text:
    Roxanna Kelley, Pl’ff, v. The Mayor, Aldermen and Commonalty of the City of New York et al., Def’ts.

      (Supreme Court, Putnam Special Term,

      Filed January, 1894.)

    1. Eminent domain—Power of legislature.
    It is within the 'competence of the legislature to authorize municipal corporations to take private property for public use without first making compensation, provided the owner can coerce compensation without unreasonable delay.
    3. Constitutional law.
    The watershed act is constitutional.
    S. Nuisances—Definition.
    The several kinds of nuisances defined.
    4. Same—Prescription.
    No person can acquire a prescriptive right to maintain a public nuisance.
    5. Same.
    In case a prescriptive right can be acquired to maintain a mixed nuisance, the user, at the time of the action to enjoin interference with it, must not be substantially in excess of that exercised during the period requisite to acquire such right.
    6. Same—Police power.
    The police power of the state, in respect to such matters, is founded upon the rule of law which requires one person so to use his property as not to interfere with the rights of his neighbors.
    ‘7. Same.
    Power to abate a public nuisance may be exercised in a manner adequate to afford an effectual remedy.
    Roxanna Kelly, the plaintiff, brought this action against the Mayor, Aldermen and Commonalty of the City of New York •and the Commissioner of Public Works of that city, to restrain them from entering upon and interfering with the premises of plaintiff in Putnam county, in this state, through which premises runs a stream, about thirty-five feet in width, known as the Middle Branch of the Croton river, through which stream the waters stored in the Middle branch reservoir are conducted into the Croton river, and thence by the Croton lake and the aqueducts into the city of New York, where the water forms part of that used for drinking and domestic purposes.
    In April, 1893, the commissioner of public works of this city entered upon the premises of plaintiff, claiming that her use of the same resulted in the befouling of the waters of the Middle branch, built a cesspool upon plaintiff’s premises, and turned into that cesspool a drain pipe, which, up to that time, had conducted fecal matter, waste water, slops, etc., from the water closets, etc., of the dwelling house of plaintiff to the Middle branch of Croton river.
    The commissioner of public works also notified plaintiff that he would, unless she did so, move back from the banks of the Middle branch her barns, stable and pigsty, which he also claimed, especially in respect to an uncemented privy on the banks of the stream, constituted a source of pollution of the stream.

      Plaintiff then procured a temporary injunction restraining the further interference by the commissioner with her property, and her complaint demanded that this injunction be made permanent.
    The case was tried in October at Carmel, Putnam county, at special term, before Mr. J ustice Dykman.
    The other facts sufficiently appear in the opinion of Mr. Justice Dykman, here given.
    The powers exercised by the commissioner in regard to what he had already done, and what he proposed to do upon the premises of plaintiff, .were by him claimed to be by virtue of his powers under what is known as the “ Watershed Act,” chap. 189 of the Laws of 1893.
    The theory of the action of the plaintiff was based upon the alleged unconstitutionality of that act, and especially of the feature of the act which allows the taking of the property before the actual payment of compensation.

      Benner & Benner (Augustus S. Hutchins and. Charles Benner, of counsel), for pl’ff: William H Clark, counsel to the corporation (Theodore Connoly, of counsel), for def’ts.
   Dykman, J.

The water supply of the city of New York is derived entirely from the valley of the Croton river. The water shed embraces an area of about three hundred square miles in extent, and is drained by the three branches of the Croton, designated as the eastern, middle and western. These branches unite in the upper part of Westchester county, and the river runs on for several miles, until it receives the Muscoot river, which brings the water from Lake Mahopac, and then it flows into Croton lake.

When it had been determined that the valley of the Croton should be utilized for the procurement of water for the municipality, the legislature passed a law authorizing the city to acquire title to land by right of eminent domain for the construction of a dam and reservoir at the southerly end of the shed, for the impounding of the water, and an aqueduct to convey the water to the city. Under that legislative authority the dam, aqueduct and reservoir were constructed, and the title to tire land covered by water was acquired. The reservoir is known as Croton lake. It is a narrow, crooked body of water, about four miles in length. The different branches of the Croton are augmented by numerous smaller streams, and upon their banks and along the sides of the three branches are barn-yards, privies, pigsties, and other places where filth is collected and washed into the streams.

These places for the collection and deposition of filth and putrefaction became so numerous and so extensive, and so polluted the water as to cause great alarm and anxiety among the inhabitants of the city.

Scientific and medical skill united in declaring the danger to health and life very great and very imminent, and in addition to the demand for the adoption of some measure which might avert the peril bv the removal of the cause.' The legislature of the state in March, 1893, passed an act entitled “ A.n act to provide for the sanitary protection of the sources of the water supply of the city of New York, chap. 189, Laws of 1893.”

By section one of that act it was made lawful for the commissioner of public works of the city of New York to acquire or take, in the manner thereinafter set forth, title to all real estate, and acquire or extinguish any interest therein of which the acquisition, taking or extinguishment may be necessary for the sanitary protection of all rivers and other water courses, lakes, ponds and reservoirs in the counties of Westchester, Putnam and Dutchess, so far as they then were or thereafter might be used for the supply of water for the city of New York. The mode of acquiring titles and the extinguishment of interests is prescribed in the law from section two to section twenty-six inclusive, and they are the usual constitutional methods. By § 27 of the act the commissioner of public works is authorized to take such measures as may be necessary to preserve from pollution and defilement all the sources of the water supply in the three counties already mentioned, and to enter upon all lands near, adjacent or contiguous to any of the sources of water supply, and to abate and remove the cause of any such pollution or defilement. All damage and injuries to property occasioned by any act under that section were to be ascertained and paid in accordance with the provision of the previous section of the act.

The plaintiff in this action owns about 100 acres of land in the town of Carmel, and the middle branch of the Croton runs through the westerly portion of her farm from north to south. Her barn and horse stable are on the east side of the stream, in close proximity to the bank, and her mansion is on the west side of the stream, a short distance from it. The drainage of her dwelling house, including that of the water-closet, is let into the stream by a soil pipe, and is emptied there, and has been for many years. Upon the ascertainment of such facts, the commissioner of public works directed the removal of the barn yard, stables, pigsties and outside privies upon the premises of the plaintiff, and caused a cesspool to be constructed upon her land and the soil pipe to be conducted into the cesspool, so that the drainage from the house would run into it, and not into the stream of water. Thereupon the plaintiff commenced this action for the purpose of restraining the defendant and its officers from further interference with her property.

The action is based upon the theory of the unconstitutionality of the act of 1893, already mentioned. It will be profitable to ascertain the rights of these parties prior to that statute. It is the legal right of every riparian proprietor to have a stream of water which passes through his land flow in its natural condition, with its channel unchanged and its purity unimpaired. Such a right was vested in and pertained to the defendant as the owner of the bed of Croton lake and the banks by which it was environed. That lake is, in fact, a running stream, through which one hundred millions of gallons of water run daily in its onward progress to the city. The pollution of the water bv the sewage from the plaintiff's house and the wash from the out buildings was an invasion of the rights of the defendant, and also constituted a nuisance.

Nuisances are of three kinds, public, private and mixed. They are public when they violate public rights and produce a common inj ury; when they injure or annoy that portion of the public which necessarily comes in contact with it. They are private when the injury resulting from them violates only private rights and produces damage to a few persons only. Mixed nuisances are those which are both public and private in their effects; public, because they injure many persons, or all the community, and private in that they also produce special injury to private rights. Wood’s Law of Nuisance, 22.

It is not always easy to determine the class to which any given injury is to be designated. In this case it is plain that the injury is not a mere private nuisance. Its injurious effects and fatal consequences fall upon all who use the polluted water, and that may include not only the million and a half of inhabitants of the city, but also all who visit there.

The nuisance created and continued by the plaintiff is either public or mixed, and, in my judgment, it is public, because it corrupts and poisons water wliich all have a right to use. It is, in its nature and consequences, an injury to all who come within the sphere of its operation, and that may be millions of human beings. The question is only important in reference to the right -of the plaintiff to prescribe for the nuisance, for in this state no person can obtain a prescriptive right to maintain a public nuisance. Wood’s Law of Nuisance, p. 743. It is presumed the same rule applies to a mixed nuisance, as that is in one sense public. I think, therefore, that the plaintiff cannot acquire a right by prescription to drain into this stream. But, even if she can, ■ she has not introduced proof sufficient to establish the same. To do that it was necessary for her to show that her use of the stream had actually invaded the rights of the defendant, and that the use and invasion ■of the right have produced an injury equal to and of the character complained of. Wood’s Law of Nuisance., page 726. The fact that a noxious trade, or a harmful use, has been continued for twenty years does not establish a prescriptive right -to its exercise. It must be shown further by the party asserting the right that, for the entire period, the pollution has been as vile and extensive as that complained of, and further, that the user, at the time of the action, is not substantially in excess of that exercised during the period requisite to acquire such right. Wood’s Law of Nuisance, id., also p. 728.

In no view, therefore, has the plaintiff established any prescriptive right to defile the water in question. The plaintiff holds her property in subordination to the rule of law which requires her so to use it as not to interfere with the rights of her neighbor. That rule is the foundation of the police power of the state, which authorizes the legislature to pass laws for the protection of the health and safety of the public, a power sufficient to warrant the destruction of property for the protection of the public health, without compensation. Van Wormer v. The Mayor, 15 Wend., 262; Meeker v. Van Rensselaer, 15 Wend., 398.

Prior to the interference of the municipal authorities the house sewage from the residence of the plaintiff, including human excrement, was drained into the middle branch of the Croton river. These discharges from the human system are very poisonous, and the sewage is poisonous if taken in the stomach. According to the testimony in this case it is a germ carrier—that is, it carries disease germs from the human system into the water, that these germs have the power of multiplying in the water, and a small number of them added to a large quantity of water will serve to infect the entire large body of water. It is, therefore, one of the most dangerous sources of pollution.

The plaintiff insists that the commissioner of public works has no power to interfere with the plaintiff, a citizen of Putnam county, in the enjoyment of her right to drain her premises into the running stream; but that contention is faulty, first, because the plaintiff never had the absolute right, free from all restriction, to drain her sewage into the stream, as I have already stated. In the next place, it is not the commissioner of public works who is interfering; it is the legislature of the state that has interfered for the preservation of the public health.

The case is novel. The city of New York has acquired the right to conduct the waters of the Croton river to that city, for public use, and in all the statutes providing for the acquisition of land, or the extinguishment of riparian rights, it has been the dedared purpose of the legislature to furnish the city of New York with a supply of pure and wholesome water, It must be assumed, therefore, that the city has the right to the water in its purity, free from all defilement, and fit for all domestic uses.

It may be assumed that millions of people use this water in the city every year, and thus the public health and safety were jeopardized to an extent that justified the interposition of the legislature by virtue of the public power of the state to arrest the evil. The abatement of a nuisance detrimental to public health is one of the ordinary functions of the public power of the state, and the nuisance created by the plaintiff is of a flagrant character. That power is, therefore, adequate to afford an effectual remedy. Renwick v. Morris, 7 Hill, 575; Fertilizing Co. v. Hyde Park, 97 U. S., 667. The enormity of the offense will be more readily discerned if it be assumed that all the riparian proprietors within the Croton watershed have the right to commit the same nuisance as the plaintiff has perpetrated, and that the water is sent to the city freighted with the seeds of disease and death with which it would be thus contaminated. The disastrous results can hardly be conceived by the imagination.

It is the apprehension of such evils, and to preserve the public health, and to avert the danger to human life, that the legislature has interfered for the sanitary protection of the sources of the water supply in the counties named. It is because the entire public is concerned. The commissioner of public works is se lected as the appointed executor of the statute, probably because he has the requisite .machinery at his command for its execution. There seems, therefore, to be sufficient reason for permitting the commissioner of public works to execute the law in the counties named therein.

As I have already said, it is the state which has interfered for the sanitary protection of the sources of the water supply of the city, and has authorized the commissioner of public works to take such measures as may be necessary to preserve from pollution and defilement all the sources of the water supply, and at any time within three years to enter upon lands contiguous to any such source of supply and abate and remove the cause of any such pollution or defilement.

Then follows a provision for compensating all damages and injuries to property occasioned by any act under that section of the statute, and the commissioner of public works is required to institute proceedings, under the provisions of that act, within ten days, to ascertain the damage and injury to property occasioned by the abatement of the causes of pollution. If such proceedings be not so instituted, then any person injured may commence an action for the recovery of the damages sustained. The money to pay for the property taken and rights extinguished, and all damages and expenses to the extent of $500,000 a year, is to be raised by the issuance of bonds by the comptroller. The board of aider-men of the city is directed to raise, from time to time, by tax upon the real and personal property in the city, the sum of money required to pay the interest upon such bonds, and to pay them at maturity.

So far as property right can be acquired in water actually appropriated to practical use for domestic and other purposes, such right has been acquired in the waters of the Croton river by the city of New York. The purpose is a public one, and the power to exercise the right of eminent domain for its acquisition and for the acquirement of the land and the extinguishment of rights necessary for its control and utilization has been delegated to the mayor, aldermen and commonalty of the city of New York.

The great objection to the statute in question is, that it undertakes to vest the title to the property taken or injured in the city before the final order for the confirmation of the report in the condemnation proceedings, but the objection is invalid. As law is settled in this state at the present day, it is within the competence of the legislature to authorize municipal corporations to take private property for public use without first making payment, provided a certain and adequate provision is made, by which the owner can coerce compensation, through the judicial tribunals or otherwise, without unreasonable delay. 2 Dillon’s Municipal Corporations, § 615; Cooley’s Constitutional Limitations, 692. The same question was presented and decided by the general term in this department, in the' case of The Mayor v. Wright, 12 N. Y. Supp., 20; 84 St. Rep., 904; under a provision in 'the act for the construction of the new aqueduct, which was precisely like the provision in the statute, and it was there held

that the constitutional requirement of the compensation was satisfied by a provision for certain and adequate payment, which can be made available by the owner.. The same question was decided the same way in the Matter of the Mayor, 99 N. Y., 569. The synopsis of the statute given above is sufficient to show that it provides a certain, definite and adequate mode of payment to the plaintiff for all damages she may sustain. It must be borne in mind that it is the intention and scheme of this act to pay for all property taken, for all injury or damage done, and for all rights extinguished.

My examination conducts me to the conclusion that the enactment of the statute in question was a valid exercise of legislative power, and is not violative of the constitution of the state or of the United States ; that its execution ought not to be arrested by the courts.

This action is destitute of merit, and the complaint of the plaintiff should be dismissed with costs.


source: Caselaw Access Project

author: O’Eriek, J.

license: Public Domain

text:
    Samuel Galle et al., Resp’ts, v. Adolph Tode et al., App’lts.

      (Supreme Court, General Term, First Department,

      Filed January, 1894.)

    1. Fbaudulent conveyances—Judgment .
    A judgment by confession will be set aside, where there was a fraudulent intent on the part of the judgment debtor, without regard to the intent of the judgment creditor.
    2. Witness—Pbiytleged communications.
    Where a client refers a person to his attorney for information, testimony as to the latter’s statements is competent.
    3. Evidence—Declarations.
    In an action to set aside confessed judgments, where a conspiracy between the debtors and some of the creditors is alleged, the declarations of the former, not made in the presence of the latter, are competent.
    Appeal from judgment entered on report of referee.
    This action was brought by judgment creditors to set aside what is claimed to have been a fraudulent disposition of property, made by the defendant debtors Tode and Wulling, by means of judgments confessed in favor of various parties, under which the property was sold by the sheriffs of New York and Orange counties. The relief sought is that such judgments be held to be fraudulent and void as against the plaintiffs, and that they be first paid out of the proceeds of the property in the hands of the sheriffs.
    In March, 1891, the debtors, being embarrassed, sought to devise some plan by which they could continue their business and occupy a position where “ none of the creditors could attach or levy or seize any of the property transferred.” In furtherance of this plan, or intent, a corporation was formed, in which besides the debtors, there precipitated Messrs. Levi, Máteme and Studeman, the first two of whom were creditors and friends, and the last a bookkeeper in the employ of the debtors. The capital stock was neither paid in nor insured; but the property of the debtors was transferred to this corporation. No secrecy was made of the purpose for which the corporation was formed, the debtors themselves avowing that it was “ in order to prevent the creditors from seizing the property.”
    Concluding that the creditors were thus held in a safe position, a meeting was called by the debtors with a view to compel such creditors to enter into a settlement. At such meeting the creditors undertook to formulate a plan by which the assets could be placed in a position that with respect thereto all the creditors might be treated alike and equitably. Apparently acquiescing in this suggestion, an understanding was had between both debtors and creditors present that no action should be taken by either until such time as a plan of settlement might be devised. In violation, however, of this understanding, and under an arrangement by which confessions of judgment should be first given to Levi, then to Máteme, and some six or eight others, none of whom except the two named had knowledge of the debtors’ intention, the assets were transferred back to the debtors, in whose possession they were seized under executions upon the judgments confessed.
    March 26 was the date fixed upon for the final meeting of the creditors, when the plan of settlement was to be presented by a committee appointed for that purpose; but, on the day preceding, a retransfer of the assets and a confession of eight judgments was engineered, by which all the assets were thereafter sold under the executions; and, with the exception of the Bowery store, which was undesirable property, the other assets, including the place of business in Fifty-ninth street and the Monroe Cheese plant, which was made into a corporation, passed into the hands of the wives of the debtors as nominal owners, but really controlled by the debtors themselves, who, under copartnership articles arranged between the wives, were made managers of the business.
    Before this property, however, got into the possession of the debtors and their wives, and after it had been seized under the executions issued upon the confessed judgments, feeling certain that the other creditors were then at bay, a meeting was called by the attorneys for the debtors, who also represented the judgment creditors, for the 28th of March, for the purpose, as stated in the notice, of presenting a statement of affairs and submitting a proposition of settlement.
    Upon such facts, 'which might be amplified by the details of the scheme resorted to, the referee decided that the plan thus devised was fraudulent, because entered into • with an intent to hinder, delay and defraud the creditors. And from the judgment entered upon his decision this appeal is taken.

      Emanuel J. Myers, for app’lt; A. J. Simpson, for resp’ts.
   O’Eriek, J.

The questions presented on this appeal have been so many times passed upon in the various litigations growing out of the attempted disposition by the debtors of their property, that it would appear useless to repeat the reasons in support of this judgment.

Upon the motion to vacate the attachment in the common law action, which is the basis of the present suit in equity, an opinion upon the facts then appearing was delivered by Mr. Justice Patterson, and, upon appeal to this general term, by the presiding justice. Galle v. Tode, 60 Hun, 132; 38 St. Rep., 863. In addition to these, the record before us is supplemented by an opinion by the referee, which succinctly states the facts and correctly states the principles of law which should control, supporting, as it does, the decision rendered by him.

The appellants, however, have with so much earnestness urged upon us a reconsideration of the questions, that we feel that a brief summary of the facts, such as has been given together with a review of the authorities, will demonstrate that there are no questons presented upon this appeal except such as have been frequently passed upon in the class of cases to which this belongs.

The most strenuous argument against the validity of the judgment is that, inasmuch as the judgments were confessed for bona fide debts, and there was a failure to show any fraudulent intent upon the part of some, at least, of the persons in whose favor the judgments were confessed,, this is fatal to a conclusion that such judgments were fraudulent.

In answer to this argument, we would repeat, what we have frequently endeavored to point out .in construing the Statute of Frauds, that it is not the intent of the person in whose favor a conveyance is made or a judgment confessed that is to control, but it the intent of the debtor. By the terms of the first section of the Statute of Frauds, we find it expressly stated that every conveyance of property, and other acts done as therein enumerated, including “a decree or judgment suffered, with intent to hinder, delay or defraud creditors, shall be void.” And to emphasize the purpose of this statute as to those who alone can be protected against its sweeping provisions, we find by a subsequent section that protection is extended only to bona fide purchasers for value. 4 R. S., Banks’ 8th ed., § 2592.

Upon this question, therefore, we need but quote, as expressive of the view of this court, from the opinion of the presiding justice in the case of Simons v. Goldback, 9 N. Y. Supp., 360; 31 St. Rep., 118, wherein he says: “There was evidence adduced by

the affidavits that there was a scheme upon the part of these defendants to remove their property from the reach of their creditors, and that the attorney who issued this execution, and who was the attorney for the entry of the confession of judgment, was cognizant of this intention. The entry of the judgment and the carrying out of the intention was evidently one scheme; but it is urged that the knowledge of this attorney of this attempt cannot affect the plaintiff, because his action cannot be said to involve the plaintiff in a scheme to cheat the creditors of the defendants so as to have his honest judgment set aside. In this proposition the learned counsel forgets that it is not necessary, in order to i n-validate this judgment, that the plaintiff had cognizance of the scheme to defraud the creditors. It is sufficient, even if this judgment was confessed upon honest debt, that it was part and parcel of a plan by which some portion of defendants’ property was to be removed and concealed from their creditors, to renders such judgment absolutely void, because all the acts of the defendants in carryingout such a scheme are necessarily tainted with the same infirmity. In the case of an assignment with preferences, although honest debts may be preferred, yet if any portion of it is tainted with the intent to defraud creditors the whole assignment fails. So, in the case of the confession of a judgment, if it is part and parcel of a scheme to remove property from the reach of creditors, although ‘the plaintiff in the judgment may be entirely honest, the judgment is tainted by the intent of the parties confessing the same.”

And in Illinois Watch Co. v. Payne, another decision of this general term, 11 N. Y. Supp., 410; 33 St. Rep., 967, it was said: “All that it (the statute) has required is that the judgment shall be suffered, or permitted, with this intent, and its existence in the mind of the debtor fulfils and satisfies the language of the statute, and it has been so construed and administed by the courts. Starin v. Kelly, 88 N. Y., 418; Loos v. Wilkinson, 110 N. Y., 195; 18 St. Rep., 110. Against that intent an innocent purchaser for a valuable consideration has alone been protected, and the party in whose favor a judgment has been fraudulently confessed is not such a purchaser.”

These we deem sufficiently expressive of our dissent from the appellants’ contentions: First, that fraud cannot be predicated upon a judgment confessed for a Iona fide indebtedness, in the absence of some agreement between the parties thereto whereby the debtor is to be benefited; or, second, that the creditors in whose favor the judgments were confessed are purchasers for value, and cannot be'affected by the fraudulent intent of the debtors, unless they participated therein.

Another position assumed by appellants is, that the intent of the debtors Tode and Wulling to commit a fraud will not-prevent them from purging themselves therefrom by abandoning the enterprise and devoting their property to the payment of their just debts.

The answer, however, to this proposition is to be found in the fact that the case is entirely barren of any evidence to show that the debtors at any time purged themselves of the intent to commit a fraud ; but, on the contrary, the evidence is consistent only with the view that the intent was ever present in all the plans and schemes devised by them, and which would result, if not held to be void, to their enjoying the fruits of their fraudulent acts by obtaining, through their wives, the possession, control and management of the property, free from any claims of their creditors. The only conclusion consistent with the evidence is that, not only did they not abandon the enterprise fraudulently entered upon, for the purpose of applying their property to the payment of their just debts, but that they have secured, ancl would continue to secure, immunity from the just attacks of their creditors, if the scheme devised were not held to be void.

As we do not, therefore, regard the questions presented as new, we think that sufficient has been said to show the counsel for appellants that nothing in his argument has convinced us that the settled view of this court in actions of this character, so frequently 'enunciated and consistently upheld, should be now departed from. Upon the facts appearing, we fail to see how any other "conclusion could be reached than that arrived at by the learned referee. The debtors started with an intent to place the property where the creditors could not reach it, and while thus holding them at arms’ length, compel them to make just such a settlement as they saw tit to propose; and when it was found that this plan was likely to be abortive, the subsequent steps were indicative of the original fraudulent intent that no portion of the property should be applied to the payment of their debts, and the judgments confessed were a scheme by which they pla'nned, and successfully as it would appear, to get the property practically under their own control by having it placed in the names of their wives, and thus, secure from their creditors, to reap the reward of their fraudulent schemes.

It is insisted, however, that, while the findings of the referee may be supported by the evidence, the judgment must be reversed because a great portion of the evidence upon which such findings rest was incompetent and improperly admitted by the referee.

To show how fallacious the argument in support of this position is, we will first take the objections made to the evidence admitted as separately urged before the referee, and then group the objections together, for the purpose of showing to what an absurd conclusion we should come if the argument of the appellants were to prevail.

The first objection is that to the admissibility of testimony given by a lawyer who was appointed chairman of the meeting of creditors when it was thought feasible to effect a plan of settlement between the debtors and all the creditors. While considering this plan, this witness’s attention was called to the bad faith of the debtors and their counsel in entering the judgments by confession in violation of the agreement that no such action should be taken; he thereupon called upon one of the debtors for an explanation, who, instead of giving it, stated that he had nothing to say, but referred the witness to his counsel, under whose advice he said he was acting. This witness accordingly saw the attorney, and it was to the statement of what this attorney then said to the witness that the objection was made, the argument in support of the objection being that any statements of the attorney were incompetent and inadmissible as against the debtors.

There is unquestioned authority for the proposition that an attorney is not competent to make admissions in conversation with third persons which will be evidence against his clients as to the facts of his case, and that the admissions of an attorney are not competent testimony to bind clients. But these are subject to the modifications that where the client refers a person to his attorney for the .purpose of having him state the client’s position with respect to any situation, thus conferring authority upon the attorney to speak for him, and leading the person seeking the information to rely on the right of such attorney' to speak for the client, the1 reason for the rules referred to by the appellants is wanting.

Another objection is to the ruling of the referee in admitting testimony of the declarations and acts of -the debtors in the absence of, and without the concurrence of, the judgment creditors. This objection, it is urged, is supported upon the ground that the cases hold: first, that declarations of a defendant who has confessed judgment, made in the absence of the plaintiff, are inadmissible to impeach the judgment; and, second, that the declarations of a grantor, after the conveyance, are inadmissible to impair the title of his grantee. The charge here was that certain persons conspired together to cheat and defraud. Having established such a conspiracy, can it be claimed that the acts and declarations of the conspirators are not competent against those claiming the fruits of the conspiracy ?

Without, however, further discussing them separately let us see to what lengths the appellant’s argument would go if we consider the objections grouped together.

Certain persons enter into a conspiracy with intent to hinder, delay and defraud, and it is argued that upon it appearing that some of the conspirators, together with certain innocent third parties selected by them, are nominally or ostensibly benefited, it cannot be shown by the acts and declarations of those who are engaged in the fraud that it was intended to cheat creditors, and that it did in fact benefit principally the fraudulent actors.

That is the case here presented. The debtors and two creditors, with the aid of their attorneys, planned a scheme under which, by means of judgments, they intended tb hinder, delay and defraud their creditors; and, upon the evidence of such fraud being apparent, and an explanation demanded, it is insisted that one who had a right to know, and who was referred to the attorney who acted for all of the conspirators by one of them, was not entitled to state what that attorney told him, because such declarations are not binding upon the clients, and that the declarations and acts of the debtors cannot be given unless it can be shown that those in whose favor the judgments were confessed were present at the time. The result would be, as we. understand the appellants’ argument, that before the declarations or acts of any of these people, who had conspired together and arranged a plan by which their creditors were to be defrauded, can be used in evidence against them, they are all - to be brought together in one place and then interrogated, and that only the admissions or declarations so made would be binding; and that,,with respect to their acts, unless it were likewise shown that what each one did was done in the presence of all the others, the evidence of such acts would be incompetent.

It is not necessary, however, to pursue a discussion of these objections, and many others which have been urged, and which we regard as frivolous, because, though one or two of them might be technically right, they would not affect the validity of this judgment.

Upon competent and uncontradicted evidence, the findings and conclusions of the referee are supported, and in this state of the record, having in mind the fact that this case was one in equity, tried before a referee, mere technical rulings upon evidence which did not affect the result or do injury would not be available to to invalidate the judgment. As held in Donovan v. Clark, 138 N. Y., 633; 52 St. Rep., 358, wheré the action was on the equity side of the court to establish a partnership and for an accounting, in such case exceptions to evidence should be disregarded, unless the appellant can show that injustice has been done upon the whole case or that the ruling complained of may have affected the result See also, Pach v. Geoffroy, 67 Hun, 406; 51 St. Rep., 777.

The only remaining question is that in which it is insisted that the findings are irreconcilable with the judgment upon the questions of fraud, and that the referee erred in making certain findings for the plaintiffs, and in refusing to find for the defendants. The answer to this, in addition to what has already been said, we think, is to be found in Crim v. Starkweather, 136 N. Y., 635; 49 St. Rep., 68; and Baldwin v. Doying, 114 N. Y., 412; 23 St. Rep., 759. The former of these cases holding that where there is any evidence to sustain the findings of a referee, his refusal to find a fact which is but a link in the chain of propositions, logically leading to a different result, is not erroneous. And the latter, that to make exceptions to a refusal of a referee to find a fact sufficient ground for a reversal, it must appear that had he found as requested, the result would have been affected.

Our conclusion, therefore, is that the judgment was right, and should be affirmed, with costs.

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


author: Parker, J. Follett, J. (concurring).

text:
    Mayer Goldsmith, Resp’t, v. William Coverly, Impleaded, etc., App’lt.

      (Supreme Court, General Term, First Department,

      Filed January, 1894.)

    Witness—Credibility.
    When the whole uncorroborated testimony of a party is coupled with the improbability of many of his statements, the adverse party is clearly entitled to have the jury pass upon his credibility.
    Appeal from a judgment of this court entered in favor of the plaintiff for the sum of $7,577.83, on a verdict rendered by direction of the court.

      Foster & Thomson, for app’lt; Butler, Stillman & Hubbard, for resp’t.
   Parker, J.

The agents in New York for the National Steamship Line, the Wilson Line, and the Anchor Line of Steamers, about May 18, 1887, made an agreement with the plaintiff, which was reduced to writing in the form of a communication signed by the agents, and accepted by the plaintiff, which reads as follows:

“New York, May 18, 1887.

“ Dear Sir.— Please note that on October 1st, 1887, we will severally return to you a sum equal to five (5) per cent, of the aggregate freights you may pay us from April 1st to July 1st, 1887, on live cattle shipments to Glasgow, Liverpool, London or Hull, England.

“ That on January 1st, 1888, we will return to you a like percentage of the aggregate freights which you may pay us on such shipments from July 1st to October 1st, 1887.

“ That on April 1st, 1888, we will return to you a like percentage of the aggregate freights which you may pay us on such shipments from October 1st, 1887, to January 1st, 1888.

“ That on July 1st, 1888, we will return to you a like percentage of the aggregate freights which you may pay us on such shipments from January 1st to April 1st, 1888.

“ Provided that any and all live cattle in the export of which, from this port to Glasgow, Liverpool, London or Hull, you may be interested, directly or indirectly, shall have been shipped exclusively, for the six months preceding each of said dates of payment, on steamers represented by the undersigned.

“ Respectfully yours,

“ P. W. J. Hurst.

“Henderson Brothers.

“Sanderson & Son.”

This agreement was discontinued orally by the plaintiff and Henderson Bros., defendants in this case, from the 1st day of April, 1888, to January 1, 1890.

The defendants in the meantime made for the plaintiff large shipments of cattle, receiving payment therefor. But from December 31, 1888, to January 1,1890, they did not pay to the plaintiff anything on account of rebates, and refused to do so for the reason, as they alleged, that plaintiff had failed to comply with the conditions upon which the right of the rebate was made to depend, in that he had not shipped all live cattle in which he was directly or indirectly interested, from the port of New York to the ports named in the agreement, by the steamship lines agreed upon.

It was to recover the amount of such rebates that induced the commencement of this action. There was no dispute as to the amounts of freights paid defendants, and the only issue presented by the pleadings was, whether plaintiff had conformed to the agreement by shipping live cattle to the ports designated in it by the steamship lines represented by the agents signing it. The burden of proof necessarily rested upon the plaintiff to establish a compliance on his part with that provision of the agreement upon which he based his claim of light to recover.

The only evidence presented by him, for that purpose, was his own testimony, which, if true, was sufficient to require a verdict in his favor. The court, assuming it to be true, directed a verdict in his behalf for the sum of $7,088.77. The defendants having asked for leave to go to the jury for issues presented, now contend that it was error for the court to direct a verdict against them, and the reason assigned is that, in view of the fact that the only evidence offered in support of plaintiff’s claim was that of a party to the action, whose testimony it is urged was to some extent discredited by his own answers on cross-examination, the question as to the truthfulness of his evidence was for the jury. That the court could direct the jury to find a verdict in favor of plaintiff in the event that they should believe his testimony to be true, but that it had no right to direct them to believe him. The early rule denied the competency of a party to the record to testify as a witness. Subsequently this rule was changed by statute, which has since become incorporated in the Code of Civil Procedure, § 928. But ever since parties to an action were qualified by statute to testify as witnesses in their own behalf, a distinction has been uniformly observed between their testimony and that of wholly disinterested witnesses. While the testimony of disinterested witnesses, who are neither impeached nor discredited, must be credited, that of witnesses who are parties to the action, by reason of their interest in the result, is ordinarily to be considered by a jury, in order that they may determine what effect, if any, their interest in the result of the controversy should have upon their credibility.

And it has been held many times that, although the testimony of a party to an action be uncontradicted, his interest presents a question as to credibility which the jury must pass upon. Honegger v. Wettstein, 94 N. Y., 252-61; Wohlfahrt v. Beckert, 92 N. Y., 490-494 ; Kavanagh v. Wilson, 70 N. Y., 177; Elwood v. W. U. Tel. Co., 45 N. Y., 549; Sheridan v. The Mayor, 8 Hun, 424; Moody v. Pell, 2 Abbott’s N. C., 274. In actions where corporations are parties, the same rule has been applied to the testimony of its officers. Canajoharie Bank v. Diefendorf 128 N. Y., 191-200 ; 33 St. Rep., 389 ; Joy v. Diefendorf, 130 N. Y., 6; 40 St. Rep., 491.

The case which tends more strongly to support the decision made than any other is Kelly v. Burroughs, 102 N. Y., 93; 1 St. Rep., 161. In that case the defendant was the first and plaintiff the second indorser on a note made by one Evans. From the statement of facts we quote: “ Defendant then testified that he indorsed the note at the request and for the accommodation of the maker and returned it to him; that the plaintiff procured the note to be discounted, had the money placed to his own credit, and, on the same day, drew it. Plaintiff, in answer, testified that he indorsed the note, and procured it to be discounted at the request of the maker, and gave the proceeds to him. Other evidence was given to the same effect.” It is apparent, therefore, that, to some extent, at least, the plaintiff was corroborated. How fully the report of the case does not inform us, but it appears from the statement of the case that it was in substantial respects. The court held there was no question for the jury, saying, “the mere fact that the plaintiff, who testified to important particulars, was interested was. unimportant, in view of the fact that there was no conflict in the evidence, or anything or circumstance from which an inference against the fact testified to by him could be drawn.” It will be observed that neither in the statement of facts nor in the opinion of the court does it .appear that plaintiff's recovery was based solely upon testimony given by himself.

But, if we assume that the fact was otherwise, and that the authority of Kelly's casé has not been impaired.by the latter decisions in Bank v Diefendorf, and Joy v. Diefendorf, supra, the conclusion is, nevertheless, required that the defendant was entitled to go to the jury, for in this case the testimony elicited from the plaintiff on his direct and cross-examination, was of such a nature, that considered in connection with the fact that he was a party to the action, the question of his credibility became one for the jury to pass upon.

The defendants relied, whether wisely or not is of no moment in the present discussion, upon the plaintiff’s testimony and his books and papers, covering the period in dispute to show that he had failed to keep his part of the agreement not to ship cattle to-the ports named therein by other than the agreed steamship lines. In order that the books land papers should be made available for such purpose on the trial, the plaintiff was duly subpoenaed .to produce such of them as covered the period from December 81, 1888, to January 1, 1890. He did not produce them, assigning as a reason that the books were lost or destroyed, and the bookkeeper dead. We quote, from his cross-examination, some of the answers made by him to inquiries with reference to them:

“ Q. And you have no books back of 1891 ? A. No.

“ Q. Where were the books which covered this period as to which we are all interested, when you saw them last? A. I can’t remember.

“ Q. What is the name of your bookkeeper ? A. That man I had at that time is dead now; he died last year. It is not quite twelve months since he died; I guess it is about-, I can’t remember exactly; nine or ten months: his name was Michael Epstein.

“ Q. How many books do you think there were that related to your business, covering this period in question when you last saw them ? A. I can’t remember.

“Q. You did a pretty'large business? A. I know that.

“ Q. How many thousands of dollars worth of cattle do you suppose you shipped, in which you were interested, directly or indirectly, during the year 1889 ? A. 1 can’t remember that; the bookkeeper knows that; he can tell you.

“I thought you said he was dead? A. Well, I know. But he knew it at the time. * * *

“ Q. You can’t seriously mean that you don’t remember whether there was one book or six books which covered the enormous shipments which you, the-biggest shipper in New York, made? A. I can’t remember.

“ Q. Did you ever see yourself any page or any book which re■corded, or purported to record, any of your transactions in cattle -during the year 1889? A. No.

“ Do you know anybody that ever did,.except the bookkeeper whom you saw buried ? A. I bought a house about two years ago, and I kept my books up at the house, and then we moved out and the books didn’t come down, and the books were destroyed ; they did’nt come to the office, because we did’nt have any safe; we bought a new safe - down here. He (the bookkeeper) always kept those books in h'is power. I, myself, am no bookkeeper. Two years ago I bought a house, and the books were left there, and we bought a safe down here, and they commenced with new books.

“Q. He claimed your books as his own property? A. Yes.

“ Q. And you didn’t make any objection to his claiming you?; books as his own property ? A. No, I always thought he was a, straightforward man.”

The defendant, evidently with the idea that plaintiff’s bank account and checks would furnish evidence of payments to other lines for the shipment of cattle, inquired of him at what banks he kept his accounts for the year 1889 ? With what success, the following questions and answers, which fairly measure it, will disclose.

“ Q. Did you keep more than one bank account during the year 1889 ? A. I can’t remember. I kept one. I can’t tell you; we have got two bank accounts ; I don’t know where we generally put the money in; I can’t remember exactly, I didn’t draw the checks; I only signed them.

“ Q. Can you tell this jury the name of any bank in which you kept an account, and upon which you were in the habit of drawing checks or signing checks during the year 1889 ? A. I can’t remember them all.

“ Q. Gan you remember the name of any bank in which you ever kept an account? A. I kept an account in the Chemical Bank.

“Q. Wa1? it not in the Chemical Bank that you kept an account during the year 1889 ? A. I don’t remember that.”

It was at least quite remarkable that the plaintiff, who was the largest shipper of live cattle from the port of New York, and who, during the year 1889, shipped between 60,000 and 70,000 head of cattle from that port to Liverpool, London, Glasgow and Hull, should, within a short time thereafter, permit the books showing all these transactions to be lost or destroyed under the circumstances testified to by him.

The care which he says he took of them was not such as would ordinarily be expected of a reasonably prudent man engaged in business of such magnitude. Clearly, the jury should have been permitted to say in view of the character of his answers to defendants’ inquiries on cross-examination, of which we have given specimens merely, whether they believed his testimony in such respect. And if the conclusion should have been reached that his testimony in that regard was untrue they would have been at liberty to disregard the rest of his evidence.

In addition, the defendants produced two witnesses, who were shipping agents of other lines, who testified that in the year 1889 they had seen plaintiff’s foreman, Mr. Hirsch, on several occasions superintending the loading of cattle on boats belonging to their lines.

In view of the general rule which obtains, when the testimony of a party is wholly uncorroborated, coupled with the improbability of many of the plaintiff’s statements', the-defendants were clearly entitled to have the jury pass upon his credibility. It was for them to say, after weighing the entire testimony, in the light of the witness’ interest in the result, whether they believed that he had met the burden resting upon him of establishing full performance of the contract on his part

The j udgment should be reversed, with costs to the appellant to abide the evept.

Yah Brunt, P. J., concurs.

Follett, J. (concurring).

The circumstances disclosed by the record made the credibility of the plaintiff a question for the jury, and the court erred in directing a verdict; but I am not prepared to hold that the credibility of a party must, in all cases, be submitted to the jury. In case the testimony of a party is wholly uncontradicted, is not improbable-on its face, and there is no circumstance which tends to discredit the credibility of the party or the testimony given, the court may direct a verdict based on such testimony. Lomer v. Meeker, 25 N. Y., 361; Kelly v. Burroughs, 102 id., 93; 1 St. Rep., 161.

I do not understand that the court of appeals has laid down as a general rule that in all cases the credibility of a party, or of a witness interested in the event of the action, must be submitted to the jury, but, in the particular cases considered, it was held that the credibility of the party or of the interested witness should have been submitted to the jury.


author: Parker, J. Follett, J. (dissenting).

text:
    The Hanover National Bank of the City of New York, App’lt, v. The American Dock and Trust Company, Resp’t.

      (Supreme Court, General Term, First Department,

      Filed January, 1894.)

    1. Notice.—Constructive.
    Where a situation is presented which, the law declares, should put a person of ordinary prudence on inquiry, he is chargeable with constructive notice of everything to which that inquiry would have reasonably led, and nothing more.
    3. Same.
    In such case, if no inquiry has been actually made, he has a right to submit to the jury the same questions as though it had beeh máde.
    Appeal from- a judgment in favor of the defendant, entered upon the verdict of a jury, directed by the court.

      Thomas S. Moore, lor app’lt; Thadeus D. Kenneson, for resp’t.
   Parker, J.

The defendant is a corporation created by chapter 881 of the Laws of 1872 to act as a storage warehouse for cotton and other merchandise, and to issue receipts certifying the amount of the merchandise so deposited, which are negotiable and transferable by indorsement and delivery, so that the transferee is deemed to be the owner of the merchandise specified, either absolutely or as a pledge for any advances or credits, subject to the payment of the company’s charges accrued upon it. The plaintiff is a national bank, engaged in general banking business in the city of Hew York, and has for a number of years been accustomed to loan money upon such receipts issued by the defendant, or upon notes with receipts as collateral security. And for about seven years prior to 1891 it has frequently loaned money to Mr. Stone, the president of the defendant corporation, taking therefor his notes with warehouse receipts of the defendant as collateral.

About March 17, 1891, Stone applied to the plaintiff to discount his promissory note payable to plaintiff’s order in ninety days for $5,000, and offered to the plaintiff as collateral for said note a paper writing in the form of the warehouse receipts issued by the defendants. It reads as follows :

“ M. W. Stone, Pres’t. A. J. Pouch, Vice P.

F. H. Pouch, Treas. A. O. Hascy, Sec’y.

“ Humber of certificate, 26,572.

“ American Dock & Trust Co., Office, Cotton Exchange, Rooms 50 and 51, Hew York.

“Hew York, Mar. 11, 1891.

“ Received on storage at 1 The American Docks,’ for account of M. W. Stone, one hundred and seventy-two bales cotton.

151 S. Y. E.

21 C. H. V.

—subject to the order of themselves on payment of the charges accrued thereon and surrender of this receipt.

“ Weight or grade not guaranteed.

“ Labor, 10c.

“ Storage per month, 10.

“Bales, 172.

“ Store, 7.

“ M. W. Stone, Pres't,

(On left hand margin.)

“ This receipt is valid only when signed by either the president or treasurer.

“ (Indorsed.) M. W. Stone.”

The plaintiff discounted the note, paying the full amount thereof, less legal discount. After the maturity of the note, the plaintiff demanded from defendant the cotton, which the receipt acknowledged possession of. As the cotton was not, and never had been, in defendant’s possession, plaintiff’s demand was refused, and this action was thereupon instituted to recover its possession or value.

The question which the facts so far stated present, was before this court in Bank of New York National Banking Association v. This Defendant, 70 Hun, 152 ; 53 St. Rep., 905. It was there held, that as plaintiff knew that the Stone named in the n ceipt was the same person who, as president, had signed it, and that he was making use of it for his own personal benefit, it was thereby put upon inquiry touching Stone’s authority.

Plaintiff’s right of recovery was denied, and, without further discussion, the position then taken is reasserted. It is true that the plaintiff made no inquiry except of Stone, but if Stone did have authority to sign receipts as president, acknowledging that ■cotton had been stored by him with defendant, that fact would have been ascertained had inquiry been made, and would have been ascertained had inquiry been made, and would have protected plaintiff.

Whether the result is the same when the facts exist, and insufficient or no inquiry is made, was considered in Wilson v. Met Elevated R. R. Co., 120 N. Y., 145-153; 30 St. Rep., 787. The court saying: “He assumed that the issue and proposed ■disposition of the notes had been duly authorized. He trusted to the fact of authority, and not to the evidence of it And can it be said that the resolution which would have protected him if he had been informed of it, cannot be invoked to aid him now? Does a purchaser of a note, under circumstances which devolve upon him the duty of inquiry, assume a greater risk than the burden of proving that which would have protected him, had he •diligently inquired before making the investment? We think not." So here, if at the time when inquiry should have been made there existed facts establishing the authority of Stone, as president of the defendant, to sign receipts evidencing a contract between that corporation and himself, they are as available to protect the plaintiff as if it had inquired at first. Had it made inquiry resulting in an ascertainment of the facts which it now proves, assuming that they are sufficient to have authorized Stone, as president, to make such contracts with himself, still plaintiff would have been burdenéd with the necessity of proving them. Instead, it believed Stone’s assertion of authority, but his representations under the circumstances surrounding their making were not binding upon defendant, because the occasion and the situation made them personal and not official. But if their truthfulness should be established by other evidence, the fact would protect plaintiff as fully as if it had the best evidence of it in its possession, at the time of making the loan. In other words, when a situation is presented which the law declares should put a person of ordinary prudence on inquiry, he is chargeable with constructive notice of everything to which that inquiry would reasonably have led and nothing more (Cheever v. Pittsburgh, S. & L. E. R. R. Co., 72 Hun, 380; 55 St. Rep., 181; Shaw v. Spencer, 100 Mass., 380). This leads us to inquire what plaintiff would have found, had it, instead of relying upon the individual assertion of Stone, made inquiry at the office of the corporation.

It would have found there, the president, Stone, who has asserted over his official signature in this receipt, that he personally had on storage one hundred and seventy-two bales of cotton, and who it is fair to assume would not have denied his authority to issue the certificate. An examination of the books would not have disclosed any authority given by resolution of the directors to the president to thus evidence contracts between himself and the corporation, nor discovered any resolution forbidding it. Further examination would have caused it to appear that on March 16, 1886, a certificate for forty-one bales of cotton was issued by M. W. Stone, vice-president, to M. W. Stone, which was subsequently used, returned and canceled in the regular course of business, and a stub corresponding with the certificate at the time of issuing of the certificate, and thereafter continuing among the records of the company, to which is attached a receipt signed by Stone, acknowledging the receipt of the negotiable certificate. April 14, 1886, another certificate for eighty-five bales of cotton was issued to Stone, as vice-president, to himself; the stub is made out to correspond, and to it is attached a receipt for the negotiable certificate signed by Stone. Under date of May 24,1886, is a certificate signed by Stone, vice-president, to himself, for two hundred and sixty-one bales of cotton, the stub is made out in the usual form and to it is attached a receipt from Stone for the negotiable certificate. June 15, 1881, a certificate for one hundred bales of cotton was issued by Stone, as vice-president, to himself, a stub was made out to correspond, to which was attached a receipt in the usual form, signed by Stone, acknowledging the delivery of the certificate by him. Under date of November 29, 1881, a certificate of eighty-three bales of cotton was issued by Stone, vice-president,, to himself, and he signed a receipt for it, which was thereupon attached to the stub corresponding to the certificate issued. All of the certificates referred to were used, returned and canceled in the regular course of business, like the others; the receipts were signed, and stubs made out in accordance with the general custom. Under the practice of the defendant, if a man having a receipt for fifty bales of cotton, and calls for one bale, instead of making out a new receipt for forty-nine bales, one is indorsed off on the back, so that such indorsement represents the deliveries as made. Upon the back of the receipt •of April 14,1886, the following indorsements for delivery appear:

“INDORSEMENT FOR DELIVERY.

The property mentioned below is hereby released from this receipt, for delivery for warehouse.

Date. Merchandise. Marks. Signature.

.Aug. 6, ’86 Three (3) Bl. 0. T. O. M. M. W. Stone, V. P. Gendar.

12, “ Ten (10) it M. W. Stone, V. P. Gendar.

“ 13, “ Forty-two (43) <( M. W. Stone, V. P. Gendar.

“ 30, “ Thirteen (13) ft M. W. Stone, V. P. Gendar, 164.

Oct. 30. Ten (10) tt M. W. Stone, V. P. Gendar.

M. W. Stone.”

These indorsements were made by the bookkeeper who signed his name underneath the entries in each instance.

No effort appears to have been made to prevent these transactions from coming to the knowledge of all interested. They were openly done, and the record of each of them is, and from the time when they severally occurred, has been contained in, and formed a part of the regular books and record of the company,. Certainly plaintiff or the officer representing it would have been justified in reaching the conclusion after a review of the transactions referred to, that they tended to show, at least that the assumption of authority by the leading executive officer has been assented to, and ratified by the company.

Inquiry of the agent in charge of the defendant’s warehouse would have disclosed the fact that cotton had been stored there from time to time by Stone; that he was accustomed to report it regularly as it came in, and did not try to conceal from anybody the fact that Stone had cotton stored there. But one other officer of the company was regularly in attendance, and he was the secretary of the company, Mr. Hascy. Of such an officer generally the court of appeals recently said (Hastings v. B. L. Ins. Co., 138 N. Y., 473-79; 53 St. Rep., 63): “ The secretary is one of the general managing agents of a corporation, and when in the discharge of the duties of his office he represents the corporation itself.” The representations made by him in the course of the business of the company are binding upon it, and how could there be a stronger representation of authority on the part of Storie to sign receipts evidencing the contract between himself, and the corporation of which he is the executive officer, than is furnished by the fact that the certificates, to which we have already referred as executed by Stone to himself, and the corresponding stubs are in the handwriting of Hascy, the general secretary.

Had plaintiff, with these facts in its possession, reached the conclusion that the president’s representations as to his authority were true, and then made the discount, its right to have a jury pass upon the question whether the evidence upon which it relied was not sufficient to amount to assent by the corporation to the president’s assumption of authority in making such certificates, could not well be denied.

As has already been observed, if the facts tending to show an assent on the part of the officers of the corporation to the acts of its president in signing certificates in behalf of the corporation, representing that it had stored for him cotton, are of such a character as would have entitled the plaintiff to a submission of the question to a jury had he on inquiry ascertained such facts. They are equally available to it for that purpose when it did not inquire, or rather when the inquiry which it did make was of one who was then acting for himself, and could not bind the company in what he said.

It is a wholesome rule which charges those who are invited to deal with the officers of corporations, in respect to securities or other obligations of the corporation, for the personal benefit of such officers, with the necessity of inquiring as to the authority of the officer to make the contract which he proposes.

But it should not be carried to such an extent as will, under all circumstances, shift the misfortunes almost inevitably resulting from lax administration on the part of the officers and directors of a corporation from its shoulders to that of the individual or corporation having dealings with one of its officers. The dividing line between the two extremes will, in the end, be located more nearly central, and therefore with greater fairness, if where the facts tend strongly to show an acquiescence in the wrong-doing officer’s assertion of a right to thus act for it, the jury be permitted to pass upon the question of authority.

This question is presented by the request of the plaintiff, at the close of defendant’s testimony to go to the jury; its denial, and the exception taken.

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

Van Brunt, P. J., concurs.

Follett, J. (dissenting).

It is not asserted in behalf of the plaintiff that the defendant authorized its president to issue the warehouse receipt by which it agreed to deliver, on demand, one hundred and seventy-two bales of cotton which it had not received. The receipt was a fraud, and, as between Stone, to whom it was issued, and the defendant, it was void. The burden was on the plaintiff to show that it did not stand in the shoes of Stone, and before a recovery can be had the plaintiff must show (1) that it is a holder in good faith and (2) that the defendant is estopped from denying its liability by some act or omission of its directors or managing officers relied on by the plaintiff when it acquired the receipt.

It is a general rule that a principal is not bound by a contract executed by an agent in favor of himself. Story Ag., 10, 11, 210, 211; Neuendorf v. World Mut. Ins. Co., 69 N. Y., 389; Voltz v. Blackmar, 64 id., 440 ; Pratt v. D. H. M. F. Ins. Co., 130 id., 206; 41 St. Rep., 303 ; Bank of New York v. Am. Dock & Trust Co., 70 Hun, 152; 53 St. Rep., 905; Morse on Banks and Banking, §99.

It appeared on the face of this receipt that the president of the defendant assumed to bind his corporation for his own benefit, and the plaintiff’s cashier testified that he knew when he took the certificate that M. W. Stone, president, and M. W. Stone, to whom the receipt was given, was the same person. So the plaintiff bad knowledge that it was a contract which Stone had no right to make, and it took the receipt at its peril. Claflin v. Farmers & Citizens' Bank, 25 N. Y., 293: Dabney v. Stevens, 2 Sweeny, 415; aff'd 46 N. Y., 681; West St. L. Sav. Bank v. Shawnee, etc., Bank, 95 U. S., 557 ; Mor. Corp., §§ 517-606.

The case is barren of evidence tending to show that the plaintiff received this warehouse receipt on the faith of any act done or omitted by the directors or the managing officers of the defendant. Facts which existed and had not come to plaintiff’s knowledge and were not relied on by it, form no basis for an estoppel in pais. A person is not estopped by conduct unless his conduct was known to and relied on by the person asserting the estoppel. The plaintiff cannot rely upon the acts of Stone, nor upon his statement made in connection with this transaction, for he was then acting in his individual capacity, for his own benefit, and not as the president of the defendant. He could not act in both capacities in the same transaction. Moores v. Citizens' Nat. Bank of Piqua, 111 U. S., 156.) _

_ I think the plaintiff took this certificate with notice of its infirmity, and that the defendant is not estopped from denying that it was issued without authority. Stone was the vice-president of the defendant from 1876 to 1890, and president from the latter daté until March 27th, 1891, when he died. In 1881, Stone, as vice-president, issued to himself two receipts for cotton, and in 1886, three receipts for cotton, all of which were regularly entered on defendant’s books. It is not shown that the issuance of these receipts was authorized, nor that the fact that they had been issued ever came to the knowledge of the board of directors or of any officer except the secretary, It is asserted that from this evidence the jury might have found that Stone was authorized to issue receipts to himsélf for cotton actually delivered.

I think the fact that five receipts were issued by Stone in his own behalf in fifteen years, during which time many thousand receipts were issued, is insufficient evidence to warrant' a jury in finding that the defendant had authorized Stone to issue receipts to himself. It seems to me that the Bank of New York v. Am. Dock & Trust Co., 70 Hun, 152; 53 St. Rep., 905, is decisive of this case, and that the judgment should be affirmed, with costs.


author: Van. Brunt, P. J.

text:
    Holland Trust Company, Resp’t, v. James A. Waddell, App’lt.

      (Supreme Court, General Term, First Department,

      Filed January, 1894.)

    1. Bills and notes—Accommodation.
    The fact that a certificate of deposit is accommodation paper as between the drawer and the payee, will not avail against a holder who has parted with value on receiving it.

      2. Same—Pledgee.
    The pledgee of collateral securities may collect or sue upon any part of the securities and hold the balance.
    3. Same.
    A provision in the principal that the holder may sell the securities does not defeat his action upon them.
    4. Same.
    An unpaid renewal note is no part of the original indebtedness, and the pledged collaterals remain as security for the debt until it is paid.
    5. Appeal—Dismissal op complaint.
    A motion to dismiss a complaint will be denied, where the defendant subsequently supplied the defect in the proof.
    Appeal from judgment, entered upon verdict and from order denying motion for new trial.

      B. N. Harrison, for app’lt; Roosevelt & Edbbe (G. N. Teaman, of counsel), for respondent.
   Van. Brunt, P. J.

This action was brought to recover upon a certificate of deposit for $20,000, alleged to have been issued by the defendant, doing business at Key West, Florida, under the name of the “ John White Bank,” to one Oppenheim, of which the plaintiff claimed to be a holder for value. The answer admitted the issuance of a certificate of deposit, to Oppenheim, but denied that such certificate was as declared upon in the complaint, and denied that the plaintiff was a holder for value, or that the plaintiff was the lawful holder or owner thereof. The answer then alleged that the certificate which the defendant issued was made and delivered to Oppenheim without consideration, which the plaintiff knew; and that the plaintiff held the writing without value and upon a fraudulent agreement that said writing should be kept merely to mislead and deceive the plaintiff’s board of directors and the Hew York state banking department, in the event of inquiry into and disapproval of the real terms of a transaction theretofore completed or agreed upon between Oppenheim and the plaintiff, by which the plaintiff either purchased from Oppenheim 100 municipal bonds of the city of Key West, Florida, for $1,000 each, or loaned and advanced $100,000 to the said Oppenheim upon his note for that amount, with said bonds as collateral security to secure the payment of the note, the precise nature of the transaction being to the defendant unknown. The answer then alleged that there was nothing due from Oppenheim to the plaintiff upon said loan for which said writing could be held as security, and that there was nothing due from the defendant to Oppenheim.

Upon the trial of the issues thus framed, the court directed a verdict in favor of the plaintiff. A motion having been made for new trial, upon a case made and settled, such motion was denied; and from the judgment entered upon the verdict, and from the order denying said motion for new trial, this appeal is taken.

Upon the trial, the plaintiff having proved its incorporation, offered in evidence the writing declared on in the complaint, to which counsel for the defendant objected as not having been proved. This objection was overruled, on the ground that the answer admitted it sufficiently to identify it, and the defendant excepted. Oppenheim’s indorsement was then proved, and demand and refusal of payment, and plaintiff rested. Thereupon, the defendant’s counsel moved to dismiss the complaint upon several grounds, among which was one that the certificate of deposit had not been sufficiently proved, which seems to embrace all the other grounds stated. This motion was denied, and an exception taken; and it is urged that this ruling was error. Whatever might have been our opinion of the question had no additional evidence been given, we think that the defendant supplied whatever defect existed in respect to the authenticity of the certificate of deposit. While upon the stand the defendant was asked: “By the Court: Q. In whose handwriting is that signature ?” (handing the witness the certificate of deposit declared on in the complaint.) This question was objected to as irrelevant and immaterial to anything as to which this witness had been examined, and as an improper question to be put by the court under the circumstances. This objection was overruled, and an exception taken, which we do not understand to be insisted upon on this appeal. “A. That looks like mine.” “By the Court: Q. Is it not? A. I think it is; I signed a paper similar to this, and I thought it had certain restrictions or limitations.”

The latter part of the answer was directed by the court to be stricken out, and counsel for defendant excepted.

“ By the Court: Q. All I want to know is, if that is your own handwriting, whose signature is that? A. That looks like mine; I thought there was a restriction of six months in the certificate, and, when I signed, that was talked of.”

It further appeared that, when this -certificate was presented to the plaintiffs, they telegraphed to the John White Bank, at Key West as follows: “Is B. Gr. Oppenheim certificate of deposit twenty thousand dollars with you good? Wire answer." On the next day an answer was received by the plaintiff from the John White Bank: “ See James A. Waddell, cashier, at 10 Wall st., New York.” James A. Waddell is the defendant in this action. On the day of the sending of the telegram by the plaintiff to defendant’s bank, Oppenheim asked defendant to go over with him to plaintiff’s office and be introduced to the plaintiff’s secretary. The defendant went there with Oppenheim, was introduced, and upon being shown the paper he had signed in Oppenheim’s office, as hereinafter stated, he was asked by the secretary whether the signature was his, which he answered in the affirmative. This evidence clearly proved the certificate, and cured whatever defect, if any, had previously existed in the proof.

The defendant, on being examined, testified as to first acquaintance with Oppenheim in November, 1889, and to the remarkable and enduring effect which a letter from the plaintiff had upon him, asking Oppenheim if he saw any good municipal bonds he could buy right to do so, and they would divide the profits between them.

There was also introduced a letter from Oppenheim to the plaintiffs, dated 8th March, 1890, announcing to them that he had made -an offer to purchase $100,000 worth of the municipal bonds of Key West, Florida, five per cent., thirty years, with the option of obtaining the entire issue of $400,000; and he made the proposition to the plaintiffs to discount his note of $100,000, with the bonds as collateral security, and offered in this connection to employ the plaintiffs to sell and dispose of the bonds of the city of Key West at a price to be named, and a commission to be agreed upon, the plaintiff, as it sold and disposed of the bonds, to place the cash received from such sale to the credit of Oppenheim’s note; and various other terms were stated. There was also introduced a letter from Oppenheim to Yan Siclen, the secretary of the plaintiff, dated the 17th of March, 1890, notifying him that the board, the next day, would pass a resolution giving him the sale of the bonds at 97-J, and a commission to him. of 2 4-10ths.

There was also introduced in evidence a proposition made by Oppenheim to the honorable board of city commissioners of Key West, for the purchase of the bonds to be issued by the city of Key West; and a contract entered into between the city of Key West and Oppenheim, dated the 20th day of March, 1890, for the sale of $100,000 of the bonds.

On the 5th of April, 1890, Oppenheim, from Key West, addressed a letter to the plaintiff stating: “ Referring to my letter to you, dated March 8, 1889, I have to add that I have become the purchaser of $400,000 of the bonds of the city of Key West, Fla., and that I am to provide $100,000 on May 1, 1890, balance on sixty days’ notice. I desire to renew my proposition above referred to to you, and to say that I expect the assistance of the John White Bank, of this place. * * * I hope to have a telegram from you on Wednesday, April 9th, as I desire to leave for Hew York on Thursday, the 10th instant.” Van Siclen, on the 9th of April, telegraphed Oppenheim, at Key West: “Will accept note ten thousand, two months, indorsed John White Bank.” Subsequent to the entering into the contract for the purchase of the bonds by Oppenheim, the defendant saw a good deal of him, and on the 10th of April, 1890, was so impressed by his mention of Van Siclen and the Holland Trust Company that he gave Oppenheim a general retainer of $5,000 a year as his attorney.

On the 29th of April, 1890, Oppenheim wrote the Holland Trust Company as follows: “ Gentlemen: I hereby make application for a loan of $100,000, which I propose to borrow on my two months’ note for that amount, with collateral consisting of one hundred thousand dollars in the municipal bonds of the city of Key West (all coupons attached), and, as additional security to the Holland Trust Company, I offer a certificate of deposit for the sum of ten thousand dollars. Said certificate of deposit is issued by the John White Bank of the city of Key West, and is dated April 1, 1890, and has six months to run, with interest at five per cent, per annum.”

On the 2d of May, 1890, the Holland Trust Company, through Van Siclen as secretary, wrote Oppenheim as follows: “ Dear Sir: The executive committee of this company has accepted your application for a loan of $100,000, by discounting your note at sixty days for that amount, with $100,000 of the bonds of the city of Key West, Fla., and a certificate of deposit for $20,000 instead of $10,000 in the John White Bank of Key West, Fla., as collateral, upon approval, etc.” 1

On May 3d, the plaintiff, through its secretary, wrote Oppenheim : “ The sum of $100,000 is here awaiting the bonds, etc., of Key West, as indicated in my letter to you of May 1st.” The letter of May 1st was not produced.

On the same day Oppenheim wrote to the John White Bank, Key West, informing him that the Holland Trust Company had placed the $100,000 for the bonds at his disposal, or rather at the disposal of the treasurer of the city of Key West, and that formal notice had been sent to the treasurer. He then states that this-letter was written simply to inform the defendant that the Holland Trust Company required him to deposit with them as collateral a certificate of deposit for $20,000, and not $10,000, as they first informed him, and asking the defendant to make a certificate of-deposit for the sum of $20,000 payable to Oppenheim, dated the 1st of April, 1890, and to have it run for six months, with interest at five per cent, per annum. It is undoubtedly from this letter that the witness got the idea that the certificate of deposit which he signed had a six months clause in it, as testified to by him. This reference to the certificate of deposit to be made by his bank, the defendant swore, was the first time anything had been said to him about any certificate of deposit to be furnished by him for use in connection with the handling of the bonds; he had never heard such a thing before, and made no reply to the letter. ■ •

On the 5th of May, 1890, Oppenheim wrote to the plaintiff, reciting the terms of the proposed loan mentioned in the plaintiff’s letter of May 2d, and accepting the loan, and asking that the cash might be ready for him against the completion of the bonds, which would be in ten or fifteen days from date.

Prior to the receipt at Key West of Oppenheim’s letter of May 3d to the John White Bank, the defendant had left for New York, where he arrived on May 6th, and from New York went to Newport, to which place Oppenheim’s letter was forwarded and was received by him.

On the 29th of May the plaintiff wrote to Oppenheim: “As previously advised, wé have been holding for you the sum of $100,000 since Friday, May 23d. The interest on this amounts to $116.67, being seven days at six per cent. Please send check so that we may get it in this month’s account.”

On the 2d of June, 1890, plaintiff also wrote to Oppenheim: “As you have not paid the interest, as per' memo, sent you on Thursday last, and as the bonds have not arrived, we hereby notify you that we cannot hold the $100,000 for you any longer.” On the 4tEof June Oppenheim wrote to plaintiffs acknowledging receipt of these letters of May 29th and June 2d, and asking them to hold the $100,000 for a week longer, and informing them that the delay in the delivery of the bonds had been caused by an informality which he hoped would be rectified promptly, and further stating1 that he expected to have funds in a few days, and promising to pay the amount due for interest on the sum held for him.

In the early part of June the defendant came to New York, saw Oppenheim, and had a conversation with him respecting the issuing to him of the certificate of deposit, which at first defendant said he could not give, as Oppenheim had no money on deposit with defendant’s bank. Defendant further testified that Oppenheim urged that the certificate was only a matter of accommodation, and was so understood by Yan Siclen, and that the certificate did not mean anything, except to accommodate him, and was intended to be held by the trust company as a satisfaction to any one who would examine the collaterals, or the papers, or assets of the Holland Trust Company. After several days, as a result of this conversation the certificate was given, dated May 1, 1890, and on the 10th of June Oppenheim wrote to Van Siclen: “I expect the bonds to arrive in the city this evening, and they will be at your bank to-morrow morning. I send my note and the certificate of deposit as agreed.” It would appear to have been on the same day that Oppenheim and the defendant went to the Holland Trust Company and saw Van Siclen, who produced the certificate which had been signed by defendant, and asked him if that was his signature, as above stated, and immediately thereafter the plaintiff deposited to the credit of the defendant in the Western National Bank, upon account of the bonds of the city of Key West, the sum of $97,500. On the 12 th of June the plaintiffs received Oppenheim’s note, payable two months after date, for $100,000, which recited that they held as collateral security bonds of the City of Key West for $100,000, and a certificate of deposit for $20,000 by the John White Bank. It further appeared that these notes were renewed from time to time, until finally, on the 11th of November, 1890, a note was given in renewal, whereby on demand he promised to pay the plaintiff $100,000, with interest at the rate of 6 per cent, per annum, and 6 per cent, per annum additional, having deposited with said trust company as collateral security for the payment of this note, and also of all other present or future demands of any kind of the said trust company against the undersigned, due or not due, the property, as per memorandum envelope herewith, dated November 11, 1890, and two envelopes were produced by the plaintiff dated November 11, 1890, evidently referring to this loan, upon one of which the collaterals mentioned were “ 100,000 bonds of the City of Key West, Florida,” and upon the other was “ $98,000 bonds, City of Key West, and 20,000 certificate of deposit in John White Bank.”

It is conceded that during this time two of the bonds had been paid, reducing the number held by the plaintiff to 98 instead of 100. This note also authorized the sale of the collateral in case of non-payment, and with authority to the plaintiff to become the purchaser at such sale.

Upon these facts appearing the court directed a verdict for plaintiff, as already stated.

It is claimed upon this appeal that the evidence was sufficient to entitle the jury to find that the plaintiff was not a Iona fide holder, of the certificate for value, and, therefore, could not recover in this action ; and that plaintiff knew that Oppenheim was not a depositor of $20,000 in defendant’s bank; and that the certificate was transferred to the plaintiff in violation of restrictions imposed by the maker as to the usé it could be put to, and that the entire principal debt in the transaction in which the certificate came into the plaintiff’s hands was paid when it matured; and also that the certificate of deposit was not collateral to the note which the plaintiff now holds; and, further, that the plaintiff had no title to this certificate of deposit which authorized it to bring suit, the condition of the pledge being that it should ■be sold.

The objections as to the horca fides of the plaintiff depend largely upon the claim made by the defendant that the plaintiff and Oppenheim were jointly interested in the speculation in the bonds. But we fail to find from the evidence any such unity of interest. It is true that the plaintiff expected to act as financial agent in reference to these bonds, and to receive a commission therefor, which expectation may have been the inducing cause for the loaning of the money to Oppenheim, but that loan to Oppenheim in no way made them jointly interested in the speculation, any more than where a customer places his stock in the hands of a broker for sale upon commission, they are jointly interested in the transaction, because the broker receives a commission upon the sale.

Neither is the fact that the plaintiff knew (if it did know) that Oppenheim had no deposit with the John White Bank, and that the certificate in question was issued for the accommodation of Oppenheim, any defense to its claim. An accommodation note would be no accommodation unless it could be used to obtain credit upon it. It is issued for that particular purpose,' and, if used for that purpose, the holder of the note, who has parted with value upon the faith of it, certainly has a legal claim to recover upon it. There is no evidence tending to show that the plaintiff had any notice of any restrictions which the defendant placed upon the certificate, nor of any false representations which were made to defendant, as he alleges, in order to.obtain his signature to the certificate. Nor is there any evidence that the plaintiff knew that Oppenheim had no deposit with the bank in question.

The claim that the certificate was made by the defendant at the instance and upon the request of the plaintiff is not supported by the evidence. It is true that the plaintiff agreed to accept, as security for the loan, a certificate of deposit issued by the John White Bank. But that that is to be tortured into a request that the John White Bank should issue a certificate to Oppenheim to accommodate the plaintiff, seems to require a considerable stretch of the imagination.

Our attention is called to the case of Produce Bank v. Bache, 80 Hun, 851, decided by the general term in the first department in T883, in which it appeared that the respondent was a married woman, who had indorsed a draft drawn by another person, and, by the terms of the indorsement, had declared it to be a lien on her real and personal estate. Her defense was want of consideration ; the indebtedness for which the draft was given had originated in discounts made by the bank, but for the payment of which the respondent was not liable; that indebtedness was carried along by renewals until the draft in controversy was given.

It appears from the language of the court that the defendant indorsed the draft at the instance and request of the president of the bank for the sole purpose of having the paper in the bank appear in form to be a proper and legal evidence of an existing indebtedness, and that the intention upon the part of the bank not to enforce the contract was communicated to the indorser.

We might refer to the case of Crowell v. Madison Square Bank, as being a much more recent authority in support of this proposition; but it has no application to the case at bar. The plaintiff made no representation or promise to the defendant or to his bank. An offer was made of a certificate of $10,000, apparently, and the plaintiffs said they would take a certificate of $20,-000. That was furnished, the money was loaned, and the defendant got the money.

Neither has the claim that the loan has been paid and the collateral thereby released any better foundation. The principle is too well settled to need the citation of authorities that the renewing of notes from time to time in no way extinguishes the original debt; it is simply an extension of the time of payment and a change as to the evidences of the debt, and all collaterals pledged for the payment would remain as security notwithstanding the extention of the time of payment. It is apparent from the manner in which this transaction was carried on that there was no money except that which the plaintiff furnished, unless, perhaps, some interest which Oppenheim paid.

The dnly remaining question is as to the authority of the plaintiff over the collateral being limited by the provision for the sale thereof contained in the note of November 11, 1890. It seems to us apparent that this provision was not a limitation upon the rights of the plaintiff in respect to this collateral, but rather an expansion of those rights, giving plaintiff a power of sale and a right to purchase independent of the rights which a pledgee of securities of this kind would otherwise enjoy.

Upon the whole case, we think that no error was committed and that the judgment should be affirmed, with costs.

O’Brien and Parker, JJ., concur.