author: O’Brien, J.

text:
    The Importers and Traders’ National Bank of New York, Resp’t, v. Cebra Quackenbush, Impleaded, etc., App’lt. Same, Resp’t, v. Same, App’lt.

      (Court of Appeals,

      Filed November 27, 1894.)

    1. Supplementary proceedings—Limitation.
    A judgment creditor is not entitled to maintain supplementary proceedings fifteen years after the docketing of his judgment.
    2. Same.
    To warrant such proceedings, the judgment must he a lien on the debtor’s real estate and chattels real, so that the execution can reach them as well as his personal property.
    3. Same.
    The judgment creditor may, it seems, revive his right by a suit upon the judgment. .
    Appeals from orders of the general term of the supreme court in ‘the third judicial department, which affirmed an order of special term in each of the above-entitled actions vacating a stay of proceedings and denying a motion by this appellant to set aside an •execution issued therein and orders for his examination in supplementary proceedings.

      Abraham Lansing, for app’lt; RobertW. Townsend, for resp’t.

      Reversing, 61 St. Rep. 750.

   O’Brien, J.

The plaintiff, on the 27th of March, 1894, obtained from a justice of the supreme court two orders requiring the defendant to appear before a referee named and .be examined in proceedings supplementary to execution as to his property. The proceedings were based upon two . judgments recovered by the plaintiff against the defendant and others on the 22d day of January, 1879, the judgment roll in each case having been filed on that day. Execution was issued upon these judgments immediately thereafter and returned unsatisfied. In March, 1894, new executions were issued upon these judgments and returned unsatisfied as a step preliminary to these proceedings. The defendant moved at special term to vacate the orders, but the motion was denied and these orders have been affirmed on appeal. About the time of docketing these judgments other creditors also obtained judgments, upon some of which proceedings of this character were instituted and.examinations had, but no property was discovered.

This appeal presents the question whether a judgment creditor is entitled to maintain proceedings supplementary to execution fifteen years after the docketing of his judgment, and after they had ceased to be a lien upon real estate and chattels real. It may be safely asserted that every remedy which a creditor has by law for the enforcement of the debt becomes barred by the lapse of some definite period of time, and when barred it cannot be revived at his mere will and pleasure without some new proceeding for that purpose of which the debtor has notice. The judgment itself is barred after the lapse of twenty years, and it is reasonable to suppose that at some time within that period the debtor' is relieved by the lapse of time from proceedings of this character. There ought to be some limitation, and one of the questions here is what that limitation is. By § 2435 of the Code of Civil Procedure the creditor is entitled to institute these proceedings by obtaining an order for the examination of the debtor at any time within ten years after the return of an execution unsatisfied ; therefore, the rights of the plaintiff to maintain these proceedings upon the judgments accrued to him as early as the year 1879 ; and the ten years expired in 1889. The decisions of the courts below are to the effect, however, that the plaintiff can revive the right at its own pleasure and extend the period indefinitely by simply issuing new executions from time to time, and thus setting the ten years running from the date of the return of the last execution. This conclusion is deduced from a literal reading of the statute which authorizes the order at any time after the return of an execution unsatisfied, and if followed to its logical result would permit the plaintiff to institute the proceedings after twenty years, when the judgment itself had become barred. We think that when the statute gave the creditor ten years from the date of the return of an execution to obtain the order that this period was intended as a limitation. The right accrued after the return of the first execution, and became barred after the lapse of ten years in the absence of some new proceeding to revive it to which the debtor is a party by notice or otherwise. It seems to me that this proposition is sustained by authority. Conyngham v. Duffy, 125 N. Y. 200; 34 St. Rep. 736; Baumler v. Ackerman, 63 Hun, 40; 43 St. Rep. 87. It is unnecessary to determine the meaning or application of § 1252 of the Code with respect to proceedings of this character, as it is obvious that the plaintiff did not comply with it or proceed under it. The plaintiff may, however, revive his right by a suit upon the judgment, which he may prosecute with the permission of the court, and having obtained a new judgment he is in the same position that he was before the ten years began to run. Code, § 1913, sub. 2. But the plaintiff was not entitled to this remedy for another reason, and that is that, under the circumstances of the case, it did not and could not comply with conditions which courts of equity have always held to be indispensable in order to maintain these proceedings. Proceedings supplementary to execution are remedies in equity for the collection of the creditor’s judgment, and were intended as a substitute for the creditor’s bill, as formerly used in chancery. Lynch v. Johnson, 48 N. Y. 27; Barnes v. Morgan, 3 Hun, 703; Storm v. Waddell, 2 Sand. Ch. 494. In such cases it was the settled rule that unless the creditor had exhausted all his remedies at law, or in case he was not in a position to avail himself of all the ordinary remedies which courts of law gave for the enforcement of judgments, the bill in equity could not be maintained and would be dismissed. The creditor must pursue his remedy at law to every available extent before he can resort to equity for relief. Dix v. Briggs, 9 Paige, 595; Crippen v. Hudson, 13 N. Y. 161; Dunlevy v. Tallmadge, 32 id. 460; Child v. Brace, 4 Paige, 309; Geery v. Geery, 63 N. Y. 256; Adsil v. Butler, 87 id. 588; Ocean Bank v. Olcott, 46 id. 12.

The same rule applies to proceedings supplementary to execution, and it is not enough that forms are observed by the return of an execution which is not effective to reach all of the debtor’s property. Austin v. Figueira, 7 Paige, 58. Accordingly it has been held that the proceedings cannot be had upon a foreign judgment, a judgment rendered by a court of the United States or upon judgments in rem where personal service was not made since they do not bind all the debtor’s property. Rocky Mountain National Bank v. Bliss, 89 N. Y. 338; Thomas v. Merchants' Bank, 9 Paige, 219. If the creditor’s judgment, by reason of the lapse of time, has ceased to be a lien upon the realty of the debtor, his remedy at law cannot be exhausted, and therefore, he must, by some pi'oper proceeding, reinstate the lien, otherwise the issue and return of an execution would become an idle and unmeaning ceremony. Carpenter v. Stillwell, 11 N. Y. 61-71.

Under § 1251 of the Code the lien of the plaintiff’s judgments upon the real estate and chattels real of the defendant ceased after ten years, and hence, when the last executions were issued in 1894 they were not and could not be effective to reach all the debtor’s property as to exhaust the legal remedy. The return on these executions is no evidence that the defendant did not have at that time abundant real estate, subject to sale upon execution, with which to satisfy the judgments.

The court is authorized in these proceedings by § 2468 of the Code to appoint a receiver of all the debtor’s property, and it is provided that when the receiver qualifies he shall become vested with the title to the debtor’s real property upon filing the order appointing him or a certified copy thereof in the county where the real estate is situated. But this provision cannot refer to real estate which is not bound by the lien of any judgment, or against which no execution has been issued upon which it could be sold. As to real estate so situated,, the creditor does not need a receiver or any other equitable relief. A court of equity will never appoint a receiver for the purpose of doing for the creditor what he may do for himself. Sollary v. Leaver, L. R. (9 Eq. C.) 22; Cory v. Bong, 12 Abb. Pr. (N. S.) 434; Orphan Asylum v. Mc Cartee, Hop. Ch. 435.

When the various provisions of the Code authorizing these proceedings are examined and considered as a general scheme to take the place of the former bill in chancery, the conclusion is reasonable that they are all based upon the assumption that at the time of issuing the execution the creditor had a judgment which was a lien on the debtor’s real estate and chattels real which would make the return effective to exhaust all remedies at law. • They were not framed to meet a case like this, where at best the execution could reach only personal property. While the statute in terms permits the creditor to apply for the order within ten years from the return of an execution upon the judgment unsatisfied, yet it must mean, according to every fair analogy, an execution which is effective to exhaust the remedy at law, and, therefore, must refer to a judgment which is a lien upon real estate.

If this view is correct it follows that the orders appealed from should be reversed, and the order requiring the defendants to appear for examination before the referee should be vacated, with one bill of costs to the defendant in all courts.

All concur, except Peckham, J., not sitting.

Ordered accordingly.


source: Caselaw Access Project

author: Andrews, Oh. J.

license: Public Domain

text:
    Theresa C. Graham, Resp’t, v. John Graham, App’lt.

      (Court of Appeals,

      Filed November 27, 1894.)

    1. Contract—Confidential relation.
    The rule as to agreements made between parties standing in a confidential relation, applies in favor of a wife in respect to an ante-nuptial contract.
    2. Same.
    The courts will regard with rigid scrutiny such a contract, where it deprives her of a prospective interest in the estate of her intended husband, and especially where no provision is made therein for her support in case she survives him.
    Appeal from judgment of the general term of the supreme court in the first judicial department, entered upon an order which reversed a judgment in favor of defendant entered upon a decision of the court on trial at special term.

      James A. Deering, for app’lt; George Bliss, for resp’t.

      Affirming 51 St. Rep. 789.

   Andrews, Oh. J.

The order of the general term from which the appeal is taken reversed, both on the facts and law, the judgment in favor of the defendant, entered upon the decision of the special term. The trial j udge found that the ante-nuptial agreement was executed by the plaintiff voluntarily and understanding^, and was valid and binding both in law and equity. The judgment followed the decision and dismissed the complaint on the merits. The .general term held that the agreement by which the plaintiff, without any consideration except that arising out of the contemplated marriage between the parties, consented to release and discharge all claims to dower in the estate of the defendant in case she survived him, and that she would make no claim to any share in his personal estate, unless under his will or some act done by him subsequent to the execution of the agreement, was void. This conclusion was' placed upon the ground that an agreement by which a woman in contemplation of marriage surrendered any future right to dower in the estate of her intended husband which might accrue to her on the marriage, required for its support a pecuniary provision, in property or money, under the statutes relating to jointures (1 Rev. St. 741, §§ 10, 11, 12, 13), and that marriage alone was not a sufficient consideration. The general term further decided that, conceding the validity of an ante-nuptial agreement for the release of dower, based on the consideration of marriage, and in the absence of any pecuniary provision, the judgment should, nevertheless, be reversed and the case be remitted for a new trial, for the reason that the evidence did not satisfy the appellate court upon the point that the agreement in question was executed by the plaintiff with an understanding of its effect, and that the law which casts upon a husband claiming under such an agreement the burden of showing that the intended wife was adVised of and understood the nature and effect of the agreement when she executed it, had not been satisfactorily discharged. If the general term was justified in reversing the judgment, nnder the rules which govern the exercise of its appellate jurisdiction, to reverse the judgment and grant a new trial upon the facts, then the order of the general term must be affirmed, irrespective of what our view might be upon the question of law determined by that court, because on the other branch of the case the order of reversal must be upheld. By the terms of the agreement of July 3, 1890, the plaintiff, between whom and the defendant a contract of marriage had existed from sometime in June, surrendered without any pecuniary consideration whatever the valuable interest which, on the marriage, she would acquire as wife in the real estate of her intended husband. That this was to. her an important transaction is shown by the conceded fact that the defendant was the possessor of real estate of the value of $100,000, and that the value of the plaintiff’s inchoate right of dower therein on her marriage (two days after the agreement was made) would have been, except for her release, at least $8,900. The subject of dower had never been broached between the parties prior to the very occasion when she was called upon to execute the agreement, nor is it claimed •that the subject of a marriage settlement was ever suggested by either. The first suggestion of the propriety of any ante-nuptial agreement came from the defendant on the Sunday evening preceding the Thursday when the agreement in question was executed. The defendant states the conversation between himself and the plaintiff as follows: “ I told her I would like to have my real estate matters fixed up, so I would have nobody interfering, so that I could use it freely whenever I would like, sell it or buy real estate, and nobody to interfere.” She said, “All right.” The . plaintiff, referring to this conversation, testified: “ He said, ‘ If 'we are going to be married I think it necessary that you should see a lawyer.’ I said, ‘Well, I don’t think so.’ He said, ‘Business is business.’ I said, ‘ My marriage is not business. I have nothing to see a lawyer about.’ He said, ‘Well, you come and see mine,’ and I said, ‘'Certainly, I will.’ He did not tell me why he wanted me to go and see a lawyer; he did not say anything about signing anv papers.”

Both parties were fully examined on the trial. The defendant did not deny any part of the plaintiff’s testimony on the subject of the conversation on Sunday morning. It is uncontradicted that the subject of dower was never iti terms referred to between the parties before the agreement was executed and there was no-negotiation between them on the subject. The defendant, according to his testimony, did inform the plaintiff that the purpose of consulting a lawyer was to have it arranged so that he could buy and sell real estate, “and nobody to interfere.” This might have led a person acquainted with legal matters to understand that it-related to an-arrangement about dower, but at best the reference was vague and would not be likely to be understood by the plaintiff. The evidence is uncontradicted that after this conversation and without any further conversation or consultation with the plaintiff, the defendent instructed his attorney to draw up an ante-nuptial agreement between the parties, whereby, in consideration of the sum of $5,000, to be paid the plaintiff by the defendant, she consented to discharge all claim of dower in his estate and to-any share of his personal property, unless given her by his will or other act of the defendant. Neither the sum of $5,000 nor any other sum had been mentioned between the parties, nor had the subject of a pecuniary provision for the wife been suggested between them. On the day fixed by the defendant the parties met at the office of the defendant’s attorney. There is some conflict of testimony as to what occurred on that occasion. It is conceded that when the sum of $5,000 was mentioned as intended to be given to the plaintiff, she refused to receive it, saying, “I can’t have any money- mixed up with my marriage.” The parties then left the office of the attorney to return when a new paper should be prepared. They returned to the office after an hour or more and then another instrument similar to the first one, except in the expression of the consideration, was executed, which is the agreement in question. The plaintiff testifies that the subject of dower was not mentioned in the conversation on that, occasion, and that the paper was hurriedly read over to her and executed, and that she did not understand that she was releasing her dower or any right in the estate of the defendant. She said : “ My understanding of the nature of the papers which I signed was to give Mr. Graham full control of his business; ” and again: “ I understood I was giving my husband full control of his property free from any interference with me.” She also testified that she did not understand the legal meaning of dower. The defendant in his testimony did not claim that anything was said on the subject of dower when the agreement was executed. The attorney for the defendant was a witness in his behalf, and in his testimony occurs the only contradiction to the testimony of the plaintiff -on this subject. He testified that when reading the first instrument when he came to the $5,000 clause she said, “ Oh, no. I don’t want any money,” and when he finished reading she said, “ The paper is all right with the exception of. the $5,000. I will not take any of Mr. Graham’s money; I am not marrying him for money.” Mr Graham said, “Well, I won’t carry out the ceremony unless you release your dower in my property.” She said, “I am willing to, but I don’t want to take any money.” There seems to be no appropriate relation between this declaration of Mr. Graham, to which the attorney testified, and the conversation which preceded it, in which the plaintiff is represented as acquiescing in the proposed arrangement with the exception stated. We have referred in some detail to the main evidence bearing upon the question whether the plaintiff executed the ante-nuptial agreement understandingly. It is an important general rule which does not permit a formal written agreement to be set aside or disregarded without strong evidence of fraud or mistake. But where an agreement is made between parties standing in a confidential relation, or in a relation which gives to one party great influence over the other, and the agreement is to the advantage of the party in whom the confidence is reposed, or whose influence is the dominant one, and to the detriment of the other party, the former will not be permitted to enforce the agreement unless it appears that his conduct was characterized with the utmost good faith, and that disclosure was made of all the material facts, or that the other party acted with a clear comprehension of the object and effect of the agreement made. This rule has been applied in favor of the wife in respect to ante-nuptial contracts. The relations between the intended wife and her future husband are regarded as confidential and naturally give to the man great influence over the woman with whom he has entered into an engagement of marriage. The courts regard with rigid scrutiny an ante-nuptial contract with deprives her of any prospective interest in the estate of her intended husband, and especially is this required in a case where such relinquishment on her part is made without any provision for her support in case she survives him. Pierce v. Pierce, 71 N. Y. 144; Kline v. Kline, 57 Pa. St. 120; S. C., 64 id. 122.

. It cannot be said that in this case there is no evidence that the plaintiff understood the transactian. But to summarize what has been said these facts are substantially undisputed (1) the relinquishment of dower was not a condition of the engagement of marriage; (2) there was no negotiation between the parties on the subject before they met and executed the agreement; (3) the defendant, in the conversation between himself and the plaintiff, did not disclose to her that an arrangement to give him the right to control his business and buy. and sell real estate without interference would mean a relinquishment of her dower right; (4) she received no equivalent for the surrender of her right. The evidence of the attorney for the defendant and of his clerk, who took the acknowledgment of the instrument, warrant an inference that she understood its purpose. But she expressly denies their testimony in material points; and even if dower was spoken of on the occasion of the execution of the instrument she may not have understood its legal significance, and she testifies that she did not understand it. She acted without the aid of counsel, and concededly not in pursuance of any prior understanding; with her husband, of which this specific agreement was the outcome.

We think the general term was justified in reversing the judgment on the facts. The order should, therefore-, be affirmed and judgment absolute entered in pursuance of the stipulation.

All concur.

Ordered accordingly.


author: Peckham, J.

text:
    Adolph Rothmiller, Resp’t, v. Theodore G. Stein, App’lt.

      (Court of Appeals,

      Filed November 27, 1894.)

    1. Fraud—Liability.
    The directors of a corporation are liable, where they know or have reasonable ground for believing that the natural, proximate and direct result of their fraudulent representations will cause a stockholder to soil his stock at a less price than he otherwise would, though its accomplishment is not the particular purpose of the fraud.
    2. Same
    What a person would have done, but did not do because of the fraud of another, may not always be a matter of such vague conjecture as to render the question incapable of that degree of proof upon which courts of justice may properly act.
    3. Same.
    Though the directors had informed the stockholder that the company was insolvent when he made his inquiries- of them, he was under no legal obligation to volunteer that information to the intended purchaser before the sale was made, where the latter was himself a stockholder and had initiated the transaction by an offer to purchase.
    Appeal from judgment of the general term of the court of common pleas for the city and county of New York, entered upon an order which affirmed an interlocutory judgment in favor of plaintiff entered upon a decision of the court ovérruling a demurrer to the complaint on trial at special term.

      Louis Marshall, for app’it; William J. Lippman, for fesp’t.

       Affirming 60 St. Rep. 646.

   Peckham, J.

The defendants insist, that there is no legal fraud alleged in the complaint, and that even if there be such allegations the complaint does not contain any statement showing that legal damages can flow from the fraud.

We think the complaint is good in both particulars. .The first ground upon which the defendants allege the action is not maintainable is founded upon the statement that the plaintiff was not induced to take affirmative action by defendants’ false representations, but that he simply remained passive, did nothing, and refrained, from selling his stq'ck at a price which would have been more advantageous to him than that at which he in fact sold.

The plaintiff did not remain passive. He had received two different offers from one who was also a stockholder and who offered to purchase from him "his stock. The one offer'was $80 cash per share; the other was $50 cash, Witbi the right to another $50 per share in January, 1894, in case the company should in the meantime have paid dividends for 1898 equal to 10 per cent. The plaintiff asked these defendants for facts in relation to the condition of the company upon which he might make up his mind which offer to accept, and they were informed of the character of the two offers and of the reasons for his inquiries. The defendants being directors, and knowing the facts, and for the purpose of deceiving the plaintiff, made statements in regard to the condition of the company which they knew to be false, and they did it for the purpose of making him believe, for reasons of their own, that the business of the company was flourishing, and they advised him not to sell his stock at less than par. The plaintiff relied upon these false statements of the defendants thus made to him, which they knew were false, and which they made with a fraudulent purpose, and he, because of the false representations, accepted the offer for the purchase of his stock at the above-mentioned $50 cash rate per share with the conditional promise of $50 more, instead of taking the $80 cash. Instead, therefore, of remaining passive the plaintiff took affirmative action, induced thereto by the fraudulent statements of the defendants. We do not, however, mean to imply the correctness of the doctrine advanced by the counsel of the defendants, that if a person simply refrain from acting, induced thereto by the fraud of another, he can in no ease recover damages sustained by him on account of such fraud. Such a case is not here now. Here the plaintiff alleges he has sustained damages because the company was in such a condition pecuniarily at the time of his-sale of the stock that it would have been better for him in the money result if he had accepted the $80 cash instead of the $50 conditional offer of purchase which was made , to him, and Jhat he would have sold at the former price if the defendants had told him the truth. He had two courses open in selling his stock, and the defendants knew it, and he was induced to take the one from which he has suffered loss because of the fraudulent representations of defendants. It is not alona a failure to sell, but there is also an actual sale produced by the fraud of the defendants. The damage arises from the sale at one price, coupled with the fact that plaintiff would have sold at the other price but for the fraudulent representations of the defendants. The fact that'their chief purpose was to induce by means of these false representations a belief on the part of the plaintiff that the-company was prosperous, and that their representations were not specially and solely made to induce the plaintiff to sell his stock at one figure rather than another, is, in the light of all the facts, not material. The defendants knew the reason for and the purpose of the plaintiff’s inquiries, and they knew that the direct, proximate and natural result of their fraudulent representations would in that particular ease be the sale of the plaintiff’s stock by him at the conditional sale at par, rather than the absolute cash one. They must, therefore, be held to have intended what was the natural and direct result of their misrepresentations, although such misrepresentations were not specially induced by a design to bring about such sale.

They cannot in such, case shelter themselves under the statement that they did not make the representations, i. e., commit the fraud with the motive or for the purpose of inducing the plaintiff to sell his stock. They intended to deceive the plaintiff and they were induced thereto by other causes, yet the natural, proximate and direct result of such deception they knew or had reasonable ground for believing would be this sale, although this accomplishment was not the particular purpose of their fraud. In such case their liability would seem to be plain.

There is nothing in the case of Brackett v. Griswold, 112 N. Y. 454; 21 St. Rep. 791, which runs counter to this doctrine. In that case it was asserted what there can be not doubt about, that to sustain a recovery in an action for fraud and deceit, the fraud and injury must be connected. The one must bear to the other the relation of cause and effect, and it. must be seen in an appreciable sense that the damage flows from the fraud as the proximate and not as the remote cause.

The complaint in this case we hold shows such to be the case. From the allegations in the complaint, if properly denied, it might be a question for the jury to decide whether the plaintiff, if the truth had been told him, would or would not have sold his stock at the rate of $80 cash. The demurrer admits that he would. Having two offers for the purchase of his stock, the inference might be drawn from all the facts stated that if the truth had been told by defendants the plaintiff would have sold at the $80 cash price. The inference arising from all the facts alleged, that he would have done so if the truth had been told, is neither too remote, indefinite or contingent to form part of the basis of a cause of action. The case differs widely in these respects from Bradley v. Fuller, 118 Mass. 238, and cases therein cited. What a person would have done, but did not do because (as he alleges) of the fraud of another, may not always be a matter of such vague conjecture as to render the question incapable of that degree of proof upon which courts of justice may proporly act.

Cases may readily suggest themselves where such possible action would be too problematical and vague to base any verdict upon it. Some of the cases cited in the Massachusetts case (supra) would seem to be of that nature. In the case under consideration we think the complaint presents facts from which a jury ought to be permitted to decide the issue whether or not, but for the fraud, the plaintiff would have sold at the cash price. We are, therefore, of the opinion that the complaint contains allegations sufficient to show the commission of actionable fraud. •

The other ground taken by defendants is based upon the fact that the complaint alleges that the corporation at the time of the sale of the stock by plaintiff was insolvent, and the defendants claim that if they had told the plaintiff the truth he would have known that fact, and would have been himself guilty of fraud if he did not communicate it to the intending purchaser, and if such purchaser were informed of the financial condition of the corporation it must follow as a legal conclusion that he would not have pur-chased the stock at all or at least at any such price as was actually received by plaintiff, and hence the latter has sustained no damage by the misrepresentations of the defendants.

In the first place, we are scarcely prepared to say as matter of law that no one would purchase stock in what he knew was an insolvent corporation at the price of $80 a share. That might depend upon a great variety of facts, such as the cause and extent of the insolvency and whether, in the opinion of the intending purchaser, the result were remediable or final, his familiarity with that cause, and his belief in his or his friends’ ability to remedy it, his opinion of the value of the stock if the business were properly conducted, his belief in his own or his friends’ ability to properly conduct it at remunerative and profitable rates and the prospect ■of obtaining sufficient control over the corporate action by the purchase of stock to enable the purchaser to carry out his policy and control the management of the company. Other facts may be easily imagined which would naturally have great weight with an intending purchaser even assuming the temporary insolvency.

The complaint in this case shows that the insolvency arose from the failure of the defendants to pay in the amount of the capital which they certified they had, viz., $5,000 each out of a total of $20,000 alleged to have been paid in, coupled with the fact that the defendants had grossly mismanaged the affairs of the company and. had squandered its moneys in the payment of large salaries and had thereby crippled its business. It does not appear that the defendants are unable to respond to a demand that they pay in the amount of capital due from them, nor does it appear that if it were paid and the salaries cut down and the management changed, that the company would not be able to go on and make a profit on its business.

It cannot be said as matter of law that if the plaintiff had communicated to the intending purchaser the facts as to the condition of the company, no such sale as the plaintiff describes would have taken place and the plaintiff, therefore, would not have been-damaged. But even if the defendants had informed the plaintiff that the company was insolvent when he made his inquiries of them, was he under a legal obligation to volunteer that information to the intending purchaser before the sale was made? We think not. We do not and we cannot in courts of law practically and wisely deal with mere moral obligations, such obligations as only a man of very high honor would feel himself bound by, or such duties as alone grow out of the moral obligation of doing as you would be done by. . These are matters for the conscience, and they are duties which in the extent of their obligation open up the vast domain of ethics, into a discussion of which it is not prac-. tically possible for human courts to enter or to pronounce judgment concerning a violation of its doctrine.

There are, of course, occasions upon which it becomes the legal duty of the’individual to volunteer information unasked by another, occasions where a failure to state a fact is equivalent to a fraudulent concealment and avoids a contract equally with an, affirmative falsehood. ,

The inquiry, then, is whether, upon any particular occasion, it was the duty of the person to speak on pain of being guilty of a fraud by reason of his silence.. Certain rules have been laid down by the courts which differ somewhat in their breadth and scope with the different and varying circumstances under which they are to be applied. The contract of marine or life insurance has been held to require the exhibition of the very highest good faith on the part of the person desiring insurance, and he has been held liable for the concealment of any material fact known by him to exist, although such concealment was not fraudulent. On the other hand, in the case of the contract of guaranty, it has been held that the concealment of a fact, in order to vitiate the contract, must be fraudulent, i. e., concealed with a fraudulent purpose, with the intent to deceive. North British Ins. Co. v. Lloyd, 10 Exchequer, 523; Kidney v. Stoddard, 7 Met. 252. In regard to sales of goods, the common law has adopted a rule which is not so strict as in the above classes of contracts. The great maxim caveat emptor is by this law applied in a variety of cases, and unless there be some misrepresentation or artifice to disguise the thing sold, or some warranty as to its character or quality, the vendee is bound by the sale, notwithstanding the existence of intrinsic defects and vices known to the vendor and unknown to the vendee materially affecting its value. (Story Eq. Juris., 10th ed., vol. 1, §§ 212, 212a.) This is the rule in regard to those who deal at arm’s length with each other, and between whom there is-no condition of special confidence or fiduciary relationship existing. In regard to the necessity of giving information which has-not been asked, the rule differs somewhat at law and in equity, and while the law courts would permit no recovery of damages against a vendor, because of mere concealment of facts under certain circumstances, yet if the vendee refused to complete- the contract because of the concealment of a material fact on the part of the other, equity would refuse to compel him so to do, because equity only compels the specific performance of a contract which is fair and open, and in regard to which all material matters known to each have been communicated to the other. (1 Story Eq. Juris. § 206.)

And the rule of caveat emptor, even in regard to the sale of chattels, is applied with certain restrictions, and is not permitted to obtain in a case where it is plain it was the duty of the vendor to acquaint the vendee with a material fact known to the former and unknown to the latter. It has been held that it is the duty of one who is about to sell a flock of sheep to inform the intending purchaser of the fact, if it be known to the vendor, of the existence of a highly contagious disease among the sheep .to be sold, and that it is a fraudulent suppression of a material fact if it be knowingly concealed. So, in regard to the sale of food for 'animial or human consumption, the law annexes an implied, warranty that the food is not in an unwholesome condition and unfit to be eaten. Jeffrey v. Bigelow, 13 Wend. 518; Van Bracklin v. Fonda, 12 Johns. 468. In sucb cases the rule of caveat emptor cannot be applied. Again, it is not applied in its full extent to the case of sales of choses in action such as bonds and promissory notes and other obligations for the payment of money. Thus in Brown v. Montgomery, 20 N. Y. 287, it was held to have been a fraudulent suppression avoiding the sale of a promissory note, where ’the vendor did not inform the vendee that the check of the maker of the note had been protested, though the informant of the vendor stated at the time his opinion that the maker of the note was solvent. And this decision rests upon the principle that one who sells commercial paper, payable to bearer, and which he does not indorse, while not liable on the paper as a party, nevertheless warrants that he has no knowledge of any facts which prove the paper to be worthless on account of the insolvency of the makers, or because it has been already paid. A promissory note or the ordinary bond is given for one purpose only, payment at its maturity, and it is plain that in ordinary circumstances one would not take a note or bond if in possession of the fact of the insolvency of its maker. It would appear that the one purpose for which such instruments are issued would fail of accomplishment because of the inability of the maker to pay. The mere fact that the vendor offers to sell the written obligation of another to pay money is evidence enough of a warranty such as is above stated, because the vendor knows that if the maker were known to be insolvent his written obligation to pay money would not be taken.

Of the same nature is the decision in the case of Bruce v. Ruler, 2 Man. & Ry. 3; S. C., 17 Eng. Com. Law, 700, where it was held that it was the duty of the tenant who proposed to his landlord a surrender of his lease to another to be taken in his stead, to inform the landlord of the fact which the tenant knew, that the proposed tenant (who proved to be insolvent) had compounded with his creditors, and that the failure of the tenant to state such fact was a fraud which rendered him still liable for the rent One of the most material and important facts relating to a tenant is that he shall be of sufficient ability to pay rent, or, in other words, shall not be insolvent, and Mr. Justice Bayley on the trial said it was to be presumed that if the landlord had known the fact he would not have accepted the man as tenant, and the suppression of the fact by the existing tenant was, legally speaking, a fraud; that it was very desirable, if possible, to make people honest. The same reason exists as in the above case of the sale of a written obligation to pay money, where the vendor does not indorse or become a party to the obligation, and the fact of insolvency is of such paramount importance that a presumption exists that the proposed tenant would not have been taken if the fact were known. Solvency is among the almost absolutely necessary conditions.

insolvency, however, is not alwavs regarded as of so fundamental a character that its mere concealment in any transaction is in and of itself a fraud. Thus, in Nichols v. Pinner, 18 N. Y. 295, it was held that a merchant who knew that lie was insolvent and nevertheless purchased goods without disclosing that fact, there being no inquiry by the vendor, was not necessarily guilty of fraud on account of such concealment, because he might have been honestly of the opinion that he could yet go on and retrieve his affairs. That case was again before this court under the name of Nichols v. Michael, 23 N. Y. 264, but the above doctrine was not altered or shaken. This court, therefore, recognizes that there is a great difference between the insolvency of one who is about to purchase goods and that of the maker of an obligation to pay money, which a third party desires and offers to sell, and it is seen that in the one case the failure to inform the other of the fact of such insolvency is not necessarily a fraud, and in the other its willful suppression is.

We think the present case comes more within the principle of the merchant buying goods than of the seller of commercial paper, the maker of which he knows or has good reason to believe to be insolvent. In the case as made by this complaint the vendee of the stock was already the owner of some of the stock in the same company, and plaintiff was neither a director or other officer of the company, and had no special means of acquiring information superior in the least degree to those of the vendee; the parties occupied no position of trust or confidence towards each other, and there was nothing in their relations each to the other that had in them the least element of a fiduciary nature. Bach was in fact dealing, as it is called, at arm’s length with the other, and we cannot say in such case that it would have been the legal duty of the vendor to volunteer the information that the company was insolvent.

The defendant was held liable in Lefever v. Lefever, 30 N. Y. 27, because be had been guilty of false representations, and his position as cashier put him in full knowledge of the condition of the bank, which the other did not in fact know.

In regard to a business corporation which is engaged in the transaction of business as a going concern, the mere fact that it is at the moment insolvent is not of that kind of materiality which breaks in upon and avoids the general rule in this state of caveat emptor.

The purchase of stock in such a corporation is made under so many different circumstances and urged by so many different motives, wholly apart from the present alleged or assumed insolvency of the corporation, that we cannot, and, as we think, ought not, to place the sale of such stock in the same class and subject to the .same rules as the sale of commercial paper under the facts as stated in the Brown case, supra.

I have already alluded to some of the circumstances which might naturally induce the purchase of stock in a corporation temporarily insolvent, and it is not necessary to repeat them here. Under the rule in this state the fact suppressed may in many cases be material, and jet its suppression may not be fraudulent If there be a legal obligation to speak, such as in a case of trust, or confidence, or superior knowledge, or means of knowledge, the case is altogether different. There is in this case the further fact that the vendee of this stock was the one who proposed the bargain and made the offer; that he was a stockholder, and presumably before he made the offer had satisfied himself, so far as he desired, as to the condition of the company, and had decided what he could, for his own purposes, properly pay for the stock. It thus appears that the plaintiff was not searching for a purchaser .and making offers to sell, but that the purchaser was seeking him, and initiating the transaction by an offer to purchase. The vendor might, under such circumstances at all events, conclude that the proposed purchaser had all the knowledge he desired in order to enable him to make his offer, and the vendor might decide to accept one of the two offers proposed to him without making any •■statement as to the company not called for by the purchaser.

We cannot say that in the'case under consideration there was a legal obligation to speak. But at the same time the least degree of misrepresentation would be very potent evideneé of fraud.

We think the demurrer of the defendants is not good, and the judgment overruling it must be affirmed, with costs, with leave to defendants to plead over on payment of costs.

All concur.

Judgment accordingly.


author: Andrews, Ch. J.

text:
    Michael R. Dinan, App’lt, v. William Coneys et al., Resp’ts.

      (Court of Appeals,

      Filed November 27, 1894.)

    1. Pleadings—Answer—Reply.
    ■Where a defense is not available as a counterclaim, the plaintiff does not, by replying to the answer, waive his right to take the objection on the trial, nor is he compelled to demur in order to raise the question.
    2. Ejectment—Counterclaim.
    A legatee, whose legacy is charged on land in his possession, cannot use it as a counterclaim, in an action of ejectment brought by the devisee to recover it.
    Appeal from judgment of the general term of the supreme court in the second judicial department, entered upon an order which affirmed a judgment in favor of plaintiff, except as to the claim of the defendant Hannah Coneys, entered upon the report of a referee.

      Garrett Z. Snider, for app’lt; A. & A. X. Fallon, for resp’t.

       Reversing 51 St. Rep. 370.

   Andrews, Ch. J.

This action is ejectment The plaintiff claimed title under a devise in the will of his father, Daniel Dinan, and in his complaint alleged the devise as the source of his title. The defendant Hannah Coneys is the wife of the defendant William Coneys and the sister of the plaintiff.' In her ■ answer she denied that she unlawfully withheld possession of the premises, and alleged that by the will of Daniel Dinan the land devised to the plaintiff was charged with the payment to her of a legacy of three hundred dollars, which had not been paid, and she demanded judgment in her favor against the plaintiff for the amount of the legacy, with interest. The plaintiff replied,, and, after admitting that the devise was subject to the charge, averred that the defendant had remained in the possession of the premises after the death of the testator, and received the rents and profits under an agreement with the plaintiff that they should be applied in payment of the legacy, and that the rents and profits received by her had been more than sufficient to satisfy it. The referee to whom the action was referred decided that the plaintiff was entitled to judgment for the possession of the premises, and the defendant Hannah Coneys to a judgment in her favor against the plaintiff for the amount of the legacy, with interest. Judgment was entered in conformity to the report. The plaintiff appealed. The general term affirmed the judgment with a modification, to the effect that the premises be sold to satisfy the legacy. The plaintiff then appealed to this court from the judgment rendered by the general term.

The question presented is whether the legacy constituted a counterclaim under the Code. If it was not available as a counterclaim, the plaintiff did not, by replying to the answer waive his right to take the objection on the trial, nor was he compelled to demur in order to raise the question. Smith v. Hall, 67 N. Y. 48; People v. Dennison, 84 id. 273. We think the legacy was not a counterclaim in the action, first, because it did not tend to diminish or defeat the plaintiff’s recovery, and, second, because it was not a causé of action accruing out of the contract or transaction set forth in the complaint as the foundation of the plaintiff’s claim, nor was it connected with the subject of the action. Code, § 501. The plaintiff, by the acceptance of the devise, became personally liable as upon contract, to pay the legacy, Brown v. Knapp, 79 N. Y. 136, and it was a charge also upon the land, which could be enforced in equity. But the faet that the plaintiff had become personally bound to pay the legacy did not make the legacy a counterclaim under the second subdivision of § 501, as that subdivision only applies whei’e the action of the plaintiff is on contract also. The subject-matter of the plaintiff’s action was the alleged right of possession of the land sought to be recovered. The subject-matter of the counterclaim was the right to recover against the plaintiff the amount of the legacy, and also (in view of the modification made by the general term) the right to relief by sale of the land for its payment. The right of the plaintiff to possession of the land was in no way qualified by the fact that a legacy was charged thereon. The existence of the legacy gave the legatee no right of possession as against the plaintiff, whether the legacy was paid or not, and being in possession did not justify her in withholding possession from the plaintiff, the owner of the legal title. Nor did the existence of the legacy tend in any way to diminish or defeat the plaintiff’s recovery. He took an incumbered title, but he had a riglit to the possession and the existence of the incumbrance in no way affected that right. The defendant Hannah Coneys was not in the situation of a mortgagee in possession. The mortgagee, under the old law, had a defeasible estate in the land mortgaged, and being in possession could defend his possession under the mortgage; and the change made by our law, which makes the mortgage a security merely, has not abrogated the mortgagee’s right when in possession of the pledge, to retain it after default, until the debt for which the mortgage is held shall be satisfied. This rule is justified by the presumed intention of the parties and the nature of the transaction. But a legatee, whose legacy is charged on land, holds no relation thereto corresponding with that of a mortgagee in possession. He has, it is true, a lien. So has a judgment creditor. . But it could not be claimed that the latter could, before sale, lawfully take possession of the lands of the judgment debtor under the judgment, or defend- an ejectment brought by- him to recover it. One of the definitions of a counterclaim in the second subdivision of § 501, is “a cause of action arising out of the contract or transaction set forth in the complaint as the foundation of the plaintiff’s claim.” The transaction set forth in the complaint as the foundation of the plaintiff’s claim is title acquired under the devise in the will of Daniel Dinan and the withholding of possession by the defendants. Upon that title he founds his right to the possession of the land. The legacy given to Hannah Coneys is given by the same will, and is thereby charged on the land devised to the plaintiff. But the right of the plaintiff to the possession of the land, and of the defendant to the legacy are wholly distinct and independent claims. The giving of the legacy, as has been said, did not qualify the devise so as to affect the right of possession. The claim of the legatee does not arise out of the transaction upon which the plaintiff relies, although both claims had a common origin and were coincident in the brain of their creator. The transaction upon which the defendant relies is the legacy. -Moreover, under both subdivisions of § 501, the counterclaim presented must “ tend in some way to diminish or defeat the plaintiff’s recovery.” The right of the plaintiff to recover the possession of the land is neither diminished nor defeated by the existence of the legacy. He is entitled to possession, notwithstanding the legacy, and this the judgment awards him.

We think the original judgment against the plaintiff was not sanctioned by the law of counterclaim, and that the modification by the general term, with turns the defense into an action in equity to enforce the charge, was a still further departure from the statute. While the statute of counterclaim ought to be liberally •construed in the interest of peace and to suppress unnecessary litigation, it does not, we think, justify the application made in this case. *

The judgments of the courts below should be reversed and a Lew trial ordered, with costs to abide the event.

All concur.

Judgments reversed.


text:
    John W. Dibble, Resp’t, v. Jeremiah W. Dimick, App’lt.

      (Court of Appeals,

      Filed November 27, 1894.)

    1. Pleadings—Answer—Affirmative defenses.
    Settlement, accord and satisfaction and payment in full are affirmative defenses, and must be pleaded.
    2. Master and servant—Compensation.
    Where the compensation of a salesman is to be a commission on sales, he is entitled to commissions on goods ordered before, though they are not delivered until after, his discharge.
    3. Appeal—Court of Appeals.
    In order to raise the point in the court of appeals, the order of affirmance should show, by a proper statement, that the court refused to review the facts for want of power or for want of a proper and sufficient record.
    4. Same—Certificate.
    Where the party appealing desires the court to review the facts, he must insert in the record a statement that it contains all the evidence or all that is material to the question sought to be reviewed.
    5. Same.
    No particular form of words is necessary.
    6. Same.
    A statement that the case contains all the testimony is sufficient, in the absence of objection.
    7. Same.
    Where both sides proceed to argument and submit the case with a statement that it contains all the testimony, without any objection, the court is warranted in assuming that all the evidence is in the case, and should pass upon the facts.
    Appeal from judgment of the general term of the court of common pleas for the city and county of New York, entered upon an order, which affirmed a judgment in favor of plaintiff entered upon the report of a referee.

      K W. Tyler, for app’lt; Ira G. Darrin, for resp’t,
   O’Brien, J.

The plaintiff recovered in this case a balance which he claimed was due to him for compensation as a salesman in the employ of the defendant. The issue presented by the pleadings was one of fact involving the terms and .conditions of the original contract under which the service was performed. The complaint alleged that the plaintiff had performed services for the defendant as a salesman at his express request, from November 15th, 1889, to January 20th, 1891, and that such services were of the value and were rendered for the agreed compensation of $4,100. That the plaintiff had been paid the sum of $2,430.41, and that the balance, with interest, was due and unpaid.

The answer admitted that the services were rendered, that the payment referred to in the complaint has been made, and denied that there was any farther sum due to the plaintiff, or that the sum stated in the complaint had been agreed upon by the parties as the compensation. The question to be tried, therefore, was the issue thus made in regard to the terms of the agreement. Both parties claimed that the plaintiff entered into the defendant’s service under a verbal contract, but they differed widely as to its terms. The plaintiff claimed that he was to be paid upon the basis of commissions upon the sales at the rate of two per cent, with a guaranty of $1,500 per year salary. The defendant claimed that the commissions were not to exceed one per cent, on all sales made at wholesale, and two per cent, on those made at retail. The amount of the commissions was, therefore, the vital point upon which they differed, and each party supported his version as to the terms of the contract by his testimony. If the defendant’s version was correct the action was defended. If the plaintiff’s was the true one he was entitled to recover the amount awarded to him by the referee. The'parties were in direct conflict as to the fact, and the burden of proof was upon the plaintiff. The defendant gave some proof in corroboration of his version of the agreement. It was shown and found by the referee that at various times after the first of November, 1890, the plaintiff had been paid commissions which he had himself computed upon the basis of one per cent, upon some of the sales and two per cent, upon others. The plaintiff attempted to explain this by testifying that the defendant refused to allow him the two per cent, on all the sales, and directed him to compute the commissions at the rate that he did, and that he took what he could get and what the defendant told him to compute the compensation at. The plaintiff, however, remained in the defendant’s employ until discharged, for what reason does not appear. The referee found the agreement to have been made as claimed by the plaintiff, and directed a judgment in his favor. The proof that the plaintiff figured commissions upon the basis claimed by the defendant, and. received his compensation from time to time upon that basis, was competent as bearing upon the terms of the contract of employment, but it could not be used when, in the case to establish a settlement, an accord and satisfaction or payment in full for the reason that there were affirmative defenses, and they were not pleaded. The referee’s finding is supported by evidence, and while we think the preponderance of proof was in favor of the defendant, still we have no power to disturb the judgment, The referee had the parties before him, and had a better opportunity than any appellate court can have to form a correct judgment as to the relative weight and credibility to be given to the conflicting statements of the parties.

The referee allowed the plaintiff commissions on goods ordered before but not delivered until after his discharge. There was no error in this ruling. The services were rendered when the plaintiff solicited and obtained the orders for the sale of the goods, though the commissions might not be due’or payable until the goods were actually delivered, but it was not necessary that the delivery should, be made during the plaintiff’s employment. The discharge of the plaintiff could not affect his right to compensation for services rendered up to that time. The other exceptions to the rulings at the trial did not raise any question of sufficient importance to justify a reversal of the judgment. The learned counsel for the defendant complains that the general term has improperly refused to review the facts. If we were permitted to look into the opinion and act- upon it we would be compelled to say that this complaint is well founded. It appears from the opinion that the general term refused to review the facts-upon the ground that the record did not contain any certificate or statement that it contained all the evidence, although it did contain a statement that it contained all the testimony. There is undoubtedly a distinction between the terms evidence and testimony. The former is the more comprehensive term and includes all the means by which any alleged matter of fact, the truth of which is submitted to investigation, is established or disproved. The latter, in common acceptation at least, embraces only the statements of witnesses upon oath, and does not include proof by writings or from other sources. But a statement, as in this case, that the record contains all the testimony, was a substantial compliance with the rule under all the circumstances. When the' defendant made and served the case this statement was inserted, doubtless, in order to comply with the rule. The plaintiff could have proposed an amendment if he thought it insufficient. But no amendment was asked and no motion to correct the case made at or before the argument, and no question then raised as .to the power of the court to pass upon the facts as well as the law. Under these circumstances the court had the power to pass upon the facts, and it is not often that a case is presented where the right to review the findings of the referee is of more importance to the party making the appeal than in this case. The disputed fact was of such a character, and the evidence upon which the findings of the referee were based was so conflicting at a single point, that the right of the defendant to have.it passed upon by the appellate court was important and substantial. But we think that this court has no power to reverse the judgment for the refusal of the court below to review the facts for the plain reason that we cannot say from the record that it has so refused.

The order is a general affirmance of the judgment without specifying the grounds or in any way limiting its legal effect. This is the evidence of the judgment rendered by the court, and its legal import is that every question in the case, whether of law or fact, has been decided. The court below, upon the defendant’s theory, refused to review the facts substantially for want of power in that a properly certified record was not before it. We cannot know this, however, from the record, but from the opinion, which is no part of the record. In order to raise the point in this court the order itself should show by a proper statement that the court refused to review the facts for want of power or for want of a proper and sufficient record, which amounts to the same thing. Snebley v. Conner, 78 N. Y. 218; Talman v. Gedney, 75 id. 481; Tilton v. Beecher, 59 id. 176; Tallman v. S., B. & N. Y. R. R. Co., 92 id. 353.

In Porter v. Smith, 107 N. Y. 531; 12 St. Rep. 479, this court reviewed an order of the supreme court refusing to pass upon the facts in the case. But in that case the order contained a statement of the grounds upon which the judgment below proceeded, and it was held that the practice adopted by the general term in that regard was correct. It is now well settled that where the party appealing desires the court to review the facts, he must insert in the record a statement that it contains all the evidence or all that is material to the question sought to be reviewed. But no particular form of words is necessary. A statement that the case contains all the testimony is sufficient in the absence of some objection on the part of the defendant that some material part of it has been omitted. The appealing party can then by motion correct the record by inserting it. Where, however, both sides proceed to argument and submit the case with a statement that it contains all the testimony, without any objection as to the power of the court over the whole case, the court is warranted in assuming that all the evidence is in the case and should pass upon the facts.

The record now before us does not present the question, and the judgment must, therefore, be affirmed.

All concur.

Judgment affirmed.

      Affirming 53 St. Rep. 225.


author: Finch, J.

text:
    Michael Doyle et al., App’lt., v. John F. Unglish et al., Resp’ts.

      (Court of Appeals,

      Filed November 27, 1894.)

    1. Evidence—Presumption—Bills and notes.
    The acceptor of a draft is presumably a debtor for its amount, and its payment is a discharge of a debt and not proof of a demand against the drawee.
    2. Same—Burden.
    In an action for an overpayment on a contract of sale, the burden of proof is on the plaintiff, and not the defendant.
    Appeal from judgment of the general term of the supreme court in the fifth judicial department, entered upon an order which affirmed a judgment in favor of defendants entered upon a verdict.

      Theodore Bacon, for app’lts; John H. Chadsey, for resp’ts.

      Affirming, 50 St. Rep. 244.

   Finch, J.

The dispute on this appeal is over the burden of proof, and arises upon a refusal of the court to charge that it rested upon the defendant as far as his pleaded counterclaim was concerned. The argument for the appellant would be formidable and possibly conclusive if the question turned solely upon the form of the pleadings, but when it was raised the facts were all-before the court and developed a situation quite different from that sketched in the complaint. The plaintiffs alleged a loan and advance of money to the amount of thirty-one hundred and thirty-five dollars, upon which payments had been made by the delivery of certain goods, wares and merchandise at the agreed price of two thousand and eighty-three dollars and fifty-six cents, and demanded judgment for the balance. The defendants answered by a general denial, and then alleged the sale and delivery of dried apples at an agreed price to the amount of thirty-three hundred and seventy dollars and forty-two cents, upon which had been-paid by draft or money thirty-one hundred and forty-three dollars, by four coreing machines, eight dollars, and by freight bills, one hundred and seventeen dollars, leaving a balance due the defendants of one hundred and two dollars and twenty-nine cents. The whole substantial controversy was over the agreed' price of the-dried apples. If that was as the plaintiffs claimed a balance was due them ; if as the defendants asserted a balance was due them: and the question arose upon whom rested the burden of proof as to the terms of the contract. If the plaintiffs could make their case without proving that contract, and it was unessential to their recovery, then the burden was not on them; and that is what they assert to be the fact. I think they are mistaken. There was no loan or advance of money, but, if anything, an over-payment which could be recovered back. The defendants denied any such loan or advance, and admitted only payments upon the goods sold. The plaintiffs on their part simply produced the drafts they had paid and rested. They had made no case. Proof of the drafts drawn upon them by defendants established no claim against the latter. The acceptors of the drafts were presumably the debtors for their amount, and payment of them was the discharge of a debt and not proof of a demand against the defendants. But no ' motion for a non-suit was made, and the case tells us only that “ thereafter conflicting evidence was given on behalf of the respective parties as to the terms and conditions of the alleged contract.” In what order that was done we do not know, but it is quite clear that producing and proving the drafts could not alone make a cause of action, and that the plaintiffs were bound to show as indispensable to their recovery the terms and conditions of the contract as they claimed the truth to be. For they had no cause of action on the drafts. They were obliged to prove that in paying them they had overpaid on the contract, and were entitled to recover back the excess. That excess, as an over-payment beyond what the contract required them to pay, was the sole basis and measure of their cause of action. They would have failed unless they proved that excess, and they could not prove that without proving the contract out of which and because of which the over-payment occurred.

I think, therefore, that proof of the terms of the contract, such as would create the over-payment claimed, was essential to the plaintiffs’ case, and so the court was justified in ref using to charge that the defendants had the affirmative.

The judgment should be affirmed, with costs.

' All concur.

Judgment affirmed.


author: Earl, J.

text:
    Harriet A. Francisco, Resp’t, v. Charles A. Smith, App’lt.

      (Court of Appeals,

      Filed November 27, 1894.)

    1. Contract—Validity—Restraint op-trade.
    Court of equity -will enforce an agreement by tbe vendor, upon the sale of a business and its good will, not to engage in a similar business in the same place for a specified period.
    2. Same—Assignee.
    An assignee of such contract may enforce it just as the assignor could have done, if he had retained the business.
    Appeal from judgment of the general term of the supreme court in the fourth judicial department, entered upon an order, which reversed a judgment in favor of defendant.

      John D. Beclcwiih, for app’lt; Myron G. Bronner, for resp’t.

       Affirming 50 St. Rep. 772.

   Earl, J.

It is unquestioned that the agreement entered into by the defendant not to engage in the bakery and confectionery business in Little Falls during the period of five years was legal and valid, and that courts of equity will enforce such agreements for the protection of the business to which they relate. Such an agreement is a valuable right in connection with the business it was designed to protect, and going with the business it may be assigned and the assignee may enforce it justas the assignor could have enforced it if he had retained the businesss. Diamond Match Co. v. Roeber, 106 N. Y. 473; 11 St. Rep. 47. The agreement can have no independent existence or vitality aside from the business. If Mr. Francisco had not disposed of the business, and had not himself carried it on, there would have been nothing for the agreement to operate upon—no grounds for equitable relief against a breach thereof, or for recovery in an action at law of anything except possibly nominal damages. He would not have lost the benefit of the agreement by omitting, for any definite time during the five years, to carry on the business. The agreement would stand for his protection at any time when he resumed or entered upon the business. It may be assumed, and indeed it is conceded, that he retained the business until he made the assignment to the plaintiff, May 25th, 1891. At that date there was nothing which prevented him from resuming and carrying on the business, and then having the full benefit of the defendant’s agreement. But before that date the plaintiff had purchased the property, tools and fixtures connected with the business, and was in possession of the place where the business had been carried on by the defendant and subsequently by her husband. At that date he assigned to her the business and good will thereof, and all his rights under the defendant’s agreement, and thus she took his place and became fully entitled to all the benefits of the agreement. Mr. Francisco having the conceded right to sell all the property and the business together, and to assign the agreement at the same time, what is there in reason or principle that precludes him from first disposing of the property and place of business, and afterwards selling and assigning to the same person the business and the good will thereof, together with the agreement made for the protection of the business? We can perceive nothing. The assignment of the agreement goes with' ana is connected with the business as much in the one case as in the other.

But still further. Before the 25th day of May, 1891, the wife owned the property connected with the business and the husband was carrying on the business in her name, largely for his benefit— that is, he and his family were to be supported out of the proceeds thereof. Thus he had a real interest in the business carried on, and we see no reason to doubt that he had such an interest as entitled him to enforce the agreement in his own name for his own protection. Under such circumstances he could assign the busi-' ness and the good will thereof, together with all his rights under the agreement to the plaintiff, and by such assignment she became entitled to and occupied the position acquired by him by his purchase from the defendant, and to the protection of his agreement.

There is, therefore, nothing unreasonable in the claim of the plaintiff to enforce the agreement, and there can be no objection to the jurisdiction of a court of equity to protect her against the violation thereof.

It follows that the order of the general term should be affirmed and judgment absolute be given against the defendant, with costs,

All concur. Judgment affirmed.


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    Frank M. Hunting, Resp’t, v. Ferdinand S. M. Blun, App’lt.

      (Court of Appeals,

      Filed November 27, 1894.)

    1. Corporation—Stockholder—Liability.
    _ In an action under § 18, chap. 40 of 1848, the performance of the condition precedent to such liability is excused by reason of an injunction, which renders such performance practically impossible.
    2. Same.
    In measuring the quality of such excuse, the plaintiff is not required to go behind the explicit order of the court and determine at his peril whether he can safely follow it.
    3. Same.
    Though the judgment granting the injunction is erroneous, yet, if the court had jurisdiction of the subject matter, its mistake is only available on an appeal or some direct review of the decision.
    Appeal from order of the general term of the supreme court m the fifth judicial department, entered upon an order which denied a motion by defendant for a new trial and directed judgment in favor of plaintiff upon the verdict directed by the court.

      B. T. Wright, for app’lt; B. 0. Ailcen. for resp’t.

       Affirming, 53 St. Rep. 343.

   Finch, J.

The plaintiff as assignee of certain employees of an insolvent corporation sued the defendant, a stockholder, for the amount of their unpaid wages. It was necessary for the plaintiff to prove the condition precedent attached by the law to his right of action that judgment upon the demand had been rendered against the corporation, and execution thereon had been returned unsatisfied. He proved such a judgment, obtained in the Auburn city court, but the corporation was located out of the city, and the judgment was held to be a nullity for want of jurisdiction in the local court. The plaintiff then sought to excuse the non-performance of the essential condition by showing that it became impossible within the period prescribed. He produced the record of an action in the supreme court brought by a creditor of the corporation to sequestrate its property and for the appointment of a receiver. Judgment was rendered granting that relief and forbidding creditors from suing the company or interfering with its assets. This injunction made performance of the condition precedent practically impossible. Such fact excused the omission. Hardman v. Sage, 124 N. Y. 32; 35 St. Rep. 54. But the defendant now attacks that judgment as also void for want of jurisdiction, and insists that plaintiff was at liberty to sue, and could have disregarded the injunction as a nullity and without being guilty of contempt of court. Even if that were true, I do not think he was bound to take the risk. In judging of his omission to act, and measuring the quality of his excuse, it does not seem to me that we should require him to go behind the explicit order of the court and determine at his peril whether he could safely defy it. The fact of its existence may reasonably justify a conclusion that a practical impossibility stood in the way of a suit by plaintiff against the corporation. But, however that may be, I think the judgment of sequestration and the injunction which accompanied it were not shown to be void by any evidence which the defendant offered. The plaintiff in that case, by his complaint, fairly alleged all that was needed to authorize the judgment of the court. It avers the recovery of a judgment against the corporation in the Auburn city court, the docket of that judgment in the Cayuga county clerk’s office, the issue of an execution and the return of the same unsatisfied; Those allegations presented a case over which the jurisdiction of the court was unquestionable. They were sufficient to invoke and requir.e a judicial determination whether they were true or not, and whether sequestration should follow, it may be that the court erred in regarding the city court judgment as valid. That was a question of law for the court to decide, and its error, if it made one, was a judicial error to be corrected by an appeal. We held substantially that in Whittlesey v. Frantz, 74 N. Y. 457. That was a case like the one before us in every respect except as to tbe defect which made the creditor’s judgment void and null.

The difficulty there was that by reason of a misnomer the corporation had not been sued at all, and there was no judgment against it. Our first answer to the objection went upon the concession that the error might make the judgment invalid, but we ■held that the judgment of sequestration could not be collaterally attacked for error in the proofs on which it rested. So in this case the evidence may have been insufficient, and the court in error, either because no defect was alleged or pointed out, or because the court thought that the presence of the president of the corporation in Auburn, where a part of the corporate property was situated, answered the requirement of the statute as to the defendants that “they are within the city of Auburn.” Laws of 1887, chap. 633, § 2. However erroneous the decision might have been, the court had jurisdiction -of the subject-matter presented for its consideration, and its mistake, if made, was only available on an appeal or some direct review of the decision. We think the case cited is decisive of this appeal.

The judgment should be affirmed, with costs.

All concur.

Judgment affirmed.


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    Addison J. Lyon, Resp’t, v. Van V. Morgan et al., App’lts.

      (Court of Appeals,

      Filed November 27, 1894.)

    Estoppel—Upon whom binding.
    The rule that an estoppel binds the parties and their privies in estate and blood, does not apply to a party who, in the process of transferring real estate, has acquired a better title than his predecessor had.
    Appeal from order of the general term of the supreme court in the fourth judicial department, which reversed a judgment in favor of defendants, entered upon a decision of the court dismissing the complaint made on trial at special term, and directed a new trial.

      George Bowen and' Edward A. Washburn, for app’lts; Edward K. Olarh, for resp’t.

       Affirming 45 St. Rep. 500.

   O’Brien, J.

The plaintiff claimed to be the owner and in possession of the undivided one-fourth part of sixteen acres of land which he sought to partition in this action, the defendant William A. Morgan being the owner of th,e other three-fourths. The complaint was dismissed at the trial on the ground that the plaintiff had failed to show any title to the land or any right to maintain the action. This judgment has been reversed by the general term arid a new trial granted. The original defendant,' William A. Morgan, died after the entry of the judgment, and his infant children, who have succeeded to his title, are the present defendants upon the record. The plaintiff and Morgan claimed title to the land or the interest sought to be partitioned from different sources. The plaintiff’s title rests upon a sheriff's deed given upon a sale under an execution issued upon-a judgment recovered by the First National Bank of Binghamton against Silas N. Carman, June 16, 1888. The land was not redeemed from the sale, and the deed was delivered to the plaintiff January 25, 1890, and recorded January 28, 1890. The record title was then apparently in the judgment debtor under a deed to him from the former owner, delivered and recorded in 1872. The plaintiff was the highest bidder at the sale and paid $762.95, which satisfied the judgment.

On November 26, 1883, Joseph Carman, the father of Silas N. Carman, borrowed of Albert E. Smith, as guardian of an infant, the sum of $10,000, and, to secure the payment thereof, gave to him a mortgage on a considerable tract of land, which included the land in question. At the time of making this loan the mortgagee was assured by the mortgagor that he was the owner of the piece of land in controversy, and that his son Silas had no interest in it, and Silas himself, in the presence of the mortgagee and his father, assented-to this statement and disclaimed all interest in the property, and the mortgagee, without further inquiry as to the title, made the loan and took the mortgage on the faith of these statements. On December 1, 1888, an action was commenced to foreclose this mortgage by the defendant Waterman, who succeeded Smith as guardian. The action was prosecuted to judgment, and the premises described in the mortgage, which included the land in question, were sold by the referee to William A. Morgan February 11, 1890, and the conveyance duly recorded February 20, 1890. ’ Morgan’s bid was $6,800 and $5,000 of it was secured by a mortgage for that amount by the purchaser to the guardian. Neither Silas N. Carman nor his judgment creditor, the bank, or the plaintiff, were made parties to the foreclosure. It is contended in behalf of the defendants, who claim under the referee’s deed upon the foreclosure sale, that Silas N. Carman is estopped.by his statements and admissions from denying their title under the mortgage, and that this estoppel extends to the plaintiff. The doctrine of estoppel, when invoked for the purpose of working a change in the title to land, is to be applied with great caution. It permits verbal statements or admissions to be substituted in place of the written evidence of transfer which the statute of frauds and the general rules of law require in such cases, and hence should not be applied unless the grounds upon which it rests are clearly and satisfactorily established, and not then except in support of a clear equity or to prevent fraud. Thompson v. Simpson, 128 N. Y. 270; 40 St. Rep. 164; Trenton Banking Co. v. Duncan, 86 N. Y. 230.

The plaintiff, so far as the record shows, was a purchaser in good faith and for a valuable consideration, relying upon a recorded title, not affected by anything, so far as appears, unless it be the admissions which the owner made when his father assumed to mortgage it, and of these admissions he had no notice. It does not appear that there was any actual possession of the land when he purchased and took his conveyance that would operate as constructive notice, and, therefore, he was protected by the Recording Act against an undisclosed equity in favor of the holder of the mortgage. Holland v. Brown, 140 N. Y. 344; 55 St. Rep. 725.

It is quite true that Silas N. Carman, the owner, was estopped from questioning the lien of the mortgage upon this land as between him and any one claiming under it, upon the findings of' the court in this case. But that estoppel did not extend to and bind a bona fide purchaser. The ■ rule that estoppels bind the parties and their privies in estate and blood applies only when subsequent parties represent the rights and estate of the party who created the estoppel, and> nothing more. It does not apply to a party who, in the process of transferring real estate, has acquired a better title than his predecessor had. "While Silas N. Carman might not be permitted to question the defendants’ title under the mortgage, yet the plaintiff may, for the reason that he purchased in good faith for a valuable consideration, relying upon the record title in the judgment debtor and in ignorance of the transaction that took place when the mortgage was given. He has, therefore, a better title than the judgment debtor had, which cannot be defeated by an estoppel of which he had neither actual nor constructive notice.

But even if the plaintiff could be bound by the estoppel, it extended only to the lien of the mortgage and could not be given any greater effect than if Carman had joined in that instrument. As the legal title would then have remained in him subject to the mortgage, so it did when he made it a lien by estoppel, and hence he, or whoever represented his title, still owned tne equity of redemption, and, therefore, were necessary parties to the action to foreclose the mortgage. The most favorable view that can be taken of the case for the defendants would put Carman in the position of a party who had consented to charge his land with the lien of a mortgage. He did not by such consent extinguish his equity of redemption any more than he would had he become a party to the mortgage, and, therefore, it must follow that as tO' the interest which remained in him the mortgage has never been foreclosed. But unless the defendants are able to charge the plaintiff with some notice, actual or constructive, of the transaction which took place between Silas, his father and the mortgagee at the time that he purchased and paid for the land at the execution sale, then the plaintiff’s title is superior and must prevail.

The order reversing the judgment of the trial court and granting a new trial should be affirmed and judgment absolute ordered for the plaintiff, with costs.

All concur.

Ordered accordingly.