author: Finch, J.

text:
    Oliver H. Booth et al., Ex’rs, Resp’ts, v. The Baptist Church of Christ et al., Resp’ts, and Cornelia Van Kleeck et al., App’lts.

      (Court of Appeals,

      Filed April 14, 1891.)

    1. Will—Suspension op power op alienation.
    Testator by his will attempted to give a large amount to the "John Guy Vassar Orphan Asylum,” an institution not incorporated or in existence at the time of his death, by directing that the executors, as soon as practicable, should procure from the legislature an act of incorporation under which the institution should be organized, and thereupon the property devised and bequeathed should be transferred to it. The executors obeyed the direction, such an act being passed four months after his deaih. Held, that the devise and bequest were void as suspending the power of alienation of real and the ownership of personal property for an indefinite period not measured by lives in being.
    2. Same—Charitable bequests.
    Testator gave “to the Baptist church of Poughkeepsie * * * the sum of ten thousand dollars in ten one thousand dollar bonds towards paying the mortgage and other debts of the church, provided said church shall raise a sum sufficient, with this legacy, to pay off such mortgage and other debts of said church within two years of my decease; and in case of failure to do this, then this legacy shall lapse and go into the residuum of my estate.” Held, invalid.
    3. Same.
    The will contained a residuary clause which gave and devised all the rest and residue of his estate to the “John Guy Vassar Orphan Asylum, when incorporated, the Vassar Brothers’ Hospital and Vassar Colic ‘e, equally, share and share alike,” and by the thirty-eighth clause directed that if any of the gifts or devises should be adjudged void or illegal, then the property should go to the executors in trust to carry out the end and objects designed by him in such void and illegal gifts and devises. Held. that the_ testator’s meaning was to carry over to'his executors only such dispositions as_ utterly failed, and not those which, failing in one direction, were yet within the scope of the residuary clause and saved by it, and that it was not restrictive of the real residuary gift.
    4. -Same.
    The legacy to the church and asylum fell into the residue and increased its volume. To one-third the residue thus swollen Vassar college is entitled; to another the Vassar Brothers has a lawful claim, and the remaining third goes to the heirs and next of kin.
    5. Same—Ultra vires.
    Testator gave certain sums to the Home, the Hospital and the Institute, upon condition that each should pay annuities of specified amounts equal to the accruing interest to certain persons for their lives. Held, to be-valid bequests, as capacity to take gifts did not require the corporation to apply their own money or property to unauthorized purposes, as the principal only came to them, the interest and income to the annuitants; the testator having made provision for the reduction in the rate of interest by charging any shortage upon his residuary legatees.
    6. Same—General or specific legacy—Memorandum.
    Testator gave to the institute$10,000 "in one hundred shares par value $100 a share of the capital stock of some good railroad or coal company guaranteed, tobe selected .from my securities as its own;” adding “ among my papers will be found a memorandum of various securities I have se lected for the payment of the several legacies.” Such a list was found, with the will setting apart specified stock to the Institute. Held, that the memorandum could not be received as a part of the will, so as to change; a general into a specific legacy. ’
    7. Same—Costs.
    As the collateral heirs compelled this litigation and put all the other parlies on the defensive, and claimed more than belonged to them, and only succeeded in some respects, and as wnat they wrest from the charities is against the intention of the testator and in spile of his avowed purpose, all the costs should come out of the share which devolves upon. the heirs and next of kin.
    Appeal from judgment of the supreme court, general term, second department, affirming judgment of special term.

      Henry M. Taylor, for app’lts; Frank Hasbrouck and Homer A. Nelson, for resp’ts.
   Finch, J.

John Guy Vassar made his last will and testament, declaring his general purpose at the beginning of his dispositions, in these words : “ Having no lineal heirs my desire and aim in the disposition of my property are to do the most good, and to forward the cause of humanity.” His collateral relatives, mostly cousins, and to the number of about fifteen, availing themselves-of their legal right to warp his purposes and divert to their own use what he devoted to charity, have assailed all the substantial dispositions of the testator as illegal and invalid. The provisions, for the benefit of Vassar College have in part been saved from the risks of the litigation by a compromise, and have been withdrawn from the peril to which they were originally exposed; but. enough of the dispositions remain to involve a very large portion of the estate, and to require of us a determination as to their construction and validity.

The testator attempted to give to the “John Guy Vassar Orphan Asylum ” a large amount of real and personal property. "When he made his will and at the date of his death no such institution had been incorporated or come into existence. To meet-that difficulty the will directed that the executors, as soon as practicable, should procure from the legislature an act of incorporation under which the institution should be organized, and thereupon the property devised and bequeathed should be transferred to it The executors obeyed the direction. Such an act-was passed about four months after the testator’s death, and the corporation at that time created claims to be entitled to receive his intended bounty. The collaterals object that the devise and bequest are void as suspending the power of alienation of real,. and the ownership of personal property for an indefinite period, not measured by lives in being. The authorities in this court, from Leonard v. Burr, 18 N. Y., 107, to Cruikshank v. Home for the Friendless, 113 id., 337; 22 N. Y. State Rep., 738, fully support the contention of the next of kin. They hold in substance that such suspension may be effected either by the creation of a trust which renders the property inalienable while the trust estate continues, or by creating a future estate by way of executory devise or contingent remainder.

Of the latter class of cases it was said that “ as it cannot be known in whom the future estate will ultimately vest, and as the person in whom it will so vest may not be in existence, no person can convey an absolute fee.” Under the present will the attempted gift was both executory and contingent. The devisee and legatee was not in existence. The will contemplated its future creation, but by an independent authority, which neither the testator nor his executors could control, and which might for fifty years or forever refuse an act of incorporation. During all that period the power of alienation and the absolute ownership would be suspended, for no person could convey a perfect and absolute title.

Two efforts in this case have been made to obviate the difficulty and answer the objection; one by the special term whose opinion was adopted by the general term on appeal; and the other by the counsel for the orphan asylum on the argument at our bar. The learned judge at special term maintained, as I understand his opinion, that upon the death of the testator the property went to the executors in trust to pay debts and funeral expenses, then to pay legacies, and finally to distribute; that the testator had not extended the time for distribution; that the legal title remained in the executors for the purposes of the trust until the time for distribution came; and that it then went to the orphan asylum which at that time was incorporated and capable of taking. Without attempting to discover the exact doctrine intended to be expressed, it is at least obvious that no trust in the executors was created and no trust estate vested in them; that they held the property simply as executors, without title to the land or ownership of the legacies. In one sense their position was that of trustees because of their official agency, but it is a novel suggestion that where no express trust has been created the executor nevertheless takes one by implication in order to pay debts and legacies and make distribution. We need not pursue the subject, however, since the counsel for the orphan asylum not only admits but vigorously asserts that the testator created no trust in the executors and vested in them no estate, and that they held simply in their official capacity and under the lawn The special term opinion seems further to be founded upon an idea that the will postponed the vesting until the time of distribution, and so the case is like Shipman v. Rollins, 98 N. Y., 311.

The will did postpone the vesting for some indefinite period of time., and "that is the exact which we encounter. During that period the ownership of the fund bequeathed is in abeyance. It is not in the executors, of course; it is not given to the next of kin, but bequeathed away from them; they do not take it by descent unless the bequest is void; the legatee had not come into existence, and so, if we assume the validity of the legacy, its ownership is left in abeyance for an indeterminate period not measured by lives. That it is measured by the time given the executors for the performance of official duty does not help the situation. Whatever the measure provided, the title to the land and the ownership of the fund is in abeyance; their vesting is postponed; there is a suspension not permissible because not within the statutory allowance. It is exactly in that respect that the present case fatally differs from Shipman v. Rollins, since there the vesting was postponed for a single life, and the court held that a bequest limited to the use of a corporation to be created within the period allowed for the vesting of future estates and interests is valid. The vesting here was put outside of the permitted period.

But the counsel for the orphan asylum presents for our consideration a different theory. He holds that there was no suspension at all for any time, because the fee of the land and the ownership of the fund devolved upon the heirs and next of kin and subject to be divested by the execution of a power in the executors to convey to the orphan asylum. He argues that the power unexecuted is not an estate, but amounts only to a lien or incumbrance which does not suspend the power of alienation or the absolute ownership, and so the title may go to the legatee when incorporated through the execution of the power. But so far as the personal property is concerned, I doubt if any special power remained when the will took effect. The provisions of that instrument which authorized the executors to purchase land for the asylum and expend money in repairs or a new construction were rendered needless by the testator's own act in purchasing the College Hill property and fitting it up for use. What remained was simply the duty of paying over the legacies bequeathed at the proper time, and such payment was merely the duty of an executor and not at all the execution of a power. But if to some extent a special authority remained •which affected the personal estate and could be treated as a power, it is exposed to the same difficulty which, as we shall see, attends the power framed for the transfer of the real estate. That was not in terms specifically devised, and it may be that under the will and codicil read together the asylum was to get its title through the execution of a power of transfer given to the executors. Assuming that to be so, the power was, as the respondent’s counsel describes it, a mere naked power to transfer the title. The law would execute it without a conveyance, and by either process it still remains that the will contemplated and planned a future and contingent estate in the corporation .to be. created which should vest at an indefinite future period not measured by lives. It is not lawful to create a perpetuity by means of a power in trust any mibre than by a direct limitation and even on the learned counsel’s theory one was created. Assume that the fee of the land and the title to the fund descended to the heirs and next of kin, and they held it subject to the execution of the power, does it at all follow that they could transfer an absolute fee in possession ? Possibly they might be deemed to hold a defeasible title, a base or determinable fee, but that is very different from an absolute fee. They could not convey such an interest or title for they did not have it The case upon which the learned counsel relies on this branch of his argument is that of Blanchard v. Blanchard, 4 Hun, 289, affirmed in this court without an opinion. 70 N. Y., 615. The power in that case was described as a mere lien or incumbrance which did not lessen or weaken the absolute fee of the holders of the residue. But the power there was simply a power of sale which might, indeed, change the form of the property but not its ownership. The court held that on a sale the owners would have the proceeds just as they had possessed the land; that they could transfer the entire estate whether real or changed by the power into' personal, and used this language to describe the situation, viz.: “ In the case before us the residuary devisees took an estate in fee which notwithstanding the incumbrance of the p.ower is neither defeasible ■ nor conditional, and they may alienate it at pleasure.”

Here the power is of a very different sort. It is one which makes the supposed estate in the heir both defeasible and conditional ; "which operates not merely to change the form of the property without touching the ownership, but takes away and destroys the ownership itself; which strips the heir and vests the estate elsewhere. Such a power is vastly more than a mere lien or incumbrance. It operates to create a future contingent estate in the beneficiary whenever the latter should become incorporated and be capable of taking, and creates an estate which, when referred back to the donor of the power, is a future and contingent estate suspending alienation and ownership until the contingency happens which enables the estate to vest. Sections 128 and 129 of the chapter regulating and defining powers bring them within the rules forbidding a perpetuity. The first requires us to compute the period during which the absolute power of alienation may be suspended by any instrument in execution of a power from the date of the creation of the power; and the second that no estate or interest can be given to a person by an instrument in execution of a power which such person would not have been capable of taking under the instrument by which the power was granted. It follows that if the testator by a direct devise could not have carried the estate to the devisee except by limiting the necessary suspension to not more than two lives, neither could he do so through the agency and intervention of a power. I do not see, therefore, that the devise and bequest to the orphan asylum can be saved by any of the theories framed for that purpose.

Its counsel cites at length in his brief two cases as sustaining his contention. Burrill v. Boardman, 43 N. Y., 254, and Inglis v. Sailor's Snug Harbour, 3 Peters, 99. The first states the question to be decided thus: “ Whether an executory bequest limited to the use of a corporation to be created within the period allowed for the vesting of future estates and interests, is valid.” And the doctrine stated in the other is that “ a limitation contingent upon the competent exercise of legislative power, within the period of the lawful suspension of the ownership of property, cannot be said to be unlawful although the contemplated action of the legislature may not be in accordance with any existing law.” I have found no case and no doctrine which would sustain the devise and bequest assailed. It must therefore be declared invalid.

What has been said renders inevitable a similar disposition of the bequest to the Baptist church. The provision of the will for the benefit of that corporation is expressed thus : “ I give to the Baptist church of Poughkeepsie, situate in Mill street, in the city of Poughkeepsie, the sum of ten thousand dollars in ten one thousand dollar bonds towards paying the mortgage and other debts of the church, provided said church shall raise a sum suffi cient with this legacy to pay off such mortgage and other debts of said church within two years of my decease; and in case of failure to do this, then this legacy shall lapse and go into the residuum of my estate.” If the condition which qualifies this bequest is a condition precedent, and the contingency contemplated must happen before the legacy can vest, we have another instance of a perpetuity and another invalid bequest. In that view of the provision of the will the case is like Rose v. Rose, 4 Abb. Ct. App. Dec., 108, in which a legacy was directed to be paid to a charitable society whenever within five years an additional sum of “$300,000 should be raised for its purposes, and was deemed to have fallen under the ban of the statute. The result is resisted in the present case by raising a question of construction. We are asked to say that the legacy vested at the death of the testator, and that the condition imposed was both a condition subsequent and within the power of the legatee to perform through the action of its own members. In the Bose case it was decided that the gift did not vest at the death of the testator, and while the language used was not identical with that employed in the w-ill before us, the difference is not favorable to the claim of the church. In the former case the expression was “whenever” within five years the sum should be raised, and the words here are “ provided ” that within two years the sum should be raised. There are no technical words which indicate the difference between conditions precedent and subsequent, and the question is always one of intention. Nicoll v. N. Y. & Erie R. R. Co., 12 N. Y., 130.

In the present case it is quite clear that the proviso qualified the vesting of the gift The testator’s purpose was not to give at all unless by the process the church debt could be effectually wiped out.' He meant that his proposed legacy should serve as an inducement or stimulant to open the purses of the church members, and to withhold his liberality unless they manifested theirs. He makes it quite clear that there is to be no gift until his condition is fulfilled, for he treats the fund as belonging to his estate and subject to his absolute disposition if the condition is not performed. He provides that in such event the “ legacy shall lapse and go into the residuum ” of his estate. A lapsed legacy is one which has never vested or taken effect. It has been defined as “ one which, originally valid, afterwards fails because the capacity or willingness of the donee to take has ceased to exist before he obtained a vested interest in the gift. ” 18 Am. &. Eng. Encycl. of Law, 28. The provision for a lapse is the reverse of a forfeiture. The words “ shall go into the residuum ” further indicate the testator’s understanding that until condition performed, and that within the specified period, he could dispose of the fund as he pleased, and without resort to proceedings for a forfeiture. lie perfectly understood and appreciated the vital difference between the two kinds of conditions and discriminated between them by the use of appropriate language. When, in another provision, he gave principal sums to a legatee upon conditions to be afterwards performed according to the terms of an existing contract, he fully comprehended that the gift was upon condition subsequent, and in giving it over for failure of performance he said: and in case the said terms and conditions are not kept and performed then on such breach and forfeiture I give, etc.” And so, drawing the distinction between a lapse in one case and a forfeiture in the other, he plainly distinguished between precedent and subsequent conditions. The gift to the church, therefore, was upon a condition precedent; did not vest at the date of the testator’s death; but the ownership was left in abeyance awaiting the result of a contingency and effected a suspension not measured by lives. We must, therefore, declare it invalid.

But the cause of humanity ” made one more struggle against the flock of collaterals, and shifted the controversy to the disposition of the funds involved in the defeated legacies. The will contains a residuary clause in these words: “ I give and devise all the rest and residue of my estate to the John Guy Vassar Orphan Asylum when incorporated, the Vassar Brothers Hospital and Vassar College, equally, share and share alike.” This, on its face, is a general residuary clause. The three legatees took the residuum as tenants in common, each being entitled to an undivided one-third. The collaterals contend that the residuary legatee must be a general legatee to take anything that does not pass by the will; that the corporations could not become general residuary legatees unless the residue should be given to them as a class ; that the residue here was not given to them in that manner but severally and to each one-third; and that the intention of the testator was to prevent void and lapsed legacies from falling at all into the residuum. To establish this intention they rely upon the thirty-eighth clause of the will, which follows the residuary clause, and is in these words: “ In case any of the gifts or devises hereinabove given shall be adjudged void or illegal for any reasons then I give and devise the property mentioned and described in such void or illegal gifts and devises to my executors hereinafter named, in trust for them to carry out and accomplish the end and objects designed by me in such void and illegal gifts and devises.” Three things are to be said about this provision. It is conceded to be illegal and ineffective as a devise or legacy and that it carries nothing to the executors. If, nevertheless, it may be considered as disclosing the testator’s intent, which is asserted on the part of the collaterals, and indicates an intention not to merge lapsed legacies in the residue, it indicates also a strong and decided intention not to dissipate them among the collaterals. But its reference is to the void devises and bequests “ hereinabove” given. The residuary disposition is one of the devises and bequests above given, and I think the testator’s meaning was to carry over to his executors only such dispositions as utterly failed; those which were entirely undisposed of; and not those which, failing in one direction, were yet within the scope of the residuary clause, and saved by it. Any other construction must set the two provisions at odds and convict the testator of antagonistic purposes. And so I think that the thirty-eighth clause is not restrictive of the real residuary gift, and we may construe it as it reads. We know from the testator’s express direction that one lapsed legacy, that to the church, was to go into the residue, and so may the others without, any added violence to the terms of the will.

How it is true that some expressions are found in Kerr v. Dougherty, 79 N. Y., 349, which indicate that a legacy to several as tenants in common of a residue is not to them as a class, and does not make them general residuary legatees. That was said, however, relatively to the rights of the residuary legatees to a residue of a residue, and in a case where practically there was no residuary clause at all. The whole subject was, at a later period, considered in Matter of accounting of Benson, 96 N. Y., 509. The clause there was : “ all the rest, residue and remainder of my estate, both real and personal, whatsoever and wheresoever, whereof I shall die seized, possessed or entitled unto I give, devise and bequeath as follows, to wit: ” two-fifths to his brother William, one-fifth to each of two nephews, and one-fifth in trust for his wife. We described that as an absolutely general residuary clause,” although there was no gift to a class but severally to the legatees; and we held that all lapsed and void legacies fell into the residue and became part of it. And so we must hold in the present case. The legacy to the church and those to the asylum, whether special or otherwise, fell into the residue and increased its volume. To one-third of that residue, thus swollen by the void legacies, Vassal’ College is entitled; to another third the Vassar Brothers hospital has lawful claim ; but the remaining third must go to the heirs and next of kin. This result follows because the residuary gift to the orphan asylum of one-third itself fails ; and the rule appears to be settled that, where by such a failure there is produced a residue of a residue, it does not go in augmentation of the other several shares, but passes to the heirs and next of kin. In Beekman v. Bonsor, 23 N. Y., 312, it was declared to be clear upon the authorities that a part of the residue of which the disposition fails will not accrue in augmentation of the remaining parts as a residue of a residue; but, instead of resuming the nature of residue, devolves as undisposed of. To the same effect are later cases. Kerr v. Dougherty, supra ; Floyd v. Carow, 88 N. Y., 571. As to one-third of the increased residue the testator therefore died intestate, and it devolved according to the law.

Thus far we have been compelled to disagree with the courts below; but we come now to a class of bequests which those courts preserved and as to which we are glad to be able to concur. The testator gave certain principal sums to the home, the hospital and the institute, respectively, upon condition that each should pay annuities of specified amounts equal to the accruing interest to certain persons for their lives, and it is contended that these bequests are invalid because none of the corporations can take without transcending their charters and applying their property, not to the relief of the aged or the advancement of learning or the care of the sick, but to the personal benefit of persons not at all within the description of the corporate beneficiaries. Numerous cases are cited of corporate attempts to pass charter boundaries by contracts and conduct ultra vires, but none of which are applicable to the present case. Capacity to take the gifts did not require that the corporations should apply their own money or property to unauthorized purposes, for substantially and in effect the principal only was given them and the interest and income was bequeathed to the annuitants. The latter were tenants for life and the former remaindermen in one and the same fund, and the respective interests, however mingled in fact, were several and distinct in law. It is answered that if the rate of interest falls, the ánnuities remaining unchanged, there will be a deficiency which the corporations will be compelled to supply from their own funds. Even that emergency the testator provided against He selected out the securities intended to be given, describing them in an extrinsic memorandum, and then adds: “But if, for any cause, the securities selected by me for this purpose should fail to realize the amount of said several annuities, then I charge the payment of any and all deficiencies on my several residuary legatees under this my will, equally.” In other words, the annuities in every event were to be paid out of funds by him provided and set apart for that purpose and in no respect and to no extent out of the property of the corporations. That the institute was also one of those residuary legatees, does not alter its situation, for, in case of a deficiency, it is still the money of the estate which supplies it and to that extent reduces the residuary gift

It is very certain that the testator might have given the fund to a trustee in trust to pay the income to two annuitants for life with remainder to the corporation, in which case the latter would have become equitable owner of the principal and the annuitants of the income. But a formal express trust was not' necessary. The principal could be given directly to one and the income for life to another, and, to whichever of the two custody of the principal was given, the choice would not alter the ownership, and equity would recognize the several rights and protect one party from waste of the principal and secure to the other his full income. The corporations were thus not required to appropriate their own property to unauthorized purposes, but, preserving the principal for themselves, to pay over the income, which was not theirs, to the true owners. In doing that they would simply be taking their part of the gift, and not parting with their own property. I do not feel the need of authorities to justify the validity of such action, but if one is needed, it will be found in Matter of Howe, 1 Paige, 214.

A further question has been argued at some length and comes-up on the appeal of the Yassar Institute, which claims that certain legacies decided to be general are made specific by the terms of an extrinsic memorandum referred to in the will, and the sole question is as to the effect of the memorandum. One of the gifts was “ of ten thousand dollars in one hundred shares, par value one hundred dollars a share, of the capital stock of some good railroad or coal company guaranteed, to be selected from my securities as its own.” The testator then added: Among my papers will be found a memorandum of the various securities I have selected for the payment of the several legacies.” Such a paper was found preserved with the will. It was entitled in' the testator’s handwriting : “ List of securities which I wish transferred to different institutions under my will of Fcb’y, ’85. John Gruy Yassar.” The list set apart, among other things, to the institute “ $10,000 or 100 shares FT. Y., Lackawanna & Western guaranteed R. R. stock a 5 pr. c. for John Cr. Yassar.” The question arising is whether this memorandum is to have effect as an integral part of the will, and so shall convert what by that instrument is either a general or demonstrative legacy into a specific one; and that involves the further inquiry whether the memorandum is a mere identification of the thing given, or is testamentary in its character.

It is unquestionably the law of this state that an unattested paper which is of a testamentary nature cannot be taken as a part of the will even though referred to by that instrument. Langdon v. Astor’s Ex’rs, 16 N. Y., 26 ; Williams v. Freeman, 83 id., 569; Matter of the Will of O'Neil, 91 id., 523. I am satisfied that this memorandum is testamentary in its character. By the will no specific securities were given, as is fully conceded. The effect of the memorandum is more than an identification. If the legacy framed by the will had been specific, and manifested a purpose to give some particular security or securities, and among those found in the assets there proved to be a larger number, so that doubt arose as to the specific securities intended to be given, an extrinsic memorandum referred to in the will to identify the thing given might be considered. But that is not the case here. The office of the paper if it shall operate at all is to give specifically what was not so given by the will; to change its terms in a material respect; to alter a bequest and modify the rights of the legatees. Such a paper, we think, cannot be received as a part of the will to affect and modify its terms, and change what was a general or possibly demonstrative legacy into a specific one.

Other questions raised by the will need not be discussed. We concur with the special and general terms as to all the disposi.. tions of the will except so far as we have expressly disagreed The result is that the judgment of the general term should be modified by declaring the devise and bequest to the orphan asylum invalid, as also the bequest to the Baptist church herein referred to, and by adjudging that such void gifts fall into the residue and form part of it, but that the one-third of such residue given to the orphan asylum goes to the heirs and next of kin as in case of intestacy, and as modified the general term judgment should be affirmed.

I have given some serious reflection to the question of costs. We are required to allow them if at all upon equitable principles. The claims of the collaterals compelled .this litigation. They put all the other parties upon the defensive and succeeding in some respects have failed in others and claimed more than belonged to them. What they wrest from the charities is against the intention of the testator and in spite of his avowed purpose. What he did give effectually should not be lessened by the success of those whom he meant to exclude in the respects here at issue. And so I think that no costs should be awarded to the orphan asylum or to the Baptist church, but the costs of all other parties in all the courts should be paid out of that portion of the estate as to which the decedent died intestate and which devolves upon the heirs and next of kin.

Judgment should be entered accordingly.

All concur, except Gray, J., absent


source: Caselaw Access Project

author: Bradley, J.

license: Public Domain

text:
    Benjamin Knower et al., App’lt, v. The Central National Bank, Impl’d, Resp’t. The First National Bank of Patterson, App’lts, v. The Central National Bank, Impl’d, Resp't.

      (Court of Appeals, Second Division,

      Filed April 14, 1891.)

    1. Assignment for benefit of creditors—Payment by assignee to CREDITOR, WHERE ASSIGNMENT SET ASIDE FOR FRAUD.
    ' Payment by the assignee to a creditor of 1he assignor of the amount of the debt due him pursuant to the directions in the assignment before any lien is ob'ained upon the fund, is effectual to vest title in such creditor 10 the money so paid, although the assignment is in an action subsequently commenced adjudged fraudulent and void as against the creditors of the assignor.
    3. Same—Confession of judgment to preferred creditor.
    The fact that defendant and other preferred creditors obtained con- • fession, of judgment by assignor, and directed the sheriff to seize and hold the assigned property upon the executions, does not necessarily raise an inference that defendant acted with any purpose other than to secure the payment of its debt.
    3. Same.
    The mere fact of knowledge on the part of a creditor of the intent of his debtor to defraud his creditors by the disposition of his property to pay or in payment of the debt due from him to the former, does not prejudice the right of file creditor to seek and obtain payment.

      Appeal from final judgments entered upon decisions of the general term of the supreme court in the first judicial department, affirming interlocutory judgments sustaining demurrers to the complaints.
    The main and ultimate purpose of the actions was to require the defendant bank to pay the amount of money received by it from the assignee for the benefit of creditors of Halsted, Haines & Co. And to support such relief in behalf of the plaintiffs in the first action, it is alleged that in July, 1884, Halsted, Haines & & Co., being possessed of a stock of goods of the value of $450,-000 and other property, made to one May a general assignment for the alleged benefit of their creditors, and by it directed the assignee to pay a large number of preferred debts amounting to about $409,000, among which was the claim of the defendant bank amounting to $40,000 ; that on or about the 17th day of October, 1884, that sum was paid by him to such bank ; that on September 20 and October 18, 1884, the plaintiffs recovered judgments against Halsted, Haines & Co. upon which executions were issued and returned unsatisfied; that in January, 1885, actions were commenced by the plaintiffs against such assignors and assignee to set aside the assignment upon the ground that it was made with intent to hinder, delay and defraud the creditors of the assignors; and that on December 12th and 13th judgments in such actions were obtained and entered, setting aside the assignment on that ground. And the plaintiffs further alleged, on information and belief, that after having made the assignment with such fraudulent intent and in August, 1884, Halsted, Haines & Co. in furtherance of such fraudulent design colluded with the creditors whose claims were preferred by which each of them, including the defendant bank, with full knowledge of the fraudulent design of Halsted, Haines & Co. and with like design on their part, obtained judgments against Halsted, Haines & Co. for their claims so preferred, it being confessed by them in favor of such bank; that executions were issued upon such judgments to the sheriff, requiring him to seize and hold the assigned property and thereby secure the same from the efforts of the unpreferred creditors to secure thereout their demands and to enable the assignee to sell under the assignment; and that the sheriff, acting upon the instructions of the preferred creditors, allowed the assignee to sell the property under the assignment, which he did, and the executions were returned unsatisfied. The 'plaintiffs also alleged that at the time the defendant bank received payment of the amounts of its preference a suit, commenced in September, 1884, in favor of parties named (other than any of these plaintiffs), creditors of H, H. & Co., to set aside the assignment upon the ground before mentioned, was pending, and that the defendant bank knew of its existence and object, and that in January, 1888, judgment was therein entered setting aside the assignment. Then followed the allegation that the assignment was made by H, H. & Co. with intent to hinder, delay and defraud their creditors, including the plaintiffs, who were such at the time it was made. These are substantially the matters alleged in the complaint in the action, Ho. 1.
    The plaintiffs in the other action do not allege the recovery of any judgment by them setting aside tjjie assignment Hor is it there claimed that the defendant bank was in any way connected with any fraud in the assignment or its execution. In other respects the complaint is substantially the same as in the action first mentioned. One of the grounds of demurrer in each was that the complaint did not state facts sufficient to constitute a cause of action.

      John J. Adams, for app’lts; George A. Strong, for resp’t.

       Affirming 35 N. Y State Rep., 1035.

       Affirming 35 IT. Y. State Rep., 143.

   Bradley, J.

This controversy presents the question whether or not a creditor of an -assignor for the benefit of creditors can retain the money paid to him by the assignee pursuant to the direction in the assignment as against another creditor, who, by action subsequently brought, succeeds in setting aside the assignment as fraudulent against the creditors of the assignor. It is urged on the part of the plaintiffs that the creditor receiving payment of his debt from the assignee takes it subject to the condition that "the assignment remains effectual; and that when the assignment falls, the title of the creditor to the money so paid him pursuant to its direction fails; and that, for the purpose of the remedy of the attaching creditors, the money so paid must be treated as part •of the estate of the debtor, to be accounted for by the creditor receiving it. This proposition is founded upon the assumption that he received the payment and took the money through the title vested by the assignment in the assignee and not otherwise.

It is a familiar rule that a debtor may voluntarily pay such of his creditors as he pleases, and they may take payment to the -exclusion of others, and thus exhaust all his property. And at the time the one in question was made, an insolvent debtor might legitimately accomplish the same thing by means of a preferential .■assignment of his entire property for the benefit of his creditors. Although this necessarily had the effect to withdraw his estate from the ordinary legal process, and thus operated to hinder the -creditors in the collection of their debts, it was valid if made in .good faith and did not unnecessarily by its directions delay the ■appropriation of the assigned property to the payment of creditors in the order provided-for by the assignment. When the trust is accepted by the assignee he may be compelled to execute its •directions; and it is irrevocable by the assignor. And the question whether or not an assignment is fraudulent in fact as against the creditors of the assignor is not important for the purposes of the execution of it by the assignee, unless an attack by action is made upon it by them or some of them. Until then his duty to proceed in its execution continues. And consistently with that ■duty he is entitled to have allowed to him all payments before then made by him of and upon debts of the assignor in accordance with the instructions given by the terms of the assignment. Ames v. Blunt, 5 Paige, 15; Collumb v. Read, 24 N. Y., 505; Pond v. Comstock, 20 Hun, 492 ; 87 N. Y., 627.

All the creditors of the debtor are entitled to payment of their lawful claims against him if his property is sufficient to pay them; and those given a preference by his assignment are entitled to payment by force of the directions contained in it while the assignee is at liberty to execute them. The title is vested in an assignee for the purpose merely of executing the trust in the manner directed, and essentially so to enable him to do it. And when payment is made by an assignee to the creditor pursuant to such directions the latter receives the fund from the debtor through the execution of the trust, and his title is supported by the preexisting debt upon which payment is made pursuant to the right of the debtor to make and the creditor to receive it.

By the commencement of an action in equity by a judgment creditor to reach the property of his debtor, he obtains a lien upon the choses in action and equitable interests of the latter, which lien becomes effectual upon the recovery of judgment for the relief sought. Edmeston v. Lyde, 1 Paige, 637; Eager v. Price, 2 id., 333. This rule is not to the same extent applicable to property subject to levy of execution. . Albany City Bank v. Schermerhorn, 1 Clarke, 297; Davenport v. Kelly, 42 N. Y., 193. No action affecting this case, in which any of these plaintiffs were parties or represented as such, was brought until after payment was made to the defendant; and no lien by relation to a time prior to that was acquired by them on the fund so paid. They must rest their claim to recover upon the position that because the assignment was fraudulent as against the creditors of the assignor, the title to the money paid never passed to the defendant, but remained in the debtor. It is true that the theory upon which property fraudulently assigned is reached by a creditor, on adjudication to that effect, is that title has not passed from the assignor ; and such is the ground upon which a levy of execution upon assigned property is effectually supported. It may be observed that an assignment being valid between the parties to it is, if fraudulent as against creditors, only voidable by adjudication at their election or that of some or one of them; and unless an attack is made with a view to such judicial determination, it will be treated as valid and must be executed accordingly. And when faithfully executed by the assignee without such challenge by any creditor, it is difficult to see any sound principle upon which the results should be subverted. Diligence may defeat its execution, but to hold that so far as the trust has been performed no rights have been effectually taken from it, would render it unsafe for any creditor to accept payment otherwise than by force of adjudication, or after the validity of an assignment is in that manner established. It is; however, urged that an antecedent debt does not furnish a supporting consideration for money paid to enable the receiving creditor to retain it as against another who proceeds upon or successfully for an adjudication of the invalidity of an assignment pursuant to which the payment is made. It is not seen that the doctrine sought to be applied in its relation to the transfer of property necessarily aids the plaintiffs.

The sale of property to a creditor in payment of a debt and taken by the latter solely for the purpose of such payment, cannot be defeated by another creditor by reason of the fraudulent intent on the part of the vendor, although the purchaser was cognizant of such intent of the vendor. Dudley v. Danforth, 61 N. Y., 626. And while the sale to the creditor has in the debt due him a valuable consideration for its support, he will not without the aid of some new consideration be treated as a bona fide purchaser in such sense as to take title paramount to a prior equity or lien existing in favor of another. Ray v. Birdseye, 5 Denio, 619; Wood v. Robinson, 22 N. Y., 567; Seymour v. Wilson, 19 id., 421. This doctrine would be applicable to the case at bar if the plaintiffs had acquired a lien on the fund or the property producing it prior to the time the payment was made to -the defendant bank. But the contrary is the fact; and at that time the equity of the defendant was equal to that of the plaintiffs. The title of the defendant to the money paid upon its claim did not depend for support upon that of the assignee, as would be the case of a stranger taking a transfer of property from the trustee, but the payment was a performance of the directions of the assignor in his assignment, and by force of those directions the fund passed from the assignor through the act of the assignee to the defendant in discharge of the debt due to it; and it would seem that the latter could rest upon its right to take the money paid and retain it supported by title, as effectually as if it had without the aid of an assignee been paid to him directly by the debtor. Nat. B. & D. Bank v. Hubbell, 117 N. Y., 397; 27 N. Y. State Rep., 396. This view is not inconsistent with the fact that when an assignment is set aside the functions of an assignee cease, and the entire provisions of the instrument fall. By reason of the voidable rather than void nature of such an instrument and of the fact that it is valid between the parties to it, the instructions given by it remain effectual and the execution of them may proceed until interrupted by some process or proceeding having that effect. The view here taken is that the invalidity of the assignment, established in the subsequent actions of the plaintiffs, did not have the effect to restore the fund paid to the defendant to the estate of the debtor for the purpose of relief in their behalf, nor was it subject to any lien in their favor as creditors of the assignor.

Our attention is called to no adjudicated case presenting this precise question, but Murphy v. Briggs, 89 N. Y., 446, has analogously in principle some application to the subject. There a debtor conveyed real estate in "fraud of his creditors, and at his request the grantee made a mortgage upon the premises to a creditor of the grantor to secure the payment of a debt due from the latter to the mortgagee. The position was taken by the attacking creditors there as, here, that as the deed was set aside there was no title in the grantee to support the mortgage. But the court held in effect that the security for the payment of the debt was in legal effect furnished by the grantor through his grantee, who then being apparently vested with the legal title was the instrument to execute the mortgage, and that the mortgagee had in the debt which it was given to secure a valuable consideration. In that case the mortgage was dependent for its support upon title in the mortgagor, while in the present one the payment may have been effectually made upon the mere instructions or directions of the debtor given to a person, appointed by him to make it, unaided by title in the person executing such directions. The nature of the relation between an assignor and assignee for the benefit of creditors is not one of contract, but the assignee takes his position as such by appointment; and because the assignor, after making such assignment embracing his directions, ceases to have any dominion over the property, any successor to the assignee, on his retirement by resignation or otherwise from the trust, can only be appointed by the court. This has no essential bearing upon the question here further than it tends to illustrate the fact that the title is given to the assignee simply to enable him to execute the directions of the assignor embraced in the instrument by which he is appointed. The fact, as has been held, that the assignee cannot, as against a creditor successfully attacking an assignment, retain moneys in payment of a preferred debt due from the debtor to him or to a firm of which he is a member, is not inconsistent with the right of another creditor to hold that paid to him upon a debt due him from the assignor. The reason for this difference evidently arises out of the relation of the assignee as a party to the instrument creating the trust, and who is charged with its execution ; and theoretically his right to funds which he is authorized by the assignment to take and apply to his own use is not entirely perfected until his account of the execution of the trust is rendered and in some manner approved or established. This rule is generally applicable to trustees, and by statute is applied to executors and administrators who have claims against the estates represented by them.

In Hone v. Henriquez, 13 Wend., 240, the question had relation to the claim of right by a creditor to set off his debt against the proceeds of property placed by the assignor in his hands to sell. The assignment was adjudged fraudulent and void and it was properly held he could not make the set-off. His was not a case of payment, and he had no claim of title. The question here did not arise in that case. These views lead to the conclusion that payment by the assignee to a creditor of the assignor of the amount of the debt due him, pursuant to the directions in the assignment, before any lien is obtained upon the fund, is effectual to vest title in such creditor to the money so paid, although the assignment is, in an action subsequently commenced, adjudged fraudulent and 1 void as against the creditors of the assignor. We have thus far proceeded upon the assumption that the defendant had not in any manner participated in the fraud charged against the assignor.

The allegations in the complaint in the Knower action charging collusion, after the assignment was made, of the assignors with the defendant and other preferred creditors, resulting in judgments and executions and finally a sale of the property by the assignee and the return of the executions unsatisfied, would be effectual to support the action if the validity of the defendant’s debt against the assignor were challenged by any allegation in the complaint. But, in considering the question arising upon the charge referred to, it must still be assumed that such debt was honestly due from the assignor to the defendant. This charge had relation only to transactions after the assignment was made, and the defendant, with knowledge of the fraudulent design of the assignor, was seeking to obtain payment of the debt due to it. The only allegation tending to show a purpose to prejudice other creditors was that the defendant and such other preferred creditors directed the sheriff to seize and hold the assigned property upon the executions and “ thereby secure the same from the just and legal efforts of the unpreferred creditors to secure payment thereout of their just demands against the same, and to enable the said assignee to sell and dispose of the same under said alleged general assignment.”

No inference necessarily arises from such allegation that the defendant acted with any purpose other than to secure the payment of its own debt. And with that view he was at liberty to procure confession by the assignor of judgment, issue execution and direct the sheriff to levy it on the property. And, as has already been observed, the mere fact of knowledge on the part of a creditor of the intent of his debtor to defraud his creditors by the disposition of his property to pay or in payment of the debt due from him to the former, does not prejudice the right of the creditor to seek and obtain payment. The case of Mackie v. Cairns, 5 Cow., 547, has no necessary application to this branch of the present case. There the assignor after making a general assignment for the benefit of creditors, which by reason of trusts reserved for the benefit of the assignor was apparently fraudulent as against his creditors, the assignor confessed a judgment to the assignees as such while the assignment remained valid between the parties to it. The assignment and judgment were held to be fraudulent as against the creditors. The judgment so confessed and taken was intended to be resorted to only m the event the assignment should be adjudged invalid; and in the meantime the purpose of the assignees was to proceed in execution of the assignment. The result of the final determination was that the judgment was infected with the same vice as was the assignment itself. In the present case, the confession of judgment was to a creditor and founded upon a valid debt. And it must be assumed that the defendant took it for its own benefit. This it had the right to do.

It is not seen how knowledge of the defendant at the time of the receipt or payment of its debt, that a suit was then pending in behalf of parties other than any of the plaintiffs here, to set aside the assignment, can aid the plaintiffs or as against them prejudice the defendant. The other action referred to was in its effect and result available only to the parties plaintiff in it, and for the purposes and to the extent of their claim only against the assignor would the adjudication in their favor set aside the assignment. Bostwick v. Menck, 40 N. Y., 383. There is no other question requiring consideration. The judgment should be affirmed.

Judgment affirmed, with costs.

All concur.


author: Haight, J.

text:
    Edgar D. Crowinshield, as Supervisor of the Town of Ira, App’lt and Resp’t, v. The Board of Supervisors of the County of Cayuga, Resp’t and App’lt.

      (Court of Appeals, Second Division,

      Filed April 14, 1891.)

    1. Town bonds—Sinking fund—Waiver.
    The town of Ira being bonded for the building of a railroad, the town collector turned over the state and county tax collected from the railroad to the county treasurer, who applied the same to the payment of state taxes and for county purposes. The town tax collected from the railroad was used for town purposes. The county treasurer failed to set aside any portion for the sinking fund, as required by the act of 1809. Held, that there being no facts to show that the county treasurer could have invested the town moneys, if paid to him, so as to produce a greater income than the legal rate of interest or that the bonds could have been purchased at any sum below par, the use of such moneys for town purposes was not a waiver of the right of the town to have the state and county tax applied to the sinking fund. The court would not assume such for the purpose of reversing the judgment.
    2. Same.
    The town has the absolute right to have the sinking fund provided for in the act applied in the payment of the bonds, without regard to the stock held by it.
    3. Same.
    In an action for failure to apply railroad taxes to the creation of a sinking fund under the act of 1869, the town is entitled to recover the moneys paid by the county treasurer for state taxes as well as those paid out for county purposes.

      (In re Spaulding, 34 N. Y. State Rep., 980; 125 N. Y., 194, distinguished.)
    Cross appeals from a judgment of the general term, fifth department, awarding judgment to the plaintiff, under a submission made pursuant to § 1279 of the Code of Civil Procedure.

      William P. Woodin, for deft; A. P. Pick, for pl’ff.
   Haight, J.

On the first day of March, 1871, the town of Ira, pursuant to the provisions of chapter 433 of the 1866, and the several acts amendatory thereof, issued its bonds to the amount of $40,000 in aid of the construction of the Southern Central' Railroad; that subsequently, and from time to time thereafter, payments were made by the town upon such bonded indebtedness until the 1st day of March, 1888, at which time such indebtedness was fully paid and the bonds were surrendered and cancelled; that the moneys with which such payments were made were raised by a general tax on real and personal property liable to taxation in the town of Ira, including the real and personal property therein owned by the Southern Central Railroad Company; that the state and county taxes, exclusive of school and road taxes, collected from the said Southern Central Railroad Company upon the assessed valuation of its real and personal property in the town of Ira, in the years 1872 to 1887 inclusive, were in amount as follows: State taxes, $934.24; county taxes, $977.81; town taxes, $3,572.90; that the state and county taxes in each year were paid over to the treasurer of the county by the town collector, and the samo was used by liim in the payment of the state taxes and the ordinary expenses and obligations of the county; that the town taxes so collected were by the collector paid over to the supervisor of the town and were by him used and expended in payment of the ordinary and current expenses of the town ; that no money was ever set apart by the treasurer of the county as a sinking fund with which to pay off and retire the bonds so issued by the town of Ira, as required by chapter 907 of the Laws of 1869, and the several acts amendatory thereof. The plaintiff seeks to recover the amount of state and county taxes collected from such railroad company in the town of Ira, during the years named, which were paid over to the treasurer of the county and used by him as aforesaid. The general term awarded judgment in favor of the plaintiff for the amount of the county taxes, with the interest accrued thereon, collected and paid over to the treasurer of the county within the six years prior to the submission of this controversy, and refused to award judgment to the plaintiff for the amount of such state taxes.

It is now contended on behalf of the defendant that the diversion by the town of Ira of the town taxes collected in each year from the railroad company exonerated the defendant and its treasurer from any obligation or duty to contribute the county and state taxes thus collected to a sinking fund for the redemption of the bonded indebtedness of the town; that such diversion by the town was unlawful; that it deprived the county of its right to share in the benefits and advantages which might have resulted from a strict and faithful observance of the statute by the town in regard to the sinking fund, and that it consequently amounted to a waiver on the part of the town of the statutory scheme provided for the payment of its bonded indebtedness.

The answer to this contention is, that the facts do not establish a waiver on the part of the town or constitute an estoppel; that a duty was imposed upon the county treasurer to invest, as a sinking fund, for the purpose named, the state and county taxes that came into his hands for that purpose, and that it is not apparent that the county has suffered by reason of any failure on the part of the town or its officers to pay over to the treasurer the amount collected of the railroad company for town purposes. The theory upon which the plaintiff seeks to recover of the defendant is that it has diverted and converted to its own use the moneys collected and held by the treasurer for the sole purpose of paying and retiring the bonds issued by the town. It is insisted that if the town taxes had been paid over to the treasurer, and had been by him invested, that he might have been able, through his management of the fund, to purchase the bonds below par, and thus sooner pay off and retire them; but the amount of such town taxes, as we have seen, were but $3,572.90, and there was no investment thereof that the treasurer could make which was authorized by the statute which would produce a greater income thereon than the interest allowed by law, the amount of which would not have been sufficient to pay the bonds or any considerable portion thereof before they matured and were, in fact, paid and retired by the town. The facts agreed upon make no mention of any time in which the bonds in question could have been purchased at any sum below par, and we cannot assume such fact to have existed for the purpose of reversing a judgment.

It is conceded in the briefs of counsel for the respective parties that the stock of the railroad company subscribed for by the town, upon the issuing of its bonds, still remains in the possession of the town and has not been sold, and it is claimed on behalf of the county that it had the right to have this stock sold and the proceeds applied in the payment of the bonds in accordance with the provisions of the act of 1869 referred to, as amended by chap. 283 of the Laws of 1871.

We hardly think it necessary at this time to enter upon an extended consideration of these acts, for the reason that they have already been considered and construed by the court of appeals in former cases; and, as we understand those cases, they were disposed of upon the theory that the acts in question do not impose a tax or burden upon the other towns of the cqunty; that a town, by bonding itself and causing a railroad to be built, created a new and an additional property, which became the subject of taxation ; that the rest of the county was simply deprived of the benefits to be derived for the time being of the taxation of such property, so that the town might reap the benefits of the taxes collected thereon, by having the same applied in the satisfaction of its bonded indebtedness; the result of which was to make the sinking fund provided for in the act, up to the time that the bonds matured and became due and payable, a fund which the town had the absolute right to have applied in the payment of the bonds without regard to the stock. Clark v. Sheldon, 106 N. Y., 104-111; 8 N. Y. State Rep., 537; Bridges v. Board of Supervisors of Sullivan County, 92 N. Y., 570-579.

As to the appeal by the plaintiff, it distinctly appears in the facts agreed upon that the state and county taxes were diverted and paid out for state and county purposes. We, therefore, cannot assume that it remained in the general fund of the county, as was the case in In re Spaulding v. Arnold, 34 N. Y. State Rep., 980 ; 125 N. Y., 194 ; but the plaintiff should have been awarded judgment for the amount of th'e state taxes collected and appropriated within six years prior to the submission. Strough v. Board of Supervisors of Jefferson County, 119 N. Y., 212-218; 28 N. Y. State Rep., 967.

The judgment of the general term should be modified by adding to the recovery against the defendant the sum of $361.91, together with $71.54 interest thereon to the 18th day of December, 1888, together with interest thereon from that date to the date of the entry of the judgment, and, as so modified, the judgment should be affirmed, with costs to the plaintiff.

All concur.

       Modifying and affirming 26 IT. Y. State Rep., 985.


author: Van Brunt, P. J.

text:
    Walter Langdon, Pl’ff, v. The Mayor, etc., of New York, Def’t.

      (Supreme Court, General Term, First Department,

      Filed February 13, 1891.)

    1. Eminent domain—Compensation bob taking bulkhead bights.
    Where the city by the construction of a new bulkhead wall has taken away the rights of an owner of a bulkhead, the measure of compensation of the latter for such deprivation is not necessarily limited to a capitalization of the amount which might have been received at such bulkhead for wharfage and cranage, but he is entitled to receive what he could have obtained in the market for these rights, viz.: the sum for which it could have been sold, whether its value arose from preferential rights of the large steamship companies, or the right to collect wharfage.
    3. Same—Evidence.
    Reports of the dock department showing that they had bought bulkhead property and wharf rights is admissible as an admission that similar property had been purchased at certain prices; if the property purchased was different from what the admission would imply, the city should show that fact by other evidence.
    Motion on the part of the defendants to confirm referee’s report, and motions by the plaintiff to set aside referee’s report, and for a new hearing.

      Thomas P. Wickes, for def’t; W. H. Peckham and W. J. Marrin, for pl’ff.
   Van Brunt, P. J.

It has been determined in this action that the plaintiff was entitled to recover from the defendant the value of the property which was taken by the defendant in the construction of its new bulkhead wall in front of plaintiff’s bulkhead, and the reference which has, resulted in the report now before us was to take proof and report the same with his opinion as to the value of the property so taken both at the time of the taking of the property and also at the time of the hearing before the said referee.

The referee having heard the proofs reported that in his opinion there was no difference in value between the time of the taking of the property and the time of the healing; and reported in favor of the plaintiff for a very small amount of the sum which was claimed by him ; and the question which comes before this ■court upon the presentation thereof is what judgment should be rendered upon the facts established.

The claims of the parties were very wide apart, and it seems to us, upon an examination of the evidence, that the investigation has proceeded to a considerable extent upon an erroneous theory. It seems to be considered that as this right to the bulkhead "was a right to collect wharfage and cranage, that therefore the measure of compensation to be paid to the plaintiff was to be necessarily limited to a capitalization of the amount which might be received at such bulkhead for wharfage and cranage; and, in the opinion of the learned referee, very copious references are made to the opinions of the court of appeals in these bulkhead cases to sustain this view.

We think, however, that these opinions do not bear this construction, but that the language used is to be interpreted in view of the question which was being discussed by the court and presented at the time. When this case was before the court of appeals the court discussed the evidence and reversed the judgment because it appeared that the experts who were examined as witnesses for the purpose of determining the value of the property taken had included (and the referee had done the same) an erroneous element in fixing such value; and all that was decided was that a report based upon evidence which had taken into consideration an erroneous element of valuation could not be sustained.

There seems to be no reason why the plaintiff, because of the peculiar nature of the property, stands in any different relation to the power exercising the right of eminent domain than the owner of any other property, namely, that he is entitled to compensation for the property of which he has been deprived. And the ordinary rule governing such measure of compensation is that he shall be paid the market value of the property. Market value is ordinarily arrived at by conclusions deduced from transactions in property of a like character. Persons familiar with the property and with dealings in property of a like character are called upon to testify as to their opinion of its value, such opinion being based upon knowledge acquired by other transactions.

Market value is ss plain, definite term. A market signifies not only that there shall be sellers but also that there shall be buyers : because there can be no market where everybody wants to sell, and nobody wants to buy ; or where everybody wants to buy and nobody wants to sell.

Therefore in the case at bar the question to determine was, what in the market could the plaintiff have obtained for these rights which he had ? The fact that they produced a certain amount of income may have been some evidence of value. But it was by no means conclusive ; nor was it the best evidence. A man might own a lot on Fifth avenue and be able to derive very little rent from it, and yet, for the purposes of sale, it would be of great value. So it is established by the evidence in the case at bar that the mere right of collecting wharfage and cranage was but a small incident in what was the market value of the ownership of such right. And it was shown and proven in this case that to a certain class of the trade which came to the port of Hew York these bulkheads were almost a necessity, and that this had ¿been so early recognized that in 1858 the legislature had passed an act whereby the exclusive use of piers and bulkheads or wharves and slips might be given to certain ¿lasses of commerce to the extent necessary for the conducting and doing the business in which they were engaged.

It appeared that the large steamship companies who were located in and about this property were desirous of acquiring these bulkheads in order that their access to the slips might not be interfered with. And it is to be observed that this exclusive use which is authorized by the act of 1858 does not refer only to the time of the actual occupancy of the wharf and slip by the vessel itself, but such exclusive use may be kept and reserved to the extent necessary for the conducting and doing the business in which the companies were engaged. If it is necessary' to keep the slip vacant for the incoming boat although not actually there in order that the business in which they are engaged shall be properly conducted, clearly such right can be reserved under that act; and the result of the ownership of this bulkhead right by these large steamship companies was substantially to prevent their being interfered with in the occupation of the slip by any other crafts entering for the purpose of getting to the bulkhead, which exclusive use was an absolute necessity for the proper conduct of the business in which these companies were engaged. This gave a substantial value to these bulkheads far in excess of the right of collecting wharfage and cranage.

The learned referee states that if the estimate of value presented on the part of the plaintiffs is adopted, he does not think a reasonable measure of compensation for the destroyed wharfage rights of the plaintiffs as they have been limited by the courts and the value of the incident of preferential use which under the suggestion of the court of appeals may be attached thereto could be honestly ascertained and fairly measured. And he further stated: “ I do not understand that what is stated in the Eingsland case concerning this incident of preferential use necessarily requires that I should determine that it is so related to the wharfage rights of the plaintiffs in these cases as to justify a compensation therefor tremendously in excess of the value of their simple and uncomplicated wharfage rights.”

But the evidence in this casé showed beyond question that the market value of these bulkheads was far in excess of the simple wharfage rights. And if that arose from these preferential rights, however problematical they might be, the city had no power to deprive the plaintiff of his property without paying that which this property was reasonably worth, that for which it could have been sold, whether such value arose from preferential rights, or the right to collect wharfage.

Due compensation means paying the full value; and value is determined by- what a thing can be sold for.

In view of the condition of the evidence in this case at the time it was submitted to the learned referee, we concede that it was impossible to make a just and fair estimate of the value of these rights. The evidence upon the part of the plaintiff undoubtedly gave a greatly exaggerated estimate of the value of these privileges ; and the estimate on the part of the defendant on the other hand ridiculously small. The plaintiff does not seem to have been entitled to receive an award as large as is claimed by him ; neither was the city to be allowed to appropriate this property for the mere bagatelle of the capitalization of the wharfage rights.

There was evidence offered, however, which was stricken out by the learned referee which might have afforded a fair ground upon which an estimate of value might have been founded. The plaintiff offered in evidence the reports of the Dock department showing that they had bought what in some instances was described as bulkhead property and wharf rights, and in others bulkhead and wharf property at various places upon the North Biver. This evidence was objected to solely upon the ground that the deeds should be produced, as they might show that the property referred to in the report comprised more than that which had been taken from the plaintiff. This objection was sustained and the offer of evidence was refused. This, we think, was error. If the plaintiff had a right to show these facts upon the question of the value of these rights, then this evidence was competent, and if it was to be limited it was the defendant who was called upon to limit the same. The nature of the evidence' is not objected to ; but the only objection is that the deeds should be produced. Now if a party makes an admission that he has bought certain property at a certain price, that admission is evidence; and if he wants to limit the admission by showing that the property is different from that which the admission would imply, he has to offer evidence to show the limitation.

Thus it would appear that evidence which was very important in determining the value of these rights was excluded from consideration by the referee ; and such evidence not having been admitted or considered, and not being in the record as far as this court is concerned, it cannot be considered by us ; because if the evidence is to be considered, the defendant should have the opportunity to show that notwithstanding these admissions the property purchased was differently situated and of a different character from that taken from the plaintiff, and that consequently the evidence could have no bearing upon the question under investigation.

The value of this evidence is peculiarly great in a case like the one at bar, where it appears that it is difficult to fix a market value dependent upon actual transactions, these rights not being the subject of frequent barter and sale so as to enable parties familiar with the market to speak from actual transactions, but their opinions being of necessity largeN dependent upon ideas to some extent speculative.

We think, therefore, that there having been an exclusion of evidence which was competent and the investigation in respect to the value of this property having proceeded upon an erroneous theory, this report should be sent back in order that the parties may introduce additional evidence upon which a judgment may be rendered.

Barrett and Bartlett, JJ., concur.