author: O’Brien, J. Bartlett, J.

text:
    The Oceanic Steam Navigation Company, Resp’t, v. Campania Transatlantica Espanola, App’lt.

      (Court of Appeals,

      Filed January 15, 1895.)

    A majority of the court did not concur in the prevailing opinion, but simply in the result.
    Appeal from judgment of the general term of the superior-court of the city of New York, entered upon an order, which affirmed a judgment in favor of plaintiff entered upon a verdict,, and also affirmed an ordér denying a motion for a new trial.
    This action is brought to recover the amount paid in satisfaction of a judgment rendered in an action brought by one John Cleary in the United States circuit court against plaintiff for personal injuries alleged to have been caused by negligence, and for the expenses incurred in defending the same. This case is not reported in full, for the reason that a majority of the court did not concur in the prevailing opinion, but simply in the result.

      Cephus Brainerd, for app’lt;

      Everett P. Wheeler, for resp’t.

      Aff’g 53 St. Rep. 663.

   O’Brien, J.

The plaintiff, commonly known as the White Star Line, recovered a judgment for a claim which it was com-pelled to pay to a third party, in consequence of the defendant’s negligence. The plaintiff was the lessee from the city of a public pier, in the city of New York, which it sublet to the defendant in December, 1886. While the defendant was in possession of the pier, on January 18, 1887, one John Cleary was injured by the falling of a large door in use upon it. It is claimed that this accident in fact resulted from negligence on the part of the defendant. Cleary, however, brought suit against, the plaintiff, as the party-in control, as the lessee of the pier from the city, in the circuit court of the United States, and recovered a judgment for the damages sustained in consequence of the in jury. The plaintiff paid the judgment and in this action recovered from the defendant the amount so paid, with interest and costs. The recovery rests upon the principle that where one party is compelled by the judgment of a competent court to respond in damages for the wrongful act or neglect of another, a cause of action arises in favor of the party who has paid, under such circumstances, against the actual wrongdoer or party by whose act or neglect the injury wasprodueed.

On a former trial of the action the plaintiff’s complaint was dismissed, but this judgment was subsequently reversed by the second division of this court on appeal (184 N. Y. 468; 47 St. Rep. 742). It will be seen, upon an examination of the opinion of the court then given, that some of the questions now presented were, on that appeal, decided adversely to the defendant’s contention. While the action by Oleary against the plaintiff was pending in the United States circuit court, its attorneys of record in the action addressed a letter to the defendant’s agents under date of May 31,1888, in which the agents were notified that the action had been commenced to recover damages sustained by him on the 17th day of January, 1887, and was pending; that the present plaintiff was sued for'the reason that it was the lessee from the city of the pier where the injury occurred, and they added we have advised our client that your company is ‘ liable for the accident, in the event of there being any liability, and we would be glad of your assistance in obtaining testimony for the defense. The cause is on the day calendar, and will probably be tried within about ten days. The cause was actually tried on the 8th of June following the date of this letter. The learned counsel for the defendant now contends that the"' notice was sufficient and, in effect, that the defendant had no notice of the pendency of the action or any opportunity to participate in the defense. The fundamental fact which underlies this action is that the plaintiff, by reason of its general control of the pier, and not by any actual neglect "of its own, was, by the judgment of the circuit court, made liable for the defendant’s personal neglect. In such cases the action can be maintained against the delinquent party although it had no notice whatever of the pendency of the action. The notice served in this case is important only lor the purpose of binding the defendant by the former adjudication-to which it was not otherwise a party. The defendant’s liability for the result of the accident could have been determined in the action against the plaintiff in the Federal court by either making it a party to that action or giving it notice of its pendency and an opportunity to •defend. Since the former judgment was admitted upon the trial of this action to establish, at least some of the necessary facts, it becomes necessary to consider the question as to the sufficiency of the notice given.

Ho particular form of words is necessary in order to constitute ' notice in such cases, nor is it even necessary to give a written notice. It is sufficient that the party against whom ultimate liability is claimed is fully and fairly informed of the claim and that the action is pending with full opportunity to defend or to participate in the defense. If he then neglects or refuses to make any defense he may have, the judgment will bind him in the same way •and to the same extent as if he liad been made a party to the record. Village of Port Jervi v. First National Bank of P. J., 96 N. Y. 550; City of Rochester v. Montgomery, 72 id. 65; Albany City Savings Inst. v. Burdick, 87 id. 40, 45; Andrews v. Gillespie, 47 id. 487; Chicago v. Robbins, 2 Black, 418; Heiser v. Hatch, 86 N. Y. 614. When a party has been served with such a notice the law entitles him to come in as a party upon the record or to (be heard at the trial, and it is not necessary that he should be re qaired in terms to do what the law will permit him to do. I do not think that the proposition that the plaintiff was bound to offer •in the notice to surrender to the defendant the sole control and management of the litigation, is sanctioned by reason or authority. The plaintiff had been sued and it had the right to defend according to the judgment and advice of its own counsel. It was not bound to abandon, or offer to abandon, its interests to the care of a stranger whose • interests were not necessarily identical but in some respects were even hostile. The plaintiff found itself involved in a litigation in which it had two chances. It might, if possible, defeat Oleary's action, or, failing in that, could resort to its remedy over against the defendant. It could not be compelled to relinquish either of these methods of protecting itself from loss, but could at the same time and in its own way, pursue such a •course as to retain both. All that the defendant was entitled to was the opportunity to defend and protect its own interests in the same way and to the same extent as if it had been sued jointly with the plaintiff in the first instance, and this would not give to it any right to manage or control the proceedings so far as concerned its co-defendant.

But it is urged that a notice of eight, or at most of ten days, was not sufficient. The defendant was entitled to a reasonable notice and a reasonable opportunity to defend, and this question is not governed by any fixed or arbitrary rules, but must depend upon the facts and circumstances of the case. The defendant, when the notice was served, made no objection that the time allowed was not sufficient. In fact it paid no attention whatever to the notice. Nor was there any attempt made upon the trial of this action to show that the defendant was prejudiced by any omission • to give longer notice, or that it had been prevented from making any defense that it could or would have made under any circumstances. It is obvious, therefore, that upon such a state of facts it cannot be said, as matter of law, that the notice served was not sufficient. It should also be added that the sufficiency of the notice was one of the questions fairly involved in the former appeal, and which was then passed upon adversely to the defendant’s present contention.

This view as to the sufficiency of the notice rendered the judgment record in the action in the circuit court admissible in evidence against the defendant, since, in legal effect, it was a party to it and bound by it. Indeed, the only objection made to the record, at the trial, was that no proper foundation had been laid for it, which, under any circumstances, would have been obviously insufficient. This record would have been competent evidence in the case for some purposes, even if no notice whatever had been served. The plaintiff was bound to prove affirmatively that it had paid damages to Cleary, resulting from the defendant’s personal negligence, by force of the judgment of a competent court. It was the judgment which it had been compelled to pay'that constituted the substantial element of the cause of action, and the record itself was competent proof on this issue,"and perhaps the only proof of fact which was admissible.

The judgment in the circuit court, upon the verdict against the plaintiff, was entered on the 29th of September, 1888. Prior totliat date a motion to set aside the verdict and for a new trial had been made to the court upon a case and exceptions, which motion was denied and judgment ordered upon the verdict

On the trial of this action the plaintiff’s counsel offered the case and exceptions in evidence. The defendant’s counsel objected on the ground that it was immaterial, irrelevant and not a part of the record. The court overruled the objection and the defendant’s counsel excepted. It is now contended that this ruling was error, which requires a reversal of the judgment. _ It would not, I think, be very difficult to. show that the objections made to the document were not sufficient to raise any legal question, but, for the-purposes of the appeal, it may be assumed that they apprised the opposite party of some legal ground of objection which was intended. The objections, whether good or bad, were aimed at the-evidence offered as a whole, and not' to any specific part of it, and,, hence, if any part was admissible, the exception raises no question. I think it is not correct to say that these papers formed no part of the record. What constitutes the record or judgment roll in an action is prescribed by section 1237 of the Code. The summons, pleadings and other papers are certainly a part of it, and the last-clause of the section reads as follows: If the judgment is taken after trial, the judgment roll must contain the verdict, report or decision; each offer, if any, made as prescribed in this act; and the exceptions or case then on file.

Since the practice and procedure in actions at law in the United States courts are the same as in the state courts, it is diffi- . cult to see why the case and exceptions may not form a part of the record.

Apart, however, from this consideration, the case and exceptions were a part of the proceedings in an action to which the defendant had in legal effect been made a party by the notice, with, opportunity to participate in making it up. The plaintiff was. bound to prove, as .part of its case, not only that a judgment was recovered against it, in consequence of defendant’s neglect, but also that such judgment went against it upon some ground or for some reason other than its own personal negligence. No recovery could be had in the action if the plaintiff, by its own neglect, caused or contributed to the accident, even though the defendant also had been guilty of negligence. It was part of the plaintiff’s case to-show that "the judgment did hot go against it on any such ground. In other words, the plaintiff had to show upon what ground the judgment against it in the circuit court was given, and it is difficult to see what better evidence could be given on that question than the authenticated record of the proceedings at the trial, in-the preparation of which both parties to the controversy participated, or had the opportunity to participate, under the sanction of the court.

But it is not necessary to determine the precise effect which was to be given upon the trial of this action to the tecord of the-trial in the circuit court, since the learned trial judge, by his rulings and charge, confined it to a very narrow scope. At the request of the defendant’s counsel he charged the jury in the clearest manner that this record could be considered only as establishing two' facts, namely, the amount of damages which the plaintiff sustained and that Cleary, who recovered the judgment, was himself free from negligence, but that all the other necessary facts must be made out by original evidence. Of course, the judgment could not have been recovered at all had Cleary been guilty of any negligence that contributed to the injury, and especially as the defendant had notice and an opportunity to appear at the trial and contest that question, the ruling was, certainly, sufficiently favorable to the defendant. The most that the defendant can now claim is that, upon some points, the record was immaterial and irrelevant to the issues in this action, and since - the trial court instructed the jury to disregard it in determining these questions, the exception, according to settled rules, presents no ground for reversal. Upon all the other issues in case the plaintiff gave original evidence sufficient for the consideration of the jury, and whatever conflict there was with respect to these facts must be deemed settled by the verdict. The charge of the court was full and fair and correctly presented to the jury the legal principles to which the evidence was to be applied. Some other exceptions have been discussed, but we think that none of them are of sufficient importance to sustain the appeal.

The judgment must be affirmed.

Bartlett, J.

(dissenting.) "Assuming that the decision of this case on the former appeal (134 N. Y. 461; 47 St. Rep. 742), is final as to the sufficiency of the notice given defendant of the pendency of the action in the United States circuit court, I am, nevertheless, of the opinion that it was reversible error to admit,* against the objection of defendant, the case and exceptions upon the motion for a new trial in the above action as made up in the federal court.

That record contained the testimony of John Cleary, the plaintiff in that action, and of Owen Martin, who was working with Cleary at the time of the accident. The testimony was read to the jury, and the defendant insists that it was deprived of the right to cross-examine these two witnesses. Plaintiff seeks to answer this suggestion in two ways, viz.:

It is urged, first, that no objection was offered to the admissibility of this record. The objection was to the effect that it was incompetent and immaterial and not a part of the record.

I think that the testimony of the two -witnesses was no part of the record and could not be read to the jury under any rule of evidence.

The effect was to deprive the defendant of its right to cross-examine.

It is further urged, in the second place, that the charge to the jury properly limited the effect of the record, and consequently, the defendant was not prejudiced. • '

I cannot agree with this suggestion in • view of certain refusals to charge at the request of defendant, but even if it be assumed that the charge was all that defendant could legally demand, it would not cure the error of which complaint is made.

The vital question litigated in this action was as to defendant’s negligence and consequent liabilily.

To say, therefore, that on the trial of this issue, the testimony of the two witnesses, who were present at the accident, and one of them the injured -man himself, could be read to the jury without affording defendant the opportunity of cross-examination is, it seems to me, to announce a proposition utterly unsound. It cannot be assumed that the defendant would fail to elicit valuable facts in its favor Tiy subjecting these witnesses to cross-examination.

This common-law right of the defendant to cross-examine is entirely independent of the question as to what was settled by the judgment of the United States circuit court, or the nature of the judge's charge to the jury.

. The trial judge made no reference to the testimony of these witnesses. •

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

Gray, J., concurs; Andrews, Oh. J., and Peckham, J., concur in result; Bartlett, J., reads for reversal; Finch, J., concurs; Haight, J., not sitting.

Judgment affirmed.


source: Caselaw Access Project

author: O’Brien, J.

license: Public Domain

text:
    John Duryea, App’lt, v. Catharine Fuechel et al., as Executors, Resp’ts.

      (Court of Appeals,

      Filed April 16, 1895.)

    1. Judgment—Correction.
    A court has power, if it appears that a judgment has been entered by some mistake, irregularity or error which deprives it of the character of & judgment of the court, as intended by the trial judge, to vacate it or set it aside for any error of law or fact committed at the trial, so far as power is given to the trial court for that purpose by the Code.
    3. Same.
    The appointment of a referee to take proofs and report, notwithstanding the existence of a judgment in favor of the defendants dismissing the complaint, is not a matter resting in discretion, but a question of power, and all the proceedings based upon the order appointing the referee, including the judgment in favor of plaintiff, depend upon and fall with the order of appointment.
    3. Appeal—Vacation on judgment.
    Where, after an appeal to the court of appeals, the general term vacates the judgment from which the appeal is taken, the respondent is entitled to have the appeal dismissed.
    Appeal from order of the general term of the supreme court in the first judicial department, entered upon an order which reversed an order of special term amending a judgment in'favor of defendants and vacated a judgment based upon the order reversed.

      Alfred A. Gardner, for app'lt;

      Flamen B. Candler, for resp’ts.
   O’Brien, J.

This is an appeal from an order in this- action, and the record discloses a condition of things so complicated and anomalous as to render an examination of the case, and any attempt to unravel the web in which the parties are involved, quite difficult. The case illustrates how a very plain and simple issue may be obscured and the rights oE the parties lost sight of by errors or mistakes in the procedure. In an ordinary action for the recovery of the price of goods sold, the parties have become involved in a hopeless tangle of judgments, orders and appeals, without having yet, in any legal sense, touched the original question in dispute. We do not propose to consider these proceedings in their technical character since we have arrived at the conclusion that the case ought in some way to be brought back to the point from which the parties and their counsel have wandered in controversies arising from the peculiar and mistaken methods of procedure that have been followed. The action was commenced by the plaintiff in February, 1889, against George E. Fuesclisel, the defendant’s testator, who died subsequent to the joining of issue in the action. The complaint states a cause of action for the recovery of the price of certain carloads of cauliflower, and the price is stated at a gross sum, besides a certain portion of the profits made or to be made by the defendant upon the preparation and sale of the goods. The defense was substantially a general denial, a breach by the plaintiff of the agreement between the parties and a counterclaim.

In March, 1890, the issues in the action appear to have been regularly tried by the court, and, upon findings of fact .and law then made, the complaint was dismissed. There were two conclusions of law stated in the decision: (1) That the plaintiff has established no cause of action against the defendant, and (2) that the defendant is entitled to judgment dismissing the complaint, with costs. On this decision judgment was entered on the first Monday of March, 1890, adjudging-that the complaint be dismissed upon the merits, and that the defendant recover of the plaintiff the sum of §220 costs. So far the proceedings, are quite intelligible. But it is claimed by the counsel for the plaintiff on his brief here, that in some way, the parties were transposed in the decision, and that the court, in fact, did not intend to dismiss the plaintiff’s complaint, but the defendants’ counterclaim. There is nothing in the record before us to show this, except possibly, the order which was subsequently made.- This order appeal's to have been granted more than a year afterwards on April 10,1891, jipon the plaintiff’s application, and, after reciting the trial of the action, the dismissal of the complaint, the entry of judgment for the defendant, the denial of a motion by plaintiff for a new trial on the ground of irregularity and surprise with leave to apply for leave to amend the judgment, the order then directs that the judgment, entered about a year before in favor of the defendant, be amended by adding the following provisions at the foot of it: (1) That a referee who was named, be appointed to take and state an account between the plaintiff and defendant concerning the matters alleged in the complaint and stated in certain of the findings of fact mentioned ; (2) that the referee report thereon to the court with the testimony taken ; (3) that the first and second conclusions of law in the decision referred to be stricken out; (4) that the clerk correct the judgment record and docket of the judgment in the case accordingly. We. cannot know what reasons moved the court to make this, order since the papers upoh which it was granted do not appear in the record. It may be that it was intended to authorize a vacation of the judgment entered for the defendant The court had the power, if it appeared that it had been entered by some mistake, irregularity or error which deprived i.t of the character of the judgment of the court, as intended by the trial judge, to vacate it, or to set it aside for any error of law or fact committed at the trial, so far as power is given to the trial court for that purpose by the Code. But it appears that the judgment for the defendant dismissing the complaint and for costs was never in fact vacated, and it still remains upon record as the final disposition of the issues in the case.

But the parties appearel before the referee named in the order, from time to time; and proof was given before him at length touching the merits of the case. The referee reported to the court in obedience to the order, and on the 13th of November, 1893, the court confirmed it, overruling the defendants’ exceptions to the same, and directing the clerk to enter judgment for the plaintiff for over $5,000.

In this way a judgment for the defendants dismissing the complaint has been changed to a judgment for the other side. The defendants appealed to the general term from the judgment, and also from the order which appointed the referee and amended the original judgment already referred to. That court -reversed the order and vacated the judgment in favor of the plaintiff by an order entered March 16, 1894.

It appears from the opinion of the court that the reversal proceeded upon the ground that the court at special term had no power to amend the judgment in the particulars stated. The amendment of the judgment in the manner stated and the appointment of a referee to take proofs and report, notwithstanding the existence of a judgment in favor of the defendants dismissing the complaint, was not, we think, a matter resting in discretion, but a question of power. The appointment of the referee, being without jurisdiction, all the proceedings based upon the order, including the judgment for the plaintiff, depended upon'it and fell with it. It is the decision of the general term in making' this order of reversal that is sought to be reviewed by this appeal; We think that the order was properly reversed and the judgment following it properly vacated. There are some further complications presented by a motion to dismiss an appeal from another judgment, which motion has been submitted with this appeal.

It appears that, what is called a judgment, was also entered upon that part of the order of the general term which vacated ' the judgment for the plaintiff on the report of the referée. Who entered this so-called judgment, or what it adjudges, does not appear, as it is not in the record or described in the motion-papers. It does appear, however, that after it was entered, and in May, 1894, the plaintiff appealed from it to this court, just as if the court below had reversed instead of vacating the judgment upon the report of the referee. Of course there was no basis for any judgment and no autnority to review the general term in that wav. In November, 1894, after the appeal to this court, the general term vacated the so-called judgment from which the appeal was taken, and this leaves the plaintiff with an appeal in this court from a judgment which has been vacated, since the appeal, by the court in which it was rendered. It is plain that the defendants are entitled to have it dismissed. It appears, also, that .another appeal in behalf of the plaintiff has been taken to the .general term from the judgment in favor of the defendants dismissing the complaint, which was entered on the first Monday of March, 1890, already mentioned. A motion to dismiss it has been made by the defendants and denied. There seems to be some question in regard to the right of the plaintiff to have the ■appeal heard, but just what it is, does not appear. It is quite possible that the plaintiff may have a meritorious cause of action which is in danger of being lost in the contention over questions -of practice. The action of the trial court in appointing the reference, the report of the referee and the order confirming the report and directing judgment in his favor would seem to give considerable moral support, at least to that view. He ought to have an opportunity to present his case to the court and to procure a judicial determination of the. issues involved. If the judgment first entered dismissing the complaint is.in fact such a determination and not the result of mistake, irregularity, or error, within the power of the trial court to correct, then his only remedy is to pursue his appeal from it. Whatever reasons were made to appear to the court, or in fact existed, for the appointment of the referee, would seem to be of at least equal weight upon a motion to -vacate, correct or set aside the judgment,'and if, as it now stands, it does not represent the actual decision upon all the issues, it .should be set aside or vacated. The court has large powers over its own judgments, and, we think, that fairness to all concerned demands that this case should be remitted to the special term for the exercise of its discretion in that regard as the facts appearing may require.

The order appealed from should be affirmed without costs to either party, but with leave to the plaintiff „to move at special term to vacate or set aside the judgment of March, 1890, or to renew his motion for a new trial, and the motion to dismiss the appeal pending in this court from the subsequent judgment should be granted, without costs.

All concur.

Ordered accordingly.


text:
    Isabella M. Baird, as Executrix, etc., App’lt, v. William Baird, Impleaded, etc., Resp’t.1 Isabella M. Baird, as Executrix, etc., App’lt, v. James C. Baird, Impleaded, etc., Resp’t.

      (Court of Appeals,

      Filed April 16, 1895).

    1. Evidence—Pabol—Considebation.
    An instrument under seal, in the form of a mortgage upon real estate,, which upon its face expresses a consideration and purports to have been given as security for a debt may, nevertheless, as between the parties, be shown to have been purely voluntary or without any consideration, and. so invalid.

      2. Same.
    The rule which excludes evidence of parol negotiations or conditions,, when offered to contradict or substantially vary the legal import of a wril- . ten agreement, does not prevent a party to the agreement, in an action between them, from showing, by way of defense, the existence of> a contemporaneous oral agreement, made at the time the writing was executed and delivered, which renders the use of the written instrument, for any - purpose contrary to or inconsistent with the oral stipulation, dishonest or-fraudulent.
    3. Same—Admissions.
    The acts and declarations of a mortgagee with respect to the consideration, conditions, and purpose under which the instrument is made and delivered, is competent as against his personal representatives.
    Appeal from judgment of the general term of the supreme court in the fifth judicial department, entered upon orders, which affirmed judgments in favor of defendants entered upon decisions-of the special county judge of Monroe county on trial at special term, dismissing the complaint in each action.

      W. A. Sutherland, for app’lt;

      George A. Benton, for resp’t.

       Aff’g 63 St. Rep. 748.

   O’Brien, J.

Prior to the year 1873, John Baird, the plaintiff’s, husband and testator, was the owner of the farm which is covered by the two mortgages sought to be foreclosed in these actions. In that year, his two sons, William and James, defendants, went into possession of it, and the father directed the assessors to transfer the assessment on the farm to his sons. They have remained in possession ever since. In October, 1874, the father deeded the-farm to the sons, who took title under these deeds as tenants in common. It appeared that the father had two other farms, all of which had been paid for and improved with the aid of the labor and services of his sons, who had worked for him after their majority. On a settlement between the father and the two sons, it was agreed that he was indebted to them in the sum of $5,000,. and that was the consideration for the conveyance. A deed was-given to each son conveying an individual half of the farm in consideration of $2,500. The evidence tended to show, and the-trial court has found, that the intention was to vest the title in the sons in fee; but it appears that the father had some fears that his sons would not be able to take care of the property thus conveyed and that it might be. lost in speculation or otherwise. Im order to prevent such a result, as he said, he required the sons to give hack to him mortgages for §1,500 each on the farm. No-bond was given, and no actual debt was intended to be secured, and they were not recorded by the father in his lifetime. With respect to the purpose and consideration of these mortgages the testimony tended to show, and the trial court found, that they were-not intended to secure any debt or to be or become a valid subsist ing security, or to be recorded or enforced, and were, in fact, without any consideration whatever. In the year 1875 the wife of John Baird, and mother of the defendants died, and, the year following, he married the plaintiff. He died in 1883, leaving a will, in which the plaintiff was named as executrix. In that capacity she brought actions against each of the sons to foreclose the. mortgages given by them respectively. The complaint was dismissed in each case and the judgments were affirmed at general term. There are two appeals and two records, but both judgments rest on precisely the same facts, and the questions involved in both appeals are identical. Both cases may, therefore, be conveniently .considered and disposed of as one.

The plaintiff’s right to enforce the mortgage is the same and no other than the mortgagee, her husband and testator, had in his-lifetime. She stands in the place of her husband and cannot enforce the instrument unless he could, and every defense that the defendants could urge against the mortgage during the life of the father, they may interpose now against his personal representative. The instruments purport to have been given to secure the payment of money, but it was shown at the trial affirmatively, and found by the trial court, that no debt in fact existed in favor of' the father against either of the sons; that there was no intention to give the mortgage on the one hand, or to hold it on the other, as security for any debt. That in fact there was no legal or equitable consideration moving between the parties and no intention on either side to treat the instruments as binding obligations or as valid subsisting securities. • The evidence upon which these findings were made, if competent, was sufficient and the fact is not open to question or review here.

The findings are based upon the business relations which the parties occupied to each other before the father gave up the possession of the farm to the sons.and then conveyed it to them, taking back the mortgages in question, and upon his subsequent conduct ■ and declarations as to the character of the instruments and the purpose of their execution and delivery. The general principle that an instrument under seal, in the form of a mortgage upon real estate, which upon its face expresses a consideration and purports to have been given as security for a debt may, nevertheless, as between the parties, be shown to have been purely voluntary or ynthout consideration, and so invalid, is not denied. Davis v. Bechstein, 69 N. Y. 440; Hill v. Hoole, 116 id. 229; 26 St. Rep. 657; Briggs v. Langford, 107 N. Y. 680; 12 St. Rep. 461; Thomas on Mort. § 847; Jones on Mort. § 1297.

The point upon which the learned counsel for the plaintiff relies-is that evidence was"not admissible at the trial to wholly contradict and defeat the instruments by showing, contrary to what appeared on their face, that they were intended to have no operation whatever. It is sought to distinguish this case from that of a deed, absolute upon its face, which may be shown to be in fact a mortgage, and from the numerous other cases in which equity permits a party to show that an instrument, appearing upon its face to be of one character, is or ought to be in truth of quite .another character. It is said that the principle upon which these ■cases rest gives no sanction to what was held by the court below in this case, that a party may impeach his deed by showing, not •only that it was without consideration, but that it was intended to have no validity or becoming of any binding force whatever.

The desire on the part of the father to retain some sort of guardianship over the title to the farm which he had conveyed to the defendants" was, perhaps, natural enough under the circumstances, and it is frequently shown in such transactions. That the -rnort.gages were not intended to be held by. him for any other purpose is supported by the circumstances that no bond was given ; that they were not recorded, and no claim was made by the mortgagee -during his life, a period of about nine years that they were in his hands for any other purpose or for the payment of either principal. •or interest though past due. All the circumstances, when considered with the proof of the statements and declarations of the father, were sufficient to warrant the findings of the trial court ‘with respect to the real purpose with which the instruments were made and their true consideration. Holmes v. Roper, 141 N. Y. 67; 56 St. Rep. 596; Lyon v. Richer, 141 N. Y. 225; 56 St. Rep. 804.

The presumption of some consideration that arose from the presence of a seal was overthrown, and we must assume that the instruments were without consideration of any kind. Gray v. Barton, 55 N. Y. 68; Best v. Thiel, 79 id. 15; Torry v. Black, 58 id. 185; Home Ins. Co. v. Watson, 59 id. 395; Dubois v. Hermance, 57 id. 673.

There is no reason that we can perceive for giving to these instruments any greater force or effect than was contemplated by the parties when they were executed and delivered. ■ There is no estoppel or any right which attached in favor of third parties, and we are not aware of any principle which would now require a court of equity to treat these instruments as valid subsisting obli-. gations unless they were intended as such when made, and this is negatived by the findings.

Nor do we perceive any good reason why the real purpose and true consideration and object of the mortgages should not be made to appear when the aid of a court of equity is invoked for their -enforcement. The authority relied upon by the learned counsel for the plaintiff in support of his contention is a remark of Judge Rapallo in the case of Hutchins v. Hutchins, 98 N. Y. 56, in which it was said : “It has never been held that a deed can be so far contradicted by parol as to show that it was not intended to operate at all, or that it was the intention of the agreement of the parties that the grantee should acquire no right whatever under it, ■or that he should reconvey to the grantor on his request without any consideration.”

That remark must be understood with reference to the facts of the case then under consideration, which was the case of a deed ..absolute in form but intended as a mortgage. The defendant’s 'answer was, however, so drawn as to leave room for the construction that he intended to urge that the conveyance was intended to be wholly inoperative, or in trust, or to secure a debt which the ■parties had agreed should never be paid, and it was with reference to this feature of the case that the expression was used. It was ■applicable to the case then under review, but cannot be regarded as authority for the proposition that the defendants in this case are precluded from showing that the mortgages were without any ■consideration in fact, or that they were not intended by any of the parties to have .the effect of incumbering or defeating the title which the father had just conveyed to his sons. The rule which excludes evidence of parol negotiations or conditions, when offered to contradict or substantially vary the legal import of a written -agreement, does not prevent a party to the agreement, in an action between the parties, from showing, by way of defense, the existence of a contemporaneous oral agreement, made at the time the writing was executed and delivered, which would’ render the use of the written instrument, for any purpose contrary to or inconsistent with the oral stipulation, dishonest or fraudulent. Juilliard v. Chaffee, 92 N. Y. 529. The consideration of a written instrument is always open to inquiry, and a party may show that the ■design and object of the agreement was different from what the language, if alone considered, would indicate. Id. Parol evidence may also be given to show that a writing, purporting to be a contract or obligation, was not in fact intended or delivered as such by the parties. Grierson v. Mason, 60 N. Y. 394. So, a conveyance absolute in form- may be shown, as against the heir at law of the grantee, to have been made in trust for the benefit of a partnership firm, of which the grantee was a member, and so held by him in trust for. the firm. Bank v. Grote, 110 N. Y. 12. Ofcourse there may be cases where the rights of innocent third parties intervene to modify or change the rules, as in the case of-negotiable instruments, or where there exists some element of estoppel, but as between the parties to the instrument there is no reason why the truth, with respect to the real object and consideration of the instrument, may not be made to appear. The plaintiff was not entitled to maintain the actions for the foreclosure of the mortgages unless it was fonnd that there was some debt due to her for the payment of which they were the security. The findings are that no debt ever existed, and this is conclusive against the plaintiff’s right of action. In an action to enforce a mortgage -by sale of the land the amount,-if anything, of the lien is an issue which the parties certainly have the right to contest. It is the debt which gives the mortgage vitality as a charge upon the land, and generally where there is no debt or obligation there is no subsisting mortgage. The instruments contain a consideration clause and a seal, and much of what has been said by courts. and writers to the effect that a party cannot be permitted to defeat his own deed by parol proof is based upon the importance which was attachad to the presence of these conditions in an instrument by the common law. The_ conception that some consideration was necessaay to support every-promise and covenant wa£ borrowed from the civil law, but the consideration was formerly deemed to be conclusively established by the presence of the consideration clause or the seal.. It was originally supposed that the recitals and clauses of a contract expressing a consideration could not be varied by parol proof to the contrary, but that rule was gradually abandoned and now that clause is open to parol proof McCrea v. Purmot, 16 Wend. 460; Hebbard v. Haughian, 70 N. Y. 54; Ham v. Van Orden, 84 id 269. So, also, the conclusive presumption of a consideration which formerly arose from the presence of a seal was modified by statute, and it is now open to the maker of such an instrument to allege and prove the absence of any consideration in fact as a defense. 3 R. S. (5th ed.) 691, §§ 77, 78, Code,, § -840.

0. There are, it is true, expressions to be found in some cases to-the effect that while the question of consideration is open to be-varied by p arol proof, yet the party cannot be permitted to claim that a deed or other instrument with a consideration clause or a, seal, or both, is wholly without consideration, and thus entirely defeat it. If this idea is anything more than a somewhat shadowy and fanciful remnant of the ancient law, it is not easy to define its precise scope or practical application when applied to an executory instrument like a mortgage. To say that in a case like this-it is open to the defendant to reduce by parol proof the sum expressed as the consideration to one dollar or. any other nominal sum, but that he cannot go any farther, would be to confess that the distinction, if it exists, is altogether without substance. The: instrument would be defeated in either case. It is quite certain that by recent adjudications deeds and other instruments have .been defeated, in a great variety of cases, by parol proof of want of consideration, or that they were delivered upon conditions which would render their use for any other object a fraud upon the maker, or that the purpose for which delivery was made was different from that indicated upon their face. It will be sufficient to refer to some of the cases without further comment Reynolds v. Robinson, 110 N. Y. 654; 18 St. Rep. 235; Blewitt v. Boorum, 142 N. Y. 357; 59 St. Rep. 27 ; Andrews v. Brewster, 124 N. Y. 433 ; 36 St. Rep. 412. So, also, actions -to foreclose mortgages have been defeated upon allegations and proof differing in no substantial respect from' that appearing in this case. Briggs v Langford, 107 N. Y. 680; 12 St. Rep. 461; Hannan v. Hannan, 123 Mass. 441; Wearse v. Pierce, 24 Pick. 141; Hill v. Hoole, 116 N. Y. 299; 26 St. Rep. 657; Davis v. Bechstein, 69 N. Y. 440; Parkhurst v. Higgins, 38 Hun, 113. There may be cases, no doubt, where the party will be held estopped by his deed from claiming that it is void for want of consideration, especially where by its terms it appears to be an absolute conveyance oí land. Matter of Mitchell, 61 Hun, 372; 41 St. Rep. 131. A voluntary conveyance, intended to take effect as sucli, and not executory, is generally good between the parties without actual consideration, but that principle has no application to this case. It is not quite correct to say that the defendant was permitted to show by parol that these instruments were never to have any operation or effect. They were in fact executed and delivered for a purpose, though .not to secure the payment of money, and they may have accomplished the very object contemplated. That was to protect the defendants against their own improvidence in contracting debts upon the faith of their title to the farm. Whether that purpose was lawful or practicable .or possible or the contrary is quite foreign to the inquiry. It is enough to know that such was the motive and consideration in the minds of all the parties which induced the execution and delivery and no other. Having procured them in that way, it would be unconscionable now for the mortgagee or his personal representative to use or enforce them as obligations for the payment of money.

The defendants had been in possession of the farm under the final contract between them and their father to convey it to them, in consideration of the amount found due upon the settlement, for more than a year before the deeds or mortgages were given. During that time they were in a position to enforce specific performance, and hence the execution and delivery of the mortgages were purely voluntary acts on their part, and constituted, so far as appears, no element of the consideration for the deeds.

The acts and declarations of the mortgagee with respect to the consideration, conditions and purpose under which the instruments were made and delivered, being admissions against his interests, would have been competent proof against him in a suit to enforce the mortgages in his lifetime, and hence are now competent against the plaintiff who represents him. Holmes v. Roper, 141 N. Y 67; 56 St. Rep. 596; Lyon v. Ricker, 141 N. Y. 225; 56 St. Rep. 804; Hobart v. Hobart, 62 N. Y. 80.

We think there was no error in the result and that the judgments should be affirmed, with costs.

Baetlett, J. concurs; Peckham and Geay, XX, concur in the result; Andrews, Oh. X, dissents; Haight, X, not sitting.

Judgments affirmed.


author: Bartlett, J.

text:
    Susan Geoghegan, as Administratrix, etc., App’lt, v. Atlas Steamship Company, Resp’t.

      (Courtf Appeals,

      Filed April 30, 1895.)

    Kegligence—Ship owkee.
    It is the duty of the master, or the mate or some other officer of a ship, to see that the iron door of the forward gangway or port, on the starboard side of the ship, is properly closed and secured at night. A failure to perform this duty is negligence for which the owner of the ship is not liable.
    Appeal from judgment of the general term of the court of -common pleas in and for the city and county of Hew York, entered upon an order, which affirmed a judgment in favor of defendant entered upon a decision of the court on trial at circuit; also appeal from an order of said general term, made June 2,1890, which affirmed an - order of special term denying a motion by plaintiff for the issuing of a commission.

      Roger M. Sherman, for app’lt;

      Everett P. Wheeler, for resp’t.
   Bartlett, J.

This is an appeal from a judgment of the court, of common pleas for the city and county of New York affirming-a judgment dismissing the complaint at the close of the trial, and. from an interlocutory order denying a motion for a commission.

The plaintiff seeks to recover damages for defendant’s negligence in causing the death of her husband who fell from defendant’s ship and was drowned.

The complaint avers that defendant is a British corporation and its steamship ‘ Albano’ sailed under a British register; that the-intestate was assistant steward of the ‘Albano,’ and on the 11th day of September, 1884, while the steamship was on the high seas-off the coast of the United States of Colombia, in the bay of Savanilla, or within the territory of that government, he met his death-as stated.

We were asked to consider several questions on this-appe'al.

It was insisted that the jury should have determined whether the ship was on the high seas at the time of this accident or within-the territorial limits of the United States of Colombia. If the-ship was on the high seas, then did the law of the flag place the-right of the parties under 'Lord Campbell’s Act (Ch. 93, Acts of Parliament, 9th and 10th of Victoria) which created a cause of action unknown to the common law against a person who, by his wrongful act, neglect or default, caused the death of another ?

If the ship was within the territorial limits of the United States-of Colombia, was the plaintiff entitled to the commission moved for to prove the law in force in that jurisdiction at the time of the accident?

The view we take of this case renders it unnecessary to pass, upon these questions. We do not think there was evidence sufficient to authorize the jury in finding the defendant guilty of negligence and the-deceased free from contributory negligence.

On the evening of the accident, which occurred about eight o’clock and after dark, the iron doors of the forward gangway or port, on the starboard side of the ship, were left open, and the opening, instead of being-guarded by the ordinary bulwark rail, was secured to a certain extent by a rope made fast on either side of the gangway, not stretched taut, but more or less slack according to conflicting evidence.

It was a dark night, the ship rolled at her anchor and the waves-were breaking against her side.

It was proved that it was. part of the duty of the deceased to> wash the silver after dinner and to pass ont on deck and throw overboard the water used for that purpose.

No one saw the deceased fall overboard, nor did any one see him go on deck. The second engineer of the ship testified he was. on deck and heard a gurgling cry that led him to shout there was a man overboard; a rope was thrown over; a hand was seen lifted out of the water; boats were lowered and an unsuccessful search made; the roll was called and it was found intestate was missing.

There is no direct proof as to how the deceased met his death; there is nothing to show that he fell through the open port, or that his exit from the ship was accidental.

It is true a theory may be adopted which would lead to the moral conviction that his death was accidental while in the discharge of his duty and in the exercise of reasonable care, but all this falls very far short of sustaining the burden of proof under which the plaintiff rested.

As to the defendant’s alleged negligence the proofs are equally defective.

If the deceased came to his death by reason of defendant’s-negligence, it rests upon the alleged absence of the bulwark rail over the gangway opening.

Without going into details, we think there was a failure to show that the bulwark rail was not provided by the defendant, or, if not furnished, that it was essential in addition to the iron doors supplied to close the gangway at all times when cargo was not being received or discharged.

If the deceased came to his death by reason of the iron doors being left open on the night of the accident, then it was the negligence of a co-servant which led to the result.

It was the duty of the master, or the mate, or some officer of the ship to see that these gangway doors were properly closed and secured at night. The, failure to perform this duty is negligence for which the owner of the ship is not liable. Benson v. Goodwin 147 Mass. 238; Rogers v. Ludlow Mfg. Co., 144 id. 198; The City of Alexandria, 17 Fed. Rep. 390.

The evidence in the case at bar tended to show that if any one was negligent in leaving the iron doors open it was the mate, and the appellant insists that plaintiff proved the inherent incapacity of the mate, and that it was the defendant’s duty to show affirmatively that it had valid reasons to suppose he was competent.

We do not think the evidence would sustain a finding by the jury that the mate was incompetent or that the defendant waschargable with knowledge,of the fact.

The judgment and order should be affirmed, with costs.

All concur.

Judgment affirmed.


author: Finch, J. Finch, J.

text:
    Stephen Smith et al., as Executors, etc., App’lts v. Town of Greenwich, Resp’t.

    ( Court of Appeals,

      Filed April 9, 1895.)

    Pleading—Demurrer.
    Where a complaint is so drawn as to admit of a construction that the action is to recover interest due and payable upon the sealed bonds of a town issued in aid of a railroad construction, and, besides, all the elements of an action on an implied contract, are fully and carefully supplied and they enter into and form part of what is pleaded as one single and complete cause of action, and the answer interposes the defense of the six-year and the ten-year statute of limitations, a demurrer to these defenses is properly overruled. The defendant has a right to plead all the defenses it has in either aspect of the complaint.
    Appeal from judgment of the genenal term of the supreme «ourt in the fourth j udieial department, entered upon an order, "which affirmed a judgment in favor of defendant entered upon a ■decision of the court on trial at special term overruling plaintiff’s demurrer to the answer and dismissing the complaint.

      Brainard Tolles, for app’lt;

      Charles C. Van Kirk, for resp’t.

       Afl’g 61 St. Eep. 786.

   Finch, J.

The plaintiffs servéd an ambiguous complaint. That is the way in which they encountered defeat and the cause of their principal trouble. Their argument here goes upon a denial of that ambiguity, after having admitted it upon the trial, and having refused to remove it when it was explicity pointed out. The 'Complaint was so drawn as to admit of a construction that the action was to recover interest due and payable upon the sealed bonds -of the town of Greenwich issued in aid of a railroad construction. .But, regarded as specialties, the instruments were exposed to certain possible objections. The complaint shows that six thousand and five hundred dollars of the bonds were issued before May 12th, 1871, and therefore, although the commissioners were duly and lawfully appointed, were authorized to borrow the money and to bind the town to its re-payment they were nevertheless, specific.ally limited to the issue of bonds payable in thirty years, and-tbey made the mistake of executing them maturing in twenty years. 'The balance of thirty-three thousand and five hundred dollars were issued after May 12th, 1871, and when, by an amended act, it was lawful to make the securities payable within any period' less than thirty years. But that amendment of the law' which made the twenty years’ credit permissible imposed another condition which was that the commissioners should not issue the bonds so ■as to make more than ten per cent, of-the whole loan fall due in. .any one year. The question of the liability of the town had three times been before this court anterior to the commencement of this action and the preparation of the complaint therein. Potter v. Town of Greenwich, 92 N. Y. 662; Brownell v. Town of Greenwich, 114 id. 518; 24 St. Rep. 6; Hoag v. Town of Greenwich, 133 N. Y. 152; 44 St. Rep. 519. In the last case it was conceded for the purposes of the argument, but without either discussing or deciding the point, that the twenty-year bonds, issued when the law required a credit of thirty years, were for that reason void as -securities; but, it was held that, disregarding them, the town was -still liable upon an implied contract to pay principal and. interest •of the .money loaned. That was the. legal situation when the present complaint was drawn. The pleader observed that if for any reason the power to issue bonds concededly existing, was imperfectly or unlawfully executed, there still would remain a right of action founded upon the authorized and completed loan, and resting upon an implied contract-of re-payment. Observing that fact h.e drew his complaint with a double aspect. He sets out the bonds and the precedent facts necessary to make them authorized; but beyond that he carefully pleads the loan of the money of the town in good faith, its receipt and use of the money for the permitted purposes and the failure to pay after demand. All the elements of an action on an implied contract, irrespective of the sealed bonds, were fully and carefully supplied, and they entered into and formed part of what was pleaded as one single and complete cause of action. When the defendant answered, it had to face this ambiguity, and come prepared for either attitude which might be assumed. Regarding the complaint as a suit on the bonds, it alleged defenses aimed at a destruction of their validity. Regarded as an action on an implied contract to recover interest payable on the money loaned, the defense of the six-year and the ten-year statute of limitations was interposed. To those defenses the plaintiffs demurred. The defendant’s brief asserts, and the facts were denied or questioned on the argument,, that at the first trial the defendant’s attorney, in o£en court, offered to stipulate that he would strike out the defenses demurred to, if plaintiffs’ attorney would stipulate to recover only on the bonds as valid contracts under seal, or on a cause of action to which the six or ten years’ statutes would not be a defense, and the court said openly, that an order would be granted sustaining the demurrer if such stipulation should be made. The ambiguity of the complaint, its double aspect, thus came very plainly to the surface. The plaintiffs were charged with it, were asked to remove it, were offered immunity from the pleas of the statue if the ambiguity should be ended, but they steadily and persistently refused. The demurrers were overruled, and thereupon judgment was rendered for the defendant dismissing the complaint. Why that was done the record before us does not show, and it is not material to inquire, since no question is raised here, except over the sufficiency of the pleas and the overruling of the demurrers.

It is at this point it seems to me that the learned counsel for the plaintiffs makes his mistake. He says that as to the sixty-seven bonds issued after May 12th, 1871, there has never been in this court any adjudication of their invalidity and we have always treated them as valid. That is entirely true and the general term is mistaken in saying that we have ever held them to be void. But what then ? The reply of the learned counsel is that he should have recovered upon them as specialties. I think so too, so far as the facts have come to our knowledge, though we do not so decide; but whose fault is it that there was no such recovery, and how is any such question before us ? When the demurrers were overruled the trial must have proceeded in some manner upon the issues joined. The plaintiffs were at liberty to prove their bonds, the defendant at liberty to establish their invalidity, quite possibly even by some new proof of which we had never heard and upon which we had never passed. What took place we do not know. The record before us discloses nothing but a judgment for the defendant on the merits. It may have been very wrong, bat how can we inquire into it ? By what process can we say that the court erred in rendering it when we know nothing of what was proved or admitted on the trial ? The only alleged error brought to our notice is the ruling on the demurrer. Beyond that we are necessarily ignorant of what occurred. Something may have been proved or admitted in open court which justified the judgment rendered and showed the bonds to be invalid outside of any previous ruling of burs. The decision on the demurrer is before us. The niaterial on which to consider it is presented, but the judgment for the defendant on the merits is brought here bare and lonesome, and without anything showing it to have been erroneous. It is not necessarily wrong: it may have been entirely right, and no question about it is here for our review. The inevitable inference from what we do know is that plaintiffs regarded the pleas of the statute of limitations as fatal, if those pleas stood and perilled the entire result on the decision of the demurrers. Why they did so we are not required to explain or even to understand.

The learned counsel says also that this court did not decide in the Hoag case that the bonds issued before May 12th, 1871, were void. That also is true. We assumed their invalidity for the sake of the argument because, conceding so much we thought, there could still be a recovery and put the decision upon the ground of an implied contract. We did so for the reason that, we had grave doubts of the validity of those bonds considered as securities, and have such doubts still. The question differs from that decided in City of Quincy v. Warfield, 25 III. 317. There the bonds bore twelve per cent, interest when the statute only permitted eight, and the court held the bonds good pro tanto. An illegal excess was to be cut off. But here something not. in the bonds was to be added, viz., an additional credit of ten years. . But, again, that question is not before us, and we are not required to consider or discuss it. The same thing also is true of the further contentions that a suit on the coupons is a suit on the bonds because they partake of the nature of the-specialty, and that the bonds themselves in spite of the error they contained were good for all purposes except the term of credit. For there are In the record no findings either of fact or law and no request for either, no objections of any kind and not a single exception; in other words, nothing upon which error could be predicated. Nevertheless the question of the demurrer and the validity of the pleas may be regarded as submitted to us by the common consent of both of the litigating parties.

There is' thus only the one question presented, whether the court should have stricken out the pleas of the statute of limitations. They were a good ■and complete and perfect defense to the-cause of action pleaded which rested on an implied contract. If plaintiffs, nevertheless, could under the same pleadings and in spite of the pleas have recovered on the bonds as specialties they should a least have tried to do so, should have presented their proofs and arguments, asked rulings and taken exceptions, instead of apparently consenting to a final judgment against themselves on the merits simply because their demurrer was overruled. The ambiguity of the complaint was not the defendant’s fault. ' It had the right to plead all the defenses it had in either aspect of that complaint, and when it offered to withdraw those pleas if the plaintiffs would stand solely upon their bonds the latter have only themselves to blame for the refusal.

The record discloses no error and the judgment should be affirmed, with costs.

All concur.

Judgment affirmed.

Motion for a reargument.

Finch, J.

A motion for a reargument is made in this case accompanied with elaborate explanations entirely immaterial to the legal question decided, and of consequence only to a wrong view of the opinion rendered. The point involved and decided was wholly one of pleading. We held, in affirmance of the courts below, that the cause of action pleaded as one and single was upon an implied contract to pay the interest upon a loan to the town; that to such cause of action the statute of limitation was a complete and perfect defense; that the demurrer was, therefore, properly overruled and judgment for the defendant inevitable unless barred by some other possible proceedings of which the record gave no knowledge. I urged as reasons for that construction the form and character of the complaint itself, pointing out that it followed closely the essential facts needed to sustain an action on an implied contract as disclosed in the Hoag case and unessential to an action on the bonds themselves; that two distinct classes or groups of bonds creating distinct grounds of action were enveloped in the complaint, and which were those issued illegally in form before the amendment of the statute, and those issued, without defect thereafter; that an action on an implied contract would justify a single action on both classes while an action on the bonds would not; and that on the hearing an offer was made by the defendant, concurred in by the court, that if plaintiff would stipulate to stand on his bonds alone.or upon a cause of action to which the pleaded statute of limitation was no defense the demurrer should be sustained and the trial proceed, but the plaintiff refused. I have not the least doubt on that state of the case that the judgment rendered was correct. To have denied the defendant the protection of his plea would have been almost inexcusable. That is all there is of the question presented and of the decision made, and the sole pertinent commentary upon it contained in the moving papers, outside of a persistent claim that the complaint was not ambiguous, although two different constructions have been clashing along the whole line of trial and appeal, appears to be that the assertion of defendant’s- brief as to what occurred in the offer of a stipulation was denied on the argument. I took more than usual pains to be sure of the fact asserted, but it is not necessary or seemly to dispute about that, for on .this motion the affidavit oi; the counsel who tried the case for the plaintiff is produced which shows that the offer was made and that the court did approve it. It is added that the offer required a withdrawal from the complaint of the allegations that the money was actually loaned to the town and that the commissioners intended to act within their powers, and for that reason was refused. The very reason assumes a purpose in some manner and in some way to rely upon' something else or other than the coupons as partaking of the nature of valid bonds, and neither the court nor the counsel were bound to speculate upon the chances of an undisclosed purpose.

■Beyond what is pertimeut to the question decided come suggestions entirely outside of it, founded upon so much of the opinion as intimated a possibility, consistent with the record, that the hearing had proceeded beyond the mere issue of law. • The judgment in terms recited that it was ‘ upon the merits.’ rThe plaintiff might have withdrawn his demurrer upon the usual terms, and I think should have done so, or divided his complaint into its two possible causes or action with the assent of the'defendant or of the court, in either of which cases the merits would have been reached. In view of that possibility I said: first, that there were no findings or exceptions appropriate to its review, and, second, that the only alleged error brought to our notice was the ruling on the demurrer, and that as the case stood the inevitable inference was that the plaintiff perilled his whole action on the demurrer. In other words, that if the complaint had been by consent or otherwise divided into its two causes of action the plea fatal to one was not necessarily so as to the other, and the issues joined could have been tried, the plaintiff seeking to prove his bonds and the defendant to invalidate them, but that, while that possibility existed, the inevitable inference was that the judgment rested upon the decision of the demurrer. That inference is conceded to be correct, and all the statements of what we erroneously believed as to other proceedings or other possible reasons for the judgment are without the least foundation. Our suggestion of what the plaintiff might have done and I think should have done is turned into a belief that it was done, and into a ground of the decision in the face of the explicit statement that we knew nothing about it, and that the inevitable inference from the record was that the judgment stood wholly upon the demurrer. So treating it, and it is conceded that we should have done so, we held that the demurrer was properly overruled and the judgment correct. Occasionally where a party fails for reasons connected with the practice adopted we feel a sympathy which leads to an effort for his relief, but we need not indulge any where, without surprise or inadvertence, but with a view of gaining an advantage, there has been an apparent effort to rely on the bonds to cut off the statute' and then on an implied contract to remedy defects in the bonds. The coupons sued on matured in 1873, and had been due for almost twenty years when this action was brought. The allegation of the complaint is that they were found among the papers of Culver after his death, and that he had possession as owner, and that is all that is asserted as to his title. The bonds themselves have been paid with interest while the coupons in suit have been left unclaimed. We have no such impression of the justice of the demand as to make us grant some favor which is not even asked.

The motion should be denied, with ten dollars costs and disbursements.

All concur. Motion denied.


author: Finch, J.

text:
    Susan B. Anthony et al, Resp’ts, v. The American Glucose Company, App’lt.

      (Court of Appeals,

      Filed June 14, 1895.)

    Corporations—Transfer to new corporation.
    Where the transfer of property and business of several original companies to a new corporation to be organized is upon an agreement between the corporators of all of them that payment for the transfer shall be made by apportioning to the original stockholders the whole of the stock of the new company not reserved for the use of the treasury, the action by certain stockholders in one of the original companies against the new corporation for a delivery of its stock to tnem is maintainable against the new corporation, and such stockholders are not to be turned over for relief to their own original company after by agreement all its functions had ceased, though it might not be wholly dead. The new corporation owes a contract duty directly to the individual corporators and not to their corporate entities.
    Appeal from an order of the general term of the supreme court in the fifth judicial department, which reversed a judgment entered upon the report of a referee dismissing the complaint upon the merits, and which granted a new trial.
    This action was brought to compel the defendant to issue $12,-500 of its capital stock to the plaintiffs, Susan B. Anthony and Mary S. Anthony, and to account for and pay over to the plaintiffs the dividends which had been declared thereon since the year 1883, together with other earnings properly distributable upon the plaintiffs’ stock.
    The referee decided that the remedy of the plaintiffs was not to be sought in an action against the defendant, but in action against the Leavenworth Sugar Company to compel it to turn over to the plaintiffs their proportionate share of the capital stock of the defendant claimed to have been received by the Leavenworth Sugar Company under the agreement hereafter mentioned, together with other earnings properly distributable upon the plaintiffs’ stock, though not declared as dividends.
    On and prior to the 21st of February, 1883, the plaintiffs were the holders of forty shares of the capital stock of the Leavenworth Sugar Company; and, in the year 1889, by assignment from Daniel B. Anthony, they became the owners and holders of fifty other shares of capital stock, making ninety shares in all which they now possess.
    There existed on the 21st of February, 1883, a corporation organized under the laws of New Jersey, known as the Firmenich Sugar Refining Company, having its principal office in the city of Buffalo, N. Y., and the Buffalo Grape Sugar Company, and the American Grape Sugar Company, each of which was organized under the laws of the state of New York, having, respectively, their principal business in the city of Buffalo; the Peoria Sugar-Refinery, a corporation organized under the laws of Illinois, having its principal office in Peoria, Illinois, and the Leavenworth Sugar Company, organized under the laws of Kansas, having its principal office in Leavenworth, Kansas. Each of these corporations was the owner of a plant for the manufacture of glucose and grape sugar, and each of them was engaged in the business of making and selling those articles. On the 21st day of February, 1883, these five corporations entered into an agreement in writing, with the assent of all the stockholders of each of them, including the plaintiffs and their assignor, Daniel R. Anthony, for the formation of a new corporation to be organized under the laws of the state of New Jersey, to be - called the American Glucose Company, with a capital stock of $15,000,000, divided into 150,-000 shares of the par value of $100 each. That company is the defendant.
    By this agreement all the real estate, buildings, engines, boilers, tools, machinery and fixtures, including everything properly covered by the description of “ plant; ” and all horses, mules, carts, wagons, harness, sleighs and 'the appurtenances thereof, together with all letters patent and licenses, rights, trade marks and • contracts of every nature belonging to each of the parties, was to be vested in the new corporation by proper instruments, and by perfect title, by the tenth day of March of that year, or as soon thereafter as possible. The new corporation, the American Glucose Company, the defendant, was, by the terms of the agreement, vested with a perpetual license to use any processes or machiney in use in any of the factories of the five above-mentioned corporations, whether owned by such corporations or by any stockholder thereof.
    Of the capital stock of the defendant, 125,000 shares, being at par $12,500,000, were allotted to be applied towards the acquisition of the property of the five corporations, and were to be divided as follows: 25,000 shares to the Firmenich Sugar Refining Company, and 100,000 shares to the remaining four corporations ; the residue of the stock, namely, 25,000 shares, was to be retained in the treasury of the defendant.
    The defendant became the purchaser in pursuance of this agreement of all of these plants, properties, rights and franchises, together with the materials and supplies, exclusive of the manufactured stock and stock in process of manufacture, of each of these five corporations at the cuirent market value thereof. It had also the right to purchase the material in process of manufacture in each of these factories, by paying therefor at the rate of two and one-half cents per pound, reduced to finished merchantable goods, with a gravity of forty degrees Beaume, taken at a temperature of one hundred degrees Fahrenheit; together with all manufactured merchantable goods, inclusive of starch in the starch department of the Buffalo Grape Sugar Company, at a given price. A clause was inserted providing for the contingency of opposition to this scheme by any stockholder of any of the five old companies to this arrangement; but no opposition seems ever to have been made by any of the stockholders. Provision was made for a working capital of the defendant in the sum of at least $1,000,000, for which bonds were to be issued bearing interest at the rate of seven per cent per annum, payable semi-annually, in the sum of $100 each, or multiples thereof, amounting in all to the sum of $1,250,000. Payment of these bonds was secured by mortgage of the new company upon all and singular the property acquired of the old companies, or to be acquired thereafter.
    The defendant assumed by this agreement all contracts theretofore made in good faith by any of the five corporations, for the sale of glucose, syrup, grape sugar, starch or feed, but did not assume any contracts for the sale of mixed or mixing sugar, or any ■contract involving the testing of any patents or improvements It .also assumed any or all contracts theretofore made in good faith by any of the five corporations or by Cicero J. Hamlin, William Hamlin and Harry Hamlin, or any of them, for the services of any employee, agent or broker, in the factories of either of said •corporations, or iu, their business.
    This agreement, which contained other provisions not necessary do be recited in this connection, was consummated on the 17th ■day of March, 1883, by proper transfers and conveyances executed by these five corporations to the defendant, covering all property real and personal, of the character and description above mentioned; and thereupon the defendant became the absolute -owner thereof.
    It was shown, and the fact was found by the referee, that Cicero J. Hamlin, William Hamlin and Harry Hamlin were the owners of all the capital stock of the American Grape Sugar Company .and of the Buffalo Grape Sugar Company; and of all of the stock ■of the Peoria Sugar Refinery, except a small portion thereof owned by one Edward F. Easton, and of all the capital stock of the Leavenworth Sugar Company, excepting a small portion thereof which was owned by F. D. Locke, and excepting also the ninety shares which were owned by the plaintiffs and their brother, Daniel R. Anthony. The whole of the capital stock of the Leavenworth Sugar Company was $150,000, at par, in shares of $100 each. William Hamlin was at all of theses times, and for years afterwards, the secretary of the American Grape Sugar 'Company, and secretaiy and treasurer of the Buffalo Grape Sugar Company, the secretary and treasurer of the Peoria Sugar Refinery, and the secretaiy and treasurer of the Leavenworth Sugar Company. The Messrs. Hamlin arranged in a'.manner satisfactory to Locke and Easton for the number of shares of the new company which they should receive in place of those then held by them. They failed, however, to make any effective arrangement with tlm plaintiffs or with Daniel R. Anthony in regard. This failure to bring ■about an adj ustment with the Anthonys arose from the fact that the
    Messrs. Hamlin insisted, as a condition of a delivery to them' of their share of the defendant’s stock, that the Anthonys should pay the sum of $11,813.78, being, as was claimed by the Hamlins, an equitable proportion which their stock bore .to the whole of Nthe indebtedness of the Leavenworth Sugar Company, which, as they averred, amounted to $196,896.48,
    There was, accordingly, issued by the defendant, a certificate for the 900 shares of its capiial stock in the name of Daniel R.' Anthony; but it was received by William Hamlin, who refused to surrender it or any part of it to Daniel R. Anthony, who was acting for his sisters as well as for himself, except upon the conditions above mentioned. But the name of Daniel R. Anthony was entered upon the books of .the defendant as one of its stockholders to this amount, and notices of subsequent dividends were* from year to year sent to him as such stockholder.
    ■ Certificates of stock of the defendant were issued to the stockholders of the Firmenich Sugar Refining Company in exchange-for their shares in the last-named corporation.' This was done-upon the certificate or statement made by the Firmenich Sugar Refining Company.
    In the month of October, 1883, after a dividend of two and one-quarter per cent of the capital stock of the defendant had been declared, and notice thereof given to Anthony, payment of Anthony’s share was withheld by the directors of the Messrs. Hamlin, subject to an expected settlement between them and Anthony. After the final failure of such negotiations for a settlement, the Messrs. Hamlin caused the said dividend declared upon the said certificate of stock of the defendant issued in the name of Daniel R. Anthony, to be credited to themselves in three parts, one-third each to Cicero J. Hamlin, William Hamlin and Harry Hamlin.
    Subsequently the capital stock of the defendant was reduced from $15,000,000 to $1,500,000, notice of «which was given to-’ Anthony with a request that he authorize the cancellation of the 900 shares of the stock which stood in his name, and take in place thereof ninety shares of the reduced capital stock; but to-this notice and request Anthony paid no attention. Afterwardsother dividends were declared by the defendant'upon this capital stock, notices of some of which were given to Anthony, and the same have remained unpaid, and have been held in the -defendant’s account known as unpaid dividend account. All other stockholders of the defendant have been paid their dividends.
    The Messrs. Hamlin acquired their 'stock and controlling interest in the Leavenworth Sugar Company on the 5th day of June, 1882, and immediately thereafter, at a meeting of the stockholders of that company, held at Leavenworth, Kansas, they caused themselves to be elected officers'and directors of that company. Immediately after their election as trustees they adjourned their meeting as directors of said company in their office in Buffalo, N. Y., where a meeting was held by Cicero J. Hamlin, William Hamlin, Harry Hamlin and Franklin D. Locke, as directors of said company, on the 10th day of June, 1882, and where all the subsequent meetings of the directors of the said company were held, and where all the meetings of the said fornr Hamlin companies, so called, were held, after the Messrs. Hamlin gained control of them. But no formal meeting of the directors of any of the four Hamlin companies has been held since the making of the agreement by the five corporations to form a new company, and the transfer of the property of said companies to said defendant in pursuance of said agreement of February 21, 1883.
    The referee dismissed the complaint of the plaintiffs upon the ground that they cannot maintain this action because no contract relations of any nature exist between the defendant and any of the stockholders of the five corporations entering into the agreement for the organization of the defendant.

      John G. Milburn, for app’lt;

      John Van Voorhis, for resp’ts.

       Affirming, 49 St. Rep. 857.

   Finch, J.

There are two theories of the facts of this case, one technically true but substantially an error; the other really true but formally open to criticism; and upon our choice between them will be quite certain to depend the ultimate conclusion. One theory interposes between the parties really interested and actually contracting the corporate entities of the five original companies, and behind that legal shelter seeks to protect the company in default to its stockholders and turn them over for relief to their own original company after by agreement all its functions had ceased, although possibly it may not be altogether and hopelessly dead. The defense is not meritorious. It simply attempts to substitute circuity of action for direct responsibility, and requires ns to blind our eyes with the the theoretical abstraction so as to shut out the obvious and undoubted truth. We have of late refused to be always and utterly trammelled by the logic derived from corporate existence where it only serves to distort or hide the truth, and I think we should not hesitate in this case to reject the purely technical defense attempted. For nothing is plainer than that the transfer of the property and business of the five original companies to the new company to be organized was-upon an agreement between the corporators of them all that payment for the transfer should be made by apportioning to the original stockholders the whole of the stock of the new company not reserved for the use of the treasury. That agreement is not denied by anybody, and every word and every act of all the companies, and of each and all of the corporators, have proceeded upon that assumption. The companies, as corporate entities, could not alone and without the consent of their constituent members make a transfer which was intended to end their whole practical business existence, and it was agreed by such companies when they made the written contract among themselves, that the refusal of any one corporator in any one company to give his consent to the transfer should turn the proposed sale into.a mere lease. The authority of the corporations to sell and to make a valid agreement of sale to which the company could become a party, was upon the explict and understood condition that the new stock should be issued in exchange for the old stock to the several corporators, and the necessary consent of the stockholders was given upon that express condition. How fully and perfectly this was understood is obvious from the fact that the offers of the new company to issue its stock to the plaintiffs were always coupled with the condition that the latter should surrender their old stock and cease to be stockholders in the old companies at the moment when they became such in the new. Anthony swears that when he gave his consent to the sale the Hamlins agreed that he should have the one hundred and twenty-five shares that he claimed as his due proportion of the Glucose Company stock, and that he -gave his consent on that basis and upon that condition. None of the Hamlins carry their denial beyond the question of amount. 'They dispute that, and that only. William Hamlin, in his letter ■of April 11, 1888, explicitly admits mailing ninety shares to Anthony as being those agreed upon between the parties. There is nowhere a word said by anybody looking to an issue of shares to the corporation instead of to their stockholders.

Armed with this limited and conditional authority from their ■corporators, the companies took up their first duty, which was to .agree among themselves as to the proportion of stock to be allowed to each as the gross share to which, under the existing parol agreement, their individual members in proper proportions would be entitled! For that purpose the written contract was made. It did settle the gross share of the Firmenich corporation, and the amount of stock to remain unissued, and the amount to go to the corporators of the four Hamlin companies in the lump of one hundred thousand shares, but left unsettled the gross proportion ■of each of the latter, and so necessarily the share of each individual corporater. The reason of this omission is evident. The Hamlins were the only stockholders in two of the companies, and ■almost the sole owners of stock in the other two. The only necessary distribution would be to fix the shares of Locke, Easton and Anthony, which, it was assumed, could be done by agreement, and -.so the gross share of the four Hamlin companies was allotted to them in one amount.' Allotted is the word used in the contract instead of issued or paid. It was consistent with the fundamental .and existing parol agreement among the corporators. It did not mean, in violation of that agreement and in contempt of the specific -authority conferred, that the new stock should be issued to the old ■companies. It could not mean any tiling so absurd. They were powerless to surrender the stock of their shareholders in exchange and to say that the new stock was to be issued to the shells of corporations having no stockholders to whom it could distribute it, unless to the new Glucose Company itself, which alone would possess the surrendered certificates, is to say that the individual ■corporators meant to throw away, and utterly waste their rights. Nothing of the kind was meant, and the word allotted was’ fitly used to fix the gross share of the four companies, and not authorize, in violation of the fundamental agreement, a payment or issue To them as partners or tenants in common or in any manner ■whatever.

When the Glucose Company came into existence it had made no contract and was bound by no obligation. It was free to buy out the five companies on any terms it could secure, but chose to adopt those offered by such companies and their corporators.. It knew accurately what those terms were in all their details. Almost ■every member of the board bad been a party to the arrangement .and participated in framing it, and so, with full knowledge, it' adopted the contract offered, completely and as a whole. It formally accepted the preliminary contract made between the'companies knowing that it vested only on condition of an issue of stock to the corporators, and in buying later the plant at Tippecanoe it formally agreed to give its stock to the person interested. It is thus a mistake to say that the Glucose Company dealt only with the five corporations. It dealt also and necessarily with the individual corporators whose consent it required, aud obtaining it on •condition of payment to them, and with full knowledge of that •condition, became obligated to each stockholder to issue to him his due and proportionate share of Glucose Company stock.

It we admit that the defendant may not have been bound to decide proportions among individuals, the result is not changed. No dispute about them arose until it sprang up between the Hamlins on the one side and Anthony on the other. The latter claimed 1,250 shares on the. original and 125 shares on the reduced capital ;as payable to him; the former insisted that only 900 shares on one basis and ninety on the other, were due Anthony, and it is now fully conceded that the plaintiffs are entitled on a proper distribution to at least ninety shares of the stock of the new company as their due and just portion. That question as against the Glucose Co. is settled. It is true that Anthony claimed more, but that the just proportion is at least ninety shares nobody disputes or has ever disputed. It was clearly error to refuse the plaintiffs that -except upon the theory that the Glucose Company came under no contract obligation to the individual stockholders. I think it did, .not only by reason of the primary Contract of.the stock- • holders whose benefits it secured and took, but also because by its own conduct it has recognized and adopted that contract. It has issued its stock to every individual stockholder in all the five companies, and never to either one of the companies or by their corporate direction, for there has been since the sale no -corporate action of either and its own construction of its own duty should be conclusive.

Let us examine the defense interposed somewhat more closely.

It is said the Glucose Company bought solely of the corporate entities, and as a matter of law was bound only to pay them. That might have been. If the corporations alone could have made the contract, if the individual stockholders had no privity •of contract with the Glucose Company, the contention would have been sound, at least in a court of law. But none of those conditions exist, as 1 have already sought to show, and the Glucose Company did owe a contract duty directly to the corporators, and stands before us claiming to have tendered full performance of that very contract duty.

It is said that the Glucose Company issued its allotted stock to the Leavenworth Company, and that ended its contract obligations. The proof relied upon is a formal certificate, No. llr of 99,400 shares issued to the four-Hamlin companies, as partner or holders in common. It was wholly unauthorized. The-companies, as I have said, had no right to a share of that stock. They never requested its issue, they never accepted it, and never had it at all. William Hamlin, secretary of the new company and of four of the old ones, all powerful and multiform, and multiudinous of office as he was, neverethless was-not the Leavenworth Company, Its board of directors never-met to give a direction about the issue of stock to it, or to-any one in its behalf, to accept a tenancy in common creating, possibly, an unlawful partnership, to receive payment of- what-was not due to it, to surrender shares it did not have, to return a certificate of which it knew nothing, or to decide what stockholders were entitled to new stock, and in what proportions. All this, the power of William Hamlin, secretary, and as such, authorized to keep the minutes of meetings which had ended, assumed to do. He had no such authority, and the Glucose pompany obeyed-him at its peril.

But certificate No. 11 was never a payment or issue of stock, effectively, at all. It was merely a temporary setting aside, or allotment of shares oat of which, in due season, the actual issue by way of payment was to be made to the individual corporators concededly entitled to receive that payment. Wm. Hamlin, secretary, surrended it to Wm. Hamlin, secretary, and then told Wm. Hamlin, secretary, to whom the Hamlins directed it to be issued, which was to the Hamlins mainly, except the ninety shares. I do not mean to complain of or criticise that action. These gentlemen who so controlled their corporation practically owned it, and had an honest right to dictate, but the company must take the consequence of its obedience.

It is said that the four companies and the Hamlins should have been made "parties defendant. I do not see that the corporations have the slightest interest in this controversy. The general term thinks them dissolved and dead. I do not go so far; but if the hollow and empty shells had life enough to stand up before the-court as parties defendant, at least they had no interest in the dispute and are in no manner affected by its results.

Nor were the Hamlins necessary parties. They have received, their full shares of stock. Giving ninety shares to the plaintiffs will not affect the admitted proportions of a single stockholder, all of whom have their shares, and at least ninety are left, and there is treasury stock much beyond any amount claimed.

That defense was suggested on the argument, and pressed as a justification for refusing a delivery to plaintiffs, and was that they ought to pay to the Hamlins about $11,000 as their part of the burden of the debts of the Leavenworth Company. There were such debts, but there is ho finding of their amount, nor who. paid them, nor that they have been paid at all, nor that the Hamlins made such payment. The debt may be wholly unpaid, or canceled in the process of consolidation, or assumed and paid by the Glucose Company out of earnings. And even if the plaintiffs are, or ought to be, bound for the payment claimed, there is neither plea, finding nor proof that it was an agreed precedent ■condition of plaintiffs’ right to their due proportion of stock in the consolidated company, nor that any assessment had been lawfully made against the Anthonys or that there was any lien upon the stock due them.

Equally without foundation is the contention that a certificate to the plaintiffs for ninety shares of the Glocuse stock was delivered to the Leavenworth Company for them and that such company was alone in default for the withholding of the stock. There is no proof and no finding that such certificate was ever delivered to the Leavenworth Company or received or accepted by it, or that it became in any manner possessor of the stock. On the contrary, the finding is that it was delivered to William Hamlin without specifying any representative or official character. That he held it as agent of the Glucose Co. and tendered it as such agent is made certain by his letter inclosing it in which he says “we” have just been able to issue the stock, and “we” will change its form if necessary. “ We,” can only mean the Glucose Co. and the certificates in Hamlin’s hands were still held by that company and tendered by it to the plaintiffs. And besides the certificates if they had been handed to the Leavenworth Co. were clogged with an unlawful condition which the Glucose Co. had no right whatever to impose.

We think, therefore, that the order of the general Term was right and should be affirmed, with judgment absolute for the plaintiffs upon the stipulation. We are all of opinion, however, that under the peculiar and exceptional circumstances of the litigation, that final judgment can only be for the ninety shares and the dividends and interest thereon. The referee denied plaintiffs’ right wholly. The general term affirmed such right only as to the ninety shares and left the balance finally defeated. We affirm that order on the same theory, holding that plaintiffs’ claim, as we sustain it, is limited to the ninety shares, and the judgment absolute must recognize what has been decided to be the plaintiffs’ right.

The order should be affirmed, with judgment absolute against the defendant on its stipulation.

All concur, except Gray and Haight, JJ., not voting.

Ordered accordingly.