author: Daniels, J.: Davis, P. J.: Brady, J.,

text:
    THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, Appellant, v. LAWRENCE S. SMITH and others, Respondents and Appellants.

      Agreement to extend loan without specifying the time — when it constitutes a sufficient consideration to support a new pi’omise.

    In 1869, tlie plaintiff having caused the necessary papers to be prepared to commence an action to foreclose a mortgage given to it by the defendant Smith, the latter proposed,if the plaintiff would allow the loan to stand, to give a new mortgage to secure the payment of the sum secured to be paid by the first, together with a bond to be executed by additional parties. The plaintiff accepted this offer and the newbond and mortgage; discontinued the proceedings instituted for the foreclosure of the first mortgage, and took no further steps to collect it down to 1874, when this action was commenced to foreclose both mortgages, and to recover a judgment for any deficiency against the parties liable upon the bonds as collateral to which they were given. When the second bond and mortgage were given, no particular period or time was mentioned or agreed upon, for which the loan secured by the first mortgage was to be allowed to remain uncollected.

      Held, that the general agreement to allow the loan to remain for the time uncollected, followed by an actual forbearance of several years, furnished a sufficient consideration to support the second bond and mortgage as between the parties thereto, although no particular period for the forbearance was agreed upon. (Brady, J., dissenting.)
    Appeal from a judgment entered upon tbe trial of this action by the court without a jury.

      This action was brought to foreclose two mortgages, one given to plaintiffs, by Lawrence Shuster Smith, individually and as executor of the last will and testament of John M- Smith, deceased.
    When the cause was in this court before, on an appeal from the judgment rendered upon the trial before Mr. Justice Westbrook, the point was raised in behalf of these defendants, that the mortgages in the complaint mentioned did not constitute a lien on more than one equal fourth part or share of the premises therein described, and that there was error in the decision of the learned justice with reference thereto. The judgment, in that instance, was reversed at the General Term, in January, 1876. On the reversal of the judgment the cause was sent back for a new trial, and on such new trial, before Mr. Justice Barrett, judgment was rendered in accordance with the opinion delivered at the General Term.
    The court below found that the defendant, Lawrence S. Smith, as the sole surviving executor of the said last will and testament of John M. Smith, late of the city of New York, deceased, borrowed of the plaintiff, on the 4th day of April, 1868, and the said plaintiff on that day paid to him as such executor, the sum of $25,000, and he executed and delivered to the said plaintiff his bond. That on the same day, to secure the payment of the indebtedness to said plaintiffs, the defendant, Lawrence S. Smith, as executor as aforesaid, executed, duly acknowledged and delivered to the plaintiffs a mortgage. That the said mortgage was duly recorded in the office of the register of the city and county of New York, on the 4th day of April, 1868, in Liber 841 of mortgages, page 308. That on or about the 12th day of July, 1869, for the purpose of further securing the payment of the indebtedness secured by the said bond and mortgage, the said defendant Lawrence S. Smith, as sole surviving executor of the last will and testament of John M. Smith, late of the city of New York, deceased as aforesaid, and also individually, and Ann Eliza, his wife, did on that day execute, and on or about the 12th day of July, 1869, acknowledge and deliver to the said plaintiffs a mortgage whereby they in form granted, bargained and sold to the said plaintiffs the premises in said complaint described, upon the same tenns and with the same powers, provisions, conditions and covenants as contained in tbe aforesaid mortgage. That tbe said last mentioned mortgage was given as additional and collateral security to said first mortgage, made by said Lawrence S. Smith to said plaintiffs, and that said first mentioned mortgage was then and still is unpaid. That said last mentioned mortgage recited that it was made in execution and by virtue of the powers contained in said last will and testament of John M. Smith, deceased. That the said last mentioned mortgage was duly recorded in the said register’s office on the 28th day of September, 1869. That on or about the 2d day of April, 1868, for the purpose of further securing the indebtedness secured by said bond and mortgage, the defendant, Andrew J. Scott, for a good and valuable consideration, did execute and deliver to the said plaintiffs a bond sealed with his seal, whereby he bound himself, his heirs, executors and administrators in the penalty of $50,000, upon condition that the same should be void if the said defendant Andrew J. Scott should pay to the said plaintiff the sum of $25,000, on the 1st day of June, 1869, with interest for the same at the rate of seven per cent per annum, payable half yearly on the first days of June and December. That said bond was given in connection with and as collateral security to the said bond of Lawrence S. Smith to the said plaintiff for the same amount as aforesaid. That on or about the 8th day of July, 1869, for the purpose of further securing the indebtedness secured by the said bonds and mortgages the defendants Clifton Bolton, Henry A. Bowerman and Donald Cameron, did on that day execute and deliver to the said plaintiffs a bond sealed with their seals, whereby they bound themselves, their heirs, executors and administrators in the penalty of $50,000, upon condition that the same should be void if the said defendants Clifton Bolton, Henry A. Bowerman and Donald Cameron should pay to these plaintiffs the said sum of $25,000 with interest, on demand. The said bond last mentioned was collateral to the bond and mortgage of the said Lawrence. S. Smith, as sole surviving executor, held by the said plaintiffs, recorded in New Tort register’s office, as aforesaid. That the circumstances attending the execution of the bond of Henry A. Bowerman were the following : After the bond secured by mortgage recorded in Liber 847 of mortgages, page 308, had become due, and in June, 1869, this bond and the said mortgage securing the same were placed in the hands of the attorney of the plaintiffs for collection, who made the necessary searches and drew the complaint. The bondsman, Lawrence Shuster Smith, thereupon agreed with this attorney that if a confirmatory mortgage was executed and also the bond (of Bower-man and others) procured, a foreclosure action would not then be instituted. The desired confirmatory mortgage and bond, in the case, were executed and delivered to the plaintiffs, and the bondsman, Lawrence Shuster Smith, paid to this attorney all his charges for drawing and preparing the same, and for preparing to commence proceedings for collecting the claim and all expenses in the matter, the plaintiffs being put to no expense in the matter, no written or other agreement was made between the plaintiffs and any of the parties to the transaction, the aforesaid bond of Bowerman was payable by its terms on demand, no proceedings to collect the indebtedness mentioned in the said bond or to foreclose the mortgages securing the same were instituted until' the 29th day of April, 1874, when this action was instituted.

      Hemry E. Demies <& Julien T. Demies, for the plaintiffs appellants.
    Mere indulgence of a principal will not discharge a surety. (Thompson v. Hall, 45 Barb., 214; Singer v. Troutman, 49 id., 182; JRemsen v. EeeJcman, 25 N. Y., 552; Schro&ppel v. Shcrn, 3 id., 446.) An agreement to forbear, generally, without an agreement to continue it for a specified time, will support an agreement to pay. (Mcrpes v. Sidney, Cro. Jac., 683; Elting v. Vanderheyden, 4 Johns. R., 237; Weston v. Randall, 20 Wend., 201; Wilby v. Elgee, Alb. Law Jour., vol. 12, No. 19, p. 303; Nov. 6, 1875.)

      J. S. Smith, for infant defendants and respondents Smith.

      Edmund Coffin, Jr., for the defendant and appellant Bowerman.
    As the want of consideration was pleaded, the seal on Bowerman’s bond gives it no validity as against positive proof that it was without consideration. (2 R. S., 406, §§ 77, 78; Morgan v. Smith, 7 Hun, 244; Anthony v. Harrison, 14 id., 198, aff’d Ct. of Appeals; MoCulloeh v. Hoffman, 10 id., 133.) This obligation would be void under the statute of frauds, as expressing no consideration, were it not for the seal. (Ba/mum v. Childs, 1 Sandf., 58; S. 0., 11 Barb., 14; Bush v. Stevens, 24 Wend., 256.) In order to constitute a consideration, tbe extension of time must be under a valid reciprocal agreement to forbear, which the debtor could have enforced during the time of the extension; otherwise the transaction amounts to nothing more than “indulgence,” and will not constitute a consideration for an independent promise, no matter how long the indulgence continues. (Bank of Troy v. Topping, 9 Wend., 273 ; Watson v. Bandell, 20 id., 201; Pratt v. Coman, 37 N. Y., 440; Mechanics and Farmerd Bank v. Wixon, 42 id., 438; Cary v. White, 52 id., 138; Atlantic National Bank v. Franklin, 55 id., 235; Post v. Dorerrms, 60 id., 371; Rix v. Adams, 9 Yt., 233; Bussell v. Buck, 11 id., 166; Hakes v. Hotchkiss, 23 id., 231; Downing v. Funk, 5 Rawle, 69; Muirhead v. Kirkpatrick, 21 Penn., 237; Longsdale v. Brown, 4 Wash. C. Ct., 148; Story on Contracts, §§ 440, 441.) The bond of Bowerman is to be construed by the rules regulating a guaranty of collection, and not by the rules regulating a guaranty of payment. The distinction between the two classes of obligations is, that under a guaranty of payment, the rights of the parties are legally fixed on default in payment, and in consequence the surety or guarantor has no relief for neglect of the creditor to enforce collaterals or prosecute the principal debtor except in equity, and then on affirmative proof on his part that he requested such action; whereas, under a guaranty of collection, the rights of the creditor and obligation of the surety or guarantor are not fixed until after the creditor has prosecuted the principal debtor, and enforced all his other primary collaterals; and, in consequence the guarantor is relieved from liability by laches' of the creditor, without proof of any request on his part that the creditor proceed. (Newell v. Fowler, 23 Barb., 628; Cad/y v. Shelton, 38 id., 106; Northern Ins. Co. v. Wright, 13 Hun, 166, aff’d Ct. of App., 76 N. Y., 445; Craig v. Parkis, 40 id., 181, and cases cited, especially in the dissenting opinion of Judge Mason ; Eisenlord v. DiTlenbach, 15 Hun, 23; McMurra/y v. Noyes, 6 Weekly Dig., 160, Ct. of App., Peb. 1878; 72 N. Y., 523; Newell v. Fowler, 23 Barb., 628; Moseir v. Wapel, 56 id., 80.)

      Butler, Stillman <& Hubbm'd, for the defendant and respondent Cameron.
   Daniels, J.:

There is no foundation for the objections urged in favor of the defendants Smith, by their guardian, to that part of the judgment directing the sale of the property in controversy. For it has been in terms declared that they were the owners of an undivided three-fourths of the premises mortgaged, and that no title to those portions had passed to the plaintiff by either of the mortgages delivered to it. A sale of the property under the judgment would consequently leave their three-fourths entirely unaffected, and operate wholly and entirely upon the interest which was the proper subject of incumbrance by the mortgages. The first mortgage taken upon the property by the plaintiff was given in April, 1868, and the debts secured by it became due on the 1st day of June, 1869. The plaintiff contemplated a foreclosure of that mortgage, and took measures to institute such an action. While the papers were being prepared a proposal was made, to give a new mortgage, together with a bond to be executed by additional parties as further security for the payment of the debt. It was proposed to give these obligations, if the plaintiff would allow the loan to stand, which proposition was accepted by it, and the proceedings then on foot, preparatory to the commencement of the foreclosure action, were abandoned.

The additional mortgage was executed and the bond agreed upon was given upon the understanding that the loan should be allowed to stand and remain for the time uncollected. No particular period was mentioned or agreed upon for which the loan was to be allowed to remain uncollected, but as a matter of fact no proceedings were taken for its collection from that time down to the year 1874. These facts appear by the testimony of the mortgagor taken upon a previous trial of this action. It has been strenuously urged by the counsel for Bowerman, one of the persons who executed the bond given with the mortgage, for which the extension of the loan was obtained, that what transpired did not constitute such a consideration for the bond as will legally sustain it. The objection is placed upon the circumstance that no particular period was agreed upon through which the forbearance of the debt should be allowed to extend. And it has been urged that the cases of Cary v. White (52 N. Y., 138) and Atlantic National Bank v. Franklin, (55 id., 235) maintained the propriety of this objection. But the point there presented and decided was not whether such a consideration would be sufficient to sustain an obligation of this description, but it was whether the holder of the obligation in suit could be regarded as a holder for value, in such a sense as would exclude defenses which the parties would otherwise he entitled to insist upon. An instrument for the payment of money may itself very well be founded upon a sufficient legal consideration, and for that reason be binding upon the parties executing it, even though a person afterwards acquiring it may not be in a condition to be a holder of it, for value, as that phrase has been construed and understood in the administration of the law. Whether the instrument itself has been founded upon a legal consideration is a point of an entirely distinct and different character, not controlled by authorities of the nature of those already referred to. For the purpose of constituting such a consideration all that is required is that it shall either benefit the person on whose behalf the instrument is made, or produce some injury to the party receiving it. And forbearance, or the extension of the time for the payment of an existing debt, has, within this rule, been regarded as sufficient to sustain an obligation executed to obtain that end. The accuracy of this' proposition is not denied in this case, but it is claimed that before the instrument can be sustained, for which the forbearance may be given, that some particular period over which it is to extend shall be made the subject of the agreement. But this proposition is not sustained by the authorities. In the early case of Mapes v. Sidney (Choke’s James, 683), it was held that a promise by the defendant to pay the debt, in consideration that the plaintiff would forbear to sue one F. S. upon it, was a good consideration for the promise inasmuch as it appeared that the forbearance had in point of fact been secured. No time was there agreed upon, but still it was held that the plaintiff was entitled to recover1, as the object the party had in view in making the promise was actually obtained. In King v. Upton (4 Greenl., 387) the action was upon a guarantee of a promissory note made after its maturity. It was alleged that the consideration of the guarantee was forbearance and further time for the payment of the note, and this was held to be sufficient as long as it appeared that the time had in fact been given to the debtor. The same l’esult was sustained in Elting v. Vanderlyn (4 John., 237), where it was said by the court that the consideration of forbearance generally is sufficient without setting forth any specific time. Watson v. Randall (20 Wend., 201), and the effect of the decision in Grocers’ Bank v. Penfield (7 Hun, 279, and 69 N. Y., 502), are substantially the same. In Oldershaw v. King (2 Hurlstone & Nor., 517), the consideration for the promise was that the creditor would not require immediate payment from the debtor, and it was held to be sufficient because that implied a reasonable extension. And as much as that may with equal propriety be inferred from the agreement made in this case to let the debt stand. The fact that the bond was made payable on demand was not inconsistent with its existence as long as it formed the consideration of that instrument. The facts of this case brought this portion of it within the principle established by these authorities, and for that reason the objection raised upon the alleged want of consideration should not be sustained.

It has been further urged in favor of the same defendant, that inasmuch as the bond was made collateral to the preceding bond and mortgage of .Smith, that the plaintiff has lost its rights to enforce it by reason of a failure to prosecute those obligations. But this position is entirely inconsistent with the purpose and object of giving the bond itself. It was to secure just that indulgence that this bond was delivered to the plaintiff, and the objection cannot now be consistently urged against its validity that the latter has observed, as it appears to have done, the terms of the agreement forming the consideration of the instrument. Upon the trial of this cause the counsel for this defendant also proposed to show that rents and profits of the mortgaged property had accrued, which might have been collected by the plaintiff and applied toward the payment of the mortgage debt. •

This evidence was excluded by the court and the defendant excepted. That exception is now relied upon in support of the appeal taken in his favor. But if the plaintiff had entered into the possession of the mortgaged property and collected the rents, the object intended to be secured by giving this bond would have been defeated. The inducement to it was that Smith, the principal debtor, should be relieved from proceedings for the collection of the debt, and that it should be allowed to stand. The plaintiff assented to that arrangement upon the delivery of this bond, and after doing so it could not properly have instituted an action and sequestrated the rents and profits of the property without violating the terms and spirit of the understanding forming its consideration. For that reason this offer was properly rejected. But if this evidence had been received the case would not have been brought by it within the authorities urged in support of the appeal taken by this defendant, for the rents never having been received by the plaintiff were in no sense held by it as a further security, and it did not have the ability to appropriate them to the payment of any part of the mortgage debt. It is only when the creditor has received and is able to control a further security, which is allowed to be appropriated to some other object, that the surety for the principal debtor has the right to complain. This was not a case of that description and it cannot be controlled by the authorities which have been cited. The order allowing Cameron, who was one of the persons executing the bond, to set up his discharge in bankruptcy, seems to have been properly made; and under the bankrupt law his discharge relieved him from liability for the payment of the debt mentioned in the bond. The point upon which the plaintiff’s appeal was taken has been fully considered and disposed of in the opinion of Mr. Justice Brady, and to his conclusion upon that subject complete concurrence is given. As the other appeals are ineffectual the judgment in the case should be affirmed.

Davis, P. J.:

I concur with Mr. Justice Daniels in the opinion that the appeal of defendants is not well taken.

Brady, J.,

dissenting:

Two appeals were taken in this case, one by the plaintiff and one by the defendant Bowerman.

• The appeal of the plaintiff rests on the ground, sought to be maintained by a series of propositions, that the mortgagor had power to execute the mortgage which he gave, embracing the whole property described and not one-fourth of it only. On the previous appeal in this action we decided that question adversely to the plaintiff, and we see no reason to change tbe judgment then pronounced.

The defendant Bowerman invokes our consideration of several propositions in reference to his alleged liability for a deficiency. One of them is that there was no consideration for the bond which he gave as collateral to the bond and mortgage of Lawrence S. Smith, already referred to. What occurred in reference to the bond and what led to its execution is stated by Mr. Turner in the case, and is as follows: “I am one of the law firm of Turner, Kirkland & McClure; we do now, and in 1869 did, some business for the plaintiff; in 1869, I think, in the month of June, Mr. Winston, the president of the plaintiff, placed in my hands the mortgage of Lawrence Shuster Smith, executor, etc., now under foreclosure in this action; that was delivered to the plaintiff April 4, 1868, and I was directed to foreclose the same; I put in the requisite searches and prepared the complaint; before the papers were served the defendant, Lawrence Shuster Smith, called on me and offered to execute new papers, and to give personal security if the loan could be permitted to continue; the plaintiff agreed to this, and I prepared the confirmatory mortgage, which was executed by Mr. Smith and his wife, and also the collateral bonds of Bower-man, Cameron and Bolton, which they executed; on my delivering those to the plaintiff, I was authorized to discontinue the foreclosure proceedings, and did discontinue them and returned the original complaint to the plaintiff; no papers were served in the foreclosure suit; Smith paid the fee; there was no written agreement to my knowledge in reference to the matter.”

The bond itself is payable on demand; it thus appears that there was no agreement to extend the time for the payment of the original indebtedness. On the contrary, the pre-existing obligation remained in full force and the bond of Bowerman and others, which was a collateral security, was entirely independent of it. As already suggested, it was an. obligation which was payable on demand. There is no evidence in the case to show that there was any other understanding or agreement than that there should be a continuance of the bond and mortgage. But no definite period was named. The transaction was a mere indulgence therefore and for no stipulated period. There was nothing, from aught that appears in the case or the papers executed, to prevent the plaintiffs from demanding payment of the original indebtedness immediately after the execution of the bond itself. This is not a sufficient consideration within the authorities. It has been so expressly declared. (Atlantic National Bank v. Franklin, 55 N. Y., 235; Cary v. White, 52 id., 138.)

It appears that the learned judge who presided at the Special Term was asked to make certain findings with reference to the consideration and the character of the agreement, of which the bond of the defendant Bowerman and others was predicated, which he declined to do, and this presents the question discussed for our determination and imposes upon us the duty of reversing the judgment, so far as it affects him individually.

For these reasons I think the judgment appealed from should be affirmed except as to the defendant Bowerman, in regard to whom it should be reversed.

Judgment affirmed.


source: Caselaw Access Project

author: Davis, P. J.:

license: Public Domain

text:
    JOHN E. ANDREWS and BENJAMIN T. KISSAM, Executors, etc., of GEORGE W. COSTER, Deceased, Respondents, v. THE NEW JERSEY STEAMBOAT COMPANY, Appellant.

      Damwges for connen'sion of property — when the amount thereof ma/y depend upon the intent of the wrongdoer — when the question of intent should he submitted to the jwry.

    The plaintiffs brought this action to recover damages for the conversion of their two-tenths interest in a steamboat known as the “Francis Skiddy,” which was, in 1864, engaged in running between Troy and New Yoi'k. On her last downward trip for that year she struck upon a rock and was' so badly damaged that, to prevent her from sinking, she was run upon the shore and stranded. A few days thereafter the defendant, the owner of the other eight-tenths of the vessel, without consulting or notifying •the plaintiffs took the machinery and other portions of the vessel and converted them to its own use, and sold the hull and received the proceeds thereof. The plaintiffs claimed and evidence was given tending to show that the vessel could have been raised, floated to a dock and repaired, at a cost not exceeding $5,000, and would then have been a valuable property. The defendant claimed that, owing to the doubt whether the vessel could be raised before the river was closed by ice, in which case she would have been destroyed by the ice and floods, it deemed it wiser to tate out the machinery and dispose of the hull at the best price it could obtain. The principal question was whether the defendant was to be held liable as for the conversion of a valuable steamboat slightly damaged, but easily repairable, or whether it was to be held liable only for the conversion of the articles and machinery taken from it.

      Held, that the decision of this question turned upon the intent with which the defendant took possession of the vessel, and that the court erred in taking the question of intent from the jury.
    Appeal from a judgment in favor of tbe plaintiffs, entered on the verdict of a jury and from an order denying a motion for a new-trial made on the minutes of the justice before whom the action was tried.
    This action was commenced in the month of November, 1865, and was originally brought in equity to have the plaintiffs declared part owners of a steamboat called the “ Dean Richmond.” The issue as then framed was referred to the late Mr. Nichols who dismissed the complaint. Upon appeal from this judgment the General Term whilst sustaining the referee in his conclusions that the plaintiffs should not be declared part owners of said boat, yet held that there was sufficient in the complaint and evidence to justify the recovery of damages. The case is reported in 11 Hun’s Reports, at page 490.
    After this decision the complaint was amended so as to transform the action to one at law for damages caused to the plaintiffs by the act of defendant in converting the steamboat Francis Skiddy,” of which the plaintiffs were the one-fifth owners, the defendant being the owner of the four-fifths of said boat. The issue raised in this action was tried before Mr. Justice YaN Beunt and a jury in the month of February, 1879, when a verdict was rendered for the plaintiffs in the sum of $58,455.81 damages and interest.

      John R. Dos Passos and Chas. Jones, for the appellant.

      William Allen Butler, for the respondents.
   Davis, P. J.:

This action is brought to recover damages for the conversion of the property of the plaintiffs in the steamboat Franeis Skiddy.

Tbe plaintiffs and tbe New Jersey Steam Navigation Company were tbe owners of tbe Skiddy, tbe company owning eigbt-tenths and tbe plaintiffs two-tentbs. In September, 1864, tbe New Jersey Steam Navigation Company sold all its interest in tbe steamboat to the defendant and received a certain amount of tbe defendants’ stock in payment. Tbe Skiddy was to be delivered under the sale at tbe close of navigation of that season. She was then employed in plying on tbe Hudson river, between New York and Troy, in a line of steamboats known as tbe Troy line, and its business, as appears from tbe evidence,'was a profitable one. On her last downward trip, at a point a short distance below Albany, tbe Skiddy struck upon a rock which broke in several planks of her outside bull known as her “ sponsons,” through which she rapidly filled with water, and to prevent her sinking in deep water she was, as speedily as possible, run ashore and stranded on tbe flats of the river where she remained in a partially sunken condition. Notice was given to the defendant of her condition on tbe following day, which was Saturday, and on Monday following tbe defendant took possession of her where she lay. It is not claimed that tbe injuries she received by running on tbe rock were not purely accidental, nor that tbe stranding of her in tbe manner in which she was run upon tbe flats, was not a judicious and necessary mode of saving her with her passengers and cargo from sinking in deep water. There was nothing, therefore, in these acts in the nature of a conversion of the interest of the plaintiffs in the boat.

The theory of the case on the part of the plaintiffs is in substance that the defendant had, previously to the time of the injury to the boat, resolved after the close of navigation to take out her engine, which it is claimed was a peculiarly valuable one, for the purpose of putting it into a new and much larger boat, to be constructed for their separate use and called the “ Dean Richmond,” and to fit up the Skiddy for future use with a cheaper and smaller engine ; but that when they learned of the injury to and stranding of the boat, they abandoned the idea of refitting her and resolved to take her to pieces so far as practicable where she lay and to sell her hull and apply her engine and whatever else could be taken from her and the proceeds of sale, to their own use, without consulting or respecting the rights of the plaintiffs, and without regard to the question whether the boat could be raised and repaired.

On the part of the defendant the theory of the case is that the injury was of such a character, and occurred at so late a season of the year, that the boat could not, with reasonable care and prudence, be raised before the navigation of the river at that point would be closed by ice; in which case it would be impossible to raise her, and she would remain exposed to destruction, and probably be destroyed by the ice and floods of the winter and spring; and that therefore they concluded the better course would be to dismantle her, take out her engine and machinery so far as possible, and dispose of her hull where it lay for such price as they could obtain. It is hardly questioned in the case but that the injuries to the boat were of such a character that she could easily have been raised, floated to a dock and repaired at an expense of not exceeding |5,000, at any other season of the year. Rut it is insisted by the defendant that the lateness of the season rendered the effort to do so, so dangerous and doubtful in its results, that it was justified in saving what was possible from the boat instead of attempting to raise her. The plaintiffs were neither consulted nor notified as to what was done, and had no opportunity, as it appears, to concur in or dissent from the action of the defendant. The mere act of taking possession of the boat by the defendant would not be a conversion per se. As the owner of eight-tenths, and entitled to possession under its purchase, the defendant was lawfully entitled to take possession of the boat when the further ability to navigate her had been effectually terminated by the injury she had received.

There is no question made, apparently, on the part of the defendant but that the machinery and other parts of the boat which were taken from her by its agent, and brought to the city of New York, were afterwards so converted and used by the defendant that it became liable to the plaintiffs for the value of their property therein, and in the hull in the condition in which it was when sold. But the question litigated and contested is as to the time when such conversion took place, and the condition of the property at that time; on the one hand it being claimed that the defendant had unlawfully taken and converted the property of the plaintiffs in a valuable steamboat, which had received only a temporary injury which could be easily repaired, and was in such condition that her value as a .steamboat substantially remained; and on tbe other hand that the defendant had only taken possession of the beat after she had been injured and stranded, and while her condition was such, owing to the lateness of the season, as rendered the experiment of raising and removing her too hazardous to be justifiable; and that their action in dismantling her was taken in good faith to save as much of value as possible before she could be utterly wrecked by her continued exposure.

It seems to us that there can be no doubt that if the defendant took possession of the boat with the fixed intent of destroying her as such, and taking possession and removing everything appertaining to her that could be carried away, and selling what remained for their own benefit, regardless of the rights of the plaintiffs as well as of the question whether the boat could be raised and repaired, those acts would be a conversion of the plaintiffs two-tenths of the property for the value of which this action will lie.

It is very true that this question of intent is strongly colored by the neglect of the defendant to consult with the plaintiffs touching the disposition of the boat, and by their subsequent conduct in converting everything that was taken from her to their own use. But those facts were not, as it seems to us, sufficient to resolve the question of intent in taking possession into one of law upon the evidence, and thus take it wholly from the jury. There was evidence enough given (and some attempted to be given, but excluded) bearing upon the question as one of fact, to require it to be submitted to the jury. The court, however, ruled that there was but a single question to be so submitted to the jury, and that was one as to the amount of damages.

The court in its charge said: “ There is a difference of opinion between the learned counsel for the defendant and myself, at the very outset of this case, as to the questions which are to be submitted to you, and as to the liability of the defendant in this case. For the reasons which I stated yesterday, it seems to me there is but one question which you are to determine, and that is the question as to the value of the interest of the plaintiffs in the Francis Skiddy on the 25th of November, 1864, at the time she was converted to theif own use by these gentlemen.”

And again the learned judge said: “Now, as I was remarking, the simple question for yon to determine is the damages which the plaintiffs have suffered by the wrongful act of the defendants. It was claimed on the part of the counsel for the defendants that there was some question as to when this conversion took place, as to whether it was a conversion when the boat was lying in the stream near Albany, or whether it was a conversion when they put the joiner work and the engine, which they took from that boat, into the Dean Richmond. Now, gentlemen of the jury, as I decided yesterday, the action of the defendants in taking possession of that boat as they did, without any notice or any consultation with their co-owners, was an act in itself of conversion, and made them liable to them for the value of that property, then* there and at that time. They were bound, before they were going to destroy this property, before they were going to dispose of it in such a way that it could not be used for the purpose for which it had been used, to notify, consult and give the other owners an opportunity to do that which they thought best for the purpose of preserving their property; and when they acted without any regard to the rights of the minority owners, they acted in their own wrong; they became wrong-doers, and they are responsible to the plaintiffs in this action for that wrong which they perpetrated against them.”

To these portions of the- charge exceptions were duly taken. We should feel inclined to construe these portions of the charge as meaning in substance a taking of possession with intent to destroy the boat. But that construction cannot be given, inasmuch as the learned judge took the question of intent altogether from the jury, and reduced their consideration of the case to one simply of damages. It is not just to the defendant to say that the submission of the single question of damages to the jury was acquiesced in on its part, for after the charge was given the defendant requested the court to charge among other things as follows: “ That if the jury believed that it was doubtful whether the Skiddy could be raised before the river was frozen over, and there was danger that she would be materially damaged or destroyed by the ice and freshets, and that the defendant thus believing, deemed it to be for the interest of the owners of the vessel to take out and remove the engine and the other parts and appurtenances, which were taken out and removed, then the act of the defendant in so doing was not a conversion, and tbe only damages recoverable by the plaintiffs are two-tenths of the value of the property after it was thus taken out and removed, with interest.”

The court refused so to charge and defendant excepted.

The court was also requested to charge: “ That if the Skiddy could not be raised before the close of navigation on the river, and there was great danger that she would be destroyed by the ice or freshets, then it was the duty of the defendant to save as much of the vessel and its appurtenances as possible, by taking out and removing such parts and portions as could be removed, and in so doing it was not guilty of a conversion of the vessel.”

The court refused so to charge and defendant excepted.

These requests seem to us to strip the ease of all pretext that the defense assented to the submission of the single question of damages to the jury, except in so far as that question related to the conversion of the property subsequent to its being taken from the vessel and brought to New York, and there afterwards used as has been stated.

We are at a loss to see on just what ground the question of the intention with which the defendant took possession of the boat, as she lay stranded in the river, can be withheld from the jury, for we do not see how the taking of possession by the owner of eight-tenths of the boat, with a view in good faith to save as much as possible from what was supposed to be in imminent danger of total loss, could be lawfully construed into a conversion of the other two-tenths. The right of the defendant to take possession, and to control and use the boat as such owner, was a perfect one in law and did not subject them to an action of this character; and if the jury had found, upon a submission of the question of the motives and purpose with which they took possession, favorably to the defendants theory, the case would at once have been reduced to a consideration of the damages for the subsequent conversion of the portion of the boat so saved and of the hull when sold.

There were various other requests made by the defendant on the subject of damages which were refused and exceptions taken, which, it seems to us, were not properly disposed of, but we are not inclined to consider them in detail.

The court upon the question of damages did submit for the jury to consider tbe question, whether, in consequence of the approaching cold weather there was any chance of getting the boat out of its position, and how much her value as a steamboat was affected by the circumstance that the river was likely to close within a short space of time. This was well enough so far as it went, because that consideration was one that would more or less affect her value as a steamboat at the time of the defendants taking possession of her in the manner which the learned judge held was, in itself, a conversion. Having held that the act of taking possession was in itself a tort which subjected the defendant to this action, he then charged that upon this question of condition, all the presumptions were against the defendant, and against its theory of the feasibility of raising and repairing her before the closing in of winter, because, as the learned judge said, “ they are the wrong-doers and must excuse themselves, and every presumption is in favor of the plaintiffs, and it is their duty to establish to your satisfaction that the boat could not be raised.”

As in our view, the mere and naked act of taking possession without regard to defendants intention in so doing was no conversion, the charge cannot of course with propriety be sustained.

We reach, with regret, the conclusion that there must inevitably be a new trial of this case. The conduct of the defendant was in any view oppressive. It assumed practically to act without respecting the rights of the plaintiffs, and with a degree of indifference to such rights that naturally would excite the indignation of courts and juries, still the case must be tried with a view to settled legal principles, and we feel constrained, therefore, to reverse the judgment and remand the case for a new trial, costs of both parties of this appeal to abide the event.

Beady and Baebett, JJ., concurred.

Judgment reversed, new trial ordered, costs to abide the event.


text:
    SIEGMUND T. MEYER and ASHER T. MEYER, Appellahts, v. JOHN AMIDON, Respondent.

      False statement — when a jury may infer an intent to defraud the inquirer — when the question should he submitted to the jury.

    When a statement is made Tby a party who assumes or intends to convey the impression that he has actual knowledge of its truth, though conscious that he has no such knowledge, and when he knows that the inquirer relies and is about to act upon his statement, a jury may he justified in finding, on proof of the falsity of the statement, and of the injury sustained by the party relying thereon, that the party making the same intended to deceive and defraud the inquirer.
    Where the party making such statement testifies that he simply undertook to repeat what had been told him, while the party to whom it was made testifies that the statement was positive and made as being within the personal knowledge of the party making it, held, that the question should be submitted to the jury.
    Appeal from a judgment entered on a dismissal of tbe complaint ordered at the Circuit.

      Everett P. Wheeler, for the appellants.

      A. J. Vanderpoel, for the respondent.
   Davis, P. J.:

At the close of the evidence on both sides, on the trial of this case, the court, on motion of the defendant’s counsel, dismissed the plaintiffs’ complaint and refused to submit any question in the case to the jury. The plaintiffs’ counsel excepted to the order of dismissal, and made several requests for leave to go to the jury upon several questions of fact claimed by him to arise upon the evidence.

The only question to be considered upon this appeal is, whether there was any evidence in the ease which ought to have been submitted to the jury for their finding upon any question of fact.

The action was brought to recover damages for alleged fraudulent misrepresentations in respect of the credit and standing of the firm of Blackmer, “Walker & Co., who were merchants doing business at Boston, Mass. The plaintiffs were merchants doing business in tbe city of New York. The defendant was a member of the firm of Amidon, Leavitt & Co., wbo also were merchants doing business in tbe city of New York. It was shown in evidence that Blackmer, "Walker & Co., applied to the plaintiffs’ firm to make purchases of goods upon credit, and that the plaintiffs refused to sell to them without satisfactory reference as to their responsibility. The plaintiffs were thereupon referred to the defendants’ firm for information on that subject, and an employe of the plaintiff was then sent to the defendants’ firm to obtain such information. He was referred by a member of the firm to the defendant, and his testimony as to what took place between himself and the defendant is as follows :

“ I stated to Mr. Amidon that I had called to obtain reference about Blackmer, Walker & Co.; he told me the firm was perfectly responsible; that they had $21,000 capital equally contributed: that Mr. Southworth was worth, outside of his business, from $25,000 to $50,000, and that they had sold them $6,000 worth on credit, and they would gladly sell them $10,000 worth; he told me they had sold them on six months’ time; he told me Blackmer, Walker & Co., owed them at that time $6,000; that is all I recollect that was said between Mr. Amidon and myself on that occasion.”

The plaintiffs sold a bill of goods amounting to several thousand dollars, relying, as they state, upon these representations of the defendant. It was shown to be untrue that the firm of Blackmer, Walker & Co., had any such amount of capital in their business, and that Mr. Southworth, one of the partners, was worth no such sum outside of his business as that stated in the representation; and it was shown also that their indebtedness to Amidon, Leavitt & Co., was not at that time $6,000, but was only about $4,000; that the firm of Blackmer, Walker & Co., had no capital beyond three notes of the individual partners, each for $5,000, payable in six months, but never paid, and $2,000 in merchandise put in by one of the partners; that in about three months after the sale of the goods by plaintiffs to them, they became insolvent, paying to their general creditors but about ten cents on the dollar, except the firm of Amidon, Leavitt & Co., who were fully paid and secured beyond their actual indebtedness, and who afterwards repaid to one of the firm, the sum of about $100. the excess received beyond such indebtedness. There was no direct proof in the ease that the defendant knew at the time the alleged representations were made, that they were untrue, or that he intended in making the same to deceive the plaintiffs, or enable Blackmer, Walker & Co., to perpetrate a fraud upon them. The defendant’s testimony as to what took place between him and the employe of the plaintiffs’ when the latter came to him to inquire concerning the responsibility of Blackmer, Walker & Co., was as follows: “He said he came in to inquire in reference to the firm of Blackmer, Walker & Co.; I told him that Mr. Blackmer and Mr. Walker came into our store sometime in February, I think, and represented that they wanted to buy some goods of ns; they said they had formed the firm of Blackmer, Walker & Co.; I told Mr. Meyer that they came in there and said they had formed the firm of Blackmer, Walker & Co., and I told Mr. Meyer the statement that Mr. Walker had made to me; I asked Walker to make a statement of how their firm started; he said they started with a capital of $21,000; I asked him if that was paid in, and he said it was; he went on and told me how it was paid in; he said that Mr. Blackmer put his in in stock; he and Mr. South worth in cash; I told Meyer T asked Mr. Walker if that was paid in and he said it was; he said he, himself, had $20,000 outside of his business, and owned some real estate in Lowell, and Mr. Southworth had from $30,000 to $40,000 outside of the business; Meyer asked me whether we sold them, and I told him we sold them, and from the statement they made we considered them good; that we were willing to sell them; I did consider them good; 1 told him I thought we would be willing to sell them from $8,000 to $10,000 from the statement they made.” The defendant further testified that he had no doubt at that time of the responsibility of the firm of Blackmer, Walker & Co., for $7,000, $8,000 or $10,000, and that he thought he would not have hesitated to have sold them $8,000 or $10,000; that he believed what Mr. Walker told him, and that that was what he stated to Mr. Meyer.

It will be observed that the testimony of these two witnesses is in direct conflict as to the statements that were made. The one testified that the statements were positive in their character and were affirmations of matters of fact, as though within the personal knowledge of tbe defendant; tbe other that tbe statements were simply repetitions of representations made by a member of tbe firm of Blaekmer, "Walker & Co., to tbe defendant, npon wbicb be had relied in making sales to that firm.

It became a very important question of fact in tbe case as to wbicb of these witnesses tbe jury believed, because if the jury found that tbe defendant bad made tbe statements in respect to tbe capital and condition of the firm of Blaekmer, Walker & Co., and of tbe property of Mr. Southworth, one of its members, as matters of fact within bis own knowledge, or that be assumed or intended to convey tbe impression that be bad actual knowledge of their truth, though conscious at tbe time that be bad no such knowledge, they would have been justified in finding tbe further necessary fact of an intention to deceive tbe plaintiff.

When this case was before tbe Court of Appeals after a former trial (45 N. Y., 169), it was held that tbe learned referee before whom it bad been tried bad failed to find that tbe representations were fraudulent, or that tbe defendant believed or bad reason to believe when be made them that they were false, or that be assumed or intended to convey the impression that be bad actual knowledge of their truth, though conscious that be bad no such knowledge. And tbe ease was sent back for retrial because tbe referee, as that court held, upon findings merely that tbe representations made by tbe defendant were false, and that tbe plaintiffs were induced by them to give credit to tbe subject of them, and that damage ensued therefrom to the plaintiffs, bad held as matter of law that tbe plaintiff was entitled to recover without a further finding that tbe defendant bad any intention to deceive or defraud tbe plaintiffs. Tbe referee bad distinctly refused to pass upon that question as matter of fact, and therefore tbe court held that it could not be assumed by them that be bad found any fact beyond what was actually set forth in bis report.

There is nothing in the decision of tbe Court of Appeals that at all impairs tbe settled principle in such eases as this, that where a statement is made by a party who assumes or intends to convey tbe impression that be has actual knowledge of its truth, being conscious that be has no such knowledge, and knowing that tbe inquirer relies and is about to act upon bis statement, a jury may be justified in finding, on proof of tbe falsity of tbe statement and of the injury sustained, tbat tbe party making tbe same intended to deceive and defraud tbe injured party.

Tbe intent is, of course, a question of fact to be found by a jury, and not one of law to be disposed of by a court; and tbe jury may infer tbat a party who assumes or intends to convey tbe impression tbat be bas actual knowledge of' tbe truth of bis own assertions, knowing that be bas no such knowledge, is animated by a fraudulent or evil design cmd intends tbe injury tbat is produced by tbe falsity of bis statements. This is, we think, a well established principle of law in eases of this character, with which tbe decision of this case by tbe Court of Appeals is in no respect in conflict. (Oberlander v. Spiess, 45 N. Y., 175 ; Meyer v. Amidon, 45 id., 169 ; Marsh v. Falker, 40 id., 562; Duffany v. Ferguson, 66 id., 482.)

If it bad been submitted to tbe jury to find in this case whether the defendant presented tbe condition and credit of tbe firm of Blackmer, Walker & Co., as matters of fact within bis knowledge, or merely stated to tbe plaintiff’s agent what members of tbat firm bad asserted to him in those respects, tbe jury would doubtless have been instructed tbat if they found tbe assertions were positive,, as of matters within tbe knowledge of the defendant, it would be their further duty to inquire whether be made them, knowing tbat be bad no knowledge of their truth, and tbat if they found tbat be did. make them, conscious tbat be had no such knowledge, tbat it would bo in tbat case for them to say whether or not tbe intent to deceive was thereby shown to their satisfaction, and tbat tbe plaintiff was entitled to recover, if in their opinion these three things concurred.

We think it was the right of the plaintiffs to have bad the case submitted to the jury to pass upon these several questions and inferences, and that it was error to refuse it. The defendant himself testified in substance that be bad no knowledge on the subject except as derived from the statements made to him by Walker, one of the firm. It would not, therefore, have been an embarrassing question for the jury to have found that the representations, if positively made as matters of fact, were made without any other knowledge of then’ truth than the mere assertions of one of the members of the firm. Hence it cannot be said that the court was justified in taking from the jury the question of fact as to what was the character of the statement actually made by the defendant; nor could it with propriety take from the jury the question whether the defendant had any such knowledge as justified the making of a positive affirmative statement; and the question of intent being one of inference from the character of the statement, the absence of actual knowledge, and from the other circumstances of the ease, was equally the property of the jury.

It is by no means clear, and we do not therefore mean to intimate any opinion as to what ought to have been the verdict of the jury; we only mean to say that the case made by the evidence was one which should have been submitted to the jury for their determination.

Some other circumstances were shown to which reference has not been made, such as the relationship between the defendant and one of the members of the firm; the alleged refusal of the defendant’s firm to fill subsequent orders of Blaclnner, Walker & Co., and the manner in which their indebtedness to the defendant’s firm was secured before its maturity. These circumstances and their explanation as given by the defendant and his witnesses, were, of course, proper matters for consideration by the jury who were entitled to give to them such weight as in their judgment they required.

A careful consideration of the case has thus led us to the conclusion that the court erred in taking it altogether from the jury, and that for that error the judgment should be reversed and a new trial ordered, with costs to abide the event.

Daniels, J., concurred.

Present — Davis, P. J., Brady and Daniels, JJ.

Judgment reversed, now trial ordered, costs to abide the event.


text:
    DANIEL E. SICKLES and others, Respondents, v. BENJAMIN RICHARDSON, Appellant, Impleaded, etc.

      Bonds of a corporation cannot be levied upon until they home been delivered — a pledgee may waive his lien and sell the property under an execution — jRight oj action in bondholder — Evidence—what statements of a pa/rty a/re admissible as pwt of the res gestm.

    The plaintiffs, claiming to be the holders of bonds issued by the Chicago, Saginaw and Canada Railroad, brought this action, in behalf of themselves and all others similarly situated, against the railroad company, the trustees under a mortgage issued by it to secure the payment of the aforesaid and other bonds, and one Richardson, to restrain the latter from transferring a number of such other bonds purporting to be secured by said mortgage held and claimed to be owned by him, and to procure their cancellation. Upon the trial it appeared that 600 of the bonds were pledged to Richardson to secure large sums of money lent and advanced by him to the company. Subsequently, upon a settlement with the company it gave to him its notes for the amount in which it was then indebted to him, viz., the sum of $185,000, which sum included a large amount of the indebtedness for which he held the bonds and also a subsequent accruing indebtedness for which he held no collateral. Thereafter Richardson, after offering to surrender the bonds and demanding payment of the notes, brought an action on the latter in which he subsequently recovered a judgment. Under an attachment issued in this action the sheriff levied upon 2,974 bonds of the company, then in the office of the company, but which had never been issued by it. Thereafter these bonds were sold by the deputy sheriff under an execution issued upon the judgment, and purchased by Richardson.

      Eeld, that the bonds having never been delivered were not the subject of attachment, nor of sale upon execution, and that Richardson acquired no title thereto by his purchase.
    The 600 bonds were sold at the same time by the deputy sheriff and purchased by Richardson. Upon the trial it was claimed by the plaintiffs that they were sold by virtue of the attachment and execution, and by Richardson' that they were sold by virtue of the pledge in pursuance of due notice of the time and place of sale given by him to the company.

      Held, that even if the bonds were sold under the execution Richardson acquired a good title thereto, subject, perhaps, to the right of the company to redeem on payment of the amount for which they were pledged, as he was entitled to waive the lien upon them created by the pledge and have them levied upon and sold as property of the judgment debtor.
    Upon the trial Richardson offered to prove the agreement made by him as to the selling of the 600 bonds, with the deputy sheriff, who was then dead.

      Eeld, that the agreement was admissible as a part of the res gestm, as tending to characterize the transaction of sale, and that the court erred in excluding the evidence.

      Quow'e, as to whether such an action as the present one could be maintained by the plaintiffs.
    Appeal from the judgment in favor of the plaintiffs, entered upon a trial had at Special Term.

      Dexter A. HcmJems, for the appellant.

      Elihu Boot, for the respondents.
   Davis, P. J.:

This action was brought by the respondents, on behalf of themselves “ and all other persons similarly situated and having a common interest with them,” as holders of bonds of the Chicago, Saginaw and Canada Railroad Company against the appellant Richardson and the said railroad company and Ashbel Green and William Bond, who are trustees under a mortgage given by the company of . its road and other property, to secure all the bonds issued under such mortgage. The object of the action is to restrain the appellant Richardson from transferring a large number of the bonds, held and claimed to be owned by him, and to compel their cancellation, and to restrain the trustees under the mortgage from recognizing such bonds as valid obligations of the company. The railroad company appeared in the action, but made default by not answering. The trustees appeared and answered, admitting some of the allegations of the complaint and putting in issue some others, and, in substance, asserting their willingness in all things to fulfill their duties and obligations as trustees under the trust deed or mortgage, and alleging as a reason for not having taking pro ceedings against the defendant Richardson in this State, that they have commenced a suit in the Circuit Court of the United States, in the district of Michigan, for the foreclosure of the mortgage or trust deed, and that in such suit, as they are advised and believe, the various questions which have been raised in this case will be presented for adjudication, and the rights of the several parties determined. The defendant Richardson answered separately, putting in issue most of the material allegations of the complaint, and asserting a title to 2,974 of the bonds in his possession, acquired through a sale by thé sheriff of the city and county of New York, under an attachment and execution and upon a suit brought and judgment recovered by him in the Court of Common Pleas of the city and county of New Y ork, against the said railroad company; and also alleging title to 600 of the bonds held by him by reason of a pledge thereof made to him by the railroad company as security for a large amount due to him, and a sale under the pledge, after a notice, etc., at which sale he became the purchaser of the said bonds. The appellant also set up that before the commencement of this action the said trustees, Green and Bond, under and in accordance with the terms and conditions of the said mortgage, in pursuance of the powers therein conferred upon them, commenced a suit for the foreclosure of the said mortgage under which said bonds were issued, in the Circuit Court of the United States, in the district of Michigan, in which district and within the jurisdiction of which court said railroad is located; and that the said court has obtained jurisdiction of the whole subject-matter, to adjudicate and determine all rights and equities between all the bondholders under the said mortgage, and especially all rights and equities relating to said 2,974 bonds and said 600 bonds now held by the appellant.

The trial resulted in a judgment in favor of the plaintiffs, and against all the defendants, declaring all of the bonds held by the appellant Richardson to be invalid and void as obligations of the company, and not entitled to participate in any of the benefits secured, and intended to be secured, by the mortgage, and perpetually restraining and enjoining the trustees under the mortgage from recognizing, acting upon or obeying the directions of any person or persons as the holder or holders, or by virtue of the possession or claim to ownership of the said bonds, or any of them, and perpetually restraining and enjoining the appellant Richardson from selling, pledging, disposing of or in any way using the said hon.ds, and ordering them to be canceled and appointing a receiver to take into his possession and cancel the said bonds in the mode directed by the judgment, and after such cancellation to return the same to the said appellant Richardson and adjudging costs and allowances against the appellant Richardson.

The plaintiffs allege no title upon which to bring and maintain this action, except that they are holders for value and owners of bonds to the amount of over $250,000, which are part and parcel of the 5,500 bonds executed, certified and secured by the said mortgage of the company; and upon this title they claim to attack the validity of the bonds held and claimed by the appellant Richardson in this action, and to have the same annulled and canceled and to prevent the trustees and the company from recognizing them as valid obligations, and the appellant from asserting them as such in any proceeding under the said mortgage; and as a reason for themselves proceeding by action, they assert that the trustees have declined to take proceedings against the appellant, and that the company, upon application to its president, has declined to take any action to obtain the relief demanded, or any action or proceeding whatever in the premises. There is no averment or proof that the board of directors of the railroad company have been requested to take any proceedings, or have refused so to do, but it is, in substance, alleged that said board of directors are, and have been, under the control of the said appellant and parties in his interest.

It was proved upon the trial that the alleged action to foreclose the mortgage and determine the rights of all parties and claimants therein had been commenced in the Circuit Court of the United States for the district of Michigan by the said trustees before the commencement of this action, and was still pending and undetermined, and that a part of the remedy prayed for in that suit was to obtain an account of the bonds secured by said mortgage, with the amount due on said bonds of principal and interest, and the names of the lawful holders thereof.

Upon this state of facts it is not easy to see upon what principle the plaintiffs as mere naked bondholders, and in that right creditors of the railroad company, can attack the right and title of other bondholders claiming also to be creditors of said company and have the same adjudicated as an independent cause of action in their own Dehalf against the railroad company, the trustees under the mortgage deed, and the creditors. Such an action under the- circumstances, and while the trustees are proceeding in a court of competent jurisdiction, is probably wholly without precedent. But it is not necessary to determine the question of the right of plaintiffs to bring this action, and the effect of the suit pending in the Circuit Court óf Michigan upon that right, because upon other grounds, we think the judgment must be reversed and a new trial granted. Upon which new trial those questions can be more fully and carefully presented and considered, and perhaps upon some additional facts.

The complaint alleges that the plaintiffs are owners and holders for value of upwards of $250,000 of the bonds issued by the company under this mortgage. This allegation was put distinctly in issue by the answer of the appellant. The court below has found that they are the owners of $150,000 of those bonds; and to this finding an exception was duly taken on behalf of the appellant.

It is now insisted that no evidence was given upon the trial to sustain the finding; and this seems to have been the fact. A careful reading of the case has failed to disclose any such evidence, and the points of the learned counsel for the respondent fail to point out any. The question was not raised by the appellant or either of the defendants at the close of the plaintiffs’ case, or at any other time during the trial. The fact of the plaintiffs’ ownership ought, perhaps, to be taken to have been assumed by all parties. The case shows that the appellant’s counsel requested the court to find that the plaintiffs were holders and owners of 160 of the bonds, but not judgment creditors or stockholders,” thus virtually conceding the ownership to that extent. The court refused so to find, and the appellant excepted to the refusal. The precise amount of the bonds owned was not a material fact so far as any right on their part to have the bonds held by the appellant declared canceled is concerned. Under such circumstances it is not necessary to consider whether the failure of proof is sufficient ground for reversing the judgment. The proof will doubtless be readily supplied upon a new trial.

The appellant Richardson, as the case shows, lent and advanced large sums of money to the railroad company, for which 600 of its bonds were pledged and delivered to him as collateral security. Subsequently, upon an adjustment and settlement of accounts between himself and the company, made by the board of directors, it was found that the company was indebted to him in the sum of about $185,000, which sum included a large amount of the indebtedness for which he held the 600 bonds as collateral, and a subsequently accruing indebtedness for which he held no collateral, making the aggregate above stated. Three notes payable on demand were given to bim by tbe railroad company covering tbe full amount of tbe indebtedness.

At that time be still bad in bis possession, beld as collateral to tbe indebtedness first above mentioned, tbe 600 bonds previously delivered. His right to them as collateral security was clearly recognized by tbe resolution of tbe board of directors authorizing the giving of tbe notes. Shortly after tbe notes were given be presented tbe notes and the collaterals then in bis hands, and demanded payment of tbe notes, offering to surrender tbe collaterals upon such payment. Payment was not made, and thereupon be commenced suit in tbe Common Pleas upon tbe said three notes to recover tbe amount thereof against tbe said company. In that action he subsequently sued out an attachment against tbe property of tbe company, and tbe sheriff attached and took into bis possession 2,974 bonds of $1,000 each, belonging to tbe company and then in tbe office of tbe secretary of tbe company, and gave to tbe secretary a receipt for tbe same. These bonds bad never been, in fact, issued by tbe company. Tbe 600 bonds were at that time still in tbe possession of tbe appellant. There is no evidence showing that they were, in fact, attached by tbe sheriff under tbe writ in his bands, and tbe appellant testifies that they were never attached.

Upon this state of facts it is clear, upon authority, that tbe 2,974 bonds which had never been issued were not tbe subject of attachment, nor of sale upon execution. They bad been prepared and made complete in form by due execution for tbe purpose of borrowing money, but until delivered they bad no more validity than tbe undelivered note of an individual made for tbe same purpose. It was settled in Coddington v. Gilbert (17 N. Y., 489) that such bonds, until delivered by tbe company, were not in any sense property, and were not liable to be seized upon attachment or execution. Under this authority it must be beld that tbe sheriff took nothing under tbe attachment of tbe 2,974 bonds, and could carry no title to such bonds to tbe purchaser on tbe sale under tbe execution. In respect of them, therefore (assuming that this action can be maintained by tbe plaintiffs, and that tbe suit in tbe Circuit Court of tbe United States in tbe State of Michigan does not abate or bar this action), tbe legal conclusions of tbe court below in respect to tbe invalidity of these bonds are correct.

But a very different condition of things, both of fact and of law, applies to the 600 bonds. By the delivery of those bonds to the appellant as collateral to the moneys loaned or advanced by him, they had a complete inception, and became valid and effective instruments in which the pledgee had title and property sufficient to enable him to execute the pledge in accordance with its legal purport, under the agreement of the parties. The making and delivery of the notes for the indebtedness, although the notes cover a larger sum than that for which the pledge had been specifically made, did not impair the right of the pledgee. He could still enforce the pledge, certainly to the extent of the indebtedness which it was made to secure; and if it be true that the attachment was not in fact levied upon the bonds as the evidence tends strongly to show, then his lien upon the bonds and his right of possession and disposition continued wholly unaffected by the existence of the suit and the issuing of the attachment.

It appears in the case that these 600 bonds were afterwards sold at the same time and place of sale, of the 2,974 bonds by one Smith, who was an auctioneer and deputy sheriff. On the part of the plaintiff it is claimed that these bonds were sold under the execution issued upon the judgment, and that therefore the lien of the pledge was displaced and the 600 bonds fell into the category of the 2,974 bonds, and became invalid for the reasons that affect the validity of the bonds last named.

On the other hand, it is claimed by the appellant that these bonds continued all the while under the pledge ; that he demanded payment of the sum for which they were pledged, and offered to return the bonds upon such payment being made ; that after the failure to pay he gave notice of the time and place of a sale under the pledge, which time and place were the same as those of the sale of the other bonds under the execution. He claims that he had, the day previous to the sale, made an arrangement with Smith to sell the 600 bonds by virtue of the pledge and independently of the execution; and he testified, in which he was corroborated by Mr. Davenport, that on the day of the sale he carried the bonds himself in a trunk from their place of deposit to the place of sale, and there opened the trunk and took out one of the bonds, delivering it to the auctioneer to be sold under the pledge; that the sale of the 600 bonds was then made by offering fcbe one delivered, with the privilege of one or more, and that he became the purchaser of the whole of the bonds, and immediately took them into his possession as such purchaser. The evidence certainly tends strongly to show that this is a correct statement of the facts, and would clearly have justified the court in so finding. "We think the finding, as made on this subject, was against the weight of evidence.

It was offered, on the part of the appellant, to prove the agreement made between the appellant and Smith prior to the sale in respect of the selling of the 600 bonds. This was excluded by the court, and the appellant was, in substance, confined to what actually transpired at the time of making the sale. The exclusion of this evidence, we think, was clearly erroneous. The agreement, if any was made, between the appellant and the autioneer and deputy sheriff Smith, as to selling the 600 bonds under the pledge, was a part of the res gestee, which the appellant was entitled to prove. It would of course characterize the transaction of sale by the auctioneer, and greatly corroborate the appellant’s testimony, that the same was under the pledge and not under the execution.

The several exceptions taken to the exclusion of this evidence were well taken, and in our judgment, necessarily lead to a reversal of the judgment, for if proof of the arrangement previously made for the sale had been allowed to be given, it might well, upon consideration of the court below, have led to a different conclusion.

The testimony tending to show that the sale was made under the execution rested almost wholly in certain documents found in the office of the ex-sheriff, which were by no means conclusive upon this important question. Neither the sheriff nor any of his officers were called as witnesses, and the deputy sheriff by whom the sale was made being dead, it became important that all legitimate evidence bearing upon the transaction should have been received by the court. For its exclusion of this evidence, there must, as we have airead said, be a new trial.

But it may be very well to express, as a proper subject of consideration, our grave doubts whether if the sale of the 600 bonds were in fact made under the execution, the result of that sale would reduce the bonds to the condition of invalid instruments. Undoubtedly, under the authorities, the levy of them under the attachment, and the sale under the execution with the consent of the appellant, would be a waiver of his lien under the pledge. The rights, if any, that he would acquire to them, would be under the purchase at the execution sale. The bonds having been delivered to him as collateral security for large loans made by him to the company, the act of delivery had made them valid instruments. They were attachable in his hands. For that reason neither the company nor anybody else could assert that they had ceased to be valid because they had been attached or levied upon execution. A party who holds property under a pledge to secure a debt of the pledgor does not destroy the pledge or affect his rights under it by prosecuting his debt to judgment. The pledge still remains the security for the judgment debt, or so much of it as it was originally made to .secure. Nor does the pledge cease to be property by reason of the levy of an execution upon it under the judgment. It still retains its character of property, although in the form of bonds, which it received upon the delivery for value to the pledgee. The bonds in question being valid in the hands of the appellant, and having had a legal inception for value, he was capable of conveying a good title to them to any subsequent bona fide purchaser for value, even though Ms act might, as between himself and the railroad company, amount to a conversion.

It seems to us a non sequitv/r both in law and logic, to hold that a party who holds such valid instruments pledged as collateral, and who has rightfully put the indebtedness for which they are pledged into the form of a judgment, must, if he chooses to waive Ms lien and levy the property on execution, thereby cease to have any rights in it whatever; and still more so, to hold that the act of such levy deprives the bonds of the character of property, and makes them instruments which have had no inception for the want of delivery. None of the authorities cited by thelearned counsel for the respondents seem to us to go the length of producing such results.

We are of opinion that the sale, if made on execution, had the purchase been made by a third party, would have carried a valid title; but having been made by the pledgee himself, it at most still left open for the company or the receiver the question of an election to exercise a right of redemption upon payment of the original amount for which they were pledged. These questions will be entirely open |pr consideration upon tbe new trial, and we think will justly lead to different conclusions in respect at least of the rights attaching to the 600 bonds.

The judgment must, however, be reversed upon the other grounds above assigned, and a new trial ordered, with costs to abide the event.

Beady and Barrett, JJ., concurred.

Judgment reversed, new trial ordered, costs to abide the event.


text:
    THE PEOPLE OF THE STATE OF NEW YORK ex rel. SARAH L. BURNET, Appellants, v. DANIEL JACKSON, Auditor of Accounts, add JOHN KELLY, Comptroller of the City of New York, Respondents.

      College of the Oily of New York — is not subject to the control of the city authorities — the a/uditor or comptroller cannot remew claims allowed by the ti'ustees.

    The College of the City of New York, as organized by chapter 264 of 1866, is a body corporate, with the full powers and privileges of a college conferred by the Revised Statutes, and the trustees thereof are endowed with all the powers conferred upon trustees of colleges by such statutes.
    The college is in no legal sense a department of the city, but is an independent • corporation, not subject to the control, management or visitation of the authorities of the city, except as may be specially provided for and permitted by the legislature.
    The disposition of the fund, authorized to be raised by chapter 471 of 1872, is conferred altogether upon the trustees of the college and the board of education of the city of New York, and no supervisory or inquisitorial control over the same is given to the finance department of the city, nor is it subject to the review or control of the auditor or comptroller.
    In April, 1879, one Burnet, who had been engaged as a teacher in the public schools for more than twenty years, and as a teacher in the College of the City of New York for the previous eleven or twelve, died leaving a widow. Thereafter the board of trustees of the college, at a meeting duly held, adopted a resolution directing that Burnet’s salary be paid from the date of his death to the end of the annual school year, September 1, 1879, to his widow or legal representative. The auditor and comptroller having refused to audit the account or issue a warrant therefor, on the ground that the claim was a mere gratuity or gift and did not constitute a legal claim upon the public treasury.

      Held, that a mandamus should issue to compel them to audit and pay the claim.
    Appeal from an order made at Special Term, denying an application for a mandamus, requiring the auditor to audit and the comptroller to draw his warrant in favor of the relator for the sum of $844, an amount equal to the salary that the relator’s intestate, late teacher in the College of the City of New York, would have received between the day of his death, in April, 1879, and the first day of September, 1879.

      Goudert Brothers, for the appellants.
    The College of the City of New York is not a department of the city, and the comptroller has no discretion to exercise over any payments or accounts, other than those of the various departments of the city, as prescribed by sections 29 to 86 of the charter of 1878. (People ex rel. Kedicm v. Neilson, 5 Thompsom & Cook, 367; New York Bal. Dry Dock Co., v. Mayor, etc., 8 Iiun, 247; People ex rel. Dam/nat v. Comptroller, 77 N. Y., 48; People ex rel. Little v. Kelly and Jackson, determined in this department August, 1878; People ex rel. Murphsj v. Kelly, 76 N. Y., 490.)

      William G. Whitney, for the respondents.
    The application for a mandamus must be denied so far as the comptroller is concerned, since it is conceded that the claim has never been audited by the auditor. (The People v. Bre/nna/n, 18 Abb. Pr., 100.) The trustees of the College of the City of New York had no authority or jurisdiction to audit or allow a claim not legally binding upon the corporation. (1 R. S., 600, § 3 [6th ed., vol. 2, p. 391] ; Hodges v. City of Buffalo, 2 Denio, 110; Halsted v. The Mayor, 3 Comst., 430, 435; Haswell v. The Mayor, MS., Ct. of App., June, 1879.) The allowance of the claim by the trustees of the College of the City of New York, being an excess of jurisdiction, was a nullity, and not binding upon the auditor. (People v. Lamrenee, 6 Hill, 244; People v. Stout, 23 Barb., 349, 354; People v. Homes, 21 How. Pr., 117, 125; see also the MS. opinion, not yet reported, of Judge Yan Hoesen, for the General Term of the Court of Common Pleas, in the case of O’Leary v. The Boa/rd of Edmcaiion, filed April 5, 1880.) '
   Davis, P. J.:

The facts upon, which this application is based are as follows: Edward E. Burnet, late husband of the relator, had been engaged in teaching in the public schools of this State for twenty-four years prior to his decease, and for the last eleven or twelve years as a teacher in the College of the City of New York. As such teacher he was employed at 'an annual salary of $2,375, payable in equal monthly installments. In the month of April, 1879, and while engaged as such teacher, he died, and his salary up to that date has been paid. On the 24th of June, 1879, the executive committee of the college adopted a resolution by which it was resolved that the salary of Mr. Burnet be paid, from the date of his death until September 1,1879, to his widow or legal representative ; and afterwards the board of trustees of the said college, at a meeting duly held, adopted the same resolution; whereupon an account or voucher was made up in due form by the officers of the board of education and the board of trustees of the college, and sent to the finance department for audit by the auditor, and for the issuing of the proper warrant by the comptroller. Those officers refused to audit the same and to issue a warrant therefor, on the ground that the claim represented by the relator is in effect a claim for a gratuity or gift from the public treasury for an amount equal to the salary of her late husband for the period subsequent to the 1st day of September, 1879, and such claim does not constitute a legal claim upon the public treasury. The court below held that the objection of the auditor and comptroller was well taken, and that the city had a right through them to assert the gratuitous character of the claim as a defense.

It is not disputed that the fund authorized to be raised under chapter 471 of the Laws of 1872, had been raised and paid into the city treasury for the use of the trastees under the direction of the board of education as required by law. There can be no doubt that the College of the City of New York, as organized by chapter 264 of the Laws of 1866, is a body corporate with the full powers and privileges of a college, conferred by the Revised Statutes of this State, and that the trustees of the college are endowed with all the powers conferred upon trustees of colleges by such statutes. It is in no legal sense a department of the city of New York, but is an independent corporation not subject to tbe control, management or visitation of the authorities of the city, except as may be specially provided for and permitted by the legislature.

The moneys authorized to be raised for the support of the college became, when so raised and paid into the city treasury, a fund exclusively devoted to such uses and purposes, and the city authorities have no control over the same in any manner to direct or dispose of them. It was held, however (Dannat v. The Mayor, 66 N. Y., 585), that having been paid into the city treasury they cannot be drawn out except with the forms prescribed by section 34 of the charter of 1873, chapter 335, which provides that no moneys shall be drawn out of the treasury except upon the warrant of the comptroller, and that no warrant shall be signed by the comptroller except upon vouchers examined and allowed by the auditor, and filed in the department of finance. These provisions, however, did not change the character of the fund. The money still remains a “ distinct and independent fund,” as was said by this court in The People ex rel. Kedian v. Neilson (5 T. & C., 367), devoted to the support and maintenance of that institution which cannot be rightfully diverted to any other use.” The disposition of that fund is by law conferred altogether upon the trustees of the college and the board of education of the city of New York, and no supervisory or inquisitorial control over the same is given to the finance department of the city. The responsibility for its proper distribution in conformity to law rests altogether upon the trustees of the college and the board of education, who for any abuse of their power or discretion may be prosecuted, or restrained in a proper manner and in a proper forum, but are not subject to be reviewed or controlled by the auditor or comptroller of the city. This question was lately before the court in The People ex rel. Little v. Kelly. In that case the board of excise had audited and allowed a bill in favor of the relator for 100 copies of a printed list of liquor dealers at the sum of $1,386.17, and proper vouchers therefor were presented to the auditor and comptroller for the payment out of the excise funds in the city treasury. Those officers refused to audit and pay the same on the ground that the expense was unnecessary and the amount excessive. It was held that these questions did not belong to the finance department of the city, because the fund in the treasury was subject to the exclusive disposition of the board of excise, and in substance that the auditing and allowing of the claim by that board were conclusive upon the auditor and comptroller. That case is in principle decisive of the one before us. A similar principle was determined by the Court of Appeals in The People ex rel. Murphy v. Kelly (76 N. Y., 490), in which it was held that the comptroller had no power to refuse to take the steps prescribed by the law to raise money for the building of the Brooklyn bridge, on the grounds that in his judgment the bridge was not properly constructed and could not be completed within the sum limited by the legislature.

It is not necessary for us to determine, therefore, whether the trustees of the college and the board of education had power to allow to the widow of the deceased teacher the salary that would have accrued to him for the current year of the school. In their discretion it was thought to be a wise and prudent disposition of the fund, under the peculiar circumstances of the case, in view of his long and faithful services, and the probability that his death had been hastened by his devotion to the duties of his employment. The legislature has seen fit to make them the depositaries of that discretion, and if, in their judgment, the interests of public education would be advanced and encouraged by such an allowance, we have no desire or disposition to condemn or criticise it.

In the view we have taken of the case, the court below should have granted the mandamus.

The order must be reversed and an order entered directing the mandamus to issue.

Bbady and Barrett, JJ., concurred.

Order reversed.