text:
    THADDEUS MUNSON, Appellant, v. MELVIN CURTIS, Respondent.

      Costs — the right to costs is to he determined, hy the statute in force at the time they are tohereeovered— Codeof Civil Procedure, sec. 3070, as amended by chap. 522 of 1885.
    In October, 1883, the plaintiff recovered a judgment in a Justice’s Court for fifty-five dollars and thirty-four cents, besides costs, from which an appeal was taken by the defendant to the County Court, where, in June, 1886, a new trial was had, and a verdict for forty-four dollars and ninety-one cents was rendered in favor of the plaintiff. On July 3, 1885, section 3070 of the Code of Civil Procedure was amended by chapter 522 of that year so as to provide that if neither party, within fifteen days after the service of a notice of appeal, served an offer to allow judgment to be rendered for a specified sum, the party recovering a judgment in the County Court should be entitled to costs.

      Held, that the right of the respective parties to recover costs were to be determined by the section as amended, and that as the plaintiff recovered a judgment, in the County Court, and no offer had been made by either party, he was entitled to costs.
    Appeal by the plaintiff from an order of Ontario County Court, setting aside the taxation of the -plaintiff’s costs and directing the allowance and taxation of the defendant’s costs.

      L. G. Kail, for the appellant.

      Spencer Gooding, for the respondent.
   Bradley, J.:

In October, 1882, this action was commenced in Justices Court, where the plaintiff recovered fifty-five dollars and thirty-four cents, besides costs, from which an appeal was taken by the defendant to the County Court of Ontario county for a new trial, which was had there in June, 1886, and a verdict of forty-four dollars and ninety-one cents rendered for the plaintiff, Both parties presented bills of costs for adjustment and insertion in the judgment to the clerk, who allowed and taxed the plaintiff’s costs. On the defendant’s motion for retaxation, the County Court set aside the allowance of the plaintiff’s costs and directed those of the defendant to be taxed and inserted in the judgment. From this order the plaintiff appeals, and the question arises as to the effect of the amendment of section 3070 of the Code of Civil Procedure by Laws of 1885, chapter 522, upon the i-ight to costs in the action. As the recovery in the Justice’s Court was reduced more than ten dollars by that of the County Court, the defendant' would have been entitled to costs under the statute, as it was at the time the appeal was taken to the County Court. The amendment of that section was passed June 13, 1885, and took effect the third day of July following; and! by it the modification was such, that if neither party, within fifteen days after the service of notice of appeal, served an offer to allow judgment, etc., the party recovering in the County Court is entitled to costs.

Before this change of the statute by such amendment, the time to make the offer provided for by it had elapsed, and compliance in that respect for protection in the matter of costs could not be had. It is, therefore, contended by the defendant’s counsel, that the provisions of the amendment of section 3070 are not applicable and do not govern the right to costs in this action ; and that such, right is within the saving purpose of section 3352, which provides that nothing contained in any provision of the Code should render ineffectual cr impair any proceeding in an action taken pursuant to law, or any other lawful act done, or right lawfully accrued or established before the provisions of it take effect, unless the contrary is expressly declared; and that for the purpose of avoiding such result, etc., the statutes in force on the day before such provisions take effect are deemed to remain in force notwithstanding their repeal. The propriety and purpose of the provisions of that section are apparent, and they cannot be construed to embrace the situation presented here. The considerations involved in the saving provisions of that statute, had in view the support of proceedings lawfully taken and rights lawfully accrued or established. The right of review furnished by a statute under which it is taken, is one of the rights saved by the section, but no right to costs had accrued to either party at the time this amendment of the statute was made. The allowance of costs by one party against another to an action is wholly statutory, and is dependent upon the statute existing at the time the right to costs under it accrues. (Supervisors v. Briggs, 3 Denio, 173.) There is no vested right to unrecovered costs, and there is no want of legislative power to impose or deny costs in actions, or t<3 impair the force during their pendency of any statute on the subject of costs.

No question can arise upon the construction and import of this amendment of 1885, furnished by its terms. There is no opportunity to say that the legislative intention was, that its terms should be so qualified as not to apply to appeals then pending. While such may have been a suitable qualification, so as to obviate any prejudice from inability to render all of its provisions available in such cases, that consideration does not go to the question of legislative power, or to the legal effect of the statute, although it might, in giving it construction, if its terms permitted one, which would protect the situation of the parties as it was at the time of the amendment, so as to conform their rights to that furnished by the then existing statute. There was no. legal authority for the defendant to serve an offer before the amendment, and none was furnished by that to him to make the qffer there provided for. As applied to this action the statute required the payment by the defendant of the costs of the plaintiff, if the latter recovered any sum whatever in the County Court. It may seem a hardship to be charged with the consequences of the omission to do that which he is not by the statute permitted 1 o do; but relief from this situation is not found in the construction of the statute. Nor can we adopt the view of the court below that this section, as amended, was not applicable to this case, and, therefore, the- right to costs was dependent upon sections 3228 and 3229, which entitled the defendant to costs because the plaintiffs recovery was less than fifty dollars. And in support of that are cited Snyder v. Hughes (27 Hun, 373) and Quick v. Wixon (Id., 592). So far as they are authority, it was held that when the statute' regulating costs on appeals from Justice’s Court to County Court cannot be applicable to a case presented, the right to costs will be governed by the general provisions of sections 3228 and 3229 That is not this case. During the time of the pendency of this action there has been, continuously, a statute providing for costs of such appeals to the County Court and for the recovery of them. And the intermediate amendment does not defeat its application to this ease, and, therefore, the operation bf sections 3228 and 3229, upon the rights of the parties in this action to costs, is defeated.

The governing statute entitled the plaintiff to costs. This is the view taken by the court in the Fourth Department, in Sheehan v. Buller (24 N. Y. Weekly Dig., 168), which, we think, was correctly decided.

These views require the conclusion that the order should be reversed, and the motion for retaxation denied.

Haight, Angle and Childs, JJ., concurred.

Order reversed, with disbursements of the appeal only, and motion denied. ’ •


source: Caselaw Access Project

author: Bradley, J.:

license: Public Domain

text:
    EDWARD L. THOMAS, Plaintiff, v. THE MONTAUK FIRE INSURANCE COMPANY, Defendant.

      Bight of an insurance company to be subrogated to the rights of a mortgagee to whom it has paid a loss — what satisfaction of the debt by the mortgagee prevents his recover' ing on the policy.

    This action was brought upon a policy of insurance, issued by the defendant, by which it insured “ William Emerson against loss * * * to the amount of six hundred dollars on his frame ice house * * * Loss, if any, payable to E. L. Thomas (the plaintiff), mortgagee, as his interest may appear” There was no undertaking on the part of Emerson, who owned the property, to insure, and the policy was procured and the premium thereunder was paid by Thomas. The property was destroyed bj fire, in October, and on November 17,1874, the mortgagor paid to the plaintiff the interest upon the bond and mortgage, and deeded the property to him, receiving from him the bond and mortgage upon which the plaintiff had indorsed the following receipt: “ Received by deed in full of the within bond and the debt thereby secured, and the same is hereby surrendered and canceled; but the insurance procured and paid for by E. L. Thomas at his expense and for his protection, and any sum he may collect by reason of the same, is not affected by this surrender, but are and remain his property.”

      Held, that the policy was to be treated as a contract with the plaintiff for his indemnity only, with no right in the mortgagor to the benefit of it in case of loss.
    That upon payment of the loss to the mortgagor by the insurance company, it would acquire the right of subrogation pro tanto, and might enforce the mortgage and bond to which it was collateral, to that extent.
    That such right does not rest on contract, but on principles of justice and con- . siderations of equity, which enable a party, who has been required to pay the debt for which another is primarily liable, to become subrogated to the rights and remedies of the creditor.
    That if such right of subrogation on the part of the defendant was defeated by the act of the plaintiff, the latter could not recover in this action.
    That the receipt given by the plaintiff should not be construed as an absolute discharge of the debt, but as an undertaking on the part of the plaintiff not to prosecute the mortgagor, reserving to the plaintiff the right as against the defendant to collect the amount due from it to him upon the policy.
    That as the receipt, as so construed, would not be available as a defense to the mortgagor in an action brought against him by the insurance company, it did not prevent the plaintiff from maintaining this action.

      Connecticut Fire Ins. Co. v. Brie By. Co. (73 N, Y., 399) followed.

      Qumre, as to whether the defendant, in exercising its right of subrogation, might be required to first seek relief against the mortgagor upon the bond.

      Motion by the plaintiff for a new trail, on exceptions taken at the Monroe Circuit, and ordered to be hoard at the General Term in the first instance.
    The action was brought upon a policy of insurance made Septemoer 12, 1884, by the defendant, by its terms insuring for one year “ William Emerson against loss * * * to the amount of six hundred dollars on his frame ice-house. * * * Loss, if any, payable to E. L. Thomas, mortgagee, as his interest may appear.” Emerson had the title. The plaintiff was his mortgagee to the amount of $5,000. No undertaking on tlie part of the mortgagor to insure appears. The plaintiff, on his own account, procured the policy and paid the premium. The property was destroyed by hre October 13, 1884. The plaintiff thereupon commenced an action to foreclose the mortgage, and oil November 17, 1881, the mortgagor paid to the plaintiff the interest upon the bond and mortgage and made to him a deed of the property, and upon the bond the plaintiff indorsed a receipt as follows :
    “ Received by deed, etc., in full of the within bond and the debt • thereby secured, and the same is hereby surrendered and canceled. But the insurance procured and paid for by E. L. Thomas at his expense and for his protection, and any sum he may collect by reason of the same, is not affected by this surrender, but are and remain his property,

      “ Rochester, November 17, 1884.
    “E. L. THOMAS.”
    The plaintiff was nonsuited.

      J. D. Lynn, for the plaintiff.

      B. E. White, for the defendant.
   Bradley, J.:

The questions presented are: First. Did the contract of insurance between the plaintiff and the defendant give to the latter the right of subrogation in the event of loss and payment of it? Second. If it did, was that right defeated by the payment of the bond and mortgage to, and the surrender of them by, the plaintiff as represented by the receipt of the latter?

Although the mortgagor was named as a party insured by the policy, it was in fact taken by the plaintiff, as mortgagee, solely for his own benefit, and the premium was paid by him without any arrangement with the mortgagor that he should be charged with the expense of the insurance. The case is, therefore, distinguished from Grosvenor s. The Atlantic Fire Insurance Company (17 N. Y., 391), and the policy may be treated as a contract with the plaintiff for his indemnity only, with no right in the mortgagor to the benefit of it in case of loss. In such case the rule in this State is that on payment of the loss to the mortgagor by the insurer the latter takes the right of subrogation pro tanto, and may enforce the mortgage and the bond, to which it is collateral, to that extent. (In Matter of Kip, 4 Edw. ch. 86; Ætna Fire Ins. Co. v. Tyler, 16 Wend., 385; Kernochan v. N. Y. B. Fire Ins. Co., 17 N. Y., 428; Excelsior Fire Ins. Co. v. Royal Ins. Co., 55 id., 343, 357; Foster v. Van Reed, 70 id, 19, 24; Ulster Co. Savings Institution v. Leake, 73 id., 161, 164.)

The question presented here did not necessarily arise in those cases, but the doctrine has been repeatedly stated by the courts of this State, and the proposition must be deemed adopted and settled here. The principle upon which the rule is founded is not very clearly defined by the cases. It is, however, put upon the ground analogous to that arising out of the relation of principal and surety. In Carpenter v. The Providence Washington Insurance Company (16 Peters, 501) Story, J., says that “where the mortgagee insures solely on his own account, it is but an insurance of his debt,” and and upon payment of the loss “ the underwriters are entitled to an assignment of the debt from the mortgagee, and may recover the same amount from the mortgagor, either at law or in equity, according to circumstances, for the payment of the insurance by the underwriters does not in such case discharge the mortgagor from the debt, but only changes the creditor.” To say in such case that the insurance is of the debt, is evidently not an accurate expression. The insurance is of the mortgagee’s interest in the property, and of the security for the debt rather than the debt itself, and is taken for his indemnity in that respect. And the liability of the insurer arises upon any loss of the property bj fire, without reference to the question, whether or not the remaining security i-s adequate for the payment of the mortgage debt.

The remedy over by way of subrogation is given because the insurer has been required by its contract to pay the loss, which, as between it and the mortgagee, operates to discharge pro tanto the debt without affecting the liability of the mortgagor or the force of the mortgage given to secure it.

The adoption of this proposition makes the way to the right of subrogation, as the- consequence, clear. Such right does not rest in contract, but on principles of justice and considerations of equity, which enable a party who has been required to pay the debt, for which another is primarily liable, to become subrogated to the rights and remedies of the creditor. (Gans v. Theime, 93 N. Y., 225.) It will not be questioned that when a mortgagee, solely on his own account and at his own expense, procures an insurance of his interest, the contract is wholly between him and the insurer, and that the mortgagor is not entitled to the benefit of any liability incurred or payment made by the insurer on the contract of insurance. But whether the underwriter, without the aid of a provision to that effect in the policy or contract, can, on payment, take any benefit of the security by means of subrogation to the remedy of the mortgagee, has been questioned by some judicial authority and text writers. And in that respect,, the courts of Massachusetts are not in harmony with those of this State. (King v. State Mut. Fire Ins. Co., 7 Cush., 1; Suffolk Fire Ins. Co., v. Boyden, 9 Allen, 123.) In the view taken of the contract of insurance, the mortgagor had no beneficial relation to it, and on payment by the defendant of the loss, it would have the right of subrogation. It follows that if such right was defeated by the act of the plaintiff, he cannot • recover. The transaction between him and the mortgagor, as represented by the receipt of the plaintiff, was that the interest on the debt, and the deed of thé property were received in full of the “ bond and the debt thereby secured,” and that it was surrendered up and canceled. The question arises upon the construction and effect of this provision of the instrument in connection with the following, which adds: “ But the insurance procui’ed and paid for by E. L. Thomas, at his expense and for his own protection, and any sum he may collect by reason of the same, is not affected by this surrender, but are and remain his property.” This paper was signed by the plaintiff and delivered with the bond to the mortgagor. And if it may be construed as a release of the latter, with the reservation of the right to proceed against the defendant upon the policy, the instrument may be treated as an undertaking of the plaintiff not to prosecute the mortgagor. (Price v. Barker, 4 E. & B., 760; Couch v. Mills, 21 Wend., 424; Matthews v. Chicopee Mfg. Co., 3 Rob, 711; Green v. Wynn, L. R., 4 Ch. App., 204; affirming S. C., L. R., 7 Eq., 28; Hubbell v. Carpenter, 5 N. Y., 171.) If, however, the mortgage debt was fully paid by the mortgagor, that rule cannot apply, and the remedy over by way of subrogation is gone, and with it the plaintiffs’ right of' action against the defendant is defeated.

The provision that the insurance is not affected by the surrender of the bond, in the manner that it was done, is not consistent with that declaring a receipt in full of it. And when the intent of the parties is sought for in the instrument and the surrounding circumstances, so far as they furnish any aid in that respect, if it may be seen that the purpose was to enable or permit the plaintiff to proceed to collect his loss from the defendant, which cquld not be accomplished if payment in full was made by the mortgagor to the plaintiff, but to treat it as in full, subject to the right of the plaintiff reserved, furnished by the policy, to collect of the defendant an amount on account of the loss by fire, the several provisions of the receipt or release were consistent and may be harmonized. And if such purpose appears from the paper and attending circumstances, the mortgagor may not be permitted to make the release effectual as a defense to an action by the defendant to enforce its right of subrogation.

In Connecticut Fire Insurance Company v. Erie Railway Company (73 N. Y., 399, reversing S. C., 10 Hun, 59), the defendant had become liable to the owner of property insured by the plaintiff, for loss by fire occasioned by the negligence of the railway company, with which the insured made a settlement, reduced to writing, which purported to be “in full of all claims, demands and causes of action” against the railway company for $2,100 received; but a clause was inserted that it was not intended to discharge the insurance company from any claim, which the insured had against it for insurance, “ but as a full settlement with and discharge of the Erie Railway Company only.” The court there held that, in view of the circumstances, the instrument of settlement should be so construed as to give effect to tlie reservation, and preserve the claim of the insured against the insurance company, and render the settlement with the railway company subject to such right.

It is difficult to distinguish, in rule of construction and effect applicable, the case at bar from that one. Here the amount of the bond and mortgage, exclusive of interest, appears to have been $5,000.

The only evidence of value of the premises, at the time of the conveyance to the plaintiff, tended to prove them worth $1,200. This (if such was their value) was very much less than the debt secured by the bond and mortgage. This fact is a mere circumstance, not excluded from consideration in the construction of the release, on the question of the intent of the parties, and whether the purpose was, that the interest paid and the conveyance made should pay and discharge in full the mortgage debt. If such were the intent of the parties, it is not apparent why they provided hy the terms of . the instrument that the receipt and surrender, and their purpose as there expressed, should not affect the insurance in question taken by the plaintiff, unless it was by reason of the form of the undertaking of insurance in the policy, and that, notwithstanding which, and the release, they understood the plaintiff was entitled to collect of the company.

We think the doctrine established in Connecticut Fire Insurance Company v. Erie Railway Company requires the conclusion that the exception to the direction of nonsuit was well taken. If this view is correct, tliere is no question of surrender of the bond and mortgage, or of merger by the conveyance in the way of the exercise of the right of subrogation. Such right has relation to the situation of the security held by the mortgagee at the time of the loss for which recovery is sought. What advantage the plaintiff will finally realize by a recovery in this action, is not the subject of inquiry here, as it is not now necessary to determine whether, in the exercise of the right of subrogation, the defendant may be required to first seek relief upon the bond against the mortgagor.

The motion for a new trial should be granted, costs to abide the event.

Barker and Haight, JJ., concurred; Smith, P. J., not voting.

Motion for new trial granted, costs to abide event.


author: Bradley J.:

text:
    EGBERT DENTON Appellant, v. CHARLES A. MERRILL, Respondent.

      General assignment by a firm, — liability of the firm for moneys belonging to the county wrongfully received and used in its business by one partner — when statements made in the schedule prepared by the assignee do not establish the intent of the assignor in making the assignment.

    This action was brought by the plaintiff to recover for the conversion of a quantity of personal property, to which he claimed title under a general assignment for the benefit of creditors made by the firm of Porter & Sperry. It was defended by the sheriff, who had seized the goods under executions issued upon judgments recovered against the firm, upon the ground that the assignment was rendered void as to the creditors of the firm, on account of a preference expressed in it, as follows:
    “To pay to the board of supervisors of Chautauqua county, New York, all sums and indebtedness due Chautauqua county by the said firm of Porter & Sperry, and to pay. the said board of supervisors all indebtedness due for moneys had of Orrin Sperry, treasurer of Chautauqua county, and to pay to the said board of supervisors all debts and liabilities which the firm of Porter & Sperry owe or have incurred to Orrin Sperry, treasurer of Chautauqua county, and to pay said board of supervisors all moneys had by them and used by them, which moneys belonged to Chautauqua county.”
    The defendant claimed that there was no existing indebtedness or liability of the firm to the said county or its county treasurer.
    Upon the trial it appeared that the firm consisted of Marshall Porter and Edwin T. Sperry; that Porter owned half of the stock on hand, and that Sperry, who had no capital, had borrowed money with which to purchase the other half from a retiring partner. Edwin T. Sperry acted as deputy or clerk for his father Orrin, who had been for several years county treasurer. The moneys belonging to the county, received by the county treasurer, were deposited by Edwin in his own name, and were, from time to time, drawn from this account and deposited in the firm account, from which they were drawn and used in the business of the firm by Sperry, and also by a clerk of the firm, who was authorized to and did draw checks upon the firm account, and also upon Sperry’s individual account, in which the moneys belonging to the county were deposited. The moneys so drawn from Sperry’s account were usually credited to him on the books of the firm. The clerk also signed the name of the firm to two notes, made payable after date to E T. Sperry, and to one note, made payable to the order of Orrin Sperry, for moneys of the treasurer placed in the hank to the credit of the firm, and used for the purposes of its business. In the schedule prepared by the assignee the board of supervisors appeared as creditors for money had by the firm, for sums embracing these notes, respectively stated, and also for the sum of $10,461.21.

      Upon, an appeal from an order denying a motion for a new trial, made after a verdict had been directed in favor of the defendant:

      Held, that the court erred in directing the verdict.
    That, without deciding as to whether the appropriation of the funds which came into the custody of the county treasurer, and the manner in which this was done, created a liability of the firm to the county, either legal or equitable, yet as the assignment itself did not state the amount of the claim to be preferred, and as the evidence showed that for a portion of the funds so taken and used in the business a note of the firm was made payable to the order of Orrin Sperry, who was the county treasurer, the case should have been submitted to the jury, as they might have treated this diversion, appropriation and use of the money as the act of the firm, in which case the assignment would not have been fraudulent as against the creditors of the firm.
    That the statement of the amount of the debt due to the board of supervisors, in the schedule prepared by the assignee, could not be treated as characterizing the intent of the assignor in making the assignment.
    Appeal from order of the Chautauqua Special Term, denying the plaintiff’s motion for a new trial.
    The action was brought to recover for the alleged conversion of a quantity of personal property, consisting of a store of goods in Mayville, N. Y., to which the plaintiff claims title by virtue of an assignment for the benefit of creditors by Marshall Porter and Edwin T. Speny constituting the firm of Porter & Sperry, made by them to him July 23, 1884. The defendant, as sheriff of that county, levied upon and sold the goods by virtue of several executions issued upon judgments recovered against the firm.
    The trial court directed a verdict for the defendent, and from the order denying a new trial this appeal is taken.

      G. 1). Murray, for the appellant.,

      George Gorham, for the respondent.
   Bradley J.:

The ground upon which the defense rests is that the assignment made by Porter & Sperry for the benefit of their creditors to the plaintiff, was fraudulent and void as against the creditors of the assignors, on account of the preference expressed in it as follows : “ To pay to the board of supervisors of Chautauqua county, New York, all sums and indebtedness due Chautauqua county by the said firm of Porter & Sperry, and to pay the said board of supervisors all indebtedness due for moneys had of Orrin Sperry, treasurer of Chautauqua county, and to pay to the said board of supervisors all debts and liabilities which the firm of Porter & Sperry owe or have incurred to Orrin Sperry, treasurer of Chautauqua county, .and to pay said board of supervisors all moneys had by them and used by them, which moneys belonged to Chautauqua county,” and for the alleged reason that there was then no existing indebtedness or liability of the firm of Porter & Sperry to the county of Chautauqua or to the board of supervisors of that county.

In April, 1880, the firm of Porter & Sperry was organized. It succeeded that of Miller & Porter, and purchased the stock of goods on hand of that firm, amounting to $5,393.81. Porter retained in the new firm his interest in the property of the preceding one, which was one-half. This was all the capital he had, and he owed some debts. Sperry had no capital prior to going into the firm, and borrowed the money to purchase the interest he took in it. Ilis father Orrin Sperry for several years had been and then was treasurer of the county of Chautauqua, and the son Edwin T. 'Sperry, acting as his deputy or clerk, had the charge of the business of the treasurer, and on and after the formation, of his firm he had the office and did the business of the treasurer in a room of the store building occupied by the firm. Thereafter and up to near the time of the assignment, moneys which came to the county treasurer as such were used to pay the debts and bills payable of the firm. This use of the money constitutes the claim in view, and claimed to be covered by the preference referred to in the assignment of the firm of Porter & Sperry.

To avoid the inconvenience of requiring the treasurer to sign the 'checks to draw the money from the bank, the funds of the treasurer were there deposited from time to time to the credit of E. T. Sperry, and by his check were transferred to the credit of the firm, •and drawn by it for its purposes, and sometimes the treasurer’s funds were placed in the bank directly to the credit of the firm. Usually when credit was in that manner transferred and furnished to the account of the firm in the bank, the member, E. T. Sperry, ■took credit for it on the books of the firm ; so that in consequence .of its .use of 'Such funds, he appears, by the books, to have become its creditor. The business of placing these funds to the credit of ¡the firm was not all done by E. T. Sperry, personally. The firm liad a confidential cleric and bookkeeper, who also, in the absence of E. T. Sperry (which was a considerable portion of the time), had the charge, for him, of the business of the treasurer. This clerk, by authority derived from E. T. Sperry, took moneys from the treasurer’s funds and placed them to the credit of the firm in the bank. He had authority from him to draw checks in his name, and did: to transfer money in the bank from the account of ,E. T. Sperry to the credit of the firm. He also had authority to draw checks, drafts and notes in the name of the firm, and did so draw checks to pay its bills. He also signed the firm name to a note of date January 4, 1884, for $846.03, payable at thirty days to the order of E. T. Sperry, and one of date March 4, 1884, for $304.59, payable at one day to his order; also a note of date January 22, 1884, for $450 payable at thirty days to the order of Orrin Sperry. The evidence tends to prove that these three notes were drawn and signed by this clerk, for treasurer’s moneys by him placed in the bank to the credit of the firm, and used for the purposes of its business, and that those amounts were not placed to the credit of E. T. Sperry on the books., This clerk had substantially the charge of the bookkee ping of the finp the last two years of its business. The plaintiff, as assignee, caused the schedule to be made, and in the account of creditors represented by it appears, the board of supervisors of Chautauqua county as a creditor for money had by the firm, for sums embracing those three notes respectively stated, and also for the sum of $10,461.21 in addition. The question arises whether this appropriation of the funds which came to the custody of the county treasurer, and the manner which it Avas done, created a liability of the firm to the county in any view which may be taken of it. The relation of the county treasurers to their respective counties, and the consequences of their default are to some extent prescribed by the statute.

Before he enters upon the duties of his office the treasurer is required to give a bond to the supervisors of the county, to be approved by the board, etc. (1 R. S., 369, § 18, amended by Laws 1874, chap. 502.) He is under the supervision of the board of supervisors so far that they may require improvement of the security given by him when, in their judgment, it is deemed expedient for the safety of the fund in his charge (Id.), and he is required to render an account to them annually and such other time as they may direct. (1 R. S., 369, § 23 ) And all losses which may be sustained by his default in respect to moneys received by him of those collected through the means of taxation are chargeable on the county. '(Id., 419, § 5.) As to such money the treasurer is practically the custodian for the county of it, charged with prescribed duties in reference to its disbursement, and his relation and duties have the nature of an agency (Supervisors v. Otis, 62 N. Y., 88; Newman v. Supervisors, 45 id., 676, 636), and the liability to third persons for money improperly levied and collected, which go to the treasurer, is that of the county and not his. (Newman v. Supervisors, supra; Cary v. Curtis, 3 How. [U. S.], 236.) They are, therefore, trust funds which the county, in its corporate capacity, may take such means, through the aid of the courts, as may be necessary for their preservation and proper uses. The person to whom the custody of these funds of the county of Chautauqua, which came to the treasurer, was entrusted, has diverted some of them from their legitimate purpose to the use and business of the firm of which he was a member, and he is liable to account for them to or in behalf of the county in a proper action for such purpose. But .the fact of his liability alone did not permit the firm to give to the claim a preference, to the prejudice of its creditors; and to treat it as a liability of him only, the assignment will be deemed fraudulent and void as against the plaintiff. ( Wilson v. Robertson, 21 N. Y., 587.)

When a member of a firm borrows money and uses it in the business of the partnership, or when he appropriates the money of ■another for that purpose, the presumption goes in behalf of the lender or owner of the fund so used of liability of the firm to him. (Estate of Davis, 5 Whar., 530; 34 Am. Dec., 574: Brown v. Higginbotham, 5 Leigh, 583 ; 27 Am. Dec., 618; Jaques v. Marquand, 6 Cow., 497; Hutchinson v. Smith, 7 Paige, 26, 33 ; Ontario Bank v. Hennessey, 48 N. Y., 545.) But when he borrows the money so used, upon his individual credit, of a person knowing the existence of the firm, and when he lends to his firm trust moneys held by him, without any notice to his copartner that it is such, no undertaking or contract on the part of the firm arises to pay ■the lender of the money or the beneficial owner of the trust fund.

Tliis case presents a peculiar aspect in view of the question presented. The members of the firm have united in an assignment giving preference to a claim arising out of the use of money by the firm in its business, and which was appropriated to such use in violation of law. Assuming that no action at law could have been maintained against the firm to recover the amount of money so diverted by Sperry and used by the firm, the question may arise whether there are any equities in support of the claim.

The form and apparent effect given to transactions which may interrupt proceedings in actions at law, do not necessarily always defeat the application of equitable considerations, and through them the means of relief. It is a rule of equitable cognizance that funds and property impressed with a trust may be pursued until they reach a holder in good faith. (2 Perry on Trusts, § 838 ; In re Le Blanc, 14 Hun, 8 ; Sadler's Appeal, 87 Penn. St., 154.

This rule is less effectual as applied to money than in its appneation to property other than money, for reasons obvious in and essential to business transactions. (Ferris v. Van Vechten, 73 N. Y., 123, People v. M. and M. Bank, 78 id., 269 ; Stephens v. Board of Education, 79 N. Y., 183.)

The evidence permits the inference that the partner Sperry had no funds of his own, and none other than those of the treasurer to his credit in the bank, and consequently those so deposited by him were impressed with the trust, and he had no right to transfer any there, from his account to that of the firm; and the same may be said of the looneys referred to, deposited directly to its credit in the bank. (Pennell v. Deffell, 1 De G. M. and G., 372; Knatchbull v. Hallett, L. R., 13 Ch. Div., 696.) And the mere fact of its deposit to the credit of the firm, did not relieve it from ics character of trust fund, so as to defeat the right to follow and recover it as such. It, or the most of it, was then drawn by one member, or the clerk of the firm, upon its check, with knowledge of its character, in violation of the trust, with which it was imjiressed.

The question whether the firm was a recipient m good faith of the fund in this manner appropriated by it, is a question entitled to some consideration. The member, Sperry, so far as appears, took nothing from the firm on account of this money so used, except credit on its books. This was an apparent, but not a substantial consideration. It was a mere representation bearing upon the state of the accounts, to arise only upon an accounting, which has not been had between the members of the firm. This money has gone into and contributed to produce its property on hand, and property the proceeds of which have been taken by the firm. And that such property and proceeds might not be charged on account of these funds is not entirely clear. (Ferris v. Van Vechten, 13 N. Y., 113.)

We have thus far proceeded without reference to the inquiry whether the member Porter was chargeable with knowledge of the appropriation and use of these public funds in the business of the firm; and on the assumption that he was not, we are not prepared to hold the firm liable for the moneys so used, which were placed to the credit of Sperry on its books, and express no opinion on that question as applied to the assignment; in view of the equitable considerations involved. The relation of the respective members of a firm to it, is that of agency, and for the purposes of remedy against it, each member is chargeable eiviliter with the act of his copartner in the partnership business, and with the knowledge and purpose with which the act is performed; and in this instance the confidential clerk, in like manner, represented the firm when acting within the power with which he was invested by it. When this public money was placed to the credit of the firm, it was impressed with the trust, and the account or credit produced by it was subject to lien for its repayment. The partner Sperry and the clerk of the firm knew this, and that the funds were appropriated in violation of law and of the trust, when they drew upon it the firm checks to pay its bills. By doing this, the owner was deprived of the equitable remedy, which then existed, to reclaim the money from the bank. The intermediate act of transfer to 'the credit of the firm was attended with no consideration which denied to the owner such equitable right, but the defeat of it was consummated by the act of the firm, in thus drawing upon the account so produced. (Chester v. Dickerson, 54 N. Y., 1; Bradner v. Strang, 89 id., 299-306.) However difficult it might be to sustain an action in behalf of the county against the firm upon that state of facts, the inquiry may very properly arise and be entitled to consideration, whether in view of the situation and all the circumstances before adverted to, there were not equities which- legally justified the recognition by the firm of tb'e claim and went in support of tlie preference which the assignment sought to give it.

But without determining or expressing any opinion on that proposition, we proceed to the consideration of the relation of the schedule to the assignment, and its effect upon the provisions of the latter, in view of the distinction which may be made of a portion of the claim from the rest of it. It will be observed that the assignment itself states no amount of the claim in question preferred by it, and that it alone may fairly be construed to cover any liability of the firm, whatever the amount of it may be, on account of the appropriation and use by it of the funds of the county treasurer. It appears that $150 of those funds were taken and used in the firm business, and a note for that amount was made in its name, payable to the order of Orrin Sperry, who was such treasurer.

The evidence tends to prove that this money was taken from the treasurer’s funds by the clerk of the firm, and the note so drawn and made by him in its name, without the knowledge of the treasurer of this act; that the note was not delivered to him, but was placed in the desk as the representative asset of such amount, and that this sum was not placed to the credit of the partner, Sperry, in the company books. The conclusion, therefore, was not required that this was a loan by that partner to the firm, but rather that it was an appropriation of so much of this county fund by the firm to its business, by the consent of one member and through the act of the clerk. The jury were, we think, permitted to treat this diversion, appropriation and use as the act of the firm.

The schedule of creditors,' etc., as made after the assignment, embraces the amount of 'this note and other sums, as those which the board of supervisors are entitled to receive, upon the liability of the assignors, amounting together to upwards of $12,000. The evidence tends to prove that the schedules were made by and under the direction of the assignee, pursuant to the requirement of the statute (Laws 1877, chap. 466, § 3, sub. 5), and not by the assignors.

This schedule may have been competent as evidence, but it was not necessarily a part of the assignment in such sense, as to make the language of the provision of the preference in question express the amount of the sums mentioned in the schedule as the amount necessarily preferred by it as the claim for county funds diverted and used. And, therefore, the validity of the assignment does not, necessarily depend upon the existence of the amount of the firm liability mentioned in such schedule. The act of making an assignment is that of the assignors, and its validity depends upon the intent with which it is done and as of the time it was made. The required schedules, when made by them, reflect upon the act of making the assignment, and may be treated as representing the purpose of its provisions and giving to them a more specific application. (Talcott v. Hess, 31 Hun, 282, 284; Shultz v. Hoagland, 85 N. Y., 464, 468-69.) It is difficult to see how the act of an assignee, subsequent to the assignment, in causing to be made a schedule “in so far as he can,” can ordinarily be treated as characterizing the intent of the assignor in making it; at all events it cannot, as matter of law, be said that the assignee in such case has expressed in the schedule the purpose of the assignor when he executed the assignment, and thus give invalidity to the latter. In Terry v. Butler (43 Barb., 395), the schedule was made by the assignor, and was treated as part of his act in making the assignment and- chai'acterized the latter. That fact distinguishes that case from the one at bar. If these views are correct, the assignment may not be found fraudulent as against the creditors of the firm, if the firm was liable for any amount within the terms of the preference as expressed in the assignment, and that question should have been submitted to the jury. The new trial is granted upon this ground. While there are circumstances that might, with some force, be urged as bearing upon the question, whether the partner had reason to and did believe and understand that the treasurer’s funds were being taken and used in the business of the firm during, or some part of, three and a half years, when they were so appropriated in about forty instances, we do not consider that question or express any opinion upon it, as it is not deemed necessary for the purposes of another trial, when the facts may be more or less varied by the evidence, and permit and exclude inferences which are not supported by the evidence as it now appears in the record.

The question of amount of the claim covered by this preference provision of the assignment is not, -for reasons before given, necessarily involved in this review. If that instrument is sustained as valid, the amount which comes within the preference in behalf of the county may arise upon its execution, when the creditors can be heard in such manner as they may be advised by way of support of their respective claims, and in challenging the amounts of those of other named creditors; and then considerations other than those determined on this review may arise.

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

Haigiit and Angle, JJ., concurred.

Order reversed, and new trial granted costs to abide event. !


text:
    WILLIAM S. LITTLE, Plaintiff, v. JAMES C. FARGO, as President of the Merchants’ Dispatch Transportation Company, Defendant.

      Common carrier — when its liability cannot be limited by a custom not brought to the knowledge of the party dealing with it — when a common carrier may justify its delay in transporting goods, by showing that it was caused by a strike among certain of its employees.

    The defendant, a joint stock association, was, and still is, engaged in the transportation of property, as a common carrier, hy lines of railroad, among which are the New York Central and Hudson River, and the Lake Shore and Michigan Southern Railroads. The office of the defendant at Rochester was, at the time hereafter mentioned, in the freight office of the New York Central and Hudson River Railroad Company, by which company receipts were given to persons there delivering goods for transportation by the defendant company. On April 25,1881, the plaintiff, by his agent, delivered at the freight office for transportation by the defendant to the plaintiff, as consignee, at Corning, in the State of Iowa, five boxes and one bale of trees in good order, and received from the New York Central and Hudson River Railroad Company a receipt to that effect, upon the margin of which were the letters “M. D.,” indicating that they were received for transportation by the defendant company. The trees were shipped April twenty-sixth, and did not reach the place of destination until May twenty-first, when they were dead and worthless.
    Upon the trial of this action, brought by the plaintiff to recover the damages thereby sustained, the defendant claimed that its undertaking, as a common carrier, was qualified by a special agreement by which the plaintiff assumed all risk of injury by delivery and loss that might be occasioned by mob, riot or insurrection, and sought to support this claim by proving the method and course adopted by the company in carrying on its business, which was that the receipts from the railroad company, for goods delivered at the freight depot to be carried by the defendant, were presented by the consignor to the agent of the defendant company, and bills of lading taken from it expressing the contract and limiting the liability of the defendant.

      Reid, that as there was no evidence given which would justify the conclusion that the plaintiff had knowledge or information of such custom, the defendant’s liability was not affected by it.
    That the fact that the receipt of the railroad company did not express the terms of a contract to carry was not important, inasmuch as the defendant received and proceeded to transport the property without any contract other than that which was implied by the said receipt.

      Sheltonv.Merchants’ Dispatch Transportation Company (59 N.Y, 258) distinguished.
    The defendant claimed that it was prevented from transporting the property to the place of destination within the usual time, by riotous and tumultuous assemblages of persons, who by force and violence detained and delayed the transportation without its fault, and that the delivery of the goods was made as soon, and in as good condition, as it was able to make it. The evidence tended to prove that the goods arrived at Englewood, a freight yard near the city of Chicago, on April thirtieth, were taken to the city on May third, and delivered to the connecting carrier-on May sixteenth; that the Lake Shore and Michigan Southern Kailway Company encountered difficulties in moving its trains into and through the city, which were occasioned by a combination of persons, composed of switch-men of that and other railroads and others, to obstruct the movement of the trains; that there was a strike of this class of employees, which commenced on May second and continued until May sixteenth, which quite effectually interrupted the business of the road; that although the company employed other men, and had an adequate force to operate its trains, they were prevented by this organized opposition from proceeding with .the business; that the trouble was mostly within the city, but that it also extended to the Englewood yard.

      Reid, that while the defendant was liable for the failure of the agencies, employed by it to carry the property, to exercise proper care and diligence, yet as the evidence given upon the trial would have authorized the jury to conclude that the company used all reasonable means and effort to move its trains, and that the delay in the time occupied in so doing was without negligence or fault on its part, it was error for the court to refuse to submit the case to the jury and to direct a verdict in favor of the plaintiff.

      Geismer v. Laica Shore and Michigan Southern Sailway Company (102 N. A . 503) reversing; S. C. (34 Hun, 50) followed.
    Motion by the defendant for a new trial on exceptions taken at Monroe Circuit, and ordered to be heard at the General Term in the first instance.

      William 8. Oliver, for the plaintiff.

      Daniel H. McMillan, for the defendant.
   Bradley, J.:

The Merchants’ Dispatch Transportation Company, a joint stock association, of which Fargo was president, was a common carrier, engaged in the transportation of property as such by lines of railroad, amongst which were the New York Central and Hudson River Railroad and the Lake Shore and Michigan Southern Railway. The office of the defendant company at the city of Rochester was, at the time in question, in the freight office of the New York Central and Hudson River Railroad Company, and when goods were delivered there for transportation by the defendant company receipts were given by the railroad company to the consignor.

On the 25th of April, 1881, the plaintiff, by his agent, delivered at the freight office for transportation by the defendant company to the plaintiff, as consignee, at Corning, in the Slate of Iowa, five boxes and one bale of trees, in good order, and received from the New York Central and Hudson River Railroad Company a receipt to that effect, upon the margin of which were the letters “ M. D.,” indicating that they were received for transportation by the defendant company. The trees were .shipped April twenty-sixth, and did not reach the place of destination until the twenty-first of May following, when they were dead and worthless.

The trial court declined to submit any question to the jury, and directed a verdict for the plaintiff for the amount of his loss and interest, and exception was taken. The defendant company admits that the property was delivered to and received by it for transportation from the city of Rochester, New York, j;o Corning, Iowa, and alleges: First. That its undertaking as a common carrier was qualified by a special agreement by which the plaintiff assumed all risk of injury by delay, and loss that might be occasioned by a mob, riot or insurrection. Second. That it was prevented from transporting to the place of destination within the irsual time by riotous and tumultuous assemblage of persons, who by force and violence detained and delayed the transportation without its fault, and that the delivery of the goods at their place of destination was made as soon, and in as good condition as it was able to do it. The usual time occupied in the transportation between those places was eight to ten days.

It is contended on the part of the defendant, that it was relievod from liability by contract between the parties ; and this contention is founded upon the method and course of business of the defendant company, which was that the receipts from the railroad company, for goods delivered at the freight house to be carried by the defendant, were presented by the consignor to the agent of the defendant company and bills of lading taken from it — expressing the contract of the carrier, and that those made in relation to property like that in question released the company from liability arising from its perishable character. At least, the evidence on the part of the defendants tended to prove that such was its method and the effect of its bill of lading! And for the purposes of the question here, we so assume. The plaintiff is not charged with this situation unless he was advised of this course of business and custom of the defendant at the time he shipped this property. The defendant received and undertook to transport, and did carry the goods without delivering to the plaintiff any bill of lading or informing him on that occasion of any qualification of its duty as a carrier. It may be that if he understood that such was the method of the defendant in making its contracts of carriage he would have been chargeable with its legal effect, although he omitted to present the receipt of the railroad company and obtain the bill of lading. It then might be said that he had knowledge that the contract was not implied by the mere acceptance indicated by the receipt of the railroad company. (Shelton v. Merchants Dispatch Transportation Co., 59 N. Y., 258.) But that qnestion may be worthy of discussion. It is not here and we express no opinion, upon it. (Dorr v. N. J. Nav. Co., 11 N. Y. 485.)

Although the plaintiff had on previous occasions shipped goods for carriage by the defendant, and they had been transported by it, he says that he had never received any bill of lading, nor anything other, more or different than the receipt of this railroad company upon the delivery of the goods, and that he never had understood or been advised of any course of business or custom of the defendant which required the presentation of such receipt and the taking of a bill of lading, or that the defendant had any method of making a contract for transportation at Rochester other than that which was implied by the receipt of property for that purpose in the manner that it was done and represented in this instance. And while the agent of the defendant expresses quite confidently that the plaintiff understood this method of the defendant, he founds his statement wholly upon assumption and belief, without the knowledge of any fact or circumstance to support his statement as evidence. There is, therefore, no evidence to justify the conclusion that the plaintiff had knowledge or information of any custou of the defendant in respect tó its contract for transportation, which qualified its common law undertaking as common carrier, and therefore, as applicable to him and the transaction in question, there is no modification of the defendant’s liability as such. (Coffin v. N. Y. C. R. R. Co., 64 Barb., 379; affirmed, 56 N. Y., 632; Nicholas v. N. Y. C. and H. R. R R. Co., 89 id., 370.)

The fact that the receipt taken by the plaintiff of the railroad company, did not express the terms of a contract to carry, does not seem to us important, inasmuch as the defendant received and proceeded to transport the property without any contract other than that which was implied- by the receipt of it for carriage to the place of destination, and when it assumed to do so the undertaking of- the defendant, as carrier, was complete without any further contract. The determination in Shelton v. Merchants' Dispatch Transportation Company (supra) was governed by the fact that the shipper and the carrier had a habitual course of dealing respecting the contracts for transportation, which was properly considered in giving construction to their acts and intention at the time of the delivery and shipment of the goods, and therefore the bill of lading taken by the shipper from the carrier after their shipment, might be treated as the consummation of the understanding of those parties at the time they were delivered to and received by the carrier. This was the ground for its support as the contract, and furnished the reason for the reversal of the court below. (4 J. & S., 527.)

The right of the defendant was to withhold the transportation of the property, and decline to send it forward until the bill of lading was taken, defining and qualifying its duty or liability as carrier, and to promptly so advise the plaintiff or his agent. The fact'that the plaintiff had that year executed with the railroad company a contract having relation to transportation by it for him, qualifying its liability in some respects, we think had no material bearing on any question here; that was made with the company as a principal party, and related solely to transportation by it for the plaintiff. The goods in question were carried by it for the defendant, and the latter was' the only party with which the plaintiff contracted to transport them.

The defendant undertook to carry the property to the place of destination, and assumed, in that respect, the common law duty. And if the delay which occasioned the injury to it was caused by want of due diligence on the part of the defendant, it became liable to the plaintiff. This is the more serious question. The defendant was responsible for the failure to exercise proper care and diligence on the part of the agencies employed by it to cany the property. Their negligence is that of the defendant, and if it was without fault, the plaintiff is not entitled to recover. (Wibert v. N. Y. and E. R. R. Co., 12 N. Y., 245.)

The goods arrived at Englewood, a freight yard near the city of Chicago, on April thirtieth, and were taken to the cily May third and delivered to connecting carrier May sixteenth. The evidence tended to prove that the Lake Shore and Michigan Southern Railway Company encountered difficulty in moving its trains into and through the city, which was occasioned by a combination of persons composed of switchmen of that and other railroads, and others, to obstruct the movement of the trains; that there was a strike of this class of railroad employes, which commenced. on May second and continued until May sixteenth, and they quite effectually, during the continuance of the strike, interrupted the business of the road; that although that company employed other men, and had an adequate force to operate its trains, they were prevented by this organized opposition from proceeding with the business; that the strikers got on to the trains, applied the brakes, stopped them, took out and threw away the coupling pins, thus cutting the trains to pieces; turned switches, and in that manner derailed moving trains; sought, by persuasion and threats, to induce and compel the workmen to quit the service of the company, and by other means sought to obstruct and delay the movement by the company of its trains.

This trouble was mostly within the city, but it also extended to the Englewood yard. And upon the evidence, the conclusion was permitted that the company used all reasonable means and effort to move its trains, and that the delay in the time occupied in so doing was without negligence or fault on its part. So far as this interruption necessarily delayed the delivery of goods to their place of destination, it constituted a legal excuse and defense to the railroad company for any injury to freights occasioned by such delay, although caused largely by the action of the employees of the company who were in the strike. They were not its employees ' while so engaged against the company. (Geismer v. L. S. and M. S. Ry. Co., 102 N. Y., 563.) And the same defense is available to the defendant, so far as the transportation of the property in question was necessarily delayed, aud the loss occasioned by the same cause. The railroads were the known agencies for the transportation by the defendant of the goods. The fact is so alleged and admitted by the pleadings; and the undertaking of the defendant to carry them was so qualified as not to embrace liability for the consequences of necessary delays in transit by the railroad companies. To constitute such delay an excuse it must be without fault or negligence of the carrier, and such as could not, by the exercise of reasonable care and diligence, have been avoided. It is contended, on the part of the plaintiff, that there was no necessary occasion for any material delay in transferring aud forwarding the property in question, because the connecting line for it was the Chicago, Burlington and Quincy Railroad, and the transfer to it could properly be made at Englewood, and that there was no occasion to take it into the city of Chicago or to subject it to the delay occasioned by the obstructing forces there.

The plaintiff’s agent says that the trees were destined for the Chicago, Burlington and Quincy Railroad for carriage beyond Chicago; that about May twelfth he found them on the platform of the freight depot of the Lake Shore and Michigan Southern Railway, in Chicago; that there was then no appearance of violence or strike, and that the trees had to be taken back to Englewood to be sent west to their destination. These facts are entitled to consideration, and it may be, by the use of the proper diligence which the company was required to exercise, that the plaintiff’s property may have been transferred and sent forward in time to have obviated the loss sustained, and a finding to that effect would have been supported by the evidence; but, in viewof all the circumstances, there was a question of fact for the jury. The evidence tends to prove that the strike of the switchmen was general, of all the railroads coming into the city; that it extended, to some extent, to Englewood. This property was in a freight car upon the Lake Shore and Michigan Southern Railway. Iiow it was situated, in reference to other property, (if any) in the same car, or the location of the car in the train of which it was a part, does not appear. It does appear that there were several trains collected at the Englewood yard, and there is some evidence tending to prove that the company was diligently making an effort to reach its connecting lines; and whether the company failed, with reasonable diligence, to avail itself of all the facilities and the best opportunities under all circumstances, cannot be determined as matter of law upon the evidence and inferences derivable from it. This, and the whole question of diligence and negligence, so far as it has relation to the transportation of the plaintiff’s property, was properly a question for the consideration of the jury. ft may be that if the trial court had been advised of the opinion of the Court of Appeals m the Qeismer case, resulting in reversal of the decision of this court (34 Hun, 50), delivered only a few days before the trial of this action, the case might have been sent to the jury, upon the question referred to, as one of fact for them to determine.

The motion for a new trial should be granted, costs to abide the event.

Haight and Lewis, JJ., concurred.

Motion for new trial granted, costs to abide event.


author: Barker, J.:

text:
    THE NATIONAL EXCHANGE BANK OF AUBURN, Plaintiff, v. JOHN VENEMAN. Impleaded with other Defendants.

      Negotiable paper — right of the maker to defend an action, brought by a bona fide purchaser for value before maturity, upon the ground that he was induced to sign the paper by false representations as to its cha/racter — the burden of proving this, and his freedom from laches, rests upon him.

    Where a party is induced to sign a negotiable instrument, by fraud, artifice or deception practiced upon him by another as to the nature of the instrument, and the maker signs, the same innocently and under the belief that it is a contract of a different character, there can be no recovery upon the bill or note although the holder may be an innocent purchaser for value before maturity, unless the.maker was guilty of laches or carelessness in omitting to read the same, or by some other means ascertaining the true nature and import of the instrument.
    If, however, the maker was guilty of laches or negligence in this respect he will be liable to a bona fide holder for value, who purchased the note before maturity.
    Where the plaintiff is a bona fide purchaser before maturity for value, the burden of proof is cast upon the defendant, to show that he was induced to sign the note by false and deceptive representations, and that he was free from laches or negligence on his part.
    The testimony given upon the trial of this case was considered by the General Term, and held to be sufficient to justify the court below in denying the request of the plaintiff’s counsel to direct a verdict in its favor upon the ground that upon the. undisputed facts the defendant was guilty of laches and carelessness in signing the note upon which the action was brought, without ascertaining its nature and import, and that as the plaintiff purchased the same before its maturity; in good faith and for a valuable consideration it was entitled to a verdict for the amount of the note as matter of law.

      The National JBxchange Bank of Auburn v. Ogden (81 Hun, 452) distinguished.
    Motion by plaintiff for a new trial founded upon exceptions ordered by the trial court to be heard at the General Term in the first instance. The cause was tried at the Chautauqua Circuit, and a general verdict rendered for the defendant, of no cause of action.

      John D. Teller, for the plaintiff.

      Walter L. Sessions, for the defendants.
   Barker, J.:

This action is founded upon a negotiable promissory note made by the defendant Yenemans for the sum of $220, payable to his own order, and by him delivered to a person with whom he liad a business transaction on the day the note bears date. Before its maturity the plaintiff became a bona fide purchaser thereof for value. The maker interposed the defense that at the time he signed the note he understood and believed that it was a contract of a different import, not a note; that he was induced to sign and deliver the same by the false and fraudulent representations of the person to whom it was delivered as to its true nature and contents.

Upon the trial he also contended that, in view of all the attending facts and circumstances, he was free from the imputation of laches and carelessness in relying upon the person to whom it was delivered as to the real character of the instrument. At the close of the evidence the plaintiff requested the court to direct a verdict in its favor upon the ground that upon the undisputed facts the defendant was guilty of laches and carelessness in signing the note without ascertaining its nature and import, and as the plaintiff purchased the same before its maturity, in good faith and for a valuable consideration, it was entitled to a verdict for the amount of the note as matter of law. This request was denied by the court, and the plaintiff took an exception to the ruling, and this presents the only ■question for our consideration.

Most of the evidence bearing on the question of the defendant’s negligence was given by himself, as a witness in his own behalf. If the jury believed his statements they were justified in finding, as facts that several days before the note was signed the defendant had negotiations with two persons at his own house, both of whom were strangers to him, which resulted in the execution and delivery of two separate instruments in writing, both of which were given in evidence. By the terms of one of them the defendant was appointed the agent of the “ Port Huron Iron Works,” located at Port Huron, Michigan, with authority to sell, in the township in which the defendant resided, cornsliellers manufactured by that company. By the terms of the other agreement, signed by the defendant and one J. Perry, who claimed to be the agent of the said company, the company agreed that the defendant might return, after four months’ experiment in making sales, all machines which were not sold which he had received from the company.

Before any of the machines were delivered to the defendant, and on the day the note was given, another person, also a stranger to the defendant, called at his house and stated to him in substance that he was the agent of the manufacturing company, and that there was then at the railroad depot, located some few miles from the defendants residence, twenty cornshellers, which had been consigned to him in pursuance of the previous arrangement, and that he desired the defendant to sign a memorandum or contract, as evidence to be shown to the company that the defendant had received cornshellers shipped to'him, and that he was pecuniarily responsible for the same.

It does not appear from the case that this person disclosed his name, or that the defendant made any inquiries as to his authority to represent the manufacturing company; nor does it appear that there was not a manufacturing company known by the name of the Port Huron Iron "Works, engaged in the manufacture of cornshellers at Port Huron. But the jury were justified in reaching the conclusion that the defendant negotiated with the persons first named in good faith, supposing that he was making a valid contract with a responsible party, intending, on his part to carry out the agreement, and also believed that one or more machines would be sent to him -for the purpose of being sold as agreed upon in the written instrument. The last named person came to the defendant’s house in company with a young man some seventeen years of age, who was then also a stranger to the defendant; but, upon the trial, it appeared that he was a servant of the liveryman who had been engaged to carry the stranger from the depot to the defendant’s house. Before the note was signed the defendant stated that he had fears that the paper which he was asked to execute might turn out to be a note, and thereupon the stranger assured him that it was not, and was nothing but a contract of the nature already stated. The driver remained in charge of the horse and so near to the parties that he might have heard their conversation, and the note was signed and delivered in his presence. The note was partly written and partly printed, and the defendant did not request the "boy in charge of the horse to read the same to him. The defendant is a German, by birth and a farmer. Neither he nor his wife could at that time read English, written or printed, and his nearest neighbor lived about half a mile distant. Before signing the paper the defendant consulted his wife as to its contents, and she informed him that she was unable to read it, and did not understand its meaning. It was not disputed upon the trial but that the signature of the defendant to the note was procured by gross fraud and imposition, perpetrated by the person to whom he delivered it, and that the latter was acting in concert with the persons with whom the defendant had the first negotiations.

The jury were also justified in reaching the conclusion that when the defendant signed the note he "believed it was a paper of a different character, and did not contain a promise to pay money to any one unconditionally. The defendant admitted that he intended to execute an instrument which would contain a promise on his part of some hind, and that the form of the same and the extent of his liability was to be ascertained and measured by the writing itself. The general rule of law applicable to the case is that where a party is induced to sign a negotiable instrument by reason of fraud, artifice or deception practiced upon him by another, as to the nature of the instrument, and the maker signs the same innocently and under the belief that it is a contract of a different character, then there can be no recovery upon the bill or note, although the holder may be an innocent purchaser for value before maturity, unless the maker was guilty of laches or carelessness in omitting to read the same, or by some other means ascertaining the true nature and import of the instrument. If, however, the maker was guilty of laches or negligence in this respect, he will be liable to a bona fide holder for value, who purchased the note before maturity. (Dan. on Neg. Inst., § 850; Chapman v. Rose, 56 N. Y., 137; Foster v. MacKinnon, 38 Law Jour. [N. S.], 310; Citizens' Nat. Bank v. Smith, 55 N. H., 593; Penn. R. R. Co. v. Shay, 82 Pa., 202 ; Big. on Bills and Notes, 583.

In his charge to the jury, the learned judge stated the law appli. cable to the case, in conformity to both of the propositions. Neither party excepted to these instructions. The plaintiff’s counsel now concedes their accuracy as general legal propositions. His contention now is that, upon the undisputed facts, the plaintiff was entitled to a verdict, and that it was error not to direct a finding in the plaintiff’s favor, as requested on the trial.

As the plaintiff was a Iona fide purchaser for value before maturity the burden of proof was cast upon the defendant to show that lie had been induced to sign the note by false and deceptive representations, and that he was free from laches or negligence on his part. We think a case was made for the consideration of the jury, and that the question of the defendant’s negligence was properly submitted to them for their determination. As the maker could not read the English language he was obliged to rely upon the representations made by the other party, or consult and ascertain its contents from some third person. His wife, who was present, could give him no information as she was unable to read the paper. It cannot be said, as we think, that it was negligence per se not to seek his neighbors and learn from them the contents of the writing. The subject matter of the negotiations was not of great importance, and the terms of the agreement assented to by the defendant were plain and could be readily and accurately expressed in writing by any person who could write and was accustomed to business. The nature and character of the paper intended to be executed must always be considered in determining the question of the defendant’s negligence, so far as it is based on the omission to inquire of others for the purpose of ascertaining from them the contents of the writing. If a farmer, who could not read, should sell and deliver to a mill a load of grain and receive pay therefor, and should then be requested to sign a voucher in the miller’s counting room, and should sign a paper prepared for that purpose and it turned out to be a negotiable instrument;, could it be said that the farmer was guilty of negligence, as matter of law, because he did not seek some third person for the purpose of ascertaining the import of the writing ? The case supposed is not like the one before us in all respects, but it has been stated for the purpose of illustrating that the question of negligence is not always one of law and often becomes a question of fact for the consideration of a jury.

The neglect to exhibit the paper to the boy in charge of the horse for the purpose of ascertaining from him its contents presents a more serious question. Because this was not done the plaintiff bases his whole argument, that the defendant was guilty of negligence as matter of law. The evidence tended to show that this young man was the apparent companion or servant of the party with whom the' defendant was transacting the business; and were it not for that cir. cumstance we should be of the decided opinion that it was the duty of the defendant to consult him as to the contents of the paper. A statement had been made to the defendant, in the presence of the boy, as to the contents of the paper, and the defendant had no good reason for supposing, if a fraud was contemplated, that the boy could be used as a means of exposing it. The lad was then a stranger to the defendant, and the defendant had some reason for believing that these persons visited him for a common purpose. Within the rule, as laid down by the leading authorities, we are of the opinion that the defendant made a case which required the court to submit it to the jury, and it was for them to say whether he had executed himself in placing the confidence which he did in the other party to the transaction as to the contents of the instrument.

As the exception to the refusal to direct a verlict in the plaintiff’s favor was ordered to be heard here in the first instance, we have no power on this motion to determine whether the verdict is against the weight of evidence. On the former trial of this case there was a verdict for the defendant, which this court set aside, for the reason that it then appeared by the case that the wife of the defendant could read English, and that he did not consult with her for the purpose of ascertaining the contents of the paper, and that the omission to do so was negligence per se.

The plaintiff cites us to our decision in the case of this Plaintiff v. Ogden (31 Hun, 452) as an authority in support of his argument that the exception was ■ well taken. In that case it was held that the defendant therein, the maker of a note, was guilty of negligence in omitting to consult the members of his own family, who could read and were present at the time of its execution.

In sustaining the ruling of the trial judge in submitting the question of negligence to the jury, we do not intend to depart from the rules of law stated in our opinion in that case.

The plaintiff’s motion for a new trial is denied, and judgment ordered for the defendant on the verdict.

Smith, P. J., and Bradley, J., concurred ; Haight not sitting.

Motion for a new trial denied, and judgment ordered for defendant on the verdict.


text:
    REUBEN BRINKER, Respondent, v. HENRY B. LOOMIS, as Executor, etc., of LESTER CRANE, Deceased, Appellant.

      Costs — when allowed against an executor— Code of Civil Procedure, secs, 1885,1836.
    After the defendant had duly qualified and while he was acting as the executor of one Lester Crane, deceased, the plaintiff presented to him a claim, duly verified, for services rendered to the testator. The defendant having rejected the claim and refused to refer the same, the plaintiff brought this action, in which he recovered a verdict for $333.55. No notice was ever published by the executor requiring creditors to present their claims.

      Held, that the plaintiff was entitled .to costs as a matter of right.

      Field v. Field (77 N. Y„ 394) followed.
    Appeal from an order of the Chautauqua county Special Term allowing costs to be taxed, in the plaintiff’s favor; against the defendant as executor of the last will and testament of Lester Crane, deceased.

      Sessions & Palmer, for the appellant.

      Bootey, Fowler & WeeJcs, for the respondent.
   Barker, J.:

The executor never advertised for the presentation of claims against the estate of the testator. Thé plaintiff presents his claim duly verified, to the executor in April, 1884, who rejected th'esame and refused to refer as provided by statute. Thereafter this action was commenced, and the plaintiff recovered a verdict for $232.55r and upon these facts the special Term awarded costs against the defendant as executor. The application for costs was resisted upon the sole ground that a case was not made for their allowance within the provisions of sections 1835 and 1836 of the Code.

As the claim was not presented “ within the time limited by a notice published, as prescribed by law, requiring creditors to' present their claims ” as provided by those sections the case of Field v. Field (77 N. Y., 294) is in point and sustains the ruling of the Special Term allowing costs to the plaintiff. In that case, as in this, the claim was presented to the executor for allowance before the publication of any notice and the same was rejected accompanied with a refusal to refer. .After such disallowance the executor did publish a notice, and the claim was not again presented by the claimant within the time limited by a notice published as then prescribed by law. The last circumstance does not exist in the case now here. It was held in that case, that the plaintiff having recovered a verdict on his claim was entitled to costs; that a claim may be presented to the exector at any time after he has duly qualified, and that there is nothing in the statute requiring that such presentation shall be made, followed by a refusal to refer, during the publication of the notice to creditors, to entitle the plaintiff to costs in case he succeeds in an action based thereon. The notice is for the protection of the executors and the estates which they represent, and there is no absolute obligation to give it at all. In that case the question arose and was decided before the Code went into effect. But we think the sections of the Code contain nothing new on the subject, and that the provisions of the Revised Statutes were simply brought forward and re-enacted, and that sections 1835 and 1836 should receive the same construction as was given to the former statute in Field v. Field (supra). In section 41 (2 Revised Statutes [3d ed], 153) there is a negative provision that no costs shall be recovered in any suit against an executor or administrator, unless it appear that the demand on which the suit was founded, was presented within the time fixed by a notice published as prescribed by law. In sections 1835 and 1836 (Code of Civil. Tro.) is found a like negative proviso, that costs shall not be awarded against an executor, except when it appears that the plaintiff’s demand was presented within a time fixed by a notice as prescribed by law. The language of the old and the new statute is essentially the same and relates to the same subject-matter.

The claim having been duly presented, and the executor refusing to refer the plaintiff was entitled to costs as a matter of course. (Snyder v. Snyder, 26 Hun, 324.)

The order should be affirmed, with ten dollars costs and disbursements.

Smith, P. J. and Bradley, J., concurred; Haight, J., not voting.

Order affirmed, with ten dollars costs and disbursements.


author: Barker, J„°.

text:
    MARY C. LEINEN, Respondent, v. JOHN J. ELTER and Others, Respondents. (THE CITY OF ROCHESTER and JOHN A. DAVIS, its Treasurer, Appellants.)

      Judgment in an action of pa/rtition — persons having a lien on the entire premises are not affected by the judgment unless they are made pa/rties to the action — Code of Civil Procedure, sees. 1588,1539, 1557.
    Upon the hearing of a motion to confirm the report of a referee, appointed to sell certain lands in the city of Rochester which this action was brought to partition, it appeared that certain city taxes and assessments, and certain county taxes assessed against the premises were unpaid, and that the lands had been sold by reason thereof and certificates of sale issued to purchasers. A judgment was entered distributing among the parties the proceeds of the sale, except the sum of $1,800, which was held for further distribution, if not needed, to pay the taxes and assessments, and an order was made referring the matter back to the referee, to take proof of the several claims, taxes and liens against the lands and proceeds of sale, by reason of said tax certificates, and to report the same with his opinion thereon to the court; the plaintiff’s attorney being required to give eight days’ notice of such reference to the said purchasers and to the city of Rochester and the treasurer of Monroe county.
    The parties appeared before the referee, who, after receiving evidence as to the mode and manner of making the several assessments, and as to all the proceedings connected with the same, reported to the court that the taxes were illegal and void. Thereafter the court, upon notice to said purchasers and to the city of Rochester and its treasurer, made an order amending the judgment of distribution and directing the payment of the sum reserved, and declaring that the taxes were null and void and that the same were vacated and set aside, and the city of Rochester was permanently enjoined and restrained from making, executing or delivering to either of the purchasers of the certificates any deed in pursuance of the sale.

      Held, that, as neither the city of Rochester nor its treasurer were parties to the action, the court did not acquire jurisdiction over the subject-matter of the controversy, and that its order should be reversed.
    Appeal by the city of Rochester and its treasurer from the order of the Monroe Special Term, declaring certain general city taxes and assessments, levied and imposed by the common council of the city of Rochester upon a portion of the lands sold under the proceedings had in the above entitled action to be invalid and void, and enjoining and restraining the mayor of said city from executing and delivering any lease to any holder of certificates of sales for said taxes and assessments.
    This action was brought for the partition of certain lands owned by the parties, as tenants in common, part of which were located within the city of Rochester. By the interlocutory judgment the city lots were ordered to be sold, and were sold, and the proceeds brought into court and distributed among the parties, except the sum of $1,800 which was held by the order of the court for future distribution among the parties, if the same was not needed, or some part thereof, to pay tax liens levied on the lots by the city of Rochester. A general tax had been levied upon the property, and an assessment for local improvements had been made which, in the aggregate, amounted to the sum of about $1,400. The premises had been sold for the general tax and bid in at one of the sales by C. C. Seymour, who received a certificate of sale, and at the other sale by W. W. Chapin, who also received a like certificate, and at the county sale by Lyman Johnson. Mrs. Seymour paid to the city treasurer the sum of $482.62, the full amount of her bid. Mr. Johnson paid on his bid $229.48. The assessments for local improvements were unpaid at the time of the sale of the lots under the decree in the partition suit, and the city claimed that the taxes were all valid and were enforceable in the mode and manner pointed out by the city charter. By the city charter taxes properly assessed are a lien upon the premises, and collection may be enforced by a sale of the same. Neither the city of Rochester or its treasurer were made parties to this action. After the interlocutory decree was entered in the partition suit, and also after the premises were sold and the report confirmed, it "was referred to a referee to take proof of the several claims, taxes and liens against the lands and proceeds of sale, by reason of said tax certificates, so held by the purchasers, and to report the same with his opinion thereon to the court, and the plaintiff’s attorney was required to give eight days notice to the said purchasers of such reference, and to the city of Rochester and the treasurer of Monroe county. The parties appeared before the referee and proofs were taken as to the mode and manner of making the several assessments and as to all proceedings connected with the sale, which were reported to the court together with the referee’s opinion. By his report he found that all the taxes were illegal and void and thereupon, on notice to the city of Rochester and. its treasurer, the court made an order amending the final judgment of distribution and directing the payment of the said sum of $1,800 to the parties, and declared that all the taxes were null and void and the same were vacated and set aside and the city of Rochester was permanently enjoined and restrained from making, executing or delivering to either Seymour or Chapin any deed in pursuance of the said sale. From that order the city of Rochester and its treasurer have taken an appeal.

      Ivan Powers, for the city of Rochester and John A. Davis, its treasurer, appellants.

      William PL. Olmsted, for the plaintiff, respondent.

      William H. Shuart, for the infant defendants, respondents.
   Barker, J„°.

The appellants contend that the order appealed from should be reversed for the reason that the Special Term did not acquire jurisdiction over the subject-matter of the controversy. This question may, very properly, be first considered. I am of the opinion that the appellants’ position is entirely correct, and that so much of the order as is appealed from should be reversed without considering the validity of the tales assessed upon the property and claimed by the appellants to be a valid lien thereon. The premises were assessed as an entire parcel, and the taxes levied thereon, if valid, became a lien upon the whole thereof, and was not limited to the respective share or interest of either of the several common owners. If the taxes in dispute are valid, then they are a general lien or incumbrance on the whole of the premises. This is not disputed by the respondents, the parties to the partition suit, and the proceedings under review were instituted by them to relieve the fund from all claims for taxes and assessments set up by the appellants and mentioned in the order. The taxes being general liens or incumbrances, if valid, the question of their invalidity could not be litigated between the owner of the premises and the city of Rochester in the partition suit, without making the latter a party thereto. The lien and - incumbrance, -if valid and not paid, may, t»y appropriate subsequent proceedings instituted by the city, ripen into an ownership of the land, or a right of possession and use thereof, for a long period of years under the provisions of the city charter authorizing a sale of lands for unpaid taxes. The city may become the purchaser on such sale and possesses the power to transfer a certificate of sale, or to sell the premises, if no redemption is made by the owners. If the owners of the premises desired to question the validity of the taxes and have the same declared void in the partition suit, they should have made the city of Rochester a defendant therein. The statutes regulating partition of lands contains an express provision on the subject, which has not been observed in the partition proceedings, and the omission to do so is fatal to the validity of the order. By section 1538 of the Code of Civil Procedure, it is declared who must be made parties in au action for the partition of land, and persons having liens and incumbrances thereon are not included in such requirement. In the next section it is stated who may be made defendants, and the provision includes all persons who may have a lien or interest on the entire property. If they are made parties, then the final judgment must award to the party holding the lien his entire right and interest in the property, or the proceeds thereof, or the court may reserve or leave unaffected his entire right and interest or any portion thereof. The section then concludes with a broad qualification, intended as a full protection to the parties in interest, and is expressed in the following language: “ A person specified in this section, who is not made a party, is not affected by the judgment in the action.” In subsequent sections provision is made relative to making persons parties defendant who may have liens and incumbrances on an undivided share, or interest in the property, and for the ascertainment of the liens of creditors upon the several shares of the several owners. (Secs. 1540, 1557, 1561, 1578.) In another section, 1557, the effect of final judgment in a partition suit is declared, and it is therein expressly stated that a final judgment shall not affect the rights and interests of persons, as reserved in section 1539. By chapter 393 of the Laws of 1883, section 1578 is amended, and it is there provided that a party having any specific lien upon an undivided share or interest at the time of the filing of the notice of the pendency of the action, shall not be affected by the judgment unless he is also made a party thereto. Prior to the Revised Statutes an incumbrancer upon an undivided share of an estate was not a proper party to a suit for the partition of the whole property. The interests were not affected by the partition. The lien attached to the divided share in case of actual partition, and, in case of sale, the purchaser took the land subject to the incumbrance. TJnder the Revised Statutes creditors having specific liens upon an undivided share of the premises sought to be partitioned could be made parties to the proceedings, and persons holding general liens or incumbrances might be brought in by notice, so as to bind them by the sale. (2 R. S., 318, § 10; id., 324, §§ 42, 43; id., 327, § 62; Harwood v. Kirby, 1 Paige, 470 ; Halsted v. Halsted, 55 N. Y., 442.)

In that way the purchaser acquired a perfect title, and a lien upon the fund derived from a sale was substituted for a lien upon the land. The rule as established by the Revised Statutes, enlarging the power of the court in partition cases so as to displace liens upon the property and transferring the same to the fund, has been preserved by the provisions of the Code of Civil Procedure. But general liens upon the entire property, or general or special liens upon individual shares existing at the time of the filing of the notice of the pendency of the suit, cannot be affected by the final judgment unless the parties having the liens are made defendants, thus securing to the lienors their day in court, so that they may protect their interests. I am unable to find any case where it has been held that a general lien upon the whole property, paramount to the rights of the tenants in common, can be cut off or affected unless the person having the lien is made a party. It seems certain that the legislature intended that persons claiming to have advei’se liens may be made parties defendant in a partition suit, at the election of the moving party, and their validity be adjudicated therein. (Sec. 1539.) But as doubts have been entertained upon that question by the higher courts, we do not express any opinion upon the subject, as it is unnecessary for us to do so in disposing of the pending appeal. (Barnard v. Onderdonk, 98 N. Y., 158; Jordan v. Van Epps, 85 id., 427.)

"What may be the views of the respondents’ counsel on the question which we have considered, we are not advised, as in their printed brief they make no reply to the argument of the appellants that the Special Term had no jurisdiction over the subject-matter. We have not looked into the record for the purpose of determining whether the taxes were valid or not, as we have reached the conclusion that if we should concur with the Special Term, that they are void, then the order could not stand, as the court was without jurisdiction to determine that question.

The order of the Special Term, as to the parties who have appealed, is reversed, with ten dollars costs of this appeal and disbursements.

Smith, P. J., Haight and Bradley, JJ., concurred.

Order reversed, as to appellants, with ten dollars costs and disbursements.