author: CULLEN, J.

text:
    Patrick H. Flynn v. Brooklyn City R. Co. et al.

    (Supreme Court, Appellate Division, Second Department.
    October 30, 1896.)
    1. Corporations—Action by Stockholder—Pleading.
    An allegation, in an action by a stockholder to set aside a lease executed by the corporation, that plaintiff has notified the officers of the' company that the lease was unlawful, and to the injury of the stockholders, and demanded that there shall be distributed among the stockholders the profits from the business of the corporation without regard to the lease, is not equivalent to an allegation that the corporation, on being applied to, refused to sue to set aside the lease.
    3. Railroads—Lease—Validity.
    A lease by a railroad company of its property is not rendered invalid, by the fact that it was executed pursuant to a scheme that another corporation should own the stock of the lessee.
    3. Same—Action to set aside—Pleading.
    A complaint, in an action by a stockholder to set aside a lease of a railroad, which alleges that the lessor would be able to pay 15 percent. dividend, if it retained its road, instead of 10 per cent, the amount which the lessee agreed to pay, and that certain persons, some of whom were directors of the company, entered into a scheme to divert a portion of the earnings from the stockholders, by renting the road for less than its rental value, is defective 'in failing to charge what the fraudulent conduct and motives of the stockholders were. Cullen, J., dissenting.
    Appeal from special term, Kings County.
    Action by Patrick II. Flynn against the Brooklyn City Railroad Company and another to set aside a lease executed by defendant, Brooklyn City Railroad Company. There was a judgment in favor of defendants, and plaintiff appeals.
    Almet F. Jenks and James C. Church, for appellant; William C: De Witt and Julian T. Davies, for respondents.
   CULLEN, J.

—This action was brought by the plaintiff, a stockholder of the defendant, the Brooklyn City Railroad Company, to set aside a lease of its railroad executed by that company to the defendant, the Brooklyn Heights Railroad Compan)r. At the opening of the trial of the action the plaintiff admitted that the lease sought to be avoided bad been approved by the votes of the holders of more than two-thirds of the stock of the Brooklyn City Railroad Company, and that he (the plaintiff) was the only complaining stockholder. Hpon these admissions the defendant moved to dismiss the complaint, on the ground that the complaint, as modified by the admissions, failed to state a good cause of action. The motion was granted, and from the judgment entered upon such decision of the trial court this appeal is taken.

The two grounds upon which the learned trial court based its determination were—First, that the complaint was defective in failing to allege that the action was brought, not only in the right of the plaintiff, but also on behalf of all other stockholders of the corporation; and, second, that the complaint failed to set forth any sufficient demand upon the eor¡Doration to bring an action to set aside the lease. As to the first objection to the complaint,' we are by no means clear that it was well taken. The complaint showed that the action was brought, not for a wrong personal to the plaintiff, but for a wrong against the defendant corporation, of which he was a shareholder, and his right of action was not primary, but derivative from the corporation, and existing only by the failure of the corporation to assert its own right. In such a case the action doubtless should be and is on behalf, not only of the particular plaintiff, but all the stockholders of the same corporation. But we are not prepared to say that a failure to make such an allegation can in any manner modify the character or limit the effect of the action. Sage v. Culver, 147 N. Y. 241, 69 S. R. 524, was similar in its character to the action now before us. The defendant interposed a demurrer to the complaint on the ground of its failure to state a cause of action. The precise objection presented. here was raised and argued in that case. The complaint did not allege that the action was brought on behalf of all the stockholders of the corporation. The demurrer was overruled, and in the opinion delivered in that case it is said:

They [the plaintiffs] bring this action as such stockholders against the defendants as directors, and ask the court to adjudge that the defendants account to them or to the corporation concerning certain transactions in regard to the management of the affairs of the corporation which are stated in the complaint. It is the sufficiency of these allegations as the basis of an action that is challenged by the demurrer. The complaint contains proper allegations to warrant the plaintiffs, as stockholders, in bringing the action, instead of the corporation itself, and there is no difficulty on that, ground, if the allegations are otherwise sufficient.”

It is claimed that the Sage Case is distinguishable from the one before us in that it prayed for relief only in favor of the plaintiffs, and not for the corporation, but we think this contention is not sustained by the facts. The complaint asked for an accounting from the defendants. The accounting could only be from the defendants to the corporation, not to the plaintiffs in that action alone, and that it was the corporation that was entitled to the account plainly appears from the opinion above quoted. It is not necessary to dilate on the question, as in our opinion, even if the objection were good, it did not justify the dismissal of the complaint. As the objection did not go to the existence of any requisite fact, but solely to the form of a pleading, the plaintiff should have been allowed to amend his complaint.

The second ground on which the decision of the trial court proceeded we think clearly correct. It is settled law that in this class of cases, as the primary right of action is in the corporation, the stockholders can intervene only upon the refusal of the corporation to seek to enforce its own rights. “ An action for injuries caused by such misconduct must be brought in the name of the corporation, unless such corporation or its officers upon being applied to for such a purpose by a stockholder, refuse to bring such action. In that contingency, and. then only, can a stockholder bring an action for the benefit of himself and others similarly situated, and in such an action the corporation must necessarily be made a party defendant. When a stockholder brings such an action, the complaint should allege that' the corporation, on being applied to, refuses to prosecute; and as this averment constitutes an essential element of the cause of action the complaint is defective and insufficient without it.” Greaves v. Gouge, 59 N. Y. 154; Hawes v. Oakland, 104 U. S. 460; Leslie v. Lorillard, 31 Hun, 305. The averments of the complaint before us, in these respects, are insufficient. The allegations of the twenty-ninth paragraph of the complaint are that the plaintiff demanded of his corporation, as a stockholder of the road, his share of the proceeds of the operation of the railroad over and above the rent stipulated to be paid in the lease. This demand called for no action by the lessor company against the lessee company. A payment of some sum of money to the plaintiff would have been a complete compliance with the demand. Further, the plaintiff had no right to the payment of any part of the earnings of the railroad, except as the corporation should declare dividends. Assuming the lease complained of to have been illegal, or even wholly void, the. whole earnings of the railroad in such case would belong to the lessor, not to the plaintiff, nor was he entitled to any aliquot share of them. The thirtieth paragraph states that the plaintiff has notified the directors and officers of his company that the lease was unlawful and to the injury of the stockholders of the companjr, and has demanded that there shall be distributed among the stockholders all the profits and receipts from the operation of the railroad, without regard to the lease; that such distribution necessarily involved such action on the part of said officers and directors as would effect the annulling of said lease, but that said directors and officers have failed and neglected to take any proceedings towards the annulling of said lease or agreement. There is the same criticism to be made on the statements of this paragraph as upon those of the preceding paragraph. There is alleged no demand that the corporation institute any action to annul the lease. As the right of the plaintiff to bring the action, is based on the refusal of the corporation to act, this defect is fatal.

Both at the trial and oh this appeal the defendants further contend that the complaint states no case sufficient to set aside the lease. The scheme of the lease of the road of the Brooklyn City Company, as detailed in the complaint and the circular from the board of directors to the stockholders, annexed to the complaint and made part thereof, is substantially as follows: A syndicate proposed to the directors and stockholders of the railroad company that the railroad should be leased to another company for a net sum above all taxes,, expenses, etc., equal to 10 per cent, of the stock of the company, which at the time was $9,000,000. A traction company was to be formed with a nominal capital of $30,000,000, which was to own and control the company which might lease the railroad. The syndicate was to secure and deposit the sum of $4,000,000 as a fund to guaranty the payment of the rent stipulated. Each shareholder of the railroad company, for every $100 par value of stock, was entitled to subscribe for and receive three shares of traction-company stock upon the payment of $15 per share, or to sell his right, to such subscription. This would dispose of $27,000,000 of traction-company stock. The remaining $3,000,000 of that stock was to go to the syndicate, which was to pay for the stock at the same rate as that exacted from the stockholders of the Brooklyn City Railroad Company,—$15 per share. It is stated in the complaint that at the time this scheme was formulated the Brooklyn City Railroad. Company possessed very valuable franchise and property; that it had been operating a horse railroad; that it had paid continuously dividends at the rate of 8 per cent, per annum; that it had at this time obtained the franchise or privilege of substituting electricity as the motive power in the operation of its railroads ; that tire change of motive power would render the operation of the railroad far more profitable than it had previously been, by both diminishing the expense of operation and increasing its patronge; and that the company was in a condition to increase its earnings and pay dividends to the stockholders in excess of 10 per cent., and at least 15 per cent. It is further stated that the defendant, the Brooklyn Heights Railroad Company, possessed a short railroad, of little value; that its capital stock of $200,000 was not worth more than 50 per cent, of its par value; that the company was. without means to pay the rental of 10 per cent, to the Brooklyn City Railroad Company, except as it derived such means from the earnings of the latter company. It is then stated that to carry out this scheme the railroad of the Brooklyn City-Company was leased to the Brooklyn Heights Company; that the plan of distributing the $30,000,000 of stock of the traction company, and leasing the road to the Brooklyn Heights Company, was to deprive the stockholders of the Brooklyn City Company of the earnings of that road, and is illegal and fraudulent.

We see no ground on which it can be successfully maintained that the lease was illegal. The power of railroad companies to demise their own roads, or lease those of others, has existed in this state from the earliest period of railroads within it.. For a long time this power was held to depend on the statute, of 1839, which authorized railroads to contract with each other for the use of their roads. Woodruff v. Railway Co., 93 N. Y. 616. And this power could be exercised by the board of direction without the assent of the stockholders. Beveridge v. Railroad Co., 112 N. Y.; 20 S. R. 962. Flow, by chapter 676 of the Laws of 1892 (section 78), express authority to lease railroads is given, but it is provided that leases exceeding in term one year shall not be valid or binding unless approved by the holders of two-thirds of the stock of the corporations. The concession of the plaintiff, made on the trial, is that the lease was ratified by more than two-tliirds in amount of the stockholders. The lessee is a railroad company, and therefore legally competent to accept the lease. The fact that the scheme contemplates a traction company which should own the stock of the Brooklyn Heights Railroad Company brings into the case no element of illegality. There is no limitation on the right of any person, individual or corporation, domestic or foreign, to own or hold the stock of railroad corporations of this state. There is doubtless an element of stock-jobbing- or stock-watering- in the scheme,—the issue of $30,000,000 of traction stock at 15 cents on the dollar,'—but this is not condemned by the laws of this state as to railroad companies. Van Cott v. Van Brunt, 82 N. Y. 535. It is forbidden as to certain corporations, but there is no such general legislation on the subject that we can say it is condemned by public policy of the state, whatever may be our own notions as to its wisdom and propriety. FTor is the scheme, as detailed, fraudulent per se. The stockholders of the Brooklyn City Railroad Company were to receive dividends at the rate of 10 per cent, per annum. It doubtless was the expectation of the syndicate that the profits from the operation of the railroad would exceed the stipulated rent, otherwise there would be no profit in the undertaking, but that does not condemn the scheme as fraudulent. In most bargains there is a' contemplation of profit by one side or the other. If the sole reliance for the payment of the rent was to be the earnings of the Brooklyn City‘Railroad Company, it might well be said that it was a most foolish bargain, because in that case the railroad company would have much to lose and nothing to gain by the transaction. But this was not the plan. Four million dollars was to be deposited in a trust company on the delivery of the lease, as the security for its performance. There is no complaint that this sum was not so deposited. It certainly cannot be said that, where the stock had been paying only 8 per cent, dividends for years, a lease at the rate of 10 per cent, guarantied by the deposit of $4,000,000, or an amount equal to nearly one-half the capital stock of the railroad company, was necessarily a foolish, much less a fraudulent, bargain. Besides this guaranty of dividends, the stockholders of the Brooklyn City Railroad Company had the right to subscribe to the stock of the traction company. If he thought that the future operation of the railroad was to be profitable, he could, of course, acquire the stock of the new company by paying his proper subscription ; but he was not compelled to venture any further sum unless he saw fit, because under the plan each stockholder was entitled to dispose of his right to subscribe. Nor does the fact that the whole of the stock of the traction company was not apportioned among the stockholders of the Brooklyn City Railroad Company necessarily show unfairness. The right to subscribe to $3,000,000, or one-tenth of the whole capital, was to go to the syndicate; but this provision for the syndicate was not a gift, or without consideration. The syndicate had already advanced $500,000 as security for carrying out the plan of lease in case the stockholders should adopt it. It was, further, to secure the deposit of $4,000,000 on the execution of the lease. Of course, if all the stockholders of the Brooklyn City Railroad Company should exercise their election of subscribing to the traction stock, such subscriptions, in addition to the subscription of the syndicate, would amount to $4,500,000,—a sum exceeding the amount of the required deposit; but, in case the stockholders of the City Railroad Company did not subscribe, the syndicate would have to advance the money itself. It would be absurd to imagine that any people would enter upon this scheme, and advance moneys for its accomplishment, unless there was to accrue some profit, or hope of profit, to themselves. The right not to receive as a bonus, but to subscribe for, a tenth part of the traction company’s stock, cannot be said, on its face, to be excessive or unfair compensation to the syndicate for the part it was to assume in this plan, nor is there any allegation to that effect to be found in the complaint.

It may be said by the plaintiff that it is his desire that the Brooklyn City Railroad Company shall carry on its business as formerly, manage its own road, receiving all the profit therefrom, and, of course, running the risk of its own losses. It may be, as he asserts, that the-profit so accruing to the stockholders of the Brooklyn City Railroad Company will be far in excess of 10 per cent., and that it would be wiser had the company never leased its road. But the plaintiff is one of Arsry many stockholders in the company,—one of many interested in a common enterprise. . In the management of that enterprise, so far as its conduct is authorized by law, not his will or judgment, but the will and judgment of the majority, must control, even though he should be right and the majority wrong in their judgment. Generally, the rule must be that in such cases the will of the majority shall govern. The court would not be justified in interfering, even in doubtful cases, where the action of the majority might be susceptible of different constructions. To warrant the interposition of the court in favor of the minority shareholders in a corporation or joint-stock association, as against the contemplated action of the majority, where- such action is within the corporate powers,, a case must be made out which plainly shows that such action is so far opposed to the true interests of the corporation itself as to lead to the clear inference that no one thus acting could have been influenced by any honest desire to secure such interests, but that he must have acted with an intent to subserve some outside purpose, regardless of the consequences to the company, and in a manner inconsistent with its interests.” Gamble v. Water Co., 123 N. Y. 91; 33 S. R. 88. As already stated, the action of the Brooklyn City Bailroad Company in leasing its road was within its corporate powers, and it cannot be said that the action of the stockholders in leasing their road at 10 per cent, per annum, with the guaranty and privileges above recited, Avas “ so far opposed to the true interests of the corporation itself as to lead to the clear inference that no one thus acting could have been influenced by any honest desire to secure such interests.”

But though the lease was within the power of the defendant corporations, and upon its face the plan for lease is neither fraudulent nor oppressive, still fraud might be proved as a matter of fact, if the allegations of the complaint are sufficient for that purpose. As the facts were not entered upon at the trial, but the complaint dismissed on the openipg, it is necessary to see whether the pleadings sufficiently charge fraud. It is charged that the Brooklyn City Bailroad Company would be able to pay 15 per cent. dividends if it retained its road, instead of 10 per cent., and that the effect of the lease is to deprive the company of its full earnings. As already said, this does not necessarily render the lease illegal or fraudulent. Generally a lease, if made at a low price, deprives the lessor of its earnings ; if at a high price, the lessee of its earnings. In the fifteenth paragraph it is alleged that certain persons, some of whom were directors of the company, designed and entered into a scheme to divest a portion of the earnings from" the stockholders, and in pursuance of that scheme to lease the railroad for a consideration less than its rental value. Except so far as the persons were directors of the railroad company, there was no wrong in their attempting to lease the railroad cheaply. But as to the directors of the company such conduct would be fraudulent,'because their loyalty was due to the company and its stockholders, and, of course, it would be equally wrong in other parties to combine with the directors. To this it may be urged that the allegation would be true possibly if one, and certainly if two, of the directors only were parties to such a scheme, while a clear majority of all the directors may have acted from a desire to benefit the stockholders. The allegation is justly subject to this criticism. But in the twenty-third paragraph of the complaint it is charged that the scheme of leasing the road was unlawful, the effect and intent thereof on the part of the shareholders who designed, approved, and carried the same into effect being to injure and defraud the stockholders of the company. We are inclined to the opinion that this is a charge as to the motive and object of all the stockholders voting for the approval of the lease. We can appreciate the improbability of all the shareholders acting in bad faith, against their own interests as shareholders, for some undisclosed advantage in another direction; but we cannot say, as a matter of law, that.the allegation is incapable of proof to sustain it.

Except as to this view of the sufficiency of the allegation of fraud, we all are in accord. But as to this two of my associates, the presiding justice and Mr. Justice Hatch, differ from me. They are of opinion that the allegation is defective in failing to charge what the fraudulent conduct and motives of the stockholders were, and also think that the allegation of fraud is to be construed in connection with the other statements of the complaint as to the scheme of leasing the railroad, and so construed to charge nothing more than an intent to carry out that scheme. They are therefore of opinion that no case is stated justifying an avoidance of the lease.

The judgment appealed from should be affirmed, with costs.

All concur.


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    The People ex rel. William L. Ward v. Theodore Roosevelt et al.

    (Supreme Court, Appellate Division, Second Department.
    Oct. 30, 1896.)
    Elections—Certificate of nomination.
    The officer to whom nominations are certified by the secretary of state is controlled by such certificates, where there is no appearance of invalidity on their face.
    Appeal from special term.
    - Application by William L. Ward for a writ of mandamus to Theodore Roosevelt and others. The application was granted, and defendants appeal.
   PER CURIAM.

—We think the order directing the issue of a writ, of mandamus was erroneous. The. secretary of state certified to the county clerk of Westchester County and the police commissioners of Hew York City the nomination of Ben L. Fairchild as a candidate for representative in congress, under the name designated by the secretary of state of “¡National Republican Party,” and the emblem of a triangular flag, with the word “ Protection ” on it. In Re Madden, 148 N. Y. 136, 41 S. R. 938, it was held the duty of the county clerks of the respective counties to provide the tickets in accordance with the certificates from the secretary of state. It was there said:

“ He [the county clerk] can only know officially, from the certificates sent to him, by the secretary of state or those deposited with him who have been duly nominated, and by what party or parties nominations have been made. I find in the act of 1895 no authority conferred on the county clerk to insert any names in the printed list of candidates of any party except those whose nominations have been duly certified in accordance with the act.”

It is provided, by section 56 of the election law that:

“ If there be a division within a party, and two or more factions claim the same, or substantially the same, device or name, the officer aforesaid shall decide between such conflicting claims, giving preference of device and name to the convention or primary, or committee thereof, recognized by the regularly constituted party authorities; and if the other faction or factions shall present no other device or party name, the said officer shall select a different device and party name for each such faction, which shall be used upon the ballots to distinguish its ticket. If two or more conventions are called by different authorities, each claiming to represent the same party for that purpose, the said officer shall select a suitable device and party name to distinguish the candidates of one faction from those of the other, and the ballots shall be printed accordingly.” Laws 1895, c. 810.

It is conceded by the learned counsel for the relator that where rival conventions, each claiming to represent the regular organization of the party, make different nominations, it may in certain cases be the duty of the secretary of state to place the nominees of both conventions upon the official ballot, placing one in the regular party column, and the other under a separate name and device. Therefore the form of tickets certified by the secretary of state shows on its face no appearance of invalidity; and it is the duty of the officers to whom the nominations are certified to comply with such certificates. The case of People v. Rice, 129 N. Y. 419, 41 S. R. 938, is not in point. The decision of Judge Edwards did not exclude Fairchild from the ballot, but directed that the relator be placed thereon as the regular Republican nominee.

The order appealed from should be reversed, and the motion denied without costs.

BROWM, P. J., and WILLARD BARTLETT, J., dissent, on. the ground that to render a decision reversing the order appealed from at this late day would be likely to imperil the election, on account of the difficulty of changing the official ballot in season.


author: McADAM, J.

text:
    Margaret Costello v. Robert Herbst.
    (Supreme Court, Appellate Term, First Department.
    October 29, 1896.)
    1. Appeal from city court—Review of facts.
    The appellate term of the supreme court cannot consider the weight of evidence on appeal from the general term of the New York City court.
    2. Trial—Objections to evidence.
    A general objection to a question is not sufficient, where the question is proper in part.
    Appeal from city court of New York, generahterm.
    Action by Margaret Costello against Robert Iierbst. From a judgment of the city court (38 N. Y. Supp. 1123) affirming-a judgment in favor of plaintiff, defendant appeals.
    Hoadly, Lauterbach & Johnson (J. V. Bouvier, Jr., of counsel)," for appellant; J. Henderson (H. C. Skelly, of counsel), for respondent.
   McADAM, J.

—The action -was to recover $623 and interest as a balance due for goods which James C. Hadden, the plaintiff’s assignor, had delivered to the defendant, at his request, on his agreement either to pay therefor or return the goods. The defendant claimed that he received the goods upon consignment, to be.held for the assignor’s account, with power to sell,, subject to all advances, commissions, and charges incurred by him, the amount of which exceeded the value of the goods.. While the acts of the parties assumed, to an extent, the form contended for by the defendant, the plaintiff’s assignor testified that the understanding on which the consignments were made was that the defendant should either pay for the goods or return them. If the goods had been returned, the moneys paid by the defendant to the assignor would have been regarded as-advances, or if the defendant had offered to return the goods, upon being reimbursed his advances, the dealings would have continued in the form of consignments. But as the defendant,, according to the evidence, refused to return the goods, the transactions became sales to the defendant; and what he terms “ advances,” payments on account. Separate prices were put upon the goods, and it was optional with the defendant either to make use of the property in his own way, paying these prices, or to reject and return the goods, and avoid the consequences of a sale. The defendant contends that in order to-effect a sale of the merchandise he had the right to further ship and consign the same to correspondents and representatives of his, wherever they might be located, and the expenses attendant upon such further shipment or consignment were to be borne by Hadden, plaintiff’s assignor ; in short, that the goods were consigned in the usual course of trade, and in accordance with the rules prevailing in that class of traffic. The evidence gives color to this contention, and the general term of the court below might, in its discretion, have concluded that the transactions were consignments of this character, and reversed the judgment on the facts ; but we cannot do that, there, being some evidence to sustain the finding of the jury. The verdict having been upheld by the trial judge, and the finding sustained by the general term by its affirmance of the judgment, this court cannot consider the weight of evidence. Arnstein v. Haulenbeek (Com. Pl.), 11 N. Y. Supp. 701; Claflin v. Watch Co., 7 Misc. Rep. 668 ; 58 S. R. 380; Gleason v. 16 Misc. Rep. 30; Kreizer v. Allaire, 16 Mise. Eep. 6. Thorn.

In speaking and writing of the moneys credited as payments on account, the assignor in some instances termed them “ advances ” ; and from the use of this term the defendant insists that the transactions will bear only the interpretation that they were consignments, in the manner and to the full extent claimed by him in his defense. But this does not follow, because it is not inconsistent with the claim of the plaintiff that the deliveries were nothing more than consignments, if the defendant was willing to return the goods, charged with his lien for the advances, but if he declined to return them (and the plaintiff swears he did decline), that they should be considered as executed sales. The invoices contained fixed prices at which the defendant might have the goods, and his retention of than, according to the understanding, was to convert the consignments into sales at the prices named, and the so-called advances into payments on account. The convertibility of the transactions from consignments to sales has led to the introduction into different parts of the record of a contrariety of terms, such as “ sale,” “ conditional sale,” and consignment,” which is apt to confuse if the meaning of these words as applied to the dealings is not kept in mind. The defendant admits that on several occasions, when he had orders for goods from his South American customers, he purchased the goods from the assignor outright, and that on other occasions when goods were consigned the latter waived the accounts of sale, and took a lump sum in payment, and thus the transactions apparently appeared as sales, when in fact they were not. In all instances, however, the goods were billed directly to the defendant at agreed prices, delivered aboard the ship designated by him, and cleared in his name. The special agreement relied on by the plaintiff was one the parties had a legal right to make, and deliveries under it divested the plaintiff’s assignor of all title or control over the goods, unless the defendant elected to return them, for until the exercise of this option the goods were practically his. He had the jus disponendi, and was at liberty to sell upon his own terms, and to whomsoever he pleased; the only consequence being that he was to pay to Hadden the » prices charged by him in the invoices, and to this extent (less the advances) would become Hadden’s debtor. See Ex parte White, 6 Ch. App. 397; In re Nevill, Id.; In re Linforth, 4 Sawy. 370; Fed. Cas. No. 8,369; Fish v. Benedict, 74 N. Y. 613 ; Carter v. Wallace, 32 Hun, 384. The rule in regard to such sales is laid down in 21 Am. & Eng. Enc. Law, 647, as follows:

Contracts of sale made on condition that the property may be returned at the option of the buyer are regarded by the courts as carrying the property absolutely to the buyer. The act of returning the goods is a condition subsequent, which may, if performed, defeat the title vested. If the right of return is not duly exercised, and the property is retained, the right is forfeited, and the sale becomes absolute, like any other sale. If the time for deciding whether to keep the goods has been fixed by the contract, the decision must be made and communicated to the seller within the time agreed upon. If this provision of the contract has not been complied with, the sale becomes absolute, and the buyer becomes liable for the price. * * * If there is no time fixed for exercising the option of taking or returning the goods, the decision must be made within a reasonable time. The jury must determine, under all thé circumstances of the case, what is a reasonable time.”

The defendant claims that the trial judge erred in admitting evidence as to Hadden’s method of doing business with the defendant anterior to the transactions in suit. The course of dealing was uniform, and the evidence was “ for the purpose of explaining their acts ■ and communications with each other in reference to the transaction now in controversy.” Richards v. Millard, 56 N. Y., at pages 581, 582. And see Abb. Tr. Ev. 318. A general objection to the proof, that it is incompetent and irrelevant, is unavailing as a ground of exception, if the evidence is admissible for any purpose. Hersey v. Benedict, 15 Hun, 282, 285; Beebe v. Bull, 12 Wend. 504. So, where a question put to a witness is proper in part only, a general objection is not sufficient to make it error to admit it. The particular ground of objection must be pointed out, or otherwise the true point may be concealed, rather than disclosed. Hochrieter v. People, 2 Abb. Dec. 363 ; 40 N. Y. 66. And see Ensign v. Hooker, 6 App. Div. 425, 431; 39 N. Y. Supp. 543, 547. The trial judge was not called upon to limit the effect of the evidence, nor to qualify its purpose, in his instructions to the jury, and there is no specific objection in the record in regard thereto which proves error.

The assignments of the claim from Hadden to Wilson R. Brown, and from the latter to the plaintiff, were in writing, and it was not objected that they were insufficient in form to pass title to the plaintiff. The effort of the defendant to get at the amount of consideration for the transfers was without merit, because of the immateriality of the inquiry. Hays v. Hathorn, 74 N. Y. 486; Freeman y. Falconer, 45 N. Y. Super. Ct. 383; Stone v. Frost, 61 N. Y. 614; Allen v. Brown, 44 N. Y. 228; Sheridan v. Mayor, etc., 68 N. Y. 30.

We find no reason which calls for reversal, and the judgment must be affirmed, with costs.

All concur.'


author: BARRETT, J.

text:
    John Kennedy et al. v. Joseph F. McKone.
    (Supreme Court, Appellate Division, First Department.
    November 13, 1896.)
    Reference—Award of costs by referee—Review.
    The decision of a referee appointed awarding costs in accordance with his conclusions of law is reviewable only on appeal, and not by motion at special term.
    Appeal from special term, New York County.
    Action by John Kennedy and another against Joseph F. McKone to foreclose mechanics’ liens. From an order denying a motion to vacate the taxation and bill of costs in favor of defendant, McKone, and to direct a taxation of the costs in accordance with the referee’s report and the former taxation, plaintiffs appeal.
    Artemas B. Smith, for appellants; John E. Eustis, for respondent.
   BARRETT, J.

—The question presented by the motion which resulted in the order appealed from was decided by the referee. He found all the facts necessary for the decision of the question, and upon those facts he awarded costs in accordance with his conclusions of law. The court at special term could not overrule the referee with regard to these, any more than with regard to any other of his conclusions. His decision upon all questions presented to him could only be reversed by an appeal from the judgment entered upon his report. The report of a referee appointed to hear and determine the issues has the same force and effect, in all respects, as the decision of a justice of the court after a trial at special term. It follows that the motion should not have been entertained. The order appealed from should therefore be reversed, with $10 costs and . disbursements of the appeal, and the motion, dismissed, with $10 costs.

All concur.


text:
    Michael McGuire v. Third Ave. R. Co.
    (Supreme Court, Appellate Division, First Department.
    November 6, 1896.)
    Street railroads—Injuries to persons on track—Evidence.
    Negligence and contributory negligence are questions for the jury where it appeared that plaintiff’s intestate, who was killed while attempting to cross defendant’s street-car track, looked both ways before going on the track, and waited for an approaching car to pass ; that lie went on the track without noticing a car coming from the opposite direction, because his view was "obstructed by a wagon; that the car, which slackened its speed on account of the wagon, suddenly-started when the wagon passed; and that deceased hesitated, and then jumped back, but without avoiding the car.
    Appeal from trial term, New York County.
    Action by Michael McGuire, as administrator of Michael McGuire, Jr., deceased, against the Third Avenue Railroad Company, to recover damages for the death of plaintiff’s intestate. From a judgment for $1,000, and $254.65 costs, entered on verdict in favor of plaintiff, and from an order denying a motion for new trial,, defendant appeals.
    W. N. Cohen, for appellant; R. P. Harlow, for respondent.
   PER CURIAM.

—Upon a careful review of the evidence, we are of opinion that this case was properly submitted to the jury. We cannot find, as matter of law, that the deceased was guilty of contributory negligence. Nor can it be said that there was no exddence of negligence on the defendant’s part. The situation was a peculiar one. The deceased had exhibited unusual prudence in his preliminary movements. He looked carefully about him, and up and doxvn, before attempting to cross the1 avenue. He .saxv the car going uptoxvn, and he stopped and xvaited for it to pass. He then proceeded. But his progress and view were obstructed by a brewery xvagon, which passed between him and the car coining down toxvn. This downtown car slowed up to let the brexvery wagon pass. As it passed, the gripman started the car up suddenly. The deceased then found himself in a critical position. He xvas undoubtedly startled, and thrown somewhat off his balance,"by the sudden and precipitate start of the cable car. He hesitated, and jumped back. But it was too late, and he xxms struck by the rapidly advancing car. Whether the deceased sawQthis car at the moment he attempted to cross, or should have seen it; whether the attempt to cross just as the brexvery wagon got out of the xvay xvas a mere error of judgment, or a piece of , foolhardiness; xvhether it xxms exTen an error of judgment,— were all questions of fact proper for the consideration of the jury. So as to the conduct of the gripman. Whether he saw or should have seen the deceased in time to prevent the accident, and xvhether he caused an undue or violent propulsion of his car at the critical moment, "were questions fairly for the jury. It is, upon the whole, impossible to sustain the defendant’s contention that there was neither evidence of the ■deceased’s freedom from contributory negligence nor circumstances from which such freedom could be inferred. It is •equally impossible tq sustain the contention that there was absolutely no evidence from which the gripman’s negligence •could properly be found or inferred. There are no exceptions •of any importance,—none which call for consideration.

The judgment should be affirmed, with costs.


author: PER, CURIAM.

text:
    The People ex rel. Milton Lawson v. James J. Martin et al.

    (Supreme Court, Appellate Division, First Department,
    November 6, 1896.)
    Policemen—Dismissal—Review of decision.
    The dismissal of a policeman is sustained by the evidence where the roundsman testified that he saw the policeman enter a liquor saloon; that a young man ran up, and told him that the roundsman was coming ; and that he afterwards saw the policeman coming out of a hallway below the store; and the policeman’s record showed that numerous complaints had been preferred against him,'—though the policeman testified that he was not in the saloon, but that he entered the hallway while chasing some boys.
    Certiorari by William Lawson to review the proceedings of James J. Martin and others, constituting the board of police .commissioners, dismissing relator from the police force.
    Louis J. Grant, for relator; James T. Malone, for respondents.
   PER, CURIAM.

—The relator was charged with being absent from his post and in a liquor saloon during his tour of duty. It is insisted that the charge was not proven. This involves a consideration of the testimony upon the trial. The roundsman swore that at the time specified “ I walked down First avenue, and when I got to Sixty-Sixth street and First avenue I saw the officer between Sixty-Fourth and Sixty-Fifth streets, on the west side of the avenue, walking towards me. I walked down. I got near Sixty-Fifth street, and I ■saw the officer walking in this liquor store. He had no more than got inside the door before Isaw a young fellow running up after him to tell him I was on the corner. Then I saw the young fellow coming out of the side door. I saw this officer •then come to the side door, and look around, and walk back. I remained on the corner a few minutes, and I saw him come out of a hall door a few doors below. * * * I asked Mm what he was doing in there, and he said he was chasing some boys playing ball, and then came out through the hallway.” The relator testified that he had chased some boys some distance away, and then came back, “ and tried to get one of them, and when they seen me one of them ran through the-middle of the block, and the other three ran around and into-this liquor store. I chased them up through the house and over the roofs, and tried to catch one. When the roundsman seen me he was at Sixty-Third street and First avenue. I was not in the liquor saloon.” This, together with the record of the relator, which showed that numerous complaints of one-character and another had been preferred against him, upon which judgment' had been rendered against him for one or-more days’ pay, was substantially all the evidence produced. The punishment does seem to me unusually severe for what, apparently was- a trivial offense, it not having been shown that the officer was in the saloon for any length of time or drank while in there, but that he went in and came out immediately after,—whether, as surmised by the roundsman, because he-was told he was watched, or of his’ own accord, must be a matter purely of conjecture. While the evidence is slight, and the testimony of the roundsman and that of the relator are-capable of being reconciled, still there was sufficient for the-consideration of the commissioners, and we cannot disturb their finding. The writ should accordingly be quashed, and. the proceedings dismissed, with costs.


author: WILLIAMS, J.

text:
    Samuel H. Hubbard et al. v. John W. Looschen.
    (Supreme Court, Appellate Division, First Department.,
    October 23, 1896.)
    Payment—Evidence.
    A finding that the note sued on had not been paid is sustained by the evidence, where defendant’s testimony that it had been paid by delivery of notes óf a third person to plaintiffs is contradicted by plaintiffs, and it appears that the notes so delivered by defendant were slightly in excess of another debt due from him to plaintiffs, and that plaintiffs gave him a check for the excess.
    Appeal from judgment on report of referee.
    Action by Samuel H. Hubbard and John 0. King against Emma A. Looschen, as executrix of the will of John W. Looschen, on a promissory note. There was a judgment in favor of plaintiffs, and defendant appeals.
    Joseph N. Tuttle, for appellant: Norman S. Dike, for respondents.
   WILLIAMS, J.

—The action was brought to recover the amount of a promissory note for $126.25. The making and delivery of the note were admitted. The defenses were that the note had been paid, and that a settlement had been made between the parties, which covered this note. The referee decided that the note had not been.paid, and that it Avas not covered by the settlement, and ordered judgment accordingly for the plaintiffs.

As to the defense of payment, the question was purely one of fact, as to which the decision of the referee upon conflicting evidence should not be disturbed. The defendant claimed the payment was made by the delivery of a note of a third party (one J. S. Dewing) for $130. Defendant so testified, while one of the plaintiffs and them agent testified to the contrary. The counsel for the appellant makes no argument as to this branch of the case, but confines himself to the defense of settlement. It seems to me this also was purely a question of fact, for the decision of the referee upon conflicting evidence. There seems to be no dispute but that at the time of the settlement the defendant was indebted to the plaintiffs upon two notes,—one for $167.53, and the other for $199.34,—making a total of $366.87. At that time defendant delivered to Mr. Dike, attorney for plaintiffs, notes of third parties,—one of It. B. Lee for $115, and one of F. Muehlfeld for $111.36,—and he had before that paid Mr. Dike $50 in money, and delivered to him another note of a third party (one Muehlfeld) for $100, making a total of $376.36. This was an overpayment of the two notes owing by him of $9.48. This difference is very likely accounted for by the note at the bottom of the receipt, “ Check for $9.08 to J. W. L.” It is evident certainly there was no claim made that this small item was intended as a payment in settlement of the note in suit. The figures were made, and the notes and cash were delivered in payment of the two notes mentioned, which were concededly owing and. unpaid, and of nothing else. This being done, a receipt was given by Mr. Dike, closing with the words, “ being in settlement to date for overdue notes due S. H. Hubbard & Co.,” ■who were the plaintiffs. The plaintiffs claim that the note in suit was not considered in the settlement at all, but was overlooked by mistake. The defendant claims that the note in suit was talked about, that both parties agreed it was paid, and that the receipt was expressly said to cover this note, which, though paid, had not been delivered to the defendant. There is a sharp conflict in the evidence on this subject between the defendant and Mr. Dike. It turns out that the note had not in fact been paid, and we do not think the finding by the referee that the note was not talked about or considered at the time the settlement was made and the receipt given should be disturbed. Considering the finding of the referee as to the fact as well made, it cannot be doubted that the note in suit was by mistake left out of the settlement, was not covered by it, and constituted no defense to this action for the recovery of the. amount of the note. The authorities referred to in the opinion of the referee were ample authority for the proposition for which they were cited.

The judgment appealed from should be affirmed, with costs.

All concur.


text:
    Matter of Application by J. Blackburn Miller for Leave to Lay out Highway.
    (Supreme Court, Appellate Division, Second Department.
    Oct. 27, 1896.)
    Highways—Opening—Liability of town for costs.
    A town is not chargeable with the fees of commissioners appointed ’ in a proceeding to open a road, where the proceeding was vacated after the commissioners had made their report, as Laws 1892, p. 2205 (Highway Law) § 92, requires the town to pay the cost* only in case • of on assessment of damages by the commissioners.
    Appeal from Orange County court.
    Application by J. Blackburn Miller for leave to lay out and open a highway in the town of New Windsor, and for the assessment of the damages caused thereby. From an order directing the town of New Windsor to pay the fees of commissioners appointed in a proceeding, said town appeals.
    H. R. Lydecker, for appellant; Headley & McClung, for petitioner ; W. C. Anthony, in pro. per.; W. F. Cassedy, for Sarah M. Carson.
   CULLEN, J.

—The petitioner, Miller, made application to lay out a new highway. On his petition the county court appointed commissioners to determine whether the proposed highway was necessary, and to assess the damages^ by reason thereof. The commissioners reported in favor of the highway, ■ •and assessed the damages occasioned by laying out the same. The proposed highway, however, ran through the brickyard of one Sarah M. Carson. She did not consent to the layihg out of the highway through her land, nor did the highway commissioners of the town certify that the public interests would be promoted'by the opening of the highway. After the commissioners appointed by the court had made their report, Carson and the town of Hew Windsor moved to vacate all the proceedings for laying out the highway, on account of the failure to obtain such consent or certificate. The application was granted, and the court imposed on the petitioner, Miller, the costs of Mrs. Carson, and directed the town to pay the fees - of the commissioners appointed to assess the damages. From the order imposing upon it the payment of such fees, the town has taken this appeal.

We entirely agree with the contention of the commissioners of appraisal that they should be paid for their services, but we are of the opinion that that expense should not be imposed on the town. The general plan and policy of the statute are plain. Any person assessable for highway labor in a town may make application to lay out such highway as he desires. When application is made, the applicant is required to give an undertaking, with sureties, that in case the commissioners determine against the highway he will pay the fees of the commissioners, and costs of the proceeding, not exceeding $50. Highway Law, § 83. In case of assessment of damages by commissioners appointed by the court, the costs are directed to be paid by the town. • Id. § 92. It was plainly intended that in case the proposed improvement should be carried into effect the costs and expenses occasioned by it should be defrayed by the town, but in case of a determination adverse to the proposed improvement the expense should be borne by the applicant. This is just, as the proceedings are instituted, not by the town, but by the applicant, at his own election. It is contended that the rule does not apply to the present case, because the commissioners appointed by the court did not report against the proposed highway, but the proceeding failed, from the absence of the necessary consent of the owner, or certificate of the highway commissioners, and that such a contingency is not expressly provided for in section 83, as rendering the applicant liable for costs and expenses.» It may be that this view is correct, but, if this be so, there is a casus omissus in the statute. It is not proper for us to determine the question, as it is not directly raised on this appeal. It would seem, however, by the language of the section, that the fees of the commissioners and the costs of the proceeding stand on the same footing, and that, if the applicant could be made liable under this section for the latter, he could also for the former. The responsibility of the town for these fees is based on section 92 of the highway law. It provides that, in all cases of assessments of damages by commissioners appointed by the court, the costs thereof shall be paid by the town, except when damages are reassessed. There could be in this case no legal assessment of damages, because there was no right to lay out the highway. We think the section refers to the case of a valid assessment of damages only, and this accords with our view of the general scope and purport of the statute,—that the town should bear the expense where the petitioner succeeds in his application for the improvement, not in the case of proposed improvements which fail.

The order appealed from should be reversed, without costs.

All concur.


text:
    Elsie B. Coals v. Julius J. Suckert et al.

    (Supreme Court, Appellate Term, First Department.
    September 28, 1896.)
    1. Stenographers—Liability for fees—Contract between parties.
    An agreement between the parties to an action for divorce that each should pay half of the fees of the stenographer employed to take testimony before the referee is not binding on the stenographer, where no stipulation to that effect was filed with the referee or entered on his minutes, and no notice of the agreement was given to the stenographer.
    3. Same—Eight to compensation.
    The right-to compensation of a stenographer employed to take and transcribe testimony before a referee depends on contract, as a stenographer in such case holds no official position.
    Appeal from eleventh district court.
    Action by Elsie R. Coale against Julius J. Suckert and Maria L. D. Suckert for services rendered by plaintiff as stenographer in an action between defendants. There was a judgment in favor of plaintiff, and defendant Julius J. Suckert appeals. . .
    Charles J. Hardy, for appellant; Root & Clarke (A. Thain, of counsel), for respondent.
   McADAM, J.

—This is an appeal by the defendant, Julius J. Suckert, from a judgment rendered against him jointly with the co-defendant. The defendants, husband and wife, had serious differences respecting their matrimonial obligations, which culminated in a suit by the wife for divorce. A motion was made for alimony, and counsel fees to enable the wife to prosecute the action, and the court directed a reference to ex-Judge Y an Hoesen to determine whether any, and if so, what, relief of the character claimed should be awarded. The referee reported in favor of the wife, and the court confirmed the report, and awarded alimony (the amount not appearing), together with $500 counsel fées. The plaintiff, a stenographer, called in by the referee, took and transcribed the testimony, and at the request of the parties one copy thereof was furnished for the use of the referee, and one to each of the attorneys to assist them in conducting the prosecution and defense of the application on behalf of their respective clients. The stenographer’s bill amounted to $261.32, and at the request of the attorneys each of them was furnished with a copy of it. The husband sent his check for one-half of the. bill, accompanied by a letter, in which he said he would pay no more, for the reason that by agreement between the parties the other half-was to be paid by the wife. The plaintiff, disavowing all knowledge of the agreement, insisted that it did not bind her, and brought suit against the husband and wife to recover the unpaid balance of the bill. The wife offered no defense, while the “husband answered, denying any joint employment, and pleading the special agreement with his wife whereby he was to pay one-half of the fees only. It must be assumed that the circumstances established an employment of the plaintiff by the parties, for they so regarded it throughout the reference, and the husband, after its conclusion, conceded it by paying one-half of the bill, placing his exemption from liability for the other half on the agreement with his wife. Such, also, is .the necessary effect of the husband’s stipulation at the trial, wherein he agreed that the only question in dispute to be determined was his liability jointly with the wife for the half of the .bill unpaid. The husband never disputed liability on any ground other than the agreement with his wife by which she was to pay one-half of the plaintiff’s bill, and he cannot, after litigation has begun, change his ground, and mend his hold. Thorne v. French, 4 Misc, Rep., at page 441; 54 S. R. 137; affirmed 143 N. Y. 679; Jones v. Electric Co., 7 App. Div. 465, 473. The rule is elementary that if a person allows another to work for him under such circumstances that no reasonable man would .suppose that the latter means to do the work for nothing, he will be liable to pay for it. The doing of the work is the offer; the permission to do it, or acquiescence in its being done, is the acceptance. Clarke, Cont. (Hornbook ed.) 25; Wood, Mast. & Serv. §§ 62, 67; Lewis v. Trickey, 20 Barb. 387; Smith v. Railroad Co., 102 N. Y. 190,192; 6 N. E. 397. The right to recover is not controlled by the law relating to the taxation of stenographer’s fees as, between the parties to the original .action, but by the application of the principles which prevail in ordinary cases of employment, wherein parties for whose benefit services are performed are jointly liable for their value. Where one is employed by several persons to perform a service for the benefit of all, and there is no agreement for a separate charge, the obligation is joint. 1 Pars. Cont. (6th ed.) 11. The principle' was applied to a stenographer suing for his fees (Adams v. Railroad Co., 20 Abb. N. C. 180), and the liability was held to extend to all the parties in the action wherein the ¡services were rendered. It seems just that in actions for divorce the expenses of a proceeding before a referee to ascertain the financial condition of the husband for the purpose of determining'the amount of alimony and counsel fees should be borne by the husband. Bish. Mar. and Div. §§ 911, 978; Collins v. Collins, 80 N.Y. 1; De Llamosas v. De Llamosas, 62 N.Y. 618; Smith v. Smith, 35 Hun, 378; Schloemer v. Schloemer, 49 N. Y. 82. In the case last cited an order directing the husband to pay the plaintiff’s attorney $250 for referee’s fees in a divorce suit was affirmed.

The appellant claims that these cases merely determine the ■question as between husband and wife, and do not apply to persons not parties to the record; but we fail to see how, as between themselves, certain obligations flow, but that, when a person has performed labor for the husband and wife jointly, and is seeking to enforce the obligation, a different result must follow. But, irrespective of' this, the evidence of employment is sufficient to charge the parties in the present instance. ■ There is no proof that the wife had any separate estate or any credit save that of her husband, and the very nature of the application which was referred for determination would imply that she was without the necessary means of livelihood, or the ability to pay even the counsel she had employed to assert her legal rights, much less pay the stenographer the fees for transcribing or furnishing the minutes of the reference. A stenographer on a reference holds no official position, and his right to compensation depends upon contract, express or implied. He owes his connection with the case to the consent of the parties, and where they permit him to act, knowing he expects, compensation, they should agree with him as to his charges- and the mode of payment, or bring home to him in some intelligent form any special limitation upon their liability; otherwise the law may infer an agreement on their part to pay the-customary fees, enforceable as other contracts are against the-persons for whose joint benefit the work is performed. In partnerships the parties are liable jointly to persons performing labor or giving credit to the firm, and, if there is any special provision in the articles limiting the powers of any partner or exempting him from liability, it is unavailing against-third persons, unless it be proved that notice of the provision was brought home to the party before the credit was given. 1 Colly. Partn. [6th ed.) notes by Wood, 629, 630. And upon the same principles agents who fail to disclose their agency are made personally liable. Story, Ag. § 266; Whitman v. Johnson, 10 Plise. Rep. 725; 64 S. R. 613. Assuming for-present purposes 'that the defendants, by their agreement, effectually regulated, as between themselves, the liability for stenographer’s fees, it could not affect the plaintiff unless communicated to her, or made apparent in some form sufficient to charge her with notice. The agreement as to dividing fees was not reduced to writing in the form of a stipulation filed with the referee, nor was it entered upon the official minutes;. so that there was nothing to imply notice to the plaintiff; and she testifies that she had no knowledge of the agreement until after her work had been performed, and that she never assented to it in any way. Nor is it reasonable to assume that the plaintiff .would have given credit to the wife when the plaintiff knew, from the very nature of the proceeding before the referee, that it was based on the wife’s impecuniosity and the husband’s supposed ability to pay. The burden of proving that the plaintiff had knowledge of the special agreement was on the husband, and, as he failed to satisfy the justice that it was made known to the plaintiff so as to imply an assenLthereto upon her part, the judgment against him is not without evidence • to sustain it. The appellant, in his answer, pleads payment under the'alleged special agreement; but as he was liable, upon the facts found, for the whole amount of the bill, he established a payment of one-half only, and this was credited in the ■ complaint, wherein the balance alone was claimed. We need not consider the technical effect of receiving the husband’s check for half of the bill, in connection with the letter which accompanied it, further than to hold that it did not establish the defense of payment pleaded. What effect that letter and the retention and use of the check would have had if the defendant had- pleaded accord and satisfaction of a disputed liability (Fuller v. Kemp, 138 N.Y. 231; 52 S. R. 342) is not - presented for review by the record before us.

The judgment must be affirmed,, with costs.

All concur.


author: O’BRIEU, J. INGRAHAM, J.

text:
    Johannes H. Johannessen v. John Munroe, et al.

    (Supreme Court, Appellate Division, First Department.
    October 23, 1896.)
    Letter of credit-^Transfer—Estoppel to deny validity.
    Defendants are estopped to deny that a letter of credit issued by them, was for valuable consideration, where plaintiff accepted it from a third person in payment of a debt after defendants had informed him that it was duly issued, and was good for the full amount. In-graham, J., dissenting.
    Appeal from trial term, New York County.
    Action by Johannes H. Johannessen against John Munroe and others on a letter of credit. There was a judgment in favor of plaintiff, and defendants appeal.
    George A. Strong, for appellants; Wilhemus Mynderse, for respondent.
   O’BRIEU, J.

—In considering this case upon the former appeal, I reached a conclusion, as shown by the opinion (84 Hun, 594, 32 H. Y. Supp. 866), that:

“As to instruments other than promissory notes, particularly instruments in writing, such as special letters of credit, which are neither negotiable nor assignable, in order to charge the maker or withdraw the liability, it is necessary to prove that such instruments were made for a consideration, unless such liability can be supported by an estoppel. * * * Applying these principles to the case at bar, we think that, unless the plaintiff states a good cause of action upon the theory that, as the result of the representations made by the defendants, he accepted the letter in payment of Boe’s indebtedness, thus becoming a holder for value, and so entitled to avail himself of the terms of the letter of credit, then the dismissal of the complaint was right.” See cases cited.

Upon the trial, evidence was offered tending to show that the claim of Johannessen had been placed in an attorney’s hands for collection, and upon the strength of the letter of •credit which was accepted in payment legal proceedings were stayed. And in marshaling the evidence the learned trial judge, in his charge to the jury, to which no exception was taken, said:

“That then Captain Johannessen, having this claim * * * against Boe, came to Butler, Stillman & Hubbard’s office, arid consulted them with reference to this ’ matter with Boe, and that these attorneys, acting for him, wrote a letter to Boe with reference to an indebtedness, and intimated that proceedings would be taken unless the indebtedness was paid. Thereupon Boe offered $500 in cash, if I remember the amount right, and this letter of credit, in payment of the indebtedness then existing, and which was about to be enforced; that being the difference between the amount of two charter parties of the same ship, and for which difference Boe was liable. * * "x' That they, [referring to those representing Johannessen] went to the office of John Munroe, and had a conversation with Mr. Munroe, in which Munroe stated and represented that this letter of credit was issued by his house; that it was a good and genuine letter of credit. * * *”

The jury has found that the representations were made to-the plaintiff before acceptance of the letter of credit, and that-thereafter, and as a consequence, he agreed that his attorneys; should not proceed legally to enforce the claim, and he thereupon-discharged Boe from his indebtedness by receipt in full. It thus appears that the plaintiff did forego his then right to-enforce his claim by legal proceedings, and accepted the letter of credit in payment of an indebtedness. Mr. Justice In-graham concedes that, if this were a promissory note, and received under like circumstances by the plaintiff in payment of' an indebtedness, which was receipted for and discharged, the. plaintiff could recover. Daniels, Meg. Inst. (3d ed.) § 1790, says with respect to letters of credit:

“ While not possessing all the characteristics of negotiability which pertain to bills and notes, [they] partake of them to-such an extent as tobe necessarily classed as negotiable instruments.”

The jury having concluded that the representations were made, and it now appearing that the plaintiff, in whose favor the draft was made, received it in payment of an indebtedness, for which plaintiff receipted in full, and gave up his then right to enforce it legally, it seems to me that, under the law as-ex pressed upon the former appeal, the judgment should be affirmed. I therefore dissent from the opinion in favor of reversal.

YAM BRUMT, P. J., and WILLIAMS, J., concur.

INGRAHAM, J.

(dissenting).—This action is brought to-recover the damages sustained by the plaintiff in consequence of the refusal of Munroe & Co., of Paris, to accept or pay a bill at 90 days from date, drawn by the plaintiff, for $300, under' a letter of credit dated Movember 26, 1892, whereby the defendants, John Munroe & Co., certified that they had opened a credit with Munroe & Co., of Paris, in favor of the plaintiff, for 15,000 francs or £600, a bill of £600 having been drawn by the plaintiff upon Munroe & Ob., of Paris, acceptance and payment thereof having been refused, as the credit had been cancelled by the defendants prior to the drawing of the bill. This credit was issued to one Carston Boe, and by him delivered to the plaintiff: There was no consideration paid by Boe or the plaintiff to the defendants for the credit, and it was obtained by Boe upon representations which it is. not disputed would, as between Boe and the defendants, have-given the defendants the right to cancel the credit. Upon the first trial the complaint was dismissed on the ground that it did not state facts sufficient to constitute a cause of action; and on an appeal to the general term of the supreme court of this department the judgment entered on that dismissal was reversed, and a new trial ordered. 84 Hun, 600. Upon the new trial the court submitted to the jury but one question, and that was whether or not the evidence of the plaintiff as to an interview that he had with one of the defendants prior to the acceptance of the letter of credit by the plaintiff was correct, or whether the evidence of one of the defendants as to that interview was correct; the court holding as a matter of law that, if the jury believed the plaintiff’s evidence as to this interview, the plaintiff was entitled to a verdict, the court charging the jury as follows:

“ How, that is the whole case, and all there is in it on the proofs as they are now before the court, and it is for you to say which of these parties you think are entitled to credit. If you find that Munroe’s version of this is right, the defendants would be entitled to a clean verdict. If you find that the Avitnesses for the plaintiff have presented it in the proper and reliable form, then the plaintiff would be entitled to verdict in the sum of $3,527.28.”

Upon the trial, therefore, the right of recovery was based solely upon the effect to be given to the conversation Avhich took place between the plaintiff and Mr. Munroe, one of the defendants. And the principle upon Avhich plaintiff claims that the statements made by defendant Munroe at that interview established a cause of action in favor of the plaintiff was that of estoppel, it being claimed that, in consequence of representations made by Mr. Munroe to the plaintiff, the defendants are estopped from denying that the letter of credit constituted a valid and existing obligation that Munroe & Co., of Paris, Avould accept the drafts drawn under the letter of credit, and that the defendants are liable for the refusal of Munroe & Co., of Paris, to accept such draft. Upon the former appeal to the general term three opinions Avere Avritten, one by Mr. Justice O’Brien in favor of a neAv trial, the presiding justice concurring in the result of the opinion of Mr. Justice O’Brien, and Mr. Justice Follett dissenting. In the opinion of Mr. Justice O’Brien the legal effect of a letter of credit was considered, and his conclusion is:

“That unless the complaint sIioavs that the defendants agreed for a valuable consideration that the draft would be accepted, or expressly in Avriting agreed to so accept it, or unless the plaintiff, upon the faith of such agreement to accept, parted Avith something of Avalué to Boe, from Avhom he received the letter of credit; then no cause of action is stated. In the latter, alternative the complaint is sustainable upon the theory of an estoppel, Avhich, from its nature, requires the support of a consideration. In other Avords, unless there is a parting with value, it is difficult, if not impossible, in any given case to create an estoppel. * * * In other words, the defendants having, upon the application of Boe,- extended to the latter a credit available in favor of the plaintiff, which the plaintiff received, but which, before taking, he inquired about from the. defendants as to its Availability according to its terms, and, after assurances such as were here given, it having been then received by the plaintiff for value, we think that, irrespective of the question whether or not the defendants received any consideration from Boe therefor, the plaintiff, as against the defendants, is entitled to recover.”

The presiding justice concurred in the result of this opinion, but dissented from the definition given to a letter of credit, and places his concurrence upon the following ground:

“ Prior to its acceptance the plaintiff made inquiry of the defendants, and was assured by them that it had been duly issued, and was available for the full amount thereof, in the manner provided by the terms thereof. The defendants, having made this representation upon which the plaintiff Accepted the letter of credit for value, are estopped from alleging that it was issued without value, or because of fraudulent representation. The plaintiff, having taken it in good faith for value, after the representations made, has an undoubted right to enforce it.” 1

Mr. Justice Follett dissented upon the ground that the representations were not sufficient to estop the defendants from alleging that the letter had been obtained by fraud, or was without consideration, but were merely representations that the letter was genuine, and available according to its "terms. As before stated, upon the former trial the complaint was dismissed upon the ground that no cause of action was alleged, and all that was decided was that, if the plaintiff actually parted with value, relying upon the representations made by the defendants that a draft drawn by the plaintiff under the letter of credit upon Munroe & Co. would be paid, the defendants are then estopped from denying the validity of that agreement. The evidence of just what value the plaintiff parted with was not before the court, and upon this trial, under the decision of the general term, it must be made to appear that the value parted with was such as would entitle the plaintiff to claim an estoppel according to the rules governing that subject. We have now before us the evidence upon which the plaintiff relies to establish this estoppel, and it is necessary for us now to determine whether that evidence is sufficient. The contract in question was made between the defendants and Boe. Plaintiff had no knowledge of the contract when made, and at the time the contract was made it does not appear that Boe was indebted to the plaintiff in any sum of money. It appears that Boe had chartered the steamship Raylton Dixon; that the steamship arrived in New York in the month of February, 1892; that Boe did not carry out his charter, and that the plaintiff was. obliged to recharter his ship; that there was a loss to the steamship on recharter of between thirty-three and thirty-five hundred dollars, and that Boe & Co. were responsible for such loss. The charter was not introduced in evidence, nor was there any evidence as to when the recharter was made, or when the liability of Boe & Co. to the plaintiff arose. On the 26th of February, 1892, the letter of credit in question was issued by the defendants. That letter was obtained by Boe upon an agreement between himself and the defendants; and thereby the defendants agreed that Munroe & Co., of Paris, would accept and pay a draft drawn by the plaintiff for 15,000 francs, or £600, at 90 days’ date. The contract is, in substance, an agreement made between Boe and the defendants for the benefit of a third party (the plaintiff). The drafts were not to be drawn upon the defendants, but upon the house of Munroe & Co., in Paris. And the liability of the defendants arose from a breach of the agreement that the Paris house would accept and pay the drafts drawn by plaintiff. It ivas thus an agreement in favor of a third party, between whom and the defendants no contractual relations existed, and from whom no consideration had been received to uphold the contract.

This court has lately decided in the case of Buchanan v. Tilden (Sup.), 39 N. Y. Supp. 228, that such an obligation could not be enforced by the third party, in whose favor the contract was made, unless there existed at the time the agreement was made some obligation on behalf of the person making the contract to the third party. So that it is clear that no obligation ■ in favor of the plaintiff as against the defendants would exist, unless either by a legal or equitable assigment from Boe to plaintiff a legal' right that Boe had to enforce this obligation against the defendants was transferred to the plaintiff, or that defendants were estopped from impeaching the validity of the contract.

The difference between a general guaranty and a special guaranty was considered in the case of Bank v. Kaufmann, 93 FT. Y. 276. There a special guaranty is defined as one which will operate in favor of the particular persons only to whom it is addressed, while general guaranties are open for acceptance by the public generally. And this contract is evidently one that, as between the plaintiff and defendants, would come Avithin the definition of a special guaranty. By the earlier cases it Avas held that no action would lie at the suit of an assignee upon a special guaranty because no privity existed betAveen such assignee and the guarantor. But the court in that case held that this obstacle Avas removed in this state by the Code of Procedure, AAdiich authorized any party acquiring an interest in a guaranty to bring his action and recover thereon, proAÚded a cause of action previously existed upon the contract in favor of his assignor, the court saying:

“ The real party in interest in such contracts is now entitled to maintain, an action for damages arising from a breach of such contract in his own name, although he was not originally privy to it. In other words, the same effect is now given to an equitable that formerly pertained to a legal assignment, and they are now both equally cognizable in a court of law.”

It seems to follow, from this that the plaintiff’s right to recover must depend upon his being the equitable or legal assignee of a right that Boe had to recover from this defendant; and, as was stated in Bank v. Kaufmann, supra:

“ Such a guaranty contemplates a trust in the person of the promisee, and from 'its very nature is not assignable until a right of action has arisen tliereon, which may, like any other cause of action arising upon contract, be then assigned.”

A surety under such a contract “is entitled to the application of the strict rule of construction, and cannot be held beyond the precise terms of his contract.” Now, it is entirely clear that in this case there did not exist, and never existed, as between the defendants and Boe, any right of action in favor of Boe which he could enforce, or which he could assign. He had paid nothing to the defendants, but had obtained this letter upon representations as to its' use which, as between him and the defendants, made the contract void, or voidable at the election of the defendants. They had at any time a right to cancel the letter of credit before it had been acted upon by some third party under such circumstances as would operate to estop the defendants from exercising that right: and up to the time of the attempted transfer, Boe being in possession of the instrument, no right of action existed as between Boe and the defendants which could be transferred or enforced. The transfer of the instrument, therefore, to plaintiff, transferred no cause of action by either a legal or equitable assignment. This principle was fully recognized in the decision of the general term, before cited, on the former appeal. It was there held that, if any liability existed, it must be because the defendants were in some way estopped from alleging that the credit itself was void, or from canceling the credit as it existed. And what was said in Bank v. Kaufmann, supra, applies expressly in this case:

“ It cannot be seriously claimed that a proposition, either written or oral, made by one person to another, agreeing to guaranty the payment' of any draft wrhick the other might draw, furnished a sufficient consideration for the promise. * * * In all of the cases cited where guarantors have been held liable, even to third persons, upon such instruments, the letter embraces either an express or implied request to such persons to advance value upon the faith of the paper therein described; and it is because they have parted with value upon such requests that the liability of the promisor to them is predicated. If no liability is incurred in favor of a third party unless he has parted with value, much less can it be claimed that it is in favor of an original party to the contract, from whom, as is shown affirmatively, no consideration whatever proceeded.”

A different question would be presented if plaintiff had sold a draft drawn under the credit of a person who had purchased it relying on the terms of the credit, and such purchaser had sued for. a failure to pay that draft. It seems to me clear that no estoppel did arise, because the position of the plaintiff was not materially changed after the representations made by the defendants to him, and before notice was given that the credit had been improperly obtained, and was canceled. “ Before a party can be estopped by what he has said from asserting the truth, it must appear that the person claiming the estoppel had acted or rested upon his statements, so that he will suffer harm if they are not conclusively held to be true.” Winegar v. Fowler, 82 N. Y. 316. And in 7 Am. & Eng. Enc. Law, 17, it is said that one of the essential elements to establish an estoppel is that, “ The other party must have been induced to act upon the representation or concealment. His action must have been of a character to result in substantial prejudice were he not permitted to rely on the estoppel.”

But I do not think that the transfer to plaintiff was such as to constitute him a holder for value, within the rule applicable to negotiable paper. The mere receipt of a note in nominal payment of a precedent debt without evidence that it was received in absolute discharge and satisfaction beyond what may be inferred from accepting or receipting it in payment is not •sufficient. Insurance Co. v. Church, 81 N. Y. 218. But what Avould constitute a sufficient consideration on the transfer of a promissory note, or other negotiable instrument, to make the transferee a bona fide holder for value, might be clearly insufficient to create an estoppel. It is necessary for the party relying upon the estoppel to go further and show that in some way his position has been changed to his injury, relying upon the statements made. In other Avords, to create an estoppel, there must be such a change of position on the part of the party claiming the estoppel as will make it inequitable to al- . low the party making the representations to insist upon his legal rights, or shoAV that the representations made were not, in fact, true. In this case it seems to me clear that the plaintiff’s position was not in any Avav changed in consequence of his reliance upon what the defendant Munroe said. About two hours after the intervieAV relied on to create the estoppel, the defendants notified the plaintiff that they had canceled the letter of credit, it having been used for a purpose different from that Avhich the agreement between Boe and the defendants provided that it should be. Boe’s position was not changed during that time in the slightest. He Avas as responsible, so far as appears, after the notice of the cancellation Avas given as before. FTothing had happened that would preArent this plaintiff from pursuing all the remedies against Boe that lie had prior to the giAÚng of the receipt. Plaintiff had simply given Boe a receipt in full upon the delivery of this letter of credit, which, within a few hours after its receipt, he had been informed had been fraudulently misapplied for a purpose other than those for which it was issued, and had been canceled. Such a payment was conditioned only, and the right, of the creditor to proceed upon the original indebtedness is unimpaired. Insurance Co. v. Church, supra. It seems to me, therefore, that plaintiff had parted with nothing upon the faith of the represensations made by the defendants, and was. not entitled to insist as against the defendants that they were estopped from alleging that they had been defrauded by Boe, and that the letters of credit given to him had been misapplied. It is clear that the rules applicable to negotiable instruments do not apply to this letter of credit. At most, it was merely a contract between the defendants and Boe that their correspondent in Paris would accept a bill of exchange drawn on them by plaintiff. They issued no négotiable instrument, and gave to neither plaintiff nor Boe a promise to pay. What they did agree to was that Munroe & Co., of Paris,, would accept and pay drafts drawn by plaintiff to an amount equal to £600. That contract allowed or required the application of no different rules than in the case of any other mercantile contract whereby one party agrees that another will pay a sum of money or will be liable for the damages sustained by a, breach of his contract that a third party will pay a sum of money. But, to constitute such a contract, a consideration is necessary, and such a contract is always void as between the parties, if induced by fraud, or where there is a misapplication, in violation of the agreement under which such contract was made. To say that a transfer to a creditor of such a contract by the party obtaining it by fraud, who gives a mere receipt stating that the transfer was accepted in payment of the debt, places any of the parties in such a different position as to create an estoppel, appears to me to be extending the rules applicable only to negotiable instruments to ordinary contracts, and changing in a most material manner the rules upon which the enforcement of contracts is based. It seems to have been conceded by all the judges before whom this case has been that, but for this estoppel, the plaintiff would not have been entitled to recover; and, in my view of the case, the facts did not justify the finding that the defendants were estopped.

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


author: INGRAHAM, J.

text:
    Charles Remsen et al. v. Metropolitan El. Ry. Co. et al.

    (Supreme Court, Appellate Division, First Department.
    November 6, 1896.)
    1. Elevated railroads—Injuries to abutters—Evidence.
    Error, if any, in permitting counsel to ask a witness, in an action, for injuries to abutting property caused by the construction of an elevated railroad in front of plaintiff’s property, whether, if there had been no elevated road in front of plaintiff’s property, there would have been an increase in its value like a proven increase elsewhere, is cured by an answer that there would have been an increase, but without stating its probable extent.

      2. Evidence—Documents—Paper used to refresh memory.
    A paper which a witness has used to refresh his memory on cross-examination, and from which he was cross-examined, is admissible as, part of the cross-examination.
    Appeal from special term, New York County.
    Action by Charles Bemsen and William Manice, as executors of and trustees under the will of William Bemsen, deceased (substituted for said William Bemsen on his death during the pendency of the action), and Mary J. Edwards, Gerard M. Edwards, Mary M. Ostrander, and Laura J. Edwards, and Henry Lewis Morris and Mary J. Edwards, as executors of and trustees under the last will of Jonathan Edwards, deceased, against the Metropolitan Elevated Railway Company and the Manhattan Railway Company for an injunction and damages by reason of the construction and operation of defendants’ elevated railroads in front of plaintiffs’ property on Sixth Avenue, Mew York City. From a judgment for plaintiffs, defendants appeal.
    Brainard Tolies, for appellants; W. G. Peckham, for respondents.
   INGRAHAM, J.

—We have examined with care the testimony in the light of the defendants’ criticism, and it is sufficient to say that we think the findings of the court were sustained by the evidence. While it is true that in this case there was a sharp conflict in the testimony of the witnesses produced by the plaintiffs and by the defendants as to the values, both rental and fee, of this property during the period from 1873 down to the present time, and while much of the testimony given on both sides is unsatisfactory and contradictory, we think that the trial judge, having the witnesses before him and hearing their testimony, was in a position to judge of its effect, and of the weight to be accorded to it; and that there was sufficient in the case to justify the findings. It is not necessary that ive should go over the testimony, stating the facts testified to Avhich we think justified the findings of the court below. It is sufficient to say that an examination of the whole testimony has satisfied us that such findings are sustained by the evidence.

There are several objections to testimony relied on by the counsel for the defendants. But two of them require notice. The plaintiffs were allowed to aslc an expert witness called by "them the following question: “ Q. In your judgment, suppose there had been no elevated railroad on Sixth avenue; would there have been a like upward rise - on Sixth avenué ? ” The 'witness had testified before this time as to increases in value of property of adjoining streets and avenues, and had been asked generally his opinion as to the increase of rental and fee values of such property. It may be that question is objectionable in form, although it would appear that the substance of the question was within the ruling of the court in the Hunter Case, 141 N. Y. 287 ; 57 S. R. 400. In that case a witness was -allowed to testify as to whether or not the existence of this -elevated railroad would affect the rental value of the property in front of which it was constructed favorably or unfavorably, and it was held that, while the amount of damage caused by the construction and maintenance of the road could not be testified to, the fact that damage was caused, or that the value -of the property was affected unfavorably, was competent evidence for an expert witness. This question would seem to be within this ruling. The question was not, therefore, subject to the objections specified by counsel for the defendants; but, however objectionable the question may have been, the answer of the witness rendered any objection to it valueless. The answer was simply that the property on Sixth Avenue would have increased in value, without attempting to specify the amount of such increase, or without attempting to specify the amount of the increase in comparison with adjoining property. The answer thus brought the evidence expressly within the rule stated in the Hunter Case, supra. We would not be justified in reversing the judgment because of an incompetent question, when the answer to the question made the evidence ■entirely competent.

The only other objection to testimony that seems to require notice is the objection to the admitting in evidence of plaintiffs’ expert’s transcripts of recorded'sales, but we think, under the circumstances, there was no error in receiving such transcripts in evidence. Upon cross-examination of plaintiffs’ expert, the counsel for the defendants called the witness’ attention to many transactions which purported to be sales of property in this vicinity; and during the cross-examination the witness produced a paper which he used for the purpose of refreshing his recollection, and that paper was subsequently used by ■counsel for the defendants in his cross-examination of the witness. After the cross-examination was completed, this paper which counsel for the defendants had used in his cross-examination of the witness, which he himself inspected, and from which he had questioned the witness, was competent evidence, :as- a part of the examination of the witness, and to show the -source of the information of the witness, and as an explanation of his testimony. It was not introduced as proving each individual transaction therein recorded. It was proper for the court to. have before it the instrument upon which the witness had been interrogated, and from which he had made his answers ; and it is quite clear that in admitting it the court considered it in this aspect only, and did not treat it as independent evidence of each separate transaction, apart from the witness’ testimony as to such transaction.

The other objections to the testimony do not, we think, require notice; and, after a review of the whole case, we are satisfied that the award was moderate, and that there was no legal error committed. We think, however, under the circumstances of the case, that the interest allowed from annual rents, amounting to the sum of $8,190.98, should be deducted from the amount of the judgment, and that the judgment, with this modification, should be affirmed, without costs.

All concur.