William Smith, gave his entire real estate to his only son, Egbert T. Smith, during his life, adding the following provision : “With the right and privilege of disposing of the same by will or devise to his children, if any he should have, and in case he should die without leaving any children, lawfully begotten, then and in that case I give and devise the same to the children of my daughter Lydia, to them, their heirs and assigns forever.

The plaintiffs are the children of the son, and while the date of their birth is not very material, it appears from the appellant’s brief that they were in esse at the time of the execution of the will. The testator died in 1857, and the son in 1889, without having exercised the power given him to devise the real property to his children. The appellant is the only daughter of the testator, and claims that by the failure of the son to execute the power the testator died intestate as to this real property, and that an equal undivided half of it has become vested in her as one of his heirs at law; and the validity of her claim is the sole question involved .in this appeal. It is not disputed that the authority given to the son to dispose of the estate in remainder to his children constituted a valid trust power. It would have been so regarded under the equitable rules controlling the enforcement of powers before the adoption of the Eevised Statutes; and it fulfills with exactness the definition of a special power in trust embodied in § 95 of the article on powers. 4 E. S. (8th ed.), 2447-8. But the donee of the power died without executing it, and it thus becomes important to determine whether the execution of it was imperative or only discretionary. -If the former, equity will regard that as done which the trustee should have done, and the beneficiaries of the power will take the land in equal shares; if the latter, they acquired no vested right to the property under the provisions of the will. Here, again, the'statute comes to our aid, and by pointing out the essential quality of an imperative power leaves but little room for judicial construction.

Section 96 declares that “Every trust power, unless its execution or non-execution is made expressly to depend on the will of the grantee, is imperative, and imposes a duty on the grantee, the performance of which may be compelled in equity, for the benefit of the parties interested.” All the conditions required to establish an imperative trust power are here presented. Authority to dispose of the property was concededly granted. . The beneficiaries were distinctly designated, and there was no express declaration or provision in the grant confiding the execution of the power to the discretion of the donee. The imperative nature of the trust is not destroyed, because the language creating the power is permissive. If the disposing ' power is given, and it is not coupled with words which expressly, or by necessary implication, make the donee the final arbiter of its exercise, its execution must be decreed. Some positive expression of an intention to make the ultimate conveyance of the property depend upon the volition of the trustee must be found, or there must be annexed to the power some qualification plainly indicating that the donor has substituted the judgment of the donee for his own, for the purpose of determining whether the authorized disposition shall eventually be made.

The eminent counsel for the appellant, however, contends that by the language employed in the creation of the power, the testator has expressly declared, or at least clearly indicated, that its execution or non-execution was to be dependent upon the will of the donee. It is insisted that the words “ right ” and “ privilege ” necessarily import a discretion. Such may be their general signification, but not when used for the purpose of creating a trust power. If the testator had said that he authorized and empowered his son to devise the property to his children, it cannot be doubted that an imperative trust power would have been created; but to hold that the power is only discretionary, because he gave him the right and privilege to so dispose of it, would be to introduce a distinction which the difference in the form of expression does not warrant. The words are not the same, it is true, but their legal effect is. The right to do an act is the possession of the highest authority, and a privilege is a right or power specially conferred. In both cases, full and unrestricted authority is given to dispose of the testator’s property for the benefit of others, and from the earliest times this has been deemed sufficient to impress the power with a trust which imposes upon the donee the duty of executing it.

There are forcible reasons why testamentary powers should be so construed. They are a part of the final act of the owner in ordering a distribution of his estate, which is not to be effectual until after his death. The testator’s wish is his will, and expressions, which, in other instruments, might not be regarded as a command, are, under such circumstances, obligatory. As was said by the learned judge who wrote in Dominick v. Sayre, 3 Sand., 555, and who was one of the framers under consideration: “Words of mere authority have the same efficacy in creating a trust as a positive direction. The words, in their ordinary acceptation, may be discretionary, but in a court of equity are mandatory.” In all such cases, the permission imports a power ; the power implies a trust; and the trust imposes a duty. It is analogous to the rule of construction which has been applied where the legislature has by statute declared that a public officer “ may ” do an act, which, if done, will result in a benefit to an individual or to the public. The authority thus conferred is mandatory and its exercise can be compelled, although the language is in form permissive and not imperative. But it is objected that in this view of the rights of the grandchildren, no good reason can be shown why the testator should have created the power at all, as the property must go to them in equal shares, whether it was executed or not. It is suggested that a direct devise of the remainder to the children who might survive the son would have been a simpler form of effecting the same result. This may be true, but it is not seen how it detracts from the force which must be given to the terms employed according to the well-settled rules of construction in this class of cases. It might not be difficult to indicate some points of difference between the two modes of disposing of the remainder, but whether they exist or not cannot be material. The testator had his choice of methods; and if he chose the indirect way we cannot refuse to follow it, although we may think that the same object might have been reached by a more direct and less obscure form of expressing his will.

The entire testamentary scheme is in harmony with this construction of the power given to the son. When its different provisions are considered, the conclusion cannot be avoided that the testator intended to give the remainder in the real estate to the son’s children if he should leave any surviving him. There is no gift over of the remainder in case the life tenant failed to exercise the power, and there is a gift over in case he died without leaving children surviving him. This raises a very strong presumption that he intended the children, if there were any, should have the property upon the death of their father, which, in the absence of words expressly rebutting it, would ordinarily be deemed conclusive upon the question of the character of the power granted. There is, in addition, the legal inference against partial intestacy, which must have its due weight. The will assumes to deal with his entire estate, and the authorities are numerous that under such circumstances a construction of its provisions will not be adopted, which will leave a part of the property undisposed of if, by any reasonable interpretation of its language, it can be avoided. It is also apparent that the distinctive feature of his scheme was a division of his estate between the son and the daughter and their respective families so that the one should take the realty and the other the personalty After making suitable provision for his widow, and giving some unimportant specific legacies, he bequeaths his entire personal estate to the daughter, and provides-that, if it shall not amount to thirty thousand dollars, his executors shall sell so much of his other property as will be necessary to pay her the full amount, and adds, that he desires his daughter to keep the legacy for the benefit of her children. In like manner he sought to secure to his son’s children the enjoyment of the-real property after the death of her father, and we do not think that any inference can be justly drawn from the provisions of this-will that the testator contemplated that any portion of it should in any event be diverted from them.

The judgment and order appealed from must be affirmed, with, costs.

All concur.


author: Peckham, J.

text:
    The Pittsfield National Bank, Pl’ff, v. William H. Bayne et al., Def’ts. William H. Tailer, Impl’d, App’lt, v. David J. Lees, Rec’r, Resp’t.

      (Court of Appeals,

      Filed December 12, 1893.)

    1. Appeal—Restitution.
    Where an application for restitution is entertained and an order for restitution in part is made, if, as matter of law, the applicant is entitled to restitution of the whole, such order is appealable to the cpurt of appeals.
    2. Restitution—Receiver.
    The judgment in an action to set aside an assignment for creditors directed the assignee to pay to the plaintiff the amount of its judgment within ten days after service of a certified copy of the decree, and if he did not do so he was directed to pay the same to a receiver, to whom he was also to account for all the property of the assignors in his hands. The assignee appealed and no certified copy was served. An appeal to this court was subsequently taken, and pending such appeal the receiver obtained an order directing the assignee to immediately deliver the property and adjudging him in contempt if he failed lo do so. The assignee made the delivery under protest, and the order was subsequently vacated. On motion for restitution, Held, that the assignee, upon reversal of such order; was entitled to he restored to possession, and the receiver had no right to retain any part of it for the purpose of taking therefrom commission and fees.
    3. Same—Waiver.
    The fact that the assignee acquiesced in the payment by the receiver to the plaintiff of the amount of its judgment is not a waiver of his right to insisting upon the repayment of the balance, and gives the receiver no right to exact commissions thereon.
    Appeal from so much of an order of the supreme court, general term, first department, directing restitution of property as allowed the receiver to retain the sum of $450 to cover his commissions, counsel fees and disbursements.
    The defendants Bayne and one Campbell, constituting a partnership, executed on the 4th of March, 1890, an assignment for the benefit of their creditors to the defendant William H. Tailer. The plaintiff was a creditor of the partnership, and, after obtaining a judgment for its claim against the firm, the plaintiff commenced this action to set aside the assignment as fraudulent and void as to it. The defendant Tailer, as assignee, was made a party to the action. The case was tried in the city of New York in November, 1891, and on the 13th of February, 1892, judgment was directed by the court to be entered, decreeing the assignment to be fraudulent and void as to the judgment creditor, the plaintiff in the action. Pursuant to the decision of the court judgment was entered on the 15th of February, 1892, by which it was adjudged that Tailer should pay the plaintiff the amount of its judgment (which was stated), together with interest from a day named and costs as taxed, the whole amounting to a named sum. It was also adjudged that if defendant Tailer did not pay this amount within ten days after service upon him of a certified copy of the decree, then he was directed to pay the amount to Mr. Lees, who was therein appointed receiver of all the property of the late partnership, and Tailer was also directed to account to the receiver for all the property received from the firm by him as such assignee. The receiver was then directed by the decree to sell the property, and out of the proceeds pay the plaintiff the amount due it, and hold the balance subject to the further direction of the court
    The defendant Tailer at once appealed from this judgment to the general term, and gave an undertaking to stay proceedings thereon. The appeal was argued on June 18, 1892, and the case held under advisement by the court.
    For some reason not plainly apparent, but possibly because of a claim that the undertaking already served did not stay plaintiff’s proceedings, the defendant Tailer, upon affidavits, obtained, on the 5th of July, 1892, an order to show cause, returnable on the 8th of the same month, why the plaintiff’s proceedings upon the judgment should not be stayed. On the return day the application for a stay was denied, and the ad interim stay granted with the order to show cause was vacated at the special term.
    On the 9th day of July, 1892, the general term affirmed the judgment appealed from, and judgment of affirmance and for costs was, on that day, entered in the clerk’s office. On the 14th day of July, 1892, the defendant Tailer appealed from the judgment of affirmance by the general term to the court of appeals, and gave an undertaking for securing the payment of the whole judgment in case it was affirmed, or any part thereof, as provided for in the Code. On the 15th of July, 1892, Mr. Lees, receiver, upon affidavits, obtained an order to show cause, returnable on the 18th inst., why the defendant Tailer should not forthwith deliver all the property to him, the receiver, in compliance with the demand theretofore made, and why the defendant Tailer should not be punished as for a contempt of court in failing to comply with the judgment by turning over the property in his possession to the receiver, as directed thereby. No copy of the decree setting aside the assignment in the case, certified or otherwise, had then or has ever been served on the defendant Wm. H. Tailer, and no certified copy thereof had ever been served on the attorneys for Mr. Tailer, but a demand had been made upon his attorneys in •Mr. Tailer’s absence, and in behalf of the receiver, demanding the payment of the moneys to Mr. Lees as such receiver.
    On the 18th of July, 1892, the order to show cause was argued, •and on the 20th of that month an order was entered directing the defendant Tailer, within one day after the service on his attorneys ■of a copy of such order, to forthwith deliver to the receiver all "the property of the partnership directed by the judgment made and entered on the 15th of February, 1892, and the defendant Tailer, in default thereof, was adjudged guilty of a willful contempt of court, and it was directed that a commitment should issue against him committing him to the jail in the county of New York until he should have complied^ with the judgment by delivering the property to the receiver. The receiver procured the order to show cause above mentioned, and his counsel, in conjunction with the counsel for the plaintiff, argued the motion on the return day.
    Pursuant to the last order Mr. Tailer paid over all the funds of which he had become possessed as assignee, and which were in the form of a certified check and certificates of deposit, amounting in all to $7,511.71. The amount of the plaintiff’s judgment and interest was then $6,145.24. The payment was made by Mr. Tailer under protest in writing, in which he stated that it was "made in compliance with the terms of the order of the court, dated July 20, 1892, and he claimed that said order was erroneous and had been appealed from, and that the moneys were delivered because the court denied a stay of proceedings pending his appeal from the order; and he further stated that he would continue to claim that the receiver’s possession of the papers was not legal, and that the receiver’s only duty in the premises would be to return the moneys to him in full, with all interest during the time of their detention by him.
    On the 21st day of July, 1892, Mr. Tailer procured an order to show cause, returnable on the 5th of August, 1892, why there should not be a reargument of the order adjudging-him in contempt, and why there should not be a stay of proceedings pending an appeal from such order, and upon such terms as the court might direct, and the motion upon the return of that order was opposed by the receiver and his counsel, and by counsel for the plaintiff. The motion for the reargument was denied, as was also the motion for the stay of proceedings pending an appeal from that order, and the stay of proceedings granted under the order to show cause was vacated and set aside.
    Things remained in this condition until the 16th day of December, 1892. On that day the general term reversed the order appealed from which adjudged Mr. Tailer in contempt, with costs and disbursements of the appeal, and denied the motion to punish him as for a contempt, with ten dollars costs to be paid by the plaintiff or its attorne}rs.
    On the 1st day of February, 1893, the defendant Tailer noticed a motion to be submitted to the general term for an order directing the receiver, Lees, to make restitution of the moneys which had been paid to him by defendant Tailer under protest, and because of the order made by the special term on July 20, 1892. On the argument of that motion at the general term it appeared in substance that the receiver, after the payment to him by Tailer of the moneys in question, had informed the attorneys for Mr. Tailer that the plaintiff’s attorney insisted upon his paying to such attorney the amount of the plaintiff’s judgment,- and as there was no stay of proceedings prohibiting him, the receiver, from making such payment, he would do the same unless the counsel for Mr. Tailer should obtain such order, to which it was anwered that in such an event the assignee would have the additional security of the plaintiff for the moneys paid to it, and that in any event it might be of advantage to have such judgment paid, as it was running at the rate of six per cent interest, whereas the moneys which Mr. Tailer had had on deposit in the trust company only earned two per cent. Mr. Tailer’s counsel advised the receiver to be careful how he acted and how he paid money under this order before the appeal was decided, because he might be liable to repay the whole amount to the assignee. The receiver subsequently prepared papers and asked the court for its direction as to what he should do in relation to the payment of the amount of the judgment of the plaintiff. The court declined to give any directions, and the motion was withdrawn. The receiver subsequently paid to the plaintiff the amount of his judgment and interest.
    Upon these facts appearing in the course of the motion for restitution before the general term, that court credited the receiver with the amount of the payment he had made to the plaintiff in payment of its judgment, with interest thereon to the date of the payment. This was not objected to by counsel for Mr. Tailer, and that payment is now acquiesced in by him. This leaves a balance of $1,366.47, and it appearing that the judgment setting aside the assignment had been affirmed by the court of appeals, since the defendant Tailer noticed his motion for restitution, the general term ordered that the receiver should retain out of this balance the' sum of $450, which sum was allowed him to cover his commissions, counsel fees and disbursements, and the remainder of the sum, $916.47, with such interest as the trust company with which the balance had remained on deposit should allow, the receiver was directed to pay over to Mr. Tailer, as assignee, within ten days after service upon him of a copy of the order. From that portion of the order which allowed the receiver to retain the sum of $450 to cover his commissions, counsel fees, disbursements, etc., the defendant Tailer has appealed to this court.

      Henry L. Burnett, for app’lt; Franklin Bien, for resp’t.
   Peckham, J.

Mr. Tailer did not pay the money voluntarily, but only by reason of the order of the special term of the court and under protest. The receiver was a moving party to the proceeding resulting in the granting of such order. By the terms of the judgment in which the receiver was appointed, the defendant Tailer had the right to pay the amount of plaintiff’s judgment and costs directly to it, and such right remained until ten days after the service upon Tailer of a certified copy of the judgment or decree. This certified copy was never served upon him, and hence , the receiver never had the legal right to demand or receive possession of the property held by Tailer. In addition to that defense, the defendant Tailer had appealed from the judgment avoiding the assignment to the court of appeals, and had given a valid undertaking to stay proceedings upon such judgment pending that appeal.

Motwithstanding these facts, and in spite of them, the receiver, while the appeal was still pending, took active measures to obtain possession of the property, and to that end applied to the court, with the result as already stated. Upon appeal to the general' term by Mr. Tailer that court reversed the order of the special term and denied the receiver’s application, and held, for the reasons above stated, that the receiver, when he applied for it, had no right to the possession of the property. Mr. Tailer’s motion made to the general term, after such reversal, for an order of restitution, has been granted with a proviso that the receiver may retain a sum named for his commissions, counsel fees and disbursements. The correctness of that allowance is the sole point in this appeal.

The counsel for the receiver mainains that the order is not appealable to this court, for the reason that it was a discretionary one with the general term. If this be true we cannot review the exercise of that discretion, unless in case of an abuse thereof, which does not appear. In one aspect the action of the court is discretionary. It is not legally bound to act when its action is invoked by a mere motion or application for an order of restitution. ,It may deny that mode of relief and turn the party over to his action. If, however, it retain the application it must decide upon the facts which are presented to it, and if they show a legal right to demand restitution, and- a legal right to the full sum demanded, I apprehend there is then no discretion with the court to refuse to grant any relief, or to grant but a portion of the relief demanded. Under such circumstances the court is not asked for a favor which it may grant upon such terms as it shall choose to impose. Hence, Brownell v. Ruckman, 85 N. Y., 648, is not in point. If the application be wholly denied, and nothing further appear in the order, it may very possibly be that the denial would be regarded as an exercise of the discretion vested in the court, whether to entertain such application or not, and the order of denial might not be appealable. When, however, the application is entertained, and an order for restitution in part is made, if, as matter of law, the applicant is entitled to restitution of the whole, then the order which refuses it is appeal-able here.

The case of Holloway v. Stephens, 58 N. Y., 670, decided in this court without an opinion, is not in conflict with these views. In that case the court below directed defendant to restore the property received by him by virtue of the judgment, which was subsequently reversed. The defendant appealed to this court from such order for restitution and the appeal was dismissed. The record shows that the order for restitution was undoubtedly ■right. The court below having made a correct decision and the record coming here for review, it may be that technically the form of our order should have been an affirmance of the order appealed from, instead of a dismissal of such appeal. The case cannot be cited as an authority that in such a case as this the action of the court below may not be the subject of review by this court. The order was a final one ; it affected a substantial right; it was not a matter of discretion, and it was made upon a summary application after judgment. The Code makes such an •order appealable to this court. Code Civ. Pro., § 190, sub. 3.

I say the order was not a matter of discretion. If it were, of -course, the action of the general term is final. If the court below had in any possible aspect the right to allow these commissions .and counsel fees, then we are concluded by its action.

The general term has held (and we agree with it) that the receiver had no right to the possession of these moneys. The special term of the supreme court thought differently and so ordered. While that order was in force, it was a protection to the receiver, and an answer to any opposition which might be made to the allowance of the receiver’s commissions and counsel fees. When the •order was reversed and the application of the receiver for the possession of the property was denied, then the receiver ceased to have the right to retain the moneys for the purpose of taking his commissions and fees to counsel out of them. The person who had the moneys in his possession when the order to deliver them to the receiver was made, had the legal right to be restored to such possession when that order was reversed and the receiver's application denied. Haebler v. Myers, 132 N. Y., 363; 44 St. Rep., 403, and cases cited. We must regard the possession of the receiver as wholly unauthorized, because the order upon which alone his right is based has been reversed and held to have been unauthorized and illegal. This money belonged to the assignee so far as the receiver is concerned. A portion of it, under the judgment, the assignee was directed to pay to the plaintiff, and the balance he was entitled to retain as the owner, in trust, of course, for the payment of the debts of the assignors. The receiver, under an order which has been reversed, has obtained possession of these moneys, and he must now pay them back undiminished by any claim for commissions or counsel fees paid to his counsel.

It is the same in regard to this property as if the receiver ought not to have been appointed. In such case, if the receiver has taken possession of property, he must deliver it up and cannot have his own commissions deducted. Weston v. Watts, 45 Hun, 219; 9 St. Rep., 779. The fact that the assignee now acquiesces in the payment by the receiver of the amount of the plaintiff’s judgment, is no waiver of any right of the defendant to question the receiver’s right to the fund or to insist upon the re-payment of the balance after the crediting of the plaintiff’s judgment. Although not entitled to the moneys, and although he procured such possession in spite of the opposition and under the protest of the defendant Tailer, the receiver paid the plaintiff’s judgment, with the acquiescence, it may be said, of Mr. Tailer. This is no-waiver of the rights of the latter and gives the receiver no right, to exact commissidns thereon. We do not decide that in all cases where an order appointing a receiver, or an order-directing funds to be placed in his possession is reversed, no-commissions can be allowed the receiver. There may be circumstances existing in any such case which would render it-matter of discretion whether or not to permit commissions, etc.,, to the receiver, and with its exercise we would have no right of re^view, if not abused.

Here, however, we think there was no discretion. The provisions of the judgment, under which alone the receiver could claim a right of possession, had not been complied with by him, and he had no right whatever to these moneys. The defendant Tailer had the clear, legal right to retain them when the order was reversed. The receiver should have been compelled to pay over the whole amount demanded, being the balance in his hands and the interest earned by it, after deducting the amount paid to the plaintiff for its judgment.

If the receiver is entitled to collect his commissions, etc.,- from any one, it is probably the plaintiff, who seems to have joined him in his attempts to obtain possession of the fund and to defend the same.

The order should be amended by striking out the permission to the receiver to retain the $450, and he should be directed to repay the whole balance in his hands, with the interest actually earned and received, after deducting the payment made by him to the plaintiff. No costs will be imposed upon the receiver in this court.

All concur.


author: Finch, J.

text:
    Charles E. Ogden, Resp’t, v. Elizabeth Alexander et al., App’lts.

      (Court of Appeals,

      Filed December 12, 1893.)

    1. Mechanics’ lien—Member of firm who buys his partner’s interest-WITHIN THE STATUTE.
    One who has joined as a partner in furnishing labor and material, but thereafter has bought out his associate, is not a mere assignee of the firm, but becomes the several owner of the claim and is within the protection of the statute.
    2. Same—Abandonment by contractor.
    Where the contractor abandons the contract before the final payment becomes due, and the building is completed by the owner at a less cost than the contract price, the question of whether a material man could obtain a lien upon the balance depends upon whether the owner stood upon the forfeiture and proceeded in his own way and at his own expense, in which case the final payment never became due to the contractor tó any extent, or whether he elected to proceed under the contract in behalf of and at the risk of the contractor.
    3. Same—Election—Notice.
    At the time of filing plaintiff’s lien the defendant stated that there wae plenty of money coming to the contractor; that he would not pay any more money to him, hut what what was coming would go to the workmen, and material, and that there was enough and plaintiff would get his pay. It appeared that the notice of election was not given, hut it also appeared that the contractor had made a general assignment to defendant. Meld, that under these circumstances service of the notice was necessary, and the failure to serve the same did not rehut the defendant’s declarations, which were sufficient to authorize a finding that he proceeded under the contract.
    Appeal from judgment of the supreme court, general term, fourth department, affirming judgment in favor of plaintiff in an action to foreclose a mechanic’s lien.

      Samuel H. Fancher, for app’lts; Alexander Neish, for resp’t.

      Affirming 43 St. Rep., 829.

   Finch, J.

The claim of the plaintiff, Ogden, to enforce a mechanic’s lien against the property of the owner, Alexander, is resisted upon two principal grounds. The latter had made a contract with Hill for the erection of a house. By its terms Hill was to furnish all necessary labor and materials, and receive as compensation $8,425, payable in specified instalments at agreed stages of the work. Hill contracted with the firm of Oliver &. Ogden to do the plumbing of the house, and supply and set a furnace therein, and they entered upon the performance of the work. While so engaged, and before its completion, Ogden bought out the interest of Oliver, so that the partnership became dissolved and ceased to exist, and then Ogden continued the performance of the contract with Hill. When the work was substantially finished, Ogden filed a notice of lien which he now seeks to foreclose, and is met by the objection that he stands in the attitude of an assignee of the firm of Oliver & Ogden, and so is not authorized by the statute to file and enforce a lien.

It is conceded to be the general rule that such "liens are lost when the debts upon which they rest are sold and transferred to-others. Rollin v. Cross, 45 N. Y., 771. There is a double reason for the doctrine. The right of the sub-contractor against the owner is purely statutory, and such an assignee, not having performed the labor or furnished the material, is not within the terms of the act allowing a lien. Beyond that the protection intended to be given is purely personal, and designed for the security of the mechanic and material man whose labor and materials have gone into the construction, and not for the safety of strangers, who merely purchase a debt.

The technical argument for subjecting the plaintiff’s claim to the operation of this rule governing a mere purchase by an assignee, is quite plausible. The learned counsel for the appellants reasons that the firm of Oliver and Ogden furnished the materials and labor, and not the individuals composing it; that the statute, therefore, gives the lien explicitly to the firm, and not to Oliver or to Ogden ; that the purchase by the latter of Oliver’s interest in the partnership made him, in legal effect, the assignee of the firm; that thereafter the firm ceased to exist, its lien died with it, and-only the bare debt passed to Ogden; and that the right of lien was personal to the firm, and could not be transferred by it to one of the individuals composing it But I think that construction is quite too narrow and technical. The statute itself requires that we shall construe it liberally, and in furtherance of the remedy, Laws of 1885, chap. 342, § 25, and the reason of the rule invoked by the defendants has no necessary or just application to the case before us.

It is very clear that a mere purchase of the debt from a subcontractor would not carry with it the right to a lien. The purchaser could not be described as a “ person furnishing ” labor or materials, for he did not, and simply bought from one who did. He could buy or not as he pleased, and might be a mere speculator for whose safety the statute has no concern, and the mechanic who sold'would get protection through the proceeds of his sale. But the situation here is wholly different. Technically, the material and labor were furnished by the firm, by the legal entity which describes the partnership, but really and substantially the labor and materials were furnished-by the individuals composing the firm. Neither can be said to have furnished merely a specific or aliquot part, for the interest of each extended to and permeated the whole, and each could fairly be described as a person, or one of the persons, who had furnished the work. Ogden was not a mere assignee. He had personally encountered the risk involved in trusting Hill; his personal interest extended to every hour of the labor done, and every dollar of the value furnished; he stood entirely within the scope and purview of the statutory purpose; he was not a mere stranger buying a'claim, but a mechanic who had actually and substantially furnished the láboí arid material, and had simply, by his purchase, become the sole person interested, instead of remaining the one of two. We may grant that Oliver lost all ownership of the claim and retained no equity against, or interest in, the partnership assets, at least, after all its debts had been paid, but that fact does not make Ogden a mere assignee, or put him outside of the intended purpose and scope of the statute.

I think he was fairly within it, for back of the technical description of his interest lies the substantial fact that, as one of the firm while it existed, he did in reality aid in furnishing the labor and materials, bore in part the cost of so doing, and was entitled in the end to a share of the compensation. Doubtless if the firm had continued to exist, the lien filed would properly have been claimed in the partnership name, but its dissolution upon the transfer of all its assets to one member ought not to strip him severally of"a right which he before held jointly, or compel us to assert the technical truth, but substantial untruth, that Ogden at no time and in no manner became a person who had furnished labor and materials. So that I think a just and reasonable construction will, when it is needed, look beneath the legal fiction, and rest upon the substantial truth so far as to include within the protection of the statute one who has joined as a partner in furnishing labor and material, but thereafter has bought out his associate and become the several owner of the claim.

The appellants raise a second objection which does not seem to have been appreciated, or at least is not satisfactorily answered by the referee and the general term. If we assume, as the plaintiff claims, that Hill’s statement of payment made to him in full is untrue, and that when the lien was filed the last contract payment of $925 remained wholly unpaid, it does not follow that the plaintiff acquired a lien upon that sum, unless in some manner and to some extent it became due and payable to Hill. There is no finding that Hill ever earned any part of it so as to be entitled to its payment, and, therefore, it is said there is no proof of any fund due from Alexander to Hill to which the plaintiff’s lien could attach.

The facts are that Hill abandoned the contract and never performed it. He made an assignment and discontinued work entirely. He thereby forfeited all right to the final payment at the option of the owner, and with that forfeiture fell any possible right of the lienor, unless the owner waived the forfeiture, as by the terms of the agreement he was at liberty to do, and elected to ■complete the work under the contract at Hill’s expense. If he made that election and so completed the work, and the cost proved to be less than the payment due at the end, the difference would be Hill’s profit and payable to him, and upon that the lien could rest.

If, on the other hand, there was no such waiver, and no such election, but Alexander chose to insist upon the forfeiture, and went on, not under the contract, but in his own way and at his own expense, then the final payment never at all, or to any extent, became due to Hill, and there was nothing upon which plaintiff could have a lien. It does not answer this difficulty to say, as did both the referee and the general term, that after appropriating from the last stipulated payment all that it actually cost to complete the house there still remained a balance unappropriated and representing Hill’s profit. The materiality of that fact depends wholly on the question whether the owner stood upon the forfeiture, or completed the house under the contract, and in behalf and at the risk of the contractor. Wheeler v. Scofield, 67 N. Y., 311. The written agreement permitted the latter choice by the owner upon giving three days notice, but there is no finding of any such fact, and, unless we can supply it in some manner, there is nothing due to Hill and no fund to feed the lien. I incline to the opinion that we can supply the missing fact. In support of a judgment we are at liberty to gather from the evidence any needed fact such as could have been sustained if it had been actually found, and especially one which must have been involved in the findings made. Marvin v. Brewster Iron M. Co., 55 N. Y., 547. Alexander in his lifetime, and his heirs after his death, did complete the house and asserted no claim of forfeiture, which they were bound to do distinctly if they chose to rely upon it, but, on the contrary, recognized the continuance of the contract and the sufficiency of the final payment for the work remaining to be done. Thus, Alexander said when the lien was filed that “ there was plenty of money coming to Mr. Hill; ” that “ Ogden was the last man he would pay;” that “he should not pay Mr, Hill any more, but what was coming would go to the workmen and the material; ” •' that there was enough and Charlie should get his pay.” These statements are entirely inconsistent with any purpose to enforce a forfeiture, and quite clearly indicate an intent to proceed under the contract, and apply the final payment to the completion of the house in that manner and according to the terms of the contract, It is true that the three days’ notice was not given, and that omission is urged as conclusive proof that Alexander was not proceeding, and did not intend to proceed, under the permission of the contract. The suggestion has some ■force until we consider all the circumstances. When Hill abandoned the work he made a general assignment to Alexander himself, and the latter, to some extent, represented Hill. No notice to himself was needed, and as assignee he could know that a forfeiture was not intended. The requirement of notice was wholly for Hill’s benefit, and neither he, nor any one claiming through him, is asserting the need of its existence. The omission, therefore, does not rebut the very explicit declarations of Alexander, and, I think, we are justified in assuming as a fact that the house was completed under the contract and not independently of it. The case thus becomes clear. The surplus over and above the cost of completion was due to Hill from the owner; it was enough to pay Ogden; and he may enforce his lien upon it.

There are some other objections to the form and regularity of the notice of lien, but which we deem sufficiently answered in the; opinion of the referee.

The judgment should be affirmed, with costs.

All concur.