author: Patterson, J. O’Brien, J.

text:
    Eugene Kelly, App’lt, v. Jay Gould et al., Resp’ts.

      (Supreme Court, General Term, First Department,

      Filed June 3, 1892.)

    1. False representations—Statements inducing the advancement of MONEYS BY THIRD PERSONS.
    In an action of deceit brought by persons who had advanced money to a contractor to build a railroad in which defendants were interested, upon. the faith of representations made by said contractor, it appeared that some of the defendants merely recommended that the contract and the proposal of the contractor be accepted by the construction company. IJeld, that this did not amount to a representation upon which the action could be maintained against them.
    2. Same.
    The secretary of the construction company, who, without authority, signs the contract, and authorizes the contractor to go on with the work, and without knowledge of the truth, makes representations, although in good faith, which he knows, or ought to know, will be repeated to third parties, in order to raise money for the work, is liable for his acts to one who has advanced money on the faith of such representations in case they prove to be false.
    Appeal from, judgment in favor of defendants entered on dismissal of complaint.

      Ewing, Southard & Fairchild, for appl’t; John F. Dillon and A. L. Pincoffs, for resp’ts.
   Patterson, J.

—The plaintiff herein sues as the assignee of the Milmo Kational Bank of a specific claim asserted against the defendants or some of them. That claim arises out of transactions consisting of the advance of money by the bank (which was located in Texas) to a certain firm of contractors, viz., Messrs. Hunter, Sampsel & Wells, on drafts drawn by such contractors on one of the defendants and which drafts were dishonored. The firm referred to was, at the time the drafts were drawn and the money was advanced, engaged in the work of building, as contractors, a railroad in Mexico, with which enterprise, it is claimed, all the defendants concerned in this appeal were connected, or in which they had some interest impelling them to do what is now urged as a ground of liability against them. It is asserted by the plaintiff that the money was advanced by the Milmo Bank relying on representations communicated to its cashier by Mr. Sampsel, one of the contracting firm; that such representations were made by the defendants George J. Gould, Jay Gould, Sage, Dodge and Work to Sampsel, with intent that they should be communicated to and acted upon by third parties, who might advance money to the contractors; that those representations were false and were known to be false by the defendants making them; and hence, that such defendants are liable for their deceit and fraud.

It is the. settled law of this state that an action on the case for, deceit in representations will lie in favor of parties other than those to whom such representations are directly made, under certain circumstances. In Eaton, Cole & Burnham Co. v. Avery, 83 N. Y., 31, the general rule applicable to such cases was stated in the unanimous opinion of the court, and it was held that it is not essential that a false representation should be addressed by the person making it directly to the party who seeks redress for having been deceived and defrauded thereby. The rule of liability in such cases differs necessarily in one respect, but only in one, from that which obtains in an action brought by the person to whom the representations are directly made. The elements necessary to the maintenance of an action such as the present are: that the representations if proven to. have been made, must be false; that they must have been known by the defendant to be false, or it must be shown that he had reason to know that they were false; or that he assumed and intended to convey the impression that he had knowledge of the facts when he really was without such knowledge, and that the false representations must have been made with the intent that they should be communicated to and acted upon by third parties, and that they were the inducing cause of the act resulting in loss to such third parties. These are the recognized criteria of liability in actions of this character, and we have endeavored to state them in the simplest and plainest terms. Eaton, etc., v. Avery, supra; Oberlander v. Spiess, 45 N. Y., 175; Meyer v. Amidon, id., 169.

At the trial at circuit the learned judge dismissed the complaint on the ground that the proof failed to establish the cause of action, and ordered the exceptions to be heard in the first instance at the general term. What is now before us is the correctness of this ruling in view of what we conceive to be the principles of law controlling the case, and the determination of that question requires a critical and careful analysis of the whole record as it comes before us concerning the evidence as it stood when the plaintiff rested the case. We are thus brought to a consideration of the facts, and at the threshold we find that there are different sets of parties sought to be made liable.

As to the several corporations it is clear that there is no liability imposed upon them. As to the defendant George Gould, it is also clear that he did not in any way participate in any of the matters directly involved in the action, as he was absent in Europe at the time of their occurrence. The true starting point of the case on the facts is the inquiry, what took place between Sampsel and the cashier of the Milmo Bank in Texas, with reference to the advances of money being made in consequence of representations of any of the defendants, for the only statements made to the Milmo Bank were to the cashier by Sampsel, and the attempted connection of the parties (other than the corporations) who' are. sought to be held liable on the alleged representation must be accomplished by showing that the cashier of the Milmo Bank was influenced by statements made by Mr. Sampsel to such cashier by authority of those who are sought to be held liable in this action. Sampsel’s statements are repeated in detail in the testimony of the cashier of the bank, and therefore so much of the case is proven ; but Sampsel’s authority to bind others by his statements must also be established.

We must have regard to the situation of the parties at the time the alleged false representations were made in New York to Sampsel, and the first fact of importance is, that prior to the transactions which form the staple of this action, there had been, two railway companies in Mexico constructing or authorized to construct separate works under concessions granted by the Mexican government, and which for general purposes of reference only were called the Grant road and the Gould road. On one of the roads certain work had been performed by the firm of contractors of which Mr. Sampsel was a member, and during the progress of that work the contractors had raised money, with the knowledge and authority of those who were the promoters of or interested in it, from the Milmo bank; and thus relations were undoubtedly established which would give to the Milmo National Bank some ground for assuming that Mr. Sampsel and his copartners in drawing drafts to pay for construction were authorized to do so by some of the parties interested. Those parties were Dodge, Work, Jay Gould and Sage; but the enterprise with reference to the building of one particular road seems to have been checked, and subsequently and on further concessions of the Mexican government the two roads were to be consolidated with the proviso that work should be resumed at a particular day. The firm of contractors had kept their force in Mexico ready to prosecute the work, but it seems to have been necessary that before they went on with it arrangements should be made in New York city with the promoters of both corporations as consolidated to raise funds to go on with that work, and to authorize the contractors to continue it. Mr. Sampsel came to New York, and on arriving here he found this state of facts to exist; an alleged new construction company had been organized in form, or at least the skeleton of such a company had been created; of that skeleton corporation the defendant Work was secretary, and the defendant George Gould was president. When Mr. Sampsel arrived in New York he went immediately to Mr. Work and talked with him about the subject, and everything that seems to have been subsequently ordered respecting that corporation and its operations was done directly between Work and Sampsel.

After interviews with Jay Gould and Sage, Work appears to have stated something that satisfied Mr. Sampsel that his firm might proceed with the work of construction, so as to save the concession within the time limited; but there is nothing that we can find of any representation or statement even on Mr. Work’s testimony (and he was called as the principal witness for the plaintiff) which would connect Jay Gould or Sage or Dodge with any representation actually made, or with any inducement actually held out by which Sampsel was authorized to put them in the position of representing anything on which a third party would be induced to rely in advancing money for the purposes of building the road. All that Jay Gould or Sage certified to respecting the matter was a mere recommendation, and that related to the acceptance of the contract by the new construction company and the proposition-of Sampsel. That was not a representation. No fact is stated, and what is claimed to be a communication from Sewards respecting negotiations and money to be raised abroad, to carry on the new scheme for the consolidated roads, is in no way a false representation; because such communication was undoubtedly made on authority, as clearly appears from the proof, and there was no bad faith whatever in making it.

The principal testimony relied on by the plaintiff is, as already stated, that which comes from the defendant Work, who was called by the plaintiff as a witness, and that testimony certainly requires and has received very serious consideration. Work has sworn to certain statements made to Jay Gould and says in his testimony that it required a lengthy recital to explain the' relations of the different companies to each other and Jay Gould’s particular relation to this transaction. It is evident from his testimony that Jay Gould knew very-little if anything about the new construction company or its taking the contracts for building the road referred to under the consolidation. Work was the secretary of the new Southwest Construction Company; but we do not find anything in the whole of the testimony binding Jay Gould to any statement whatever, except the mere recommendation ; and the same finding will apply respecting Sage and Dodge.

There are a great many statements of beliefs and opinions in the testimony of Work not amounting to proof, but the whole of what he says is so inconclusive and so far apart from anything to charge the other defendants with false representations, that it ■ would have been error on the part of the learned judge to have submitted the case to the jury upon the criteria of liability referred to above as the tests in law leading up to responsibility for false representations in a case of this character. The testimony of "Sampsel is clear that he never had any conversation either with Gould or with Sage or with Dodge which would authorize the making of the statements which seem to have been the inducing cause of the action of the Milmo Bank in cashing the drafts in suit. Sampsel’s testimony as to his conversations with Dodge at Council Bluffs, and his other conversation, do not make any one responsible, as we read the case, for any statements that Sampsel may have made to the cashier of the Milmo Bank, no matter in what good faith they may have been made by Mr. Sampsel (and we have no doubt of his good faith and honesty), as representations authoritatively made that the capital had been raised and that the money was forthcoming. Even the correspondence with Major Worthen, the engineer, as it appears in the record, does not carry out the plaintiffs vfeoL, and although Dodge may have said that the same interest would construct the new road in addition to that connected with the Grant road, there is nothing in that statement to furnish the basis of false representations upon which third parties were authorized to act or upon which it was supposed they would act.

We conclude, on the whole testimony as to all the defendants, except the defendant Work, that a case has not been made out which would have authorized the learned judge at the circuit to submit the issues to the jury, and that the motion for a nonsuit was properly granted with respect to all the defendants other than the defendant Work. Concerning him a different.state of facts is presented.

We think it is clear that, apart from any question involving moral turpitude, he proceeded in the whole transaction to authorize Mr. Sampsel to go on with the work of construction of the consolidated roads without knowledge and without authority and in such a way as to make him liable for his acts in the premises. He signed the contract in the name of George Gould, president, by himself (Work) as secretary, and when he knew or might have known that the contractors intended to rely upon his representations, and when or under circumstances rendering it necessary for such contractors to repeat those representations to third parties in order that money might be raised for the purpose of going on with the work of construction. We think Work was bound to know from the situation and special .- circumstances the truth or falsity of the statements that he made Hunter, Sampsel & Wells, and that they would be repeated to Major Worthen, the engineer in charge of the work, and to the Milmo National Bank, and whether it was over zealousness in the absence of actual fraud or intent .to deceive, or something else, it is clear that he acted with precipitancy and recklessly, and that, at least, in anticipation of what he thought might be done and from sanguine expectation, he made representations and statements for other people to act upon, as to which he had no actual knowledge. The circumstances connected with the $2,000 draft justified both Mr. Sampsel and the Milmo National Bank in relying upon the statements thus made by the defendant Work as to the contract which he authorized being made for going on with the construction of the road.

Something has been urged on argument respecting the duty of the defendants Jay Gould' and Sage and Dodge to communicate to Sampsel or to the Milmo Bank the failure of the negotiations in Europe, when it was ascertained that the Sewards report was inaccurate and that the money could not be raised. This would be so of course, were it not for the fact that upon the whole case it does not appear that either of the defendants now referred to had been put in such a position by way of representations emanating from them as to require them to take any action with respect to giving information concerning occurrences as to which they were not hound by any representations.

We, therefore, conclude that the complaint was properly dismissed as to all the defendants ¿he defendant Work, and that as to him the exceptions should be sustained and a new trial ordered, with costs to abide the event; as to the other defendants, exceptions overruled and judgment directed dismissing the complaint, with costs. •

Van Brunt, P. J., concurs.

O’Brien, J.

—The questions as presented by the demurrer to the complaint, and upon the testimony offered upon the trial, are entirely different. The only doubt created in my mind upon the record as to the disposition made by the trial judge related to the liability of two of the defendants, J. Henry Work and Jay Grould. I concur with Mr. Justice Patterson as to Work, and after some hesitation also in his views as to the liability of Jay Grould upon the facts proved.

I therefore concur.


source: Caselaw Access Project

author: Van Brunt, P. J.

license: Public Domain

text:
    In the Matter of the Probate of the Will of John Henry Fricke, Deceased.

      (Supreme Court, General Term, First Department,

      Filed June 3, 1892.)

    1. Will—Undue influence.
    Testator, whose only heirs at law and next of kin were his brother and sister, gave all his property to his wife. . It appeared that the relations between testator and his wife were of the most cordial character; that she had faithfully performed all her duties to him; that the brother was in the habit of vilifying her, which had come to her ears; that the will was drawn pursuant to testator’s directions and executed with great deliberation, and there was no evidence of any importunity or direct action on the wife’s part to induce the making of it. Held, that the will was not an unnatural one, and that the claim of undue influence was not made out.
    3. Same—Right of disposal.
    The fact that a part of the property was inherited from the father of the parties would not affect the right of testator to dispose of it as he saw fit.
    3. Same—Testamentary capacity—Delusions.
    The existence of delusions will not justify the rejection of a will unless it was an insane delusion.
    4. Same.
    The will was made eight months before testator’s death. He transacted business intelligently and without assistance up to a short period before his decease. On an autopsy held upon his body tumors were discovered upon the brain, but it did not appear whether they had any effect on his mind. Held, not sufficient to show mental incapacity.
    Appeal from decree of the surrogate admitting will of John H. Fricke, deceased, to probate.

      Horace Graves, for contestants; W. P. Butler and C. P. Reed, for resp’t.
   Van Brunt, P. J.

—The testator died on the 30th of October, 1888, leaving a last will and testament which was executed on the 9th of February, 1888. He gave all his property, real and personal, to his wife, the proponent, and made her sole executrix. His heirs and next of kin were a brother William and a sister Mary, who are claimed to be the contestants, it however being somewhat dubious as to whether the persons representing the sister Mary could have conferred upon them by her any authority to act. The probate of the will was objected to on the ground of want of due execution; that the will, if executed, was obtained by the undue influence of the testator’s wife and sole legatee ; and that the testator was not of sound mind at the time of the execution of the will.

The will appears to have been executed with all the formalities required by the statute before three witnesses, all of whom were examined upon the application for probate and testified to the facts necessary to a valid execution of the will.

It is true that upon cross-examination confused and contradictory statements were made as to some of the events attending the execution. But it is apparent upon a reading of the testimony that the formalities of the statute were complied with and the will properly executed. In addition to that we have the testimony of the attorney, who was present and states what took place, and his testimony alone, if true, and there is no reason to doubt it, would be sufficient not only to justify, but to require the probate. It is not necessary here to discuss this testimony at length.

The other objections, viz., that the will was obtained by undue influence, and that the testator was of unsound mind at the time of its execution, stand upon a slighter foundation than the claim which was advanced that there had been no due execution of the will.

It seems to be assumed that the will was an unnatural one. We are of opinion from an examination of the record that if any other disposition had been made of the testator’s property it might well have been-said that he had not acted in a natural manner.

It appears from the evidence that the contestant William had been in the habit of vilifying the testator’s wife, which fact had come to the ears of the wife and probably to those of the testator. This fact, it seems to us, would, of itself, have been a sufficient reason for refusing to allow William to participate in his estate.

The conclusion derived from a reading of the evidence was that the relations between the testator and his wife were of the most cordial character; that she served him faithfully and well, no matter what her antecedents may have been; that she failed in none of the duties which devolved upon her by occupying the position of wife to the testator, and that instead of she ruling or controlling the testator, it is apparent^ that his will controlled in his own household. We say apparent, because the fact appears from the testimony of the witnesses offered by the contestants. When pressed, they can show no instance in which his wife was able or attempted to overcome his will.

It is a familiar principle that it is not sufficient to show that a party benefited by the will had the motive and opportunity to exert undue influence. There must be evidence that he did exert such influence, and so control the action of the testator either by importunities which he could not resist, or by deception, fraud, or other improper means, that the instrument is not the will of the testator. Cudney v. Cudney, 68 N. Y., 148-152. There is not the slightest evidence of any importunity or direct action upon the part of the proponent to induce the making of the will.

The evidence shows that the will was drawn pursuant to directions given by the testator; that it was not a sudden,proceeding, but was done with great deliberation, and more than- premeditatian. And there is no evidence whatever that the proponent had any connection with, or even urged the making of the will.

In Brick v. Brick, 66 N. Y., 149, the court say: “No importunity or direct action on the part of Mrs. Brick to induce the making of this will is shown. It is not indispensable that there should be direct proof of the exercise of undue influence. It may be inferred from circumstances; but the circumstances must be just such as to lead to the inference that undue influence was employed, and that the will did not express the real wishes of the testator. The circumstances immediately attending the execution of the will, so far from indicating that it was the result of any influence-exercised on the testator, tend strongly to show that it was his frée and spontaneous act,” language strikingly applicable to the facts of the present case.

In the Matter of Smith, 95 N. Y., 516-522, the court say, “Undue influence, which is a species of fraud, when relied upon to annul a transaction inter partes or a testamentary disposition must be proved and cannot be presumed.” And in the Matter of Martin, 98 N. Y., 193-196, it is said: “ The case then is -one where the testator had testamentary capacity, a present knowledge of the contents of the will, and whereat its execution she was surrounded by all the guards which the statute has prescribed to prevent fraud and imposition. A will under these circumstances can he avoided only by influence amounting to force or coercion, and proof that it was obtained by this coercion. The burden of proving it is on the party who makes the allegation.”

The principles enunciated in the cases cited show that it requires more than proof of the opportunity to exert undue influence, and the fact of benefit arising from the will, to justify a finding of undue influence. There must°be proof tending to show the fraud; and that proof must be inconsistent- with the absence of undue influence or fraud. Suggestion, argument, solicitation, are not undue influence. It is only when the will of the testator has been overcome by active influence, so that he is no longer able to resist, no matter how much he may be so inclined, that undue influence is made out.

It seems to us that the evidence establishes that the testator had a firm desire that his wife should have his property, and that was the reason for the execution of the will in February, and the deeds subsequently in August.

It seems to be assumed upon the part of the contestants that because a part of this property was inherited from their father the testator, therefore, had no right to dispose of it as he might see fit. But we are not aware that any such consideration can enter into the question as to the right of a testator to dispose of his property. It makes no difference from what source it comes, whether acquired by himself or inherited, the law gives him the right of disposition; and there are no such equitable claims in favor of collateral relatives against the wife as seems to be supposed upon the part of the contestants.

It is urged that the testator was laboring under delusions as to his brother, and that he was mentally incapable of performing a legal act. Even if we take as true the testimony which has been offered to establish this alleged delusion in respect to his brother, that of itself would not be sufficient to justify a rejection ■of the will.

It was held in Clapp v. Fullerton, 34 N. Y., 190, that it is not sufficient to justify the rejection of a will that a testator jn ■other respects competent entertains the mistaken idea that one of his daughters was illegitimate, if it was not the effect of an insane delusion, but of slight and inadequate evidence acting upon a jealous and suspicious mind. In that case the testator had made a marked distinction in the division of his property between his two daughters.

It seems to us clear from a reading of this testimony that the contestant never supposed his brother to be of unsound mind .and incapable of managing his affairs until after he was dead. He was allowed to remain in the possession of and to manage his property, which he did with reasonable skill and care. He did not exhibit, in his business dealings at least, any deficiency in mental acumen, and no idea of mental disease seems to have been suggested until probably after the autopsy, which was made to discover the cause of death. The evidence is conclusive upon the fact of the testator’s ability to transact his business up to a very short period before his death, and that he could do it intelligently and required no assistance in respect thereto; and it is upon the autopsy that the whole basis of this claim of mental weakness stands.

And when we come to examine the medical testimony, and that of- the contestant’s witnesses, it is manifest what slight grounds there are for the contention of testamentary incapacity. Great stress is laid upon the evidence of Dr. Dana. He was an expert, examined upon hypothetical questions, knowing nothing of the facts, and testified accordingly. In the hypothetical questions which were put to him upon the part of the contestants it is manifest that there were divers elements inserted in respect to which there was not the slightest evidence; one of which was that the stomach of the testator was healthy. There was no evidence that it had ever been examined. Upon the contrary, the evidence showed that from the effects of the embalming fluid its character had been so destroyed that nothing could be told respecting it. And that element would seem to have been an important factor in considering the effect of the tumors upon the brain, from which the testator was undoubtedly suffering. It required no expert to declare that the man described in the hypothetical question was incapable of legal action; in other words, that he was insane, because the very question itself described an insane man. If those facts were true, which they certainly were not, it was absolutely impossible that the testator could have carried on the business which beyond question he did carry on, or perform the acts which he did perform, without there being in the slightest degree any question as to his capacity.

So when the proponent came to put her hypothetical question to Dr. Dana, and asked him if such a man was insane, he answered “No, because you describe a sane man with no elements-of insanity present” Therefore, so far as this testimony was concerned it did not appear whether these tumors had any effect upon his mind or not; because they could exist without serious mental weakness and might be the cause of mental weakness, and consequently their existence could have little to do with the determination of the question of the testator’s mental capacity. As has already been observed, it was only because of the existence of the tumors that the idea was suggested that this man had been insane for six or eight months prior to his death. It had not been dreamed of before It requires proof considerably stronger than this to establish mental incapacity. The evidence seems to us to show much more than was necessary to uphold the testamentary act.

As is said in Horn v. Pullman, 72 N. Y., 269-276, there is no presumption against a will because the testator may be a man of advanced age. Nor can incapacity be inferred from an enfeebled condition of mind or body. Such a rule would be dangerous in the extreme; and the law wisely sustains testamentary dispositions made by persons of impaired mental and bodily power, provided the will is the free act of the testator, and he is able to comprehend the condition of his property, and the scope, meaning and effect of the will.

Applying this rule to the case at bar, it is apparent that there is not a scintilla of trustworthy evidence which impeaches the testamentary capacity of the deceased. There is not even present the element of an inequitable will, because, as has been observed, under the circumstances of the case, if- he had acted otherwise, it would appear that he had not done that which the principles of equity required' him to do in- respect to his property.

The points raised as to the rulings upon the admissibility of evidence do not seem to be at all well taken, except that relating to the testimony of Dr. Heuel, which, in our opinion, was not competent at the time it was admitted, but is competent under the law as it now stands, an attending physician, where the executor waives the privilege, being allowed to testify. And as this is a court of original jurisdiction, it may consider the evidence notwithstanding the exception. But even if Dr. Heuel’s testimony was stricken out, there would be no reason whatever for coming to any different conclusion than that which has been arrived at.

Upon the whole case, therefore, we are of opinion that the decision of the surrogate is right, and that the decree should be. affirmed, with costs.

O’Brien and Barrett, JJ., concur.


author: O'Brien, J.

text:
    Charles E. O’Connor, Rec’r, Resp’t, v. The Mechanics’ Bank, Def't.

      (Supreme Court, General Term, First Department,

      Filed June 3, 1892.)

    Costs—Party in interest—Assignee.
    Plaintiff, as receiver in supplementary proceedings, brought action, against defendant to recover the amount of a check drawn on it by the executors of an estate in favor of the judgment debtor. He was defeated, and a judgment for costs entered, which was assigned to the executors. Held, that the executors occupied the same position as the bank, and could enforce the judgment for costs against the judgment creditor at whose instance plaintiff was appointed, without waiting until it shall finally appear that the receiver will not be able to pay.
    Appeal from order denying motion to compel a judgment creditor to pay a judgment for costs.

      Edwin R. Leavitt, for resp’t; W. C. Beecher, for app’ltf.
   O'Brien, J.

—In April, 1886, Lewis S. Chase recovered a judgment against Herbert F. Beecher, and in proceedings supplementary to execution the plaintiff was appointed receiver of the property of the judgment debtor. Thereafter, upon the written request of Chase, and solely for his benefit, the plaintiff, as receiver, brought suit against the Mechanics’ Bank of Brooklyn to recover the amount of a certain check which had been drawn by the executors of the estate of Henry Ward Beecher, deceased, upon the bank to the order of the judgment debtor. In this action, after two trials, the plaintiff was defeated, and a j udgment for costs was entered in favor of the defendant. This judgment for costs was assigned to the executors of Beecher, and they make this motion to compel the judgment creditor Chase to pay the costs awarded by the judgment; and from the order refusing to grant such motion this appeal is taken.

In Ward v. Roy, 69 N. Y., 96, 99, it is held: “If a creditor at whose instance a receiver has been appointed, and especially if he is solely interested,- instigates and conducts a prosecution for his own benefit through the receiver, the obligation to pay costs created by the statute is equitably as binding upon him as if the legal machinery was not employed.”

We do not understand that any fault is found with this rule, which, in the absence of other facts, would require that Chase, the judgment creditor, who instigated the suit which was brought by the receiver against the bank, should pay such costs. Had this motion been made by the bank, therefore, we fail to see what defence or reason could have been interposed against the granting of the motion. The question, however, is presented as to whether the assignee of a judgment for costs is in any worse position, or whether the circumstance that the assignees in this case happen to be the executors of Beecher, deceased, in any way militates against or destroys the rights which.otherwise the assignee of a judgment would acquire by virtue of the assignment of such judgment to him. • v

As we understand the respondent, while admitting if the receiver had now in his hands sufficient funds belonging to his receivership wherewith to pay these costs that he would be obliged to pay them; or if the receiver had no funds, that then, under Ward v. Roy, supra, the defendant might resort to the creditors; still, such a motion should not be granted until it should finally appear that the receiver would not be able to pay such costs. In other words, respondent’s position is, that inasmuch as certain proceedings have been taken by the receiver in the surrogate’s court which may eventually result in placing in the hands of the receiver an amount sufficient, not only to pay these costs, but also the judgment of the creditor Chase, this motion is premature and should not be granted until proper opportunity and time are afforded the receiver, and all efforts have been exhausted, to collect an amount sufficient to pay the judgment for costs out of the judgment debtor. This assumes that, as against the judgment debtor, the plaintiff is entitled to receive, not only an amount sufficient to pay the judgment which has been obtained against the debtor, but also an amount sufficient to pay the costs of an unsuccessful litigation waged by the receiver against a third party without the consent or knowledge of the judgment debtor.

It seems to us reasonably clear that, in a case like this, where no other than the creditor Chase is interested in the receivership, the judgment debtor would have a right on offering the amount of the judgment obtained against him together with interest and costs, to have the same satisfied and the receiver discharged. This would not include, nor could the receiver insist upon the judgment debtor paying, in addition, the costs of an unsuccessful litigation waged against a third party in an action to which the judgment debtor was in no sense a party and of which he had no notice.

"We do not think that any distinction can be made between the rights which the defendant, the Mechanics’ Bank, had and those which flowed to the executors to whom the judgment for costs was assigned; and, therefore, they are in the same position to enforce the judgment for costs as the bank would have been in bad not the assignment of the judgment been made. It has been made to appear that the receiver is now engaged in an endeavor to recover from the executors the amount of the judgment out of the property of the judgment debtor now in their hands. If successful in discovering such property and in obtaining an order from the surrogate or otherwise that the amount of the judgment, should be paid by the executors out of the property of the judgment debtor, they would, in some, form, undoubtedly be entitled to .offset or deduct from such recovery the amount of the judgment for costs which they now hold by assignment against the plaintiff.

The executors have in open court offered to pay the difference between the judgment for costs assigned to them and the amount of the Chase judgment, the payment of which the receiver is seeking to enforce against the property of the judgment debtor. We regard this proposition as eminently fair, and as giving him all that he could obtain as the result of prolonged proceedings. If the receiver thinks that some law can be found to sustain his position that he is eventually entitled to recover from the judgment debtor not only the amount of the Chase judgment, but also the costs of the unsuccessful action against the Mechanics’ Bank, no-good reason is presented why in the meantime the executors should be prevented from receiving the amount due them by reason of the claim which they have against Chase by virtue of the assignment of the judgment from the bank.

We are of opinion, therefore, that the proposition is eminently fair and just which is made by the appellants, to offset the judgment for costs against the Chase judgment, the executors paying the difference and holding their claim as against the judgment debtor; and that, upon the failure to accept this proposition, the executors are entitled to the order applied for requiring the judgment creditor, who was unsuccessful in a litigation against a third party, to pay the costs thereby resulting, where it has been shown, as here, that the receiver is unable to pay them.

We think, therefore, that the order appealed from should be reversed, and, unless the respondent accepts the offer of the appellants in regard to offsetting the claims, that the motion should be granted.

Order reversed accordingly, with ten dollars costs and disbursements, and motion granted, with costs.

Van Brunt, P. J., and Barrett, J., concur.


author: O’Brien, J.

text:
    The Central National Bank et al., Resp’ts, v. Sigmund J. Seligman et al., App’lts.

      (Supreme Court, General Term, First Department,

      Filed June 3, 1892.)

    1. Assignment for creditors—Judgments—Preferences.
    An insolvent firm made an assignment for creditors and allowed judgments to be taken against them on the same day for more than one-third, of their assets. The assignment and judgments were filed almost simultaneously, and under executions issued on such judgments almost all the-assets were taken and sold. The assignment was void on its face and was so treated. Held, that the judgments were a part of the scheme the effect, of which was to create forbidden preferences, and were fraudulent and void.
    2 Same.
    Creditors holding bona fide debts who secure illegal and fraudulent preferences are not entitled to any benefit by reason thereof, and where the preferences consist of judgments or an assigned account the moneys realized thereunder cannot be retained by them.
    3 Same—Creditor’s action—Parties.
    Where the plaintiffs have produced in evidence a decree made in a former action brought by them upen certain of the judgments included in this action setting aside the assignment and appointing a receiver, an objection that plaintiffs have no standing to maintain the action, but that the receiver was the proper paity, may be raised for the first time on appeal, although not taken by answer, and the decree modified by dismissing the-complaint as to those judgments.
    Appeal from a judgment of the special term.

      A. J. Dittenhoefer, for app’lts; Blumenstiel & Hirsch and Vanderpoel, Cuming & Goodwin, for resp’ts.
   O’Brien, J.

—Certain of the defendants composing the firm of Seligman Bros. & Co. made a general assignment on the 2d day of July, 1888. Thereafter the plaintiffs, judgment creditors, commenced this action to set aside two judgments recovered "by the •defendants, Hertz and Moses, respectively, and also an assignment •of book accounts made to the defendants Sonneborn, upon the ground that they constitute preferences exceeding one-third of the assignor’s estate, in violation of chapter 503 of the Laws of 1887. The judgment demanded is that these so called preferred ■creditors pay over to the plaintiffs the sums they have collected. From the judgment rendered in. favor of plaintiffs this appeal is taken. The general assignment, each of the judgments, and the transfer of accounts, were created on the same day, July 2d; these various documents being drawn in the office of the counsel ■for the debtors.

As indicative of the intent of the parties, evidence was offered '.to show that the demand notes, upon which the judgments are based, were given so as to authorize suit in lieu of other notes outstanding in the hands of creditors, none of which would mature until long after July 2d. The assignment and judgments were all filed within five minutes of each other, though appellant laid special stress upon the fact, it is true, that the judgments were not docketed until after the assignment was made and filed.

Under the executions immediately thereafter issued a levy was made by the sheriff, and subsequently upon- the latter being indemnified, nearly all of the assigned estate was taken and sold, except the account assigned to Sonneborn, and about $4,900 realized by the assignee. It is thus made to appear that although •over $30,000 was realized out of the assets of the insolvent firm by the creditors preferred, there came into the hands of a receiver, out of the $4,900 received by the assignee, a net surplus, after providing for expenditures, of about $544.81.

Although some question is made as to the total value of the debtor’s property at the time of the assignment, and as to whether or not the preference exceeded one-third of the assets, the finding of the learned trial judge we think is amply supported not only by the figures already given, but by the fact that the actual value of all the property, as scheduled, was but $35,621, while the liabilities, actual and contingent, were over $300,000, and, as we have already seen, the amount actually realized was less than the scheduled value of the property.

It is not necessary for us to go over in detail the evidence which warrants the conclusion reached by the trial court, that the judgments, executions, transfers of accounts and the former assignment, constituted together the general assignment which was made on July 2d. They were all executed and carried into effect simultaneously, and the result was to dispose of all the property of the insolvent debtors to three or four preferred creditors, who were thus given not only more than one-third, but practically the entire assets of the insolvent firm.

As. we have already stated, much emphasis has been placed upon the fact that they were entered after the assignment, and evidence was presented tending to show that the assignors refused “to allow these judgments to be entered before the assignment, or to give any preference by judgment.” Expressions however of this character, on the part of the assignors, cannot destroy the force and effect of their actions. The question presented was-whether or not all these transaction, were part of one scheme, the effect of which was to create forbidden preferences. If so, under the authorities the assignments and the judgment must be held to be fraudulent and void.

It is immaterial, as held in many cases, into how many parts the performance or execution of the scheme may be broken.

As said in White v. Cotzhausen, 129 U. S., 329, the law will regard all acts having for their object and effect the disposition of the estate as parts of a single transaction. It can, therefore, make no difference whether the judgments precede or follow the assignment,-if they are part of the single plan or scheme to give unlawful preferences. It is conceded that the general assignment was void on its face, and upon the entry of judgment the preferred judgment creditors, as well as all the others, treated it as absolutely void, and proceeded to enforce their claims as though no assignment had been made. As said in the case of the First National Bank v. Bard, 32 St. Rep., 1010: The single circumstance that a judgment was confessed at or about the same time the debtor executes a general assignment does not of itself, standing alone, and irrespective of other facts connected with the transaction, necessarily require the conclusion that the confessed judgment is a part of the assignment.

Here, also, the fact that the judgments were allowed to be taken on the same day, to be entered after the assignment, standing alone so far as any presumption or inference of fraud to be drawn therefrom, would not be as strong in favor of attacking creditors as judgments upon which levies were made on the same day but which were docketed prior to the assignment. The effect of the judgments is, however, to be considered with all other circumstances, for the purpose of determining the intent of the parties; and where the manner in which the judgments are allowed, andXsubsequently enforced, is inconsistent with any other view than that they were part of the scheme to give an unlawful preference, the fact of whether such judgments were entered prior or subsequent to the assignment must be immaterial. It becomes, therefore, simply a question as to whether the evidence justified the conclusions of the learned trial judge, and upon a review thereof we find no ground which would justify the setting aside of the conclusions reached, that the judgments, transfers of accounts, and general assignment were all part and parcel of one transaction or scheme, and that the defendant creditors, knew that the assignment was contemplated, thus participating in the fraud.

The law as to the effect upon the judgment has already been settled by this court, upon the second appeal in the case of the First National Bank v. Bard, 59 Hun, 529; 37 St. Rep., 275. Excepting the fact of the judgments being entered subsequent, instead of, as in that case, prior to the assignment, the facts in the two cases are very similar. The learned trial judge was therefore-right in holding, upon the findings and conclusions made, that the assignment and judgments were fraudulent and void. This brings us, however,, to the question which was expressly reserved in the Bard case, as to what results follow in respect to tire preferred creditors’ liability to account to the plaintiff in a creditor’s action such as this for the amount received by them respectively under their judgments. Here, therefore, the question is squarely presented as to whether or not the plaintiff can compel the defendants to account for such sums received under their judgments. Upon the part of the appellants it is contended that an action will not lie by one creditor to compel another creditor to pay over to him moneys received by the latter in payment of a bona fide debt, even if they are the proceeds of an unlawful preference under a general assignment. As authority for this proposition, reference is made to the case of Knower et al. v. Central National Bank, 124 N. Y., 552; 37 St. Rep., 89, and the Leather Manufacturers' Bank v. Halstead, 124 N. Y., 674; 37 St. Rep., 964. These cases are undoubted authority for the doctrine that payment by an assignee to a preferred creditor, * * * of a debt honestly due him, pursuant to the directions in the assignment, before any lien has been obtained upon the fund, is effectual to vest title in" such creditor to the money so paid, although the assignment, in an action subsequently commenced, is adjudged fraudulent and void as against creditors.

We do not, however, regard these cases as being in point. A vast difference in principle exists between a case of an honest creditor, who, in payment of an honest debt, receives from an assignee, pursuant to directions in an assignment, the amount of a preferred claim before the lien of another creditor has attached thereto, and the case of a creditor who has obtained payment of his debt by means of a fraudulent scheme upon the part of the assignor to give a preference which is prohibited by the statute. The latter case, which is the one here presented, in principle more closely resembles the cases of Berger v. Varrelmann, 127 N. Y., 281; 38 St. Rep., 813, and Manning v. Beck, 129 N. Y., 1; 41 St. Rep., 199.

The former (Berger v. Varrelmann) was a suit in aid of the assignment, and in that respect is to be distinguished from the one here brought, which is a creditor’s action to reach the property for the benefit of the plaintiff. It was therein held that the provision of the act of 1887, limiting the amount of preference, * * * is not confined to preferences in the assignment itself, but applies to those created by a separate instrument, in contemplation of the .assignment; it includes all instrumentalities which the insolvent debtor, in contemplation of a general assignment, voluntarily employs to give a preference, and it seems the want of knowledge on the part of a creditor, so preferred, that an assignment was contemplated will not avail to validate the preference.

In that case, as in this, the question was also presented as to whether or not the preference-should be scaled down to one-third, so as to conform to the statute, or whether the preferred creditors were obliged to turn over the entire amount realized. Though here was a strong dissent, the opinion of the court was against the right of the preferred creditors, under circumstances where the judgments were set aside, to retain the proceeds of any preference even to the extent of an amount not exceeding one-third of the estate of the assignors.

Manning v. Beck, supra, was, like this, a creditor’s action to reach the property for the benefit of the plaintiffs, and though the judgment in favor of the plaintiffs was reversed because there was no finding that the bill of sale attacked was executed in contemplation of making an assignment, the reasoning of the court would seemingly lead to the conclusion, and is therefore a strong argument in favor of plaintiff’s view, that the effect of a determination that judgments are fraudulent and void is to deprive the creditors so fraudulently preferred of any benefit which they may have derived under such judgment.

We are of opinion, therefore, that creditors holding bona fide debts, who secured illegal and fraudulent preferences, are not entitled to any benefit by reason thereof, and that where, as in this case, the preferences consist of judgments or an assigned account, that moneys realized thereunder cannot .be retained by them. This, however, brings us to what may be regarded as the most serious question in the case. The assignment having been set aside in a prior action, instituted by these same plaintiffs, and a receiver appointed, the question is presented whether or not the title to all of the debtor’s property did not pass to such receiver, and to him .alone, and as to whether the plaintiffs here have any standing to recover from the defendants judgment creditors, the moneys they received.

It is insisted by respondents that this objection is not available for the reason that it is not set up in the answer, nor in any defense interposed, that the receiver is a necessary party. It must be remembered, however, that this objection is not simply that the proceedings are irregular, but that the plaintiffs have failed to ■establish a cause of action, and have by the introduction of the decree appointing the receiver shown that they have no standing in court. While, therefore, this objection is not taken by the answer, the question still remains whether this failure to set up that the right of action exists in another person operates to make the defendant liable to an improper plaintiff, or to give to such plaintiff the cause of action that exists in favor of another.

We are of opinion that, whereas, in this case a decree was offered by the plaintiff and admitted in evidence showing that, with respect, to certain of the judgments, which are included with others and made the basis of this action, such judgments were in a former action also used for the purpose of setting aside the general assignment, which resulted favorably to the plaintiff and in which action a receiver was appointed, such judgments are not again .available in another action. And though the objection is'not taken by answer, it may be raised for the first time upon appeal, it being clear that the objection, even though attention had been called to it upon the trial, could not have been obviated.

In this connection it should be remembered that the complaint did not allege the former decree, nor did it contain any reference to the former action; and, therefore, there was nothing in reference thereto which could have been denied by the answer. Where, therefore, as here, in an equity action, during the progress of the trial facts are presented to the court showing that the plaintiff has no standing in court, or that the right which he seeks to enforce is one that exists in favor of another person, it becomes the duty of the court to dismiss the complaint; and where this is not done, such an objection is available upon appeal where it is shown that it could not have been oviated by other proof.

The rule as laid down in Passavant v. Bowdoin, 39 St. Rep., 238, is thus stated:

“If the plaintiffs have such a judgment (a prior judgment setting aside the assignment), then they cannot bring this action based upon the same judgments which form the basis of that decree to again have the assignment set aside; and, so far as their complaint is concerned, seeking to get a decree setting aside this assignment upon its face establishes no cause of action, it appearing that they have thereby obtained such relief on behalf of the very judgments upon which this action was based. It further appears that for the protection of this very judgment in the action in which the decree was entered declaring this assignment to be null and void they have had a receiver appointed of all the assigned estate. Our attention has not been called to any principle by which a judgment creditor, after having set aside an assignment upon the ground of fraud, can maintain an action as such judgment creditor for the purpose of collecting the assets belonging to the estate, a receiver thereof on behalf of such judgment creditor having been appointed.”

The application of this rule to the facts here presented will require that the judgment appealed from should be modified by omitting the judgments which were included in the former action,, and which the decree identifies as follows:

The judgments entered in favor of the Central National Bank on July 31st for $4,154 and $4,255 respectively, and on August. 3d for $4,330.01, in addition to all the judgments in favor of Vietor and Achelis, which are three in number, and are set forth in the complaint and decree herein. The decree as modified should require that as to all of these judgments enumerated the complaint should be dismissed.

So far, however, as the other judgments included in the complaint are concerned, and which were not included in the former action, the plaintiffs being entitled to relief herein, the decree should be affirmed.

In one other respect we are also of opinion that the decree should be modified, and that has reference to the selection of a new receiver.

It is evident that by reason of the way in which the matter was presented, no attention having been particularly called to the proceedings in the former action, in which a receiver was appointed,, the learned trial judge felt at liberty to designate another receiver. The effect, however, of the existence of two receivers of the property of the same defendants would result in confusion and possibly litigation to determine their respective rights to the fund which under the decree is required to be paid over by the defendants. Under such circumstances the receiver first appointed, unless he has been discharged, should have possession of the property. Our conclusion therefore is that the judgment should be modified as directed, and as so modified should be affirmed, without costs.

Van Brunt, P. J., and Patterson, J., concur.


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    William E. Smith, Resp't, v. Stephen Underhill, App’lt.

      (Supreme Court, General Term, First Department,

      Filed June 3, 1892.)

    Partnership—Accounting—Disposal of assets.
    At the date of dissolution of a partnership there was owing to the firm from a corpora’ion of which plaintiff was a trustee an account for goods purchased and moneys advanced, and the firm also owned certain produce exchange certificates. After the dissolution, defendant, as liquidating partner, charged said account to plaintiff personally and did not dispose of the certificates. In an action for an accounting the evidence tended to ■show that the cash items of such account were connected with consignments of merchandise to foreign countries in which the firm assumed to act as principals, and the referee held that plaintiff was not personally liable for such account, but the loss, if any, was the firm’s, and that it was the duty of defendant to sell the certificates within a reasonable time, and that under the circumstances six months would be a reasonable time. Held, no error.
    Appeal from judgment in favor of plaintiff entered upon report of referee.

      Robert B. Alling, for app’lt; George L. Rives, for resp’t.
   O’Brien, J.

—This is an action for an accounting of the partnership estate of Smith & Underhill. The partnership had existed for many years, and was dissolved by mutual consent April 30, 1886, on which day the partners entered into an agreement by which defendant was made the liquidating partner, since which time he has remained in possession of all the assets. But two matters are now in dispute between the parties, which may be classified as the Kings County Manufacturing. Company account and the Produce Exchange certificates.

In respect to the former, it appears that plaintiff in November, 1880, organized the Kings County Manufacturing Company, becoming a trustee therein and president thereof, and continued such until the company ceased to do business. Plaintiff was also the principal stockholder in such company, owning three-sevenths of its stock, which stock represented a capital fully paid in cash of $7,000. Upon its formation some shares were transferred by plaintiff to the defendant, who for a few months remained as trustee, but resigned, transferring the stock back again to plaintiff. The testimony shows that between November, 1880, and June, 1882, this company had numerous dealings with the firm of Smith & Underhill. The latter sold goods to the ■company, made it loans in money, and paid money to third persons for its use. The business of the partnership was a general produce commission business, and some evidence was introduced showing that these dealings between the copartnership and the company were similar in their nature to dealings carried on by the copartnership with other persons. All these copartnership transactions were entered in the copartnership books in two separate accounts; one of which, called the “loan account,” consisted simply of moneys of the copartnership loaned by the plaintiff Smith to the company, the full amount of which -was paid by plaintiff and the account closed in June, 1882.

In addition to this loan account was another showing items of merchandise and cash payments to take up drafts and notes connected with the consignment to foreign countries of merchandise manufactured by the company, and which would appear to have been handled by the copartnership. In this latter account we find the item of loans of $19,761.97, but it is conceded that this is the same item that appears as credited to the firm and which was transfeired to this account from the loan account andas stated paid by the plaintiff. This need not, therefore, be referred to again, because not in issue between the parties. In this general account appears a balance due from the Kings County Manufacturing Company to the firm of $9,180.74 and such was the account at the date of dissolution and, with the exception of two items, one in 1885 and one in 1886, it so appeared in the books from February, 1888. After the dissolution, however, without the knowledge or consent of the plaintiff, the defendant, assuming that such amount was not chargeable against the firm, but against the plaintiff personally, balanced the same by debiting the plaintiff’s account therewith.

The question, therefore, presented is, whether this amount of $9,180.74 was due the copartnership from the Kings -County Manufacturing Company, or from the plaintiff personally. Several grounds are urged by appellant for holding that this was an indebtedness due by the plaintiff, all of which will be briefly considered : First, that the use of the funds of Smith & Underhill (by plaintiff to carry on the business of the Kings County Manufacturing Company rendered him personally liable for the loss occasioned thereby. Second, that plaintiff was liable personally for all the debts of that company, including the amount due the firm,'by the failure to file annual reports in 1882 and 1884. Third, by taking, and subsequently surrendering securities received from his co-trustees to secure him from any liability being placed upon him alone for indebtedness of the company plaintiff became personally liable for the indebtedness due from the company to the firm.

In respect to the first, had the defendant sustained the claim in his answer, to the effect “that though such account is entered on said books in said company’s name, yet the plaintiff herein was-the principal stockholder and member of said company, and the advances made by said firm to said company were so made by the direction of said plaintiff and for his benefit,” “that said company was insolvent and said plaintiff, though he knew the same, notwithstanding, directed'and made advances of the firm’s money to-said company,” then his conclusion would have been right that, the plaintiff should be charged with the whole of said account of the company. This was the theory assumed by defendant in charging plaintiff, without his knowledge or consent, with this account subsequent to the dissolution. This entry made after dissolution in the books was entirely unwarranted and unauthorized, and in no respect changed the position or rights of the parties. As respects partnership books between the partners, until the contrary appears, it must be assumed that the entries therein are correct; and while they are not conclusive, the burden is upon the one charging their incorrectness to show the same. This burden the defendant assumed. It was then made to appear and is now conceded by counsel for defendant, that in respect to so much of the debt as arose from purchases of merchandise the plaintiff was not liable therefor. It is likewise conceded that this amount included certain items of merchandise amounting to several hundreds of dollars. Exclusive, however, of such items of merchandise, the appellant claims that the balance is made up of moneys loaned by the plaintiff out of the copartnership funds.

It is unquestionably the law that one partner has no right, without the knowledge and consent of his copartner, to loan the partnership money or assets. The question presented, however, is, were these loans pure and simple of partnership moneys? The burden was upon defendant to sustain this claim; and upon testimony tending to show that these cash items were connected with the consignment of merchandise to foreign countries, in the consignment of which the firm assumed to act as principals, and with respect to some if not all of which the defendant cooperated and consented, the referee concluded that the burden placed upon the defendant had not been sustained; but, on the contrary, that the plaintiff’s view was correct, that these transactions were similar in their nature to dealings carried on by the firm with other persons and out of which the firm expected remuneration, and that any loss resulting therefrom and properly chargeable against the Kings County Manufacturing Company, account was the firm’s, and not one for which the plaintiff was alone responsible.

There being evidence to sustain the view taken by the referee, and such as was given to the contrary not being so preponderating as to warrant us in reaching a different view upon the questions of fact, we would not be justified in disturbing his findings.

With reference to the second ground, as to the statutory liability imposed upon trustees for failure to file annual reports, two answers are conclusive against appellant’s contention; one, that it was not pleaded; and, second, that it is barred by the statute of limitations.

In respect to the claim that the taking from and giving up of security to his’ co-trustees made the plaintiff personally liable for the indebtedness of the company due to the firm, it is sufficient to say that it has not been established that the plaintiff took any .security to cover this indebtedness of $9,180.74; but the contrary does appear, that such was taken to secure a different claim which when paid resulted in a surrender of such securities.

For these, in addition to the reasons assigned for his conclusion, by the referee, we think that the position of appellant in respect to the Kings County Manufacturing Company account should not. be sustained.

The second question presented on this appeal relates to the Produce Exchange certificates. These were in the possession of the-defendant as liquidating partner at and after the date of dissolution, and under the very terms of the agreement of liquidation the business of the firm was to be closed up “ as speedily as possible.” These certificates the defendant retained up to the commencement of this action, and, so far as appeared, has never sold-them even up to the present time.

Under no view of the duty devolving upon him can it be held that he was entitled to retain such certificates, when, at any time-during this long period, the same could have been sold, and should have been, with a view of closing up the affairs of the partnership. .We think that the. rule applied by the referee was, the correct, one; that it was the duty of the defendant as liquidating partner to have sold the same within a reasonable time after dissolution - and having in view all the facts in this case with respect to what was a reasonable time, we find no ground for criticising the view taken by the referee, that six months after the date of dissolution was a reasonable time within which these certificates should have-been sold.

In regard to the allowance granted to plaintiff, this was a matter within the discretion of the learned justice at special term, and in view of the character of the litigation and its outcome, we do not think that such discretion was improperly exercised in the granting of the allowance.

We have examined, in addition to these claims urged by appellant, the various exceptions to findings and to rulings upon questions or evidence, and have discovered no errors that would justifus in interfering with the judgment

We are of opinion, therefore, that it should be affirmed, with costs.

Van Brunt, P. J., and Barrett, J., concur in result.


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    Roderick H. Smith, Resp’t, v. The Martin Anti-Fire Car Heater Co., App’lt.

      (Supreme Court, General Term, First Department,

      Filed June 3, 1892.)

    1. COBFOBATIONS—CONTEACT MADE BY PBESIDBNT.
    Plaintiff was employed by defendant’s president to act as its agent to. secure orders from railroad companies for fitting up trial trains with the device manufactured by it, for which services a commission was to be-paid. In an action for commissions, defendant claimed that the president was not authorized to make the contract with plaintiff, as its by-laws provided that the vice-president should attend to the details of the business. Held, that as the contract was one within the scope of the apparent authority of the president, and directly related to the business of the corporation, plaintiff was not bound by the limitation of authority contained in. the by-laws which were not brought to his knowledge.
    2. Same—Ratification.
    After plaintiff had obtained from a railroad corporation an acceptance-of a proposition signed by him as such agent, and had submitted the same to defendant, the vice-president called on the railroad superintendent, and, after some slight alteration, marked the proposition approved. Held, that this constituted a ratification and adoption of plaintiff’s services, and rendered defendant liable to pay for the same.
    Appeal from judgment in favor of plaintiff entered upon report of referee.

      Benjamin S. Harmon and Charles F. Mathewson, for resp’t; O. W. Johnson (Daniel Whitford, of counsel), for app’lt.
   O’Brien, J.

-—-This action was brought for an accounting and to recover from the defendant such amounts as might be found to be due to plaintiff as commissions for services rendered pursuant to a contract claimed to have been made between the plaintiff and the president of the defendant company. The latter was a domestic corporation engaged in the manufacture and sale of a certain device for heating railroad cars with steam drawn from the locomotive. The complaint alleged that in February, 1887, the defendant through its authorized agents'entered into a contract with the plaintiff, by which it was agreed that the latter should endeavor to secure orders from different railroad companies for fitting up a trial train or trains with the device manufactured and sold by the defendant; for which services plaintiff was to receive ten per cent of the amount received by defendant for the fitting and equipping of the first or trial train, and five per cent, of all amounts thereafter received from the railroad company for the fitting up and equipping of additional cars and locomotives with defendant’s invention or device.

The two questions most strongly urged upon this appeal, and to which alone we shall direct our attention, are, first, was any such contract made ? and, second, if so, was it one binding upon the defendant as having been made by a duly authorized agent ?

The testimony in brief shows that at the time of the making of the alleged contract, the plaintiff and William Martin, the defendant’s president, resided at Dunkirk, 1ST. Y., where the chief office of the defendant was located. Intending to change his residence from Dunkirk to this city, the plaintiff, who was well acquainted with the officers of the defendant and especially with the president Martin, had an interview with him in respect to doing business for the defendant company, and as a result he testified that a contract such as alleged in the complaint was entered into.

Though the making of any such contract was put in issue by the answer, which was supported by the testimony of' Martin, the question was purely one of fact, and the conclusion reached by the referee is sustained by evidence showing the existence of a contract of the character claimed by plaintiff. The conduct of the plaintiff in having his cards prepared describing himself as the “ Agent for the Martin Anti-Fire Car Heater Company,” his thereafter calling upon the superintendent of the Hew York Central Company, and subsequently submitting to him a written proposition signed as agent of the defendant, and his notification to defendant of the acceptance of the proposition, were facts strongly tending to support, and consistent only with, the view that plaintiff thought himself warranted to represent and act as the agent of the defendant. Impressed, no doubt, with the strength of such testimony, the defendant, to avoid the legal effect of the contract as claimed, insists that it was the individual contract of Martin, who did not assume to bind the defendant. We think, upon this question, the finding of the referee that Martin did assume to bind the defendant finds support in the evidence.

It is further urged, however, that Martin had no authority to-bind the corporation; that although he was the president, his duties related to supervision over the mechanical portion of the-work, and that one Shaw, who was vice-president of the defendant, was constituted by the by-laws the general agent to attend to-all the details of the business. On examination, we do not think that the by-laws relied upon as limiting the powers of the president aré susceptible of the construction which the defendant would now seek to place upon them, nor do they in any substantial degree take away the powers ordinarily conferred upon the president of a corporation. Be this, however, so or not, it-was clearly shown that no knowledge of any limitation of the powers of the president under the by-laws was brought "home to the plaintiff; but, on the contrary, the entire testimony shows that a contract, such as' is claimed to have been made, was within the apparent scope of the authority conferred upon the chief executive officer of a manufacturing corporation.

We assent to the propositions of law, which are supported by numerous authorities, and which are relied upon by the appellant,, that the president of a corporation has, by virtue of his office merely, no authority to contract for the corporation, and that one-contracting with a corporation is bound to take notice of limitations contained in the by-laws on authority to contract for the corporation. These as general propositions of law are correct; but they are subject to certain well defined modifications which have grown out of the necessity of broadening and giving validity to the acts of the executive officers of business and manufacturing corporations, some cases going to the extent even of holding such corporations to be bound by the acts of their agents whenever justice and fair business dealing would seem to require. Unlike the rule as it prevailed at common law, corporations are now held to be affected with constructive notice, and implied assent, tacit acquiescence, and generally with the same legal and equitable considerations as affect the rights of natural persons. So far as' business, trading and manufacturing corporations are concerned, it would be utterly impossible to transact their business if persons dealing with their officers and agents were hampered with the-old rule that they were bound to know the exact extent of their authority to bind the corporation. We think, therefore, that the first distinction to be observed in respect to the acts of officers relates to the nature of the corporation and the character of its business.

Another distinction to be observed in testing the question as to what acts would bind a corporation is, to determine whether or not such acts áre done or performed in connection with the purn )se directly connected with tile company’s legitimate business. As stated in Spelling's recent work on Private Corporations, § 193: Usage and custom and the necessities and conveniences' of business attach to certain corporate officers functions independent of any express authority from the board of directors.. In the exercise of these they are as much the agents of the corporation as if authority go to act were specially delegated. The president, for instance, as chief executive officer of the corporation, may bind it by all acts the performance of which is incidental to his office. When the president of a corporation performs an act pertaining to its business, a presumption exists in favor of the legality of the act.” See, also, Morawetz on Private Corporations (2d ed.), § 538; Beach on Private Corporations, § 202.

While it is impossible to reconcile all the cases with this view of the law, there Being dicta in some of the cases, and others holding directly, that a president by virtue of his office has no authority to make* a contract on behalf of the corporation, we think that most of them can be reconciled with the .view here expressed, if we keep in mind the distinction always to be made as to whether the contract in its nature is directly connected with the purpose of the incorporation, whether made in the usual course of the business of the corporation, and by an officer or agent acting within the scope of the apparent authority of such officer or agent. The application of such principles of law to the contract found by the referee to have been entered into by the defendant corporation through its president presents a case where the president, by acting within the scope of his apparent authority, made a contract relating to the business of the corporation, which the latter has acted upon to its profit, and by which in honesty and fairness it should be bound.

Were we, however, to go to the extent of holding that the limitations upon the powers of the president would have prevented the-making of this contract, and that the only officer authorized to bind the corporation was the vice-president, we do not think, upon the facts here presented, that the appellant can gain much comfort from such a contention. It is shown that after the plaintiff had entered into negotiations with the superintendent of the railroad company, after a written proposition had been made and accepted, the vice-president called upon the superintendent, and having the facts of the written proposition and acceptance before-him, upon examination, after some slight alterations therein, which in no respect changed the substance of the contract, he marked the same approved.

If this was not a ratification of the acts of the plaintiff, and if such testimony cannot be regarded as proving acquiescence in the plaintiff’s negotiation with the railroad company, it would be difficult to determine what else would be required. The vice-president, with the knowledge that the plaintiff was holding himself out as the agent of the defendant, -approved of the contract substantially as made by the plaintiff with the railroad company ; and there is evidence to support the finding of the referee, that at. the time of accepting the order from the railroad company and ■equipping the trial train, the defendant’s managing officers knew that the order had been obtained through the efforts of the plaintiff, claiming to act as the agent of the defendant. Upon this appearing, even assuming that the president of the defendant was not authorized to make the contract with plaintiff, yet the corporation, in availing itself of plaintiff’s services thereunder, has adopted and ratified the same, and should pay for the services according to the agreement.

Upon an examination of the record, therefore, wé see no reason to interfere with the conclusion reached by the referee, which is -consonant not only with justice and equity, but with well settled principles of law.

We are of -opinion, therefore, that the judgment appealed from should be affirmed, with costs.

Van Brunt, P. J., and Barrett, J., concur in result.


text:
    Marie T. Upington, Resp’t, v. Louis J. Pooler, App’lt.

      (Supreme Court, General Term, First Department,

      Filed June 3, 1892.)

    1. Wn-L—Devise—Bights of devisees where building is upon -both lots.
    One D. who owned a piece of land on S. and E. streets leased the same to one M., who was to build thereon, the buildings to belong to D. He built several houses, some fronting on E. street and running back forty-eight feet. By D.’s will she gave to plaintiff the rents and profits of house and lot 15 S. street, and to defendant lot 13 S. street, each being described as 33 by 138 feet. The houses on E. street projected about fourteen feet on the rear of plaintiff’s lot. In a former action by the lessee for a renewal it was adjudged that plaintiff was entitled to one-third of the ground rent, and for twenty-three years defendant conceded, either voluntarily or under coercion of the court order, plaintiff’s right to one-third of the rents. Held, that it was not the intention of testatrix to give defendant, in addition to the corner lot, that portion of the buildings which projected beyond it, and'that plaintiff was entitled to what was upon the lot given to her, and that she was entitled to recover one-third of the rents received from such buildings.
    .3. Appeal—Case.
    A statement that the foregoing is all of the testimony taken on the “ trial of this action,” is not equivalent to a statement that the case contains all the evidence introduced on the trial.
    '3. Same.
    Where documentary evidence received on the'trial is omitted from the case, findings of fact will not be reviewed on appeal, as such evidence 1 may have had an important bearing upon the determination of the question submitted.
    Appeal from judgment in favor of plaintiff after a trial at circuit.

      George Bliss, for app’lt; James M. Hunt, for resp’t.
   O’Brien, J.

—The action was brought in form as for money Lad and received, and the questions litigated relate to the division of rents received from certain premises at the corner of .Spring and Elizabeth streets in the city of Hew York. The plaintiff claimed to be entitled to one-third of the net rents received from the property during the time covered by this action, and alleged that the defendant was entitled to two-thirds thereof; but the latter having collected a greater amount, a recovery is-sought for the excess over such two-thirds of the rents received by the defendant. From the judgment in favor of plaintiff this-appeal is taken.

The facts show that one Mary Davy owned certain property on the northwestern corner of Spring and Elizabeth streets in the-city of Mew York, a lease of which she made to one John.' Muhlenbrinck, who, in pursuance of a covenant in the lease,, erected buildings on the lots. These buildings, seven in all,, fronted in part on Spring street, and in part on Elizabeth street.. After the buildings had been erected by the lessee Mary Davy died, leaving a will in which she provided in respect to plaintiff’s interest in the property, subject to certain annuities, as follows: “ I give the rents, issues and profits of such last mentioned house and lot ’" (described as “ my house and lot of land known as number fifteen Spring street”) “to my grand niece.” * * * The: •defendant, as heir-at-law, inherited from his father a portion of the property, and as devisee under the will another portion. The property which he took as devisee under the will was described as “ my house and lot known as number seventeen Spring street;” and the other portion inherited by defendant from his father is thus described: “ My house and lot known as number thirteen Spring street in the city of Mew York, being about twenty-three feet wide on Spring street by about one hundred and twenty-eight feet in length on Elizabeth street.”

The questions in dispute arise from the fact that by the conveyances under which Mary Davy got title, and in the instrument, by which she leased to Muhlenbrinck, the property in question was described as being known as lots of certain numbers on the Bayard Farm map, so-called, while Muhlenbrinck erected his buildings without any regard to the interior line of those lots, though keeping within their exterior lines. Though some of the buildings erected fronted on Elizabeth street, she described none of the property as so fronting. In addition to the building on the corner, four other buildings were erected fronting on Elizabeth street, three of which not only extended across the entire twenty-three feet of width ascribed to the Spring street lot, but about fourteen feet further to the rear.

The principal question presented is, whether or not the defendant, in addition to the property which was designated by Mrs. Davy as Mo. 13 Spring street, and as being about twenty-three feet wide on Spring street by about one hundred and twenty-eight feet in length on Elizabeth street, is entitled to the rentals receivable from the portions of the Elizabeth street houses which project beyond the limit of the description as fixed into the adjoining lot some fourteen feet, and which lot, prior to the erection of such houses, was known as Mo. 15 Spring street.

There would be much force in the contention of the appellant,, that the testatrix in the descriptions intended to devise the property as actually occupied and built upon at the time of her death, were it not that this is clearly excluded by the particular descriptian which is affixed to the house and lot known ás Ho. 13 Spring street, which, by metes and bounds, limits it to twenty-three feet on Spring street by one hundred and twenty-eight feet in length •on Elizabeth street. In addition to this limitation by metes and bounds, we must remember that the entire premises were leased by Mrs. Davy to Muhlenbrinck as three lots, but no restriction was placed as to the manner in which he should build thereon, .and he was at liberty to use them as though they constituted but a single plot.

' It is true that a portion of the finding made by the trial judge, that the buildings erected by Muhlenbrinck under his lease with Mary Davy made use of the three lots of ground in question as a single lot, is excepted to. But when we recall the fact that seven buildings were erected upon three lots, without regard to the lot divisions, and three of these buildings extend transversely across the lots, which are only about twenty-three feet wide, to a depth of thirty-eight feet, evidence is furnished that the 'three lots were used by the builder as though they constituted a single' plot. Under the covenant in the lease, these were to be erected at the expense of the lessee, and provision was made therein by which at the termination of the lease Mrs. Davy was to pay for such buildings. Had she, therefore, erected the houses herself, or had she not placed a descriptive limitation upon the corner lot, there would be room for holding with the appellant that it was intended to give to the devisee of the corner lot all the buildings fronting thereon, whether projecting backwards upon the other lots or not. This, however, as shown, is not reconcilable either with the language used by the testator or the facts appearing upon the record.

This hypothesis being excluded, but one other remains, which was the one found by the learned trial judge as contended for by the plaintiff. It may be true that if the plaintiff had to maintain her position solely upon the description relating to her lot, without reference to other facts or provisions of the will, much difficulty would be found in supporting her view. While it may be an inverse mode of reasoning, instead of establishing a fact directly, to resort to other facts for the purpose of excluding any other reasonable hypothesis, still such conclusions are none the less to be relied upon where more direct and certain evidence is wanting. In other words, it may be demonstrated with reasonable certainty that it was not the intention of the testator, which is the primary canon of. censtrnotion, to give in addition to the corner lot all the buildings erected thereon, whether they projected backwards upon another lot or not.

Having thus eliminated the defendant’s interest in any portion •of the houses other than those erected upon the lot owned by him, .and as no one else but the plaintiff has any interest therein, we are forced to conclude, as the testatrix’ intention to dispose of all her property is made evident, that the plaintiff was to have, under the description of “ my house and lot,” not only the portion of the lot as actually.occupied by the building fronting upon Spring street, but was to have the whole of the lot which was formerly known as No. 15 Spring street, and which, as shown, covered the same premises as was designated on the Bayard Farm map, running back and embracing the land upon which fourteen feet of the rear of three of the houses fronting on Elizabeth street were placed.

In favor, however, of plaintiff’s position as showing her to be entitled to one-third of the lands, in addition to what has' already been said, much force as an argument, if it is not conclusive as an adjudication, is to be derived from the prior proceedings, involving in some respects the same questions here presented, and also from the construction which, by acquiescence, the parties themselves seem to have given to the will of Mrs. Davy.

In the suit brought by Muhlenbrinck for a renewal of the lease, the plaintiff applied to have one-third of the rents in the hands of a receiver appointed in that suit paid over to her. Upon the reference ordered the question was determined in her favor, though this report does not appear to have been confirmed, but instead another reference was ordered to ascertain what proportion of the ground rent, under the terms of the Muhlenbrinck lease, the premises had earned since the appointment of the receiver.

.This was necessary because, according to the claim made by Muhlenbrinck, he was entitled to all the proceeds over and above the ground rent which he was liable to pay for all the premises. Pendingjdecision, nothing could be distributed beyond the amount of such ground rent. In his report the referee found, and it was confirmed, that the plaintiff was entitled to one-third thereof

To destroy the force of an adjudication, the appellant insists that a distinction is to be made between the question of the ground rent and the question of the rents from the buildings, which latter, he claims, was never passed upon by the court. With respect, however, to the ground rent, it seems reasonably clear that, except upon the theory that the plaintiff owned the land the entire depth and with a frontage equal to that of No. 13, a conclusion by the referee could not have been reached that plaintiff was entitled to one third of such ground rents. We are inclined to think, therefore, that the question of the extent of plaintiff’s right in the property was directly involved upon that reference.

It is thus made to appear that for at least twenty-three years prior to the commencement of this action the defendant has conceded, part of the time without any apparent objection, and part of the time under the coercion of the order of' the court, that this plaintiff was entitled to one-third of the rents from the entire premises in question, which she has received. And though we assume that no adjudication binding upon the defendant has heretofore been made, we have it made clearly to appear that the parties themselves have construed their respective rights in these premises to be the same as adjudged by the court below. If we conclude, therefore,- that plaintiff has a right to the rents and profits arising from the use of one-third of the entire property, it is difficult to see what better rule could have been adopted for determining the value than to take an exact one-third thereof. This is the rule that the parties seem to have acquiesced in, and which, upon the facts presented, the learned judge below thought to be right and proper; and his conclusion we find no reasons for disturbing.

A question was made in respect to inconsistencies in the findings, it being claimed that the learned judge had marked certain findings of appellants “as already found.” But an examination will show that the reason therefor was ihat, having already made certain findings for the plaintiff which were inconsistent with those presented by the defendant, he in effect refused to find them otherwise than “as already found;” and so far as the appeal is concerned we have regarded them as though they had been refused, which was undoubtedly the position taken by the learned judge below.

So far as any finding of fact is concerned, we might, without considering it, have disposed of it upon the objection made by the respondent, that no such question of fact is before this court upon this appeal. It is well settled that, unless the case upon appeal contains a statement that it contains all the evidence introduced at the trial, the facts are not before the general term for review. This case contains no such statement, although we find in it the following: “ The foregoing is all of the testimony taken on the trial of this action.” In addition to the testimony which fell from the lips of witnesses, considerable evidence of a documentary nature was introduced, as claimed by the respondents, which has been omitted from the case. Where that is made to appear, findings • of fact will not be reviewed on appeal, for the reason that evidence other than that appearing in a case may have had an important bearing upon the determination of the question submitted to the trial judge. In this case, however, having reached a determination upon the record as made by the appellant adverse to his contention, we thought best to make known the same, rather than put appellant to the trouble of making another case, we assuming that nothing would aid him; and the result reached being favorable to respondent, she is not prejudiced by our review of the facts.

Upon the case as made we find no valid grounds for disturbing the judgment of the court below, and are, therefore, of. opinion that it should be affirmed, with costs.

Barrett, J., concurs; Van Brunt, P. J., concurs in result.


author: Per Curiam.

text:
    Jennie E. Wood, Adm’rx, Pl’ff, v. Robert M. Nesbit, Def't.

      (Supreme Court, General Term, First Department,

      Filed June 3, 1892.)

    Submission of controversy—Irregularity,
    A submission of controversy in which the statement and briefs of both sides are drawn by the same attorney is not of the independent character re- ■ quired by the Code, and the court will refuse to entertain the same.
    Motion to dismiss a submission of controversy and set aside the decision heretofore rendered thereon.
    On this motion it was made to appear that an attorney named B. E. Valentine prepared not only the statement of facts, but also the briefs for the respective parties.

      Davies, Short & Townsend, for motion; Magner & Hughes, opposed.

       Withdrawing 42 St. Rep., 778.

   Per Curiam.

—Upon examination of the voluminous affidavits submitted upon this motion, not one-tenth part of which had any relevancy to the question involved, we have concluded that Mr. Valentine was in fact the counsel for both parties, that the controversy was not of that independent character which the Code contemplates ; we think therefore that the motion should be granted, without costs.

[On this opinion an order was entered vacating the former decision and dismissing the submission, and álso recalling the opinion of the court reported in 42 St. Rep., 778. Ed.]