text:
    JOHN C. SOUTHWICK, Plaintiff, v. THE FIRST NATIONAL BANK OF MEMPHIS, Defendant.

      Right of one to recover money paid wider a mistake of fact.

    March 13, 1873, one Thayer drew a draft upon a firm doing business in Memphis, of which he was a member, to the order of the firm of J. iST. Merriam & Son, of Boston, by which it was indorsed to one F. P. Merriam, who sent it to a bank at Memphis for collection. The firm, upon which the di-aft was drawn, accepted it, but, being unable to pay it at maturity, were authorized by the firm of J. N. Merriam & Son, the payees, to draw a sight draft upon such firm, and use the proceeds thereof in taking up the old draft. The sight draft was drawn, and was discounted by the First National Bank of Memphis, which applied the proceeds thereof upon an existing indebtedness of the drawers, in ignorance of the agreement between such drawers and the drawees. The drawees haying accepted and paid the draft, in the belief that the proceeds arising upon its discount had been used in taking up the old draft, subsequently brought this action against the defendant to recover the amount thereof, on the ground that the money was paid under a mistake of fact.

      Held, that the action could be maintained.
    MotioN for a new trial on exceptions ordered to be heard, in the first instance, at the General Term, after a verdict directed in favor of the plaintiff at the circuit.
    In 1873, J. N. Merriam & Son were a firm doing business in Boston, and Francis P. Merriam resided in that city.
    On March 13, 1873, George H. Thayer, a member of the firm of South worth, Thayer & Co., a firm doing business in Memphis, Tenu., drew ou said firm, in Memphis, a draft for $2,500, payable in forty days after date, to the order of J. N. Merriam & Son. It was accepted by the drawees (Southworth, Thayer & Co.), and passed by the payees, J. N. Merriam & Son to Francis P. Merriam, who held it at maturity and sent it to Memphis for collection, where it was, at the time of the events out of which this action arose, held for collection by the Merchants’ Bank of Memphis.
    Southworth, Thayer & Co. being unable to pay this draft‘so notified J. N. Merriam & Son, and on May 5, 1873, the latter firm telegraphed Southworth, Thayer & Co., at Memphis, as follows:
    “BostoN, May 5, 1873.
    “You may draw upon us at sight for $2,500 to pay draft in our favor. Can you not make it at thirty or sixty days ?
    “J. N. MERRIAM & SON.”
    The “ draft in our favor” meant the above mentioned draft of March 13, 1873, then held in Memphis for collection.
    Thereupon, Southworth, Thayer & Co., drew the draft involved in this action, being a draft for $2,500, dated Memphis, May 6, 1873, drawn by Southworth, Thayer & Co., to their own order at sight, on J. N. Merriam & Son.
    One Wiggs, the book-keeper of Southworth, Thayer & Co., then took the draft to the First National Bank of Memphis, the defendant’s bank, (where that firm kept an account) and asked the bank to take it and allow Southworth, Thayer & Co. to check on the proceeds “ for enough to meet a note'due on that day.”
    The defendant’s cashier refused to do this, or to do anything with ithe draft - except to credit the proceeds on an over-draft of Southworth, Thayer & Co., which then amounted to some $6,800.
    The draft was subsequently left with the defendant, discounted by it, and the proceeds applied upon the said over-drafts.
    On the day of its receipt the defendant sent the draft for collection to its correspondent, the First National Bank of Boston. It was presented to the drawees, J. N. Merriam & Son, on May tenth and then accepted, and paid by them on May thirteenth, in the belief that the proceeds would be applied to take up the first draft. Subsequently this action was brought by the plaintiff, to whom Francis P. Merriam and the firm of J. N. Merriam & Son had assigned their claims, to recover the amount so paid to the defendant.

      John B. BnrrUl, for the plaintiff.
    Southworth, Thayer & Co. had no right to apply the draft in question to any other purpose than to take up the old acceptance of March 13, 1873. It was invalid in the hands of the defendant, who had not paid or parted with anything of value thereon, and it could not have recovered thereon. (Stalker v. McDonald, 6 Hill, 93 ; Weaver v. Darden, 49 N. Y., 293; Stevens v. Oom. Bx. B’k, 3 Hun, 150; Fulton B’k v. jPhoenix B’k, 1 Hall, 562 ; Gomstock v. Hier, 73 N. Y., 269; Haynes v. Rudd, 24 S. C. R., 477 ; Ooddington v. Bay, 5 J. C. R., 54; affirmed, 20 Johns., 637.) The acceptance was paid under a mistake of fact, and it is not necessary that the mistake should have been mutual — mutuality of mistake being necessary only where reformation and not rescission is sought. (Smith v. McLinn, 4 Lansing, 41; Rider v. Powell, 28 N. Y., 316, opinion, Weight, J.;. Duncan v. Berlin, 46 N. Y., 685 ; Kingston Bank v. Bitinge, 40 N. Y., 395 ; Merchant’s Bank v. National Bagle Bank, 101 Mass., ' 285; Appleton Bank v. McGilray, 4 Gray [Mass.], 520 ; Westerlo v. Dewitt, 36 N. Y., 340 ; Martin v. McOormiclc, 8 N. Y., 331 ; Mills v. Alderbury, 3 Exch., 593 ; Chester v. Bank, 16 N. Y., 336 ; Lake v. Artisans’ B’k, 3 Keyes, 276, and cases cited at page 278 ; Ganal B’k v. B’Jc of Albany, 1 Hill, 287 ; Goddard v. Merchants’ B’Jc, 2 Sandf., 247 ; RJieelY. HicJcs, 25 N. Y., 289.) The fact that by the exercise of proper diligence the assignor of plaintiff might have avoided the error is no defence. (Kingston B’k v. Eltinge, 40 N. Y., 395 ; Nat. Life v. Jones, 1 S. C. [T. & C.], 470 ; Dim-can v. Berlin, 46 N. Y., 685; S. O., 11 Abb. Pr. [N. S.j, 116.) The rule .that the plaintiff’s recovery may be defeated by showing that the defendant has a counter-equity to retain the money is not law in this State. (Oanaday v. Stiger, 55 N. Y., 453.) The fact that the defendant received the proceeds of the draft in money, and that the money when so received was applied to the credit of Southworth, Thayer & Co., does not prevent the plaintiff” from recovering it back, when it was paid by him to defendant under mistake, and when the defendant will not be prejudiced by canceling the credit which he has given to Southworth, Thayer & Co. ,(Van Allen v. Am. B’k, 52 N. Y., 8 ; Tradesmen’s B’k v. Ghem. B’k, 1 Paige, 302 ; • Mechanics’ B’k v. Levy,
      3 id., 606 ; ¡Skinner v. Merchants’ B’k, 4 Allen, 290 ; Atlantic v. Same, 10 Gray, 532.)

      Francis O. Barlow, for the defendant.
   Barrett, J. :

This case, although elaborately argued in voluminous briefs, is really in a very narrow compass.

When J. N. Merriam & Son paid their acceptance, they were under no legal obligation to do so. The draft had been substantially diverted by Southworth, Thayer & Co. Such was the legal effect of its application to a different purpose from that authorized by Merriam & Son. The defendant took the paper in reduction of Southworth, Thayer & Co.’s previous over-drafts. It is true that it had no notice of the restriction, but that does not alter the legal aspect, of the case. There was no present consideration, no parting with value, no security surrendered, no new credit given, nothing but the application on account of the antecedent debt. Consequently, it being a case, not of accommodation paper, but of diversion, the bank was not a bona fide holder for value. (Weaver v. Barden, 49 N. Y., 293, and cases there cited by Allen, J.)

Now, Merriam & Son paid the acceptance, without notice of the diversion and in reliance upon its application by Southworth, Thayer & Co., to the use for which alone it had been authorized. They, therefore, paid it under a mistake of fact, and the defendant is bound ex aequo et bono to make restoration. We find no authority precisely in point, but the general principle is laid down in many cases. (Lake v. The Artisans’ Bank, 3 Keyes, 276; Duncan v. Berlin, 46 N. Y., 685; Merchant’s Bank v. National Eagle Bank, 101 Mass., 285; Appleton Bank v. McGilvray, 4 Gray, [Mass.], 520; Mills v. Alderbury, 3 Exch., 593.) And there would seem to be no good reason why a recovery should not be permitted.

Lake v. The Artisans’ Bank (ubi supra) is almost entirely parallel. There the plaintiff paid a note upon which he believed himself liable as indorser; in fact, he had not been charged. The court held citing Waite v. Leggett (8 Cow., 195); Wheadon v. Olds (20 Wend., 174); Chester v. Bank of Kingston (16 N. Y., 336), that if ho paid it under that mistake, there could be no doubt that he -was entitled to recover. “That would not,” said Parker, J., have constituted a “ voluntary payment; ” for the payment, if so made, was not made with full knowledge of all the material facts.

In Comstock v. Hier (73 N. Y., 269) the court went still farther. The note was indorsed for a specific purpose ; there was, as here, a diversion, the makers transferring the note on account of an antecedent debt. These transferees then passed the paper to a bona fide holder for value, who recovered against the indorser ; the latter ivas then permitted to recover over agaiust the original transferees without value. Thus if the bank here had transferred to A. B., for value, and A. B. had thereupon collected of Merriam & Son, the latter could have recovered over from the bank. “I am of the opinion,” said AlleN, J., “that the plaintiff had an election of remedies, trover, for the conversion of the note, or an action for money had and received far the amount which the defendants realized upon the sale of the note.”

If such an action could be sustained, it is difficult to perceive why a recovery could not also be had, in case the amount of the note had been paid by the plaintiff directly to the defendants, in ignorance'of the vice in the latter’s title.

We have been referred to a class of cases, of which Justh v. National Bank of the Commonwealth (56 N. Y., 478); and Stephens v. The Board of Education of Brooklyn (Court of Apps., MSS. op. of Andrews, J., December 9, 1879) are examples, as bearing upon the present question.

These cases, however, proceed upon entirely different considerations and are really irrelevant to the present discussion. They simply apply the old rule that money, fraudulently or even feloniously obtained, cannot bo followed into the hands of one who took it innocently in the way of business, or in payment of a debt. The checks, when paid, were treated as current money. “Being certified to be good,” said JohNSON, J., in the Justh Case, “and having been actually paid, they are to be regarded as money for all purposes.”

It was upon this basis, namely: the importance of strengthening public confidence in the currency, that both cases proceeded. “It is absolutely necessary,” said ANDREWS, J.; in the Stephens Case, “ for practical business transactions that the payee of money in due course of business shall not. be put upon inquiry, at his peril, as to the title of the payer. Money has no ear-marks. * * * It is generally impracticable to trace the source from which the possessor of money has derived it.” That there is a plain distinction between such cases, and those arising out of promissory notes, is clearly indicated hy JOHNSON, J., in the Justh Case. “ In support of this claim,” he observes at pages 482 and 483, “ they (the plaintiffs) now insist that the same rules shall be applied to the defendant’s right to retain the money which it has received, as would have been applicable if Gray & Co. had, by the same fraud, obtained their promissory notes, and had passed them to the defendant under the same circumstances as the checks were passed, and the defendant was now prosecuting them on the notes. In this supposition the plaintiffs are mistaken. They are tho parties who were cheated by Gray k Co., and the loss by the fraud on them cannot be transferred to tho defendant, an entirely innocent party. The money which the defendant had received came in the regular course of business in a form as'current as if it had been bank notes or United States currency. If it can be followed by reason that the party who paid it procured it fraudulently, for aught I see, the transaction of business must stop, for no inquiry and no precaution could guard the receiver from responsibility.”

Some other questions were raised, but they call for no special consideration. The testimony objected to was properly received, but the facts to which we have adverted, and on which the case really rests, sufficiently appeared from entirely unobjectionable testimony. There was no question for the jury, as the plaintiff was entitled to a direction upon the few facts which were beyond dispute. This was fully understood, as both parties asked a direction and neither requested a submission.

As to the form of the complaint, that we think was unimportant.

The plaintiff being entitled to recover upon tho facts, and no surprise being claimed or indeed being possible under tho circumstances, it is almost a matter of course to disregard technicalities, or, if necessary, to conform the pleadings to the proofs, even upon appeal. In furtherance of justice that may now be considered as done.

As to a demand, we think the attitude assumed by the bank in the correspondence rendered it unnecessary.

Besides, the objection on that head was limited to the alleged failure to prove a demand “ in the right of J. M. Merriam & Son.” It was not necessary for the plaintiff to formulate the theory of the demand. Non constat, if the defendant had simply objected that no demand had been made the plaintiff would have shown a specific demand and refusal independent of the letters. We need not, therefore, consider whether a demand was really essential.

The question of jurisdiction is settled by the case of Cooke v. The State National Bank of Boston (52 N. Y., 96).

The exceptions must be overruled and judgment given for the plaintiff on the verdict, with costs.

Davis, P. ¡I., and Beady, J., concurred.

Exceptions overruled, judgment ordered for plaintiff, with costs.


source: Caselaw Access Project

author: Potter, J.:

license: Public Domain

text:
    EDWARD S. VAIL, Receiver of the Secor Sewing Machine Company, Respondent, v. RICHARD HAMILTON AND SEYMOUR A. BUNCE, Appellants.

      Manufacturing company —pledged stock — consent to the giving of a mortgage — A receive.r may set aside a mortgage on the ground that the assent of the requisite number of stockholders was not given thereto.

    A receiver of a manufacturing corporation, appointed, upon the application of a creditor, who has recovered a judgment against it and had an execution issued thereon returned unsatisfied, may maintain an action to set aside a mortgage executed by the company, on the ground that the written assent of the stockholders owning at least two-thirds of its capital stock had not been first procured.
    'Where the corporation has become the owner of certain shares of its own stock, and has thereafter transferred them to secure a loan made to it, and has delivered the certificates thereof and transferred the stock on its books to the lender, it cannot, while such shares are so pledged, assume to sign, as the owner thereof, the written assent to the execution of a mortgage required by the statute.

      Appeal from a judgment in favor of the plaintiff, entered upon the trial of this action by the court without a jury.

      F. A. Paddock, for the appellants.

      H. E. Davies, Jr., and G. Irvine Whitehead, for the respondent.
   Potter, J.:

This is an appeal from a judgment at Special Term declaring a mortgage, purporting to have been executed by the Secor Sewing Machine Company, incorporated under the act of March 17, 1848, and its amendments, to the defendants as trustees, void and without effect as against the plaintiff as receiver.

The plaintiff was appointed receiver upon the application of a creditor, upon whose judgment against the corporation an execution had been returned unsatisfied pursuant to section 36 of part 3, chapter 8, title 4, article 2 of the Revised Statutes. (2 Revised Statutes, 462, 463.)

The ground of the action is, that the mortgage is illegal and void in not having had “ the written assent of the stockholders owning at least two-thirds of the capital stock of the corporation ” to its execution pursuant to section 2 of the act under which it was incorporated, as amended by the act of 1871, chapter 481.

That question, and whether the plaintiff as such receiver can maintain this action to sot aside the mortgage upon that ground, are the questions presented upon this appeal.

As appears from the case no question was raised in the court below in relation to the right of the plaintiff as receiver to maintain this action. Passing the question of the defendants’ right to raise that question for the first time upon this appeal, we can entertain but little, if any, doubt that the receiver had the power to bring this action. The powers of receivers of insolvent corporations are specified and defined by sections 67, 68, of jxart 3, chapter 8, title 4, article 3 of the Revised Statutes, and are further enlarged by the act of April 17, Laws of 1858, chapter 314.

By virtue of this latter act, receivers of insolvent corporations may, for the benefit of creditors, or others interested in the prop erty held in trust, disaffirm, treat as void, and resist all acts dope, transfers and agreements made, in fraud of the rights of any creditor, including themselves, etc.

The theory, upon which the action is brought, is that the corporation executed a mortgage upon its property without authority, the effect of which was to give some of its creditors a preference and security for the payment of their debts over the debts of other creditors. If such illegal and unauthorized transfer was allowed to stand, it would occasion delay and embarrassment, if not actual loss to the creditors not provided for in the mortgage or transfer.

Every illegal transfer of property to secure one creditor at the expense, or to the detriment of another, is in fraud of the rights of the latter. It is by reason of such consequences that conveyances and transfers of property in numberless instances are declared fraudulent. The receiver represents all the stockholders and creditors of the corporation, and it is as much his duty to sot aside illegal and fraudulent transfers made by the company in fraud of some of its creditors to other of its creditors, as when made in fraud of all its creditors to those who are not its creditors. We think the receiver had this power to bring this action at common law. (Osgood v. Laytin, 48 Barb., 463.) But, with the enabling provisions of the statute of 1858, we think there can be no doubt that the action was well brought.

We come now to the consideration of the question decided by the court below, whether the mortgage in question was authorized and executed pursuant to the provisions of the act of March 17, 1848 (chap. 40), in relation to manufacturing, and mining corporations. By section 2 of that act, as originally passed, such corporations may purchase, hold and convey both real and personal property, but shall not mortgage the same nor give any lien thereon.

This section was amended in 1864 (chap. 517) and 1871 (chap. 481), so as to authorize a mortgage 6f the property of this class of corporations upon a certain precedent condition, viz. : that the written assent .of the stockholders, owning at least two-thirds of the capital stock of such corporations, shall first be filed in the office of the clerk of the county where the mortgaged property is situated.

The stock of the Secor Machine Company was divided into 5,000 shares ; all of the stock had been once issued, but 940 shares had been surrendered to br been purchased by the corporation. Of this 940 shares the corporation had transferred to T. A. Conk-ling 500 shares, as security for a loan made by him to the company, and delivered him the certificates therefor, certifying that he was the proprietor thereof, and the same was duly recorded upon the books of said company.

The company assumed to sign, by its president and secretary, the assent, in behalf of- this 500 shares of stock, to the giving of this mortgage. If the corporation had not the right to sign the same, then the assent of two-thirds of the owners of the stock was not obtained and the mortgage would be unauthorized.

It was held in the Green Point Sugar Company v. Whitin (69 N. Y., 328) that the amount of stock actually issued and owned is to be regarded as the capital stock, and not the nominal amount specified in the articles of the association. In that case but 2,000 of the 2,500 shares of the nominal capital stock had been issued and the 500 unissued shares were not taken into the account in ascertaining and procuring the assent of the owners of two-thirds of the stock.

The court say in that case, “ only 2,000 shares had heen actually issued and only that number was then owned.” In this case the 500 shares had been issued, but had again come back m some manner to the corporation. Now does the corporation sustain any different relation to these 500 shares of stock which had come back to it than it did before it issued them ? The corporation could sell or make the same disposition of them after their return to the corporation, as it could before they were issued by the corporation.

Can it be said in any exact and proper legal sense that a corporation is one of its own stockholders ? It would lead to some singular and anomalous results. For instance, the stockholders of a corporation are made jointly and severally liable for the debts of the corporation in certain contingencies. Can a joint action be maintained against the corporation and individual stockholders, especially in that class of cases, where the creditor must first sue the corporation and have an execution upon the judgment against it returned unsatisfied before he can sue the individual stockholder at all ?

But if it is conceded that a corporation may be one of the owners of its own stock, the corporation had transferred this identical 500 shares of its stock on behalf of which it assumed to assent, and the same stood in the name of Mr. Conklin when the assent was signed and filed. There are well established general principles in relation to corporations and their stockholders that stock owned by, or under the immediate control of the corporation cannot be voted upon by the corporation (Ex parte Barker, 6 Wend., 509, Ex parte Desdoity, 1 id., 99; State ex rel. Page v. Smith, 48 Vt., 266; Am. Railway-Frog Co. v. Haven, 101 Mass., 398); and that the person in whose name the stocks stand upon the transfer books of the corporation is made liable to the creditors of the corporation in certain contingencies, and has the right to vote upon the stock (Adderly v. Storm, 6 Hill, 624; Worrall v. Judson, 5 Barb., 210; Matter of Empire City Bank, 18 N. Y., 199); but it is urged, upon the part of the appellant, that these principles have been changed by the provisions sixteen and seventeen of the act in question, which declare that the pledgees of stock shall be liable as stockholders, and may represent the same at the meetings of the corporations and vote as stockholders.

Effect should not be given to language changing a law, beyond the subject or limitation expressed by the language employed to make the change. The language used to indicate this change is somewhat significant. It is that “ every person who shall pledge his stock, may, nevertheless, represent the same at the meetings and vote accordingly as a stockholder. This language has application to an individual owing stock and should not be construed to embrace the corporation which, as we have seen, cannot vote upon the stock it may own or, more properly speaking, have an equitable title to the proceeds of.

Besides, the language used relate^ to representation, and voting upon the stock of the pledgor at the meetings of the stockholders. The assent of the owners of the stock of the company to the giving of a mortgage is not, by the terms of the statute to be given, at a meeting, or by any vote of the stockholders at a meeting. It is to be the separate and individual signature to the written assent of the consenting stockholder, and may be obtained from the stockholders generally, and upon as many pieces of paper as there are assenting stockholders.

If a mortgage, given under the circumstances of the one under consideration, is valid, it may be made the instrument of the grossest fraud. By this means the corporation may first pledge its stock to a person for a loan of money, and immediately after, upon the strength and faith of the very stock pledged, assent to a mortgage to another more favored creditor upon all its property, which must first be applied to the payment of the mortgage before there will be any value or security to the pledgee of the stock.

We think the judgment should be affirmed, with costs.

Davis, P. J., and Barrett, J., concurred.

Judgment affirmed.


author: Barrett, J. : Brady, J.

text:
    ROBERT L. CUTTING, Respondent, v. WALTER L. CUTTING, Executor, etc., and others, Appellants.

      Beneficial power, what is — What powers are valid —■ When the appointee ofapower holds as trustee for the creditors of the 'donee — Reraised Statutes changes the formen' rule as to real, but not as to personal estate.

    A power authorizing' a person named to appoint, by his last will, a person or persons to whom real estate, belonging to the donor of the power, should be conveyed, is a general beneficial power within section 79 of 1 Revised Statutes, 732.
    The word “ enumerated,” in section 92 of 1 Revised Statutes, 733, providing that “ no beneficial power, general or special, hereafter to be created, other than such as are already enumerated and defined in this Article, shall be valid,” is not to be read literally as limiting beneficial powers to those specifically detailed in the previous sections, but is to be construed as used in the sense of .“mentioned,” “indicated,” “referred to,” or “authorized.”
    The equitable doctrine that where one having a general power of disposition executes it in favor of a purchaser, not for a valuable consideration, and then dies, such purchaser is considered in equity as a trustee for the creditors of the donee of the said power, was abolished by the Revised Statutes as to real estate, but still continues in force as to personal property.
    A testatrix, by her will, devised" a certain share of her estate to her executors, in trust, to receive the rents, issues and profits thereof, and apply the same to the use of her son Fulton during his life; and, on his death, to convey the capital of such share to sufch person or persons, as he should by his last will appoint, and in default of appointment "then to convey the same to other pex’-sons as therein prescribed. ,

      Fulton executed • the power of appointment by his will, and died insolvent.

      Held, that the power of appointment conferred by the testatrix upon her son was a valid, beneficial power.
    That his exercise of the power of appointment did not have the effect of subjecting the real estate to the claims of his creditors, but did so operate as to the personal estate. (Brady, J., dissenting, in so far as it was held that the son’s creditors were not entitled to enforce their claims against the real estate.)
    Appeal from a judgment entered at Special Term, overruling the demurrers severally interposed by the defendants, and granting the relief prayed for by the complaint, that certain judgments, amounting to over '$50,000 recovered by the plaintiff against Fulton Cutting, deceased, in his life-time, be charged upon one of the shares of the estate of Gertrude Cutting, deceased.
    By the sixth item of her will, Gertrude Cutting devised and bequeathed a share of her estate to her “ executors in trust to receive the rents and profits thereof during the life of my son, Fulton Cutting, if ho survive me, and to apply the same to the use of my son, Fulton Cutting, during his life; and, upon his decease, to assign and convey the capital to such person or persons, and in such manner as he, by his last will and testament (and not otherwise), may direct and appoint,” and in default of such appointment she gave “one-half of such capital to each of his sons, Bajmrd Cutting and Fulton Cutting,” to be held by each for life, with remainder to his issue, with provisions for the case of death, without issue and survivorship of these two grandsons. In case of failure of issue of both grandsons, she gave the share to “ such of my children as may then be living and unto the issue then living of such of them as may have died leaving issue.” And it was her expressed “ desire to provide for all contingencies,,, and not have any of the principal devises or bequests herein contained lapse or fail for want of persons living capable of taking the same under this will.”
    By the seventh clause of her will the executors were empowered, in their discretion, to convey and transfer any part of this trust share free from further trust or contingency ; but no such transfer is alleged to have been made.
    Fulton Cutting having survived the testatrix, his mother, died in 18-75, leaving a will and codicil duly executed, by him. By the will the capital of the trust share devised and bequeathed by' the sixth item of his mother’s will was appointed by him to his brother Walter, upon trust for his two sons, being the two grandsons to whom it was given by such sixth item, and certain powers of advancement to them and of management were conferred upon the trustee. And, by the codicil, he gave and bequeathed to his sister, Anne F. Reubell, “ the full and entire interest which I now have or may have in the estate of my deceased mother, Gertrude Cutting.”
    In April, 1866, the plaintiff recovered against Fulton Cutting two judgments, which he claims to be entitled in equity to have paid out of the trust share of the estate of Gertrude Cutting,
    “ under said wills and codicil, and by reason of the exercise of the power of appointment by said Fulton Cutting.”

      Q. B. Moore, OH ford D. Hand and Samuel Hand, for the; appellants, W. L. Cutting, executor, and Anne F. Reubell.

      Stephen P. Hash, for the appellants, W. B. and R. F. Cutting.

      Henry H Anderson, for the respondent.
   Barrett, J. :

The facts which raise the very interesting question presented by this case are few and simple. Mrs. Gertrude Cutting, who died in the year 1864, devised a certain share of her estate to her executors in trust, to receive the rents, issues and profits thereof, and apply the same to the'use of her son, Fulton Cutting, during his life; the capital of such share, upon the death of Fulton, to be conveyed to such person or persons as he, Fulton, should by his last will (and not otherwise) appoint. In case of failure to appoint, then one-half of the capital of such share was to go to each of Fulton’s sons for life, with remainder over to their issue.

Fulton Cutting died in the year 1875 largely insolvent, and the plaintiffs are among his judgment creditors. By his last will he exercised the power of appointment. The plaintiffs thereupon filed this bill, claiming that the exercise of the power operated to render the property liable, as assets, to the demands of Fulton’s creditors, in preference to the claims of bis appointee. The latter demurs. As we understand it, the defendants take three positions:

First. That the power itself was not beneficial within 1 Revised Statutes, 732, section 79, and that consequently under 1 Revised Statutes, 732, section 73, it was unauthorized and void.

tSecond. That even if beneficial it is prohibited and invalid under 1 Revised Statutes, 733, section 92.

Third. That even if beneficial and valid, the exercise of the power does not operate to let in the donees’ creditors.

The power in question was, of course, general under section 77 ; that is, it authorized the alienation in fee, by means of a will, of the lands embraced in the power, to any alienee whatever.

We cannot agree to the proposition that this'general power was not beneficial within the meaning of section 79. A general power is beneficial, within the definition of this section, when “ no person, other than the grantee has, by the terms of its creation, any interest in its execution.”

It is contended that a beneficial power cannot be predicated of a disposition of property by will, and not otherwise, for the reason that such disposition cannot, in any just sense, be said to be made by the testator for his own benefit. Where the power is appurtenant to a life estate in the donee, the reason of this contention fails, both under the statute and on principle. The question, however, is not one of actual or direct benefit to the donee. The word “beneficial,” as used in section 79, has a technical signification.

In the case of the alienation under a general power, by means of a will, it does not necessarily involve any personal or pecuniary benefit, profit, or advantage to the grantee of the power. Section 84 speaks of a “ general and beneficial power to devise the inheritance.” Although no benefit, in a legal sense, results to the donee, it may yet be a “ beneficial” power. .The cases support this view. In Freeborn v. Wagner (49 Barb., 43), the power was to the testator’s wife to make such testamentary disposition of the property there-inbefore given to her as should seem to her just and proper.

“This power,” said Gilbert, J., “is general and beneficial, because it authorizes the alienation by will to any alienee whatever, and no person other than the grantee has, by the terms of its creation, any interest in its execution.” This case was affirmed (4 Keyes), where Woodruff, J., at page 35, said : “ This power is both general and beneficial.”

But more entirely in point and decisive of this question is the case of Jennings v. Conboy (73 N. Y., 230). The court there held that it was intended by section 79 to make a power beneficial, both, when' by its terms the donee iras solely interested in its execution, and when it was entirely silent as to the beneficiary. Earl, J., at page 235, quotes section 79 and comments upon it thus : “ The meaning of this section is plain. If by the terms of the creation of the power no other person than the donee has an interest in its execution, then it is beneficial; or to the same purpose, if the instrument creating the power does not, by its terms, give an interest in its execution to any one else, the donee is the sole beneficiary. It is claimed, however, that this section must be road as if it provided that when, -by the terms of the creation of the power, the donee has an interest in its execution and no other person has such interest, then it is beneficial. If this had been the meaning of the section, why were other persons named and such bungling phraseology used ? It would have been much more direct and natural simply to have provided that ‘ a general or special power is beneficial where the donee thereof is, by the terms of its creation, the sole person interested in its execution.’ ”

There need be no confusion upon this subject, when the distinction between a beneficial power to appoint by will - (under §§ 77 and 79), and an absolute power to dispose of the fee in the life-time of the donee (under §§81 to 85) is clearly recognized ; and also, when the definition of a beneficial power is contrasted with that of a power in trust. We have seen that a general power is beneficial, when no person other than .the grantee has by the terms of its creation any interest iu its execution. Á general power is in trust when any person or class of persons, other than the grantee of such power, is designated as entitled to the proceeds or any portion of the proceeds, or other benefits to result from the alienation.

It is, however, insisted, that this power, if beneficial, is, for that very reason, invalid under section 92.

That section reads as follows : “No beneficial power, general or special, hereafter to be created, other than such as are already enumerated and defined in this Article, shall be valid.”

The contention is that the power in question, although defined, is not among those previously enumerated. We hardly know how to treat this novel and somewhat startling proposition. That the power in question is an exceedingly cominon one cannot be doubted; of that fact, the records of almost every surrogate’s office in the State will afford ample evidence. Questions of importance under .similar powers have repeatedly arisen, and have been solemnly determined, without the power itself being challenged. Notably in the case of Livingston v. Murray (68 N. Y., 485); and see Magoffen v. Patton (3 Edw. Chy., 65); and Wright v. Tallmadge (15 N. Y., 307). The title to a vast amount of property rests upon the validity of such powers. It behooves us, therefore, to consider this question with extreme care. Our best judgment, after full and thoughtful consideration is, that these words, enumerated and defined,” are not to be read literally as limiting beneficial powers to the few specially detailed in the previous sections. They might be read disjunctively, if that were necessary to give them the effect intended. Even if read collectively, it would not be a strained interpretation to apply the word “ enumerated,” to the classification of powers contained in section 76. It will be observed that the only powers speefi-cally enumerated in the sections preceding 92 are those respecting married women and tenants for life. Sections 81 to 85 do not enumerate powers, but lay down rules as to when certain powers shall take effect as a fee. It cannot for a moment be supposed that this elaborate and comprehensive system was codified, and its machinery put in force, for so slight, narrow, and wo had almost said, trivial a purpose. The use of the word’ “ enumerated ” may have been infelicitous and inexact. That it was used in the sense of “mentioned,” “indicated,” “referred to,” “ authorized,” cannot well be doubted ; that is the true construction. It was the view of Mr. Justice NelsoN, when in Root v. Stuyvesant (18 Wend., 271), he held that this ninety-second section, “ neither adds to, nor takes from it, (the ar’ticle on . powers), but in terms declaims what must otherwise haye been pronounced by the courts, namely, that a power inconsistent with the law is void.”

There is no evidence of any intention to detail every particular power admissible under the definitions. No such intention can be gleaned from what is simply an enabling enactment with regard to married women, one which was essential to include the case thus provided for within the definitions. Indeed the definitions necessarily import “ enumeration.” For instance, section 77, as we have seen, in part defines a general power as one which authorizes the alienation in fee by means of a conveyance to any alienee whatever. To say that a power which is within this definition is not enumerated seems to us unreasonable. It would even be an absurd conclusion to hold that, although the statute declares a power to be general when it authorizes the alienation in fee, etc., yet that such alienation in fee under the defined power is not authorized. The reductio ad absurdum would be quite as apparent if it were held, that although a general or special power is beneficial under certain defined conditions, yet a grant of such a power in conformity to the conditions is unauthorized.

The respondents may well suggest the possibility of such a view exciting surprise. . It is natural that they should look elsewhere for harmony ; but the statute, as thus construed, cannot be reconciled by falling back upon the provisions as to general powers in trust. These latter are neither within the definition nor the spirit of the general and beneficial powers. They have an entirely different scope and purpose. The fiduciary or trust character, with regard to the proceeds resulting from the alienation according to the power, pervades them. We need not pursue this branch of the subject further, being satisfied upon the whole that this was a perfectly valid, general and beneficial power.

We now come to the third question. The solution of this question depends entirely upon the effect of the Revised Statutes. Previous thereto, the rule that the exercise of such a power subjected the estate to the claims of creditors was thoroughly well established by a long and unbroken line of decisions in England and in this country. There were occasional protests against the refinement and subtlety of the rule and its lack of logical foundation; but it continued to be the rule. (4 Kent, 339; 2 Sug\ den, § 277; Chance on Powers, § 1817; Tallmadge v. Sill, 21 Barb., 51; Johnson v. Cushing, 15 N. H., 313; Ashfield v. Ashfield, 2 Vern., 287; Thompson v. Towns, 2 id., 319; Lassells v. Cornwallis, 2 id., 465; Hinton v. Toys, 1 Atk., 465; Jenney v. Andrews, 6 Mad., 264; Lord Townshend v. Windman, 2 Vesey Sen. 2; Fleming v. Buchanan, 3 DeG., M. & G., 976; Vaughan v. Vanderstegen, 2 Drew, 165, 176, 363; Shattock v. Shattock, L. R., 2 Eq., 187; Nail v. Punter, 5 Sim., 555.)

The question then is whether the rule has been abrogated by the Revised Statutes. After very careful reflection, we find ourselves drawn to the conclusion that it has been so abrogated, and that the new rules for the protection of creditors, embodied in the article on powers, were intended to be complete, comprehensive and exclusive. It is impossible to read the revisers’ notes (5 Edmund, 325) without seeing what a radical change in the entire subject was contemplated. This very question of the rights of creditors was specially considered. Old devices by which lands were placed effectually beyond the reach of creditors, and the inadequacy of existing remedies, were pointed out. The particular doctrine now under consideration -was referred to as the “single case in which creditors may be relieved.” The comment upon this was as follows, page 327: “ If a man having a general power of disposition executes it in favor of a purchaser, not for a valuable consideration, and then die, the purchaser is considered in equity a trustee for the creditors ; but, as against the debtor in his life-time, or if he die leaving the power unexecuted as against the owners of land, the creditors are without.remedy. ‘These distinctions,’ Mr. Sugden says, 1 may seem refined, but they are well established.’ We confess that ‘refined’ does not seem to us the appropriate word.”

Thus it will be perceived that the revisers deemed this rule inadequate, incongruous and, we think we may safely add, absurd; what they proposed in its place were the clear and logical provisions of sections 81 to 85. They prefaced this with the following remark : “ That a change of the existing law is here, not merely proper, but necessary will be admitted by all.”

This proposed change referred to the rule in question, as well as to the other surrounding incongruities pointed out by the revisers. They did not desire to treat “a mere power as actual property,” for that, they say, “would be a plain violation of legal principles.” Nor did they wish to engraft this rule, which had no better foundation than arbitrary judgment necessitated by a different legal system, upon the homogeneous provisions which they had framed with so much care and ability. They even doubted whether a general power to devise, annexed to a previous estate, should be considered an absolute power of disposition. “ But there are obvious means,” they add, “ by which, with the aid of this power, the tenant for life or years may acquire, even in his life-time, the entire dominion of the property.” (Page 328.)

The result was section 84. But if they doubted, in the particular referred to, they could have had no doubt where the incident of a previous estate ivas wanting. Under such circumstances dominion could not be exercised over the property. The application of the rents to the use of the donee could no more effect such a purpose than their application to the use of another, and the mere independent exercise of testamentary appointment wp.s evidently not within the mischief sought to be remedied.

It should also be considered that the revisers had before them the protests against this rule to which we have referred. Besides their own quotation from Sugden, they may well have been influenced by the following criticism of Judge Stoet, which will be found in note 1 to section 176, page 176, of his Equity Jurisprudence.

“ The distinction is a nice one, and not' very satisfactory. "Why, when the party executes a power in favor of others, and not of himself, a court of eqidty should defeat his intention, although within the scope of the power, and should execute something beside that intention, and contrary to it, is not very intelligible. If it be said that he ought to be just before he is generous,

1 hat addresses itself merely to his sense of .morals. The power enabled him to give, either to himself or to his creditors, or to mere voluntary donees. Why should a court of equity restrict this right of election, if bona fide exercised ? Is not this to create rights not given by law, rather than to enforce rights secured by law ? If the power was bona fide created, why should a court of .equity interpose to change its objects or operations ? ”

Coming to the act itself, we find thiit its language is very broad. Section 73 provides as follows Powers, as they now exist by law, are abolished ; and, from the time this chapter shall be in force, the creation, construction and execution of powers shall be governed by the provisions of this article.”

Note the language — creation, construction and execution. Now, the construction of powers necessarily involves the effect to be given to them ; that is, the effect throughout, upon all parties, and upon all rights.. This view is not controlled by sections 93, 103 and 104. Section 93 has reference to special and beneficial powers ; section 103 to the execution of trust powers, and section 104 to beneficial powers, and the interest of persons entitled to compel the execution of trust powers.

Under sections 93 and 103 the powers therein referred to are subjected in equity to the claims of creditors. Under section 104 every beneficial power passes to the assignees of the person in whom such poAver is vested; but the beneficial poAver here contemplated is, of course, such as vests some tangible right or interest in the grantee, capable of passing to an assignee, e. g., a general and beneficial poAver, where the grantee has, by the terms of its creation, an interest in the alienation in fee by means of a conveyance to any alienee whatever. It certainly does not cover a mere option to appoint by will.

But further, Avhile we think that this is a beneficial power within the statutory definition, Ave very much doubt the applicability of that Avord in its common and general sense. Indirect possibilities of advantage are not to be treated as legal interests. It is apparent that Mrs. Cutting never intended that her son should reap any individual gain from the exercise of this power.

That is .not the just office of an appointment thereunder. It may well be doubted whether equity Avould specifically enforce any agreement with respect thereto. (See Blagge v. Miles, 1 Story Cir. Ct. Rep., 445; Reid v. Shergold, 10 Ves., 370.)

We have not overlooked the cases Avhere specific performance of agreements to devise were decreed. (Parsell v. Stryker, 41 N. Y., 480; Johnson v. Hubbell, 5 Am. Law Reg., 177.) These, however, were cases of contracts with respect to one’s own property. But a mere authority, a power to appoint by will and not otherwise, cannot be said to be property, nor the subject of barter and sale.

Here the grantee, Fulton Cutting, was, so to speak, his mother's representative, empowered to do an act which she, to quote section 74, might herself lawfully perform. The grant implied confidence in his judgment, affection, and good faith in the exercise of the authority conferred. Down to his last moment he was to be perfectly free and untrammeled in such exercise of power. Of that freedom he could not, from considerations appertaining to the character of his power and the implications resulting from the quality and surroundings of his mother’s grant, be deprived, nor could he relinquish it himself. But this very liberty was limited to the designation, not of one to whom he had obligated himself for a consideration or personal advancement, but of those who should freely have, receive and enjoy.

These considerations clearly affected the revisers and the Legislature which acted upon their recommendation. It was evidently considered that the mere isolated power of appointment, annexed to no previous estate, was not that kind of absolute power of disposition which was within the mischief sought to be suppressed.

“ There is a moral obligation on every man,” the revisers say, “to apply his property to the payment of his debts.” But what property ? They furnish the answer. “ It is an affront to common sense to say that a man has no property in that which he may sell when he choose, and dispose of the proceeds at his pleasure.”

It was for that class of cases that they provided the new, and as they believed, all sufficient remedy of turning the absolute power into a fee. We are, therefore, of opinion that the rights of the present appointee are vested, and cannot be' questioned at the suit of Fulton Cutting's creditors. These views, however, are only applicable to the real estate. The old rule has not been abrogated as to personalty. The chapter in which powers are included is entitled, “ of real property,” etc. The whole scheme has reference to lands. The powers which are abolished by section 73, and those which are created by subsequent sections, are powei-s respecting lands. A power, under Section 74, is an authority to do some act in relation to lands: Powers as to personal property have not been abolished, nor have the provisions respecting land powers been applied thereto. This has been distinctly held with respect to trusts. (Kane v. Gott, 24 Wend., 661; Gilman v. Reddington, 24 N. Y., 12; Cruger v. Cruger, 5 Barb., 239.) Yet the language is there the same : “ uses and trusts, except as authorized and modified in this article are abolished.” The analogy is complete.

In Gilman v. Reddington (ubi supra), Comstock, J., remarked that11 trusts in personal estate are subj ect to no statutory restriction; in other words, the Legislature has never attempted to define and enumerate the lawful occasions for creating such trusts. They stand, therefore, as at common law, subject only to the statutory rule against the suspension of ownership for more than two lives.”

Powers are not limitations of future or contingent interests in lands. But, even if they were, the only effect would be to subject personalty powers to the rules hi relation to future estates-in lands. (1 B. S., 773, § 2.)

The inalienabilily of the rents and profits during Fulton Cutting’s life has no bearing on this question. The old rule did not proceed upon considerations of the alienability of rents and profits. The case, as to personalty, stands as it did before the Bevised Statutes. We feel bound, with due respect to the doctrine of stare decisis, and in view of the overwhelming weight of authority to which we have called attention, to hold that as to the personalty the creditors are let in.

The judgment must therefore be modified, so as to limit the plaintiffs lien to, and his right to payment from, that part of the principal of the share in question which consisted of personal property, without costs of this appeal.

Davis, P. J., concurred.

Brady, J.

(dissenting).

I have not time at present to express my views of the rights of creditors arising from the due execution of a power, such as granted by Mrs. Cutting, and must content myself by simply observing that the Bevised Statutes do not, m my opinion, contain any provisions designed to abrogate the law on that subject, as it existed ill regard to real estate when a valid power was created and exercised. And, farther, that I do not discover from the revisers’ notes any intention to interfere with the results of such a power and its exercise. What is said by them is not as clearly enunciated as it might Be, a peculiarity which generally seems to mark the mystic subject of powers and trusts where treated ; but the whole expression of the revisers, in regard to the matter, leads my mind to the conclusion that they meant to secure the existing rights of creditors more effectually. I therefore dissent from so much of the judgment pronounced by my brethren as conflicts with this opinion.

Judgment modified as directed in opinion of Barrett, J.


author: Potter, J.: Brady, J:

text:
    CHARLES H. GEORGE AND AMOS C. BARSTOW, Respondents, v. RICHARD S. GRANT and others, Appellants.

      Limited partnership — 1 JR. 8., 766, §§ 20 and 21 — when a mortgage given by a special partner is void under.

    This action was brought by the plaintiffs, as creditors of a limited partnership, known as Vose, Dinsmore & Co., composed of Yose as the general, and Palmer and Dinsmore as the special partners, to set aside a mortgage given by Palmer upon his individual real estate to the defendant Grant. The money received upon the mortg'age was used by Palmer in paying individual debts, .among which were a debt due to Grant, the mortgagee, one due to Grant's sister, the amount of which he received as her agent, and one due to a firm of which Grant was a member.
    The complaint alleged that at the time of giving the mortgage Palmer had by his acts become liable as a general partner, that he was insolvent, and that the mortgage was executed with the intent to give the said Grant, his firm and sister, a preference over the firm creditors^ and that it was received by Grant with knowledge of such facts and intent.
    Upon a demurrer to the complaint, on the ground that it did not state facts sufficient to constitute a cause of action, held, that the mortgage was a violation of sections 20 and 21 of 1 Revised Statutes, 766, and void as having been executed with the intent to give to the individual creditors of the special partners a preference over the firm creditors.
    Appeal from an interlocutory judgment entered herein, overruling demurrers interposed to tlie.complaint, on the ground that it did not state facts sufficient to constitute a cause of action.

      Geo.. H. and F. P. Foster, for the appellants.

      B. F. Blair, for the respondents.
   Potter, J.:

This is an appeal from the decision of this court, at Special Term, overruling a demurrer to the complaint interposed severally by the defendants, Palmer & Foster.

The action is brought by the plaintiffs, who allege, in their complaint, that they were creditors of a limited partnership, styled Yose, Dinsmore & Co., and composed of Yose as the general, and Palmer & Dinsmore as the special partners, to set aside a mortgage executed by said Palmer upon his individual real estate to the defendant Grant, for a loan of money with which ho paid individual debts, among which were a debt to Grant, the mortgagee, and a debt owing by him to a firm of which said Grant was a member, and a debt owing by him to the sister of Grant, who received the same as the agent of the sister.

The complaint also alleges that said Palmer, by reason of his acts, and section 22 of the act in relation to limited partnership (1 R. S., 767), had become liable as a general partner. That said mortgage was void, having been executed contrary to section 21 of said act, and asking to have said mortgage, and the proceeding to foreclose, and the deed conveying the premises described in said mortgage to the defendant Foster on the foreclosure sale, set aside.

Soon after the receiving of said mortgage, the mortgagor Palmer executed a general assignment of his individual property to the defendant Foster, for the benefit of his individual creditors, and such assignee is made defendant in this action ; and about the same time the partnership of Yose, Dinsmore & Co. also made an arrangement for the benefit of the partnership creditors, and that Yose, Dinsmore & Co. are insolvent.

The grounds of the demurrer are, that the complaint does not state facts sufficient to constitute a cause of action, and that Yose and Dinsmore' are necessary parties to the action. Sections 20 and 21, above referred to, of part 2, chapter 4 of title 1 (1 Revised Statutes, 766-767), aro as follows :

“ Section 20. Every sale, assignment or transfer of any of the property' or effects of such partnership made by such partnership, when insolvent or in contemplation of insolvency or after, or in contemplation of the insolvency of any partner, with the intent of giving a preference to any creditor of such partnership or insolvent partner, over other creditors of such partnership ; and every judgment confessed, lien created or security given by such partnership, under the like circumstances, and with the like intent, shall be void as against the creditors of such partnership.”
“ Section 21. Every such sale, assignment or transfer of any of the property or effects of a general or special partner, made by such general or special partner when insolvent, or in contemplation of insolvency or after, or in contemplation of insolvency of the partnership, with the intent of giving to any creditor of his own, or the partnership, a preference over creditors of the partnership, and every judgment confessed, lien created, or security given by any such partner, under the like circumstances, and with a like intent, shall be void as against the creditors of the partnership.”

The complaint alleges, in addition to the facts above stated that, at the time of the giving the mortgage by said Palmer, he was insolvent, and that the mortgage was executed with the intent of giving to the defendant Grant, his firm, and his sister and other individual creditors a preference over the creditors of the partnership, and that the mortgage Avas received by said Grant with like intent and purpose, and knowing of the insolvency of said Palmer, etc. This would seem to bo a preference forbidden by the terms of the statute referred to and to constitute a cause of action in. favor of the plaintiffs, who are creditors of the partnership, to have the instrument or mortgage, through which such preference was attempted to be affected, declared void and ineffectual as against these plaintiffs.

The language of this statute is plain and its meaning certain. It declares that any sale, assignment or transfer of property, and every judgment confessed, lien created, or security given by a general or special partner when insolvent, or in contemplation of insolvency, with the intent of giving to any creditor of his own a preference over creditors of the partnership, shall be void as against the creditors of the partnership. This provision, of course, relates only to limited partnerships and to the general or special partners in limited partnerships. A very clear exposition and history of this statute may be found in Farnshawe v. Lane (16 Abb., 71).

The provision makes such preferences void regardless of any knowledge by the creditor of the insolvency or the intent of the partner ; the invalidity of the preference is not made to depend upon any knowledge or collusion or fraud upon the part of the creditor. In this respect, the provision under consideration is unlike many other statutes declaring transactions between debtor and creditor or third party void. It is plain that if the transaction is direct between the partner of a limited parnership and his creditor it is void, and the creditors of the partnership would be declared to be entitled to the fruits of the preference.

Is the rule different when, as is alleged and admitted in this case, the money was borrowed of, and the security therefor given to a person who was himself a creditor, and was also one of the firm which was a creditor of the partner and to which firm a portion of the money so borrowed was paid, while another portion of the borrowed money was paid to the lender as the agent of his sister, another creditor of the partner, and the money was loaned, and these payments from it made to these individual'creditors, with the fall knowledge upon the part of the lender that the special partner •was insolvent, and was paying away the money received from him upon the mortgages in question to give his own creditor a preference forbidden by law.

To hold that a mortgage given under such circumstances was not within the object and spirit of the statute would be altogether too narrow and technical a construction. Whether the operation and effect of this statute would conflict with any rule adopted by the courts for paying, distributing or marshaling the assets of partnerships or individual debtors among their creditors is not worth our while to inquire ; nor is it important to inquire at this stage of the case whether the mortgage is totally, or but partially, void. That question will be decided in the progress of the caseto a full and final determination. We are only required upon this appeal to determine whether there is a light shown by the allegations of the complaint admitted by the demurrer, constituting a cause of action against the defendants, who have demurred to the complaint.

There can be no question in regard to the necessity and propriety of making Foster, the assignee of the defendant Palmer, a defendant in this action. . He stands, by reason of Palmer’s assignment to him, in place of Palmer in respect to the equity of redemption upon the mortgage in question, and all the assigned estate.

The defendants, Palmer and Foster, only of the defendants in the action, demurred to the complaint. We are clear, as against them, the complaint states a cause of action. The remaining ground of the demurrer is that Y ose and Dinsmore are necessary parties to this action. We perceive no reason or occasion for.making them parties. They never owned or had any interest in the property, the transfer of which is sought to bo set aside by this action.

It is the creditors of the partnership, and not the partners, who have a right to complain of the transfer in question.

We think the questions raised by the demurrers were well decided, and their decision should be affirmed, with costs.

Brady, J:

I concur, although I do not regard the question discussed free from doubt. The statute, as suggested in the case cited from 16 Abbott’s Practice, is susceptible of two interpretations, the design would seem to be to keep the partnership interest intact for creditors of the firm, and to subject the independent individual rights acquired by the limited relation to their demands, and not to extend the equity to the individual property of the special partner.

Present — Brady and Potter, JJ.

Order affirmed, with costs.


text:
    CHRISTINA SHARP WYLIE, Respondent, v. LEVI A. LOCKWOOD, Appellant, Impleaded with EMELIA N. STILWELL and others.

      Will, construction of — issue of a deceased child, when it is entitled to the benefit of survivorship.

    A testator, by his will, gave all his estate to his children, “ to have and to hold 'to them, as tenants in common, during their respective lives,” and directed that in case any or either of his children “ should die without issue his, her or their share, shall go to the survivors or survivor of them living at the time of such death, respectively, without issue, equally during, their respective lives, and after his, her, or their respective deaths, to their issue respectively in fee simple. On the death of either of my said children, leaving issue, I g-ive and devise to such issue, and to their heirs and assigns forever, the share or proportion of my estate hereinbefore devised for life to the parent of stich issue.”
    The testator left eight children, three of whom died intestate and without issue. Then the fourth died leaving issue, and thereafter the fifth died intestate and without issue.

      Held, that the issue of the fourth child were entitled to share in the estate of the fifth child, i. e., that such issue were entitled to one-fourth, and not merely to one-fifth of the entire estate.
    Appeal from so much of a final judgment of partition, and of the interlocutory order directing a. partition, as adjudges that the plaintiff is entitled to a one-fourth instead of a one-fifth interest in the real estate described in the complaint in the action.

      Henry TI. Anderson, for the respondent.

      D. G. Orosby, for the appellant.
   Potter, J.:

This is an appeal from a judgment of this court at Special Term and the interlocutory order directing a partition of the premises described in the complaint, and awarding to the plaintiff one-fourth thereof. The rights of all the parties to the actiou are derived from the bill of one Samuel Norsworthy, who died December, 1878.

No question is made in relation to the execution and validity of the will.

The relative rights or shares of the parties in the premises depend upon the construction of the will; by the construction given to the. will by the court below, the plaintiff is entitled to the one-fourth of the premises. By the construction contended for and claimed by the defendant and appellant, Lockwood, the plaintiff should have but one-fifth of the premises. The contention is between one-fourth and one-fifth.

The provisions of the will, which lie at the bottom of this dispute, are as follows:

“ Fifth. Immediately after my youngest child shall becqme of age, I give and devise the -whole of my estate, real and personal, to my said children, or such of them as may be at that time living, to have and to hold to them, as tenants in common, during their respective lives ; and I order and direct that in case any or either of my children should die without issue, his, her or their share shall go to the survivors or survivor of them living at the time of such death, respectively, without issue, equally during their respective lives, and after his, her or their respective deaths, to their issue respectively in fee simple. On the death of either of my said children, leaving issue, I give and devise to such issue, and to their heirs and assigns forever, the share or proportion of my estate hereinbefore devised for life to the parent of such issue ; and I do earnestly recommend to my said children that they do agree upon and appoint one of themselves, from' time to time, to manage, improve and conduct the concerns of the property hereby devised to them respectively, to the best advantage, and in such manner that the benefit intended to them and their issue, by this my will, may not in any way be impaired.
. “ Eighth. If any of my daughters shall marry without the consent, in writing, of my wife and the said William B. Skid-more and Burtis Skidmore, or some two of them, she shall forfeit her share of my said estate, which shall immediately pass to and be vested in her surviving sisters, who shall hold and enjoy the same during the life of my daughter so marrying without consent; but after her death, her children shall enjoy the share hereinbefore devised to them in the same manner as if their mother had married with consent.”

At tlie time of the testator’s death there were eight living children, viz. : Louise, Mary, -Frances, Ann, Emilie, John, Samuel and William.

John, Samuel and William died without children, and intestate. Frances also died unmarried, and intestate. Emilie married, and had two children, of whom plaintiff is one; the other died, without children, and intestate. When Emilie, the mother of plaintiff, died she left her surviving none of her brothers, but all of her sisters, including Frances. When Frances died as above stated, without children, and intestate, she left her sisters Louisa, Mary and Ann surviving her, and each of them having children.

The question to be decided in this case is, whether the plaintiff, who is the child of the testator's deceased daughter Emilie, takes any estate devised by the testator to Frances, in addition to the estate -which she takes from her mother under the will. Under the devise to her mother Emilie, the plaintiff took one-fifth. If she also takes from the devise to Frances, her share is increased to one-fourth. What was the intention of the testator in this respect ? This is to be determined from the language employed by the testator in the will, and the evident scheme upon which he has attempted to dispose of his estate.

The language of the will is to have its proper and ordinary signification. When the language is doubtful or susceptible of auothcr than the ordinary meaning, or when one rendering is loss strictly grammatical than another, as where words are employed referring to a more remote instead of a more proximate antecedent, that construction will be adopted which will best harmonize with the general and obvious scheme of the will, support and give effect to all its provisions, prevent disinheritance of the lineal descendants, and produce equality of benefits among those standing in equal natural relations to the testator. (1 Eodfield on Wills, 422 to 439, et seq.; Low, Executor, v. Harmony, 72 N. Y., 408.)

This rule of construction has been adopted to the extent of making the word “ children,” as used by the testator, mean grandchildren.

In the case of Scott v. Guernsey (48 N. Y., 106), the court, in giving construction to the will in question in that case, interpo-latecl the word “amongst,” changed the word “or” to “and,” and made the expression, “at the time of executing the will,” to mean “ at the time of the wills taking effect.”

In a case quite analogous to this under consideration, Sir R. Malins, V. C., says in Gross v. Maltby (L. R.), 20 Eq. Cases, 378 ; 15 Eng. R. by Moak, 384 : “ There is no rule more clearly established than this, that when the intention of a testator is clearly manifest, the court will endeavor to carry out that intention so far as the words will permit.” In that case the word “ survivor,” if given its literal meaning, would have defeated that intent, and so was changed to “other.” The substitution of “other” for “survivor,” to carry out the testator’s intent, was made in In re Arnold’s Trusts (L. R.), 10 Eq., 252, and In re Palmer’s Settlement Trusts (L. R.), 19 Eq., 320 (11 Eng. R., Moak, 354), the word “survivors,” in one connection, was construed literally, and in another part of the same will was construed “ others.”

Now, what was the manifest intention of the testator, as evinced throughout the general scope and meaning of the will ?

He devised a life estate to his nine children as tenants in common so long as they should live, with a devise over to those of them surviving any of those dying without issue. To the issue of those dying, he devised in fee the share before devised for life to the parent so dying.

If any of his daughters married without consent of her mother and the executor in writing, the shai’e devised to that daughter for life was devised to the other life devisees during the life of said daughter, but with remainder in fee to her children at her decease. It is plain that he had his grand-children in mind, for he devises to them in fee the share their parent had for life, immediately upon the parent’s decease. It is also plain that he intended his own children should take estates for life.

Now, to give the construction to the will claimed by the appellant might result in this : that the shares of those of his children that should die without issue would pass to the last surviving child of the testator, and if he or she had issue, all the estate devised for life to those of his children dying without issue would go to the issue of the last survivor if he or she had issue, and if not, would pass from under the will entirely.

There is nothing to show that the testator ever contemplated or desired such a result. He certainly provided that his grand-children should havener stirpes the share of their parent, and there can be no reason imagined or suggested why these grand-children should not take a share of those of his children dying without issue, instead of giving all such shares to the children of the survivor or putting them beyond the pale of the will.

The last sentence in this fifth division of the will under consideration affords additional evidence that the intent of the testator was to give a life estate to his own children, and the remainder in fee to his grand-children. In that sentence, after having devised his estate for life to his own children, he recommends to them that they appoint one of their number from time to time to manage and improve the property to the best advantage and in such manner that they should receive the benefits intended for them and their issue ; that is, as we understand, to all the grand-children without discrimination or inequality among the respective issue of his children.

This unnatural and, we think, unintended result can be avoided without any change of the language of the testator, or any violence to it, or the rules of grammar, if the word “ their,” in the second sentence of the fifth division, is construed to refer to all the testator’s children having issue, instead of referring to the survivor of Ms children having issue. There are two classes of children mentioned in that sentence: one class is children having issue, and the other class is children having no issue. “ Their” in that sentence, refers to and stands for the class having issue, and means the same as if the testator had said the issue of the class having children, nr the issue of my children generally, or such issues as any of my children may have.

Wo think this mode of construing the language of the testator to accomplish his manifest intention is consistent with many well considered cases, and as we apprehend, in conflict with none when closely considered. (Waite v. Littlewood, L. R., 8 Chy. App., 74; Badger v. Gregory, L. R., 8 Eq.. 78.)

The case of Guernsey v. Guernsey (36 N. Y., 267), referred to by appellant’s counsel, is not opposed to the view we have taken of tMs case. In that case the testator gave an estate in fee to each of bis three children. If either died without issue, there was an unmistakable contingent devise of the share of the one so dying to the survivor or survivors of the children of the testator in fee.

Wo think the judgment should be affirmed,'.with costs against the appellant.

Davis, P. J., and Babrett, J., concurred.

Judgment affirmed, with costs.


author: Barrett, J. :

text:
    MALTBY G. LANE, Trustee, Etc., Respondent, v. ARCHIBALD THOMPSON BROWN AND S. AMELIA BROWN, Appellants, Impleaded with ELIZA BERRIAN, Respondent.

      Estate, when vested — when children take as tenants in convmon and not as joint tenants.

    A testator, by ms will, provided: “ I direct my executors to pay the one equal half of the net income of the residue of my estate to my sister Margaret E. Campbell during her life; and, at her death, to pay the one-quarter of the principal of such residue to such person as she may have appointed to receive the same, and in default of such appointment, to such person or persons as would be entitled thereto by law as her heirs or next of bin, and that they apply the other equal half of said net income to the support, maintenance and education of the family of my nephew, Archibald T. Brown, during his life, and that another quarter of the principal of said residue shall he paid to the children of my said nephew, Archibald T. Brown,, upon the death of my sister'Margaret.” Archibald T. Brown had three children living at the time of the testator’s death, two of whom died in the life-time of Margaret E. Campbell.

      Held, that the children of Archibald T. Brown took vested estates in remainder" in the one-quarter of the said residue, upon the death of the testator, and that the representatives of the deceased children were entitled to their shaves therein on the death of Margaret E. Campbell.
    That the said children took as tenants in common, and not as joint tenants.
    Appeal from a judgment of the Special Term, construing the eighth clause of the will of Adam Thompson, deceased. The said eighth clause was in the following words:
    “ Eight. I direct my said executors to pay the one equal half of the net income of the residue of my estate to my sister Margaret E. Campbell during her life, and at her death to pay the one-quarter of the principal of such residue to such person as she may have appointed to receive the same ; and in default of such appointment, to such person or persons as would be entitled thereto by law as her heirs or next of kin, and that they apply the other equal half of said net income to the support, maintenance and education of the family of my nephew Archibald T. Brown during his life, and that another quarter of the principal of said residue shall he paid to the children of my said nephew Archibald T. Brown, upon the death of my sister Margaret; and at the death of said Archibald, I direct the other half of said residue of my said estate to be paid to all his children then living and the descendants of those who may have died, they taking the share of their deceased parent, subject to a payment to be made to Elizabeth, the wife of said Archibald, if she shall survive him, of four hundred dollars a year, while she remains his widow, and no longer.”
    The question in controversy arises out of the language itali- • cised. Archibald T. Brown had three children living at the death of the testator. Of these, two died before the decease of Margaret E. Campbell, intestate and without issue. The legal representatives of the deceased children claim each one-third of the one-quartef of the residue. Mrs. Berrian, the surviving child, claims the whole one-quarter. The Special Term adopted her view of the case, and decreed accordingly. From such decree the representatives of the deceased children appealed.

      Francis LarJcin, for the appellant, S. Amelia Brown.
    The one-quarter of the residue vested in the three children of Archibald T. Brown at the death of the testator. (2 R. S. [6th ed.], 1101, § 13; 47 Barb., 309; 49 id., 56; 1 Hun, 354; 8 Bosw., 480; 4 N. Y. S. C. R. [T. &. C.], 82; 18 N. Y., 418; 6 id., 360; 31 Barb., 562; 28 id., 367; 5 id., 101; 2 id., 248;- 40 ich, 495; 52 N. Y., 118, 123; 24 id., 9, 16; 41 id., 81; 1 Lans., 366; 2 R. S. [6th ed.], 1167, § 2; 13 N. Y., 273; 28 Barb., 145, 193 ; 25 id., 136; 10 id., 388; 4 Paige, 342; 1 S. Ch., 342; 18 How. Pr., 54; 7 Paige, 230, 534; 3 Barb. Ch., 93; 35 N. Y., 371; 4 Hun, 291, 408; 43 N. Y., 382; 4 Lans., 239; 5 id., 167; 2 R. S. [6th ed.], 1104, i 44; 9 Abb. pr. [N. S.], 446; 3 Hun, 519; 4 id., 289.)

      J. W. Gerard, for the appellant, A. T. Brown.
    At the death of the testator the children of A. T. Brown took vested estates in remainder; and, on the death of any of them before Mrs. Campbell’s life estate terminated, their shares passed to their heirs or personal representatives. (Harman v. Osborn, 4 Paige, 336; Moore v. Little, 4.1 N. Y., 66; Loe v. Provost, 4 Johns., 60; Livingston v. Green, 6 Lans., 50; Stowellv. Graves, 2N. Y. Sup. Ct., 211; McKinstry v. Saunders, 2 id., 181 and 186, citing Manice v. Manice, 43 id., 368; Embury v. Sheldon, 68 id., 228; Smith v. Scholtz, 68 id., 42; QonMing v. Ooncicling, 3 Sand. Ch., 64; Rogers v. Rogers, 3 Wend., 505; Van While v. Bloodgood, 1 Brad., 154; Sheriden v. Haus, 4 Abb. Ct. App. Dec., 218; Barber v. Wood, 1 Sand., 129; Livingston v. Green, 52 N. Y., 118; Williamson v. Field, 2 Sand., 533.)

      E. T. Snelling, for the respondent Eliza Berrian.
    Mrs. Ber-rian, the sole survivor of her class, takes the entire moiety of the said fund. (Milbanlo v. Grane, 25 How., 193; Putnam v. Putnam, 4 Brad., 308; Gardner v. Printup, 2 Barb., 83; Webster v. Webster, 2 P.Wms., 347; Scott v. Bargemcm, 2 id., 68; Barnesr. Allen, IBro. C. C., 167 [*181]; Lady Shore v. Billingsly, 1 Ver., 482; Willing v. Baine, 3 P. W ms. ,115; Kings v. Luff Join, 1 Dicks. Rep., 392; Whiter.Baber, 6 Jur. [N. S.], 591; Buleftndy.Record, 2 Sim., 354.) Those who compose the class are to be ascertained at the expiration of the intermediate estate. (WessingerY.Hunt, 9 Rich. Eq. [S. C.], 459; Batemans. Gray, Law Rep., 6 Eq., 215; Collin y. Collin, IBarb.Ch., 630; see opinion of Chancellor at p. 637; Lovett v. Buloid, 3 Barb. Ch., 137; MilbanJc v. Crane,. 25 How., 193; Gimblett v. Purton, Law Rep., 12 Eq., 427; LlawJoins v. Everett, 5 Jones’ Eq., 42.) Yhe bequest being to a “ class, no estate vested until the time of payment,” i. e., the death of testator’s sister, Margaret Campbell. ( Warner v. Durant, Ct. of App., January, 1879; 19 Alb. L. Jour., 279; Drake v. Pell, 3 Edw. Ch., 251; Andrews v. Partington, 3 Bro. C. C., 401; Ellison v. Airey,
      1 Yes. Sen., Ill; Bateman v. Gray, Law Rep., 6 Eq., 215; Gimblett v. Burton, id., 12 Eq., 427; Remnant v. Ilood, 6 Jar. [N. S.], 1173; Ohevaux v. Aislabie, 13 Sim., 71; Bansbury v. Read, 12 Yes., 75.) The legal estate ivas in the executors and trustees until the expiration of the estate for life. (Brahe v. Bell, 3 Edw. Chy., 251; see Yice Chancellor’s Dec., p. 267.) When legacies are given to two or more persons in undivided shares, as “ to the children of,” the legatees will take as joint tenants, there being no words of severance. (Butnam v. Butnam, 4 Brad., 309; Motley v. Bird, 3 Yes., 628; Button v. Torre, 6 Jur., 234; Be Witte t. BeWitte, 11 Sim., 41.)

      James JY. Blatt, for the plaintiff, respondent.
   Barrett, J. :

We have no doubt that one-quarter of the residue of the estate vested in the children of Archibald T. Brown upon the death of the testator.

The statute declares that future estates are vested where there is a person in being who would have an immediate right to the possession of the lands upon the ceasing of the intermediate or precedent estate. (2 R. S. [Banks’ 6th ed.], 1101, § 13.) That is precisely this case. The children of Archibald T. Brown were “ persons in being,” entitled to immediate possession upon the death of Margaret E. Campbell. The same rule applies to limitations of future estates in personal property. (2 R. S. [Banks’ 6th ed.], 1167, § 2.) This is not affected by the form of the devise. The direction'to trustees to pay over the principal, upon the death of Margaret E. Campbell, was a sufficient devise of the property, and vested it in the children. (Manice v. Manice, 43 N. Y., 378; Gilman v. Reddington, 24 id., 11.)

It is claimed, upon behalf of Mrs. Berrian, that as the devise was to .a class, no estate vested until the death of Margaret E. Campbell. The cases do not support this contention. It is true, as was said by the chancellor, in Collin v. Collin (1 Barb. Ch., 637), that where an estate is-to be distributed among a class, at the death of the testator, those who are in esse at that time, and no others,, are entitled to share. But, even in that case, if the ’ ' class consist of the children of a particular person, those begotten at the time, but born afterwards, are included. The reason of the rule is, that members of the class antecedently dying are not actual objects of the testator’s bounty.

Thus, in Magaw v. Field (48 N. Y., 668), it was held that, where one Gerritsen devised a piece of land to the children of Magaw, the two (out of seven living when the will was executed) surviving, at the death of the testator, took the whole estate.

This was undoubtedly the state of things contemplated by Mr. Justice AlleN, when, in Milbank v. Crane (25 How. P. R., 199), he speaks of property given to the children of A., vesting in any one answering the description, without regard to previous deaths. His language is a quotation from Jarman, who is simply giving the reason why such legacies do not lapse because of the death of a member or members of the class (less than all) during the testator’s life-time. (2 Jarman, 295.)

Where the distribution is not to be made at the death of the testator, but subsequently upon the death of a particular person, all who then answer the description will be entitled to share. This, however, does not postpone the vesting of the future estate, nor prevent its taking effect at the death of the testator. It- is only another mode of stating the doctrine that the remainder, though vested, is subject to be opened to let in after-born children.

Mr. Justice AlleN’s decision (ubi supra) will be found to be entirely in harmony with these well-settled principles, when it is noted that there the bequest was to the children of the testator living at the decease of the widow, and the surviving children of such of them as might then be dead ” (page 198). It was upon this provision that the learned judge based the remark that it was “apparent, from the tenor of the will, that the persons who were to take under this clause of the will were to he ascertained at the time of the death of the widow, and that only those who were then living, and answered the description of the will, could take under it.” Nor should this matter of the vesting of future estates or interests be confounded with questions regarding specific legacies. Whether these latter vest in presentí, though payable in futuro, depends, of course, upon the particular phraseology of the will and the intention of the testator. (Warner v. Durant, 76 N. Y., 133.) What is relevant to the present discussion is the effect of the statute upon the language employed, and as to that there can be no doubt under the authorities ; nor can there be any doubt as to the intention, derived from the entire will.

The remaining point made by the learned counsel for Mrs. Berrian is that the Brown children took as joint tenants and not as tenants in common. This also is answered by the statute (2 K. S. [Banks’ 6th ed.], p. 1104, § 44), clearly so as to real estate. As to the personalty, we agree with Gilbert, J., in Blanchard v. Blanchard (4 Hun, 289), that the remark of Surrogate Bradford in Putnam v. Putnam (4 Bradf., 309) was too broad.

With a single exception, the statute applies to personalty the same rules as it has prescribed with respect to limitations of future or contingent estates in land. Rapallo, J., in Manice v. Manice (ubi supra, p. 382), says, that the statute clearly indicates an intention, on the part of the Legislature, “that in all respects, other than the suspension of ownership, limitations of future interests in personalty should be governed by the same rules as estates in lands.”

In Graff v. Bonnett (31 N. Y., 13), Hogeboom, J., declared that, “ it has been held in several cases that the statute, which provides that limitations of future or contingent interests in personal property, shall be subject to the statutory rules prescribed in relation to future estates in land was, in effect, a legislative application of the sam& principles and policy to both classes of property." This language was quoted and approved in Campbell v. Foster (35 N. Y., 372).

Kent (vol. 2, p. 351), says, “that in legacies of chattels, the courts at one time leaned against any construction tending to support a joint tenancy in them, and testators were presumed to have intended to confer legacies in the most advantageous manner.” He then proceeds to call attention to certain English cases (Campbell v. Campbell, 4 Bro., 15; Morley v. Bird, 3 Ves., 628; Crooke v. De Vandes, 9 id., 197; Jackson v. Jackson, id., 591), where a different rule was laid down. It must be considered that the tendency of English institutions was towards the consolidation of interests and the perpetuation of estates, while the leaning with us is in favor of subdivision and separate enjoyment.

It will be found that the cases in this country of legacies of chattels, treated as held in joint tenancy, were, where as in Putnam v. Putnam (ubi supra), the legacy was to two or more persons named in the will, and the general language excluded the idea of a severance. In the great majority of the cases this is so, even in England.

In the will now under consideration, the idea of severance runs throughout, and the thought of survivoi'ship, incident to joint tenancy, is plainly excluded.

The judgment of the Special Term must be reversed, with costs to the appellants, to be paid out of the fund, and a judgment entered in accordance with the views expressed in this opinion, with costs to each of the parties in the court below to be paid out of the fund.

Davis, P. J., and Beady, J., concurred.

Order reversed, with costs to the apjiellants to be paid out of the fund ; judgment ordered in accordance with opinion.