text:
    THE FIRST NATIONAL BANK OF CORRY, Pa., and THE FIRST NATIONAL BANK OF WESTFIELD, N. Y., Appellants, v. ORSON STILES and others, Respondents.

      Estoppel — when a mortgagor is estopped from enforcing an agreement upon which the mortgage was given, as against an assignee thereof — when one for whose benefit the mortgage was given is also estopped.

    Prior to September 26, 1873, three drafts, amounting in all to $10,000, drawn by one McKay upon one Nash, by whom they were accepted for McKay’s accommodation, had been discounted by the persons in whose favor they were drawn. The drafts were about to fall due, and McKay, being unable to pay them, executed and delivered to Nash a bond for $10,000, secured by a mortgage upon real estate, upon the agreement and understanding that Nash should sell the same for cash and apply the proceeds thereof to the payment of the said drafts. On the next day the mortgagee, without the knowledge or consent of the mortgagor, or of the owners and holders of the drafts, assigned and delivered the said bond and mortgage to one Stiles, as president of a banking company, to be held by it as collateral security for the payment of any and all sums of money which were then or might thereafter become due from Nash to the said company. The company had no knowledge or information of the purpose for which the bond and mortgage were given, or of the.existence of tile drafts, and took the assignment in good faith for the purpose therein expressed, and at the time of so doing discounted commercial paper for the said Nash, to an amount exceeding $10,000, the proceeds of which were applied in taking up paper previously discounted for him, and upon which he and other parties were liable, Nash being then indebted to the company in an amount exceeding that sum. Thereafter the company purchased the said bond and mortgage absolutely from Nash, and surrendered to him commercial paper upon which be and other parties were liable, without knowledge of the purpose for which the bond and mortgage were given, or of the existence of the drafts, and in the belief that Nash bad the right to so dispose of it. At the time of giving the bond and mortgage, McKay was indebted to Nasi), including the acceptances on the drafts, in the sum of about $15,000, and Nash credited Mm with the amount of the bond and mortgage about six months after it was given to him.
    In an action brought by the holders of the drafts which remained unpaid, to restrain the company from selling the land under a decree entered in ail action brought by it for the foreclosure of the said mortgage,

      Held, that McKay, by giving to Nash a mortgage purporting on its face to be founded on a valuable consideration, and containing no reference to the condition or agreement upon which it was given, was estopped from disputing the validity of the title acquired by the company by its assignment from Nash, and from insisting upon the moneys arising from the sale being applied to the payment of the drafts.

      That as the holders of the drafts claimed under the mortgage, they could not repudiate its form or the legal consequences flowing therefrom; and that, as the estoppel was created by the form in which the mortgage was given, they also were estopped from disputing the validity of the company’s title.
    Appeal from a judgment in favor of the defendants, entered upon the report of a referee.

      R. R. Marvin and II. O. Lakin, for the appellants.
    The creditors of McKay were entitled to the benefit of the security given to Nash, at the time the mortgage was made to Nash, and Nash could not, by any act of his, deprive the plaintiffs of their equity. (Death v. Hand, 9 Paige, 432-435, and cases therein cited; Bank of Auburn v. Throop, 18 Johns., 505; EvertsonY. Booth, 19 Id., 494; Morrioe v. Harrison, 1 Eq. Oa. Abr., 93 ; Eastman v. Foster, 8 Met., 19-23; Moses v. Murgatoyd, 1 Johns. Ch., 127-129.) The assignee of a judgment or other chose in action, takes it subject to all the equities which existed against it in the hands of the original holders. (Heath v. Hand, 1 Paige, 329; White & Tudors’ Eq. Cas., Law Lib., vol. 62, p. 233, 3d series; ElUs v. Messirvin, 11 Paige, 464 ; Bush v. lathrojp, 22 N. Y., 535 ; Comstock v. Hier, 73 N. Y., 273.)

      Morris <& Russell, for the respondents.
    If a trust was created by the execution of the mortgage and its delivery, which plaintiffs could have en forced as against Nash and McKay, and which was irrevocable, as the plaintiffs insist, then Nash was clothed with the legal title of the mortgage, which was the trust estate, and could give a good and perfect title to an innocent purchaser giving a good and valuable consideration for the same. (Tiffany & Bullard on Trusts, 788, 818; Hill on Trusts, 4 Am. ed., marg. p. 165, 510; 2 Story Eq. Jur., 309, § 977; Briggs v. Davis, 20 N. Y., 23;. 3 Paige, 437; 41 Barb. 285; Saitoh v. Wells, 48 N. Y., 585; Dillaye v. Commercial Bank of Whitehall, 51 Id., 347.) When McKay made the mortgage absolute on its face acknowledging an indebtedness, and directed Nash to sell the same (notwithstanding the non-negotiable character .of the mortgage) McKay and those claiming under him are estopped from asserting title as against a bona fide assignee of the mortgage for value and without notice. (Moore v. Met/ropolitan

      National Bcmh, 55 N. Y., 41; MoNiel v. Tenth National Bcmh, 46 Id., 325; Story on Agency, §§ 73, 127, p. 154, note 1.)
   Talcott, P. J.:

The complaint in this case sets forth in substance that one Joshua W. McKay made his several drafts in favor of the bank at Corry, amounting in all to $5,000, and made his other drafts in favor of the bank at Westfield, amounting in all to $4,000, and made his certain other draft for $1,000 in favor of the defendant Blaine and others named, who were partners carrying on a banking business at North East, in Pennsylvania, all of which drafts were discounted by those banks respectively prior to September 26, 1873, all of which drafts were drawn on the defendant Nash, and by him accepted for the accommodation of McKay, the drawee, and all of which drafts were outstanding and unpaid on September 26, 1873. That the banking company at North East refuse to be made plaintiffs, wherefore they are añade defendants. That Orson Stiles and cea’tain other persons named as defendants were at that time copartners, caraying on a banking business at Eredonia, in Chautauqua county. That the said McKay, on September 26, 1873, executed and delivered to said Nash his bond and onoa’tgage, conditioned to pay said Nash the sum of $10,000, with the interest, at the times therein specified, which mortgage was upon a certain parcel of land in Clyrnea’, Chautauqua county, then owned by McKay, and that said bond and onortgage were execaated to Nash for the sole piarpose of secuaing him as the acceptor of the said drafts, and that Nash agreed he woaald use the bond and mootgage, or negotiate the same, for the sole purpose of raising money to pay the several sums so owing “ upon the said draftsbut in violation of said agreement, “Nash sold and transferred the same to the said Orson Stiles, as trastee, for the said copartnership, composing “The' Union Baaaking Coanpany,” at Eredonia. That as such tauistee, Stiles has commeaaced an action for the foa’eclosua’e of said mortgage, and obtained a judganent thereon, on which judgment the land is advertised for sale, and the plaintiffs claian that the said bond and mortgage were divea’ted from the original pmrpose for which they wea’e anade, and the plaintiffs pray the relief that Stiles, as saach trustee, be restrained from enforcing the said decree of foreclosure, and that the same, or so much thereof as may be necessary, be applied in payment of, or held as security for,- the amount due on said drafts.

The persons composing “ The Union Banking Company ” answered, alleging a leona fide purchase of the bond and mortgage for a full and valuable consideration, in Septembei’, 1873. That Nash brought the bond and mortgage to the office of the Union Banking Company for sale on September 27,1873, and represented to said Orson Stiles that he was the sole owner thereof, and that the same were made to him to secure advances previously made by him to McKay; aud that, believing such representations to be true, they advanced to Nash the full amount thereof, partly in the note of McKay, and the balance in cash or its equivalent, and took from him an assignment of the bond and mortgage as security therefor. That in March, 1874, on further representations of both Nash and McKay, to the effect that the said bond and mortgage were given for money advanced to McKay by .Nash, and that they were made for the sole benefit of Nash, and confiding in the truth of such representations, the Union Banking Company, on the application of Nash, surrendered to him certain negotiable commercial securities, on which Nash and others were liable, to the full amount of the bond and mortgage, and took an absolute assignment of said bond and mortgage in good faith, and without any notice that the plaintiffs had or claimed any interest therein, or the proceeds thereof. They further, allege that Adams Davis, the president of the First National Bank of Corry, Levi A. Skinner, the president of the First National Bank of Westfield, aud Alexander W. Blaine, an officer or agent of the banking company at'North East, were all made parties to the foreclosure suit, and that said banks had full notice of said suit, but did not appear therein, or in any way set up or make known to the Union Banking Company that they had any interest in the said bond and mortgage, or its proceeds. That the question as to the right of said Nash to negotiate the said bond and mortgage, and appropriate the avails thereof to his own use, was made an issue in the sa!d suit, and was fully tried and deteimined as between the Union Banking Company and McKay in favor of said company, which, judgment and determination still remains in full force.

They further set up that said Adams Davis, Levi A. Skinner and Alexander W. Blaine, with full knowledge that the Union Banking Company was the owner of said bond and mortgage, received a deed •of.the premises described in the mortgage, as the agents of their respective banks from the said McKay, for the purpose of securing the said banks, the sums due to them respectively upon said drafts, .and that Davis, Skinner and Blaine were duly served with the summons in the foreclosure action which resulted in the judgment in favor of the Union Banking Company.

By stipulation, the case was referred to the lion. William A. Henderson to hear and determine. He has reported that the Union Banking Company acquired a good title to said bond and mortgage by virtue of the said assignments made thereof to Orson Stiles as president of said company, and that, as against said defendants, the plaintiffs have no legal or equitable claim or title' thereto, nor to the proceeds of the sale of the mortgaged premises, which lias been had under the said decree, and that the complaint should be dismissed, with costs; and a judgment has been ordered' accordingly.

Amongst his other findings of fact, the said referee reports in ’ substance that the drafts in the complaint mentioned, or a portion' thereof, being about to fall due, McKay was unable to pay the same and communicated that fact to Nash; and it was then, ■on September 26, 1873, mutually agreed between the two that, •“ for the purpose of providing the funds with which to pay and' take up said drafts, McKay should make, execute and deliver to' Nash, a bond and mortgage for the’amount and in the terms' stated.” That said Nash’ . . . should sell said bond and mort-' gage for cashj and the money so to be received by him therefor .should be used and applied by said Nash in the payment of said' ■drafts. It was this consideration that induced the making and delivery of the bond and mortgage by the mortgagor, and the receipt' thereof by the mortgagee, and that it was expected by the parties' to the said bond and mortgage at the time of its delivery, that it could and would be sold by said mortgagee, to the defendants composing tbe Union Banking Company, for cash; that on the day following the execution of said bond and mortgage, viz.: on September 27, 1873, the said mortgagee, without the knowledge or-consent of the said mortgagor, or of the owners and holders of said drafts, assigned in writing under his hand and seal, the said bond and mortgage to the defendant Orson Stiles, as president of said Union Banking Company, for the use and benefit of said company,’, as collateral security for the payment to said Union Banking Company, of any and all sums of money then due and owing to said company by said mortgagee, or which said mortgagee should thereafter owe said company, and the said mortgagee at the same time-delivered said bond and mortgage to said assignees; that said mortgagee was then owing the Union Banking Company a sum of money much greater than said bond; that at the time of the execution and delivery of the said assignment, the said assignees had no-knowledge or information of the purpose for which the said bond and mortgage was executed and delivered as aforesaid, and no-knowledge of the existence of said drafts, and the said assignees took said assignment in good faith for the purpose expressed in said written assignment aforesaid, and the said assignees, relying on the said assignment, did at said- time, discount other commercial. pcvper for said Nash to am, amount exceeding $10,000, the proceeds of which were applied in taking up paper previously discounted for-said Nash by said assignees, and upon which Nash and other parties-were liable. Nash on the same day informed McKay of the disposition he had made of said bond and mortgage.

Furthermore, that in April, 1871, Stiles, as president, purchased from said Nash absolutely the said bond and mortgage, for the use of said Union Banking Company, which said company, in consideration of said absolute sale, surrendered to said Nash, commercial paper, which it had previously discounted for him, and upon all of which Nash and other parties were liable. And that neither of the members of said Union Banking Company had any knowledge- or information of the actual purpose for which said bond and mortgage w»8 made and delivered to Nash, or of the existence of said-drafts, cm ef the liability of Nash thereon, but took the absoluteassignme:»\ of said bond and mortgage, in good faith, believing; Nash to have the lawful right to make such disposition thereof. That “at the time before stated,” — i. e., at the time of the execution and delivery of the bond and mortgage, McKay was indebted to Nash including the acceptances for $10,000, and Nash gave McKay credit for the said bond and mortgage about six months after the same was given. The learned counsel for the appellants is understood to complain somewhat of the findings of the referee' upon questions of fact, and we can see that the evidence given by the vai’ious witnesses is contradictory, uncertain and somewhat obscure, and often not quite intelligible; but the learned referee, having personally seen and observed the witnesses, knew better than we can know the credit to which they were entitled and how they meant to be understood; and we are not able to say that the report of the referee is unsustained by the evidence in any material particular.

The mortgage was recorded in the office of the clerk of Chautauqua county on September 30, 1873. The counsel for the appellants claim that upon the findings of the referee, the bond and mortgage having been executed by McKay to Nash, for the sole purpose of raising the money wherewith to pay the drafts mentioned in the complaint, that the plaintiffs and the banking company at North East are entitled to reclaim from the Union Banking Company the bond and mortgage or the proceeds thereof, although it does not appear that they ever knew of the tnist created in Nash, much less that they in any manner acquiesced in or assented to the same. This might be so, except for the doctrine of estoppel m pais, as applicable to the facts in the case.

It is said by the chancellor in Curtis v. Tyler (9 Paige, 432), “ It makes no difference that such principal creditor did not act upon the credit of such security in the first instance, or even know of its existence.”

The contention of the appellant’s counsel rests upon the general principle that the assignor of a chose in action not negotiable, can only transfer the interest he has in the instrument, and the purchaser only takes such interest as his assignor had to part with, and in support of his views of the case the counsel places much reliance on the cases of Bush v. Lathrop (22 N. Y., 535), Greene v. Warnick (64 N. Y., 220), and Trustees of Union College v. Wheeler (61 N. Y., 86.) But the case of Bush v. LatJvrop is overruled upon tlie point under consideration — the effect of tlie doctrine of estoppel. Judge Earl says, in delivering tbe opinion of the court, in Greene v. Warnick (supra), page 225; Under the authority of the case of Moore v. Metropolitan Bank, Noble ought to have been held estopped from asserting his title to the bond and mortgage in consequence of his absolute assignment of the same, by which he conferred the apparent ownership upon Preston and apparent authority to sell, and so, for the decision of that case (Bush v. Lathrop), must now be considered to have been erroneous.”

The case of Trustees of Union College v. Wheeler, decided by the Commission of Appeals, which holds that the assignee of a bond and mortgage takes, subject not only to latent equities of the mortgagor, but of third persons having an interest in the mortgaged premises, must be considered to have been decided upon the peculiar circumstances of that case; and does not purport to disagree with the cases which hold the contrary, where the principle of estoppel is applicable. On the contrary, the doctrine in Moore v. Metropolitan Bank (55 N. Y., 41), is in the opinion of Davigiit, Commissioner, alluded to on a motion for reargument in the Union College case, where he says, at page 114: “ The point in Moore v. Metropolitan Bank is simply whether the law of estoppel is applicable on the question of title, as between a first assignee and a remote purchaser of a non-negotiable chose in action. It is held that it is. The rule that the chose in action itself is •open to all defenses groAving out of the original transaction, in the hands of any assignee no matter hoAV remote, remains unshaken, -and must continue so until elementary rules of law are o\mrthrown.”

It is held in McNeil v. Tenth National Bank (46 N. Y., 325), that “ where the owner of property confers upon another an apparent title to or power of disposition over it, he is estopped - from asserting his title as against an innocent third party who has dealt •with the apparent owner in reference thereto without knoAvledge ■of the claims of the true owner. The rights of such third party •do not depend upon the actual title or authority of the one with whom he dealt, but upon the act of the owner, which precludes him from disputing the title or authority he has apparently conferred.” ... If the owner intrusts to another, not merely the possession of the property, “but also written evidence over his own signature of title thereto, and of an unconditional power of disposition over it, the case is vastly different. There can be no occasion for the delivery of such documents, unless it is intended they should be used, either at the pleasure of the depositary or under contingencies to arise. If the conditions upon which tins apparent right of control are to be exercised are not expressed upon the face of the instrument, but remain in confidence between the owner and depositary, the case cannot be distinguished in principle from that of an agent who receives secret instructions, qualifying or restricting an apparently absolute power.”

The facts of this case seem to bring it precisely within the principle laid down by Judge Kapallo in the case last cited, but the case is criticised by stating that it related to the title to corporate stocks, to which some decisions have given a quasi negotiable character. But afterwards, in the case of Moore v. Metropolitan National Bank (55 N. Y., 41), the Court of Appeals, in an opinion delivered by Grover, J., applied the same principle to all non-negotiable choses in action, and it was then held that “ A bona fde purchaser for value of a non-negotiable chose in action, from one upon whom the owner has by assignment conferred the apparent absolute ownership, when the purchase is made upon the faith of such apparent ownership, obtains a valid title as against the real owner, who is estopped from asserting title in hostility thereto.” And the case of Bush v. Lathrop is again expressly overruled, so far as it neglects to notice and apply the principle of estoppel to the case. See also Dillaye v. Commercial Bank of Whitehall (51 N. Y., 345), in commenting on which, in the Union College case, Dwight, Commissioner, says, at page 106: “ The point was, whether one who held a mortgage in trust, with an apparently unrestricted power of disposition, could transfer it free from the the claims of the cestui que trust to a purchaser in good faith. It was held that he could.”

In the case at bar, the plaintiffs, to take the most liberal view of their equitable rights, were no more than cestui que trusts, of the mortgage, or its proceeds, according to the agreement between the mortgagor and mortgagee, and no evidence of any such trust or interest appeared upon the face of the papers, or was in any manner communicated to the Union Banking Company. But it is insisted by the appellant that if the doctrine of estoppel m pads can be in this case applied to Nash and McKay, it cannot affect the rights of the plaintiffs, because their rights in equity attached to the mortgage when it was delivered to Nash for the purpose of raising money upon it to pay the drafts in question. So, also, did the rights of the cestxti que trust in the case of Dillaye v. Commercial Bank of Whitehall.

But in this case the estoppel was created by the very form' of the mortgage itself, purporting to be a mortgage from McKay to Nash founded on a valid consideration, and with no other condition but for the payment of the money by McKay. The plaintiffs-claim under that mortgage, and so claiming, they can neither repudiate its form or the legal consequences which followed from the circumstances that it was apparently a mortgage from McKay to Nash, subject to no condition other than the payment of the money purporting to be secured by it to Nash. Having no other claim against the defendants than by and through this mortgage, the vices is in the plaintiff’s own title. The instrument under which the. rights of the plaintiff are claimed to arise is the very same which constituted the estoppel, and which held-out the pretense that it was made solely to secure the payment of a debt to Nash, and if the plaintiffs were now permitted to deny that such was the fact it would enable them jointly with McKay to perpetrate a fraud upon the defendants, the assignees, from which it is the office and object of the doctrine of estoppel to protect the purchaser in good faith and for value.

The complaint ih the foreclosure suit is not set out in the case, and it does not appear that Davis, Blaine and Skinner were made parties, as in any manner representing their respective banks. No further attention is, therefore, paid to so much of the defense as is claimed to be founded on the estoppel by record of the judgment in the foreclosure ease.

"We think in tbe light of tbe modern decisions tbe referee came -to tlie correct conclusion on tbe facts found by bim.

Judgment affirmed, with costs of appeal, to be paid by tbe appellants.

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

Judgment affirmed, with costs.


source: Caselaw Access Project

author: Talcott, P. J.:

license: Public Domain

text:
    THE BUFFALO GRAPE SUGAR COMPANY, Respondent, v. JOHN L. ALBERGER, Appellant, Impleaded, &c.

      .Action hy corporation to determine conflicting claims to its stoch — when it cannot he maintained — Tem/pora/ry injunction — when it cannot he granted — Oode of Cirnl Procedure, §§ 603, 604.
    The plaintiff, a corporation, alleged in its complaint that it had issued two certificates of stock, numbered respectively three and four, to one Williams, who had transferred them to the defendant Hamlin; that certificate No. 3 had been presented to it by Hamlin, and that the same had been canceled and a new certificate had been issued to him therefor; that certificate No. 4, having been lost by Hamlin, wrongfully came into the hands of Williams, .and through him to the defendant Alberger, who presented it to the plaintiff, and demanded that it should enter the transfer to him, upon its books; that Alberger also claimed to be the owner of the other certificate transferred to Hamlin; that the plaintiff, before notice of the claim of Alberger, believing the certificate No. 4 to have been lost, had issued a new certificate therefor to Hamlin, which was still outstanding; that the •plaintiff feared' that Alberger demanded the transfer to be made, with the intent of bringing an action against it to recover the penalties imposed by chapter 40 of 1848, for its refusal to transfer the stock; that the plaintiff was unable to determine the respective rights of the parties, and feared that it might be exposed to injury by reason of the issue of the said certificate to Hamlin. It prayed for a judgment determining the respective rights of the parties, and that if Alberger had no interest in the certificate it might be delivered up and canceled.
    .HfiM,that, upon the facts stated, the plaintiff had no right to bring the controversy into a court of equity, and that as it was not entitled to the judg- . ment demanded, a temporary injunction, restraining the defendant from disposing of the said certificates or prosecuting any action or proceeding against the plaintiff for its refusal to transfer the stock upon its books, was improperly granted and should be vacated.

      Appeal by the defendant Alberger, from an order made at Special Term, denying a motion to vacate an injunction order granted herein.

      A. G. Sice, for the appellant.

      8. 8. Sogers, for the respondent.
   Talcott, P. J.:

This is an appeal from the order of the Special Term in Erie county, refusing to vacate an injunction order, granted in this case, restraining the defendants and each of them from disposing of either or any of the certificates of the plaintiff’s stock in their possession, mentioned in the complaint, and from prosecuting any action or proceeding against the plaintiffs for the refusal to transfer such stock upon its books.

The writ of injunction, as formerly known, is abolished, and a temporary injunction can only be granted by an order as prescribed by the Code. (Code of Civ. Pro., 602.)

The judgment demanded in the complaint in the case is that it be determined what right, if any, the defendant Alberger has acquired in and to certain certificates of stock of the plaintiff corporation, and wliat the respective rights of the defendants thereto may be, and that if the defendant Alberger be found to have no interest therein, then that a certain certificate, described as certificate No. 4, be delivered up and canceled.

The complaint in substance alleges that in January, 1874, the plaintiff issued to one Horace Williams two certificates for its capital stock; one, numbered three, for forty-three shares, and one, numbered fotvr, for twenty-three shares, and that in or about the year 1874 said Williams transferred the said stock to Cicero J. Hamlin; that certificate No. 3 was presented to the plaintiff by Cicero J. Hamlin and canceled, and a new certificate issued to said Hamlin ; that about January 12, 1880, the defendant Alberger presented to the plaintiff the certificate numbered four, and demanded that the twenty-three shares of stock represented by the same be transferred on its books to said Alberger, and, at the same time, [¡resented to the secretary and treasurer of the plaintiff a written demand that he should enter the transfer of the shares of stock represented by said certificate No. 4, from said Williams to the said defendant Alberger, on the books of the plaintiff, containing an alphabetical list of its stockholders, showing their place of residence, the number of shares held by each and the time they respectively became the owner thereof, and the amount of stock actually paid in, showing to whom and from whom the same was transferred, and that such request was refused because of the facts thereinafter set forth, and that defendant Alberger further served notice upon the plaintiff to the effect that the forty-three shares of stock, originally represented by certificate No. 3, were the property of Alberger; that the defendant Iiamlin claims that the shares represented by both said certificates belong to him; that certificate No. 4, having been lost, wrongfully came to the hands of Williams, and through him to Alberger; that the same having been so reported lost, the plaintiff, before the service of said notice upon him, had issued a new certificate to said Hamlin in lieu of certificate N o. 4, which is still outstanding in the name of Iiamlin ; tli at the plaintiff fears that Alberger, in presenting said certificate and demanding the transfer thereof to him, did so with intent thereby to lay the foundation of an action or actions at law, to be brought by him against the plaintiff for a penalty or penalties, under the “ Act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes,” passed February IT, 1848, ch. 40, and the acts amendatory thereof and supplementary thereto.

That the plaintiff is unable to state what the respective rights of the defendants are in regard to said certificates, and the stock represented thereby, and that it fears it may be exposed to injury because of the issue of the said certificate to Hamlin, in lieu of certificate No. 4.

The object of the complaint seems to be to compel the defendants to litigate in this suit their respective rights to the stock of the plaintiff, originally represented by' certificate No. 4, and perhaps, also, to litigate their respective rights to the stock represented by certificate No. 3.

By section 603 of the Code of Civ. Pro., an injunction order may be issued “ where it appears from the complaint that the plaintiff demands and is entitled to a judgment against the defendant, restraining the commission or continuance of an act, the commission or continuance of which, during the pendency of the action, would produce injury to the plaintiff.”

Or, secondly, under section 604 — “ where it appears hy affidavit that the defendant, during the pendency of the action, is doing, or procuring, or suffering to be done, or threatens, or is about to do or to procure or suffer to be done, a/n act m violation of the plamtiff’s rights respecting the subject of the action, a/nd tendvng to render the judgment ineffectual.”

This is not a suit of interpleader, such as is provided for in section 820 of the Code of Civil Procedure, as it is not averred that any action is pending, and in other respects fails to make a case within' that section. It is not a case for a bill of interpleader, as authorized by the general rules of equity.

The complaint states a perfect title to the stock, represented by the two certificates, in Hamlin, and does not show that the plaintiff is ignorant of their respective rights, or that there is any doubt concerning the same. (Shaw v. Coster, 8 Paige, 339; 2 Barb. Ch. Pr., 2 ed., 117; Mohawk & H. R. R. v. Clute, 4 Paige, 384.)

It does not appear that the defendant, Alberger, is doing, or procuring, or that he threatens, or is about to do any act in violation of the plaintiff’s rights, and we do not see that the plaintiff is entitled to the judgment which it demands in its complaint, or to any judgment at all against the defendant, or either of them. If the plaintiff has embarrassed itself by issuing a certificate to Hamlin, in lieu of the' one alleged to have been lost, that gives it no right of action against Alberger.

We do not think the case is within the principle upon which the case of the New York & New Haven R. R. v. Schuyler (34 N. Y., 30), was maintained.

In that case spurious certificates of railroad stock had been issued hy an officer having apparent authority to do so, which were undistinguishable on their face from the certificates of genuine stock,- and were outstanding in the hands of numerous holders as evidence ■of interest in the property of the corporation. Numerous suits had been commenced in various courts to enforce the claims of various of these holders of the spurious certificates, and the value of the genuine stock of the corporation was greatly diminished. The corporation was the holder of the legal title to the railroad and its fran■cbises, and it was held that the corporation, so representing the legal title, could maintain an action against Schuyler and three hundred and twenty-five others, the alleged owners of the over-issued stock, for the purpose of having their respective rights adjusted and determined, and it was held in that case that the number •of parties and the multiplicity of actual and threatened suits will ¡sometimes justify a resort to a court of equity, when the subject is not at all of an equitable character, and there is no other element -of equitable jurisdiction.

This ease is destitute of the elements of equitable cognizance, ■which results from the multiplicity of the claimants, and from the ■circumstance that numerous suits have been commenced, or are ■threatened. - ■ '

It is net claimed that any suits have been threatened, but only Tacts áre alleged, from which it is apparent that the corporation has reason to apprehend that Alberggr will commence an action at law ■against the corporation, to enforce a claimed right which, is strictly -of legal cognizance, and to which, if ho is not entitled to the stock •claimed by him, the ■ corporation will have an adequate defense in •one, or, at most, two actions, in which the légahright caAbe determined. .

•We do not see that there is any ground upon which the plaintiff •can draw this controversy into a court of equity, and. thus deprive the claimant of the ordinary right of a, trial by .jury; and because the plaintiff is not entitled to the judgment demanded by it, the injunction order should have been vacated. ' •' "

Order appealed from reversed, and the injunction order vacated, with $10 costs of the motion, and costs and disbursements of the. appeal.

Present — Talcott, P. J., Smith and Haedin; JJ.

Ordered accordingly.


text:
    PHILANDER MOTT, Plaintiff, v. THE HAVANA NATIONAL BANK OF HAVANA, N. Y., Defendant.

      What instrument is a negotiable note — Rights and duties of a conditional vendor of property — when he is liable for the full value of the property if he retake it.

    One Nighthart, having purchased au engine from the American Engine Company, gave to it a note in the following form:
    “Fourteen and one-half months after date I promise to pay to the order of the American Engine Company $450, at seven per centum, at the Havana. ■ National Dank, at Havana, N. Y., value received, being in part payment for a portable engine, which engine shall be and remain the property of the owner of this note, until the amount hereby secured is fully paid.”
    This note having been indorsed by one Woodward, for the accommodation of Nighthart, was transferred by the company to the plaintiff, who brought this action against the defendant, with whom the note had been deposited for collection, to recover damages for its neglect to properly protest the same and notify the indorsers thereof.

      Held, that the note was a negotiable one, and that it was the duty of the defendant to demand payment thereof of the maker, and notify the indorser of its non-payment.
    Upon the trial the defendant offered to prove that, after the maturity of the note, the plaintiff, acting veder the rights reserved in the note, caused the sheriff to take possession‘of the engine, and thereafter caused the same to be sold under an execution issued upon a judgment recovered against Night-hart upon the note, and purchased the same for $68, and also offered to prove that the engine was at the time of the sale and of the trial worth $500.

      Held, that as this action was founded on the defendant’s negligence, the plaintiff could recover no more than would fully compensate him for the injury sustained thereby.
    That the plaintiff, who assumed to have and exercise the rights of the vendor of the engine, must, as between the parties, be treated as holding the engine under a chattel mortgage or pledge.
    That, as he had himself purchased the engine at the sale, the defendant was entitled to prove the value thereof, and have it applied in satisfaction of the debt.
    That the court erred in rejecting the evidence.
    Motion for a new trial on exceptions ordered to be beard in the first instance at the General Term, after a verdict directed in favor of the plaintiff.

      B. Baldwin, for the plaintiff,

      JDa/vid B. Hill, for-the defendant.
   Talcott, P. J.:

This action is brought against the defendant for neglecting to notify the indorser of a note sent to it for collection. The note was given by one Frederick Nighthart to.-the “ American Engine Company,” in part payment for a - steam engine, and was indorsed by one Gilbert Woodward for the accommodation of Nighthart, and by the American Engine Company transferred to the plaintiff before maturity, with its indorsement. The note was in the following form:

“$450. New York, October 15, 1815.
Fourteen and Oüe-half months after date, I promise to pay to the order of the American Engine Company $450, at seven per centum, at the Havana National Bank, at Havana, N. Y., value received, being in part payment for a portable engine, which engine shall be and remain the property of the owner of this note, until the amount hereby secured is fully paid.
“ FRED. L. NIGHTHART.
“No. —, due Jan’y 4,1811.”

After giving evidence touching the indorsement of Woodward, and proving the recovery of a judgment on the note against Night-hart, and an execution with the indorsement of a levy on a portable engine, and the sale thereof for the sum of $68, and notice to ITun.tingdoh, who was the cashier and notary of the bank, of the place of the post-office address of the indorser, Woodward, which was at Odessa, about six miles from Havana, and. that Nighthart had the possession of the engine until the commencement of the suit against him,'the plaintiff rested, when the counsel for the' defendant moved for a nonsuit: 1st. On the ground that the note described in the complaint is not a negotiable note,, and. that* consequently, no demand of the maker or notice to the indorser was necessary to charge him. 2d. That the plaintiff has failed to prove that he has suffered any injury by the failure to charge Woodward, because the engine company was the first indorser, and primarily liable, and there was no proof that the engine company was. not perfectly responsible. The motion was denied by the court, and the defendant excepted. c.. . . ' ....

Only one of these propositions is presented by the counsel for the appellant on this appeal, to wit, that the instrument is not a promissory note. :

The note in this case was an agreement to pay the money specified in it to a certain payee, on a day certain, and contained all the requisites of a negotiable promissory note ; and the addition of the statement of the consideration, to wit, the engine, with the statement that it was to remain the property of the owner until the note was paid, did not render it non-negotiable. (Arnold v. Rock River, &c. R. R. Co., 5 Duer, 207; Willoughby v. Comstock, 3 Hill, 389; Hodges v. Shuler, 22 N. Y., 114.)

■ Another exception, to which attention is called, arises upon offers of proof by the defendant’s counsel, which were rejected, to which' rejection the defendant excepted. The offers of proof were as follows:

The defendant’s counsel offered “to prove that in February, 1877, the plaintiff’s attorney instructed the sheriff of Schuyler county to take possession of the engine in question, and that he (the said sheriff) did take possession of it, and that the attorney directed him (the said sheriff) to do so under the reserved right in the note, calling his attention specially to it, saying to him (said sheriff) that the property remained the property of the owner until it (the note) was fully paid, and that in pursuance of that, direction the plaintiffs agent did take possession of the property, and held it until the plaintiff recovered the judgment against Nighthart, which has been introduced in evidence, and that then the plaintiff directed the sheriff to levy upon that machine, and sell it upon the execution issued upon that judgment. That the sheriff accordingly did seize the engine, and sold it upon the execution, for $68. That the plaintiff became the purchaser at that sale, for that sum, and that the sheriff applied the purchase-money upon the execution. Also, to prove that the machine was, at that time, and still is, worth the sum of $500. These offers were made by the defendant’s counsel, claiming that the plaintiff was accountable to the defendant for the value of the machine, over and above what was applied on the execution, to the extent of satisfying the note.”

It will be recollected that the note contained no agreement that the purchaser of the engine was to be entitled to the possession of the property, but solely that it was to be and remain the property of the owner of the note until the amount should be fully paid. Under the arrangement specified in the note, the property in the engine remained in the vendors, or passed to the owner of the note ■by the indorsement and transfer; (Ballard v. Burgeti, 40 N. Y., 314; Herring v. Hoppock, 15 Id., 409.)

The maker of the note had, so far as appears, no interest in the engine which could be sold on execution. (Herring v. Hoppock, supra; Strong v. Taylor, 2 Hill, 326; Cole v. Mann, 62 N. Y., 1.)

At most, Nightliart’s possession was that of a mere licensee, and when the sheriff, as the agent of the plaintiff, asserted the right of the latter to the possession, and took possession of the engine from Nighthart, before the commencement of the suit against him, there was no title or right of possession remaining in Nighthart which could be the subject of the sale. Yet it is impossible not to see that under the agreement evidenced by the note, the engine, in the hands of the plaintiff, was a mere security for the payment of the note. It was, in fact, a collateral security for the payment of the purchase price.

Though not technically a chattel mortgage, the note gave rise to relations between the conditional vendor and his vendee, as between themselves, of a similar character.

It is impossible to believe that the arrangement between the parties contemplated that the vendee should be liable to pay the whole face of the note, while the vendor at the same time retained his title to, and asserted and resumed the possession of the property which formed the entire consideration of the note.

It is settled that if the mortgagee in a chattel mortgage takes possession of the mortgaged property, after a forfeiture of the conditions of the mortgage, it is a satisfaction of the mortgage debt, providing the value of the property is sufficient j but if, upon a fair sale of the property less than the amount of the debt be realized, the mortgagee may sue for the balance. (Stearns v. Marsh, 4 Denio, 227; Case v. Boughton, 11 Wend., 106.) But if there is no sale of the property mortgaged, or a material irregularity in the sale, the mortgagor is entitled to have the whole value of the property applied in satisfaction of the mortgage debt; and as the plaintiff became the purchaser at the sale, the engine would still remain in his hands in the nature of a pledge. (Story on Bailm., § 315; Duden v. Waitzfelder, 16 Hun, 337.)

We think the vendor, or, in this instance, the owner of the note, who assumed to have and to exercise the rights of the vendor of the engine, cannot be in a better position as between the parties, in respect to the property which he held as a collateral security for the payment of the note, than though he simply held a mortgage or pledge of the engine.

In an action for neglecting to protest a note, whereby the liability of an indorser has been lost, the party sued has a right to show on the question of damages, any such state of facts as will tend to show that the loss of the plaintiff has been less than the face of the obligation of the maker.

The general rule is, that in an action for negligence the plaintiff can recover no more than the amount which will fully compensate him for the injury sustained by the negligence in question. And in an action of this particular character, the defendant may show that the creditor holds collateral securities for the payment of the debt, to which he may .resort in diminution of the damages which would prima faoie appear to have been sustained by the negligent omission to charge the indorser. (First National Bank v. Fourth National Bank, 77 N. Y., 320, 328, 329; Borup v. Mininger, 5 Minn., 523; Allen v. Suydam, 20 Wend., 321.)

' In this view, a majority of the court think the evidence offered should have been admitted on the question of damages, and that the rejection thereof was error, for which a new trial must be granted.

Present — Talcott, P. J., Smith and Hardin, JJ".

New trial granted, costs to abide the event.


author: Smith, J.:

text:
    THE BUFFALO & JAMESTOWN RAILROAD COMPANY, Respondent, v. JOSEPHUS H. CLARK, Appellant. THE SAME, Respondent, v. ERIE L. HALL, Appellant. THE SAME, Respondent, v. HORACE H. GIFFORD, Appellant.

      JRailroad company — when a subscription to its capital stock, made before its incorporation, is valid — when a subscriber is not released by its failure to complete the road — or by its sale on foreclosure.

    The defendant, a few days prior to the organization of the plaintiff under the general railroad act of 1850, signed an agreement in writing, by which the subscribers thereto, in consideration and for the purpose of becoming stockholders in the said company, agreed to take the number of shares of its capital stock set. opposite to their respective names, and to pay for the same in such time and manner as required by the company. After its organization the plaintiff accepted the subscription of the defendant, and made an assessment of ten per cent, upon the amount so subscribed, which assessment was paid by the defendant.
    Un an action to recover the amount of certain other assessments subsequently imposed upon the stock,

      JEelil, that the agreement of the defendant to subscribe to the capital stock of the company was valid and binding, though he did not sign the articles of associatiation, nor the subscription book kept by the company in pursuance of section 4 of chapter 140 of 1850.

      JErie ill N. Y. Gity 11. 11. Go. v. Owen, 32 Barb., 018, and Troy & Boston JR. JR. Go. v. Tibbits, 18 Id., 297, — distinguished.
    That the objection that the agreement was invalid, because the corporation was not in existence at the time it was made, was obviated by the fact that the corporation accepted the subscription after it was organized, and that the defendant ratified it by paying an assessment thereon, and that the subscription should be regarded as having taken effect at the time of such acceptance and payment.
    "What acts of a corporation amount to an acceptance of such a subscription, considered.
    The articles of association contemplated a road from the city of Buffalo, through the counties of Erie, Cattaraugus aud Chautauqua to a point in the Slate line in the southerly boundary of the latter county. The road had been built from Buffalo to a village in Chautauqua county, distant some fourteen miles from the State line, and its further construction abandoned. It did not appear that the abandonment was effected by a resolution of the board of directors or by any alteration of the articles of association, or that it was anything more than a mere cessation or suspension of the work.

      Held; that the defendant was not thereby released from his liability upon his-subscription.

      Held, further, that he was not so released by reason of the fact that the road and the franchises of the company had been sold upon the foreclosure of a. mortgage given by the company.
    Appeal from a judgment in favor of the plaintiff, entered on the-decision of a justice of' this court, upon a trial had at the Erie Circuit, without a- jury;
    The action was brought to recover the amount of certain assessments upon shares of the capital stock of the plaintiff, alleged to beheld by the defendant.

      II. 0. Lahin, attorney, for the appellant; R. P. Mwrvm, of counsek

      Pass, Gleveltmd <& Pissell, for the respondent.
   Smith, J.:

, The principal question in the case is whether the defendant made-such a subscription for stock as constituted him a stockholder in the-plaintiff corporation, and- liable to be assessed. The plaintiff was-organized as a railroad corporation, under the provisions of the statute of 1850, known as the general railroad act. (L. 1850, ch. 140.)-The date of its organization was March 23, 1872. A few days-prior to the organization of the company, the defendant, with several other persons, signed an agreement in writing, by which the-several subscribers thereto agreed to take and pay for the number-of shares of the capital stock of said company, of $100 each, set opposite their respective names. The agreement was in the following words : “¥e, the undersigned, in consideration of, and for-the purpose of becoming stockholders in the Buffalo and Jamestown Railroad Company, do hereby subscribe and take the number of shares of one hundred dollars each share, of the capital stock of said company, set opposite our respective names, and agree to-pay therefor in such time or manner as required by said company.” The defendant set opposite his name ten shares. The-trial judge found that the plaintiff, after its organization, accepted the subscription of the defendant, made as aforesaid, as .and for a subscription to it's capital stock, and the defendant was required by it to pay, and did pay accordingly, to the directors thereof ten percent. on the amount so subscribed by him, as aforesaid, in money. Upon the facts and findings above stated, the defendant was held liable.

The contention on the part of the defendant is, that he is not liable, inasmuch as his subscription was not made in either of the model pointed out by the act of 1850, that is to say, by signing the articles of association that were filed with the Secretary of State, or by subscribing in 'the books opened by the directors after the company was organized. ¥e do not think the position is sound. According to the provisions of section 1 of the act of 1850, the persons who have subscribed the articles of association filed, and all persons who shall become stockholders, shall compose the corporation. N o particular mode of becoming a stockholder is pointed out in section 1. Section á provides that subscription books may be opened by the directors, for the purpose of receiving subscriptions, but there is no language in any part of the act indicating that such mode of subscription is intended to be exclusive. It is not provided that a subscription shall be void unless made in such books. The payment of ten per cent, undoubtedly is a prerequisite to a valid subscription, the language of the statute being that “ no subscription shall be received or taken without such payment.” If it had been provided that no subscription should be received unless made in the books opened by the directors, there would have been some warrant for the defendant’s position, but that the legislature has not said, and the courts cannot interpolate it by construction. The appellant’s counsel argues that the whole proceeding is statutory, and that, in order to be valid, it must be had in the way pointed out in the statute. That, we conceive, is true in part only. The statute is the grant of power to create the corporation, and in creating it the statute must be followed strictly; but the corporation being formed, the taking of shares of its capital stock is a matter regulated by the general law of contracts, except so far as the statute has provided otherwise, expressly or by necessary implication. Doubtless it would be convenient and useful to have all subscriptions entered.in a book under the charge of the directors, for many purposes connected with the affairs of the corporation, such as the distribution of stock, making assessments thereon, and enforcing the individual liability of stockholders; and probably considerations of this nature led to the provisions of section 4, referred to; but as between a subscriber and the corporation, it is not essential that his subscription, otherwise valid, should be made in such book. Wo think it would be putting a forced and unwarranted construction upon the language of section 4, to hold, in the absence ■of negative or restrictive words, that it was intended to confine the making of a valid subscription for stock to the mode there pointed out.

This conclusion does not conflict with any adjudication to which our attention has been called. The learned counsel for the appellant cited and relied upon the cases of Erie & N. Y. City R. R. Co. v. Owen (32 Barb., 616), and Troy & Boston R. R. Co. v. Tibbitts (18 Id., 297.) Those cases are not in point. In Owen’s -case, duplicate sets of articles of association, pursuant to the general railroad act of 1850, were circulated for subscription before the corporation was formed,, one of which was subsequently filed in the office of the secretary of state, as required by the first section of the act, and the other was not filed. The defendant was sought to be made liable upon his subscription to the latter, and it was held that he was not liable. There was no question in the case as to the requisites of a valid subscription under section 4, after the ■corporation had been organized, and what was said on that subject, although entitled to the respect due to the opinion of a learned and experienced judge, was obiter dictnmn. Nor is there any analogy between the two cases, so far as the particular question under consideration is concerned. In Owen’s case there was no room for construction, the language of the first section, under which alone the case was decided, being explicit, that the persons who have so subscribed such articles of association,” that is, the articles filed with and indorsed and recorded by the secretary of state, “ and all persons who shall become stockholders in such company, shall be a corporation,” &e. The defendant, not having signed the articles .filed, and -not having become a stockholder by means of anything done before or- after the corporation had an existence, was properly field not to be a member of tbe corporation. The case of Tibbitts, which was cited in Owen’s case, arose under the general railroad act of 1848. Tibbitts was sought to be made liable as a stockholder in a corporation formed under'that act, by reason of his having subscribed a preliminary paper, previous to the organization of the company, by which he agreed to take the amount in capital stock, placed opposite his name, without subsequently affixing his signature to the articles of association, or subscribing to the capital stock in the books opened by the directors or elsewhere. THe act of 1848 contained substantially the same provisions as that of 1850, in respect to what persons should constitute the corporation, and as to the manner of subscribing for stock after the corporation was formed. It was held that the preliminary subscription was a mere provisional act, and had no legal vitality standing alone, and that the defendant was not liable. In that case, also, the question as to what was necessary to constitute a person a stockholder after the formation of the company did not arise. In neither of those cases was there any evidence of an acceptance by the corporation or of a ratification by the defendant of his subscription after the corporation was created. Mr. Justice Wright, who delivered the opinion in the Tibbitts case, adverted to that circumstance as distinguishing the ease from that of Hamilton & Deansville Plank Road Co. v. Rice (7 Barb., 157), where the defendant followed up his subscription, made before the company was created, by an accejrtance of a certificate for the stock, and on that ground was held to be a member of the corporation. The cases cited by the appellant’s counsel are inapplicable to the present case.

Assuming that the defendant’s agreement was not invalid because it was made in a book other than those opened by the directors, the question arises whether it was void for the reason that it was made before the corporation came into existence. There must be a promisee as well as a promisor to constitute a valid contract. As respects this point, the plaintiff’s case, in our opinion, steers clear of any difficulty, if, in fact, the defendant’s subscription was accepted by the corporation after its organization, and was subsequently ratified by the defendant by his paying assessments thereon of ten per cent. In that case, the subscription may be regarded as having taken effect at the time of such acceptance and payment, and so as having been made after the corporation was formed. It has been held frequently that an agreement to take stock in a corporation to be thereafter formed becomes binding on the organization of the corporation, and its acceptance of the agreement (Stanton v. Wilson, 2 Hill, 153; Hamilton & Deansville Plank Road Co. v. Rice, supra; Reformed Protestant Dutch Church v. Brown, 29 Barb., 335; Buffalo & New York City R. R. Co. v. Dudley, 14 N. Y., 336; Buffalo & Pittsburgh R. R. Co. v. Hatch, 20 Id., 157.)

The defendant’s counsel challenges the finding that the subscription was accepted by the company, and claims that there is no-evidence that the memorandum book in which the subscription was made came to the possession of the company, until after the-defendant refused to pay further assessments. The evidence is,, that after the subscriptions were made, the book went into the hands of Mr. Allen, who -was one of the persons who solicited subscriptions, and who was one of the first board of directors chosen by tlio company; that after the company was organized Allen transferred the book to the cashier of the Jamestown Bank, who-thereafter collected assessments of the persons whose names were-subscribed in it, and delivered to the persons so paying, receipts-signed by the secretary of the company, for such moneys, the cashier having been authorized by the secretary to do so; that the-cashier transmitted to the secretary lists of the persons paying and the moneys paid by them, and the secretary copied the names into-the stock ledger and cash book kept by him; and that after the defendant refused to pay his assessments, the book in which he-made his subscription was handed to the president of the company* It appears to have been produced by the plaintiff at the trial. It. was also shown that the defendant paid to the cashier several calls-upon his stock, amounting in all to four hundred dollars, and received from him receipts signed by the secretary of the company,, specifying the amount paid and its percentage upon his stock, corresponding to the number of shares specified in his subscription* There was enough proved, we think, to warrant the finding that, the company accepted the defendant’s subscription. There was sufficient proof of a delivery. It was enough for that purpose, that the defendant allowed the person who procured his subscription to take the book away with him ; that the company was informed of its • contents, and assumed to make assessments upon the stock so subscribed for by him, and that he acquiesced in and paid the assessments. We are of the opinion that the defendant’s subscription, having been accepted by the corporation, and subsequently ratified by him by the payment of ten per cent, thereof and over, was a valid subscription, and thereby he became a stockholder.

Another question requiring a statement of our views is, whether the defendant is released from his liability by the fact that the corporation has abandoned the construction of a part of its road. The articles of association contemplated a road from the city of Buffalo, through the counties of Erie, Cattaraugus and Chautauqua, to a point in the southerly boundary of the latter county, on the line between the States of New York and Pennsylvania. The road has been built ahd is in operation from Buffalo to the village of Jamestown, in the county of Chautauqua, but from that point to the State line, a distance of from eleven to fourteen miles, the court found that its construction has been abandoned. It does not appear that the abandonment was effected by a resolution of the board of directors, or by an alteration of the articles of association, or that it was anything more than a mere cessation or suspension of the work of construction, which may be resumed at any time. The completion of the road was not a condition precedent to the defendant’s liability to pay for his stock. By the terms of his subscription, he was to pay when required by the company. The subscriptions were obtained for the purpose of providing the company with means to construct their road, and for aught that appears, the refusal of the defendant and others to pay their assessments may have compelled the suspension of tlie work. There is still power, under the articles of association, to complete the road. The sale of the road under foreclosure does not interfere to prevent its completion, as all the property, rights, privileges and franchises of the original company covered by the mortgage, passed to the purchaser and to the new corporation formed by them and their associates. (L. 1854, •ch. 282, § 1; L. 1857, eh. 444, § 1.) The cases cited by the appollant’s counsel of a change and extension of route (Macedon & Bristol Plank Road Co. v. Lapham, 18 Barb., 312), or an alteration of charter superadding a new and different business to that originally contemplated (Hartford & New Haven R. R. Co. v. Croswell, 5 Hill, 383), are not in point. In those cases there wa& an attempt to bind the stockholder to an enterprise not covered by his contract. Here, the original undertaking has not been exceeded ; the only complaint is that a comparatively small part of it is unperformed, and for aught that appears, nothing stands in the. way of its full completion whenever the original corporation or its successor shall be in the receipt of sufficient funds for the purpose.

It is also contended in behalf of the appellant that, by reason of the foreclosure sale, the consideration on which his contract rested, has entirety failed, and he is, therefore, released. As a consideration for his subscription, he acquired all the rights of a shareholder and enjoyed them, so long as the corporation continued to operate-the road. His rights were the same, in proportion to the amount, of his stock, as were the rights of others who paid in full, and it is but just that he should contribute, as fully as they did, to the payment of the debts and expenses of the corporation.

The judgment should be affirmed.

The like order should be made in the cases of the same plaintiff against Erie L. Hall and Horace H. Gifford, respectively.

T Ancorr, P. J. and Hardin, J., concurred.

Judgment affirmed in each case.


text:
    JOHN H. ALBRIGHT, Administrator, &c., Respondent, v. JAMES H. RIKER, Trustee, &c., Appellant.

      School district — may agree to build and repair a division fence — such, contract may be made before a tax to pay for it has been voted.

    A. school district has power to authorize its trustee to accept a conveyance of land to be used as a site for a public school, and to agree, as part of the. consideration for the conveyance, that the district shall build and keep in, repair the whole of the division fence between such land and adjoining land of the grantor.
    Such a contract is valid though made before any tax to build or repair the fence has been voted.
    Appeal from a judgment entered upon an order overruling a demurrer to the complaint, and upon the report of a referee, appointed to assess damages herein.

      0. Mason, for the appellant.

      J. H. Ga/mjp, for the respondent.
   Smith, J.:

The action was commenced by the plaintiff’s intestate, Abrahaip Albright, and on his death, the present plaintiff was substituted ip his place. The complaint alleged an agreement by the defendant, to build and keep in repair a division fence between his land and the land of the intestate, and it demanded specific performance. and damages for a breach of the agreement. The complaint, alleged that the said agreement was a part of the consideration of a deed of land executed by the intestate to the defendant, as school district trustee, and was incorporated in the said deed. The deed was annexed to the complaint, and it appealed therefrom that the land was to be used as a public school site only, and that the deed was made and received upon the express condition “ that the title and estate of the grantee and his successor, in the said premises, should cease when the said use should cease, and should thereupon be vested in the grantor, his heirs and assigns; the district to build the fence and keep it in repair.” The complaint alleged that the. ■defendant, as trastee, was duly authorized by a vote of the inhabitants of the district, to enter into the agreement; that the deed was delivered and accepted by a vote of the district, and that the district refused to build the fence, and in consequence thereof the lands of the intestate have remained open.

The principal point urged in support of the demurrer is that the conveyance is a conditional deed or lease, the effect of which is to ¡burden the district with a perpetual expense for the purpose of keeping the division fence in repair, and that the agreement is uLtra vwes. It has been held by the superintendent of public instruction that a school district has no authority by law to take a perpetual lease for the site of a school house, entailing an endless debt and involving the necessity of raising an annual tax, for all time, to pay the rent. (Code of Public Instruction [1868], 367; Id. [1879], 170.) Put the instrument in question is not a lease, it ■does not reserve rent, and the obligation it imposes upon the district does not necessarily subject the district to a yearly tax. It is of the same nature as the obligation which the'law would have imposed on the district, of keeping in repair its portion of the division fence. It differs only in extent. That the district had power to agree to build and keep in repair the whole of the division fence, instead of its proportion under the statute, as a part of the consideration for which the land was deeded, can hardly be ■doubted. It had the same power as any other land owner, in respect to agreeing with the adjoining proprietor for the maintenance of the division fence between their respective lands.

Another point urged is, that the complaint is insufficient, because it does not allege that the district had by vote designated the granted premises as a site for a school-house, and had not voted a tax to build the fence or keep it in repair. We do not think it was necessary to allege those particulars. The action was .on the agreement to build the division fence and keep it in repair, and it was enough to aver that the district had purchased the land and taken a deed of it for a school-house site, and that the trustee was authorized to make the agreement in behalf of the district. • It would hot have been proper pleading to set out the evidence of the facts alleged. The contract was valid, although made before a tax had been voted or raised to meet it. In Williams v. Larkin (3 Den., 114), a .school-house had been purchased before a tax had been voted to pay for it, and a tax subsequently voted for the purpose was held legal.

Some other points were raised by counsel in support of the demurrer, but they do not require comment. The demurrer was properly overruled.

The appeal from the judgment on the report of the referee brings up only-the judgment roll. There is no case annexed to it. There is what purports to be a copy of a paper indorsed “ Minutes of referee,” but there is no evidence that it has been settled or signed as a case, and it cannot be considered bn this appeal. No error ■appears upon the judgment roll. The facts found by the referee support his legal conclusions, and the judgment should be affirmed, with costs.

Talcott, P. J., and Hardin, J., concurred.

Judgment affirmed, with costs.


author: Ssiith, J.:

text:
    GEORGE CARING and others, Appellants, v. HENRY E. RICHMOND, as Sheriff, &c., Respondent.

      ■Chattel mortgage — when it is not rendered invalid by am, agreement authorizing the mortgagor to sell the property.

    A chattel mortgage given by a vendee to his vendor, upon the goods purchased, is not rendered invalid, as a matter of law, by reason, of an oral agreement, entered into at the time of its execution, by which the vendee agrees to manufacture the goods purchased into other articles and sell the same, and when such articles are sold to pay to the mortgagee the cash received upon cash sales, and assign to him the accounts for sales made on credit; the cash and accounts so received being applied, when so paid or assigned, in payment of the debt secured by the mortgage.
    Appeal from a judgment in favor of the defendant, entered on the report of a referee.
    The plaintiffs claimed to recover certain property as the mortgagees of one 'W’estbury. The defendant justified under -certain warrants of attachment issued to him as sheriff, against "Westbury, after the execution of the plaintiffs’ mortgage, and by virtue of which he had levied upon the property in suit, which was then in the possession of Westbury. The referee held that the mortgage was void as against the attachments, and rejaorted in favor of the defendant.

      J. A. Símil, for the appellants.

      J. B. P&rhms, for the respondent.
   Ssiith, J.:

It appeal’s from the opinion of the referee that he held the mortgage void in law, by reason of a certain oral agreement which he found was made between the parties to the mortgage, before and at the time of the execution of the mortgage. The agreement, as found by the referee, was, that Westbury might manufacture the leather and findings sold to him by the plaintiffs (being a large part of the property covered by the mortgage), and sell them; and that, when sold, he should pay over to the plaintiffs the cash received upon cash sales, and assign to the plaintiffs the accounts for sales that were not made for cash, and that such cash and assigned accounts should apply in payment of said chattel mortgage indebtedness, when so paid or assigned, to the amount of such cash payments and accounts. The referee concluded that the arrangement vitiated the mortgage, not for the reason that it authorized the mortgagor to sell on credit, the referee being of the opinion that the mortgagor might be allowed to sell on credit, as the agent of the mortgagees, consistently with good faith, provided the amount of the sales, when made, was to be applied in payment on the mortgage ; but his conclusion was based upon the circumstance that by the agreement, as he interpreted it, the credit sales were not to apply on the mortgage until the mortgagor should assign the bill of the goods sold, and as that necessarily implied that the sales should be in the name of the mortgagor, the referee deduced the result that on credit sales the mortgage debt would not be diminished when a sale was made, but the whole amount would be thrown upon the remaining property, and so the mortgage would continue to protect the mortgaged property until the whole should be sold by the mortgagor, the 'mortgage debt remaining unpaid until the mortgagor should assign the accounts to the mortgagees. The force of the reasoning of the referee depends upon the assumption that the agreement did not require the mortgagor to assign the accounts at the time when the sales were made out of which they arose. But the finding, as we read it, is that the accounts were to be assigned when the sales were made. The language is “ and when sold, should pay over to plaintiffs the cash received upon cash sales, and assign to plaintiffs the accounts of sales that were not made for cash.”

Such finding is supported by the testimony of the mortgagor, and of Caring, one of the mortgagees. The only other testimony on the point is that of the plaintiff W eicher, who said that the accounts for goods sold were to be turned over “ immediately upon selling them, or when I called over there.” The balance of proof is in favor of the position that by the terms of the agreement the accounts were to be transferred immediately, or when the sales were made. Assuming that such was the agreement, we do not think that it necessarily made the mortgage void. At most, the circumstance was one to be considered in determining the question of intent. But it was not considered by the referee in that aspect, he not having found that the mortgage was fraudulent in fact. There were many other circumstances in the case, tending to show fraud in fact, but as that question was not passed upon at the trial, they are of no moment on this appeal.

When this case was before us on appeal from the order denying a motion to vacate the attachments (16 Hun, 458), it was made to appear that the agreement was that the accounts were not to be transferred and applied to the payment of the mortgage until collected. The decision then made has no application to tire facts now shown.

' It has been held that an agreement upon the mortgage of chattels, that the mortgagor shall keep possession and retail the goods-for cash only, paying over the money to the mortgagee, is not fraudulent in law, but presents a question of good faith. (Ford v. Williams, 24 N. Y., 359.) We think the sam"e rule applies to the agreement in this case, as we understand it to be shown by the evidence and found by the referee, to wit, that the mortgagor might sell on credit as well as for cash, but, in case of sales on credit, he was to assign the accounts immediately to the mortgagees.

The judgment should be reversed, and a new trial ordered before another referee, costs to abide event.

Talcott, P. J., concurred; Hardin, J., concurred in result.

Ordered accordingly.


text:
    THE FARMERS’ AND MECHANICS’ NATIONAL BANK OF BUFFALO, Respondent, v. GERHARDT LANG, Appellant.

      Guaranty — construction of it — when a gua/rantor is not released by a renewal of a note— Usury — the proof of, must correspond with the allegations in the pleading— U. 8. li. 8., §5198 — the penalty given by it cannot be,set up as a counterclaim.

    In October, 1874, one Weppner, who was engaged in business in Buffalo as a pork-packer, presented to the plaintiff, in the presence of the defendant, a paper signed by the latter, which, after reciting that Weppner desired to increase his facilities for obtaining money from the plaintiff, and proposed to pledge property in his possession to secure such loans and advances, provided as follows: “ I do hereby promise and guarantee to said bank all such pledges of-property, warehouse receipts, and other vouchers that may from time to time be given by said Frank Weppner as collateral security to said bank for advances, discounts and loans of money, and promise on my part, that the property so transferred and set over to said bank shall not be misapplied or diverted to any other purpose while such loans or advances remain unpaid to said bank, and if any default or misappropriation of the property so pledged shall be made, I do promise and agree to make good to said bank any deficiency, and fully satisfy the stipulations contained in any such receipts or other vouchers therefor, without requiring any notice to me of the several loans and discounts that may be made by said bank to said Weppner.”

      Held, that the defendant was, by the terms of the said instrument, not only bound to make good to the plaintiff any loss or deficiency caused by the misapplication or diversion by Weppner of property pledged to the plaintiff, but that he also undertook that Weppner actually had in his possession' the property which he professed to pledge, and that he could not defend an action brought against him upon the said agreement by showing that the property, for the value of which he was sought to be held, was not in existence at the time the receipts therefor were given to the plaintiff, or that the property described therein was worth much less than the receipts called for.

      Held, further, that the fact that the notes, to secure the payment of which the receipts had been given, had been renewed by the plaintiff, and that the receiptshadbeen taken from the old notes and attached to the new ones, did not affect the defendant’s liability upon his guaranty.
    The defendant set tip in his answer the defense • of usury, alleging that the plaintiff, in discounting the notes, charged interest at the rate of from ten to fourteen per cent. Upon the trial, he offered to prove that they were discounted at the rate of sixteen per cent.

      Held, that the variance was fatal, and that the evidence was properly excluded. <
    The penalty of double the usurious interest paid, given by section 5198 of the U. S. Revised Statutes, to the person paying the same or to his legal representatives, cannot be set up as a counter-claim in an action brought upon the instrument or evidence of debt, but can only be recovered in a penal action brought specially for that purpose.
    Appeal from a judgment of the Superior Court of Buffalo, entered upon the verdict of a jury in favor of the plaintiff, rendered by the direction of the court. After appeal brought, the case was certified to this court, because of the incapacity of two of the judges of the Superior Court to hear the appeal.

      W. H. Gu/rney, for the appellant.
    The gist of this agreement is that the defendant guaranteed that the property pledged by "Weppner to the bank should not be applied to any other purposes than those stated in the instrument. His contract is not operative until it is shown that there was an actual pledge or transfer of property by Weppner to the plaintiff, and a misappropriation of such property by Weppner. ■ {Pratt v. Canton Cotton Co., 51 Miss., 470 ; Walker v. Tiocker, 70 111., 527; New Ilmen Bank v. Mitchell, 15 Conn., 206; 5 Wait’s Actions and Defenses, 189.) The court erred in excluding the offer to prove the plaintiff had extended the time of payment of the notes without the consent of the defendant, the guarantor; so doing discharges,the guarantor. {Colemard v. Lord, 15 Wend., 329; Hunt s. Smith, 17 Id., 176; Wilson v. Roberts, 5 Bosw., 100 ; Leeds v. Bunn, 10 N. Y., 469; 3 Kent’s Comm., 124, and note E; Black v. Everett, L. R.; 1 Q. B. D., 669; /S'. 0., Eng. Rep., 104; Carpenter y. King, 9 Mete., 511; Thornburgh v. Madsen, 33 Iowa, 380; Merchants' Bank v. Rudolf, 5 Neb., 527; 5 Wait’s Actions and Defenses, 227-238; Lang v. Brevard, 3 Strobh., 59; Jones v. Kerr, 8 Ala., 580; Nashville Bank v. Campbell, 7 Yerg., 353; Sibley v. McAllaster, 8 N. EL, 389 ; Villais v. Palmer, 67 111., 204; Clapton v. Spratt, 52 Miss., 281; Burke v. Norman, 7 Bush, [Ky.] 583.) Extension of the time of payment of the notes releases the defendant. The surety is discharged whether or not he is damaged by such extension. (Lime Rock Bank v. Mallet, 34 Me., 547; Gifford y. Allen, 3 Mete., 255; Wright v. Bartlett, 43 N. EL, 548; Peoplés Bank v. Pearsons, 30 Vt., 711; Huffman v. Herburt, 13 Wend., 875; Meyer v. First National Bank, 78 111., 257.) The plaintiff is a national bank and had no authority to take the pledges or warehouse receipts as security for loans of money. (First National Bank of Charlotte v. First National Bank of Baltimore, 2 Otto, 122; Tolmax v. Pell, 3 Seld., 328; First National Bank of Lyons v. Ocean National Bank,- 60 N. Y., 278; Scott v. National Bank of Chester, 72 Penn. St., 471; Loyd v. West Branch Bank, 15 Id., 172; TJtica Lns. Co. y. Scott, 19 Johns., 1; Life & Fire Lns. Co. cbe. v. Mechanics' Fire Ins. Co., 7 Wend., 31; St. Louis v. Russell, 9 Mo., 507; Blair v. Perpetual Ins. Co., 10 Id., 559; Venango National Bank v. Taylor, 56 Penn. St., 15 ; Bank of the United States y. Dandridge, 12 Wheat., 64; Head v. Providence Ins. Co., 2 Cranch, 127; New York Firemen's Lis Co. v. Ely, 2 'Cow., 678-699 ; Mutual Benefit Life Lns. Co. v. Baris, 12 N. Y., 574.) The court, upon the trial, excluded any evidence upon the subject of usury, and refused to allow the defendant anything by reason of such usurious interest. This was error. (National Bank v. Lewis, 75 N. Y., 516, 524; Meech v. Stoner, 19 Id., 26 ; Henderson v. Beers, 6 Bosw., 639 ; McDougall v. Walling, 48 Barb., 369; Lu,cas v. Government National Bank of Pottsville, 78 Penn. St., 228; Thomas- v. Shoemaker, 6 W. & S., 179; Pickett v. Merchant National Bank, 32 Ark., 346; Odmay v. Central National Bank of Baltimore, 47 Md., 217.)

      &pencer 0Union, for the respondent.
   Smith, J.:

In 1874, one Frank Weppner, who was engaged in business in Buffalo as a pork-paeker, and who had been a customer of the plaintiff, applied to the plaintiff to extend his line of discount, and on October 30, in that year, he procured and delivered to the plaintiff, in the presence of the defendant, a written' instrument executed by the defendant, upon which this suit is brought, and of which the following is a copy :

“ Buffalo, October 30, 1874.
Whereas, Frank Weppner is engaged in business in the city of' Buffalo, as porkpacker and dealer in meats, and is desirous of increasing his facilities for obtaining money at the Farmers’ and Mechanics’ National Bank of Buffalo, and for that purpose proposes to pledge the property that may from time to time be in his possession to said bank, as security for discounts, Joans and advances that may be made to him by said bank in the course of his business.
“Now, in consideration of the premises, and of one dollar to me, the undersigned, in hand paid, I do hereby promise and guarantee to said bank all such pledges of property, warehouse receipts and other vouchers that may from time to time be given by said Frank Weppner as collateral security to said bank for advances, discounts and loans of moneys, and promise on my part that the property so transferred and set over to said bank shall not be misapplied or diverted to any other purpose while such loans or advances remain unpaid to said bank, and if any default or misappropriations of the ■property so pledged shall be made, I do promise and agree to make good to said bank any deficiency, and fully satisfy the stipulations contained in any such receipts or other vouchers therefor, without requiring any notice to me of the several loans and discounts .that may be made by said bank to said Weppner. '
(Signed) ' “ GERHARDT LANG.” [l. s.]

Between the time of the execution and delivery of the guaranty and January 30, 1877, when Weppner failed, he procured his notes to he discounted by the plaintiff, and he attached to each note a warehouse receipt signed by him, as collateral security for the payment of the note. Each receipt stated that the property therein described was received in store from ’W’eppner as owner, at his own premises, and was set apart and to be held subject to ■ the order of the plaintiff. By a separate writing underneath each receipt, W’eppner certified that the property therein described had been, paid for, and was unincumbered, and he thereby transferred the title to the same to the said bank. All the notes proved were renewal notes except one. The total amount of notes held by the-plaintiff at the time of the trial was $35,865, and the value of the property described in the warehouse receipts attached to the notes was $32,950. The plaintiff proved a demand of Weppner, and his refusal to deliver the property described in the several receipts, and a subsequent demand of the defendant to make good the deficiency..

The court ordered a verdict in favor of the plaintiff for the value of the property above mentioned, less the sum of $10,923.64, the proceeds of a sale of a portion of said property, which had been received by the plaintiff.

The principal questions in the case relate to the interpretation of the defendant’s guaranty. It is argued in his behalf, that the only •liability incurred by him was to make good any deficiency caused by a misapplication or diversion, on the part of Weppner, of the property pledged to the bank. We do not so understand it. lie guaranteed also the pledges and receipts themselves; that is to say, he undertook that Weppner actually had in his possession the property which he professed to pledge, as well as that be would not misapply or divert it. That being the tenor of his agreement,, many of the exceptions taken in his behalf at the trial fall to the ground. Thus, there was no error in rejecting the defendant’s offers to prove that, in fact, the property described in the warehouse receipts was not in existence when the receipts were given; that the defendant was ignorant that the plaintiff -was taking receipts on property not in the warehouse, or that was not set aside; that the defendant knew nothing of the dealings between the plaintiff and Weppner; that all the property described in the receipts was worth a much less sum than the receipts called for, and that, with the consent of the plaintiff, the property described in the receipts was not separated from Weppner’s other property in the warehouse. The defendant having guaranteed the pledges themselves, the offers referred to.were wholly immaterial. For the same reason the requests to charge that the guaranty did not extend to the receipts, and that the defendant can only be made liable for a misapplication or diversion of pledged property actually in the warehouse, were properly denied.

The defendant insists that the plaintiff, by renewing "Weppner"& notes from time to time, and thereby extending the time of payment of his debt, without the knowledge or consent of the defendant, released the latter from his liability on the guaranty. The claim is not well founded. The defendant was not holden for the payment of the notes or of the debt evidenced by them. His guaranty related merely to the collateral pledges of property, without regard to the time of payment, or the term of credit of the indebtedness which the pledges were intended to secure.

It appeared that in several instances when a note was renewed, the receipt that had been attached to it was attached to the note given in renewal, with the consent of Weppner. Such renewal did not operate as a payment of the debt which discharged the collateral receipt and released the property, and the defendant’s request to charge that such was its effect, was properly refused. The receipt continued in full force, the debt represented by the renewal note being the same as that which the receipt was originally given to secure.

Evidence was offered by the defendant to show wha.t disposition he made of the property which Weppner assigned to him soon after the failure of Weppner. The evidence was properly excluded on the ground that it was immaterial. There was no claim against the defendant by reason of his having received that property, and no ground on which he could be made liable therefor in the action, and the recovery against him- is not based upon the fact of his' receipt of the property. True, the plaintiff had proved the assignment and conveyance made to the defendant by Weppner, but they, were wholly immaterial, and, although the proof , was received against the defendant’s objection, it did not harm him, and for that reason its reception was not error, for which the judgment should be reversed.

The defendant’s offer to show that $11,000 of the property assigned to him by "Weppner had come to the jfiaintiff, was made manifestly for the purpose of showing that he had not used it for his own purposes. This is apparent from the fact that by the same offer it was proposed to show that the rest of the property had been paid to the creditors or was held by defendant as a trustee, for their benefit. But even assuming that the first branch of the offer was made for the purpose of lessening the amount of the plaintiff’s recovery, the entire offer was properly excluded, as the latter part of it, above referred to, was immaterial and irrelevant. Aside from that consideration, its exclusion did not harm the defendant, as the plaintiff had previously shown that he had received as the net proceeds of the assigned property, $10,923.64, which is doubtless the precise sum intended by the offer, and which, with interest to the time of the trial, was allowed to the defendant in malting up the verdict.

The offer to prove certain representations alleged to have been made by the plaintiff’s cashier to the defendant, at the time when he signed the guaranty, as to the nature of the liability which he incurred thereby, was properly excluded. Strictly, the offer was to show nothing more than an opinion expressed by the cashier, in good faith for aught that appears, upon a question, of law. But if the purpose of the offer was to show a fraudulent misrepresentation, made with intent to deceive, there was no such matter set up in the answer.

For the purpose of establishing the defense of usury, the defendant offered to show that each of the notes in suit was discounted by the plaintiff at the rate of 16 per cent, per annum, which the plaintiff received at the times of the several discounts. The testimony was excluded as incompetent and immaterial under the pleadings. The answer setting up usury alleged that the notes were discounted at the rate of 10 to 14 per cent. There is authority for saying that the variance was fatal. (Griggs v. Howe, 31 Barb., 100; S. C., affirmed, 2 Abb. Ct. App. Dec., 291.) The admission in the reply relied on by the defendant, is not enough for his purpose. It does not admit that the claim, if any, arising upon the facts therein stated, had been assigned to the defendant. The claim is for the penalty of double the interest paid, given by section 5198 of the United States Revised Statutes, which prescribes that the party by whom the excessive interest has been paid, or his legal representatives, “ may recover back, in an action in the nature of an action of debt, twice the amount of the interest thus paid,” &e. The section is a transcript of a part of section 30 of chapter 106 of the Laws of Congress, passed at the first session of the XXXVIII. Congress, in June, 1864. Under the section last cited, it was held by the United States Supreme Court that the penalty prescribed thereby in cases where illegal interest has been paid, cannot be set up as. a counter-claim in an action upon the instrument or evidence of debt; the only redress the party making such payment has, is by a penal action, brought specially for that purpose. (Barnet v. Muncie National Bank, 8 N. Y. W. Dig., 378.)

The testimony was properly excluded.

Some other exceptions were taken, which require no special remark. They are without merit.

The judgment should be affirmed.

Taícott, P. J., and Hardin, J., concurred.

Judgment of Superior Court of Buffalo affirmed.