author: Bartlett, J.

text:
    Richard A. Smith et al., as Trustees, etc., Resp’ts, v. Emeline F. Parsons, Individually, etc., Impleaded, etc., Resp’t; Rosalie Coe Campbell, App’lt.

      (Court of Appeals,

      Filed May 21, 1895.)

    1. Will—Construction.
    The will, in this case, was so construed as to vest the accumulations of income upon the infant’s share in her as they were paid in, until her death, and postponed until her majority only the time of payment over or enjoyment.
    3. Same.
    When a minor dies, for whose benefit accumulations of income have been directed, it is .competent, it seems, for the testator to dispose of them in the same manner as any other portion of his estate, provided they have not vested in the infant as paid in.
    Appeal from certain parts of a final judgment of the special term of the supreme court in the first judicial district, entered upon the report of a referee appointed to take an accounting after an interlocutory judgment.
    The action was brought by the executors of the will of Richard H. Campbell, deceased, for a j udicial settlement of their accounts, and for instructions in reference to certain accumulations in their hands as trustees.
    An appeal from the interlocutory judgment was taken by the infant defendant, Rosalie Coe Campbell, to the general term, where the judgment of the special term was affirmed.
    An accounting was then had in accordance with the judgment on which final judgment was entered, and from this the present appeal is taken by the trustees and Rosalie.

      S. P. Nash, for app’lt; John W. Pirsson and John Alexander Beal, for resp’t.
   Bartlett, J.

Richard L. Campbell, the testator, died leaving a widow and two daughters, Martha and Rosalie, both of tender years. He left a large personal estate, the half of which was set apart in trust for his wife, and the other half given in trust for his daughters.

So much of the provisions of the will creating the trust in favor of the daughters as is material to consider reads as follows, viz. :

Third. “I authorize and empower my executors to divide the other one equal half part or share of my estate into as many equal shares as I may leave children me surviving, and to invest and re-invest each share, and to collect and receive the interest of each share, and to apply the same, or so much thereof as they may deem necessary to the use of the child for whom said share is intended, and to accumulate the remainder of said income until the said child shall attain the age of twenty-one years, or sooner die, and upon such child attaining the age of twenty-one years, to pay over all accumulations of such income to such child, and thereafter to apply the income and interest of such share to the use of such child during the remainder of his or her natural life; and upon the death of such child before or after his or her attaining the age of twenty-one years, to assign, transfer and set over such share to the children, if any, of such child, the issue of a deceased child to take the share the parent would have taken if living, and in case of the death of any child of mine leaving no issue him or her surviving, to assign, transfer and set over the share intended for such child to my then surviving issue, by representation and not per capita.”

The daughter Martha died under age, intestate and unmarried, leaving her sister Rosalie surviving, an infant under the age of fourteen.

At the time Martha died the accumulations of income upon her share of the trust estate amounted to nearly thirty-seven thous-sand dollars, which is claimed by her mother as administratrix of her estate, and is also claimed by the guardian ad litem of Rosalie, her surviving sister.

The single question presented by this appeal is whether the accumulations of income upon Martha’s share vested as they were paid in, or was the vesting postponed until she attained the age of twenty-one years?

This precise point has never been directly passed upon by this court, and the opposing views of learned counsel have been fully presented.

Before considering the effect of the statute relating to the accumulations of personal property we will examine the will and ascertain the intent of the testator.

It will be assumed that the testator did not intend to die intestate as to any portion of his estate.

The scheme of the will seems to us clear, and the testamentary . intent fully disclosed.

So long as both of his daughters lived neither had any interest in the principal of the estate; until she attained her majority she was entitled to so much of the income of her trust as was necessary in the judgment of the trustees, and the remainder was to be accumulated until she attained the age of twenty-one years; at that time she was entitled to all accumulations of income, and thereafter received the income of the principal sum during life. If her sister died before or after attaining the age of twenty-one years, leaving no issue, the trustees were directed “to assign, transfer and set over the share intended for such child to my then surviving issue,”' etc.

The learned counsel for the appellant insists that the words “the share intended for such child,” carry with them the income not used during minority, and that the true meaning of the will is that the income was designed for the use of the infant during minority, and the surplus was intended for her if she reached majority, but not otherwise; that until she attained her majority she had only a presumptive or conditional right to the income.

We are unable to adopt this view ; but, taking the whole will together, we think it was the intention of the testator that all accumulations of income during infancy should vest at once, and only the time of payment or enjoyment was postponed until majority.

It was obviously the intention of the testator to discriminate between principal and income; if a child died the principal of her share passed to her issue, or to testator’s other issue, or to col-laterals, but the income was dealt with as a distinct fund.

Until a child died she took absolutely the entire income of her share.

When the testator, in the event of a child’s death, directed transfer of “the share,” he employed accurate language used in other portions of the will to describe the principal sum.

We do not, however, share the doubts expressed by the learned general term as to the testator’s power to make such disposition of the accumulated income of an infant dying during minority as-he might see fit; there is no legal objection to bequeathing the same to any person whether a minor or of full age, and such a, provision in a will would not violate the statute which provides that accumulations must be for the benefit of minors.

When a minor dies, for whose benefit accumulations of income have been directed, it is competent for the testator to dispose of them in the same manner as any other portion of his estate, provided they have not vested in the infant as paid in.

While we rest our decision in this case on the provisions of the-will, we are also of opinion that it is the policy of the statute permitting the accumulations of personal property for the benefit of a minor (1 R. S. 773, § 3) that they should vest in the infant beneficially when received, and it is only payment over that is postponed until the expiration of the minority.

This construction of the statute finds confirmation in the provision (1 R. S. 774, § 5) to the effect that when any minor, for whose benefit a valid accumulation of the interest or income of personal property shall have been directed, shall be destitute of other sufficient means of support or of education, the chancellor may cause a suitable sum to be taken from the moneys accumulated, or directed to be accumulated, and to be applied to the support or education of such minor.

The judgment should be affirmed, with costs.

All concur.

Judgment affirmed.


source: Caselaw Access Project

author: Gray, J.

license: Public Domain

text:
    In the Matter of the Probate of the Last Will and Testament of Asher W. Miner, Deceased.

      (Court of Appeals,

      Filed May 21, 1895.)

    1. Will—Construction.
    Unless a residuary bequest is circumscribed by clear expressions and the title of a residuary legatee is narrowed by words of unmistakable import, it will be construed to dispose of all the testator’s estate, which remains-after effectuating the previous provisions of the will, or which may be added to by lapses, invalid dispositions, or other accident.
    2. Surrogate’s court—Evidence.
    Under the provisions of § 2545 of the Code, a surrogate’s decree will not be reversed for an error in admitting or rejecting evidence, unless it appears to the appellate court that the exceptant was necessarily prejudiced thereby.
    Appeal from judgment of the general term of the supreme court in the fifth judicial department, entered upon an order, which affirmed a judgment entered upon a decree of the surrogate of Allegany county, so far as the same construes the will of Asher W. Miner, deceased.

      James C. Smith, for Maria S. Wills et al. app’lts; Charles B. Wheeler and Arthur W. Hickman, for Charles Wheeler et al. app’lts; Charles Daniels and A. L. Elliott, for resp’ts.

       Affirming 55 St. Rep. 225.

   Gray, J.

The will of the deceased was written by himself and made the following provisions: First, he gave to his wife, in lieu of dowér and all claims by her as widow, absolutely, the sum of .$20,000 and, also, during her life the use of a similar sum and the use of all lands owned by him in the town of Friendship. He gave to her all his “household goods, furniture and fixtures and effects and all his horses, harnesses, carriages, robes, and cutters.” Second, he gave to each of these respondents the sum of $10,000, less any indebtedness or notes held against them. Third, he gave to a niece the interest on $4,000 during her life. Fourth, he gave to a church the sum of $3,000, with directions as to its investment and use, and providing that if the church should be without a pastor for the term of twenty-two months the sum given should “ revert to and be a part of his residuary estate.” In the fifth, sixth, seventh, eighth, ninth and tenth clauses he made bequests for educational and charitable objects. In the eleventh clause certain specific articles were bequeathed. In the twelfth clause, he directed his executors to sell and convey any and all of his real estate, not otherwise disposed of, and to convert the same into personal estate; and he instructed them, in the event of the bequest before mentioned to the church failing, that it should become a part of his residuary estate. In the thirteenth clause, he directed that “after the aforementioned payments shall be made out of the avails of my real and personal estate the balance shall form a part of my residuary estate.” The fourteenth clause reads as follows : “All the rest and residue of my estate both real and personal not heretofore disposed of I give bequeath and devise as follow's all of my household goods furniture and effects after the decease of myself and wife to Kate M. Wellman Myra E. Oorbin and Ella Lockwood to be equally divided between them share and share alike.” It is contended on the part of the appellants, who are next of kin to the testator, that he died intestate as to the general residue of his estate. While on the other hand, the respondents, who are the three persons named in the residuary clause of the will, claim that its provisions give to them whatever belongs to the residuary estate.

The peculiarity of the fourteenth, or residuary, clause, which •creates the difficulty in this case, is that the general gift of the residuary estate, with which the clause commences, has an appearance •of being restricted and narrowed, so as to limit the interest of the persons named therein to the testator’s “household goods, furniturc and effects.” It is argued that the effect of writing in after the general gift of the residuary estate these words, viz.: “as follows all my household goods furniture and effects after the decease of myself and wife to Kate M. Wellman,” etc., was to convert the residuary gift into a specific one of the particular property mentioned. The appellants say that the words of this clause, which precede the enumeration of the testator’s household goods, furniture and effects, do not amount to a gift, as no donee is named in them, and that they are not connected with, but are separate from, the names of the three persons below, by the expression “as follows” and the other intervening words and, that being the case, the names of a donee cannot be supplied by paroi. The result is, according to their argument, that, while the opening words of the clause express an intention to proceed to give the residuary estate, the intention is unexecuted, except by what follows and that which follows is a specific gift of the remainder in the household goods, etc., expectant on the death of the testator’s wife.

It cannot be disputed but that the testator, in undertaking to draw his own will, has expressed himself in the residuary clause, which, in view of the large estate of which he died seized, was the most important one in his will, in very inartificial and inapt language. I think that this is a ease where the intention of the testator to effectually dispose of his residuary estate has very nearly failed of expression; but, with all the difficulties in the way, I think that the language of the clause is adequate to support the construction, which finds the necessary expression of the intention. If some effect is necessary to that end, it is one which it is the duty of the court to make, rather than to permit the result of a substantial intestancy. When we consider carefully the general plan of this will and the circumstances under which it was made, I think we can readily reach the conclusion that it is a case, not where the intention is really unexpressed, nor one where we have to add words to the will, or to supply its omissions, in order to find ■ the intention expressed ; but one where the words of gift in the residuary clause were merely inaptly used, or, rather, unfortunately arranged by the testator, and that we should be doing no violence to the rules of law, or of language, if we give that effect to the residuary clause, which the court gave below. If we can see that the inapt, or careless, use of language by the testator has created the difficulty in ascertaining his intention, but, nevertheless, feel certain as to what he meant, from reading the whole instrument in connection with the clause in question, we may subordinate the language to that meaning. I fully agree with the proposition, advanced for the appellants by their able counsel, that we must gather the intention of the testator from the words he has used and that it must not be a matter of conjecture or speculation on the part of the court. If it were not possible, in the will before us, to reach, with a certainty of conviction, the real intention of the testator and to find it actually expressed, 1 could not advise the affirmance of this judgment. But 1 think the testator has said enough to indicate his intention with respect to his residuary estate and" its disposition by gift to the persons named. Unless a residuary bequest is circumscribed by clear expressions and the title of a residuary legatee is narrowed by words of unmistakable import, it will be construed to perform the office that it was intended for, viz.: the disposition of all the testator’s estate, which remains after effectuating the previous provisions in the will, or which may be added to by lapses, invalid dispositions, or other accident. Riker v. Cornwell, 113 N. Y. 115 ; 22 St. Rep. 151. The rule of construction requires of the court, in dealing with the.language of a residuary gift which is ambiguous, that it should lean in favor of a broad rather than of a restricted construction ; for thereby “intestacy is prevented, which, it is reasonable to suppose, testators do not contemplate.” Lamb v. Lamb, 131 N. Y. 227; 43 St. Rep. 112. In performing the office of contraction, and in order that an apparent intention of the testator shall not be rendered abortive by his inapt use of language, the court may reject words and limitations, supply them, or transpose them, to get at the correct meaning. Phillips v. Davies, 92 N. Y. 199.

Turning to the will and the circumstances under which it was made, we find the testator to have been an active business man, who died at an advanced age ; but who, up to the end, was in good health and attending daily to his business pursuits. He had no children and had taken the three persons named in the residuary clause of his will into his family at early ages. Although he never formally adopted them, they grew up and were recognized as members of his family and the relations between them were at all times of an affectionate nature. The relations between him and his brothers and nephews and nieces were, also, of a more or less affectionate and pleasant nature. The ties of affection between him and the three women, who had grown up from childhood as members of his household, must have been strong enough to warrant him in feeling towards them as a parent might towards his children, when making testamentary disposition of his property. I refer to these circumstances, not so much because they were essential to be shown in aid of the construction of this will, but as tending to reinforce the apparent intention to make them residuary legatees. The general plan of the will itself shows that the testator had in mind to constitute a residuary fund, which might be swelled in its proportions by events affecting prior bequests. For instance, in the sixth clause of the will there is the provision that, if the bequest to the church should fail, it should become a part of his residuary estate. A similar provision again appears in the twelfth clause of the will. In the thirteenth clause he provides that the balance remaining after payment of legacies shall form a part of his residuary estate. We then have the fourteenth, or residuary, clause in question; the very existence of which indicates a purpose on the part of the testator to make a disposition of liis residuary estate and, unless there is something' prohibitive, or insuperably defective in it, the presumption 'should justly obtain from its presence, as also from the very plan of the will, that an effectual disposition had been made of whatever constituted the testator’s residuary estate. Having made certain bequests of his property and having provided with reference to a residuary estate, the testator proceeds to say what shall be done with it and his language is “all the rest and residue of my estate both real and personal not heretofore disposed of I give, bequeath and devise as follows,” etc. That language certainly is explicit and general enough to carry whatever composed his residuary estate to the donees named; and were it not for the words which intervene between that general gift and the names of the donees there could, of course, be no doubt with respect to their rights. But is it true that the doubt which ' is. raised is other than superficial and that it is not removable upon some consideration of the matter ? Shall we give the effect to the words “as follows,” which shall restrict and cut down the general gift of the testator’s estate to the specific articles mentioned and which are of comparatively small value ? Is there any reason for supposing that the testator did not mean, in making the general gift of his residuary estate, that the three women named in that clause s'hould not receive it? Can we justly say that, having in his will anticipated the existence of a residuary estate and then having expressed the intention to give it, that he has left the intention unexecuted for failure to name donees? I think not and I think that we should hold that the general words of gift carried to the three women, named as residuary legatees, all of the residuary estate; notwithstanding the presence of the qualifying words “ as follows.” The testator was mindful, when drawing the fourteenth clause, of the former provision in his will made in favor of his wife; which, apparently, gave absolutely to her the household goods furniture and effects. Intending, doubtless, that her emjoyment of them should only be for her life, he, parenthetically, to use the expression of the respondent’s counsel, effects that limitation upon his previous gift, by interjecting, in the general gift of the residuary estate to the legatees named, the words in question and which have caused the difficulty here. Having completed his will, it is evident that, out of abundant caution and because he believed it to be necessary, he inserted these words of limitation which would represent his purpose and create a life use in the specific effects mentioned.

This construction of the fourteenth clause seems to us, in every view of the matter, not only the just one'to make, but the reasonable and necessary one upon the very language of the clause, read in connection with the general scheme of the will. I may, also, observe that the absence of all punctuation leaves us at greater liberty to make that arrangement of the words, parenthetical or otherwise, which will subserve the apparent purpose of the testator.

Counsel for the respondent cites us to several cases in the English courts, which show that a general and comprehensive testamentary gift of property will not be cut down by the enumeration of particular items. In Fisher v. Hepburn, 14 Beav. 626, the will gave “ the rest, residue and remainder of my estate and effects, whatsoever and wheresoever;” and the gift was held not to be restricted by the enumeration, immediately following of “ canal shares, plate, linen, china and furniture.” In King v. George, L. R. 4 Ch. Div. 435, the testatrix bequeathed “to A. K. George all that I have power over, namely, plate, linen, china, pictures, jewelry, lace, the half of all valued to be given to Herbert George, son of Frederick George.” Vice-Chancellor Malins held that the bequest was not limited to the articles specifically bequeathed and he uses this language: “I cannot help thinking that the doctrine has been settled that where a testator gives his property generally by the words ‘all my property,’ or ‘all'my estate,’ or ‘all that I have power over,’ as in this case where he uses words sufficient to pass everything, and then proceeds to enumerate particulars,—it is now, I think, pretty well settled that an enumeration of particulars does not abridge or cut down the effect of the general words.” The appellants’ counsel seeks to distinguish the decision in Fisher v. Hepburn by the suggestion that, as the articles there were named in immediate connection with the gift of the rest and residue, their enumeration could not be regarded as an attempt to limit the gift to them; and in King v. George he suggests the distinction that an intent to give the entire residue to the legatee name was unequivocally expressed by words of direct gift of the residue to such donee, be-' fore the enumerating works were resorted to. I am inclined to think, however, that the distinctions suggested are not substantial; for we have in the clause of the will before us an absolute gift of all the rest and residue of the" testator’s estate, which is made to persons named therein; unless we allow to the words “ as follows ” the restrictive effect insisted upon by the appellants. In the case of Childs v. Wilson, 2 Jur. 415, to which we are referred by the appellants’ counsel, in his argument upon the effect of the expression “ as follows,” there was no general residuary gift. In that case the word “ namely ” followed after a gift of all the testator’s household furniture to his wife and after the gift to trustees for his wife and child of all his “ money, goods and chattels whatsoever, except my household furniture aforesaid ; ” and because, after “ namely,” he proceeded to give to his wife fifty pounds a year'for her life and to his daughter five hundred pounds when she attained twenty-one “ and in case my wife, Mary Brown, shall be pregnant at my death, the child to have five hundred pounds and my wife twenty-five pounds per annum, instead of fifty pounds as aforesaid,” it was held that there was an intestacy as to the rest of the estate not comprehended within those amounts. But there was some reason in that case for attaching to the word “namely ” the restricted meaning, because the bequests were in fact restricted by naming precise amounts.

Without further discussion of the great number of cases, which have been cited as bearing more or less upon the question here I think we are warranted in giving that construction to the residuary gift, contained in the fourteenth clause of this will, which will be in harmony with the plan of the whole will and- which will effectuate that evident intention, which the words of the clause suggest and which we think they have, although most inartificially expressed. As I have previously suggested, the case presents no-inconsiderable difficulty, growing out of the fact that the testator has undertaken to make his own will and, in doing so, has been unfortunate in the arrangement of words. But the result of a consideration of the whole will leaves the conviction that the testator has not failed to express his intention to give the whole of his residuary estate to the three persons named.

The proponents of this will offered extrinsic evidence to show the motives and the intention of the testator; which consisted in the introduction of a will, made by him some few years previous to the present will, and in considerable testimony as to the relations which subsisted between the testator and the respondents. It may be a matter of doubt as to the relevancy and materiality of very much of this evidence ; inasmuch as the language of the will was not, perhaps, sufficiently ambiguous to warrant it. The object, of course, of introducing the testimony with respect to the relations subsisting between the testator and the respondents, was to place the court; as nearly as possible, in the position of the testator when he made his will; and that evidence to that effect is generally admissible cannot be denied. It may be that as to some of the evidence here it exceeded the proper limits; but no prejudice has resulted and without it the court could have arrived at the conclusion it did. As to the previous will which was introduced in evidence, the object was to show that the same persons were intended to be benefited by the present will, who were the principal beneficiaries in the prior will. It is sufficiently plain from a comparison of the two wills and the literal identity of their language in important provisions, that the prior will must have been before the testator and furnished the model for drawing the present will. In that view of the case, perhaps, it cannot be said that there was error in receiving in evidence the former will to aid in the construction of the present one. But, whatever doubt there may be as to the admissibility of such evidence, and, in my opinion, there is considerable, it did not constitute error which calls for a reversal at our hands; for the reason that, in its absence, the same result must have been reached. Under the provisions of section 2545 of the Code of Civil Procedure, a surrogate’s decree shall not be reversed for an error in admitting or rejecting evidence, unless it appears to the appellate court that the exceptant was necessarily prejudiced thereby. The effect of that section is to leave the appellate court at liberty to disregard the error, if it could have had no influence upon the determination of the case. If the -judgment is clearly right, notwithstanding the error, it is no ground for reversal. Loder v Whelpley, 111 N. Y. 239, 246 ; 19 St. Rep. 631.

It results from the views which I have expressed, that the judgment below should b' affirmed, with costs.

All concur, except Haight, J., not sitting. Judgment affirmed.


author: Andrews, C. J.

text:
    Marie Schutz, Resp’t, v. Joseph Morette, as Sole Executor, etc., App’lt.

      (Court of Appeals,

      Filed May 21, 1895.)

    1. Pleading—Complaint—Account stated.
    In an action upon an account stated, it is unnecessary to set forth in the complaint the subject matter of the original debt.

      2. Executor—Disputed claim.
    The mere silence of an executor cannot he regarded as an admission of a claim presented so as to relieve the claimant from establishing it in the ordinary way, and put upon the estate the burden of affirmatively establishing mistake or error.
    3. Same—Limitations.
    An executor cannot, by his oral or written promise or acknowledgment, revive against the estate of his testator a debt barred by the statute of limitations.
    4. Same.
    An acknowledgment of a debt by an executor will not, in the absence of an express promise to pay, take the case out of the statute.
    Appeal from judgment of the general term of the supreme court in the first judicial department, entered upon an order, which affirmed an interlocutory judgment in favor of plaintiff entered upon an order of special term overruling a demurrer to the complaint.
    The complaint in this action in substance alleged that Margaretha Metzger died leaving a will which was duly proved in the county of New York, where she resided, and that letters testamentary were issued to the defendant, Joseph Morette; that on or about December 5, 1892, said defendant caused notice to creditors to be published to present their claims on or before June 5,1893 ; that on November 18, 1892, plaintiff presented to defendant a duly verified claim and that defendant acknowledged the receipt thereof; that said claim was as follows, viz.:
    “ City and County of New York, ss. :
    “ Marie Schütz, being duly sworn, says that she resides at No. 236 Sixth avenue, in the city of New York, and'has a claim for the sum of one thousand dollars ($1,000) against the estate of Margaret Metzger, deceased, formerly a resident of Ho. 238 Sixth avenue, which she hereby presents to the executor of the will of said testatrix and demands payment thereof, the said claim growing out of the following facts, to-wit.:
    “ At New York city and at the city of Saratoga, in the state of New York, this deponent rendered services to the said testatrix at her request, for which she promised and agreed to pay, which said services were so rendered to her at different times during a period of eight years last past, consisting of nursing and attendance both by day and at night, and the said services were fairly and reasonably worth the sum of one thousand ($1,000) dollars, no part of which has been paid. “ M. Schütz.
    “ Sworn to before me this 16th) day of April, 1894. j
    “ Francis W. Judge, Jr.,
    “ Notary Public, N. Y. Go."

    It was then alleged that although said defendant has had a reasonable opportunity for examination into the validity and fairness of the claim so presented, he has not disputed or rejected the same, and refuses to pay the same, or any part thereof.

      Judgment was demanded against .the defendant for the sum of $1,000, with interest thereon from February 1,1892, besides costs.
    The complaint was demurred to as not stating facts sufficient to constitute a cause of action.

      John S. Davenport, for app’lt; J. George Flammer, for resp’t.

       Reversing 63 St. Rep. 428.

   Andrews, C. J.

The authorities establish that an executor or administrator may state an account of dealings of the testator or intestate, and that an action or an insimul computassent may be maintained against him in his representative character to recover a claim ascertianed and adjusted on such accounting. Segar v. Atkinson, 1 H. Bl. 103; Ashby v. Ashby, 7 B. & C. 444. When the account relates to transactions between the executor or administrator and another party, upon claims not existing at the death of the decedent, although they grow out of matters connected with administration, the action lies only against the executor or administrator personally. In the one case the judgment is de bonis testatoris, and in the other de bonis.propriis. Reynolds v. Reynolds, 3 Wend, 244; Gillet v. Hutchinson's Admrs., 24 id. 184. The complaint is not demurrable, therefore, on the ground that an action on an account stated will not lie against an executor in his representative character upon an accounting between him and the plaintiff. It is important, however, in determining whether the complaint states a cause of action upon an account stated, to consider the essential characteristics of that liability. The cause of action in such case is not the obligation originally created when the items of indebtedness arose. It is the agreement of the parties made after the transactions constituting the account that a certain balance remains due from the one to the other, and a promise of the party found to be indebted to pay to the other the sum so ascertained, and in suing in this form of action it is unnecessary for the plaintiff to set forth the subject matter of the original debt. (1 Ch. Pld. 358.) The doctrine of account stated, and the remedy thereon, is said to have been founded originally on the practice of merchants, Sherman v. Sherman, 2 Vern. 276, but its scope has been extended so as to embrace an account with items on one side only, and when the transaction has no relation to trade and there were no mutual dealings. The stating of an account is in the nature of a new promise. Holmes v. D'Camp, 1 Jo. 34. The complaint in this action neither avers that an accounting has been had between the parties in respect of the alleged debt set forth in the verified claim presented to the defendant, nor that any balance was ascertained or found to be due from the testatrix to the plaintiff, nor that the defendant had promised to pay any amount whatever, nor are there any averments of equivalent import. (See form of count, 2 Ch. Pld, 90.) These essential facts are left to be inferred from the allegations that the verified claim set forth had been presented to the defendant pursuant to notice, and that, although a reasonable opportunity for examination into its validity was had, the executor had not disputed or rejected it. The complaint is based upon the assumption that an omission by an executor to reject or dispute a claim presented to-him against the estate he represents, pursuant to notice, justifies-an inference of all the facts which are essential to constitute a cause of action on an account stated. It is true that under the-present system of pleading a complaint on demurrer is deemed to-allege what can be implied by reasonable intendment from the-allegations therein, Marie v. Garrison, 83 N. Y. 14. But this-does not, we conceive, help the plaintiff. The doctrine that an account rendered becomes an account stated after the lapse of a reasonable time for examination by the party against whom it. is rendered, and he makes no objection, is, in general, founded upon a just inference that a party against whom a claim is made will dispute it, if incorrect or unfounded. His silence operates as-an admission of the correctness of the account and prima facie establishes the claim in favor of the party presenting it. Lockwood v. Thorne, 18 N. Y. 285. But the doctrine has, from the nature of the case, a much more restricted application when the plaintiff' relies upon the silence of an executor to whom a claim against the estate he represents has been presented. He is not presumed to-be personally cognizant of the transactions out of which the-claim arose. It would subject the estates of decedents to great, danger if mere silence of the executor should be regarded as an admission of a claim presented, and relieve the claimant from establishing if iii the ordinary way, and put upon the estate the burden of affirmatively establishing mistake or error. The office-of executor or administrator is one exceedingly necessary and useful, and must, in frequent instances, be assumed by persons unskilled in legal matters, and to infer from mere silence on'the part-of the executor or administrator an agreement that the claim was just and a promise to pay it would often contradict the real intention and tend to subject estates of decedents to the-payment of unfounded claims.

In the present case, even if the general rule was applicable, the nature of the claim presented to the executor rebuts any inference-of assent by the executor to its correctness, arising from mere-silence, and prevents any implication from such silence of a promise on his part to pay the claim presented. The claim on its face, in connection with other facts averred in the complaint, shows presumptively that in part, at least (and for all that appears-it may be the greater part), was barred by the Statute of Limitations at the death of the testatrix. An executor can neither by his promise or acknowledgment, oral or written, revive a debt against the estate of his testator barred by the Statute of Limitations, Bloodgood v. Bruen, 8 N. Y. 362, and against a claim so barred he is bound to plead the statute. Butler v. Johnson, 111 N. Y. 204; 19 St. Rep. 85. In view of the power and duty of an executor or administrator, the inference from his silence merely of an agreement on his part to pay a debt so situated, would be unreasonable. The implication of such a promise would place-him in the position of agreeing to do what would be a plain violation of his official duty. It was held in Young, Admr., v. Hill, 67 N. Y. 163, which was a claim in part to recover compound interest based on an account stated, that if from the account rendered “ it appears that any of the charges are not in law or equity proper claims, no promise to pay a balance into which they enter can be implied.” It is no answer to the point that the executor when sued would not be precluded from pleading the statute. The question is whether assent of the executor to the correctness of the account and a promise to pay the claim as presented, can be implied from its presentation and retention, and his subsequent silence. We think no such implication is permissible. It has been held in many cases that an acknowledgment of a debt by an executor or administrator, in the absence of an express promise to pay, will not take a case out of the Statute of Limitations. Where a debtor is sued for his own debt the law infers from an acknowledgment a promise to pay, upon which an action lies. But in case of an executor or administrator the promise must be express, and will not be implied from an acknowledgment merely. Tullock v. Dunn, Ry. & Mood. 416; Thompson v. Peter, 12 Wheat. 563; Fritz v. Thomas, 1 Whart. 66; Angell on Lim. sec. 261 el seq. In the present case no express promise is averred, but the pleader leaves it to be inferred that the debt was settled and adjusted and a promise was made to pay by the executor, from his inaction merely, and this although it presumptively appears that a portion of the claim presented was unenforceable by reason of the statute. The statutory system for the presentation and adjustment of claims against the estate of a decedent furnishes a summary and inexpensive method by which claims can be adjusted without action, or by reference. The executor or administrator may, on being satisfied of the justice of a claim presented, admit it, or, if he doubts its justness, may reject it and leave the creditor to his remedy by action if a reference is not agreed upon. But the presentation of a claim, followed by inaction, the executor or administrator neither admitting nor rejecting it, does not, we think, bind the estate as upon an account stated. It may be justly claimed that the executor or administrator ought, in the fair discharge of his duty both to the creditor and to the estate, to examine the claim within a reasonable time and make known his position in respect to it. But it would be hazardous, in view of the ignorance or inexperience of the persons called upon to act as executors or administrators, to construe mere silence on his part as an admission that the claim was a valid on.e. The creditor must see to it that the claim is admitted and allowed by the executor or administrator, and an implied admission from silence is not sufficient. In Reynolds, Admr., v. Collins, 3 Hill, 36, it was held that the presentation of a claim under the statute does not bar the running of the Statute of Limitations, and if the executor neither allows or rejects it, the creditor “ must take care to have the matter adjusted or commence his action within the period of the statute or he will be too late.”

We think the demurrer to the complaint was well taken and the judgments below should be reversed, with costs, with leave to the plaintiff to amend her complaint if so advised.

All concur. Judgments reversed.


author: Peckham, J.

text:
    Alfred Johnson, Resp’t v. Steam Guage and Lantern Company, App’lt.

      (Court of Appeals,

      Filed May 21, 1895.)
    1. Factories—Fire escape.
    A duty was imposed, by the provisions of chap. 409 bf 1886; as amended by chap. 462 of 1887, upon the owner .or occupant of the prescribed class of factories, for an omission to perform .which,the operatives who sustain damage thereby, may recover. ' •).'> ' ’ ’
    2. Same.
    The owner cannot be held liable, where the operative gives no evidence whatever from which an inference • may. properly be drawn as to where he sustained the injury, whether from'a cause,for. which the owner is, or from one for which he is not, liable. ...
    3. Same.
    .In this case, it was held that there was evidence enough upon the question as to the cause of the injuries to call for it's decision by the jury instead of by the court. "
    Appeal fom judgment of the general term of. the supreme court in the fifth judicial department, entered upon an order which; denied a motion by defendant for a new trial,and :ordered judgment' in favor of plaintiff on a verdict. - - *
    This action was brought to recover damages-, for -injuries received by plaintiff through the alleged negligence of defendant.

      Louis Marshall, for app’lt; Walter S. Hubbell, for resp’t:

      Affirming 55 St. Rep. 133.

   Peckham, J.

The plaintiff was another of those unfortunate victims who suffered damage and some of whom suffered death consequent upon the destruction by fire of the factory rented bys the defendant in the city of Rochester in November, 1888. .In the case of Pauley against this defendant, reported in 131 N. Y. 90 42 St. Rep. 636, we had occasion to review the circumstances attending the terrible catastrophe in which that plaintiff’s intestate; lost his life. We there held that the Law of 1886 (chap. 409), as amended by chap. 462 of the Laws of 1887, imposed the duty upon, the owners or occupants of a certain class of factories to provide-fire escapes therefrom, and if, from an omission to perform such-duty, an operative was injured, he might recover damages. It was also held that this duty being the creation of the statute, was measured by it, and could not be made to exceed its terms. Prior to the passage of these acts an owner or occupant of a factory not peculiarly exposed to the danger of fire by the character of the work carried on within it, was not bound to anticipate a merely remote or possible danger and to take measures to prevent- its occurrence. Such an owner or occupant was not bound by the common law to take any extra and unusual precautions for the purpose of protecting the operatives against the danger arising from fire, which such owner or occupant was not reasonably bound to anticipate. But by the passage of the acts in question we held that a duty was imposed upon the owner or occupant of the prescribed class of factories, for an omission to perform which the operatives who sustained damage caused by such omission might recover. Upon the facts presented in the Pauley case we held that the defendants had not been shown guilty of any violation of the act resulting in damage to the plaintiff, and that no actionable negligence against it had been shown on the trial.

The case now before the court does not involve any of the questions decided in the Pauley case. If it did, we should hold ourselves concluded by the decision of that case in any event, although subsequent reflection upon the rule as therein laid down leads us to the belief that it was without doubt correctly decided. The plaintiff in this case was injured while attempting to escape from the burning building by means of the fire escape, which had been attached to the east wall of what is called the elevator shaft of the so-called wing building of the factory. He came down the fire escape ladder until his feet reached, the bottom ru.ng, ten feet above the platform herein spoken of, when the heat of the iron and the fire, which was blazing out from the windows past which he descended, and the pain consequent upon the burns which he received from the flames as he was passing down the escape, and the terrible excitement of the moment, all combined to render him temporarily unconscious, and he. dropped from the fire escape, and upon recovering consciousness found himself lying across the chute used for the purpose of delivering boxes from the courtyard into the door of the. factory in the story below, at an angle of about forty-five degrees. ... •

The defendant alleges that it is impossible upon any view of the evidence in the case to ascertain the cause of the plaintiff’s injuries, or whether they.arose from a cause for which the defendan was liable, or from one for which it was. hot liable, and that to su tain the judgment against the defendant in this case would be tv attribute liability to the defendant upon a purely conjectural and speculative theory. And the defendant urges that within the rule which demands evidence that plaintiff’s injuries were caused by some negligence, or by some improper act on the part of the de-, fendant, the plaintiff has entirely failed to prove his case.

In order to make the reasons for our decision as clear as may be some few further facts must necessarily be stated. It is enough for our purpose here to concern ourselves with the south wall in the so-called wing building of this factory and the ground and structure surrounding it. The south wall ran the whole, width from east to west, and formed the northern boundary of a courtyard, and that courtyard extended south for a distance of more than one hundred feet to Centre street, running east and west. At Centre street this courtyard was about thirty feet wide, and somewhat wider at its northern extremity, where th'is south wall of the wing building crossed it. There was within this courtyard an open space of six feet two inches from the south wall of the wing building southerly to the north wall of what is called" the boiler building ; and the north wall of this boiler building was about fourteen feet high. There was thus left an open space between these two buildings six feet two inches wide and fourteen feet deep, which is herein called the areaway. The roof of this boiler house formed the paved courtyard over which one passed in going south to the exit from the courtyard on Centre street. From about the center of the south wall of the wing building an elevator shaft projected to the south, the east wall of which stretched across the areaway and continued up to the full height of the factory wing building. The south wall of the elevator shaft was the north wall of the boiler building and the west wall of the shaft crossed this area again, and the area thus was bounded by the elevator shaft. Persons coming from Centre street into the courtyard and going north towards the factory wing building would pass over and upon the paved roof of the boiler building and would thus reach the open area six feet and two inches wide and fourteen feet deep, separating the factory wing building from the paved courtyard. There was a door in this south wall of the wing building leading into that building at this point, which was just east of the elevator shaft, and the door was about three feet above the level of the paved courtyard, and in order to reach the door three steps and a platform were placed over the area and connecting the courtyard and offering a means of entering the factory door. These steps and platform were laid upon iron stanchions leading from the courtyard to the door. The platform, one side of which was against the south wall, had been originally between three and four feet wide and this platform and the steps leading up to it from the courtyard formed a covering over the arteaway. Down the east wall of the elevator shaft the five escape ladder had been placed and the south ends of the rungs were two feet eight inches from the south wall of the wing building, so that a man coming down the ladder facing west or towards the elevator shaft with his back to the east and leaning on the outer or southern edge of the fire escape, would if he dropped straight down land according to the contention of the defendant upon the platform above mentioned, although within four inches of its southern edge; while according to the evidence given on the part of the plaintiff, which made this platform but twenty to thirty inches wide, a man dropping from the fire escape would drop his left side from two inches to a foot south of the platform and strike either the skeleton iron stanchion from which the steps had been removed, or the chute now to be mentioned.

Sometime prior to the fire the entrance to the factory over these steps and platform through the door in that south wall had been closed and fastened and no one any longer entered in that way. The steps leading up to the platform had been taken away and as some of the evidence tended to show one board of the platform itself had been removed, thus leaving the iron framework exposed upon which the steps and the one board of the platform had rested, and leaving but two or perhaps three boards still remaining as a portion of the platform. These steps and the portion of the platform had been removed for the purpose of putting in a chute, running from the courtyard down to the bottom of the area and into a door of the factory at that spot. The chute was placed at an angle of about forty-five degrees, or perhaps a little steeper, and consisted of two or three parallel boards with risers on each side from five to six inches high. The chute thus ran directly from the court yard between these iron stanchions and along under the platform down to the door below. There was evidence tending to show that the west side of this platform was built directly against the east wall of the elevator shaft, and that the platform itself came close up against the south wall of the wing building. That is the evidence of the defendant; but the evidence on the part of the plaintiff tended to show that there was a space of at least a foot and perhaps a foot and a half between the elevator wall and the west side of the platform. It will thus be seen that even upon the defendant’s contention, a person coming down the fire escape and getting out to the extreme edge of the ladder, the furthest away from the south wall of the burning building, would if he dropped mathematically straight down from the lowest rung of the ladder, land within four inches of the south ■edge of the platform which was partly covering this area space, and under which ran this steep chute. If there were but the least inclination of the body to the south when falling, it would ■drop outside of and beyond the platform.

The precise point contended for by the defendant may now be appreciated. It is said on its part that this fire escape was well and properly constructed, and regarding the first story of the factory as on the grade of the paved courtyard, the fire escape came down as far as the statute required; that the defendant at the grade of the court yard had furnished a platform which was the same as the earth itself, and if the plaintiff on dropping from the fire escape fell onto this platform (or earth) and in that way sustained the injury of which he complains, the defendant would not be liable, for the reason that having furnished a fire escape as provided by statute, and the plaintiff having been injured in dropping upon the earth from a perfectly constructed fire escape, the defendant could not be held liable for that misfortune, and however improper may have been the placing of the chute at that particular spot, yet if the plaintiff sustained no injury on account of its position, the defendant is clearly not liable in this action. We will assume that if the plaintiff sustained injury from falling upon the platform, the defendant would not be liable and that it is necessary for the plaintiff to show that such was not the fact. We also agree with defendant’s counsel that if the plaintiff gave no evidence whatever from which an inference might properly be drawn as to where he did sustain the injury, whether from a fall upon the platform or a fall into the chute, and it is left to pure speculation or "guess work to decide what did cause his injury, the defendant cannot be held liable. It is true there is no direct evidence on the subject from an eye witness. The defendant says that the plaintiff himself does not pretend to be able to state how it was that he received the injuries in question. No one saw him when he fell; no one was aware of his presence there at the time. He himself got so far down the fire escape as to place his feet on the last rung of the ladder, and just at the very moment of dropping he became unconscious. Whether he fell on the platform or on one of those skeleton iron stanchions or on the chute, plaintiff very frankly says he cannot state; and there' is thus, as the defendant urges, an entire dearth of evidence upon which to sustain any recovery in this action.

After a careful reading of the evidence and much reflection upon the inferences that might legitimately be drawn from it, we are of opinion that the plaintiff proved enough upon the question as to the cause of his injuries to call for its decision by the jury instead of by the court. We do not think that such decision rested upon mére speculation, and consequently we do not agree that the verdict of the jury was nothing more than a guess. Upon questions of fact it is sufficient that there is a balance of evidence or probabilities in favor of one side or the other of the dispute, and upon such balance courts will rely in deciding the weightiest issues. . Weeks v. Cornwell, 104 N. Y. 325 at 336 : 5 St. Rep. 632. There is evidence here to establish upon a firm foundation these facts; the existence of the iron stanchions upon which originally were laid the steps from the'cóurt yard up to the platform arid also the platform itself, leading to the door of the factory; that all the,boards composing the steps had been removed, and at least bhe plank of the platform, and that the width of the platform was not moré'than twenty, certainly not more than thirty inches ; that directly between these iron stanchions and continuing underneath this'platform and connecting the court yard and the factory story fourteen feet below was this chute running down at an angle of forty-five degrees; that the fire escape was on the east wall of the elevator shaft and the end of each rung of the ladder furthest from the wing'building wall was at least two feet eight inches therefrom; the last, rung of the ladder was ten feet higher than the platform, and a man, with his feet on that rung and holding on by his hands, would be that distance above the level of the platform, his face would be toward the west and his body as far to the south on .the ladder as he could get for the purpose of getting away from the flames coming out of the windows in the south wall; and if the platform were but twenty inches wide, his left side would be at least a foot south of and bejroud the edge of the platform and hanging over this chute and almost directly over the skeleton stanchions upon which the steps had once rested. If the platform were thirty inches wide, he would still overreach it.

Upon these facts the inference is entirely admissible, and, as we think, is plainly a natural one that if plaintiff were even motionless when he dropped, he would land outside of the platform, and that he would either strike the stanchion or the chute, and upon this point it is'not material to determine which. Judging from the position in which he found himself when his consciousness returned, with his body lying across the chute, his feet to the west and bis head to the east of it, the inference from the facts is neither forced nor unnatural, nor mere speculation, and it is that he first struck the west stanchion and had then fallen over upon the chute. He did not strike the chute first, as in that case, falling or dropping directly into it, he would have gone down the chute to the bottom. He probably did not strike the platform first, as it was much too narrow in that aspect of the evidence which the jury might assume, to afford a landing place for him as he fell. The jury, therefore, had the right to find from the evidence that in all probability the plaintiff did not first strike the platform or the chute, and there was but one thing else that he-might have done and that was to strike the stanchion and break his leg in the manner described and then fall over across the chute as already mentioned. The character of the injuries to the left leg of the plaintiff was such as to favor the inference that he was thus injured. He sustained what the surgeons call a compound com-minuted fracture of the leg below the knee, the bones thus broken being driven up and into the knee joint, showing that the force was applied from beneath and upon a slope and not laterally. This could have been caused by striking as the body descended against this iron stanchion, breaking the fall and tumbling the plaintiff from that position over upon his back across the chute.

The evidence of the surgeon, to which exception was taken by the defendant, in regard to the position in which the plaintiff was when the injury occurred was, we think, admissible. He described fully and minutely the character of the injury, the position, extent and nature of the fractures and all the other details which were open to his actual observation and which were capable of exact description. The opinion which he gave, while not absolute, was at the same ‘time admissible as stating the probalities as to the position of the leg and the point from which the blow came, and the facts which he obtained from his examination formed treasonable ground upon which to base an opinion as to the cause of the fracture. People v. Willson, 109 N. Y. 345, 353; 15 St. Rep. 503. Taking all the evidence which he gave upon the facts which he observed from an actual examination of the injury itself, the resulting opinion was not an unnatural or a forced one, and while it was one which possibly any individual might give upon like knowledge derived from such examination of the inj ury, we think even if the' mere opinion itself were erroneously admitted it was not of that character which, when taken in connection with all the other facts in the case, would warrant our reversal of this judgment on that ground.

' The question whether the defendant was not guilty of actionable negligence in thus erecting a dangerous structure under the fire escape, and leaving so narrow a platform as to render it impossible for a person dropping vertically from the fire escape to land on it, was left to the jury in a very clear and concise charge by the learned judge who tried this case. Upon the request of the defendant the judge charged that if the plaintiff, when he dropped from the fire escape, landed on the platform and was there injured, that he could not recover; and the jury by the verdict have found as from this evidence we think they had a right to find, that the plaintiff did not drop on the platform, and that he did drop upon and strike either the stanchion or the chute, in all probability the stanchion. The jury have found that the defendant was guilty of negligence in allowing these stanchions and this chute to be placed and to remain in the condition they were at the time of this accident and but partially covered by this narrow platform, and the judge charged that if they found such to be the fact they would have the right to say that the defendant had failed to furnish a proper fire escape within the meaning of the statute. In this, we think, there was no error.

Upon the whole case, we think, the question of defendant's liability was properly submitted to the jury, and the judgment entered upon the verdict in favor of the plaintiff should be affirmed, with costs.

All concur, except Haight, J., not sitting.

Judgment affirmed.


text:
    Miles M. O’Brien et al., as Receivers, etc., App’lts, v. Hugh J. Grant, as Receiver, etc., Resp’t.

      (Court of Appeals,

      Filed May 21, 1895.)

    1. Banks—Clearing house.
    Under the constitution and rules of the clearing-house association, an arrangement between banks that one should act as agent for the other in clearing its checks through the clearing house cannot be discontinued nor its liability cease, until after the completion of the exchanges of the morning next following the receipt of a notice of discontinuance.
    '2. Same—Preference.
    The provision of section 48, chap. 687 of 1892, has no application, where at the time when such arrangement was made, the bank whose checks are to be cleared was solvent.
    3. Same—Insolvency.
    The subsequent insolvency of such bank does not excuse the clearing bank from the performance of its obligation towards the clearing-house banks.
    4. Same—Deposit.
    The deposit of securities made with the clearing bank constitutes a lawful pledge of the assets of the depositing bank, to protect the former against any possible loss in undertaking to clear and pay all checks drawn by the latter and sent through the clearing house, and the clearing bank is entitled to hold and apply the securities in payment of the amount so paid by it.
    ■S. Same—Fraud.
    Where there is nothing to charge the clearing hank with any knowledge or notice of the designs of the drawers of certain checks so as to make it an abettor in an unlawful scheme to obtain a preference over other creditors and it acted in perfect good faith in its payments of such checks, it was justified in so doing, and it not only could not, but it should not, be made to suffer a loss.
    Appeal from judgment of the general term of the supreme court in the first judicial department, entered upon an order which affirmed a judgment in favor of defendant entered upon the report of a referee.
    This action was brought to recover from the defendant certain securities which had been deposited by the Madison Square Bank with the St. Nicholas Bank and the proceeds of the securities, which the latter bank had converted into money.

      The following facts were found and are either undisputed or proved. In January, 1891, an arrangement was made between the Madison Square Bank and the St. Nicholas Bank (both of them being state banks); by which the latter bank, which was a member of the New York Clearing-House Association, became the agent to clear through the clearing-house checks drawn upon the Madison Square Bank. The St. Nicholas Bank submitted in writing a memorandum of the conditions on which it would undertake this business for the Madison Square Bank, as follows:
    “ $50,000 balance to be kept at all times, to be free from interest. An allowance at rate of two per cent, per annum shall be allowed on average exceeding this amount. The Madison Square Bank is to keep with this bank $100,000 in approved bills receivable.”
    In a letter dated January 9, 1891, addressed by the Madison Square Bank to the St. Nicholas Bank, the cashier of the Madison Square Bank says:
    “ Referring to conversation of our president with your good selves, we would say that we accept the terms and conditions on which your bank agrees to clear for us as per your memorandum, namely, $50,000 balance to be kept with you at all times free of interest. Interest at two per cent, per annum to be allowed us on average exceeding that amount. This bank to keep with you $100,000 of approved bills receivable. * * * We enclose copy of a letter addressed by us to the clearing-house committee to'conform with the requirements of their circular of December 18th last.”
    The letter to the clearing-house committee enclosed a copy of a resolution, signifying the acquiescence of 0the Madison Square Bank with the terms of the circular and authorizing its cashier to send a check for the annual payment of $200 required of banks clearing through members.
    It was verbally agreed between the parties, at the time of the arrangement referred to in said letter of the 9tli of January, that other securities of equal value might be substituted from time to time for those first deposited making up the $100,000 of bills receivable.
    The Clearing House Association was and is a voluntary association of banks and banking associations of the city of New York. The object of the association, as stated in its constitution, is, “ the affecting at one place of the daily exchanges between the several associate banks, and the payment at the same place of balances resulting from such exchanges.”
    The St. Nicholas Bank was a member of the association. The Madison Square Bank was not so.
    Section 25 of the constitution was as follows:
    “ Whenever exchanges shall have been made at the clearing house by previous arrangements between members of the association through one of their number, and banks in the city and vicinity, who are not members, the receiving bank at the clearing house shall in no case discontinue the arrangement without giving previous notice, which notice shall not take effect until the exchanges of the morning following the receipt of such notice shall have been completed.”
    This section was in force at and before January 9, 1891, and is still in force, and it was known to be so by the Madison Square Bank at the time of the making of this arrangement.
    After the making of this arrangement, and on and after the 13th January, 1891, the St. .Nicholas Bank made the clearances at the clearing house for the Madison Square Bank up to and including the 8th day of August,-1893, and the Madison Square Bank deposited and kept good, as to amount and value, its deposit of bills receivable with the St. Nicholas Bank and up to some time -in July, 1893, kept good its money balance of $50,000 in addition thereto. Some time prior to August 8th, 1893, the St. Nicholas Bank desired to terminate the arrangement for making "clearances for the Madison Square Bank. At that date it held, also, certain collateral securities, taken upon loans made upon notes of the Madison Square Bank and by agreement they or their proceeds should be applied to any other obligations of that bank.
    On the 8th day of August, 1893, the St. Nicholas Bank gave the notice required by the 25th section, that it would cease to make clearances for the Madison Square Bank. This was served upon the banks constituting the Clearing House Association on that day.
    - By the terms of section 25 this notice took effect upon the com - pletion of the exchanges at the clearing house on the 9th of August These clearances were made every day immediately after 10 o’clock and were completed before 12 o’clock.
    The St. Nicholas Bank paid, on the 9th of August, through the clearinghouse, checks drawn upon the Madison Square.Bank by depositors having amounts to meet the same to their credit as depositors on the books of the Madison Square Bank, $372,000. On the 8th day of August, 1893, the Madison Square Bank, after ineffectual efforts to obtain a loan to relieve its imediate necessities was visted by the clearing house committee and its condition examined; also by an officer of the. state banking department. After this examination by the committee of the clearing house their conclusion that the bank was not in a condition to continue business was communicated to the officers and some of the directors of the Madison Square Ban k.
    The Madison Square Bank did not open for business on the following day. It was, in fact, insolvent on the 8th of August, 1893,.and the officers of the St. Nicholas Bank knew before the exchanges were made on the 9th of August that the Madison Square Bank was insolvent, or that its insolvency was imminent and that it had stopped business.
    Included in the gross sum of $372,000, the amount of the checks upon the Madison Square Bank, cleared by the St. Nicholas Bank on the 9th of August, were two checks drawn by Elliott Danforth, the treasurer of the state of New York, against funds of the state deposited in the said bank, which checks were signed and dated on the 8th day of August, 1893, and were deposited in banks in the city of New York, which were members of the Clearing House Association, before 10 o’clock on the morning of the 9 th of Augustj 1893, and were by such banks sent to the clearing house on said 9 th day of August, The clearance of said checks
    were regular and according to the usual course of business among the banks constituting said Clearing House Association, notwithstanding the fact that they were not deposited for collection with a clearing house bank until the morning of the 9th day of August, 1893. The St. Nicholas Bank had no knowledge on the 9th day of August, 1893, of any irregularity in regard to the' drawing, deposit or transmission to the clearing house of any of the checks going to make up said gross amount of $372,000.
    The referee found that the payments of check on the morning of August 9th, 1893, were in performance of its contract with the Madison Square Bank and were not made with the intent on the part of either of the banks to give a preference to any creditor of the Madison Square Bank over any other creditor; or in violation of the Corporation Law of the state and he held that the plaintiffs were not entitled to recover any part of the money or securities held by the St. Nicholas Bank.
    From the affirmance of the judgment entered upon his report, at the general term, the plaintiffs have appealed to this court.

      Louis Marshall, for appl't; William Allen Butler, for resp’t.

       Affirming 66 St. Rep.

   Gray, J.

The St. Nicholas Bank claims the right to apply the securities and moneys theretofore deposited with it by the Madison Square Bank towards the reimbursement of its payments, or clearances, of the latter’s checks on the morning of August 9th, 1893. With respect to that claim the proposition of the plaintiffs is twofold. They say that rule 25 of the clearing house did not require the Saint Nicholas Bank to clear the checks drawn on the Madison Square Bank, presented after it became aware of the insolvency of the latter, and that such insolvency terminated the relation of clearing house agent and rendered any payments made unauthorized; or, if the clearing house rule is susceptible of the ■interpretion that it required the Saint Nicholas Bank to honor ■checks drawn on the Madison Square Bank after its insolvency became known to it, the contract between the banks, in so far as it contemplated such payment and the use of the securities of the Madison Square Bank to secure the advances made by the Saint Nicholas Bank, was an illegal preference under the statute. The controversy must turn, in my opinion, upon the nature of the relation which existed between the two banks in question and the clearing house and upon what was the extent of the obligation entailed upon the St. Nicholas Bank, in engaging to receive and to clear checks drawn upon the Madison Square Bank, when presented through the clearing house. For the plaintiffs it is argued that, as between the Madison Square Bank and the St. Nicholas Bank, the relation, simply, of principal and agent was created and, therefore, upon the insolvency of the former becoming known, on the morning of the day when clearances of the previous day’s checks were to be effected, that the latter bank was not entitled to pay checks drawn upon the former bank. But I think to view the relation as such is' altogether incorrect and unwarranted by the facts. In a certain and limited sense the St. Nicholas, Ban k, of course, would act as an agent, in clearing and paying checks drawn upon the Madison Square Bank. That, however, was a mere feature of the larger contractual relation, into which the two banks had entered with the Clearing House Association, and which characterized all their dealings. The agreement of January, 1891, was one to which there were three parties ; each of which was moved to enter into it by a legitimate consideration. The Madison Square Bank acquired the very substantial advantages, which the members of the Clearing House Association enjoyed, in the increased convenience, dispatch and safety of banking transactions. The St. Nicholas Bank acquired advantage, benefit and a protection by the deposit of collateral securities to the amount of $100,000 and of the cash, required to be made by the Madison Square Bank. The cash deposit was to be free of interest and maintained at a daily balance of $50,000. The members of the Clearing House Association, in. extending to the Madison Square Bank the right to have its checks cleared and paid through one of its members, were assured that all checks presented would be paid up to, and including, the day following the giving of notice by the St. Nicholas Bank of the termination of the arrangement between itself and the Madison Square Bank. The learned referee very correctly defines the arrangement between these two banks and the clearing house as constituting a tripartite agreement upon ample consideration, for the mutual benefit of all the parties who entered into it. That agreement provided for the length of its duration ; for the maintenance at all times of the stipulated security to protect the St. Nicholas Bank and bound that bank to receive and pay the checks drawn upon the Madison Square Bank as it would its own.

The St. Nicholas Bank could only agree and arrange to clear for the Madison Square Bank, in accordance with conditions imposed by the constitution and rules of the Clearing House Association; and an essential condition was that the arrangement could not be discontinued, nor should its liability cease, until after the completion of the exchanges of the morning next following the receipt of a notice of discontinuance. There was nothing in such a provision of the constitution of the clearing house, which was objectionable, legally speaking, or otherwise. It was perfectly competent for the banks to form themselves into this voluntary association and to agree that they should be governed by a constitution and by rules. When adopted, they expressed the contract by which each member was bound and which measured its rights, duties and liabilities. Belton v. Hatch, 109 N. Y. 593 ; 16 St. Rep. 354. If not in conflict with rules of law, they must be awarded that effect which is always accorded to the deliberate engagements of parties. The provisions of section 25 of the constitution of the Clearing House Association were designated as a security and a protection for the members, in the event mentioned. When the Madison Square Bank made its arrangement with the St. Nicholas Bank and, also, made compliance with the terms of the demand of the clearing house circular, I think it is clear that a definite contractual relation was at once created between the three parties whose provisions and relative engagements were effectually defined and controlled by the constitution and rules of the clearing house, in so far as they touched the proposed clearances of checks. The contract, which bound the members of this voluntary association of banks and regulated their duties, rights and liabilities, permitted the representation of an outside bank, through a member ; provided that member assumed a liability, which should not cease, until the completion of clearances on the morning next after its notice of a discontinuance was given. That liability, so exactly provided for, is, however, sought to be limited to cases, where insolvency has not supervened, as to the non-member bank. If the relation here was strictly that of an agent acting for a principal the question might be a serious one; but even then much might be said in favor of the liability which the agent had, with the assent of the principal, assumed. That, however, was not the relation. The Madison Square Bank was a contracting party in an agreement, to which the other parties were the St. Nicholas Bank and the Clearing House Association, and it had accepted and had become bound by provisions in the latter’s constitution and rules. That agreement was entered into at a time when it was perfectly competent to make it and its duration was fixed by section 25 of the constitution of the clearing house. As the respondent’s counsel says, every bank entitled to the payment of checks sent by it through the exchanges of the clearing house, in due course, had a right to rely upon the liability of any other bank clearing for the non-member and unless this'liability continued definitely and up to a certain period, the liability of the clearing bank would not be fixed and enforcible. Here, the effect of the constitution and rules of the clearing house upon the agreement was as through it had been stated, in so many words, that it should commence upon January 13th, 1891, and should be at an end on August 9th, 1893, after the clearances of that day had been completed. What was there in the agreement and its incidents, which contravened any rule of law or of policy ? The plaintiffs say that the effect is to give an illegal preference under the statute; which, it is meant, would be accomplished by the payment of checks, after the insolvency of the nonmember bank is known, and by the use by the clearing bank of the deposited securities in reimbursement thereof. To that I cannot agree. The statute referred to is the State Corporation Law (chap. 687, Laws of 1892); which, in section forty-eight, contains previously-existing provisions of the Banking Law of this state. The provisions of the section forbid the assignment or transfer of any property, “when the corporation is insolvent, or its insolvency is imminent, with the intent of giving a preference to any particular creditor over other creditors of the corporation.” This provision has no application to such a case as this ; where, at the time when the arrangement was made with the St. Nicholas Bank, the Madison Square Bank was solvent. It would be absurd to speak of the agreement of January, 1891, as having been made in contemplation of future insolvency, or with intent to give a preference to any creditor of the Madison Square Bank. If there is any presumption respecting the business engagements of going concerns, it is that they will be fulfilled; and, when security is existed, it is as a business precaution,- to compel exact and prompt performance, rather than a provision in contemplation of insolvency. If it were otherwise, business transactions, which have for their subject the accommodation of one corporation by another, in the loan of money, or the extension of credit, would be seriously embarrassed, if not checked. The statute recognizes the right of a banking corporation to transfer promissory notes, or evidences of debt, received in the transaction of its ordinary business, to purchasers for a valuable consideration and it may lawfully do so in pledge to secure its creditor, when it is in a condition of solvency. The deposit of securities made by the Madison Square Bank with the St. Nicholas Bank constituted a lawful pledge of its assets, to protect the former against any possible loss in undertaking to clear and pay all checks drawn upon the latter and sent through the clearing house. The invalidity of a transfer or assignment of property by a banking corporation, under the Banking Law, is where it has been made while in a condition of insolvency, or in contemplation of it, and with the “intent” of giving a preference. The “intent" must exist and be inferable to vitiate the transaction. . In this connection, our recent decision in Elmira Savings Bank v. Davis, 142 N. Y. 590; 60 St. Rep. 305, may be referred to; where the question involved was whether the preference given to savings bank deposits by the State Banking Law was in contravention of the United States National Banking Law; which avoids transfers, or assignments, or deposits, made with a view to prefer a creditor. It was there said, and the observation is applicable here, that “it is the voluntary act of the national bank, "in contemplation of its "insolvency and with the view of then preventing the ratable application of its property, which is avoided by the national law. In the present ease, while a going concern, it entered into ah engagement with the savings bank, which the state law required and regulated ; which vested in the latter superior rights or equities, and which, in the possible event of future insolvency, would give to it a prior claim to payment from the assets. When that event happened and the receiver was appointed, he took over the property of the insolvent concern, as trustee for its creditors and shareholders, under the same conditions as the bank held it and subject to the right of this plaintiff to be first paid in full, before other creditors were paid.” So I say here, the plaintiffs upon becoming vested as receivers with the property of the insolvent Madison Square Bank, held it subject to all rights lawfully acquired and to all superior equities'; among which was the right of the St. Nicholas Bank, by virtue of an agreement, valid in its inception and at all times, to apply the securities in its possession in" reimbursement of its payments of checks presented through the clearing house on the morning of August 9th, 1893; payments, which it was obliged to make, as well by the rule of commercial honor, as by force of .the obligations imposed by the constitution and rules of the clearing house. Nor do the cases of Overman v. The Bank, 1 Vroom [N. J.], 61, and Merchants’ Bank v. Bank of Commonwealth, 189 Mass. 518, referred to, touch this question of the obligation of the clearing bank under the constitution and rules of the clearing house and with reference to which the non-member bank had contracted—a distinction recognized in the Overman case cited.

The plaintiff’s counsel suggests a possible illustration of the effect of the construction, which is given to this section of the clearing house constitution. He says, all the creditors of the Madison Square Bank, becoming aware of its insolvency, might have drawn checks upon their deposits and, if they succeeded in getting them presented by clearing house banks, the St. Nicholas Bank would have been compelled to pay them, to its possible ruin. The illustration, however, proves nothing. That may be said to have been a risk assumed by the St. Nicholas Bank ; but very much of the business of the land, and especially that portion which is done in Wall street, is conducted upon faith and experience has shown that it has not, in the main, been misplaced. For such a contingency as counsel suggests, it was necessary that the officers of the Madison Square Bank should have been parties to an immoral and illegal scheme. The St. Nicholas Bank must be deemed to have contemplated and to have assumed every risk, in undertaking to become responsible for the Madison Square Bank, and to have exercised such reasonable judgment in doing so, and to have taken such security against loss therein, as the practical observation and the business experience of its officers suggested.

The conclusion I have reached is that the insolvency of the Madison Square Bank did not excuse the St. Nicholas Bank from the performance of its obligations towards the clearing house banks. What rather emphasizes the interest in the question of the right of the St. Nicholas Bank to clear and pay, on August 9th, 1893, all the checks drawn upon the Madison Square Bank and presented by clearing house banks, is the fact that there were four checks, exceeding in the aggregate the sum of $300,000 which were drawn under somewhat peculiar circumstances. • I may refer to two of them, aggregating $250,000, which were drawn by Mr, Dan forth, then state treasurer, on August 8th, 1893, who had heard enough, in some way, to take alarm at the situation of the Madison Square Bank with which were state funds on deposit. He arranged to deposit them with the Manhattan Trust Company, which kept accounts with the Chase and the Continental National Banks and that its checks cleared through them. The two checks were handed into the two banks, at a little before ten o’clock of the morning of August 9th, 1893, and were at once sent, with all other checks to the clearing house, where the business of clearances commences to be transacted at ten o’clock. The evidence conclusively shows that there was nothing unusual in this transaction. It is the general and invariable custom of the banks in New York city to pass all checks, dated upon the previous day and received between ten o’clock of that day and ten o’clock in the morning of the day following, by hand, or by mail, through the clearing house with the clearances of that morning. Checks may come in the morning by mail, or may be brought in by local depositors, before ten o’clock and it is considered to be regular and in the exercise of business prudence to have them cleared as promptly as the rules allow. In this case there is nothing to show that the officers of • the Madison Square Bank knew of the manner in which the state treasurer’s checks were deposited for payment by the Manhattan Trust Company, or that they had anything to do with their drawing. It appears that that company acted in good faith in the.matter and Mr. Waterbury, its president, testified that there was nothing unusual, or contrary to the usual course of business, in getting Mr. Danforth’s checks put promptly through the clearing house that morning and it-is difficult to see how it would be material, if it was otherwise. As to the two banks, which acted for the trust company, they appear to have merely performed their duty to their depositor in passing the checks severally through the clearing house. Nor can it be pretended that the St. Nicholas Bank had any knowledge or notice respecting these checks, or any of the checks which it paid in its clearances of August 9th. Its officers had no knowledge of the insolvency of’the Madison Square Bank until that morning. Its notices of the day previous to the various banks, that it would no longer continue to clear for the Madison Square Bank, were based on a dissatisfaction with its failure to keep good its promised daily cash balance of deposits. Until the clearing house committee completed its examination of the condition of the latter bank, in the afternoon of the 8th of August, it was not known how its stood. The time was one of great excitement and of a distrust in financial circles, which cast its shadow over many banks, and a bank, to justify being assisted by the associated banks, must show itself to possess sufficient resources in the possession of assets of real value. The attention of the clearing house committee being called to the Madison Square Bank, their examination resulted in the advice that it should suspend. They did not decide as to the solvency of the bank. It might resume, if it succeeded in making such arrangements as would put it in the .possession of funds by realization upon its assets. However that might be, the bank decided not to open its doors on the following ■morning. It was affirmatively testified to by the cashier of the •St. Nicholas Bank that they had no suspicion of the inability of the Madison Square Bank to continue its business, when sending out notices to other banks; but thought it unsafe to continue clearing for it, in view of its past conduct. If the evidence showed ■any knowledge in the St. Nicholas Bank as to the particular checks, as to which so much has been urged and which it paid in the clearances of the morning of August 9th, or if it had such -notice concerning the designs of their drawers as to make it an abettor in an unlawful scheme to obtain a preference over other creditors, a very different question would be presented. But there was nothing whatever to charge it with any knowledge, or notice, and all the evidence goes to prove that it acted in perfect good faith; and that being' so and its payment of checks, passing through the clearing house on the morning of Augest 9th, having been made in discharge of the liability resting upon it, under the constitution and rules of the association, it not only could not, but it should not, be made to suffer a loss. The knowledge possessed by it in common with the public, in the morning of August 9th, did not change its position, nor affect its liability. The presumption was that every check presented at the morning’s clearances was held for value and it was for the plaintiffs to rebut that presumption and to show that the banks presenting checks were not acting in good faith in what they did, but merely as agents for the drawers in obtaining the funds drawn against. They failed to do so. More than that, the evidence established the contrary, except in the possible instances of the two checks drawn by the Hhlmans; which were two of the four checks I mentioned as t iking the clearances of August 9th, 1893, out of the ordinary. I deem it unnecessary to discuss the facts respecting them. The St. Nicholas Bank was in no respect more informed about their making, or their collection, than it was about the other checks. If there was anything irregular concerning them, I agree with the learned referee that the question would affect, not the St. Nicholas Bank, but the right of the bank which presented them to hold their proceeds. If we leave out of consideration the two Uhlman checks, the balance of account is still against the plaintiffs and their action would have to fail any way.

For these reasons, as for those which were well expressed by the very learned referee and with which they are in harmony, I think the judgment below was right and I advise its affirmance here.

All concur, except Andrews, Ch. J., and Peckham, J., dissenting.

Judgment affirmed.


author: Cullen, J.

text:
    Holland Trust Company, as Trustee, etc., Resp’t, v. Consolidated Gas and Electric Light Company of Westchester County et al., App’lts.

      (Supreme Court, General Term, Second Department,

      Filed March 6, 1895.)

    1. Receiver—Mortgage—Appointment.
    A receiver may be appointed in an action to foreclose a mortgage, though one has already been appointed in an action previously brought"to foreclose a subsequent mortgage.
    2. Same.
    A verified complaint, though on information and belief as to some of its allegations particularly within the knowledge of the defendant, when not met or denied either by answer or affidavits, is sufficient, under section 713 of the Code, to support an order appointing a receiver.
    3. Same—Rights.
    The right of a receiver to the income of property received by a receiver, previously appointed under a subsequent mortgage, should not be determined on the application for his appointment.
    Appeal from an order, removing a receiver and appointing another.

      Norwood & Dilley, for app’lts; George M. Van Hoesan, for resp't.
   Cullen, J.

This is an appeal from an order of the special term removing Clarence D. Turney as receiver of the property of the defendant the Consolidated Gas, etc., Company,- and appointing James H. Moran receiver. This action is to foreclose a mortgage of the plant and franchises of the defendant gas company executed to secure the payment of a series of bonds. A subsequent mortgage was executed on the same property by that defendant to the defendant the American Debenture Company. A foreclosure of that second mortgage was instituted before this action was commenced, and in the earlier action Mr. Turney was appointed receiver.

There seems to be some misapprehension in the minds of the parties as to the character of these receiverships. Mr. Turney appears to have been appointed a general receiver of the corporation, and the order made in this action removes him as such receiver, and appoints as receiver in his stead Mr. Moran, who is also appointed receiver of the mortgaged premises and property. There was certainly no ground alleged in the complaint in this action for the appointment of a general receiver of the corporation, who stands in the nature of a statutory assignee. The case presented falls only within subdivision 2, § 1810, Code, The receiver whose appointment is áuthorized by this subdivision is only a receiver of the mortgaged property. The practice and power of the court is therefore substantially the same as it was in equity or chancery before these proceedings of the Code. We judge from the papers that such should have been also the character of the earlier receiver. We have, therefore, here the simple .case of an application made in the foreclosure of a paramount mortgage for the appointment of a receiver in that action for the benefit of the plaintiff therein. If there was a proper ease made for a receiver, one should have been appointed in this action, notwithstanding a receiver had been previously appointed in the foreclosure of the junior mortgage; for the earlier receivership inured, not to the benefit of this plaintiff, but solely to that of the junior mortgagee. Ranney v. Peyser, 83 N. Y. 1. In that case it was held that a prior mortgagee, to reach the rents of mortgaged property, must obtain a receiver in his own action, who, when appointed, would supersede the other receiver. This was, therefore, practically an original application for a receiver, and it rested in the discretion of the court as to whom it would appoint-Mr. Turney has no better ground of complaint of the failure to appoint him than any other applicant for the position would have. The application was made on a verified complaint and affidavits. The complaint set out the mortgage, the issue of the bonds, default in the payment of the interest coupons, and an election by the bondholders, under the terms of the mortgage, to declare the whole principal due. The default and election are alleged on information and belief. The affidavit sets forth the contents of the mortgage. No answer was made to the complaint, nor any affidavit presented denying the default. The defendants insist that the allegations of the complaint as to the default and election, being made on information and belief, were insufficient to justify the order. Many cases are cited by counsel to show that allegations in affidavits made on information without stating the source of the information are not competent proof of the facts stated. All of these cases have arisen with reference to attachments or orders of arrest, and are not in point. The Code requires that these provisional remedies shall be granted only on proof by affidavit of the necessary facts. But by the Code (section 713) a receiver may be appointed “on the application of a party who establishes an apparent right to or interest in the property.” We think that a verified complaint, even on information and belief, as to some of its allegations particularly within the knowledge of the defendant, when not met or denied either by answer or affidavits, fully establishes the facts therein alleged and the rights of the parties accruing from such facts. An attachment or order of arrest is granted ex parte; a receiver can be appointed only on notice, thus giving the party proceeded against an opportunity to set up any defense or controvert any claim. If it be conceded that there should have been positive proof of the election of the bondholders to declare the principal due, that fact would not affect the plaintiff’s right, under this mortgage, to the appointment of a receiver. The mortgage executed to it expressly pledged, not only the property, but the revenues and rents, and provided that, upon filing a bill to foreclose, the trustee should have the right to a receiver of the same. It was therefore not necessary that the whole principal should be due to authorize the appointment of a receiver. Hollenbeck v. Donnell, 94 N. Y. 342.

So far as relates to the income and moneys collected by the first receiver, it seems- fairly debatable whether the plaintiff in this action is entitled to receive them or not. At least, the question should not have been determined on this application; it should be left for adjudication in a proper proceeding to recover them. In this respect we think the order below was erroneous.

The order appealed from should be modified by striking out such parts thereof as appoint a receiver of other than the mortgaged property and franchises, and also so much thereof as directs Turney, receiver, to pay over to the new receiver the moneys in his hands, and in all other respects affirmed, without costs of this appeal to either party.