author: Finch, J.

text:
    The People ex rel. The Union Trust Co., App’lt, v. Michael Coleman et al, Resp’ts.

      (Court of Appeals,

      Filed June 2, 1891.)

    1. Taxes—Corporations—“ Actual value ” op capital stock.
    "Where, under § 3, chap. 456, Laws of 1857, commissioners of taxes are to determine the assessed value of the capital stock of a corporation, the thing to be taxed is the capital of the company and not the shares of the stockholders.
    2. Same.
    Such capital and surplus must be assessed at its own value, and when that is correctly known and ascertained, no other value can be substituted for it.
    3. Same.
    Where its amount and value are undisclosed and unknown, the assessors may consider" the market value of the share stock and the general condition of the company as indicative of surplus or deficiency, and of the probable amount of either.
    4. Same.
    They may further resort to such means of information when the amount of capital and surplus is disclosed, but the assessors have sufficient reason to disbelieve the statement, and such reason is founded upon facts established by competent proof.
    5. Same.
    Where the corporation presents to the assessors a sworn statement of its assets and liabilities, the truth of which is not questioned or doubted by the assessors, they have no discretion to assess the value of the capital stock at a larger sum independently of the established facts.
    Appeal from judgment of the supreme court, general term, first department, affirming order of special term dismissing writ of certiorari.

      Wheeler H. Peckham, for app’lt; D. J. Dean, for resp’ts.

       Reversing 36 N. Y. State Rep., 331.

   Finch, J.

The relator has been assessed upon an “ actual value” of its capital stock derived entirely from the market value of its shares. These are selling at the large premium of something over five hundred dollars for each share of $100, and the assessors have concededlv taken that valuation, or the principal part thereof, as the “ actual value” of the company’s stock liable to taxation instead of its own proved and established value. The relator challenges the assessment, and through all the proceeding has persistently raised and pressed the inquiry, not so much as to the mode or manner of ascertaining value, but rather as to what is the precise thing to be valued; whether the capital stock of the company, or the capital stock held in shares by the corporators. If these are the same or, in any just sense, equivalents, either might be valued, without substantial error; but if they are not such, we must determine which is to be valued before we can solve the problem of how to value it.

Now, it is certain that the two things are neither identical nor equivalents. The capital stock of a company is one thing; that of the shareholders is another and a different thing. That of the company is simply its capital, existing in money or property, or both; while that of the shareholders is representative, not merely of that existing and tangible capital, but also of surplus, of dividend earning power, of franchise, and the good will of an established and prosperous business. The capital stock of the company is owned and held by the company in its corporate character; the capital stock of the shareholders they own and hold in different proportions as individuals. The one belongs to the corporation, the other to the corporators. The franchise of the company, which may be deemed its business opportunity and capacity, is the property of the corporation, but constitutes no part or element of its capital stock, while the same franchise does enter into and form part, and a very essential part, of the shareholder’s capital stock. While the nominal or par value of the capital stock and of the share stock are the same, the actual value is often widely different.

The capital stock of the company may be wholly in cash or in property or both, which may be counted and valued. It may have in addition a surplus, consisting of some accumulated and reserved fund or of undivided profits or both, but that surplus is no part of the company’s capital stock, and therefore is not itself capital stock. The capital cannot be divided and distributed, the surplus may be. But that surplus does enter into and form part of the share stock, for that represents and absorbs into its own value surplus as well as capital, and the franchise in addition. So that the property of every company may consist of three separate and distinct things, which are its capital stock, its surplus, its franchise ; but these three things, several in the ownership of the company, are united in the ownership of the shareholders. The share stock covers, embraces, represents all three in their totality, for it is a business photograph of all the corporate possessions and possibilities. A company also may have no surplus, but on the contrary a deficiency which works an impairment of its capital stock. Its actual value is then less than its nominal or par value, while yet the share stock, strengthened by hope of the future and the support of earnings, may be worth its par or even more. And thus the two things, the company’s capital stock and the shareholder’s capital stock, are essentially and in every material respect different. They differ in their character, in their elements, in their ownership and in their values. How important and vital the difference is became evident in the effort by the state authorities to tax the property of the national banks. The effort failed, and yet the share stock in the ownership of individuals was held to be taxable as against them. The corporation and its property were shielded, but the shareholders and their property were taxed.

Now some degree of confusion and trouble have come in because these two different things are denominated alike capital stock, making the expression sometimes ambiguous. It is the important and decisive phrase in the law of 1857, under which the assessment here resisted was made, and requires of us to determine at the outset in which sense it was used. The section reads thus : “ The capital stock of every company liable to taxation, except such part of it as shall have been excepted in the assessment roll or shall have been exempted by law, together with its surplus profits or reserved funds exceeding ten per cent of its capital, after deducting the assessed value of its real estate, and all shares of stock in other corporations actually owned by such company which are taxable upon their capital stock under the lasvs of this state, shall be assessed at its actual value and taxed in the same manner as the other real and personal estate of the county.”

There are reasons in abundance for the conclusion that by the phrase “ capital stock ” the statute means not the share stock, but the capital owned by the corporation; the fund required to be paid in and kept intact as the basis of the business enterprise, and the chief factor in its safety. One ample reason is derived from the fact that the tax is assessed against the corporation and upon its property, and not against the shareholders and so upon their property. In theory every tax is charged against some person, natural or artificial, resident or non-resident, known or unknown. It is assessed not upon property irrespective of ownership, but against persons in respect to their property, 23 N. Y., 215, and effects not merely a lien but also a personal liability. On the assessment rolls in this case appeared the name of the relator as the person assessed and the amount of the tax became a charge against it Of course it could only be assessed and taxed in respect to its own property, that which in its corporate character it owned and possessed; and so it follows inevitably that the statute concerns the company’s capital stock, that is its real and actual capital, and not in any respect the share stock which it does not own and whose possessors have not been assessed.

Another reason is found in those terms of the statute which include and exclude, respectively, specific kinds or classes of property in the corporate ownership. Thus, the assessment is to be laid not merely upon the capital stock of the corporation but also upon its surplus. No such explicit direction was necessary except on the assumption that by the words “ capital stock ” was meant simply “ capital,” which would not include surplus, and so required that it be subjected by name to the valuation. If the share stock was meant its value would include surplus and make its specification not only needless but confusing. But while the statute^ includes surplus by specific mention, it excludes franchise by omitting it. The omission of franchise is emphasized by the careful inclusion of surplus. It is fully and definitely settled that the tax imposed by the statute is not upon franchise. People v. Com'rs of Taxes, 2 Black, 620. But if that be so, it is not upon the share stock, for that represents the value of the corporate franchise as a part of the total of the corporate property. And so, both by what it specifically includes and silently excludes, the .statute itself informs us that by “ capital stock ” it means and intends the company’s actual capital paid in and possessed and not .at all or in any sense the share stock.

The same thing becomes apparent from a study of the whole line of legislation which culminated in the law of 1857. It was traced in detail upon the argument with great industry and wealth of illustration. We have verified it by traveling over the same track, and, without taking pains to reproduce it, may assert the general result which it discloses and select out one or more illustrations. The investigation shows that the word “ capital ” and the phrase “capital stock” are used interchangeably and synonymously, and where the latter phrase occurs there is almost always something in the statute which stamps and labels it as referring to the actual capital of the company.

Thus the Law of 1825, chap. 254, after providing for the taxation of all persons owning or possessing property, proceeds to declare that corporations shall be deemed persons for the purposes of the act, and requires them to furnish a statement of the amount of “capital” actually paid in; and then, referring to turnpike and bridge companies, requires them to state “the amount of capital stock actually paid in or secured to be paid in.” Both clauses refer to the same assets or fund, naming it indiscriminately “ capital” and “capital stock.” Again, in the Law of 1825, chap. 254, the assessors, after putting the corporation by name on the assessment roll, are required to add the amount “ of its capital stock paid in or secured to be paid in,” and to designate how much of it is in real and how much in personal property, and so no doubt is left that by “capital stock” was meant simply the “ capital ” possessed'in cash or invested in securities or real estate.

The illustrations might be multiplied and fortified by reference to numerous acts relating to the formation or management of manufacturing, railroad, business and telegraph companies, in which the two forms of expression are used indiscriminately and as con-vertible terms; but I think quite enough has been said to require unhesitating assent to the proposition that under the law of 1857 the thing to be taxed is the capital of the company and not the shares of the stockholders.

Indeed, I should feel bound to apologize for arguing what seems to me so simple and plain a proposition were it not for the fact that it has been largely ignored by assessors, and not always clearly kept in mind by the courts; and but for the further fact that the right to adopt as the taxable valuation the value of the shares, totally disregarding the value of the company’s capital, has been asserted in this case, maintained by the courts below, and claimed to be fully justified by very much which we ourselves have decided or said.

Before examining the cases in detail to see whether they hamper our freedom of judgment upon the question presented, I think it safe and also prudent to assert three things as applicable generally and to all the cases alike. First. This court has never decided either by a direct determination or by necessary implication that the law of 1857 authorizes the imposition of a tax upon anything else than the actual capital of the corporations together with their surplus; second, that the precise question whether the capital of the companies or the share stock of the shareholders forms the basis of valuation and the thing to be assessed, has not been heretofore formally and distinctly presented; and third, that all seemingly erroneous expressions of opinion are corrected at once when they are referred to the permissible conditions under which the value of the share stock in the market may be referred to, not as the thing to be valued and assessed, but as an aid or help in discovering the value of the other and different thing which is to be valued and assessed. Keeping these general propositions in mind we now recur to the cases.

The most important, because it opened the door and led the .way to some doubtful modes of expression, is that of Oswego Starch Factory v. Dolloway, 21 N. Y., 449. That was an action against the assessors to recover damages for having laid an assessment upon the plaintiff company without jurisdiction and in violation of law. Two grounds of liability were asserted ; one that the business residence of the corporation was at Auburn ip the county of Cayuga, and the assessors of Oswego had no jurisdiction to assess it at all; and the other that the-valuation was excessive and based upon the share value and the fact of a successful and lucrative business. The report of the case shows merely that after deducting from the par capital the assessed value of the real estate the assessors added to the balance seventy-five per cent to reach actual value. I have examined the original case preserved in our records, and it develops a state of facts very much broader than the report of the case indicates. The corporation had made no list or statement of its assets as required by law. It chose to leave the assessors in the dark and furnish them with no information. They were compelled to act upon such facts as they could ascertain. They knew the prosperous character of the business, and had reason to believe that the company had a large surplus, but could not ascertain how much. In this dilemma they inquired as to the value of the share stock, and claim that they found it worth nearly double its par. Thereupon they added a part of that premium to the nominal capital as being the actual value of the capital and its accretions in the form of surplus.

In all this there was no attempt to assess the share stock, but simply an effort to get at the actual value of capital and surplus together. On the day for the hearing of objections the president of the corporation appeared. He made an affidavit which claimed that the company could only be assessed at Auburn, but which uttered no word of complaint against the valuation put upon capital and surplus, and furnished no information on that subject. On the trial ne testified that no other proof than his affidavit was put before the assessors. The latter, in their answer, explicitly deny that they took into account the value of the profitable business, or that they took, as a basis, the full value of the share stock. On such a state of facts the decision which upheld the action of the assessors was entirely correct and sound and in complete accord with the views which I have herein expressed. But while the decision was right, I am compelled to admit that-some of the reasons in the opinion are open to criticism. Judge Denio does say in substance that the actual value of the capital may be swollen above its par value by crediting to it the money value of the fact that the enterprise was happily chosen and skillfully conducted.” But the statute does not tax either the choice or the conduct. Those are the chief elements in the value of the ' franchise, and the law does not tax the franchise. If, as I think may be the truth, the learned judge had in his mind that the happy choice, and skillful conduct of the enterprise fairly indicated an accretion to capital of accumulated surplus, and meant only to-say that the value of that accretion should be added to capital, then he kept within the boundaries of the statute. But beyond, that he intimated quite plainly that the value of the share stock is the fair equivalent of capital and surplus. In tli-at conclusion I cannot concur ; but I disagree with less reluctance because the learned judge himself, in a later case, very nearly corrected the error even if he did not acknowledge it.

That was the case of People v. Commissioners of Taxes. 23 N. Y., 192. The question there involved was the right of the corporation to have deducted from the assessment that portion of its-capital invested in United States bonds, which had been issued without an express enactment exempting them from taxation. Judge Denio, on this occasion, again referred to the statute of 1857, and modified his views so far as to say that the assessors “may look ” at the value of the share 'stock, which, he adds, “ would ordinarily furnish a practical test,” and he cites his own previous decision. Four of the judges, concurring in the result, disagreed as to his construction of the statutes, and one, Judge Comstock, dissented entirely and wrote out his views at length. That opinion shows that “capital ” and “capital stock” are used indiscriminately to designate the estate of the corporation, and that such estate, and not the share stock, is the subject of the valuation. The report of the case leaves it probable that a majority of the court to that extent concurred.

It is to be noted that in neither of these cases was the precise question now discussed formally or definitely presented, or necessarily involved, and that in neither opinion is it asserted that the share stock instead of the capital is the subject of taxation. That doctrine has arisen, if at all, as an inference from what was-said* and not from what was decided. It is further to be observed that in these two cases Judge Denio betrays a consciousness that his, test of share value is both unsound and applicable only in instances which compel it as a necessity; for, first, he says, “ there is, doubtless, an incongruity in including the accumulated profits above ten per cent in the assessment where the capital.is assessed at its market value,” and assigns as a reason, what I have already said, that to assess the share stock assesses the surplus and makes its specific mention wholly superfluous : and, second, he explicitly admits that “ either the assessor or the taxpayer would have a right to examine and have an estimate made of the securities.” That admission is fatal to any theory that the share stock is the subject of valuation, for if it is, the value of the securities representing the capital is totally immaterial, and the right to have it valued depends upon its being the very subject of taxation.

Three other cases followed the two upon which I have commented in which the statute was referred to. People v. Dolan, 36 N. Y., 59; People ex rel Glens Falls Insurance Co. v. Ferguson, 38 id., 89; People ex rel. Citizens Gas Company v. Assessors, 39 id., 81. They related to the permitted deductions and exemptions, and can scarcely be said to bear upon our present inquiry except inferentially, and the inferences which they suggest are certainly not in the direction of a right to value the share stock instead of the capital.

We come now to the decision in The People v. The Commissioners of Taxes of the City of New York, 95 N. Y., 554. It would be quite sufficient to say of that case that it involved in no degree the question here at issue. The sole conflict between the contending parties assumed that capital and surplus aggregated had been fairly and justly valued, and that the property to be taxed was such capital and surplus. The opinion aggregates them under the one name of “ capital,” which was not strictly correct, and yet was sufficiently so for the purposes of an inquiry which did not depend upon any special discrimination between them. That discrimination was so carefully made by the same pen in Williams v. Western Union Tel. Co., 93 N. Y., 188, as to leave no doubt that it was perfectly understood. The point of the case was to determine whether the real estate was to be deducted from the nominal capital stock or from the actual value of the capital, using that word as including surplus, and whether at the value paid for it or at the value for which it was assessed on the assessment rolls. Those questions and those only were decided, and if in the process surplus was treated as part of capital instead of an accretion beyond it, the aggregation was at the moment convenient and immatei’ial to any necessity of the case. It did no harm then, but must not be allowed to prevent upon a different inquiry the discrimination which in fact this court had already made. If beyond that words were used which indicate that our judgments had been affected by the opinion in the Oswego Starch case, the result was natural so long as attention was not drawn to an inquiry which would have developed the existing ambiguity and its cause.

The next case relied upon by the respondent is People v. Asten, 100 N. Y., 597. That, again, was a question, and a question only, of the mode of deducting the real estate. No dispute existed over the valuation of the company’s capital stock. ItVas deemed worth exactly the par of its nominal capital, and both sides assented to that as its actual value. It was of no consequence to the decision how the assessors arrived at that value since no question arose over it, and what was said in the opinion as to the right of the assessors to consider the market value of the shares and the dividend earning power of the corporation was obiter and needless to the sole questions at issue, which were, whether the real estate-should be deducted at the price paid for it or at its assessed value on the rolls, and whether an incumbrance upcyi it in the form of a mortgage for $80,000 should or should not be deducted. Indeed, the remarks which I have characterized as obiter may, as we-shall presently see, have been justified in their application to the-action of the assessors by the existing circumstances which surrounded their actions, but which do not appear in the report of the case. „

The next authority relied on by the respondents is The People ex rel. The Panama Railroad Co. v. The Commissioners of Taxes, 104 N. Y., 240; 5 N. Y. State Rep., 647. There, again, the point involved respected solely the deduction of real estate and the manner of ascertaining the value to be deducted. Not one word was said in the opinion as to what was meant by the actual value of capital stock and surplus or what was the thing to be valued, for no question whatever was raised over that. The real estate of the company was a railroad situated in a foreign country. Not being-assessed upon the rolls in this state or elsewhere, its assessed value could not be deducted, and resort was necessarily had to its actual value. The relator sought to estimate the value of the real estate by fixing first the aggregate value of the whole railroad and then deducting the value of the equipment. This court combatted that method on the ground that it imported into the value of the real estate the additional value of the franchise. When the opinion declared that “the value of the franchise of the corporation is an important element in determining the value of a railroad as a whole, or the value of its capital stock,” it meant exactly what it said, using the last phrase in the sense which is entirely apparent, 'viz.: that of the share stock which represents the railroad as a whole or the entire property of the company as a railroad company.

The final case to be examined is The People ex rel The Knickerbocker Fire Ins. Co. v. Coleman, 107 N. Y., 541; 12 N. Y. State Rep., 315. It appeared that the relator’s stock at par amounted to $210,000, while its share stock was selling below par and for ninety cents on the dollar. But the assessors did not assess the share stock, nor take its value as the test of capital, and so showing no surplus but a deficiency. On the contrary, they went to-the company’s own books for information, and there found not a deficiency but a surplus, and deducting from the aggregate of capital and surplus the assessed value of the real estate, United States stock and the exempted ten per cent, they found a taxable balance of about $25,000. The company resisted. Their counsel argued that “the assessment should not exceed the market value of the capital stock less statutory exemptions.” By capital stock he plainly meant the share stock which was selling at ninety. The counsel for the assessors insisted that the market value of shares of stock of the corporation is not the proper and sole test of the value of the corporate capital.” On that issue we sustained the assessment. In so doing we necessarily decided that capital swollen, by surplus or diminished by losses was the subject to be valued and taxed, and not the share stock; and that when the actual value of capital and surplus was known and established, in this case by the party’s own books, no reference to the value of the shares could be permitted to lessen the valuation. The case, therefore, was correctly decided, and in entire accord with the doctrine which I have herein advocated.

But the opinion contained a statement which has been cited as conclusive by the general term, and also on the argument at our bar, and to which I now refer because it opens the way to the final point of the discussion, and to a fact which accounts for and explains most of the references to the value of share stock which are seemingly of a doubtful character. The language was this : “ The law does not prescribe how the actual value of the capital stock of a corporation shall be ascertained. That is left to the judgment of the assessors, and in appraising the actual value they have a right to resort to all the tests and measures of value which men ordinarily adopt for business purposes in estimating and measuring values of property. They may take into account the business of the corporation, its property, the value of its actual assets, the amount and nature of its present and contingent liabilities, the amount of its dividends and the market value of its shares of stock in the hands of individuals.”

Now I do not desire to withdraw in any degree the concurrence which I yielded to this statement when the case was decided, but it must not be wrested from its application to the facts then before the court, and be made to do duty on a different and broader field. The corporation was a fire insurance company with a wide range of contingent liabilities. It had made no statement to the assessors, and had left them to their own resources. Where that is so, what are the officers to do? Necessarily they must resort to such means of information as remain and are accessible, and in that emergency they may “ look at,” “ take into account,” consider the market value of the shares. That is something very different from assessing the share stock, or making its value the conclusive measure of capital and surplus. Such reference is simply the result of necessity, a resort to the poorest means of information, and -to the most- deceptive and treacherous test, because the better means or truer test cannot be obtained. How unreliable the test of share value may be through the effect of gambling, false rumors, scarce money and panics, Judge Comstock describes in his opinion, to which I have already referred ; and yet there are cases in which it furnishes some aid.to the judgment in the absence of accurate knowledge. It is such cases that the courts have had in mind when justifying a reference to the stock market, and not those in which the amount and value of capital and surplus was fully and faithfully disclosed, and so I think 'the authorities either fairly permit or fully justify the conclusions which I have reached, and which may be stated with reasonable accuracy thus: First, the subject of valuation and assessment is never the share stock, but always the company’s capital and surplus. Second, such capital and surplus must be assessed at its own value, and when that is correctly known, and ascertained, no other value can be substituted for it. Third, where its amount and value are undisclosed and unknown, the assessors may consider the market value of the share stock and the general condition of the company as indicative of surplus or deficiency, and of the probable amount of either. Fourth, they may further resort to such means of information when the amount of capital and surplus is disclosed, but the assessors have sufficient reason to disbelieve the statement, and such reason is founded upon facts established by competent proof.

If these conclusions are correct it will follow that the assessment complained of should be cancelled. The corporation presented to the assessors a sworn statement of its assets and liabilities. If it be true, there was nothing subject to assessment. But its truth, is not questioned, and there is not the least reason to doubt it. The assessors did not doubt it; they merely deemed it immaterial, and so testified when examined. In other words, knowing with certainty the value of one thing, they claimed the right to affix to it the larger value of a different thing. Authorized only to tax against the company its capital and surplus, they assumed the right practically to tax it for the share stock held by individuals. They have not, in terms, claimed that the share stock is the subject of taxation, nor has the counsel who represented them on the argument, but both have maintained and defended what is the exact and complete equivalent. The'right asserted is a discretion in the assessors at their free will to assess corporations upon and at the value of their capital and surplus or upon and at the value of the share stock independently of established facts and whenever they please. The law gives them no such discretion. How it has been exercised and how destructively to the rights of taxpayers may be seen by-comparing the action in this case with that in one of the cases which we have reviewed. Where the share stock was selling at ninety and so below par the assessors refused to take that value and went to the company’s books in search of a larger one, which they found and adopted. Here, where the actual value of capital and surplus is established so that they frankly admit the fact, they calmly disregard it and fly to the larger value of the share stock. The statute has given them no such right. They are not lawless rovers wandering among corporations at will, but regular officers, bound by discipline and controlled by the law, and whose discretion exists within fixed and definite limits.

It is said, and it is true, that large masses of personal property escape taxation, and the owners are„ persistent and artful and not over nice in their efforts to avoid a just share of the public burdens, and so we should uphold faithful assessors in every attempt to do their full duty. I think this court will not be unmindful of the situation, but before all we must first ascertain and then obey the law. If, in that process, evils result or are disclosed the remedy must be sought elsewhere.

It follows that the judgment and order of the general and of the special term should be reversed, and the assessment against the relator vacated and cancelled, without costs.

All concur, except Beckham, J., not voting, and Gray, J., absent. _


source: Caselaw Access Project

author: Andrews, J.

license: Public Domain

text:
    The Buffalo Loan, Trust & Safe Deposit Company, as Guardian, Resp’t, v. The Knights Templar & Masonic Mutual Aid Association, App’lt.

      (Court of Appeals,

      Filed June 2, 1891.)

    1. Insurance (Life)—Proof of death.
    Where there is nothing in the contract of insurance requiring the cause of death to be communicated to the association by a claimant, the insurer cannot, under guise that the requirement that “ satisfactory proof ” of the death of the assured be given, demand information of the cause of death.
    2. Same—Evidence—Physician’s certificate.
    The trial judge upon the proofs being offered in evidence by the defendant, refused to permit the certificate of the physician, furnished by the guardian to the association, and stating the cause of death to be delirium tremens, to be read in evidence, Held, no error.
    3. Same—Guardian and ward.
    Such certificate was not inadmissible as being made through the medium of the certificate of the attending physician, but because the infant was not bound by the admission of the guardian in furnishing it; an act not required by the contract of insurance.
    4. Same—Records of board of health, etc.
    The court properly excluded the records of the board of health of Buffalo, and the certificate of the attending physician, filed with the board, stating the death of the insured. The statute and ordinance making it necessary to register deaths, etc , are police regulations, and the records are required for local and specific purposes, and are not public records in such sense as makes them evidence between private parties of the facts recorded.
    Appeal from judgment of the supreme court, general term, fifth department, affirming judgment for plaintiff entered upon the verdict of a jury.

      David F. Day, for app’lt; John G. Milburn, for resp’t.

       Affirming 30 N. Y. State Rep., 464.

   Andrews, J.

By the terms of the certificate of membership the defendant obligated itself to pay to the heirs or legal representatives of the assured the sum payable on the policy, “ within sixty days after due notice and satisfactory proof of the death (during the continuation of the contract) of the said John Roberts.” There is no requirement that the cause of death shall be communicated to the association by a claimant, nor under the policy could this be exacted.

The beneficiary of the policy performed his entire legal obligation under the contract when he gave the association due notice of the death of the insured and furnished proof that the death had in fact occurred. The words ‘‘ satisfactory proof ” entitled the association to demand that the fact of death should be shown with reasonable definiteness and certainty, and if the proofs furnished failed to satisfy the association of the fact of the death, the association acting reasonably and in good faith could require further evidence.

But the insurer cannot, under guise that the requirement that “ satisfactory proof ” of the death of the assured should be given, demand information of the cause of the death. This would he a different subject. The information, however important it might be in its bearing upon a death from the excepted causes, nevertheless has no relation to the one fact which alone the claimant is bound to embrace in his proofs. See Grattan v. Metropolitan Life Ins Co. 80 N. Y., 281; Ins. Co. v. Rodel 95 U. S., 232.

The guardian of the infant plaintiff in furnishing to the defendant as part of the proofs the certificate of the attending physician of the insured did a wholly gratuitous act. If it can be treated as an admission by the infant beneficiary that the death was from the cause so certified, it is plain that the act was extremely prejudicial to the interest of his ward, for upon that assumption the infant, the real plaintiff, has substantially admitted away his cause of action.

The trial judge, upon the proofs being offered in evidence by the defendant, refused to permit the certificate of the physician to be read, and this ruling presents the main question in the case. There are two aspects under which the ruling may be considered. First, was the certificate inadmissible under § 834 of the Code of Civil Procedure, which declares that “ A person duly authorized to practice physic or surgery shall not be allowed to disclose any information which he acquired in, attending a patient in a professional capacity, and which is necessary to enable him to act in that capacity and, second, assuming that the statute does not apply to the case and that the certificate would be competent as an admission of the fact certified, if the proofs had been furnished by an adult claimant, can the act of the guardian in this case be treated as an' admission by the infant beneficiary of the same act?

Section 834 is a re-enactment of a similar section in the Revised Statutes. 2 Rev. Stat., 406, § 73. It is contained in the chapter of the Code relating to evidence, and in the article in that chapter entitled: “Competency of a Witness; Evidence in Particular Cases.” The primary purpose of the section was to declare the rule governing the examination of a physician as a witness in judicial proceedings. The three sections, § 833, § 834 and § 835, relate respectively to disclosures by clergymen, physicians and attorneys, and § 836 declares that “the last three sections apply to every examination of a person as a witness, unless the provisions thereof are expressed waived by a person confessing, the patient or the client.”

The disclosure by a o physician of information acquired in his professional character, in attending a patient, where not made in tbe course of his professional duty, is a plain violation of professional propriety. But the statute does not prescribe a rule of professional conduct for the government of physicians in their general intercourse with society. The common law did not protect a physician from disclosing as a witness information acquired professionally from patients. 1 Grreenl. Evidence, § 248. The statute was intended to afford this protection and to protect the patient also. If a physician, disregarding the plain obligations of his situation, should in conversation disclose the secrets of his patient, lie would, so. far as we know, violate no statute, however reprehensible his conduct would be.

The statute should have a broad and liberal construction, to carry out its policy. By reasonable construction it excludes a physician from giving testimony in a judicial proceeding in any form, whether by affidavit or on oral examination, involving a disclosure of confidential information acquired in attending a patient, unless the seal of secrecy is removed by the patient himself.

The verified certificate of the physician which accompanied the proofs of loss was not competent original evidence of the cause of the death of the insured, nor was it offered as testimony of the physician as to the fact. The fact that the insured died of delirium tremens was material to the defense. The admission of a party in interest is as a general rule competent evidence against him. The presentation of the physician’s certificate that the deceased died from the cause stated, operated as an admission by the guardian that the fact was as stated. It derived its force from the fact that the claimant communicated to the defendant a statement of the cause of death, which if true vitiated the policy. The statement was embodied in a physician’s certificate. If it had been contained in the guardian’s own statement, or that of 'any non-professional person, it would equally have been an admission of the fact stated. The certificate was á part of the proofs furnished. Its admission in evidence violated no confidence. The confidence had already been violated by the conjoint action of the phvsicián and the guardian. It was not offered as independent evidence of any fact in the case, but in connection with the circumstances of its transmission to the company, as an admission that the fact alleged was true. It was held in Insurance Co. v. Newton, 22 Wall., 32, that preliminary proofs presented to an insurance company under a provision in a policy, as to the proof of death, substantially like that in the present case, were admissible as prima facie evidence of the "facts stated therein against the insured and in behalf of the company. The case of Goldschmidt v. Mutual Life Ins. Co., 102 N. Y., 486; 2 N. Y. State Rep., 421, is not in conflict.

In that case the question was, whether the record and verdict of a coroner’s inquest, finding the fact of suicide, furnished by the claimant with the proofs, at the request of the company, but which was accompanied with a protest that the fact found was not true, was an admission by him that the insured died by his own hand, and the court very properly held that it was not We think the admission in the case was not incompetent because made through the medium of the certificate of the attending physician. The other ground for excluding the certificate, viz.: that the infant was not bound by the admission of the guardian, is, we think, well taken. The defendant, upon the request of the guardian, furnished blanks for the proofs, including a blank certificate of the attending physician as to the cause of the death, which were filled in by the guardian and signed and verified by the several persons whose certificates were required, and returned to the company. The office of a guardian is one of trust. He is empowered to act for the ward in the matters confided to him as guardian, in furtherance of his interests. Under the law of agency the admission, of an agent, made within the scope of his powers, are admissible in connection with some res gestee to bind the principal. But the admission must be relevant to the matter in hand and accompany the transaction to which it relates. Thallhimer v. Brinckerhoff, 4 Wend., 394. The power of a guardian to bind his ward by his admissions is more limited than that of an agent acting for an adult principal. The court will not permit the rights of a ward to be prejudiced by the admission of a guardian. His interests are under the protection of the court and it will intervene to relieve the ward from prejudicial conduct on the part of the guardian. It is a settled rule in chancery that where the infant defends by guardian, his rights are submitted to the court and he is not bound by admissions in the answer, and the court will not render a decree against the infant solely upon such admissions. Wrottesley v. Bendish, 3 P. Wms., 235; Bank U. S. v Ritchie, 8 Pet., 128; Cooper v. Hayhew, 40 Mich., 528; Ralston v. Lahee, 8 Iowa, 17; Massie v. Donaldson, 8 Ohio, 377; Turner v. Jenkins, 79 111., 229.

In the present case the guardian in furnishing the physician’s certificate did an act not required by the contract of insurance. Whatever was necessary to be done to enable the guardian to put himself in a position to prosecute the claim he was authorized to do. There is no ground for impeaching the good faith of the guardian in furnishing the certificate. He probably supposed that the company had the right to exact it. The company in remitting the blanks requested him to fill them up, and what he did was in compliance with its request. In procuring the physician’s certificate the guardian misapprehended his duty. It was an act tending to defeat the claim which he had undertaken to collect. The fact asserted in the certificate may have been the truth. But the guardian had no right to foreclose inquiry upon the subject, nor to prejudice the case by changing the burden of proof by an inconsiderate, unnecessary and prejudicial admission. See Serle v. St. Eloy, 2 P. Wms., 386; Flight v. Bolland, 4 Rus., 298; Hanna v. Spotts’ Heirs, 5 B. Mon., 362; Whart. on Ev., § 1208; McPherson on Infants, 83.

The offer of the defendant to show that by the rules and regulations of the defendant the certificate of the attending physician of the insured, in case of death, was required to be furnished as part of the proofs, was properly rejected. There is nothing in the contract or in the by-laws of the defendant requiring this, nor was it claimed that if such a rule existed it ever came to the knowledge of the assured. In the absence of any usage known to him, or of any requirement in the policy that the certificate of the attending physician should be furnished as part of the proofs of death, it could not be required. Taylor v. AEtna Life Ins. Co., 13 Gray, 434.

The court also properly excluded the records of the board of health of Buffalo and the certificate of the attending physician filed with the board, stating the cause of the death of the insured.

The statute, Laws of 1870, chap. 519, tit. 12, § 10, subd. 5, makes it the duty of the board of health of Buffalo to supervise the registration of deaths and causes of death in the city, and prescribes that no burial of a deceased person shall take place until a certificate shall have been made and presented of the death and its cause, if known, and that a refusal on the part of any person whose duty it is to make out and file for registration any such record shall be a misdemeanor. The ordinances of Buffalo also make it the duty of the attending physician to furnish a certificate setting forth the cause, date and place of death of any person in the city, and file the same in the office of the board of health. The statute and ordinance were police regulations, and the records were required for local and specific purposes, and are not public records in such sense as makes them evidence between private parties of the facts recorded. We have found no case which would justify their admission in a controversy between private parties as evidence of the cause of death where that became a material inquiry.

We find no error in the judgment, and it should be affirmed.

All concur.


author: O’Brien, J.

text:
    Michael Corcoran, Resp’t, v. The Delaware, Lackawanna & Western R. R. Co., App’lt.

      (Court of Appeals,

      Filed June 2, 1891.)

    Negligence—Railroads—Co-servants—Rules.
    Plaintiff, while in the service of defendant, was injured through Van Ness, a co-servant, allowing a car to be run down on the track striking the car under which plaintiff was working, although a red flag had been hung out at the end of the car. Defendant’s rules required men repairing cars to hang out a red flag, stated that it meant danger, and that trains should stop before passing such flag, and that employes should exercise the greatest care, etc. These rules were known to both plaintiff and Van Ness. Held, that defendant was not guilty of negligence in not having a rule forbidding the moving of other cars upon one carrying a red flag; that such idea was covered by the other rules.
    Appeal from judgment of the superior court of Buffalo, general term, affirming judgment in favor of plaintiff.

      John G. Milburn, for app’lt; Geo. W. Cothran, for resp’t
   O’Brien, J.

The plaintiff, while in the service of the defendant, was injured, in consequence of an accident which happened on the 15th of July, 1889, in the defendant’s yard in Buffalo. He had been in defendant’s employ from December previous, and his duty was to repair crippled or defective cars. On the day of the accident the plaintiff and another car repairer were at work under a broken car, on track Mo. 3, one of the tracks in the yard set apart for such repairs. One Van Mess, an assistant yard master in the defendant’s employment, had charge of the switch engine and the handling of cars in the yard where the plaintiff was at work. He had nothing to do with the repairing of cars, but simply with the movement and shifting of the cars in the making up and distribution of trains, and in placing injured or crippled cars on the tracks where the repairing was done. The car under which the plaintiff was at work repairing was about two hundred, feet west of the switch, and with no other car to the east between it and'the switch. West of this car the track upon which it was standing was occupied with cars, except there was a space not quite the length of a car between these standing cars and the one under which the plaintiff was at work. Whatever danger there was to the plaintiff, while at work under the car, was to come from the east, as that was the direction in which the switch was located. The plaintiff and the other car repairer first worked on the east end of the car, or the end nearest the switch. Having finished there, they went to work on the west end, first hanging out the usual red flag upon the east end of the car, so as to guard against danger from the direction of the switch. While they were thus working at the repairs, under the west end, Van Ness carelessly directed a car to be let in upon the track where they were at work,- which struck the car under which plaintiff was, thus causing the injuries complained of.

It appeared that during the time the plaintiff was in the employment of defendant it was customary with the car repairers, when at work under cars, to hang out a red fiag, which was the signal of danger, in order to protect themselves and to prevent other cars from coming in contact with the car which was being repaired. That Yan Hess, the assistant yard master, was guilty of negligence in moving the cars in upon track Ho. 3, and thus causing the injury to the plaintiff, is conceded. That he was a co-servant with the plaintiff in the employment of the defendant is undisputed. The plaintiff’s case is put entirely, in the complaint and on the argument in this court, upon the alleged neglect of the defendant to adopt and promulgate suitable and proper rules for the government and protection of its employes. The law imposed upon the defendant the duty to its employes of diligence and care, not only in furnishing proper and reasonably safe appliances and machinery, and skillful and careful co-employes, but also of making and promulgating rules, which, if faithfully observed, would give to them reasonable protection from injury. Abel v. D.& H. C. Co., 103 N. Y, 581; 4 N. Y. State Rep., 269; Slater v. Jewett, 85 N. Y., 61; Besel v. N. Y. C. & H. R. R. R. Co., 70 id., 171; Sheehan v. Same, 91 id., 339; Dana v. Same, 92 id., 639.

But we are of the opinion that, upon the undisputed evidence in this case, there was a substantial and reasonable compliance with this rule on the part of the defendant. The rules of this company, in force at the time of the accident, were given in evidence. One of them provided that “ Men repairing cars must see for themselves that they are protected by a flag when under and between the cars.” Another that “A red flag by day, red light or fire on the track by night, indicates danger; on perceiving such, the engineer shall immediately stop his train before passing such signal.” Rule Ho. 2, specially referring to the servants of the defendant, was in this language: “All employes of the company are expected and required, in all cases, to exercise the greatest care and watchfulness to prevent injury or damage to person or property. Vigilance and watchfulness insure safety. In all cases of doubt adopt the safe course.”

Rule 64 provided as follows : Every employe must acquaint himself with these rules and directions, and keep a copy of them in his possession. New rules are made from time to time as occasion requires. Notice of them is given on the bulletin boards of the company at Buffalo, East Buffalo, Elmira and Binghamton. Employes must keep' themselves informed of new rules by examining these bulletin boards.” It was showmthat the rules were printed on the back of the time tables and were kept for distribution at all points where the men could get them. They were kept for distribution in the office of the master mechanic and yard master at East Buffalo, where the plaintiff was at work. That the plaintiff knew the custom and regulation to hang out a red flag from a car which was undergoing repairs, and that he observed it on the occasion of the accident is clear. It is also undisputed that Van Ness, the person who had charge of the engine and the movement of the cars, knew that the plaintiff was engaged in repairing the car, as he pointed it out to the plaintiff and directed the repairs to be made. The trial court, under the defendant’s exception, submitted to the jury the question as to the sufficiency of the rules. The only suggestion made as to their insufficiency is that they did not, in terms, prohibit Van Ness, or the other co--servants of plaintiff, from moving other cars upon the one from which the red flag was shown and under which the plaintiff was. This idea, however, was neeessarilv included in the regulation which required a red flag to be hung out from a car in process of repair, and the rule must have been so understood by any person of common intelligence. It is not suggested' that Van Ness was ignorant of the meaning of the signal. The rule would not be any more effective to prevent ihe accident, or more likely to insure observance, had it been followed by a provision, in express. words, forbidding the employes from moving cars against -or in the direction of another car from which a flag was exhibited. We think that there was no proof of neglect on the part of the •defendant to make and promulgate suitable and proper rules for the information and government of its employes to warrant the submission of the case to the jury. The accident was caused by the carelessness of Van Ness, a co-servant, in leaving the switch ■open and letting in the other cars upon the track where the plaintiff was at work, and not by any omission of duty on the part of the defendant to make and promulgate proper rules, and for his negligence it is conceded that the defendant is not liable. The defendant’s counsel requested the court to charge: “ That if the ■cause of the accident was the act of Van Ness, knowing that the plaintiff had gone to this car to repair it, in having the switch -opened and letting the other car come in contact with the car under which the plaintiff was working, that the plaintiff cannot recover.” The court declined so to charge, and the defendant’s counsel excepted.

If the carelessness of a co-servant was the sole cause of the accident then, clearly, there could be no recovery. The request embodied this rule, and it had a direct application to the facts of the case, and we think it was error to refuse to so instruct the jury.

There are two or three other rulings of the learned trial judge, upon requests to charge, that would be difficult to sustain, and at least, one exception to the charge as made that presents a serious question, but, as there must be a new trial for the reasons, stated, it is unnecessary to further consider them.

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

All concur, except Gray, J., absent.


author: Gray, J

text:
    Etta L. Alexander, Resp’t, v. The Rochester City & Brighton R. R, Co., App’lt.

      (Court of Appeals,

      Filed June 2, 1891.)

    Negligence—Street rallroads.
    Plaintiff was a passenger on one of defendant’s cars. As she arose to ring the hell a wagon, coming in the opposite direction on the other track, when abreast of the car was suddenly turned off the track by the driver so that the ends of the lumber with which it was loaded were suddenly thrust through the car window, striking plaintiff in the back. The driver glancing in the mirror saw the wagon turning and set his brake, and the only damage to the car was the breaking of the window, the wood work not being touched. Held, that defendant was not guilty of negligence, and it. was an error for the judge to deny a motion for a non-suit.
    Appeal from judgment of the supreme court, general term, fifth department, affirming judgment in favor of plaintiff, entered upon the verdict of a jury in a cause tried at the Monroe circuit.

      Thos. Raines, for applt; P. Chamberlain, Jr., for resp’t.

       Reversing 85 N. Y. State Rep., 701.

   Gray, J

the trial of this action I think the plaintiff' failed to make out a case of negligence against the defendant, and, therefore, established no right to recover damages for the injuries, she has sustained. The evidence is utterly wanting in this record from which it might be inferred that the accident was in the slightest degree attributable to any act of omission or commission on the part of the car driver. Her own narrative of the occurrence and that of her witness, a fellow passenger, do not conflict with the car driver’s version, and it is plain, and above any reasonable doubt, that the incident was one which no one, in the exercise of ordinary human foresight, or of that prudence which should characterize human action when entrusted with responsibility towards others, could have anticipated. The horse car, in which the plaintiff was riding, was proceeding on its way, in the city of Rochester, upon the northern-most of the two tracks of the defendant’s road. Coming in the opposite direction, and using the rails of the other track, was a wagon heavily loaded with lumber. When this wagon was abreast of the car, ftsdriver suddenly turned off the track, and in doing so the ends of the lumber, which projected from the after part of the wagon,, were jerked or thrust by the sudden movement of turning through one of the car windows, striking the plaintiff a blow in the back. At the moment she was rising from her seat to pull the car strap -for the purpose of signalling the driver to stop at the street corner they were nearing. Her eye glancing out of the car caught a view of the wagon. When asked as to what she saw, she testified: “It was on the opposite track, turning off from it; it was about at right angles when I saw it”

Then, more particularly, she testified: “He (the wagon driver), was turning off the track at the time of this occurrence. * * * He was at about right angles with the track when I saw it; this was at the time, at the moment, that I was struck, at the moment the lumber came through the window; he was then at about right .angles; I had not observed him turning off the track before I was struck; I saw him just at the time. * * * My attention happened to be drawn off that way so as to notice him before I was hit.” Again she describes the occurrence: “ We were going in opposite directions; this lumber wagon and team were going up the street, as we call it, and I was riding down; the teams had passed each other, the teams of the car and lumber wagon, and the drivers had passed by each other; and as much ■of the car as was in front of me had passed by the lumber wagon •and its load ; I did not observe the driver of the lumber wagon when he commenced to turn.

“Q. You observed the act of turning? A. As he was turning.

“Q. And then almost immediately after you observed his act of turning you were struck ? A It was all at the same time and I was struck by the ends of the rear of the load.” * * *

The driver is the only other witness in the case whose evidence .gives any information about the movements of the wagon. From his account it appears that when he first saw the wagon it was coming towards him on the other track; following behind a street car. The road was clear before him and he was going along, passing the car and wagon, with nothing to attract his attention ; when, happening to look up in his mirror, he saw the wagon driver in the act of turning out and he at once set his brake and stopped the car, fearing some injury from the load. He testified that neither at the time when the team of the lumber wagon passed his team, nor when the wagon passed, had he seen any movement towards turning out The whole load had gone by him and it was owing to his glancing into his mirror that he noticed the sudden movement of the lumber teamster and was enabled to set his brakes to arrest his own motion.

The suddenness and rapidity with which the car was struck by the wagon load are evidenced by the fact that the breaking of the car window pane was the only damage inflicted upon the car. The woodwork was not even touched. This proved the striking of the car to have been caused by the jerk or violent movement necessarily imparted to the wagon body by the driver’s attempt to take his wagon wheels so abruptly out of the rails. The driver of the wagon was never found, and the description of the incident is thus confined to the testimony of the plaintiff and the car driver; which agree upon these essential features. The testimony of the witness, who was a passenger in the car, relates only to what took place at the time the plaintiff was struck; except that he testifies to the rapid rate at which the car was proceeding. And the evidence as to the high rate of speed constitutes, in effect, the only real basis upon which the respondent’s counsel founds his argument in support of this large "and extraordinary recovery. He claims that “ the approximate cause of the accident and injury was the high and dangerous rate of speed at which the car was being driven,” and he argues that if the driver had been proceeding at a more moderate speed he could have stopped his car and avoided the collision. I do not perceive the force of this argument. Assuming the rate of speed to have been unusual, even, the speed of the car had nothing to do. with the occurrence. The track was clear, ahead of the car driver; the lumber wagon was where it could not possibly collide with the car,, and there was nothing to indicate to the car driver that the teamster intended to change the course of his wagon. He had every right to suppose, if there was reason for his dwelling upon the very common occurrence of a wagon using the other track, that, it would not turn off in the middle of a block; but that it would continue on. It' cannot be assumed from the evidence what, if the car had been running at a slow rate of speed, would have been the result of the wagon driver’s act of suddenly turning off the rails. IE conjecture were admissible it might bear either way upon the cause's of this occurrence. If I were to conjecture upon the effect of the rapidity of the car’s movement, I should incline to the supposition that it may have prevented a severer collision.

The facts of the case permit no inference of fault in the driver. He had nothing to warn him, or even to suggest to him an impending or possible collision of the wagon with any part of his car. He was evidently alert, for he had his brake so well in hand as to be able to stop the 'car at once. He was not bound to infer the existence of danger from the approach of a wagon upon the other track. So far as be was concerned in the causes of the plaintiff’s injuries, his action was no more a procuring element than if, when abreast of the car, the wagon driver had suddenly turned bis team and intentionally driven his pole or wagon into the car. The driver of the wagon had a right to use the street railway track,, and his use of it would have led to no injurious result in this case-if, in order to leave it at that place, he had not turned his wheels so abruptly as to throw or swing the end of his wagon body around and against the passing car. It. was his negligent and reckless act which directly caused the injury to the plaintiff, and the case fails to disclose any neglect on the driver’s part which cooperated to occasion that result. As the case stood upon the evidence no inference was permissible that the defendant had failed in its obligation to carry the plaintiff with that care and vigilance which are imposed by law upon such a carrier of passengers, and to allow the jury to pass upon the issue was to invite a verdict for the plaintiff based solely upon a sympathy for her sufferings. It was distinctly error in the trial judge to deny the motion for a. nonsuit. The judgment was sought to be upheld below by reference to the case of Hill v. Ninth Ave. R. R. Co., 109 N. Y., 239; 14 N. Y. State Rep., 844, That decision is not in point. There the street car, while moving at unusual speed, was struck by the pole or shaft of a truck, which penetrated the front panels of the car with force sufficient to injure a passenger. Plainly enough, such an occurrence suggested some possible negligence in the car driver and called for some explanation of siich a collision. An inference was justifiable, on the plaintiffs proof, that the car driver might have avoided the collision, or lessened its effect, and, therefore, it was error to dismiss the complaint The very nature of the accident in that case raised the inference that the driver must have been reckless and that there might have been some way to avoid it by prudent driving, while here there was only reason to believe that the car driver could have done nothing to avoid the consequences of the teamster’s conduct.

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

All concur.


text:
    In the Matter of the Estate of James D. Prout.

      (Court of Appeals,

      Filed June 2, 1891.)

    1. Executors and Administrators—Ancillary letters—Bond — Code Civ. Pro., § 2699.
    The exception in § 2699 of the Code of Civil Procedure, allowing the penalty in the bond given on the granting of ancillary letters to be fixed at double the amount of debts, was intended to give the surrogate a discretion to modify the general rule declared in § 2698, and to accept a bond less in amount than that prescribed in ordinary cases of administration if, by reason of adequate security having already been given, additional security for the protection of the general interests was not in his judgment required, or where the' next of kin had consented to waive security, and in the case of domestic creditors where their protection was the only interest involved, to prescribe a limit beyond which security should not be exacted.

      2. Same.
    But said section does not restrict the power of the court under § 2698 to require a bond in double the amount of the personal property in this state, especially where the bond given in the foreign state on the original letters was limited to double the amount of property in that state and ignored the much larger amount in this.
    Appeal from judgment of the supreme court, general term, second department, affirming an order of the surrogate of Kings county which fixed the penalty of the bond to be given by the proposed administrator at double the value of personal property in this state.

      Wm. J. Groo, for app’lt; G. H. Crawford, for resp’t

       Affirming 34 N. Y. State Rep., 318.

   Andrews, J.

The question turns upon the power of the surrogate to require an administrator’s bond in double the value of the personal estate, in this state, of James D. Prout, who at the time of his death was a resident of New Jersey, as a condition to the grant of ancillary administration. The personal estate of the decedent at the time of his death consisted of personal effects of the value of about $2,500, in ¡New Jersey, and of stocks and securities of the value of about $40,000, deposited with a safe deposit company in the city of Brooklyn. On the 1st day of August, 1889, letters of administration were issued by the probate court of ¡New Jersey to the widow of the decedent upon her petition, setting forth that the personal estate of the decedent in that state did not exceed the sum of $2,500. The administratrix, on the granting of the letters, executed her bond with sureties in the penal sum of $5,000 to the surrogate of Monmouth county, ¡New Jersey, where the decedent resided, conditioned to account for the personal estate of the intestate “ in the state of ¡New Jersey,” which has or shall come to her hands. The petitioner did not disclose in her petition the fact that there was any other personal estate of the decedent beyond what was in his actual possession in that state at his decease. On the 1st day of April, 1890, the widow, who with her infant child had become a resident of Brooklyn, applied to the surrogate of Kings county, by petition, for ancillary letters of administration, the petition setting forth, among other things, the granting of the letters in New Jersey, and that the decedent left personal estate in Kings county .of the value of about $40,000, and that one Moses P. Prout, of Brooklyn, is or claims to be a creditor of the decedent, and that there was no other person claiming to be a creditor known to the peti-. tioner.

The surrogate thereupon issued a citation to creditors of the decedent and on the hearing Moses P. Prout presented affidavits to the effect that the decedent was indebted to him in the sum of $7,371.73 with interest; that the decedent at his death was the owner of securities to the amount above mentioned, deposited in a safe deposit company in Brooklyn ; that the only security given by the administratrix was the bond of $5,000 and that she had no pecuniary responsibility apart from her interest as widow in the estate of the decedent. The surrogate made an order that ancillary letters be granted.to the widow on condition that she should give a bond, with sureties, to be approved by the surrogate, in a penalty of double the value of that part of the personal estate of which the deceased died possessed which at his death was within the county of Kings.

The administratrix appeals from the order on the ground that the surrogate had no power to require a bond upon the application for ancillary letters in a penalty exceeding twice the amount of the debts owing by the intestate to creditors within the state. This question depends upon the true construction of § 2699 of the Code of Civil Procedure. That section is as follows:

“ Upon the return of the citation, the surrogate must ascertain, as nearly as he can do so, the amount of debts due, or claimed to be due, from the decedent to residents of the state. Before * ancillary letters are issued, the person to whom they are awarded must qualify, as prescribed in article fourth of this title, for the qualification of an administrator upon the estate of an intestate, except. that the penalty of the bond may, in the discretion of the surrogate, be in such a sum, not exceeding twice the amount which appears to be due from the decedent to residents of the state, as will, in the surrogate’s opinion, effectually secure the payment of those debts; or the sums which the resident creditors will be entitled to receive, from the persons to whom the letters are issued, upon an accounting and distribution, either within the state, or within the jurisdiction where the principal letters were issued.”

If the surrogate had power to impose as a condition to the granting of letters ancillary that the administratrix should give a bond to secure the whole fund which might come to her hands by virtue of such letters, the imposition of the condition was a discreet exercise of such power. The general rule in this and other states requires that the administrator should give security in double the value of the personal estate of an intestate before assuming the administration. The actual location of the personal estate, or of the securities by which it is represented, is not, under our statute, material in determining the amount of the bond in a case of purely domestic administration, for the rule that personal property is deemed to follow the person of the owner fixes the legal possession in the intestate at his place of residence, wherever, in fact, the property may be. Where the administrator has properly qualified and assumed the administration in the state of the domicil, he is invested with power to receive the debts owing to the intestate and take possession of the securities, and give proper acquittances wherever the debtors or securities may be, whether within or without the state.

But where a debtor or the securities are in a foreign jurisdiction, and are not voluntarily paid or surrendered to the administrator of the place of the domicil of the intestate, the courts of the foreign jurisdiction will not enforce the recovery of the debts or securities upon his application, until he has procured ancillary letters or a new administrator has been authorized under the laws of the place where assets may be. It is unnecessary to enter into the reasons of this rule. They are familiar, and the rule has been frequently recognized. See Parsons v. Lyman, 20 N. Y., 103; Despard v. Churchill, 53 id., 192; In re Hughes, 95 id., 55. The unquestioned rule of the common law that the succession to and the distribution of the estate of an intestate is governed by the law of the domicil, makes security there taken on the granting of letters of administration covering the whole personal estate of the intestate an adequate protection to all parties interested, and where ancillary letters are applied for in another state or jurisdiction, there would not seem to be any necessity that additional security should be required were it not for another principle almost universally recognized, that the claims of creditors living in a jurisdiction where ancillary letters are sought are entitled to have their just right in the assets of the intestate secured by a proper bond as a condition of granting the application. To this end security is usually required to be given by the applicant for ancillary administration enforceable in the tribunals of the place for the protection of creditors therein residing. The course of legislation in this state upon the subject of ancillary administration and the security required may be briefly stated. The Revised Statutes enacted that “ every person appointed administrator ” should give a bond in a penalty not less than twice the value of the personal estate of which the deceased died possessed. Provision was made for granting letters on the application of foreign executors or administrators where persons not inhabitants of this state shall die leaving assets here. Sec. 31.' There was no provision exempting persons applying for ancillary letters from the operation of the general rule declared in § 42, and it would seem that they, as well as domestic administrators, were required to give a bond in a penalty of twice the value of the property upon which administration was sought. Section 2699 of the Code of Civil Procedure undertook to define the practice on the application for ancillary administration, which was left much at large under the Revised Statutes. In construing the section the various conditions to be provided for may justly be considered. There might be domestic creditors entitled to protection. The assets in this state might be less or more than sufficient to provide for the rights of citizens here. Or again there might be no creditors. Ancillary letters may become necessary to enable the administrator or executor to recover assets by hostile proceedings out of the jurisdiction where the principal letters were issued.

It is contended on the part of the appellant that on an application for ancillary letters under § 2699 no security can be required in any case exceeding twice the amount of claims of domestic creditors and that the discretion of the surrogate is only to be exercised within this limit. It is evident that this construction would in the present case defeat the general policy which requires an administrator to give adequate security for the whole estate which may come to his hands. The security given in New Jersey was limited to the sum of $5,000, double the value of the personal estate of the intestate in his actual possession there, taking no account of the much- larger amount in this state, and this course seems to have the sanction of the New Jersey courts. Lewis v. Grognard, 17 N. J. Eq., 425.

The contention of the appellant, if sustained, would enable the administratrix to take into her possession $40,000 in securities belonging to the estate without any security except a bond not exceeding double the amount of the debt of $7,305, alleged to be due to Moses P. Prout It may be, then, that the primary purpose of § 2699 was the protection of domestic creditors. íhe citation is required to be issued to creditors only. Sec. 2698. The legislature may have assumed that proper and adequate general security would be exacted by the law of the place of the principal administration. But although the language of § 2699 is vague, we think it is capable of a construction which will subserve the general-policy of the law. The legislature in this section first declares a general rule that before ancillary letters are issued the person to whom they are awarded must qualify as provided in the fourth article of the title for the qualification of an administrator upon the estate of an intestate. Referring to the fourth article, it is found that § 2667 prescribes as one of the acts to be done by an administrator to qualify him for the office, that he shall execute a bond in a penalty not less than twice the value of the personal property of which the intestate died possessed, subject to certain exceptions, one of which is that with the consent of all the next of kin of the intestate the bond may, upon notice being given to creditors, be limited to twice the amount of their debts. The exception in § 2699 was, we think, intended to give the surrogate a discretion to modify the general rule declared in the preceding clause and to accept a bond less in amount than that prescribed in ordinary cases of administration, if by reason of adequate security having already been given, additional security for the protection of the general interests was not in his judgment required, or where the next of kin had consented to waive security, and in a case of domestic creditors, where their protection was the only interest involved, to prescribe a limit beyond which security should not be exacted.

It is somewhat difficult to so construe the language. But the solicitude with which courts guard the rights of infants and persons standing in the relation of beneficiaries of trusts, and the uniform policy in respect of security required of administrators, justify the court in going to the verge of construction in order to protect parties so situated and to carry out the general policy of the law.

We think the order should be affirmed.

Order affirmed, with costs.

All concur.


author: Vann, J.

text:
    Josiah Lockwood, Resp’t, v. Edward Gehlert, Appl't.

      (Court of Appeals, Second Division,

      Filed June 2, 1891.)

    1. Taxes—Sale—When title passes—Laws 1882, chap. 410, §§ 943, 946. . The title to lands sold under the Consolidation Act for non-payment of taxes passes when the comptroller certifies under his hand and seal to the fact that the notice has been served upon the owner, and that the moneys required to be paid for redemption have not been paid.
    2. Same—Sealing necessary.
    A certificate subscribed by the comptroller but not sealed by him, does not pass the title, notwithstanding a subsequent comptroller attaches the official seal thereto.
    Appeal from a judgment of the general term of the supreme court in the first judicial department, affirming a judgment entered upon the decision of the court at special term.
    Action of ejectment to recover possession of a parcel of land situate near the corner of Fourth avenue and One Hundred and Twenty-sixth street in the city of New York.
    The defendant by his original answer simply denied the title of the plaintiff, and by a supplemental answer he alleged title in himself under a tax lease for the term of 1,000 years. Upon the trial, however, his counsel announced that he made no question as to the plaintiff’s chain of title, and the only issue tried was as to the defendant’s title under his lease.

      The trial court found, upon the request of the defendant, that the tax sale, pursuant to which said lease was given, “ and all proceedings prior thereto, from and including the assessments on said premises for taxes and Croton water rents, and all notices required by law to be given previous to the expiration of the two years allowed to redeem, were regular and according to the provisions of the statute in such cases made and provided.”
    Further facts appear in the opinion.

      David Gerber, for app’lt; John Townshend, for resp’t.

       Affirming 24 N. Y. State Rep., 245.

   Vann, J.

It is conceded that the plaintiff was entitled to recover possession of the premises in question, unless his title thereto was divested and transferred to the defendant, for the period of the lease, by virtue of proceedings taken to enforce collection of the tax. As the regularity of procedure up to and including the sale is not questioned, it will be necessary to examine only those sections of the statute that govern the subsequent proceedings.

After the delivery to the purchaser of a certificate of sale, as required by § 926 of the consolidation act, Laws of 1882, chap. 410, the next step is the publication of a notice that “ unless the lands and tenements sold be redeemed by a certain day, they will be conveyed to the purchaser.” If the premises are not redeemed within two years from the date of the certificate, the comptroller is required to execute to the purchaser a lease thereof “for such term of years as the same shall have been sold, * * * and such purchaser * * * shall in virtue thereof and of this title lawfully hold and enjoy the said lands and tenements in said lease mentioned for his * * * own proper use against the owner or owners thereof and all claiming under him until such purchaser’s term therein shall be fully complete and ended, * * * provided that such lease shall not be executed and delivered until the expiration of six months after the publication of ” said notice to redeem. Id., § 941. The title referred to includes all of the sections of the act relating to “ sales of land for taxes, assessments and water rates.”

The grantee is required to serve upon the occupant, if there is one, and in all cases upon the owner of the property so conveyed, a written notice stating certain facts, and that unless the sum paid upon the sale and forty-two per centum additional, together with the expenses, shall be paid to the clerk of arrears for the benefit of the grantee within six months after the service of such notice, “ the said conveyance will become absolute and the owner, occupant and all others interested in the lands and tenements be barred from all right and title thereto during the term of years for which such lands or tenements shall have been conveyed.” No conveyance so made, as aforesaid, “ shall be recorded,” as the statute further provides, “ until the expiration of such notice and the evidence of the service of such notice shall be recorded with such conveyance.” Id., § 943.

After prescribing how the notice shall be served, it is next provided that “ the grantee, or the person claiming under him, in order to complete his title to the land conveyed, shall file with the said clerk of arrears, an affidavit * * * that such notice was duly served, specifying the time of service, the mode and manner of service, and a copy of such notice shall be attached thereto.” Id., § 945.

The remaining provisions, directly applicable to the case in hand, are as follows, viz.:

“ Section 946. If the said comptroller shall be satisfied by such affidavit that the notice has been duly served, and if the moneys required to be paid for the redemption of such lands or tenements shall not have been paid as hereinbefore provided, he shall, under his hand and seal, certify to the fact, and the conveyance shall thereupon become absolute, and the owner and all others interested in the lands or tenements shall be barred of all right thereto during the term of years for which the same shal have been conveyed.
“ Section 941. The owner, occupant, or any other person, may at any time within the six months named- in such notice redeem the lands and tenements by paying such purchase money, with the addition of forty-two per cent thereon, and the amount that shall have been paid for the lease, and every such redemption shall be as effectual as if made before the conveyance of the lands or tenements sold.”

All of the proceedings required by these provisions of the statute were duly taken by or in behalf of the defendant, except that the certificate of the comptroller, required by § 946, bad no seal. A certificate was given March 24, 1885, by Mr. Loew, the comptroller then in office, proper in form, and duly signed, but not sealed. After Mr. Loew’s term of office had expired, but before any attempt at redemption, Mr. Myers, the succeeding comptroller, caused a seal to be affixed to the certificate made by his predecessor, and at the same time application was made to him in behalf of the defendant for a new certificate, which does not appear to have been made. Mr. Loew testified that he was “ satisfied ” as to the facts stated in the certificate when he made it, but there is no evidence that Mr. Myers was thus “ satisfied,” or that he examined the affidavit before the seal was affixed.

Shortly afterward the plaintiff, claiming that he had a right to redeem until a proper certificate was made, tendered the amount required for that purpose, and the clerk of arrears receipted for the same under the compulsion of a judgment recovered against him by this plaintiff in an action brought to compel redemption, but to which this defendant, although notified of the pendency thereof, was not a party.

The question presented for decision is not whether the defendant is entitled to have his lease made absolute, but whether it was already absolute at the time of the trial, so that the plaintiff was then barred of all right to the premises during the term of the lease. If a'l of the provisions of the statute were fully complied with except the final act, and that was necessary to complete the defendant’s title, it is clear that until that act has been performed he is not entitled to possession as against the plaintiff. When, therefore, does the title to lands sold under the Consolidation Act for non-payment of taxes pass from the owner to the purchaser ?

The defendant claims that it passes upon the expiration of the period specified in the six months’ notice to redeem, provided due proof of the service thereof has been filed, and that “ the object of the comptroller’s certificate is not to complete the title, but to-guard against the lease being recorded before the service of the notice to redeem and the expiration of the time fixed therein.’’ This position, however, does not accord with the statute as we read it, nor with the decisions of the courts in analogous cases. A freeholder cannot be deprived of his land under the taxing power of the state unless the procedure prescribed, when strictly construed, is substantially complied with. Th'e object of the statute is not simply to collect the tax, but also to carefully protect the land owner from sacrifice. After the sale is completed the tax is collected and the demand of the state thereby satisfied, but much more must be done before the title of the purchaser is completed and the owner deprived of his land. A two-year notice to redeem is first given by publication, and six months after, if redemption is not made, a lease is given, but it does not entitle the purchaser to possession. The provision in § 941 as to the rights of purchasers holding leases refers to the lease when completed by the subsequent proceedings, for the purchaser holds and enjoys, “ in virtue thereof,” that is of the lease “ and of this title,” which includes all of the provisions relating to the subsequent proceedings to make the conveyance absolute.

After constructive notice to redeem has been given for two years, actual notice to owners and occupants is required by the service upon them personally of a six months further notice to redeem, except that a non-resident of the city may be served by mail, and a resident may be served by leaving the notice at his dwelling-house.

The lease or conveyance cannot be recorded until six months after this notice has been served and the evidence of service must be recorded therewith. The purchaser, “ in order to complete his title,” must also file with the clerk of arrears an affidavit “ that such notice was duly served.” Finally the comptroller, if “ satisfied by such affidavit that the notice has been duly served,” in case the money to redeem has not been paid, is required to “ certify to the fact and the conveyance shall thereupon become absolute,” and the owner barred. The language of the statute indicates that all of the proceedings prior to the comptroller’s certificate are simply steps in the process of completing the title and that it is incomplete until that certificate is made. Upon performance of that final act the title passes, for until the conveyance has. become absolute and the owner is barred, the title of necessity must continue in him, as it can be in no other person. “Thereupon,” as used in the section under consideration, (946), is the significant word that determines when the title of the purchaser is complete so that he is entitled to possession. As the title passes “ thereupon,” that is upon the giving of the certificate, it could not have passed before.

The authorities are uniform in supporting the construction thus indicated.

By a general statute relating to the assessment and collection of taxes, passed in 1819, a system of procedure was established quite similar to the one under consideration, and among other things a like certificate was required from the state comptroller. Laws of 1819, chap. 201, § 5. It was held under that act that title could be perfected only by giving the notice to redeem and obtaining the certificate of the comptroller. Jackson v. Esty, 7 Wend., 148.

Under the Revised Statutes, which contain provisions to the same effect in regard to occupied lands, and substantially identical in language with §§ 945 and 946 of the Consolidation Act, it has been held that the comptroller’s certificate is a condition precedent to the vesting of title in the purchaser. Bush v. Davison, 16 Wend., 550, 556; Smith v. Sanger, 3 Barb., 360; reversed, but upon the question of occupancy only, 4 N. Y., 577; Lucas v. McEnerna, 19 Hun, 14, 15; 1 R. S., 413. See, also, Stewart v. Crysler, 21 Hun, 286; S. C., 100 N. Y., 378, 385; Caulkins v. Chamberlain, 37 Hun, 163.

As the certificate required by § 946 was essential to complete the defendant’s title, the question remains whether the certificate given to the defendant conformed to the statute.

It is contended that the seal is unnecessary and that the provision for its use is merely directory. It is mandatory in form, for the statute commands that the comptroller “ shall under his hand and seal certify to the fact.” If not mandatory as to the seal, is it mandatory as to the signature ? If the courts, by construction, may dispense with the one, why may they not dispense with the other, or with both ? Under a statute of Ohio that required the state auditor to transmit to the county auditor certain lists of unpaid taxes, “ said lists to be certified and signed by the auditor of state, and to have thereto affixed his seal of office,” it was held that the omission of the official seal was fatal. Hannel’s Lessee v. Smith, 15 Ohio, 134. So the signature of an officer, without his title, Spear v. Ditty, 9 Vt., 282, or with the wrong title, when, as collector, he was required to sell, and as town clerk to record, has been held to vitiate a sale for taxes. Isaacs v. Shattuck, 12 id., 668.

When a statute provides that a seal shall be used, we have no power to adjudge that a signature without a seal is sufficient. The legislature saw fit to specify the method of authenticating the certificate, which, as we have seen, is the culminating act in transferring the title to land for non-payment of taxes, and we regard every part of the requirement as mandatory. This is in accordance with the rule of strict construction that appertains to the subject. 1 Blackwell on Tax Titles, § 469, 5th ed.

Was the signature of one comptroller and the seal of another sufficient to satisfy the statute ?

Assuming that the seal was in no sense personal, but that it was the seal of the comptroller’s office, and in that sense continuous, what was its effect as thus affixed ? If the other requirements of the statute were complied with, the proper use of the seal completed the certificate and the certificate completed the title of the purchaser. By whom, and under what circumstances can the seal, having this vital function, he lawfully affixed? Two facts must co-exist before the seal can be thus used: 1. The comptroller must be satisfied by the affidavit that the notice has been served; 2. The redemption money must remain unpaid. Whether the comptroller should certify to both facts, or only to the latter, as was held in Caulkins v. Chamberlain, supra, is not in this case important, but it is essential in all cases that both should exist. The first involves a judicial act on the part of the comptroller, for he can be “ satisfied,” within the meaning of the statute, only by examining the affidavit and officially deciding that it proves service of the notice upon the proper persons and in the proper manner. Id., 169. If thus satisfied he must sign and seal the certificate, as the exclusive evidence of his judicial action, provided the money has not been paid. Such an act is necessarily personal to the extent that it cannot be performed in part by one comptroller and in part by his successor, because the signing and sealing authenticates the judicial decision of the officer who made it, the same as the signature of a judge authenticates his decision upon the trial of an action. No one would claim that a judge could effectually sign a decision made by his predecessor. We think, as was pointedly said by the learned trial judge, that “the hand of one comptroller and the seal of another will not answer. One mind must be satisfied, and that satisfaction expressed by the hand and seal of the official who made it.” If this is not so, when did the title pass; when Comptroller Loew signed, or when Comptroller Myers sealed ? If it passed under the hand of the former no seal was necessary, and the command of the statute is disregarded. If it passed under the seal of the latter, an essential step in authenticating a judicial act was taken by one who took no part in the decision. Marsh v. Nichols, 128 U. S., 605 ; Deputron v. Young, 134 id., 253.

Our conclusion is that the defendant had no title to the premises in question, and no right to the possession thereof, because the required certificate was not sealed by the officer who signed it.

The judgment, therefore, should be affirmed, with costs.

All concur.