text:
    William H. Simonson v. George A. Waller, et al.

    '(Supreme Court, Appellate Division, First Department.
    October 23, 1896.)
    1. Wills—Construction—Conflict of laws.
    Where a testator domiciled in England leaves personal property in New York, where some of the claimants reside, the court of New York will construe the will according to the law of his domicile.
    2. Same—Partial intestacy.
    An English will directed that testator’s estate, consisting of personalty, be invested in trust for his “ children, or any child who, being sons or a son, shall attain the age of 21 years, or a daughter who shall attain that age or marry ; ” that the portion of Ms daughter, his only child, be held in trust for and the income paid to her during life; and that after her death the trustees should hold the same in trust for her children living at her decease ; but if, at testator’s death, there shall be no child of his living “ who, being a son, shall attain the age of 21 years, or, being a daughter, shall attain that age or marry,” then the trustees should hold the trust fund for a designated purpose. The ■daughter married and died without issue. Held, that, by the English law, the daughter took under the will a life interest in the estate, and that, as to the remainder, there was an intestacy, but that, as next of kin of the intestate as of the tim-e of his death, she took the residuary estate. 35 N. Y. Supp. 201, reversed.
    Appeal from special term, New York County.
    Action by Wiliiam Hyde Simonson, as trustee under the last will and testament of James Shaw Taylor, deceased, against George A. Waller, James T. Waller, Tom T. Waller, Alfred ZR. Waller, Elizabeth L. Warrin, Mary T. Lord,,George W. T. Lord, Samuel Lord, Jr., Thomas M. Lord, John T. Lord, Emma Smith, Laura Smith, Thomas P. Medley, Leonard Marshall, Mary L. Atkinson, and Joseph Beaumont Atkinson, for a judicial construction of the will of the testator, and the rights of claimants thereunder. From a judgment construing the will (35 N. Y. Supp. 201), defendants George A. Waller, James T„ Waller, Tom T. Waller, Alfred R. Waller, and Joseph Beaumont Atkinson appeal.
    W. A. Butler, for appellant Atkinson; Theo. N. Melvin, for defendants Waller; H. W. Jessup, Geo. C. Austin, and F. B. Colton, for respondents Lord.
   PATTERSON, J.

—This suit was instituted by a trustee of a testamentary trust, having in his possession securities of considerable value, constituting a part of the trust estate. The-purpose for which the trust was primarily established and created having been accomplished, its capital, which consists •of personal property only, is in condition to be distributed to ■or among those who may be entitled thereto, freed from the trust. Various defendants having advanced adverse claims to the funds or securities in his hands, the plaintiff filed his bill, praying that judicial construction be given to the will of the testator, and that the rights of the claimants of the fund represented by the securities referred to be settled and determined by the court. The controversy as it comes before us is between those parties, cross service of their answers having been duly made, as required in such cases. The contest arises under a foreign will, and is to be disposed of by the ascertainment and application of rules of foreign law. There are no claims of creditors involved in any way. Under such circumstances, the reasonable and proper course to pursue would appear to be to remit the whole matter of the construction of the will and the distribution of the trust estate to the courts of the country having jurisdiction of the subject-matter and of the administration of the estate, and where that estate must be finally settled and accounted for (Parsons v. Lyman,-20 FL Y. 101; Despard v. Churchill, 53 FT. Y. 198); but in this case the property in the plaintiff’s hands is claimed by residents of the state of Hew York, who assert title thereto under the will •of the testator, and it is urged that, the property being within his jurisdiction, and all the parties who claim as distributees being before the court, the resident claimants should not be subjected to the expense, delay, and uncertainty of judicial proceedings in a foreign land, but that their rights, if any exist, should be protected and enforced in this action. Recognizing the force of that position, we have considered the whole case, and reached the conclusion that the resident claimants have no such right to the property here as would require us to award it to them in this action. 'r

The case comes up on appeal from a judgment entered at special term, by which construction was given to certain clauses-of the will of James Shaw Taylor, a British subject, and a resident of England, who died in that country in 1862. The will was duly admitted to probate by the court having jurisdiction in England, but. it was never offered for probate in the-state of New York. The testator appointed George W. Taylor, Abel IT. Shaw, and' another person executors of - his will, and trustees of the trusts therein created. George W. Taylor and Shaw duly qualified, and received grant of probate or letters testamentary. The third person never qualified. Shaw died in 1866, and George W. Tajdor in 1879. They had authority by the will of their testator, James Shaw Taylor, to appoint trustees to succeed them. Shaw did not exercise that power, and George W. Taylor continued as sole trustee until his death. He left a will, and appointed the present plaintiff,, Simonson, and John T. Lord, executors thereof. This will was duly proven both in New York and in England. Lord qualified as executor in England, and Simonson in New York. By a provision of this will, but not otherwise, the trusts under the Avill of James Shaw Taylor devolved upon Simonson and Lord as trustees. , The securities now in the plaintiff’s possession Avere situated in New York, and Mr. Lord, on his oavu petition and under authority of a decree of this court, Avas discharged from the trust, and the securities Avere thereafter left in the sole possession, and management of Mr. Simonson". Sometime in 1883, the high court of justice in England, in the chancery division, upon application duly made; appointed William S. Barton, Robert Heap, and Edward Atkinson trustees of the real and personal estate of James Shaw Taylor, in substitution for the original trustees named in the will of that gentleman. Barton and Heap died in 1891. Atkinson, having power to do-so, associated with himself, in the trust, Robert J. Fletcher and Walter Hennop; and they are noAv the trustees of the estate in England, and were acting as such in February, 1892, the date at Avhich the express trust virtually expired.

James Shaw Taylor left, him surviving, an only child, Amelia Hannah Taylor. In 1868 she married the defendant, Joseph Beaumont Atkinson. The other next of kin of JamesShaAV Taylor living at the time of his death were three sisters, Lavinia Waller, Mary Lord, and Sarah Taylor. The last, named died before this action was begun, and Avithout issue. Lavinia Waller died in 1885, leaving children, parties hereto. Mary Lord also died before this action was brought, and her children who survived her, and certain of her grandchildren, whose parent died before Mary Lord did, are defendants also. Amelia Hannah Atkinson (Taylor) died in 1892, without ever having had issue. By her last will and testament, she bequeathed all her estate, except a legacy to her aunt, Mrs. Waller, to her husband, Joseph B. Atkinson. Her will Avas duly proven in England.- The Avill of James Shaw Taylor was. executed in the lifetime of his wife, and in anticipation of other children being born to him. It-was drawn with great care and particularity, and provided for almost -every conceivable contingency, except the one that occurred, an omission which, from the general structure of the instrument and the comprehensiveness of its provisions, seems to have been not accidental or inadvertent. After granting annuities to certain persons, and making provision for his wife, he gave a legacy of £2,000 sterling to his daughter “ if and when she shall attain the age of twenty-one years, or previously marry.” That is the only direct gift in terms the testator made to his daughter. He devised and bequeathed all his real and personal estate to his executors, in trust to convert the same into money, and (among other things) to invest £2,000, and hold the same in trust “ during the life of my sister Lavinia W aller, the wife of Alfred Waller, of the city of Hew York,” and to “ pay the interest and annual income thereof, and of the investment for the time being representing the same, unto the said Lavinia Waller,” etc., and from and after her decease to hold “ the same legacy, and investments for the time being representing the same, and the interest and income thereof, in trust for all the children, or any child, of my said sister, who, being sons or a son, shall attain the age of twenty-one years, or, being daughters or a daughter, shall attain that age or marry, and, if more than one, in equal shares.” Concerning his estate not otherwise disposed of, the testator left it to his executors, “ in trust for all my children, or any my child, who, being sons or a son, shall attain the age of twenty-one years, or, being daughters or a daughter, shall attain tfiat age or marry, and, if more than one, in equal shares; provided always, and I declare, that the portion or fortune under this my will of my said daughter, Amelia Hannah Taylor, who is at present my only child, shall be held by the trustees or trustee for the time being of this my will, upon trust that they or he do or shall during the life of my said daughter pay the interest and annual income of her said portion or fortune to her, for her sole and separate use, and so that she shall not have power to affect the same by anticipation, and that her receipts alone shall be sufficient discharges therefor, and, from and after her decease, do and shall hold the same portion or fortune, and interest and income thereof, in trust for all her children living at her decease, and for the issue then living of any her child or children who shall then be dead ; all such children and issue, objects of this present trust, to take in equal shares, as tenants in common, if more than one, but so that the issue of my deceased child or deceased children of my said daughter shall, through all degrees, take such share or respective shares only as his, her, or their parent or respective parents would have taken if living at the decease of my said daughter.” It was further provided in the will that until the testator’s daughter attained majority, or died before so doing, or married, the trustees might allow, without liability to account for the appropriation thereof, £150 sterling annually for her, to be paid “ from and out of the interest and annual income -of all and every of the trust moneys to which she shall under this my will be entitled in. expectancy as aforesaid, and the investments for the time being representing the same.” Provisions are made in the will for accumulations, and for the contingency of the testator dying' leaving no child or issue who, being a daughter* shall attain the age of 21 years or marry,'in which event the trustees are directed “ to hold all the said trust moneys* and the investments for the time being representing the same* and the interest and annual income thereof,” etc., upon and for such and the same trusts and purposes, and with and subject to such and the same powers and provisions, in all respects, as are hereinbefore bequeathed upon trust for the benefit of my said sister Lavinia waller and such her children or child as. aforesaid, and the investments for the time being representing such legacy, and the interest and income thereof, respectively* or as near thereto as circumstances will permit.”

Amelia Hannah Taylor having married, and died without issue and no provision having been made by the will of her father for that contingency, the respective defendants contend in the. court below, and now claim as follows, viz.: (1) Joseph B. Atkinson, the husband of the daughter of the testator, James Shaw Taylor, and the sole residuary legatee under her will, claims to be entitled to all the personal property now in the hands of the plaintiff, on the ground that the trust created for the benefit of the children of James Shaw Taylor vested, on his death, an absolute interest in the whole residuary estate in his daughter, qualified during her life to the receipt of the income only, and to be defeated by the birth of children, and that, upon her death without issue, her estate or interest became indefeasible, and passed to her husband by the terms-, of her will, or under the provisions of the law of England;. or, failing that contention, that if no absolute estate vested in the testator’s daughter, and she took only a life interest in the residuary estate, then intestacy was brought about* and that, the residuary estate being personalty (the realty having been equitably converted), it passed to his next of kin, being such at the time of his death, viz. his daughter* through whose will, or by virtue of marital relations with whom, her husband would now take., (2) The defendants standing in the place of Mary Lord claim that the testator limited the interest of his daughter to one for life ; that there is intestacy as to that residuary portion after her death; and that it now belongs to those who were the next of kin of the. testator, to be ascertained as of that time. (3) The children of Mrs. Waller claim that the testator’s daughter had only a life interest, and that on her death without issue, they took under the will, by virtue of that provision which made a contingent disposition of the residuary estate similar to that relating to the £2,000 legacy to theif mother.

The learned justice at the special term construed the will in accordance with the contention of the descendants of Mary Lord, and, in his decree, adjudged that the entire legal title to the residuary estate was vested in the trustees, in trust; that the testator’s daughter, Amelia Hannah, took the right only to receive the income of that estate, and had no control or right of disposition over it; that no interest in the corpus of the trust estate was in any manner or in any event vested in, conferred upon, or reserved or granted to her; that, by reason of her death without issue, the testator died intestate as to the residuary estate, such intestacy occurring as of the date of his daughter’s death; that that portion of the residuary estate now in the plaintiff’s hands is held by him for the next of kin of the testator surviving at the time of the death of his daughter; and distribution is directed in tenth parts among them, viz. the children of Mrs. Waller, and the children of certain grandchildren of Mrs. Mary Lord.

We are not at difference with the court below in the conclusion at which it arrived concerning the first branch of the claim of the defendant, Joseph B. Atkinson, and, for the purposes of the decision of this appeal, shall hold that his wife did not take under the will a vested interest in the principal of the residuary estate held in trust by the trustees. Clearly, it is the law of England that where there is an absolute gift, out of which specific interests are subsequently created and declared, on the failure of those specific or particular interests the absolute gift prevails. Whittellv. Dudin, 2 Jac. & W. 279 ; Mayer v. Townsend, 3 Beav. 443; Winckworth v. Winckworth, 8 Beav. 576; Gerrard v. Butler, 20 Beav. 541; Stephens v. Gadsden, Id. 463 ; Carver v. Bowles, 2 Buss. & M. 304; Cooke v. Cooke, 38 Cr. Div. 202. But in those and in other cases declaratory of the rule, and illustrating its application, there was an absolute gift in the first instance, or one positively indicated in unmistakable terms. Where the gift is to be found only in the limitations, and not in words capable, standing alone and dissevered from a qualifying context, of constituting a complete gift, there is not a vested interest in the principal as a gift. Lassence v. Tierney,, 1 Macn. & G. 557; Gompertz v. Gompertz, 2 Phil. Ch. 107; Savage v. Tyers, 7 Ch. App. 356. The rule is stated by Lord Cottenham thus:

“'If a testator leave a legacy absolute as regards his estate,, but restricts the mode of the legatee’s enjoyment of it to secure certain objects for the benefit of the legatee, upon failure of such objects the absolute gift prevails; but if there be no -absolute gift as between the legatee and the estate, but particular modes of enjoyment are prescribed, and those modes of enjoyment fail, the legacy forms part of the testator’s estate, as not having in such event been given away from it. In the latter case the gift is for a particular purpose; in the former the purpose is for the benefit of the legatee as to the whole amount of the legacy, and the directions and restrictions are to be considered as applicable to a sum no longer part of the testator’s estate, but already the property of/the legatee.” Lassence v. Tierney, supra.

And in Re Merceron’s Trust, 4 Ch. Div. 188, it is said :

“ The rule which is laid down in Mayer v. Townsend and "Whittell v. Dudin, and has been followed by the house of lords, and may be considered as settled, may be stated thus: ‘ Whenever a will gives property to a person absolutely, and then proceeds to dispose of that property for the benefit of the donee for life, and afterwards for children of the donee, and it turns ■out that there are no children to take, the cutting down fails, and the original gift remains; and, as it was absolute, so it remains absolute.’ ”

The question here is purely one of the intention of the testator, James Shaw Taylor. Did he intend an absolute gift to his daughter of the whole residuary estate to be cut down by subsequently carved out contingent interests and defeasances, failing which the integrity of the original gift was to be preserved, and the whole residuary.estate to be at the disposal of the daughter, as her absolute property ? We are speaking now of the intention as gathered from the will and its dispository provisions, and cannot search elsewhere for it. We have looked in vain through this instrument for satisfactory evidence of such intention as that ascribed to the testator by his daughter’s husband. If it is to be found, it is not in mere words of trust for the benefit of certain cestuis que trustent. The description of beneficiaries is not the whole of the gift. By the terms of the trust, the benefit is expressly confined to income, and its bestowal can scarcely be regarded as an absolute gift of that out of which the only benefit given is to arise. It is not contained in the sentence of the trust declaring that trust for the testator’s child or children, but it would arise, if at all, by force of the phrase “ share or fortune of my daughter,” applied to the trust estate. But these words may well be merely those of distinguishing reference, and not of absolute donation. There is no direct gift in the first instance to the daughter, with a trust then constructed upon that gift which would defeat the absolute gift only pro tanto. The absence of direct words of gift to the daughter is not conclusive, but it is a material circumstance. The absolute gift may, doubtless, be incorporated in the trust provisions. Such cases from the English books are cited by counsel. But here the gift of the estate is directly and exclusively to the trustees, is scrupulously kept from the control of or disposal by the daughter. The provision for her is expressly confined to the enjoyment of income, and not even. a power of appointment is given her of the principal. The trustees take the whole title and estate for the purposes of the trust. It is going too far to infer an absolute gift from the mere use of words susceptible of a different construction, and which do not have a fixed and settled judicial meaning. The careful exclusion of words of bequest to the daughter is in this conuectiou of marked significance. There was a direct gift to her,—that of the £2,000 previously mentioned. The inference would seem to be that that was the only part of his estate the testator intended should be at the absolute disposal of his daughter, or vest absolutely in her under the will. The second branch of the contention of the defendant Joseph B. Atkinson will be examined later.

We have next to consider the claim of the defendants the children of Mrs. Waller. Concurring with the justice at special term in the view that Mrs. Atkinson took only a life interest, we also agree with him in his conclusion that the Waller children do not take under the will the residuary estate they claim. The gift over to Mrs. Waller and her issue was to become operative in the event of the testator’s daughter not attaining the age of 21 years or not marrying. There is no-authority in the court to enlarge or broaden the terms of the will respecting this bequest of a remainder. The argument on behalf of the Waller children is that as the provision of the will now under consideration declares,' in substance, that, if the testator’s daughter should die before attaining full age or marrying all the residue of his estate should go to Mrs.Waller or her children; that “all that stood between the Waller children and this inheritance was the attainment of majority or marriage of Amelia; ” that “ the only influence these conditions could have on the succession was the birth of children to Amelia; ” and that in the absence of absolute ownership at any time in Amelia, and in default of her having issue, it is not unreasonable to suppose that the testator intended that same right of succession to have effect.” The whole argument rests on supposition, principally that the testator intended to die fully testate, and to benefit the Waller children next to his daughter. Of course, intestacy will not be adjudged if the contrary can by any reasonable theory be .determined, and the law favors vesting; but we are led by this argument into the very cloud region of speculation. It is inferable from the whole will that the testator did intend to die intestate, as to his residuary estate in default of issue of his daughter, and to leave its distribution to the law of his country. His will was drawn with great precision, evidently by an experienced and able draftsman, who did not servilely follow precedents from books of forms, but who comprehended and iully expressed what was contained in his instructions for the will; and there seems to have been a clear purpose to omit all reference to a disposition over in the event of Amelia’s marrying and not having children. A provision of that character would be about the first thing to suggest itself to an experienced and instructed lawyer, and we cannot import into this will, on a mere hypothetical intention, one that would give this large property to these particular claimants.

But with respect to the judgment of the court below declaring that the residuary estate passed to. the next of kin of James Shaw Taylor, to be ascertained as of the time of the death of Mrs. Amelia Hannah Atkinson, and awarding the fund in the plaintiff’s hands to the descendants of Mary Lord and to the Waller children, the learned judge in the court below was led into an error by following what was said in Savage v. Burnham, 11 N. Y. 563, but which is entirely at variance with the rule adopted and announced' by the English courts and text writers. The Burnham Case is a leading authority, often followed in our courts on other questions involved in it; but tlié point now under consideration was altogether a subordinate one. There it came up incidentally, as to a share of an estate held in trust for the benefit of the testator’s son Thomas, which share lapsed by reason of the death of Thomas before the period of vesting, and passed to the testator’s next of' kin. It was- held that Thomas was not to be included in the ascertainment of the next of kin, and that “ the devolution of the share of Thomas- must be deemed to have taken place at the time the share had lapsed, and not at the testator’s death.”' The reason stated for so holding is “this avoids the incongruity wThich has been suggested of Thomas taking, as one of the testator’s next of kin, a portion of a share lapsed by his own death.” Ho authority is cited by the very learned and distinguished judge who wrote for the court in that case to support that particular ruling. It was not made in accordance with any contention of counsel. The point wras never taken or claimed or raised in any form. The cause was not heard at the bar, but was submitted on printed arguments, in none of which is there even the most remote reference to such a proposition as the court laid down -respecting the share of Thomas. The question here is, what is the law of England on this subject, not what do we think of its consistency. If we find its judicial expounders and approved text writers declare a certain rule to be the law of that realm, we must be governed by that rule. In matters of contract, on the question of validity we give'effect to foreign law, though contrary to our own (Staples v. Nott, 128 N. Y. 403 : 40 S. B. 416); and the same rule applies to the disposition of the personal property of a decedent, distributable under the statute of a foreign country. To use the language of Allen, J., in Chamberlain v. Chamberlain, 43 N. Y. 424:

“ The law of a testator’s domicile controls as to the formal requisites essential to the validity of a will as a means of transmitting personal property, and the construction of the instrument. Personal property has no locality [the learned judge was speaking in the general sense], and therefore the law of the domicile of the owner governs its transmission, either by last will and testament, or by succession in case of intestacy.”

The question respecting the time at which the next of kin is to be ascertained seems to have arisen in the English courts more particularly in cases in which, on the failure of particular devises or bequests, gifts over have been made specificalh’" by the testator to next of kin; and as stated by Matins, Y. C., in Be Morley’s Trusts, 25 Wkly. Bep. 825, the general rule is the class is ascertainable at the testator’s death, but in the case of a will, of course, the intention of the testator would prevail if another period were fixed thereby. There are numerous cases holding that, where the gift over is to the next of kin generally, the distributees are not limited to those designated in the statute, but where it is to the next of kin, to be distributed in accordance with the statute of distribution, that statute strictly applies. Where the gift is of a life interest, and, upon the failure of a remainder, the residuary estate passes to the next of kin, which in this case must necessarily be the next of kin under the statute, it has been expressly decided by courts of the highest authority in England that the life tenant, being one of the next of kin, does not prevent a share of the residuary estate passing to him. It ivas said in Wharton v. Barker, 4 Kay & J. 483, that where there is a' limitation by will to one for life, and then, after his decease, to the next of kin of the testator, those who are to take under the designation next of kin ” are the persons answering that description at the death of the testator, and not those answering that description at the death of the tenant for life, and that the mere circumstance that the person to whom such previous life interest is bequeathed by the will is also a member of the class answering to the description of the next of kin of the testator at the time of the testator’s death does not prevent the first rule from applying. The learned vice-chancellor in that case further states that, where a person to whom such previous life interest was bequeathed by the will is the only individual so answering to that description, the authorities have not been quite so clear as to the construction to be put upon the gift over. In Bullock v. Downes, 9 H. L. Cas. 1, the residuary estate was given to trustees in trust to pay dividends to the son for life, and after his death to pay an annuity to his son’s widow if he should leave one, and the residue to his son’s children, and then to stand possessed of the same in trust for such persons of his blood as would, under the statute of distributions, have become and been then entitled thereto in case he died intestate. The son married, took the dividends during his life, and died without having had issue. It was held that the persons who were entitled as next of kin were to be ascertained at the death of the testator ; that the son was one of those persons; and that his right as one of the next of kin was not impaired by a previous gift of a life interest in the whole residue ; and, "the testator having left four daughters, the personal repi’esentatives of the son took one-fifth of the residue.

Other cases have been referred to by counsel which fully sustain the same general rule, and we are now to consider particularly whether there is any modification of the rule in a case where the life tenant is the sole next of kin, and which presents the feature of the incongruity referred to in the Burnham Case. The authorities on this subject have been collated and commented upon in 2 Jarm. Wills (5th Am. from 4th London ed.) p. 677. The learned editor cites various cases, and from them declares that the law on the much-disputed point is settled in the English courts, and that the tenant for life being the sole next of kin is not -sufficient to exclude him from a devise or bequest to the next of kin. The case of Pearce v. Vincent, 1 Cromp. & M. 598, referred to a devise of real estate and as to personalty. Urquhart v. Urquhart, 13 Sim. 613, Seifferth v. Badham, 9 Beav. 370, Nicholson v. Wilson, 14 Sim. 549, and numerous other cases referred to-in the note on page 680, fully sustain the statement of the author. Those cases have been examined, and are in point.

Now, of course, the question in this case does not arise under any express provision of the will. With reference to the subject, the will of James Shaw Taylor is absolutely silent. Such being the case, the residuary estate which is in the hands of the trustees must be held by them upon a resulting trust for those who would be entitled to the fund by the law of England. There is but one law applicable, and that is the statute of distributions in cases of intestacy; and under that statute the person who would be entitled as next of kin of the testator at the time of his death was his daughter, Amelia Hannah Atkinson. Whether it is inconsistent or hot, such is clearly the law which controls this case. But from the mere fact of the testator intending his daughter should not take under the will the deduction is not inevitable that it was his purpose she should not take as next of kin under the statute. The intention of the testator may reasonably have been to prevent the disposition of his residuary estate depending upon the caprice of his daughter, or possibly subjected to the interference of designing strangers exerting an influence upon an inexperienced woman; and, as has been well said, it is fair to infer that the testator concluded to leave the disposition of this residuary estate to the law, and not to make any disposition of it beyond a certain point, and to let it go to those to whom the law would give it.

Having reached the conclusion that the resident claimants, namely, the children of Mrs. Waller, are not entitled to the fund in the hands of the plaintiff, and that the distribution should not he made as decreed by the learned judge at special term, it becomes unnecessary for us to award the fund to any of the claimants, but merely to reverse the judgment of the court below, and direct that the fund or property now in the hands of the plaintiff be transmitted to the trustees in England, appointed by the high court of justice, in order that distribution may be made in accordance with the statute of that country. The property here is only a part of the trust estate, the bulk of which we understand is in the possession of the trustees in England, and the whole assets may there be subjected to charges and burdens of which we have no knowledge or information, and for which those trustees may be compelled to account; and it is important to the protection of the interest of Mr. John T. Lord that the fund now in Yeyr York should be transferred to the English trustees, as there- may be a possibility of his being held accountable for transferring the sole possession to Mr. Simonson.

The judgment of the court below must be reversed, and judgment entered in accordance with this opinion, and providing for an accounting by the plaintiff, to be had before the referee named in the decree of the special term, the plaintiff to be allowed the compensation to which he is entitled by law, and the costs and expenses of this action.

All concur.


source: Caselaw Access Project

author: RUMSEY, J.

license: Public Domain

text:
    Benjamin F. Farrar v. Homer Lee.
    (Supreme Court, Appellate Division, First Department.
    Nov. 18, 1896.)
    1. Principal and agent—Undisclosed agent—Liability on bond.
    PlaintiS cannot hold a defendant liable, as an undisclosed principal, on a sealed instrument which does not mention defendant or purport to have been executed on his behalf, and which he did not sign or seal.
    2. Pleading—Legal conclusions.
    An allegation that the debt evidenced by a bond executed by a third person “was and is the debt of the defendant” is a legal conclusion, and, as such, is not admitted by a demurrer.
    Appeal from special term, Yew York County.
    Action by Benjamin F. Farrar against Homer Lee, as an undisclosed, principal, on a bond. From a judgment in favor of plaintiff entered on an order overruling a demurrer to the complaint, defendant appeals.
    George E. Miner, for appellant; John R. Farrar, for respondent.
   RUMSEY, J.

—The complaint alleges, in substance, that on the 2d of July, 1894, one Michael Tanner delivered'to John C. Whitehead his bond, under seal, whereby, for a certain consideration, he bound himself to pay John C. Whitehead the sum of $1,000 on the 2d of July, 1897, with interest payable semiannually, with the further provision that the whole principal sum should become due upon default in paying the interest for 30 days after notice. The complaint further alleged that the interest on the bond which became due on the 2d of January, 1895, was not paid; that 30 days had expired since notice of the default in that payment was given, and the principal sum remains unpaid. The complaint then contains an allegation that Tanner made and delivered the bond as and for the act of the defendant, Homer Lee, and for the latter’s sole benefit and not for the benefit or interest of himself, said Tanner, in any way, and acting solely and wholly as the agent for the defendant, Lee, who was the undisclosed principal of said Tanner; that said Lee received from said Tanner, for his oavu use, the money received on said bond, and all the benefits thereof accrued to said Lee, and not to said Tanner, and the debt evidenced by said bond Avas and is the debt of the defendant, Lee, and not of said Tanner.” The complaint further alleges that Whitehead, the obligee in the bond, learned that the debt was the debt of Lee, and not of Tanner, after the delivery of the bond. The complaint alleges the assignment by Whitehead to the plaintiff, under seal, of the bond, and all Whitehead’s rights thereunder, and the debt evidenced thereby, and all his rights against Lee. The complaint then contains an allegation that, to provide the plaintiff adequate and complete relief, he is compelled to seek the equitable interference and protection of the court. There follows a demand for relief, which is not necessary to be considered here. To this complaint the defendant demurred upon the ground that it did not state facts sufficient to constitute a cause of action. At the special term the plaintiff had judgment upon the demurrer, from which this appeal is taken.

It appears by the allegations of the complaint that all the transactions which give rise to the execution of the bond were had solely between Whitehead and Tanner, who gave the bond as his OAvn act, and did not describe himself as the agent of Lee, nor was it understood at that time between him and Whitehead that he was acting for Lee. Indeed, then Whitehead supposed that he Avas dealing with Tanner alone, as is very evident from the allegations in the complaint. Whatever liability Tanner assumed, it Avas measured by 'the instrument under seal which he gave, and any preliminary contract was-merged in that instrument, so that, after the giving of that bond, Whitehead had no right of action againt Tanner, except such as Avas assured to him by the obligation which he had taken. Under those circumstances, it is thoroughly settled in this state that he could not maintain an action against any one, except the person who signed and sealed it. As the boncl was signed by Tanner in his own name, and not as-agent for Lee, it was not competent, by parol evidence, or in any way, to transfer from Tanner to Lee the obligation Avhich Tanner had assumed personally, upon the theory that he Avas acting, as the agent for Lee. This rule is well settled by authority. Briggs v. Partridge, 64 N. Y. 357; Schaefer v. Henkel, 75 N. Y. 378 ; Henricus v. Englert, 137 N. Y. 488; 51 S. R. 200.

But it is sought to hold Lee in this action, by the allegation that Tanner delivered a bond for the benefit of Lee, who was the undisclosed principal, and that Lee received from Tanner the money which he received for the bond, and that the debt evidenced by said bond is the debt of Lee, and not of Tanner. Great stress is laid by the plaintiff upon the claim that the: demurrer admits the allegation that the debt evidenced by the bond is the debt of Lee, and not of Tanner ; and it is claimed by him that, because that allegation of the complaint is admitted, a right of action necessarily follows against Lee. It is quite true that the demurrer admits every fact which is set out in the pleading demurred to, but it admits only facts which are alleged therein. Bogardus v. Insurance Co., 101 N. Y. 329 ; 4 N. E?. 522. It does not admit any legal conclusions drawn from the facts. Masterson v. Townshend, 123 N. Y. 458; 34 S. R. 104; Rector, etc., of St. James’ Church v. Huntington, 82 Hun, 125 ; 63 St. Rep. 382. Indeed, the object of the demurrer is to decide whether, admitting all the facts alleged in the pleading, the legal conclusions drawn therefrom by the pleader are correct, and entitle him to the relief which he claims from the facts alleged. The allegation that the debt evidenced by the bond was the debt of Lee is a legal conclusion, and, as such, is not admitted by the demurrer; and whether it is correct or not is the precise question to be decided upon a consideration of the allegations of fact in the complaint, and in examining this complaint this allegation must be excluded from the consideration. Excluding that allegation, there remains, in addition to ’the claim upon the bond, only the statement that Lee received the money paid to Tanner upon the bond, that Tanner was his undisclosed agent, and that Whitehead did not know those facts when he dealt with Tanner. These allegations are precisely such as -were made in the case of Briggs v. Partridge, supra, in 'which it was held that they were not available to take away from the liability incurred by the obligor of the bond, and transfer that liability to a person who was not named in it. The case of Whitford v. Laidler, 94 N. Y. .145, is not in point. In that case the defendants had made a lease under seal, as officers and agents of a corporation; and it was held that as it was stated in the paper which they signed that they acted only as agents, and it was understood on all hands that they did so act, and as the corporation had adopted their act, and taken possession of the property leased, and paid the rent upon it, the act was the act of the corporation, and not of the persons who executed the lease as its officers. But that case is quite different from the one at bar, and it was put upon the ground that the defendants were acting as agents, and not as principals, and it was for that reason solely that they were held liable. There can be no claim here that the bond does not lie at the foundation of the action. Indeed, the sole ground, apparently, upon which it is claimed that a right of action has already accrued, is that a default had taken place under’the bond, by reason of which it had been agreed that the whole amount of its consideration should become due. There is no foundation, as we have seen, for a claim against Lee upon the bond, and no facts are alleged from. which any other claim could be asserted against him. The demurrer to the complaint was therefore well taken, and the defendant should have had judgment upon it.

The judgment therefore must be reversed, with costs, and judgment ordered for the defendant "upon the demurrer, with costs, with leave to the plaintiff to amend his complaint in 20 days, on payment of the costs of the demurrer and of this appeal.

All concur. '


author: O’BRIEN, J.

text:
    Gibson Electric Co. v. Liverpool & L. & G. Ins. Co. et al. Same v. London & L. Fire Ins. Co. et al. Same v. Commercial Union Assur. Co., Limited, of London, et al.

    (Supreme Court, Appellate Division, First Department.
    November 13, 1896.)
    Insurance—Forfeiture of policy—Waiver.
    An insurance company does not waive a forfeiture for breach of a condition in a policy by permitting an appraisal to proceed to an award after knowledge of the breach, where it was ignorant of the breach when it agreed to the appraisal, and the policy provided that no waiver should result from “ any requirement, act, or proceeding * * .* relating to the appraisal or to any examination,” and nothing was done by the company to affect injuriously the insured, after notice of the breach, and before availing itself of the forfeiture. 1
    Appeal from trial term, New York County.
    Separate actions by the Gibson Electric Company against the Liverpool & London & Globe Insurance Company and another, the London & Lancashire Fire Insurance Company and another, and the Commercial Union Assurance Company, Limited, of London, and another, respectively, on fire insurance policies. From a judgment dismissing the complaint on the merits, plaintiff appeal's.
    The actions were brought by the Gibson Electric Company against the insurance companies upon three policies of fire insurance, known as “ Standard Policies,” issued by them to the appellant upon property located in the town of Chatham, Columbia County, N. Y. At the time of the issuing of the policies the premises upon which the buildings insured stood were incumbered by a mortgage held by one Job R. Furman, who was made a defendant in these actions upon his refusal to join the plaintiff in the action. The loss occurred on the 23d day of October, 1891. Prior to the fire, Furman began an action for the foreclosure of Ms mortgage by the service of a summons and complaint upon the Gibson Electric Company, mortgagor, and the insured in this action. That action of foreclosure was prosecuted to judgment, and the same entered October 20, 1891, and on October 31, 1891, the ¡iroperty was advertised for sale. After the entry of said judgment, and on the 11th day of November, 1891, an order to show cause was granted why the default of the Gibson Electric Company should not be opened, and the judgment and subsequent proceedings vacated, and subsequently the motion to open the default was granted; but, upon the action being brought to trial, final judgment was entered dismissing the complaint of Eurman. On the 28th day of October, 1891, an agreement for .submission to appraisers was executed by the plaintiff and the insurance companies. On the 4th day of November, 1891, while the appraisal was pending, and prior to the award, the insurance companies were notified of the interest of Furman ■as mortgagee. As a result, the agent for some of these companies visited the office of the lawyers from whom the notification had been received, and there obtained information in reference to the claim of Furman, and of the proceedings, for the foreclosure of the Furman mortgage, and the entry of judgment thereon. The companies, after such knowledge, did not interrupt the appraisement, and it appears that in that connection the insured incurred trouble and expense, and submitted its books for examination, and prepared and filed proofs of loss up to the 4th day of December, 1891, when the award was made. On the 16th day of December, 1891, proofs •of loss were served on the companies, and on the 17th they notified the insured that they did not recognize the loss or the validity of the policies because an action to foreclose a mortgage on the property, with the knowledge of the insured, had been commenced prior to the fire.
    A. B. Gardenier, for appellant; John Notman, for respondents.
   O’BRIEN, J.

-—The policies provide as follows:

“ This entire policy, unless otherwise provided by agreement indorsed hereon and added hereto, shall be void if, with the knowledge of the insured, foreclosure proceedings be commenced, or notice given of any sale of any property covered by this policy, by virtue of any mortgage or trust deed.”

It was established, and we do not understand that it is disputed, that there was a violation of this condition by reason of the commencement of foreclosure proceedings after the issuance ■of the policies, with the knowledge of the insured, and that judgment of foreclosure and sale was entered before the happening of the fire. In Quinlan v. Insurance Co., 133 N. Y. 356, 45 S. R. 200, this condition in the policy was under consideration, and it was held that its violation rendered the policy void. See, also, Armstrong v. Insurance Co., 130 N. Y. 560, 42 S. R. 555; Baumgartel v. Insurance Co., 136 N. Y. 547; 50 S. R. 19 ; Allen v. Insurance Co., 123 N. Y. 6 ; 33 S. R. 216 ; Messelback v. Norman, 122 N. Y. 583; 26 N. E. 34; O’Brien v. Insurance Co., 134 N. Y. 28; 45 S. R. 389; Lett v. Insurance Co., 125 N. Y. 82; 34 S. R. 411.

It is conceded that tbe foreclosure proceedings having been commenced and ripened into judgment before the fire, this rendered the policy void. But it is insisted that the acts of the insurance companies in proceeding with the adjustment of the loss after knowledge of the forfeiture waived it. Upon this question of what would constitute a waiver we are referred to the leading case of Titus v. Insurance Co., 81 N. Y. 410, a case in many respects like this. The differences, however, between the policies and the law relating thereto are marked and distinct. Those here involved are standard policies, which went into effect in May, 1887 (chapter 488, Laws 1886), which form of policy among other things provides :

“ This company shall not be held to have waived any provision or condition of this policy or any forfeiture thereof by any requirement, act, or proceeding on its part relating to the appraisal, or to any examination herein provided for.”

Unlike, therefore, the policy involved in the Titus Case, the° one here has a legal sanction for a provision which in express-terms declares that no waiver shall result from any requirement, act, or proceeding * * * relating to the appraisal or to any examination.” In addition, we have the form of the appraisal agreement, and the separate appraisals as to the machinery and as to the building, items of the policies in evidence, expressly providing as follows :

It being understood that this appointment and submission is wdthout reference to any other questions or matters of difference within the terms and conditions of insurance, and is of binding effect only so far as regards the actual cash value of the loss and damage to said property.”,

The facts relied upon to show a waiver, consisting of the trouble and expense connected with making the proofs of loss and presenting for examination books and papers and in paying an appraiser, were all connected with the appraisement itself, and are therefore covered by the provision in the standard policy to which we have referred, and in that respect differ from the cases which have arisen under the old forms of policy, of which the case relied upon of Titus v. Insurance Co., supra, is the leading one. The last expression of the court of appeals bearing upon insurance policies is to be found in Kiernan v. Insurance Co., 150 N. Y. 190, which was an action to set aside an award, made by appraisers under a policy of fire insurance, as fraudulent and void, and to recover the amount of the policy. It does not appear in that case whether it was an old form policy, or a standard. But an examination thereof we do not think will aid the appellant in sustaining its contention that the acts relied upon constituted a waiver; for while, as-therein held, in conformity with a long line of decisions, an election by the company to insist upon the forfeiture of a fire-insurance policy for breach of its conditions must be asserted within a reasonable time after acquiring knowledge of the breach,—which is not the case here,—it is also held that, when an appraisal of the loss under the fire insurance policy-is proper in any event, the mere fact that one was had at the request of the company has no bearing upon the question of waiver .or forfeiture. As therein said:

The most of the acts of the company tending to show its intent to waive the forfeiture were independent of the appraisal, for some of them preceded while others followed it. They did not bear such a relation to it as to be excluded from consideration under the clause of the policy upon the subject of waiver. Without prolonging the discussion upon this point', we announce as our conclusion that the evidence, independent of all acts relating to the appraisal, sustains the finding of a waiver by the trial court.”

Here all the acts relied upon to show a waiver were directly connected with the appraisement, and, as we have seen, as they were expressly provided against, they cannot now be relied upon, contrary to the provision in the policy, as affecting the very thing which those clauses were aimed at preventing. Upon the laiv, therefore, we think the learned trial judge was right in holding that there was no waiver, as he was equally right upon the facts, because it appeared that, at the time the appraisal was commenced, the companies had no knowledge of the foreclosure of the mortgage, and did not obtain it until some weeks afterwards, and there -is no evidence that the companies did anything to induce the insured to do anything or to incur any expense which would prevent them within a reasonable time insisting upon the forfeiture. It is true they permitted the appraisal to proceed to an award, and within a reasonable time thereafter they availed themselves of the forfeiture, and during that period, which was a short one, nothing was done by the companies to affect injuriously the insured, or induce it to change its position, or lead it to believe that, with full knowledge of the forfeiture they had waived it.

We think the judgment was right, and should be affirmed, with costs.

All concur.


author: PATTERSON, J.

text:
    W. Preston Hix v. Edison Electric Light Co.
    (Supreme Court, Appellate Division, First Department.
    November 13, 1896.)
    1. Construction of contract—Question for jury.
    It is for the jury to determine who was meant by the. term “present promoter,” in a contract to organize a corporation, where there is conflicting testimony.
    2. Corporation—Stockholders—Release of individual rights.
    The consent of a stockholder that -his company should agree to a modification of a contract in which he was individually interested is not a release of his individual rights against the other contracting, party.
    3. Principal and agent—Commission—Fraud of principal.
    A principal who agrees that his agent shall receive a percentage of money to be paid on a contract secured through such agent cannot dispose of his own right to receive the fund, and thus deprive the agent of the reward for his services.
    Appeal from trial term, New York Comity.
    Action, by W. Preston Hix against the Edison Electric Light -Company for commissions in organizing a company. From a judgment entered on a verdict in favor of the defendant, ■directed by the court and from an order denying a motion for new trial, plaintiff appeals.
    John C. Tomlinson, for appellant; Eugene H. Lewis, for respondent.
   PATTERSON, J.

—From the somewhat confused record of the colloquy between the court and counsel just preceding the -conclusion of the trial of this cause, it is difficult to ascertain the precise ground upon which the case was taken from the jury, and a verdict directed for the defendant. The learned judge, however, stated that, if he took the view of the plaintiff’s ■counsel, there would be a question for the jury,—whether, after .all, the plaintiff was a promoter of the Philadelphia Company,—but that, under the view which he (the judge) took (which view is not stated), that question was immaterial to the ■determination of the cause. An examination of the whole record discloses that the underlying question involved in the case is whether the plaintiff was entitled to 5 per cent, of the increased capital of the Philadelphia Company, as the person referred to as “ present promoter ” in the memorandum made by Johnson, and which contains the written evidence of the contract between the defendent company and Hix; for, as we understand the issues and the evidence, the case comes down to a consideration of that question. The action was brought by Mr. Hix to recover upon a contract of employment. He specifically declares upon such a contract in his complaint, stating the nature of that employment as being to promote and organize a corporation for electric lighting in Philadelphia, for which his compensation, it is alleged, was to be 15 per cent, of the stock of a company capitalized at $1,000,000, and, in addition thereto, 5 per cent, of the stock upon any future increase of that capital. That the 15 per cent, was given him, or passed through his hands, is admitted; and his. claim now is for 5 per cent, upon an aggregate of $746,000 ■of increased capital of that Philadelphia corporation.

It appeared in evidence that the plaintiff had rendered services to the defendant, from time to time, in the organization of electric light companies in various cities of the Hnited States, which companies were to conduct business as licensees of the defendant, and that, after a protracted negotiation conducted by him respecting the formation of a company in Philadelphia of the character referred to, Mr. Johnson, the president of the defendant, signed and delivered to him a writing or memorandum, which he introduced in evidence as the basis of his claim. There can be no doubt, we think, that that memorandum constitutes the contract between the parties. It was so treated by the plaintiff, who, insisting that it was such, made strenuous efforts to have it admitted in evidence, and succeeded in so doing only upon producing proof to show that Mr. Johnson, who signed it on behalf of the defendant, was authorized to execute and deliver it, as the representative of the defendant. The principal effort in the case made by the plaintiff was to get that memorandum before the jury. If it were not the contract, it was certainly nothing constituting documentary evidence binding the defendant, but was, at best, a mere memorandum made by a witness. But it was made by Johnson, the president of the defendant. It was a reduction to writing of what was substantially agreed upon between Hix and Johnson respecting the matter covered by it. It was signed by the party to be charged, was delivered to the person who seeks to enforce it, and was accepted by him as the final evidence of what he had agreed to with the president of the defendant. That memorandum referring to the transaction of the organization of the Philadelphia company is divisible into two branches; the first, so far as the plaintiff is concerned, relating to the compensation to be paid him for his services. It recites, in substance, that, of the $1,000,000 of which the capital of the Philadelphia company was to consist, the Edison company, the defendant, was to receive 35 per cent.,—30 per cent, in stock, and 5 per cent, in cash; the “ promoters ” to receive 10 per cent, in stock, a rebate from the Edison Company’s 35 per cent.; Hix to receive 5 per cent, from the Edison Company’s 25 per cent. The second branch of the contract refers to the future increases of capital, and the memorandum states, in substance, that 35 per cent, of the stock of such future increases is to go to the defendant, and a rebate of 5 per cent, therefrom to “ present promoter.” The only ground upon which the plaintiff can claim .the 5 per cent, must be that it was he who was referred to as the “ present promoter ” in this second branch of the memorandum. Hot necessarily that he was the “present promoter,” apart from and in addition to his agency proper, but that he was the present promoter, as that function—whether performed directly or through others—was embraced within his agency. It-was considered by the court on the trial that this memorandum, was not sufficiently clear in itself to indicate who was meant by the words “present promoter,” and therefore, with the consent or acquiesence of both parties, evidence was taken of the surrounding circumstances under which the contract was executed, and of what was done under it, in order that construction might be given to it in the light of such circumstances. It would seem from the phraseology of this memorandum that in its first branch a distinction in terms is made between those who came under the designation of “promoters” and Mr. Hix; for the-compensation to be given under that first branch is specifically divided between two separate parties, namely, promoters, as contradistinguished from Mr. Hix, and the latter ; and Mr. Hix testified that Jameson and his friends were “promoters.” The promoters are to receive 10 per cent, as distinct parties so designated, and Mr. Hix to receive 5 per cent. So that if the ordinary construction is to be given to the second branch of the contract, with reference to “ present promoters,” it would seemingly recognize the same distinction ' as that made in the first branch or subdivision of the contract, relating to compensation. Even as used in the first branch of the memorandum, however, it does not follow that the promoters were persons with whom the company was independently contracting. It is, in fact, clear that they were not. The plaintiff’s claim is that the contract was with him, and with him alone, and that the agreement was to pay him, and him alone ; the contract, by this form of expression, merely characterized the use to which a part of the payment was required to be put by the plaintiff.

The learned judge having allowed (and, as we think, properly) this explanatory evidence, it becomes necessary to scrutinize the record to ascertain whether there was anything to be left to the jury concerning that question of fact. The rule is not disputed that where evidence of the character referred to is admitted to aid in the explanation and interpretation of the terms of a contract, so that they may be given effect, if there is no real conflict in the evidence the matter of the construction of that contract still remains one of law, for the court; and the rule is also conceded that where, on the parol evidence, there is an overwhelming preponderance, a verdict contrary thereto should be set aside by the court. But the jury must pass on the evidence where there is a conflict. The effort on the part of the plaintiff here was to show that he really was the promoter, within the meaning of this branch of the contract, or, if not the only one, that he was associated with other people in the enterprise, as one of the promoters, and hence wras entitled to recover, as the party to whom the 5 per cent, was to be paid. The testimony to establish that relation comes from himself, in connection with certain written evidence. The testimony of Mr. Johnson, whose connection with the company ceased long before this trial, is that Mr. Hix told' him, or gave him very definite information to the effect, that the promoter was a Mr. Jameson, of Philadelphia; and that Mr. Jameson was, to some extent, connected with the subject, in that relation, appears both by the testimony of this witness and of Mr. Hix himself. But an analysis of the proof leads to the conclusion that upon the whole evidence, in the light of afi the circumstances under which the contract was executed, the nature of the conversations and negotiations had between the plaintiff and Mr. Johnson prior to the signing and delivery of the memorandum, and the practical construction which the parties gave to that memorandum by their acts under it, it was for the jury to say whether the promoter entitled to the 5 per cent, on increased capital was not the plaintiff, as distinguished from any other person connected with the organization of the Philadelphia company. It is observable that in the first branch of the memorandum the plural, “ promoters,” is used. In the second branch the singular, promoter,” is employed; the inference being, in connection with the proof offered, that the 5 per cent, referred to was to be paid to some one person. It appears beyond controversy that Johnson, the president of the defendant, was treating with the plaintiff from the beginning to the end of the transaction, and with the plaintiff alone. There is nothing to show that at anytime Johnson came into relations with any one else, except that at one time he was introduced to Jameson ; but it is clear that he did not make any arrangements with Jameson, nor have any negotiations with him. The 15 per cent, provided for in the first ■branch of the agreement was paid to the plaintiff, and he swears that he received it for those who were promoters. He also distinctly testifies on his cross-examination that he was not one of the promoters referred to in the first branch of the agreement, but, notwithstanding that statement, he also indicates in his testimony that he was interested in the 15 per cent., and that the responsibility was imposed upon him to get that 15 per cent., and to pay "part of it to those who were promoters,” in Philadelphia. That he was the person considered to be entitled to receive, in the first instance, this 15 per cent., he claims is shown by the acts of the defendant with reference to that matter. It was given to the plaintiff. It was all paid to the plaintiff. He did pay 10 per cent, to those who practically established the Philadelphia corporation. He first received that 10 per cent., and delayed taking his own 5 per cent., but he was treated as the proper party to demand and receive •all the 15 per cent. On May 31, 1888, the defendant, in response to an application of the agent, Mr. Hix, for payment of his agent’s and promoter’s commission for the formation of that [the Philadelphia] company,” passed a resolution to execute a written agreement, as evidence, of the plaintiff’s rights. This resolution recited that the defendant was to get $300,000 of the Philadelphia company’s stock; the agent and promoters, one-half of this. It proceeded:

“ Although only sixty per cent, of the capital of the company has been called in, they have issued our full percentage of stock, or $300,000, of which the agent now.asked for the $150,000, to which he is not really entitled until after the entire present authorized capítol of $1,000,000 has been paid in.”

The expression “ agent’s and promoter’s commission ” is significant. It means the commission to which the plaintiff was entitled for his services as agent, and for his disbursements to promoters. The agreement which the defendant resolved to execute is also highly significant. It recites that the Philadelphia company was under obligation to pay the defendant 30 per cent, of its capital stock, and that Mr. Hix is to receive-from the light company (the defendant) one-half thereof; that the capital stock of the said Philadelphia company has been fixed at $1,000,000, of which only 60 per cent. ($600,000) has. been called in, upon which amount there would be due to the light company 30 per cent. ($180,000), of which one-half would be due to Hix. The intention is to deliver to Mr. Hix a certain part thereof, to wit, 1,000 shares thereof, amounting to $100,000 face value, as soon as the entire capital of the Philadelphia company ($1,000,000, as aforesaid) shall have been fully paid. Further, there .is the statement that, as soon as the whole of the Philadelphia company’s stock shall have been paid, there, will be transferred and delivered to Mr. Hix, or his assigns, certificates of stock in the said Philadelphia company amounting to $100,000, face value, as payment on account of his claim for one-half of the light company’s percentage. This arrangement was afterwards carried out, and payment made in the manner specified. There is another piece of evidence, of some force, in a former contract of the plaintiff, on January 1, 1885, and appearing in evidence, in which it is stated that (referring to the compensation in stock to be given to the plaintiff for service):

It is understood, however, that this liberal compensation is provided for you with the understanding that you are expected to use such part of it as may be necessary to compensate your correspondents or promoters for the assistance which they will give you.”

How, all this evidence was not admissible, and was not competent, to establish any other contract than that which is contained in the memorandum Exhibit B. But it was admissible to show the situation and relation -of the parties to each other, and what was meant by them in that contract with reference to promoters. If it is true, then the contention made by the plaintiff, that through all this transaction these several facts existed, and were controlling, was established, viz.: That he

was employed to organize a Philadelphia company, but that he could not succeed without the assistance and co-operation of persons in Philadelphia, who were generally termed “ promoters,” who would have to be compensated for their services, and that, in the adjustment of the amount which the plaintiff was to receive, there was to be included a sum necessary to be paid to such persons, under the general name of “ promoters ” ; that, while they are the persons referred to in the contract as the ■ ultimate recipients of a portion of the $150,000, nevertheless the transaction was one directly with the plaintiff, and with the plaintiff alone ; and that in the second branch of the contract, where the word promoter ” is used, there is a recognition of his individual right and status, as the only other party to the contract with the defendant to whom the 5 per cent, on increase of capital was to be given for Ms services ; and that through the whole contract, as made, there ran the one pervading element, that the plaintiff was the only person with whom the defendant was contracting to pay compensation for services in organizing the Philadelphia company ; and that, as a consequence, all other persons operating with him were in privity with, and could claim under or through or against, him alone. The testimony of Mr. Johnson, fairly considered, and given effect to, raises a distinct issue as to the surrounding circumstances in the light of which the contract was to be construed, and upon that issue we think the learned judge was correct in the first impression he formed and announced respecting the proper course to pursue at the trial, and that it should have been left to the jury to say which version they would take, •—-that of the plaintiff, with its seeming corroboration, or that of Mr. Johnson, and certain letters of the plaintiff which appear to give support to what Mr. Johnson testified to. Had that been done, and the jury found a verdict for the plaintiff, we cannot say that it would have been so clearly against evidence that it should have been set aside on that ground.

At the trial certain objections to a recovery were urged, which influenced the trial judge in his dismissal of the complaint. On July 15, 1892, a contract was made between the General Electric Company, the successor in interest of the defendant, and the Philadelphia company, whereby the former reduced its percentage of future increases in the stock of the latter from 35 per cent, to 10 per cent., in consideration of which the latter relinquished to the former the right to transact a certain branch of the electrical business. in the city of Philadelphia. The plaintiff was a stockholder in the Philadelphia company when the proposition was made by the General Electric Company, and he voted in favor of it. After the contract was executed, the Philadelphia company made three successive increases in the amount of its capital stock. The first was of $200,000, and was distributed among the stockholders pro rata, and was so issued to represent the value of earnings put into betterments or increased plant. Plaintiff received his allotment of stock. The second increase, of $273,000, and the third, of $277,000, were issued for cash, at par; and jalaintiff availed himself of Ms right to subscribe for a pro rata share of it, then being at about 20 per cent, premium. It is said that the plaintiff, by consenting to the execution of the contract with the General Electric Company, and benefiting by the subsequent increases in the stock of the Philadelphia company, estopped himself from claiming his 5 per cent, from the defend^ ant. The elements of an estoppel are not present. The basis of an estoppel is action of one party leading to the other’s injury. The General Electric Company was not injured or misled. It made a proposition to the Philadelphia company that the former surrendered its right to 25 per cent, of future increases of the stock of the Philadelphia cornpany in consideration of the latter’s relinquishment of certain rights. That only did the General Electric Company bargain for, that it got, and that is all it was entitled to. To work from this situation a release of the plaintiff’s rights would be to bestow a gratuity upon the General Electric Company. That company was not injured. Neither was it misled. It knew that the Philadelphia company could act only through its stockholders, of whom plaintiff happened to be one. By favoring the proposition, lie was assisting the General Electric Company to obtain what it desired. It would be strange, indeed, if he were to be punished in the very serious manner suggested for so doing. What did his consent amount to, under the circumstances ? It meant but one thing, viz., that he was willing his company should enter into the contract proposed, and did not believe that his interests as a stockholder would suffer thereby. If, in fact, the increase in the capitalization of the Philiadelphia company was directly consequent upon the making of this contract, and plaintiff benefited thereby, the defendant’s successor has absolutely nothing to complain of. It is argued that the plaintiff’s consent as an' individual and as a stockholder cannot be dissevered. There is no such attempt. It is the plaintiff’s consent both as an individual and as a stockholder. But what construction is to be placed upon it ? Is it a release, strictly implied, and not express, of a valuable contract right, antecedently and independently acquired, the enforcement of which is in no way inconsistent with his act in voting as a stockholder in favor of the new arrangement made between the two companies ? Such serious consequences will not be imputed, as matter of law, from the facts as they stand on this record, and it is impossible to spell out such an agreement on the plaintiff’s part as is claimed.

The next reason assigned against a recovery by the plaintiff is that he was to be paid out of the defendant’s 35 per cent, of future stock, that neither the defendant nor its successor has received this 35 per cent., and that, consequently, a condition precedent to the -maintenance of the action is unfulfilled. Primarily, the argument rests upon the terms of the contract itself. Plaintiff’s 5 per cent, is to be a rebate from the Edison Company’s 35 per cent. This doubtless signifies that the 5 per cent, was to come out of the 35 per cent., and, in the absence of special circumstances, the plaintiff would be obliged to wait until his principal had received the fund out of which his own compensation was to come. But the principal may not bargain away his right to receive the fund, and thus deprive the agent of the reward for his services. The latter has not agreed to any such thing as this, and the injustice of it is manifest. The principal might receive a. full equivalent for the original fruits of the agent’s work, and yet not pay him a dollar. That the principal may not do this, without the agent’s express consent, we regard as a proposition too plain for further discussion. There is no such explicit consent evidenced by the terms of the writing. It is said, however, that the ■extrinsic evidence shows that the plaintiff agreed to this very thing. In proof of this, prior contracts made by the plaintiff are pointed out. They were none of them in force at this time, but they furnish, undoubtedly, some evidence of the nature of the arrangement which subsisted throughout in the defendant’s dealings with the plaintiff. It will be sufficient to cite, as an example of all, a six-months contract made on January 1, 1885, with the Isolated Company. It provided;

“Tour [plaintiff’s] compensation is to be payable at such time as we receive payment of cash or stock due to ourselves, and proportionately as payments on account are made to us, we reserving the right to accept such terms in regard to time and manner of payment as we may elect.”

On this head, Johnson testified :

“ Whether in selling a dynamo for the 'Isolated Company, or whether he organized an illumination company, he was to get his compensation from that which the company received, and in proportion and at the times received by the company. If subsequently—Mr. Hix thoroughly understands this—the company elected, for reasons which were sufficient to itself, to modify any contract, the agent invariably conceded to the company that right, and acquiesced in it.”

The contract, it will be noticed, merely gives the right to fix the “ time and manner ” of payment, It is not a fair inference that the company had the right to refuse arbitrarily payment altogether, or to contract away its right to receive the fund out of which the plaintiff was to be paid. Hor does Johnson’s testimony necessarily bear such an interpretation. He speaks of the company’s right to “modify” the contract, but this might well mean merely the privilege of changing the time of payment. Thus, even if we felt bound to hold, as matter of law, that the prior arrangement as to payment of the plaintiff continued in force at the time the memorandum agreement was made, and constituted a part of the memorandum agreement, we can see nothing therein which, upon the facts of this case, should deprive the plaintiff of his percentage upon'the stock to which the company was entitled, and which, but for the supplementary agreement with the Philadelphia company, it would have received; always providing the jury shall find that the plaintiff was the present promoter, within the meaning of the contract as already discussed. In this connection it should be pointed out that the defendant’s successor remained entitled to 10 per cent, of future increases after the contract with the Philadelphia company, and that the record shows that in at least one case it collected this from the Philadelphia company. Thus, the plaintiff ivas clearly entitled to recover something, even if we are in error in holding that he was entitled to the full rebate, as though the entire percentage of stock had been paid to the defendant in specie. And here we may add that the respondent’s contention with * regard to the receipt by the defendant of this 10 per cent.. seems to us to be without any foundation. They say that the-proof failed to show the defendant’s connection with the successor company. This point, however, was not taken upon the tidal, nor was the case disposed of upon any defect of proof in that respect. On the contrary, what was deemed to be sufficient proof was furnished; and if the plaintiff inopportunely stopped, as the defendant contends, it was undoubtedly because the fact as to the relations of the predecessor and successor company were assumed by both sides. It is a little late, and hardly fair, to raise this technicality now.

There is another question which will arise upon the new trial, and which should now be considered. The learned counsel for the appellant has suggested that the plaintiff might be entitled to 5 per cent, of the value of the business taken in exchange for 25 per cent, of the stock. We do not think that, this would be the relief to which he is entitled. To so hold would interpolate into the contract something which is not there. The contract awards the plaintiff 5 per cent, of the defendant’s 35 per cent, of stock. As plaintiff’s rights are not dependent upon the actual reception by the defendant of its-stock, he will be entitled to the value of his percentage of the stock at the time when the defendant might have received it but for the contract of July 15,1892. In' connection with this, subject, it may be added that we do not think the plaintiff, in any event, is entitled to 5 per cent, upon the first issue of increased stock. That was so issued as a dividend, in lieu or replacement of an equal amount of money earned by the Philadelphia company, and used in the expansion of the works- or plant of the company. It was, in reality, earnings, or a substitute for earnings, belonging to the stockholders, who-presumably agreed to take those earnings in that form, and was not new capital subscribed for as such. And that is evidently the only kind of increase of capital contemplated by the parties to this action in making the memorandum agreement.

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

All concur.


author: PATTERSON, J. O’BRIEN, J.

text:
    Peter Labouisse v. Evening Post Publishing Co.
    (Supreme Court, Appellate Division, First Department.
    Nov. 6, 1896.)
    Libel— Matter affecting one’s business.
    It is not libelous per se, as affecting one’s business as a cotton broker, to say that lie was the leader of an attempt to corner the cotton market and dictate prices; that such an undertaking- was a great menace to the trade ; that it was an “ utterly reckless undertaking,” which ic might be expected, and, in the interest of sound finance, might be hoped, would collapse,—there being no statement that he was not successful, nor that he was unskillful or dishonest. O’Brien and Williams, JJ., dissenting.

      Appeal from special term, New York County.
    Action by Peter Labouisse against the Evening Post Publishing Company for libel. From an interlocutory judgment sustaining a demurrer to the complaint, plaintiff appeals.
    D. McClure, for appellant; L. Godkin, for respondent.
   PATTERSON, J.

—The question we are called upon to decide is: Are the newspaper articles set forth in the complaint as defamatory of the plaintiff libelous per se, and therefore presumptively-false, and entitling the plaintiff to recover, without the allegation or proof of special damage ? It is not claimed that the articles referred to affect the personal character of the plaintiff, or are in disparagement of his general reputation; but it is claimed that, being published concerning nim in a matter relating to his profession or trade, they are in and of themselves libelous and actionable. The rule of law upon the •subject must be regarded as well settled in this state since the case of Moore v. Francis, 121 N. Y. 199, 30 S. R. 467, was decided; wherein it is held that, although no fraud or dishonesty is charged, words written or spoken tending to injure a man in his trade or occupation are actionable, and, unless the

defendant lawfully excuses them, the injured party is entitled to recover without the allegation or proof of special damage. It is unnecessary to multiply authorities upon that point. It must be conceded in its widest scope. The question here is, therefore, whether or not these articles are so clear and unambiguous, admitting of but one interpretation and application, that the question of libel or no libel becomes one of law which the court must determine; or, in other words, Avhether we can adjudge, as matter of law, that the articles complained of necessarily and inevitably tended to injure the plaintiff in his business- as a dealer, operator, or speculator in cotton, for, according to his own statement, he buys and.sells cotton on his OAvn account, and also as the agent for buyers and sellers, by which allegation is to be understood that he buys and sells both for himself and others in the market on the exchange in the ordinary way in which the operation of trading in cotton is carried on by cotton brokers and merchants engaged in that business.

The articles complained of appeared in a daily newspaper published by the defendant on the 17th of October, 1895 ; and part of the alleged defamatory matter was contained in one of the columns of the newspaper devoted to trade and business neAvs, and was headed “ The Activity in Cotton.” It referred to the enormous character of the speculation in cotton had on that day, and to the efforts made by certain parties to enhance prices, to the plaintiff as being the leader of a bull movement, to ah attempt of the plaintiff to corner the October action of the Hbav Orleans market, and dictate the prices to American . and English spinners, and force them to come into the market. and bny freely; and it stated that such an undertaking right in the middle of the harvest, was a great menace to the trade. The article then proceeded to state that, when the plaintiff" started to bull cotton, he had no idea of seeing the price advance so. rapidly or hanging on so long, but that his profits came so. quickly and increased with such rapidity that he decided to make a campaign, and double his fortune, or lose everything in the 'attempt. At the outset, he confined, his. operations to a few thousand bales per day, but now it is said his daily transactions in New Orleans and Liverpool, and in this market combined, have of late frequently exceeded 50,000-bales. “ It was only yesterday that a close friend of his in this, market estimated his total paper profit at upward of $2,000,000. It may be more, and may be less, probably the latter; but it is quite an easy thing to buy up cotton or any other speculative commodity, and amass a fortune on paper, but it is not so easy to secure it.” Now, it would seem to be quite clear that there is nothing defamatory in this publication, or that would in any way injuriously affect the plaintiff in his business, as affecting his credit or his capacity. There is nothing discreditable, unlawful, or disparaging to a man to say of him that he deals or speculates in cotton, since such transactions have been made lawful, and there can be no imputation upon the plaintiff in any way because of the magnitude of his transactions. Thus far it would seem that he was credited by the article with having so successfully and intelligently managed his enterprise that it resulted in an ostensible gain of $2,000,000. What-follows in this particular article is not a charge or accusation against or imputation upon Hr. Labouisse in any way. It is-merely a warning and a prophecy. It refers to what occurred to a Hr. Steenstrand, “who engineered the famous ccorner ’in cotton during the season of 1889-90, and who was caught in just such a difficulty.” A comparison is drawn between Hr. Steenstrand’s situation and Hr. Labouisse, and all that is said with reference to Hr. Labouisse in this connection is, after-stating the disaster that happened to Hr. Steenstrand: “ This, is just exactly what close students of the situation fear will, be the result of the present wild speculation.” How we can say, as a matter of law, that these statements are libelous per se, that they must necessarily have caused damage to the plaintiff in his business, either by causing his particular adventure to fail, or in any other way, without knowing anything-further about the operation or its results, it is difficult to see. We are asked judicially to decide that injury would necessarily result, and that the plaintiff would be entitled to a verdict for general damages simply upon the statement that has been above set forth.

But the complaint proceeds to state that in another article-contained in the same newspaper, on the same day, in another-column under the head “ Financial,” there was published an account concerning the plaintiff, as follows:

“ An utterly reckless undertaking, by a Hew Orleans speculator, to corner the cotton contract market, fixed in the middle of last week a price at which foreign spinners would not buy. The outward movement of cotton, normally heavy at this time, ceased abruptly, and the sterling market was instantly bare of bills. It may be expected, and, in the interest of sound finance, it may be hoped, that the Labouisse experiment will collapse.”

There is nothing contained in this article charging the plaintiff with unskillfulness or want of capacity in his management of his particular business, or that which was intrusted to him by his clients. It is not alleged that the Labouisse experiment did collapsq, or that he exhibited any incapacity in the transaction of the alleged effort to “ corner ” the cotton market. The effect of his effort being such as to keep the cotton spinners out of the market does not- necessarily imply incapacity or unskillfulness, simply because one kind of buyers refrained from purchasing; and the effect upon the market for sterling exchange, as matter of law, cannot be adjudged as militating against the honesty, skill, or capacity of the plaintiff. All that remains of that particular article is that the plaintiff’s speculation was called an utterly reckless undertaking.” But in the connection in which the words were used, and as applied to the subject of the article, it cannot be said that the law will conclusively presume that, unless justified, they must have affected the credit or the business of the plaintiff. He is not called in general a “ reckless speculator.” Only one transaction is so designated as reckless, and that may have been a great business success so far as he is concerned.

Again, it is claimed that in another column of the same newspaper, and on the same day, further defamatory matter was contained, in the following words :

“ The trading in cotton to-day was again very heavy, and the fluctuations were violent enough to satisfy scalpers with the most pronounced view. Mr. Peter Labouisse, together with his bull clique, although a trifle disfigured from yesterday’s violent break, were still in the ring, and they showed signs of life early in the day, by rallying to the support of the market. Mr. Labouisse and his friends in Mew Orleans tried to check the decline, by advancing prices in that market, but, as was the case yesterday, the tide was too strong for any one man or set of men to check it.”

This does not charge unskillfulness or incapacity. On the contrary, it states that, notwithstanding the adverse situation and condition of things, Mr. Labouisse and his friends were still in control, and were still enabled to maintain their positions with reference to the operation they were carrying on, although the market was declining upon them.

Here, therefore, we have a case in which a man is conducting a large commercial enterprise, in the form of a speculation, the effects of which may be disastrous to trade generally, but, as affecting his own special calling and his own particular business, is one which, according to these articles, he was virtually successful in carrying on, although the writer of the article apprehended that, from the conditions disclosed, it would end in disaster. Upon the face of the articles, it is manifest that, so far as any deduction can be drawn respecting the position in which the plaintiff was placed, he was successfully continuing this transaction at the time these alleged libels were published. How is damage to his business to be presumed conclusively as a matter of law? Is it to be assumed that customers would be repelled from dealing with him merely because he was carrying on a gigantic transaction, in which he was meeting apparently with success : What a man is entitled^ to recover damages for in an action of libel, where his personal character and repute is not involved, is damage to his trade and business. The plaintiff is not charged with want of success, nor with unskillfulness, nor with incapacity, nor with dishonesty, but with boldness and apparently successful audacity.

We are therefore led to the conclusion that on the special facts of this case, and upon a just criticism of these articles, it may not be determined, as matter of law, that they are libelous per se ; and that, if any cause of action is to be predicated on them, it can only be in connection with allegations and proof of special damage ; and that the decision of the court below was right in sustaining the demurrer ; and that the interlocutory judgment should be affirmed, with costs.

VAN BRUNT, P. J., and INGRAHAM, J., concur.

O’BRIEN, J.

(dissenting).—The plaintiff was not only engaged on his own account, but was acting as agent for others in the purchase of cotton. To say of such aman that he is engaged in “ an utterly reckless undertaking,” which is “ a great menace to the trade,” and which, it is prophesied, “ will end in disaster,” is not calculated to aid him, or to inspire with confidence those who might desire to employ him in the business of buying cotton. But, without regard to these characterizations of the articles complained of, we think their whole tenor was directly calculated to affect him injuriously in his trade or occupation, and therefore, under the authority of Moore v. Francis, 121 N. Y. 199, 30 S. R. 467, were actionable per se ; for, as therein said :

“ Although no fraud or dishonesty is charged, words written or spoken tending to injure a man in his trade or. occupation are actionable; and unless the defendant lawfully excuses them, the injured party is entitled to recover without the allegation or proof of special damages.”

I think the allegation of special damage was not essential to the cause of action, and that the complaint was sufficient, and that the interlocutory judgment was erroneous, and should be reversed, with costs.

WILLIAMS, J., concurs.