author: Haight, J.

text:
    In the Matter of the Probate of the Will of Milton Budlong, Deceased.

      (Supreme Court, General Term, Fifth Department,

      Filed June 25, 1887.)

    Probate op will—When jury must try question of competency tomase A WILL—Of fraudulent and undue influence.
    In proceedings taken to have an alleged will admitted to probate, it ap peared that, previous to the making of said will, it had been the fixed and determined purpose of the deceased, as declared to his neighbors, friends and minister on numerous occasions "during the last twenty years of his life, that he should never make a will; that the laws of the state made a good enough will for him; that his children were all alike to him. It also appeared that during the last few years of decedent’s life false and damaging statements, accusations and stories had been made and told to him by several members of his family about his daughter, Mrs. Cole, by which he had become unjustly prejudiced against his said daughter. It was shown that lie was of the age of seventy-nine when he made the said will, of a feeble condition of body and mind, and so severely and dangerously sick that his family and attendants were apprehensive that he would not survive the night. The said will was contrary to the dictates of nature and grossly unjust, among other things giving Mrs. Cole only five dollars and his son Isaac, who had been instrumental in producing the false prejudice, two-thirds of his estate, which was worth over $100,000. The surrogate admitted the will to probate. On appeal from his decision: Held, that considering the previous fixed and determined purpose of the decedent never to make a will, and his condition at the time it was made, together with the nature of the will, there was reason to doubt the correctness of the surrogate’s decision upon the question of deception and undue influence. Also, held, that there should be a trial by a jury of the issues (1) whether the decedent was at the time of the execution of the instrument in question of sound and disposing mind and memory; and, (2), whether the same was procured to be executed by fraud, circumvention, undue influence and deceit practiced upon him by Isaac or the other proponents of the will, while there was a loss of natural affection by the decedent for his daughter, Mrs. Cole, occasioned by falsehood, etc,_, of proponents, perpetrated upon him for the purpose of unduly prejudicing him against her.

      Appeal from a decree of the surrogate’s court of Monroe county, admitting the will of Milton Budlong to probate.

      J. A. Stull, for proponents and resp’ts; E. A. Nash, for contestants and app’lts.
   Haight, J.

Milton Budlong died at Perrinton, Monroe county, on the 29th day of April, 1880, at the age of seventy-nine years, leaving him surviving, his widow, Louisa Budlong; and three sons, Isaac Budlong, Schuyler Budlong and Levi S. Budlong; and three daughters, Elvira B. Hunt, Rena Root and Louisa J. Cole, his only heirs-at-law and next of kin. He had been a successful farmer and cattle grazier and left a valuable estate.

The will in question was executed by him on the 4th day of January, 1880, and provides:

First. For the paying of his debts and funeral expenses, and for the support of his wife according to her .station in life, and makes the same a charge upon his real property.

Second. He gives and bequeaths to his daughter Elvira B. Hunt, two houses and lots in the village of Fairport.

Third. He gives and devises to his two sons, Schuyler and Isaac, all his personal and real property which he shall possess at the time of his death; one-third to Schuyler and two-thirds to Isaac. .

Fourth. He gives and bequeaths to his dauther Rena Root, the sum of $5,000.

Fifth. He gives and bequeaths to his daughter Louisa J. Cole, five dollars. -

Sixth. He gives and bequeaths to his son Levi S. Bud-long, $5,000, which he charges upon the portion which he gives to his son Issac.

Lastly. He appoints his three sons executors.

It will be observed that the last three bequests follow the fift and devise of all of his property, real and personal, to is two sons, Schuyler and Isaac.

This will was offered for probate upon the petition of Isaac Budlong, and on the return day, his daughter Louisa J. Cole, filed an answer contesting the probate upon the grounds:

First. Thar the instrument offered for probate was not the last will and testament of her father.

Second. That he was not, at the time of its alleged execution, of sound and disposing mind and memory, and

Third. That the same was procured to be executed by fraud, circumvention, undue influence and deceit, practiced upon him by Isaac Budlong and the other proponents of the will, or other persons acting in their behalf, while there was a loss of natural affection by her father for her, occasioned by the falsehoods, fraud, deceit and evil practice of proponents, perpetrated upon decedent for the purpose of unduly prejudicing him against her.

The surrogate found as facts, that the proposed will was executed by the decedent in due form, and that all the requirements of law had been duly complied with, and that at the time, althougn sick with pneumonia and apprehensive of death, and about seventy-nine years of age, was of sound and disposing mind and memory and competent to make a will.

The surrogate further found that the deceased had been sick from Thursday night, previous to the execution of the will, and that no mention or suggestion had been made by the decedent or any one around him that he should make a will, nor was the subject referred to until after Isaac Bud-dong came and sat up with his father Saturday night.

That during the night he was taken worse, when for the first time during his sickness the subject of the will was mentioned, and that it was then suggested by the decedent himself, and the draftsman was selected and sent for by him, and that he dictated the terms thereof, and that the same was written in accordance therewith. That before executing the will it was read over to him; that during such reading Mrs. Budlong interrupted, saying that the bequest to Levi was not right, and asked him if he was going to give Levi anything but the $5,000, and he replied, “That is all.” That the will was read over to him three times, and was well understood by him, and he declared it was correct and as he wanted it should be. That he recovered from the sickness that afflicted him at the time and was able to attend to the ordinary affairs of the farm and other business until his death, which occurred on the twenty-ninth day of April thereafter. That after his recovery bis attention was called to the will by his wife, and he was asked if it was as he wanted it, and he refused to change it. That on many occasions during the last twenty-five years he expressed himself to the effect that he should never make a will, and stated in substance that the law of the state of New York made a good enough will for him. That his children were all alike to him and that he knew of no difference among them; one was as near as another, and that the girls should have as much as the boys. On other occasions he expressed the contrary intention, declaring that neither George Cole nor his wife should have any of his property.

The surrogate further found as facts that the will is contrary to the dictates of nature and grossly unjust; that the deceased left an estate of one hundred thousand dollars and upwards in value; that the sons were all men of large property which they have acquired for themsélves. That two of the daughters were married women, neither of them having any separate estate, and that Mrs. Hunt was broken in health, with an imbecile son dependent upon her for support, and had an estate of about seven thousand dollars left her by her deceased husband That no explanation is given or reason shown for the change of purpose of decedent towards Mrs. Endlong. That be. had declared to her only four or five years before, at a time when she said to him if there was anything there belonged to her she-wanted to know what it was; that he should never make a will; and at another time he stated to a neighbor that although she was not the mother of his children that she had always been kind to him, and if he was taken away she should have the use of one-third, and he hoped she-would not give it up. That nothing appears subsequently, to show any change of intention until the making of the will, and then no reason for the change appears. That it-was testified to that he said that with Mrs. Root’s extravagant way of living, more would do her no good, and that Mrs. Hunt was a good manager and had enough and did not need more. That there was no evidence tending to show that Mrs. Root’s mode of living had changed during the last twenty years, and no estrangement had occurred between him and his daughters, Mrs. Root or Mrs Hunt. That within two or three days after the will was made, Isaac and Levi entered into an agreement in writing, by which they agreed to divide equally what they were to receive under the will. That in the fall of 1876 he had a dangerous and painful operation performed upon his eyes, and subsequently became nearly blind and feeble in health, and from that time he became dependent upon his sons for the transaction of his business.

That in the spring of 1877, Mrs. Cole removed with her husband to a farm in Livingston county, N. Y., and from that-time to the time of her father’s death, she had little opportunity to see or visit him, and that the transaction of the business of the decedent by his sons, gave them occasion to visit him frequently, and their intercourse increased from what it had been in previous years. That decedent opposed his daughter’s marriage to Mr. Cole and was greatly displeased thereat, although Cole was of good family, but within a year or two thereafter he commenced loaning money to Cole, as he had done to his sons, to use in his business. That when they removed to Michigan, he entrusted Cole with his business in that state. That soon after their removal he took measures to get them back. He first contemplated the purchase of the Eldridge farm near his home with the view of letting Cole have it, and requested them by letter not to purchase land in Michigan until after he found whether he could purchase the Eldridge farm. That when Mrs. Cole was sick in 1876, he manifested anxiety and regard for her, and assured her that if she should not live her children should have her share of his estate, and in the spring of 1879, he said to Schuyler that he was glad that he was assisting Mr. Cole in his business by endorsing for him.

The surrogate further found that one of the reasons the decedent had for disinheriting Mrs. Cole, was the belief that she had turned against her brother Levi to assist his wife in preventing Levi from getting a divorce from her. That Levi had married a domestic in the family without the knowledge of his father until after it had occurred. That when he heard of it he suffered great agony and grief. That he sent Levi off to Michigan, and at first refused to be reconciled to him, but afterwards took him back on the Biver farm. In August,. 1879, Levi separated from his wife and went to Clarksville, Iowa, to the residence of Mrs. Boot, and there commenced an action for a divorce upon the ground of cruel and inhuman treatment, and that it was dangerous for him to live with her. That she followed him to Iowa and' defended the action, and Levi failed to obtain a divorce. That in a letter by Levi to Mrs Hunt, in October, 1879, while in Iowa, and which he caused to be handed to and read to his father, he charged Mrs. Cole with having taken a foremost position to drag his name in the dust, and that she stooped to low vile slanders to accomplish her undertaking, and that she had visited all the Irish shanties, and told the worst falsehoods her mind could imagine to make it appear as bad as possible. That she was the main cause of threatening his life, so that he dared not stay at his own house, and that she had sent his wife, who he termed that “ defraying viper,” after him. That he had no doubt that his wife and others would swear so as to make him a great deal of trouble, and prolong the case so that it never would be settled while he lived, and that it would certainly take all of his property and make him a pauper, and when that is accomplished, he wrote, I suppose Lida (meaning Mrs. Cole), will be satisfied with her undertaking.

The surrogate further found that there was no proof that Levi heard anything in regard to Mrs. Cole’s interference in his affairs, or had in any manner aided or assisted his wife, except that in a letter from Isaac to Mrs. Cole, bearing date September 19, 1879, Isaac says that Levi had heard that Mrs. Cole had been at his house several times since he went away. That Mrs; Cole went to the city the day that Rose (Levi’s wife) went west, and that Rose counseled with Judge Nash, and so Levi concludes that “you aided and assisted her to persecute him.”, In reply to Isaac’s letter, Mrs, Cole wrote Levi stating to him that she had not been at his house since he left.

She also stated that she saw Rose on the cars the day she started for the west, but did not know where she was going; that Rose deceived her by stating that she was going to Perrinton; that she had never known of Rose counseling with Judge Nash. She also had done nothing to assist Rose against him, and that all she had done was in his interest; that she had endeavored to persuade Rose to consent to a separation; that after receiving the letter from Mrs. Cole, Levi returned to New York to visit his father, but did not retract anything in his letter, but supported them by the false statement that his wife had instructions how to reach' him in Iowa on a paper in Mrs. Cole’s handwriting; that she had gone in with the lawyers against him, and that he felt that she was persecuting him; that the decedent conversed wdth Schuyler, Isaac and Levi in regard to it, and said that he believed it was so; and that while he lived he never ceased to feel bad because of her joining with Rose and the lawyers against Levi.

The surrogate further found as facts that the charges were made by Levi against Mrs. Cole, not with the intention to prejudice his father in the distribution of his estate, nor with reference to influencing him in any manner in the making of his will or the will in question; that Levi believed these charges to be true. He further found that during the sickness of the decedent some one of his sons was constantly in attendance, assisting him, and in the management of the affairs of the household, and a portion of the time his daughters, Mrs. Hunt and Mrs. Root, were present; that on Saturday after the making of the will Mrs. Cole came to see her father, and was informed by Mrs. Budlong that it would not be best for her to see him; that he had said that he could not see her; that it would kill him. The reason was given that she had joined with the lawyers against his “ darling son, darling boy/" and he could not see her in his present condition; that at this time Levi, Mrs. Root, Mrs. Hunt and Schuyler were all in their father’s house; the decedent was not informed of Mrs. Cole’s visit at that time; that when Mrs. Cole stood in the hall, about leaving the house, Schuyler and his father were engaged in conversation about the cattle and cattle market so loud that their voices could be heard in the hall; that neither Schuyler, Levi nor Mrs. Hunt saw Mrs. Cole, nor did Mrs. Cole see her father; that the fact that a wflll had been made was concealed from the daughter, and the attending physician was requested not to inform Mrs. Cole of the will, and that he and Isaac resorted to deceit to prevent the sisters from learning the fact.

The surrogate further found that the decedent at the time of the making of the will was not in any condition to be easily influenced or defrauded into making any will contrary to his deliberate judgment, and that he could not have been unduly influenced, except by deception and falsehood, and as .a conclusion of law that the will should be admitted to probate.

We have thus referred to the decision of the surrogate in extenso for the reason that there are but few exceptions, and the main facts in the case are established by it. The contestants excepted to the finding that he was of sound and disposing mind and memory and was competent to make the will in question, and at the time of the making of the will he was not in a condition to be easily influenced or defrauded into the making of any will contrary to his deliberate judgment. They further excepted to the finding that the charges were made by Levi against Mrs. Cole, not with the intention to prejudice his father in the distribution of his estate, nor in reference to influencing him in any manner in the making of his will, and that Levi believed the charges to be true.

As to the question whether he was of sound and disposing mind and memory at the time of making the will we shall have but little to say. ’ The evidence tends to show that he was then about seventy-nine years of age, very sick with pneumonia, and apprehensive of death. That at times he had been delirious, and in the night grew worse, and had a sinking spell, so that his family was much alarmed and sent for the doctor and the lawyer in the night time. That for the last two or three years, and ever since he had the operation performed upon his eyes, he had changed from his former self, becoming more irritable and nervous and changeable in mind, so that in the same conversation he would assert first one way and then another. That he grew physically weak, and would wander from his home into the lot and get lost, so that his folks would have to go for him and bring him back. That formerly he was a man of strong, resolute will and self-reliant in the exercise of his judgment, but towards the last he was easily influenced by the persons with whom he last conversed sc that after their departure he would constantly refer to what they had said and done or advised. He often referred to an attempt of a neighbor’s son to have the property of his father taken from him because of his incompetency to care for it, and then would question his hired- men if he was capable of taking care of his property, and how he would swear as to his competency in case there should be any effort made to take his property from him. Said that the boys were not satisfied with what he was doing, and wanted to put him in the insane asylum. That they could not get hold of his property quick enough.

There was other evidence on the part of the proponents tending to show that whilst he was physically weak and dependent upon his sons to transact his business that his mind was not impaired, and that he was capable of making a will. So that, upon this branch of the case, a fair question of fact was presented for the determination of the surrogate with which we should not be inclined to interfere were we satisfied in reference to his conclusions upon the other questions presented.

We are next called upon to consider whether the will was procured to be executed by fraud, circumvention, undue influence and deceit practiced upon him. As we have seen, the surrogate has found that the will is contrary to the dictates of nature and grossly unjust, and that the real reason for disinheriting Mrs. Cole was that she had turned against her brother Levi to assist his wife in preventing Levi from getting a divorce; that Levi had written a letter to Mrs. Hunt accusing Mrs. Cole of this, and charging her with having taken a foremost position to drag his name .in the dust, and that she had stooped to low, vile slanders to accomplish her undertaking; that she had visited all the Irish shanties and told the worst falsehoods her mind could imagine to make it appear as bad as possible; that she was the main cause of threatening his fife so that he dared not stay in his own house; that she had sent his wife, that “destroying viper,” after him, and had wound up by requesting that she should show the letter to his father; that there was no truth in the charges, and no proof that Levi had ever heard any such thing of his sister, and that when he returned to New York he visited his father and did not retract any of the charges made in his letter, but supported them by the further false statement made to his father that his wife had instructions how to reach him in Iowa on a paper in Mrs. Cole’s handwriting; that the father believed him, and yet the surrogate has found that the charges were not made by Levi with the intention to prejudice his father against her, or to influence him in the making of his will, and that he believed the charges to be true.

We confess we cannot well reconcile these findings. If the charges were not made to the father for the purpose of prejudicing him against his daughter, why were they made to him at all ? He was an old, feeble man in the seventy-ninth year of his age, in the last year of his life, irritable and nervous, and it was entirely unnecessary to have burdened lhs mind with the pretended misconduct of a child, and yet Levi, in his first letter to Mrs. Hunt making the charge, is careful to request that the letter be shown to and read over to his father.

Again, if the charges were made without his ever having heard anything of the kind in reference to his sister, what right had he to believe them to be true, or to falsly charge upon his sister the giving to his wife of directions to find him in Iowa ? But it is urged on behalf of the proponents that the findings of the surrogate are too favorable to the contestants in this regard, and, under the provisions of section 2586 of the Code of Civil Procedure, we are called upon to examine the whole evidence and are given the same power to decide the questions of fact which the surrogate had.

We have consequently carefully examined the entire evidence appearing in the appeal book and have reached the conclusion that the findings are not more favorable to the contestants than they should be. It appears that after Mr. and Mrs. Cole removed to Michigan that the decedent was quite anxious to get them back, and much concern and affection was expressed by Mm for his daughter, Mrs. Cole, in the letters that were written by his direction at that time. They were finally induced to give up their farm in Michigan and return. They were placed upon the Eiver farm, so-called, contaming about 1,000 acres, and a farm across the river containing about 400 acres. Cole was employed to superintend these farms upon a salary of $500 per year. So far as appears from the evidence things appear to have passed pleasantly for two or three years, when a difficulty appears to have occurred between Cole and Isaac. Isaac had purchased a lot of cattle and shipped-them to his home. They were taken from the cars and temporarily turned in a yard upon the Eiver farm which Cole was superintending. During the night the fence was broken down and the cattle became mixed with the cattle owned by Mr. Budlong. The next morning Cole separated the two herds of cattle, and subsequently a son of Isaac drove the herd to Ms own farm. Shortly after this Isaac called on Cole and accused him of stealing some of his cattle. Angry words followed, in which it is contended, on the one side, that Isaac called Cole, his wife and children vile names, and, on the other side, that Cole threatened to shoot Isaac if he did not leave the place. The evidence as to what took place is conflicting. Cole demes the charge that he threatened to shoot, but if we take the testimony of Isaac’s witnesses in reference to the transaction it shows that Isaac was the first and chief aggresssor in the matter, and the words that followed were spoken in the heat of passion. Cole-had no motive to deal unjustly as between his father-in-law and Isaac in separating the cattle. Two large herds had, without fault on his part, become mixed and it is not-surprising that, in separating strange cattle, some mistakes, should have been made.

There was no reason, therefore, for Isaac to accuse his brother-in-law of stealing his cattle. From this time on the trouble in this family seems to have thickened. Isaac appears to have been jealous in complaining of Cole and his wife, not only to his father, but to his brothers and sisters. Mrs. Cole was accused of meddling in reference to the Wadsworth farm, which had been leased to Mr. Bud-long for many years, and preventing the agent from renting it to him longer. Mr. Budlong stated that she had, and when asked how he knew, stated that his sons had told him so, and yet when Allen, the agent for the Wadsworth estate, is put upon the stand he testified that-she had never spoken with him upon the subject. Letters were written and read to Mr. Budlong charging Cole with drunkenness and his employees upon the farm of drinking; complaint was made in reference to his management of the-cattle and the lots in which he turned them for pasture. The next year Cole’s salary was cut down from five hundred to three hundred dollars. Hot only did the sons, but-their sons, become accusers and diligently report to Mr. Budlong every circumstance which would tend to prejudice-him against Cole. After Levi went to procure a divorce from his wife, Isaac appears to have championed his-charges against Mrs. Cole. He writes her stating what Levi had heard in reference to her conduct, and states that he hinted at occurrences that took place long ago; that he would not write what he said, but that Levi had given him to understand that if Mrs. Cole did not let him alone he would expose things that made him shudder to contemplate. Then in his postcript to the letter he states that-he never heard before of those dark things that Levi alludes to, and states it is in your power to squelch it- or make them public. And yet in the letter which Levi had written charging Mrs. Cole with having dragged his name in the dust and taken sides with his wife to‘'prevent his obtaining a divorce no such charge appears. On the trial, Isaac becomes the chief witness, attempting to show that Mrs. Cole, years before her marriage, on an occasion when she visited him in Hew York, was absent in the company of a young man by the name of Rice two or three days. The evidence, in our minds, satisfactorily explains- and-fully repels this charge. Hot only this, but he appears to have applied to his brother Schuyler’s wife and procured her to write Mrs. Cole advising her that she could have no further communication with her on account of the course she had pursued. In reference to the making of the will, it appears^ that Isaac had a talk with his father on this subject a few days before he was taken sick. That nothing had been said upon the subject after he was taken sick until Isaac arrived. He sat up with him that night until he grew worse. The only evidence as to what took place between Isaac and his father on this occasion is necessarily limited to the testimony of Isaac, who disclaims any mention of the subject himself until after his father had been taken worse and the family called up and himself sent for a draughtsman. It, however, appears that by the terms of the will Isaac was given two-thirds of all the real and personal property and Schuyler one-third, and that when the will was being read that Mrs. Budlong interrupted and inquired of her husband if $5,000 was all that he was going to leave Levi, and he remarked that it was. That thereupon Isaac beckoned his step-mother out of the room and gave her to understand that it was understood that he was to divide with Levi.

We are hardly able to reconcile this circumstance with the theory that nothing had been said between him and his father upon the subject. The evidence tends to show that Levi possessed the confidence and affection of his father; that the father called him his darling son and was incensed at any interference with his son’s attempt to procure a divorce and that he made him one of the executors of his will. We can hardly believe, that it was the intention of the father to substantially disinherit him, or cut him off with $5,000, and yet this would appear to be his intention unless he had had a previous understanding with Isaac to the effect that he was to divide with Levi.

In the case of Tyler v. Gardiner (35 N. Y., 559), it was held, that when it appears from the proof that the will was made by a testatrix on her deathbed, that her faculties were enfeebled by long and wasting disease; that she had been for a considerable period under the influence of the principal beneficiary; that during this period she had been imbued with causeless antipathy to her only son and had been induced to expel him from her house and pursue him with unmerited accusations; that the will originated with the chief beneficiary, who framed the written instructions, engaged the counsel and superintended the execution; that it involved a complete revolution of intention and an entire departure from the previous testamentary disposition; that it was made under mistaken "impressions of fact recently imbibed and vitally affecting its provisions; these facts coupled with gross inequality and apparent injustice in disposing of the property raised a presumption of undue influence.

In the case of McLaughlin v. McDevitt (63 N. Y., 213, 217), the rule was stated as follows: “A decedent has of course a right to change, radically and arbitrarily, the manner of disposing of his property and in the absence of fraud the courts will sustain his action in this respect, but when according to the ordinary motives which operate upon men we find an unnatural change made in a sick man’s will, and one apparently contrary to his previous, fixed and determined purpose, it is the duty of the courts to scrutinize closely the circumstances with' the view of ascertaining whether the act was free, voluntary and intelligent.” See, also, Sears v. Shafer, 6 N. Y., 268.

When we come to take into considération the previous, fixed and determined purpose of Mr. Burlong as declared to his neighbors, friends and minister, on numerous occasions during the last twenty years of his life, to the effect that he should never make a will; that the laws of the state made a good enough will for him; that his children were all alike to him; in connection with the recent facts disclosed by which he had become unjustly prejudiced against his daughter, Mrs. Cole; with his advanced age, feeble contion of body and mind; his severe and dangerous sickness, in which his family and attendants were apprehensive that he would not survive the night, and the fact that the will is contrary to the dictates of nature and grossly unjust, lead us to doubt the correctnesss of the surrogate’s conclusion, upon the question of deception and undue influence.

The decree should, therefore, be reversed and a new trial by jury at the Monroe circuit ordered of the issues:

First. Was Milton Budlong at the time of the execution of the instrument in question of sound and disposing mind and memory.

Second. Was the same procured, to be executed, by fraud, circumvention, undue influence and deceit practiced upon him by Isaac Budlong or the other proponents of the will, or persons acting in their behalf, while there was a loss of natural affection by the decedent for his daughter, Mrs. Cole, occasioned by the falseholds, fraud, deceit and evil practices of proponents perpetrated upon him for the purpose of unduly prejudicing him against her.

That the costs of this appeal abide the final award of costs.

Smith, P. J., and Bradley, J., concur.


source: Caselaw Access Project

author: Bradley, J.

license: Public Domain

text:
    Thomas F. Stark, App’lt, v. Asa T. Soule, Resp’t.

      (Supreme Court, General Term, Fifth Department,

      Filed June 25, 1887)

    1. Fraud—Representations as to value—When they form an element OF FRAUD.
    The mere statement or representation of value of property is usually a matter of opinion, and as such furnishes no foundation for an action of fraud, but when circumstances of fact are referred to by the party making such representations in support of his statement of value, and known by him to be false, he may be chargeable with fraud.

      2. Corporations—Directors—May buy stock of stockholders—Do not IN THAT OCCUPY THE RELATION OF TRUSTEES.
    A director of a corporation in dealing with the stockholders, either by purchase or sale of the stock which has been duly issued, is not as such acting in a fiduciary character as trustee or within the duties of such relations, and the rule governing and qualifying the effect of transactions between a trustee and cestui que trust do not necessarily apply. There is no legal embarassment in the way of the purchase by a director from a person holding it of stock Of the corporation towards which he sustains such relation.
    8. Witness—Credibility of—When a question for the jury.
    Where in an action on fraud the allegations of the representations and concealment which it is claimed constitute the fraud rested mainly in the testimony of the plaintiff ; Meld, that by reason of such relation to the action, the question of the credibility of his evidence was properly a question for the trial court.
    4. Judgment—Reversal of—What calls for.
    The treatment of a question of fact as though it were a question of law, and the disposition of a case on that theory is an error calling for a reversal of judgment.
    Appeal from judgment entered on decision of Monroe special term, dismissing the complaint on its merits.

      A. J. Abbott, for app’lt; J. Welling, for resp’t.
   Bradley, J.

The action is founded on alleged fraud, and its purpose is to rescind an agreement made between the plaintiff and one Hess of the one part, and the defendant of the other part, of date July 1, 1880, whereby the defendant agreed to advance to them $15,000, and they agreed to obtain the title to a certain tract of 25,000 acres of land in the state of Kentucky, and there organize a corporate company and make the land and its appurtenances the basis of $100,000, to be represented by stock to that amount, to set apart $1,000,000 of such stock for working capital, and transfer to the defendant $150,000 of the capital stock at par value, and they also agreed to transfer to the defendant all the stock and dividends thereon (if any) of the Hop Bitters Manufacturing Company, formerly owned by Wade or Stillwell, and by Sisson Torrey and Young, and all claims of the plaintiff and Hess in the Hop Bitters Manufacturing Company. And the value of such stock of the last mentioned company was mutually agreed upon and fixed at one dollar. This agreement was performed by the parties to it. And the company organized in Kentucky was known as the “Tug River Coal and Salt Company.” The plaintiff alleges that he and Hess were by fraud on the part of the defendant induced to transfer to him the stock referred to of the Hop Bitters Manufacturing Company. This was a corporation of this state doing its business at the city of Rochester.

The defendant was then, and had been for several years, its president and managing officer. The alleged fraud consisted in the concealment from them of the value of the stock, and in representing it to have no value. The plaintiff took from Hess an assignment of his interest of the subject and cause of action, and the relief in view is the rescission of the agreement of July 1, 1880, and the surrender and restoration of the money and property advanced and transferred in its performance by the parties to it as of the time of such performance by them respectively. The allegations of the complaint essential to the cause of action alleged are put in issue by the defendant’s answer. , And the plaintiff gives evidence tending to prove that he and Hess were interested in the title to 198^ shares of $100-each, of the capital stock of the Hop Bitters Company which was embraced in and transferred to the defendant pursuant to such agreement; that the defendant desired to-have its transfer made to him by the agreement, to do-which the plaintiff at first declined, and that the defendant, said to him that the stock might as well be thrown in; that it was worthless, the company was in debt and not making anything; that he owned the patent right, or the most of it, covering the formula for the preparation of the-hop hitters, and that the company was paying him a. royalty; that the plaintiff was ignorant of the financial situation of the company and its business, and was induced by such representations made by the defendant and the concealment from them by the defendant of its true condition to include the transfer of the stock as part of the-agreement, and its performance in that respect; and that-he did not discover the untruthfulness of the defendant’s, representations in that respect until in the year 1883, when he-received information that the Hop Bitters Company stock, was very valuable when the agreement was made, and had so continued; and thereupon he offered to restore to the-defendant what had been advanced by him under agreement, and demanded its rescission and surrender of the-stock which the defendant had taken by its performance, and the latter having refused was subjected to this action. Hess also says that a while prior to the time the agreement, was made the defendant represented to him that the stock. in question of the Hop Bitters Company had no value, but so far as he had any interest in the stock it was held as collateral security for the indebtednes of the plaintiff to him. The evidence justified the inference that this stock was valuable at the time the agreement was made, and that the defendant, in view of his relation to the company and its business, knew it when it is said he made such representations, and that he was desirous of obtaining it because it was valuable. The mere statement or representation of value of property is usually a matter of opinion, and, as such, furnishes no foundation for an action of fraud, but when circumstances of fact are referred to by the party making such representation in .support of his statement of value, and known by him to be false, he may be chargeable with fraud. Weidner v. Phillips, 39 Hun, 1, and cases there cited.

The defendant having been the president of this company and its principal manager since 1873, might be presumed familiar with its business and financial condition upon which the value of the stock depended. And his statements made to the plaintiff as testified to by the latter, may have permitted the conclusion of an intent on his part to deceive him in that respect with a view to obtaining the stock at a price much below its value. Simar v. Canaday, 53 N. Y., 298; Chrysler v. Canaday, 90 id., 272.

And it is contended by the learned counsel for the plaintiff that the mere concealment by the defendant from the plaintiff and Hess of the value of the stock was sufficient to charge him with fraud for the purposes of the relief, although no other means m ere used by him to mislead them, because he had to them the relation of trustee. We are not prepared to adopt that proposition to the extent stated. As a director and officer of the corporation, he was a trustee of it, and so far represented the interests of the stockholders in respect to the corporate property and rights of the company, and in that respect he had the disabilities of a trustee, and could not operate or deal in its property for his own advantage, or its or their prejudice, but the stock was not the property of the corporation, and in dealing in that with the stockholders either by purchase or sale of the stock, which had been duly issued, a director as such is not acting in a fiduciary character as trustee, or within the duties of such relation, and the rule governing and qualifying the effect of transactions between a trustee and cestui que trust does not necessarily apply. And when the expression is used by the writers, text and judicial, to the effect that the directors of a corporation are trustees of the stocxholders, it has reference only to the relations of the former to it, and the duties which that relation imposes upon them for the common benefit of the stockholders. There is therefore no legal embarrassment in the way of the purchase by a director of stock from a person holding it, of the corporation with which such relations exist. Although in view of his superior means of knowledge of its. value, slight circumstances showing a purpose, and which might have the effect to mislead the seller, resulting in a purchase much below value, might afford occasion for redress.

While a view might be taken of the evidence which would if adopted lead to the conclusion that the plaintiff was entitled to relief, it does not require that result. The representations and concealment claimed to constitute fraud rest mainly in the testimony of the plaintiff, and by reason of such relation to the action, the question of the credibility of his evidence was properly for the determination of the trial court. Dean v. Van Nostrand, 23 N. Y. W. Dig., 97. It appears that the Hop Bitters Company was-organized through the instrumentality of the plaintiff in 1873, and that he was its first president; and there is evidence tending to prove that he was somewhat familiar with the manner and cost of manufacturing the bitters; that, after the defendant became the president of the company the plaintiff was frequently at its place of business, and had the opportunity which he to some extent made available, by observation and inquiry, to ascertain something of the extent of the business done prior and up to the time of making the agreement in question, and that he had some-appreciation of the then and prospective financial condition of the company. And further, there is upon the evidence an opportunity for inference that the leading thing which he had in view at the time of the negotiation for and making the agreement was the Kentucky project with the expectation of large financial reults from the contemplated corporate organization there, and that its supposed importance was the inducement to surrender his interest in the stock in question to enable him to obtain the advance desired from the defendant for its accomplishment, rather than any representation or concealment by the latter of its value.

The conclusion was also permitted that the plaintiff s, title to the stock, or some of it, was not free from complication. None of it was held by him, or apparently in his name as owner. The Wade ninety-eight shares were represented by a certificate to Stowell, but was evidently held subject to the order of and right of transfer by Hess, to secure a debt owing him by the plaintiff. And it seems that the defendant asserted that the original purchase was made for him by the plaintiff of Wade, but the form of the transfer imports to the contrary. The Sisson, Torrey and Smith ninety-eight and a half shares the defendant claimed to own, and none of those other parties held any certificates for them. Those shares, it seems, had been the subject of actions by those parties against the defendant in 1879, and the latter was represented in the actions by the plaintiff as his attorney, which actions the plaintiff says were terminated by his purchase from those plaintiffs of their interests in the stock they were there seeking to recover of the defendant. These are only circumstances which might to a greater or less extent be considered as bearing merely upon the question of the inducement which the plaintiff had to part with his interest to the defendant in the stock. In respect to the plaintiff’s view of the value of the stock, it also appears that prior to the purchase by him of the Wade stock, in 1879, Hess had security for the debt due him upon some real estate, and was requested- to convey that for the purpose of purchasing of Wade such stock, and to take that as such security, and with a view to that, it appears that the plaintiff advised him that the stock ought to be worth something, and was better than the security he then had. And the evidence tends to show that he was quite diligent in 1879 in his effort to get the stock which he claims he owned at the time of the agreement by which he and Hess undertook to make the transfer to the defendant of the Wade stock and “the pretended claim to stock formerly claimed to be owned by John Sis-son, Samuel H. Torrey and Young W. Smith.”

It is unnecessary to make further reference to the circumstances which the evidence tends to prove in support of the contention of the respective parties. The conclusion is that it presented a question of fact for the determination of the trial court whether or not the plaintiff was entitled to relief.

It is contended on the part of the plaintiff, and we are inclined to think, that the case was not so treated by the court, but that it was there held as matter of law that whatever view which could be taken of the evidence, its weight or credibility, it was insufficient to support a recovery. There was no evidence given in the defense. When the evidence on the part of the plaintiff closed, the defendant moved for dismissal of the complaint upon the merits. The motion was granted and the plaintiff excepted. And thereupon the written decision of the court was made, finding, “That the allegations of fraud, fraudulent misrepresentations and fraudulent concealments alleged in the complaint and those that the plaintiff or said Hess was deceived and defrauded thereby are unsupported by the evidence,” and directing judgment of dismissal of the complaint on the merits. The fact that the motion to dismiss was made and disposed of as it was, and the form given to the finding before referred to, tend to show that the view of the trial court was that there was no question of fact arising upon the evidence for consideration, which -apparent situation is not overcome by the conclusion of dismissal on the merits. Wylie v. Marine Bank, 61 N. Y., 415-417.

If the view taken of the evidence is correct, the question for the court was one of fact, and it should have been treated and disposed of as such rather than as a question of law. Casten v. Decker, 3 N. Y. State Rep., 429. And for that reason the judgment should be reversed and a new trial granted, costs to abide the event.

Smith, P. J., concurs; Haight, J., not voting.


text:
    Matter of the Application of the Rochester, Hornellsville and Lackawanna Railway Co., Resp’t, to Acquire Lands of Francis G. Babcock, The N. Y., L. E. and W. R. R. Co., App’lts.

      (Supreme Court, General Term, Fifth Department,

      Filed June 25, 1887.)

    1. .Railroad—Acquiring land—Petition—Jurisdiction of court—Power to amend.
    A railroad company, for the purpose of acquiring certain land, presented its petition to the court praying for the appointment of commissioners. The petition stated the names of the persons who owned, had or claimed to own or have estates or interests in the real estate sought to he acquired, but neglected to state the residence of such persons. When the matter was brought on for hearing at the special term, an order was made permitting the petitioner to amend its petition in this regard. The persons so interested had appeared by attorneys upon the hearing. Held, that their appearance gave the court jurisdiction, notwithstanding the defect in the petition, without an amendment; that the amendment was one which the court had power to make in its discretion, and that the making of it did not tend to prejudice the rights of another railroad company which had leased the land in question.
    2. Same—Subscription for stock—Ultra vires—When authority presumed—Burthen of proof.
    Among those subscribing to the stock necessary to enable the railroad company to make the application was the Central Construction Company of New Jersey. The treasurer of said company testified that he was authorized to subscribe for the stock in question. Held, that in the absence of evidence to the contrary the court must assume that it was authorized to subscribe for, take and hold stock in a railroad company; that the burthen of showing that it was not, was upon the party disputing the authority. Milbank v. H. T., L. IB. and W. B. B. Co., 64 How., 20, distinguished.
    3. Evidence—Motion to strike out for non-production of books.
    A motion to strike out the evidence of a witness because of the non-production of books, cannot avail where the evidence as to the contents of the books was called out by the party making the motion.
    Appeal from an order of the Monroe special term confirming the report of a referee and appointing commissioners of appraisal.

      Frank E. Smith, for resp’t; James H. Stevens, Jr., for app’lts, the N. Y,. L, E. and W. R. R. Co.; E. F. Babcock, for the app’lt. land owners.
   Haight, J.

The petitioner is a railroad corporation organized under the laws of the state, and seeks to acquire the land in question for the purpose of constructing its road. For that purpose it presented its petition to the court, praying for the appointment of commissioners. The petition stated the names of the persons who own, or have, or claim to own or have, estates or interests in the real estate sought to be acquired, but neglected to state the residence of such persons. When the matter was brought on for hearing at the special terin, an order was made permitting the petitioner to amend its petition in this regard so as to state their places of residence. The persons so interested had appeared by atturneys upon the hearing, and this was doubtless sufficient to give the court jurisdiction, notwithstanding the defect in the petition, without an amendment; but the amendment was one which the court, had the power to make in its discretion, and the making of it did not tend to prejudice the rights of the appellants. In the Matter of the Prospect Park and Coney Island Railroad Company, etc., 67 N. Y., 371-378.

It is next claimed that the petitioner has not complied with all the prerequisites required by the statute in order to confer jurisdiction upon the court to appoint commissioners. The petitioner was duly incorporated, as appears by the certified copy of the articles of association produced in evidence, signed by twenty-six persons, who subscribed for the capital stock of the company to an amount aggregating $32,300. The length of the petitioner’s proposed road is fifteen miles four hundred feet.

The Central Construction Company of New Jersey subscribed for 1776 shares, aggregating $177,600, which, added to the sum subscribed by the incorporators, amounts to $209,900. The statute requires that $10,000 for each mile of the proposed road to be constructed shall be in good faith subscribed to the capital stock, and ten per cent thereof paid in. The road being but fifteen miles four hundred feet in length, it will be observed that the capital stock subscribed far exceeds the sum required, and that there has been a compliance with the statute in this regard; but it is contended that the Central Construction Company of New Jersey had no power to subscribe for the stock; that its subscription is ultra vires and void; but a careful reading of the appeal book fails to disclose any evidence tending to support this contention. It does not clearly appear whether the Central Construction Company is a corporation or a copartnership, or what it is. It does appear that it is a company organized under the laws of New Jersey for the purpose of constructing railroads, and the treasurer testified that he was authorized to subscribe for the stock in question. This, doubtless, made óut a prima facie case, for, in the absence of evidence to the contrary, we cannot assume that it was not authorized to subscribe for, take and hold stock in a railroad company. The Union Hotel Company v. Hesse, 79 N. Y., 544.

The case of Millbank v. New York, Lake Erie and Western Railroad Company (64 Howard, 20), is not in conflict with this view, for in that case it was a competing railroad company organized under the railroad laws of this state that had purchased and acquired the stock in another railroad. In this case it was held that a railroad company was not authorized by its charter to purchase stock in another company unless it acquired it in the payment of some debt or claim. But this has no application to a construction company, for in many cases these companies are paid in part for the work performed in constructing the railroad out of the capital stock. For aught that appears this company may have been specially authorized and empowered to subscribe for stock in railroad corporations. At least we are of the opinion that the burthen of showing that it was not was thrown upon the appellants. In re N. Y., L. E. and W. R. R. Co., 99 N. Y., 12.

Again, it is contended that ten per cent had not in fact been paid in. The ten per cent of the necessary subscription would amount to about $16,000 The evidence of Brown tends to show that $2,000 in cash was paid in at one time, and that of Chapman is to the effect that on another occasion he paid in $21,000 in cash. Some criticism is made as to his testimony, but the referee has found as a fact that it was paid in, and we see no reason for overruling the finding of the referee in this regard, especially as there is no evidence to the contrary.

The failure to produce,the books upon the hearing before the referee was explained by the witness, and the motion to strike out his evidence, because of their non-production, cannot avail for the reason that the evidence as to the contents of the books was called out by the appellants.

The evidence as to the quantity of land necessary to be taken for the purpose of constructing the road bank along the river was conflicting. Upon the hearing the parties stipulated that the referee should personally inspect the premises. The referee’s finding- in this regard is amply supported and should not be disturbed. Whether or not the proposed embankment will cause injury to other lands-is not properly before us for consideration in these proceedings. In re N. Y., W. S. and B. R. R. Co., 101 N. Y., 685.

As to the claim of the appellant, the N. Y., L. E. and W. R. R. Co., it appears that the petitioner caused a map and profile of its road to be made and filed on the 13th day of July, 1886, and that on the 17th of July, 1886, notice of such filing was served upon the appellants, and within due time thereafter certificates of location were filed. That on the tenth day of August the appellant, Babcock, leased to the appellant, the N. Y., L. E. and W. R. R. Co., the right to lay a track across his premises for the term of three years; and thereupon the appellant, the N. Y., L. E. and W. R. R. Co., laid a track across the petitioner’s right of way, as located upon its map, filed as aforesaid. The question as to which company had acquired the prior right of way over these lands was considered by this court in an action between the parties to this proceeding; and it was then held that the petitioner had acquired the prior right to devote this land to a public use. See opinion of Barker, J.

We are consequently of the opinion that thb order should be affirmed, with ten dollars costs and disbursements.

Smith, P. J., and Bradley, J., concur.


author: Smith, P. J.

text:
    Edward J. Kelsey, Resp’t, v. The Pfandler Process Fermentation Company, App’lt.

      (Supreme Court, General Term, Fifth Department,

      Filed June, 1887.)

    1. Corporation — Assigning its interest to a new corporation— When it has not suspended its ordinary and lawful business.
    The defendant corporation was formed under the general manufacturing act of 1848. The objects of its incorporation were the manufacturing, using, licensing and selling of certain machines and apparatus and the proc ss in which the same were used, under and by virtue of certain letters patent. After the corporation entered upon the business for which it was formed, it encountered a competing company, claiming as its own the same invention upon which the defendant relied. As the result of an agreement, a new corporation was formed, having the same capital stock as defendant, to which each of the said companies assigned their respective patents. And the defendant received seventy-five per cent of its stock and the competing company twenty-five per cent thereof. The place of business of the new corporation was to be the same as defendant’s, and the purpose for which it was incorporated was stated to be the same as the defendant, and in addition thereto the purchasing and leasing of the letters patent and inventions for that purpose, and the transaction of all business incidental to or connected therewith. Of the five trustees of the new company three were trustees of the defendant, and the other two represented the competing company. There was also provision as to the furnishing of monthly statements to each of the old companies by the new, and the division of the profits between the two companies, etc. And the officers of defendant were authorized by its board of trustees to vote the stock of the new company, etc. Held, that this did not amount to an abandonment or suspension of the business of the defendant. That the said arrangement provided for a continuance of the business for which the defendant was organized and for its control by the defendant through its ownership of three-fourths of the stock of the new corporation.

      3. Same—Stockholder cannot bring suit against corporation for' EXCEEDING ITS POWER — ATTORNEY-GENERAL MUST BRING ACTION— Alienee a party.
    Assuming that the defendant in parting with its patents and taking stock in the new company exceeded its power or acted illegally: Held, that an action to set aside the alienation of its stock must be brought by the attorney-general and the alienee be made a party, that so long as the state does not interfere, and the parties to the contract treat it as valid, the plaintiff (one of the stockholders of defendant) had no cause to complain on account of the method which the defendant had adopted for carrying on the business contemplated by its charter, especially as that method was intended to promote the interests of all the stockholders, and for aught that appeared had had that effect.
    3. Same — Practice — May appeal from judgment dissolving—Code Civ. Pro , § 1394
    Under Code Civ Pro , § 1394, a corporation, aggrieved by a judgment declaring it to be dissolved, may appeal from the judgment and from an order based upon the judgment or growing out of proceedings taken to enforce or execute it.
    Ik this case there are four appeals:
    1. Appeal from a judgment entered upon a decision of the Monroe special term declaring the defendant corporation dissolved.
    2. Appeal from a special term order convicting the defendant’s attorney, John Van Voorhis, and its secretary, Edward Gr. Miner, of a contempt.
    3. Appeal from a special term order vacating an order made at chambers staying proceedings pending an appeal from the judgment herein.
    4. Appeal from a special term order denying a motion for a stay of proceedings pending an appeal from said judgment.
    There is also an original motion on the part of the respondent to dismiss said appeals 1, 3 and 4; and also an appeal from a judgment in another action between the same parties to recover a penalty.

      J. and Q. Van Voorhis, for app’lt; J. Van Voorhis and E. A. Nash, of counsel; Bacon, Briggs and Bechley, for resp’t; Theodore Bacon and J. N. Bechley, of counsel.
   Smith, P. J.

The judgment of dissolution was put upon the ground that the corporation had suspended its ordinary and lawful business for at least one year prior to the commencement of the action. The corporation was formed in April, 1882, under the general manufacturing act of 1848. The objects of its formation declared in the certificate of'its incorporation were the manufacturing, using, licensing and selling machines and apparatus, and the process in which the same are used in the manufacture of beer and other fermentable liquids, under and by virtue of certain letters patent of the United States, specified in the certificate. The certificate stated that the capital stock of the corporation was to be $100,000, in 1,000 shares of $100 each; that the term of existence of the corporation should be fifteen years from 15th April, 1882; that its trustees should be seven in number, and its principal place of business should be in the city of Eochester. The plaintiff was and is one of its stockholders.

After the corporation*entered upon the business for which it was formed, it enbountered a competing company called “The New Process Fermentation Company,” of Chicago, claiming as its own, the same invention upon which the defendant relied. To test the' question growing out of the rival claims, the “ New Process” company brought suit against a licensee of the “Pfandler Process” company for an infringement, and the latter company assumed the defense. While that suit was pending undecided, the two companies entered into an arrangement for the purpose of composing their differences, the principal features of which were that the party which should succeed in the suit should have three-fourths, and the other party, one-fourth, of the invention; that all the patents of both companies should be placed in a third party, or new corporation to be formed for that purpose, each party reserving its rights as to licenses theretofore granted, or contracts in process of execution; that the two companies should pool all future business and divide its proceeds, the successful party to have seventy-five per cent., and the defeated party the remainder; that all suits then pending should be prosecuted for the benefit of the party commencing the same, and all future suits for the benefit of the pool; and there should be five directors of the new corporation, two of whom might be selected by the minority interest; and that the new corporation should furnish to each of the contracting parties, each month, a statement of the business done during the month, and to remit to each its proportion of the net profits received during the month.

The suit between the companies was decided in favor of the defendant herein, and thereupon, for the purpose of carrying out the said agreement, a new company was organized under the said act of 1848, called the “ Consolidated Bunging Apparatus Company,” to which the contracting parties assigned their respective patents. The certificate of incorporation of the new company bears date 18th of July, 1884, and was signed by three persons, each of whom was a stockholder and trustee of the defendant. The objects of the new corporation stated in the certificate, were the purchasing and leasing of letters patent and of inventions for improvements in the process and apparatus for manufacturing and preparing beer, wine and other fermented liquors for the market; the manufacturing, selling, licens.ing and operating of such process and apparatus under said letters patent and of inventions used for like purposes; and the transaction of all business incidental to or connected therewith. The amount of the capital stock of the new company was one hundred thousand dollars, consisting of one thousand shares; the number of trustees was fixed at five; the term of existence of the company was to be at twenty-five years, and its principal office and place of business was to be in the city of Rochester. Seven hundred and fifty shares to the stock were assigned to the defendant, and the remainder of the Chicago company, the president of the defendant was authorized and directed by its board of trustees to vote the stock of the new company owned by the defendant, in all meetings of that company, as he should deem best for the interests of the defendant and its business, and a board of five trustees of the new company was designated, three of whom were trustees of the defendant, and the other two represented the Chicago company

Evidence of the action of the defendant’s officers, in effecting this arrangement, of the motives which induced it, and of the purposes sought to be accomplished by it, is furnished by the resolutions of the board of trustees, and the reports of committees and other information upon which they acted, set out in the printed case.

So far as-we can gather from the testimony, it seems obvious that the trustees at no time intended an abandon inent or suspension of the business for which the defendant was (Organized; on the contrary, the arrangment made, including transfer of the patents to the new company, was entered into by them for the purpose of removing the formidable competition of the Chicago Company which threatened them with disaster, and in the expectation of being able, by their control of the new company, to prosecute the business for which they were organized, with greater vigor and success. These views as to the favorable effect of the arrangement upon the business of the defendant and the value of its stock, find support in the averments contained in the complaint verified by the plaintiff herein, in an action brought by him and others against the defendant herein and others, in February, 1884, and in the findings of the referee in that action, all of which appear in the appeal book before us. The arrangement seems to have been the same, in practical effect (so far as future business was concerned), as it would have been if the defendant bad taken an assignment of the patents held by the Chicago Company, giving that company in exchange for them, one-fourth of the capital stock of the defendant and the right to choose a minority of its board of trustees. If the arrangement had taken, that form, it will hardly be contended that it would have' amounted to an abandonment or suspension of the business of the defendant. The present arrangement provides for a continuance of the business for which the defendant was organized, and for its control by the defendant through its ownership of three-fourths of the stock of the new corporation. So that if the arrangement is one which the defendant had power to make and is not illegal, it is difficult to see how it works an abandonment or suspension of the business for which the defendant was formed.

It may be, however, that the defendant, in parting with its patents, and taking stock in the new company, exceeded its powers, or acted illegally. Assuming for the further consideration of the matter, without deciding, that such was the case, how is the plaintiff aided thereby in this action?

For an unlawful alienation of the property of a corporation by its officers, "where the alienee knew its purpose (as must have been the case here), the statute provides a remedy by action against the officers chargeable with the wrong, to set aside the alienation; the action must be brought by the attorney-general, and the alienee, doubtless, must be made a party. Code Civil Pro., § 1781, subd. 5, § 1782. And if the taking of stock in the new corporation, by the defendant, was an excess of power, it can hardly be said that the circumstance. is available to the plaintiff in this action; for the sole ground on which he seeks relief is, not that the defendant has exceeded, but that it has abandoned the powers given by its charter.

In fine, so long as the state does not interfere, and the parties to the contract treat it as valid, it is hard to see that the plaintiff has any cause of complaint, on account of the method which the defendant has adopted for carrying on the business contemplated by its charter, expecially as that method was intended to promote the interests of all the stockholders, and for aught that appears has had that effect.

So far as we are advised the case is without precedent. The authorities cited by the respondent’s counsel differ widely from the present action. In Ward v. The Sea Insurance Co. (7 Paige, 294), the business of the corporation, which was that of marine insurance, was suspended for more than a year under a formal resolution to that effect by the board of directors, and the management of its estate and effects was committed, as the report of the case states, to the president and secretary, aided by three of the directors. From this it is to be inferred that the board of directors had relinquished the control.

In the case of the Jackson Marine Insurance Co. (4 Sandf. Ch. R., 559), the corporation resolved to cease its business^ to cancel its outstanding policies and to hquidate all liabilities, and for more than a year had done no new business except to fulfill stipulations in then existing policies.

In Briggs v. Penniman (8 Cow., 36), it was held that a manufacturing corporation which had ceased to act was without funds and was in debt, was dissolved, within the intent of the statute, so far as to give a remedy to creditors against the individual stockholders, and that that result was not prevented by an election of trustees made apparently for no purpose but to keep the company in existence.

In The People v. The Northern Central R. R. Co. (53 Barb., 98), the defendant was insolvent thirteen years before suit, and then surrendered its property to its creditors, and ever thereafter had remained insolvent, neglected to pay its notes and other evidences of debt, and entirely suspended its ordinary business, and another corporation with the same general object, had, under the authority of the state, organized, and was in actual operation in its stead.

In most, if not all of the cases upon the subject reported in the books, there was evidence of an actual abandonment of the business of the corporation, or of a suspension for more than a year, with no effort whatever to carry it on, and no intention to resume, accompanied generally by insolvency or pecuniary embarrassment.

In this case there is no finding of insolvency. In the action already mentioned, brought by this plaintiff and others against the defendant and others, it was found by the referee that the assets of the defendant were valuable, and that they largely exceeded its indebtedness. As has been said, the decision of the special term rests upon the single fact that the defendant parted with the title to its patents in the circumstances above stated. As we think it manifest from the evidence that it did so, not with the intention of abandoning or suspending the business for which it was formed, but for the purpose of relieving itself from ruinous competition and litigation, and of having the business prosecuted with more beneficial results to its stockholders under its own control, and such business has continued to be prosecuted in the mode contemplated, we are not prepared to concur in the conclusion that the corporation was thereby dissolved.

The defendant corporation has kept up its organization. It has continued its board of trustees, president and other officers. Its omission to elect trustees in some years, is not a reason for dissolving it. The acts of its trustees are valid till their successors are elected. Laws of 1848, chapter 40, section 4. In accordance with its agreement with the Chicago company, it has received royalties upon licenses isssued by it prior to the agreement, has issued licenses to the licensees of that company, and has prosecuted or defended actions at law in which it is a party, much of which has been done within the year next preceding the commencement of this action. If these things were done merely for the purpose of closing its prior engagements and winding up its affairs, they would not prevent its dissolution in case it had in fact abandoned its business, but, in the circumstances, they tend to show that it is continuing, its business under its agreement with the rival company.

One of the actions which the company is defending was brought against it by the plaintiff herein, to recover a penalty for refusing to exhibit the stock book of the company to the plaintiff. That action was brought within the year next preceding the commencement of this suit. The complaint alleged that the refusal to exhibit the book occurred at a date which is within the same period. It also alleged the existence of the defendant as a corporation, at that time, the fact that it then had an office and place of business and trustees whose duty it was to cause the stock book to be kept open for inspection by the defendant’s stock, holders. The complaint was verified by the plaintiff. There must be a question whether the plaintiff is not estopped thereby from alleging that the defendant had then suspended its business. Bradt v. Benedict, 17 N. Y., 93, per Pratt, J., p. 100. It would seem that if this action can be maintained the obligation of the defendant to exhibit the book, had ceased by reason of its suspension. Bruce v. Platt, 80 N. Y., 379.

It appears by the appeal book that at the time when the written assignment to the new company was executed the letters patent were held by a receiver, to whom they had been transferred by the defendant, by an order of the court, but as they were afterwards re-transferred by the receiver to the defendant, under a like order, we do not think that this case is affected by the circumstance that the patents were in the receiver’s hands when the assignment was executed.

We are of the opinion that the judgment should be reversed and a new trial ordered, costs to abide event.

The reversal of the judgment removes the foundation on which the three orders appealed from rested. They grew out of proceedings on the part of the receiver appointed by that judgment to get possession of the property of the defendant, and of the action of the officers or agents of the corporation in opposing such efforts. The orders must fall .with the judgments, but as the proceedings, on the part of the plaintiff and of the receiver were apparently justified by the judgment, the reversal of the several orders should be without costs to either party.

The motion to dismiss the appeals has not been overlooked. It appears to be based upon the idea that the defendant corporation, having been adjudged to be dissolved, has no existence and cannot appeal. Every party litigant has the right to appeal from a judgment by which he is aggrieved. Code Civ. Pro., § 1294 A corporation aggrieved by a judgment, declaring it to be dissolved, is an exception to the rule. Having the right to appeal from the judgment it may also appeal from an order based upon the judgment, or growing out of proceedings taken to enforce or execute it.

The motion is denied without costs.

Haight and Bradley, JJ., concur.


text:
    James C. Stout, Resp’t, v. Thomas Jones, App’lt.

      (Supreme Court, General Term, Fifth Department,

      Filed June 25, 1887.)

    1. Contract—Waiver of provision—Effect of.
    A contract was entered into by .the parties to this action, by the terms of which the plaintiff undertook, within a time therein limited, to remove a building then standing; and to erect a new one on the site of the former. Provision was made that if the work should not be finished at the time agreed upon, the plaintiff should pay a certain rate per diem as liquidated damages. Held, that if the provision as to the t)me in which the work should be completed was waived, the defendant was not entitled to recover damages by reason of the work not being finished within the time specified.
    3. Same—Waiver of provision—Renders its observance unnecessary.

      Held, that a provision that all orders for extra work should be in writing, having been waived by the acts and conduct of the parties, the presentation of such an order was not a prerequisite to recovery therefor.
    Appeal from a judgment entered upon the report of a referee.

      Woodin & Warren, for resp’t; Payne & OBrien for app’lt.
   Haight, J.

This, action was brought to recover a balance due on a building contract, and also a sum for extra work and material. The contract was made on the ninth day of November, 1882, and in substance provided that the plaintiff should remove an old building and erect a new one upon the site thereof, as an annex to the M. E. Church of Auburn, to be used as a Sunday-school room. The building was to be constructed according to the plans and specifications set forth- in the contract, under the supervision of James M. Elliott, an architect, and was to be completed on or before the fifteenth day of June, 1883, and in default thereof the plaintiff agreed to pay to the defendant, by way of liquidated damages, the sum of ten dollars per diem for each and every day thereafter that the work should remain incomplete. Within two or three days after the signing of the contract, the plaintiff commenced work upon the job, and continued until about the twenty-fifth of Hovember. At that time he had his men engaged to tear down and remove the old building.

At about this time he had a talk with the defendant, who stated that he had made up his mind not to have the old building taken down until spring, as they wanted it to use during the winter; that the plaintiff told him if the old building was not removed until spring, he could not complete the new building in the time required by the contract; that the defendant told him that he preferred to have the old building to use during the winter rather than in the hot weather, and that' he would let him know in the spring when to commence work upon it. Thereupon the defendant discharged the men that he had in his employ for the purpose of removing the old building. Thereafter, and on Saturday, the twenty-fourth of March, the defendant notified the plaintiff that he could then commence tearing down the old building, and on the Monday following the plaintiff again commenced work. It appears from the testimony that at that time the ground was frozen and considerable delay was caused in the digging of the cellar; that thereafter heavy rains came on, filling the excavation with water, and that the digging of the cellar was delayed for about a month. The cellar was finally completed, the building erected and finished on the twenty-fifth day of December, when the same was turned over to the defendant and accepted by him.

The referee has found as a fact that the plaintiff failed to perform the work within the time required by the agreement, but that such failure was caused by the act of the defendant in preventing the plaintiff from taking down the old building, and thus delaying and retarding the progress of the work upon the new; and that the failure to complete it on or before June fifteenth, 1883, was the defendant’s own fault.

Ho question is raised as to the amount due upon the contract. It is contended on the part of the appellant that the building was not completed until 193 days after the time provided in the contract; and that he was entitled to recover ten dollars for each day of that time.

The testimony as to the conversation between the plaintiff and the defendant is somewhat conflicting; but it is conceded that the defendant directed that the old building should not be removed until spring, and it appears that the new building could not be constructed whilst the old building remained standing; and that this of necessity retarded and delayed the plaintiff in his work upon the contract. But it is argued on the part of the appellant that he was not delayed or retarded in his wopk to the amount of the 193 days. That in the winter season he could not work with the same advantage that he could in the summer.

Whilst on the other hand it is claimed that,if the old building could have been removed in November that the cellar could have been completed and the walls put up and thus the delay occasioned by the spring rains could have been avoided. But we do not think that we are called upon to speculate upon these claims, for the question for our determination is, whether or not the defendant has waived the provision of the contract requiring the new building to be constructed on or before the fifteenth day of June. Upon this question the defendant himself concedes that he gave the plaintiff until the first of September or until his return from Europe, which was shortly thereafter. The plaintiff on the other hand claims that there was no limit to the time fixed in which the building should be completed after the arrangement was made to postpone the taking down of the old building until the next spring.

Upon this conflict of evidence the referee has found for the plaintiff, and we cannot say on review that such finding is against the weight of evidence. If this provision of the contract was waived, then the defendant is not entitled to recover damages by reason of the non-completion of the building within the time specified. Weeks v. Little, 89 N. Y., 566; Stewart v. Keteltas, 36 id., 388; Mansfield v. N. Y. C. and H. R. R. R. Co., 102 id., 205; 1 N. Y. St. Rep., 390.

Upon the trial one Barnes was sworn as a witness for the plaintiff and gave evidence as to the work done upon the building, the time when they commenced to tear down the old building and the delays that were occasioned by reason of the frost in the ground and the rains occurring during the time that they were digging the cellar. Upon the cross-examination he was asked In your opinion did it delay the work by putting it off till spring? ” This was objected to by the plaintiff, the answer was excluded and exception taken. We are inclined to the opinion that the evidence was properly excluded for the reason that the fact could be determined without the aid of the opinion of experts.

As to the claim for extra work and materiál, there is substantially no dispute in the evidence and the report of the referee is amply sustained. True, the order for the extra work was not in writing signed by the parties, but it is apparent that this requirement was waived by the act and conduct of the parties. Haden v. Coleman, 73 N. Y., 567; Smith v. Alker, 102 id., 87.

The judgment should be affirmed.

Smith, P. J., and Bbadley, J., concur.


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    Frank Burns, Appl’t, v. Devine M. Munger, Resp’t.

      (Supreme Court, General Term, Fifth Department,

      Filed June 25, 1887.)

    1. Contract—Action on—Conditions precedent must be performed BEFORE BRINGING.
    This action was brought by the assignee of a party to a written contract by which the defendant agreed to pay a sum stated to that party in consideration of his delivering to him a perfect title to a certain canal boat “and clearing up the record title to the same, nullifying all liens, mortgages, etc.,” to the satisfaction of that party and delivering to him all papers necessary to properly transfer the boat to him or his order. Held, that conditions precedent must be fully performed to give a right of action to the party on whom their performance rests.
    2. Same—Construction of

      Held, that the purpose of the parties to the agreement was to vest in the defendant a perfect title to the boat. That the provisions of the agreement were entitled to reasonable interpretation and that reference should be had to the purpose in view to ascertain the intention of the parties making the agreement.
    3. Same—Construction—Laws 1864, chap. 412, in regard to chattel MORTGAGES ON CANAL BOATS—PROVIDES NO METHOD OF DISCHARGE FROM RECORD.
    Provision is made by Laws 1864, chapter 412, for the filing of chattel mortgages on canal boats in the office of the auditor of the canal department, and an entry of the fact in a book kept in his office, but no provision for discharging such mortgages of record. Held, that the agreement could not have contemplated that an entry should be made in the books of the auditor which was not authorized by statute.
    4. Chattel mortgages on canal boat—Piling—Effect of as against JUNIOR MORTGAGES.

      Held, that a senior mortgage having been filed as required by statute at the time of filing two junior mortgages, was effectual against them and remained so without refiling.
    6. Same—Foreclosure—Effect of.

      Held, that by a foreclosure and sale under such senior mortgages the record title represented by the junior mortgages and the filing and registering of them was cleared up so far as practicable and as effectually as if discharges had been executed by the mortgagees.
    6. Contract—Construction of

      Held, that the clearing up of the title was all that was required by the agreement. That this having been effectually done, the contract providing no manner in which it should be done except to the satisfaction of the defendant, his caprice could not properly take the place of satisfaction on his part.
    Appeal from judgment entered on report of referee.
    The action is to recover the purchase price of a canal boat sold by one Collins to the defendant and alleged to be due and payable to the plaintiff who is the assignee of the claim. The action is upon the agreement of the plaintiff made in writing as follows:
    “Few York, April 28, 1880.
    In consideration of Patrick J. Collins deliveing to me a perfect title to the canal boat H. H. Sabey, and clearing up the record title to the same, nullifying an liens, mortgages, etc., to my satisfaction, I will pay to the order of said Patrick J. Collins, and on delivery of all the papers necessary to properly transfer said boat to me or to my order, the sum of one thousand dollars. D. M. MUHGER.”
    The referee has found that the agreement was on April 28, 1880, executed and delivered by the defendant to Collins, and that on April 29,1880, Collins delivered the boat and a bill of sale of it, duly executed by him to the defendant or to his agent, and that although the name of the purchaser in the bill of sale was left blank, it and the boat were so delivered with the intent to convey title to the said boat to the purchaser. The referee also found that the condition in the agreement of April 28, 1880, providing for clearing up the record title nullifying all liens, mortgages, etc., to the satisfaction of the defendant had not been performed and directed judgment for the defendant.
    This conclusion is based upon the further facts found by him that one Glenn being the owner of the boat, sold it to Helen Herring in August, 1877, and took from her a chattel mortgage upon it to secure $1,550 of the purchase money, that pursuant to the mortgage the boat was taken from the-possession of the mortgagor, the sale of it duly advertised and on July 24, 1879, sold at public auction to Collins who took possession and held it until the delivery of it to the defendant or his agent April 29, 1880, that after her purchase of the boat and in 1878 and 1879, Herring made to Ryan and Hogan, respectively, mortgages upon it which were filed in the office of the Auditor of the Canal Department, that the mortgage to Ryan was renewed by filing a copy in 1879, and not after, and that the mortgage to Hogan was in like manner renewed annually to and including 1881. There is no finding that the lien of those two mortgages, or of either of them, continued on the boat after the sale on the prior and purchase money mortgage.
    ■ The party who took possession of the boat under such purchase by the defendant and ran it, caused the boat to be placed upon a dry dock in Hew Jersey for repairs in July, 1881, and failing to pay charges for the repairs there made, it was sold by a United States marshal pursuant to a decree on account of the claim and in execution of the lien of the dry dock man.
    P. Brundage, for app’lt; William Nathaniel Cogswell, for resp’t.
   Bradley, J.

It must be assumed, for the purpose of this review, that by the sale of the boat to the defendant, and the delivery of it and the bill of sale, he took title free from all liens. The view of the referee evidently was that the two subsequent mortgages ceased to be effectual liens or charges upon the boat from and after the sale of it upon the prior and purchase money mortgage, and that the title of the defendant was, so far as appeared, perfect on the delivery of the property on April 29, 1880, and put his determition on the ground that the right to require payment was dependent upon the condition precedent, that the record in the auditor’s office should in some manner represent that those two junior mortgages, or that the apparent lien appearing by such record should be made to disappear. The general rule upon the subject is that a condition precedent must be fully performed to give a right of action to the party on whom its performance rests. Oakley v. Morton, 11 N. Y., 25. And this proposition is asserted as the defense. The purpose of the parties to the agreement of sale was to vest in the defendant a perfect title to the boat, and to that end the provision referred to was inserted by the defendant in the instrument containing his promise to pay. It is entitled to a reasonable interpretation, and some reference may be had to the purpose in view to ascertain the intention of the parties in making and taking the agreement. There is no provision furnished by the statute for making the discharge of chattel mortgages of record. It is provided that they may be filed with the auditor, and that an entry .be made in a book kept in his office, in a manner specified. Laws 1864, chap. 412. It could not have been contemplated that any entry should be made in the books of the auditor not authorized by the statute. The consideration upon which the defendant agreed to pay the purchase price was that Collins should deliver the papers necessary to transfer the boat to the defendant, and deliver to him a perfect title to it, but it is said that this is not all, because the further requirement embraced within the consideration is the clearing up of the record title, nullifying all liens, etc. How is this to be done otherwise than by transferring a perfect title by delivery of the papers requisite for such purpose? The liens and mortgages were nullified when the perfect title was transferred. There could then remain no record title or title on the record in the application of that term to personal property. The clearing up the title seems to be all that was required to accomplish what was within the meaning of the agreement. How it should be done is not provided for by the contract other than that it should be done to the satisfaction of the defendant. And when it is effectually done, his caprice cannot properly take the place of satisfaction on his part. Assuming, as we do, that the defendant, so far as relates to the title and to its freedom from lien, received by the sale and delivery of the property all that was bargained for, the continued appearances upon the files and register of the auditor’s office of the two junior mortgages is not a substantial cause for failure to pay, and the rigor of a condition precedent will not in such case be applied unless the construction of the 'agreement requires. The formal discharge of those mortgages by the mortgagees would not change the apparent situation of the record in the auditor’s office, but the fact would have to appear aliunde the record. The manner in which the lien of these mortgages are discharged is not important, as no method of doing it is provided by the contract, and the effect is the same if such lien had been in fact discharged at the time of the sale and delivery of the boat to the defendant or to the person for whom he made the purchase.

The "legal effect of the first and purchase money mortgage made by Herring to Glenn was a sale by the mortgagor to the mortgagee of the property with a right of redemption in the former which was cut off by the sale, and the effect of the sale was the same upon the subsequent mortgagees of Herring. "When these two junior mortgages were filed, the prior one had been filed and there had been no omission to refile it in the manner prescribed by the statute. It was then effectual as against them and would continue so without any subsequent refiling of it. Meech v. Patchin, 14 N. Y., 71. There is therefore no opportunity upon the facts as they appear by the record to conclude that this mortgage had not priority in fact and legal effect at the time the boat was taken and sold pursuant to it, or that the sale was not in the proper or approved manner to cut off any subsequent liens on the property. It seems to follow that the lien of these junior mortgages was discharged by such foreclosure of the senior mortgage and the sale pursuant to it, and the record title, if it may be called such, represented by those two mortgages, and the filing and registering them was cleared up so far as practicable and as effectually as if discharges to that effect had been executed by the mortgagees. Bragelman v. Dane, 69 N. Y., 69; Edmiston v. Brucker, 40 Hun, 256.

There is no claim made that there was any appearance of liens upon the boat other than that represented by those two junior mortgages. And to say that the seller of the boat undertook to obtain from the mortgagees a satisfaction or discharge of those mortgages is the expression of a requirement not within his power to perform without their consent and as the performance of the contract does not require that to be done a construction cannot properly be given to it which will impose an impossible condition, or one the performance of which does not come within the power or control of the seller of the property or his assigns.

The view of the referee was that at the time of making the sale and agreement it was contemplated by the parties to it that something further should be done by way of clearing up the record title and nullifying lions, and that nothing having been done in that direction it is not sufficient that the mortgages were then in fact no lien, and that the satisfaction of thé defendant was not required until those mortgages were in some manner removed from the records or files of the auditor’s office. This is reasoning the contract into a construction which is neither substantial in its effect or practicable for performance.

But he has found that the agreement in question was made the day prior to the delivery of the property and bill of sale, and while such delivery may not be treated as a waiver of any condition in the contract of the day previous, it may be entitled to some consideration upon the question of the purpose and construction of the agreement in view of the delivery and acceptance which thus followed the time of its execution, and of the fact that the agreement of sale had not been executed on the part of the seller at the time the contract in question was made.

The conclusion that a new trial should be granted is reached upon the assumption which we think the facts as found by the referee require, that a perfect title to the property passed by the sale in question.

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

Smith, P. J., and Haight, J., concur.