author: Lansing, S.

text:
    In the Matter of the Accounting of George B. Smith et al., as Trustees of the Estate of Gorton P. Cozzens, Dec’d.

      (Surrogates Court, Rensselaer County,

      Filed July 20, 1891.)

    1. Trustees—Testamentary—Liability for defaults of co-trustee.
    Under a will, A., H. and S. were named executors and trustees, and duly qualified. A. never took upon himself the active duty as executor and trustee, the entire business being transacted by S. and H. The body of the estate was put in trust for the benefit of testator’s son, and after his death to go to his children. H. died before the accounting, insolvent. It appeared that H. & S. had divided the trust funds or securities between them, S. retaining the greater part. The hooks of the estate were kept by H. The receipts and disbursements made by S. were reported to H. and placed by him on the books. H. made periodical statements to S. Upon H.’s death a deficit of $2,060.67 was found. Held, that A. and S. were not liable for this amount.
    2. Same.
    Trustee H. said to his co-trustee S.: “I will take this $900 of the trust funds and give you my note and a $1,000 Troy & Albia Horse Railroad bond as collateral. After the death of H. it appeared' that the bond had been wrongfully taken by H. from its owner when he transferred it to S. The note was unpaid. The T. & A. H. R. Co. brought an action against A. and S. and recovered the bond. Held, that S. was liable to the estate for the amount of rae note, under the rule that a trustee is liable for the defaults of his co-trustee where he is a consenting party to the waste, or neglects some duty consequent upon his knowledge of misapplication intended or in progress.
    This is an application to settle the accounts of the trustees of the estate of Gorton P. Cozzens, deceased.
    Gorton P. Cozzens died, leaving a will, in which certain persons were named as executors and trustees, of whom Jesse B. Anthony, Theodore B. Haslehurst and George B. Smith qualified. Anthony never took upon himself the active duty as executor and trustee, the entire business being transacted by Smith and Haslehurst. The body of the estate, after the payment of certain debts and legacies, was under the terms of the will put in trust for the benefit of William G. Cozzens, the testator’s only son, who was to receive and use the income during his lifetime, and after his death the fund was to be distrbuted among the children of the said William G. Cozzens, him surviving.
    At the time of the filing of the account herein said William G. had one child, named Annie S., an infant, for whom Seymour Van Santvoord was appointed special guardian and appeared. Theodore B. Haslehurst died before the filing of the petition herein, insolvent. It appears that Haslehurst and Smith had divided the funds or securities between them, Smith retaining the greater portion of the securities and collecting the income from the same. The books of the estate were kept by Haslehurst, who kept thereon the entire receipts and disbursements connected with the estate; those made by Smith were reported to Haslehurst and placed by him on the books. From them Haslehurst made periodical statements of the entire income of the estate to Smith. Smith received, and applied the income for the use and benefit of the said William G. Cozzens.
    Upon this accounting by the two surviving trustees it appears that there is a deficit in the trust fund of $2,060.67, which the surviving trustees claim was money misappropriated without their knowledge by Theodore B. Haslehurst, their deceased co-trustee, and ask that they be credited with the amount of the loss. By their supplemental account they further ask to be credited with the loss of $900 of money likewise misappropriated by their deceased co-trustee, and to be credited also with the sum of $500 costs and expenses incurred in defending the estate against an action brought by the Troy & Albia Horse R. R. Company for the recovery of a bond which the said Haslehurst had wrongfully appropriated to his own use and assigned to his co-trustees as collateral to a note of $900 which he had given to his co-trustees as security for money borrowed by him from the trust fund.
    The special guardian objects to the allowance of the credit of the several items, and insists that the several losses have been occasioned by the negligence of the accounting trustees.

      Merritt & Ryan, for trustees; Seymour Van Santvoord, guardian ad litem, for infant, Annie S. Cozzens.
   Lansing, S.

—We shall consider, first, the propriety of the allowance of the credit of the sum of $2,060.67 upon this accounting. It will be necessary briefly to consider the facts connected with the .alleged loss of the funds, in order to make a proper application of the law. But little, if anything, is known in regard to the actual facts connected with the loss, save what appears in the books kept by the deceased trustee Haslehurst, which were not examined until after his death. From those books it appears that a mortgage upon property in the city of Troy was given by one Golden, for the sum of $2,000, September 10, 1884. That it was paid on the 10th day of September, 1886, in full. The mortgage was satisfied by Haslehurst alone, and the money never came into the hands of the trustee Smith or Anthony, and they had no knowledge of its payment at the time it was paid. On the books kept by Haslehurst the amount due on the mortgage, after it was received, was figured as cash in the hands of Cipperly, Cole & Haslehurst, bankers and brokers, at Troy, N. Y, of which firm Haslehurst was a member. Haslehurst paid interest thereon December 1, 1886, at 4 per cent, and subsequently entered in his book January 1, 1887, that he had a balance on hand belonging to the estate of $3,060, including the $2,000 above stated. This amount he entered on the books as being on special deposit with Cipperly, Cole & Haslehurst ($3,000), and credited interest thereon for four months at 4 per cent. On November 1, 1887, Haslehurst changes again the entry on the book by crediting interest from Cipperly, Cole & Haslehurst on $1,000 at 4 per cent, and on $2,000 for six months at 5 per cent.

It appears from the books that this $2,000 was simply Haslehurst’s individual note, which never has been found, and probably was never made. The proceeds of the Golden mortgage never, so far as it appears, went to the firm of Cipperly, Cole & Haslehurst, but was used by Haslehurst individually, which amount constitutes a part of the shortage of this estate. Haslehurst credits himself with interest on this note up to the last interest day preceding his death. Anthony was never consulted about the Golden mortgage and never knew it was paid, or even of its existence, until he made an examination of the books after the death of Haslehurst.

Smith knew of the existence of the Golden mortgage, but had no knowledge, until after the death of Haslehurst, that it had been paid. The loan appears to have been made by Haslehurst alone. Smith only knew of it, as interest was brought to him purporting to be interest received from the Golden mortgage. .Under these facts the question arises, are Anthony and Smith, or either of them, liable for the loss which has occurred to the trust fund ? In regard to Anthony, we think there is no serious question as to his liability. He appears to have been a consulting trustee only; he had no charge of the funds, no knowledge of the investments; indeed there was a tacit understanding, as he alleges, between himself and the remaining trustees, that they would assume the active care and management of the estate.

In regard to Smith, the case is somewhat different. He knew of the investment and had active charge, in connection with Haslehurst, of the trust, and held a large portion of the securities in his ■own hand, and collected the interest and income from the securities and disbursed the income from the entire estate to and for the benefit of the beneficiary. He was a butcher, actively engaged in his business, unaccustomed to keep books of account save a simple blotter, and relied upon Haslehurst as a skilled accountant and one peculiarly qualified for the purpose of keeping the accounts and transactions of the estate.

Doubtless he had access to the books of the estate kept by Haslehurst, but he did not in fact examine them; it inferentially appears that he would have known but little of them had he examined them, and really the only question, it seems to me, so far as this item is concerned, is : Was be and his co-trustee, or either of them, guilty of negligence in not examining the books of the ■estate kept by Haslehurst or causing them to be examined, to learn, as it has been learned since Haslehurst’s death, and might have been before, that Haslehurst was using the funds of the estate in his own business or the business of the concern of which he was a member?

The general rule in regard to the liability of executors and trustees is well settled. Co-executors and trustees may act either separately or in conjunction. They are jointly liable for joint .acts and each is separately liable for his separate acts and defaults. Bruen v. Gillet, 115 N. Y., 10; 23 N. Y. State Rep., 780; Croft v. Williams, 88 id., 384; Adair v. Brimmer, 74 id., 539.

In Croft v. Williams, Judge Finch, speaking for the court remarks that “ The general rule is, that an executor is responsible for his own acts and not for those of his associates, so that if he receives and misapplies the money, or does any act by which it gets into the hands of the other who diverts or wastes it, and but for which act the latter would not have had it, a liability to make good the loss results." * * * “ If an executor is merely passive and simply does not obstruct the collection or receipt of ■assets, he is not liable for the latter’s waste, but where he knows and assents to such misapplication or negligently suffers his co-executor to receive and waste the estate when he has the means of preventing it by proper care, he becomes liable for the resulting loss." * * * “Mere assent to the executor’s receipt of the funds is not enough." * * * “ Ordinarily in the collection of assets the rights of each are alike and one has not control or supremacy over the other. One, therefore, may sit passive and see the other receive funds of the estate and making no objections, be deemed to assent, but that does not make him responsible for what has been received. He must in some manner know and assent to the misapplication, he must be a consenting party to the waste, or neglect some duty consequent upon his knowledge of the misapplication intended or in progress. A wrong done or duty omitted must lie at the foundation of his liability.”

See also Wilmerding v. McKesson, 103 N. Y., 329; 3 N. Y. State Rep., 108; Ormiston v. Olcott, 84 id., 339.

In applying the rule above laid down to the facts relating to this item, it seems to me that Smith, whose liability is more especially insisted upon, is not guilty of such negligence as renders him responsible for this loss. He certainly had no knowledge of the intended misappropriation or of its progress and had no reason to suspect Mr. Haslehurst’s integrity either from his standing in the community or from his own dealings with him. Neither does the rule, that the knowledge of one co-nxecutor or trustee, must be imputed to the other, laid down in the case of the Troy & Albia R. R. Company v. George B. Smith, ex’r, 33 N. Y. State Rep., 203, apply here; otherwise in every case the actual non-consenting and innocent co-executor would always be bound for the wrongful acts of a recusant executor, because he would always under that rule, have implied knowledge or notice of his co-executors’ defaults intended or in progress.

The serious question is, was knowledge of the facts embraced in the books of the estate kept by Haslehurst, legally imputable to Smith and Anthony or either of them ? We are not disposed to adopt so stringent a rule. There was no suspicion of wrong doing, nothing to put the accounting executors on inquiry ; and under such circumstances it can hardly be said that they were guilty of neglect in not looking into the books kept by the co-executors or inquiring into the condition of the portion of the estate controlled by him, when they had every reason to believe that the duties which had been assumed by their co-executor were being properly performed. We don’t think the case of Earl v. Earl, which holds where executors or administrators who permit a third person to manage and control the estate, and. adopt him as their agent, are held responsible for his conduct and are liable for losses incurred by his improper and negligent management of the affairs of the estate, applies here.

In the case at bar Haslehurst was but performing his own duties as executor in what he did in keeping the books, and the fact that the remaining executors or trustees trusted to his honesty in keeping them correctly and did not inquire into every transaction which was or might have been on his books, does not as a matter of law or fact require the conclusion that they were guilty of negligence, and we shall hold for the purpose of this accounting that the trustees should have credit- for the sum of $2,060.67, lost through the misconduct of their associate trustee without their fault'

The remaining question as to the credit claimed by the executors for the loss of $900 and the costs of a suit respecting the same, presents a far different question. Said $900 was a portion of the funds of the estate which had been received by the said Haslehurst, and also misappropriated by him. The facts in regard to that item are in short as follows: Haslehurst had received the money which belonged to the estate; and to use the language of Mr. Smith, trustee, in his testimony, Haslehurst said: I (Haslehurst) will take that money and give you my note and a Troy & Albia bond as collateral, that is $900. That is the only transaction he consulted me about He said I’ll give you my note and attach a bond of the Troy & Albia Horse Railroad to it as collateral security.

It appeared after the death of Haslehurst that the $1,000 bond attached to the note as collateral had been wrongfully taken by Haslehurst from its owner when he transferred the same to Smith. The note is unpaid by reason of Haslehurst’s insolvency. An action was subsequently brought by the Troy & Albia Horse Railroad Company against the present trustees to recover the bond, and recovery was had, the court holding that the remaining executors or trustees were not bona fide holders of the bond, and that the knowledge of Haslehurst was imputable to them. Troy & Albia H. R. R. Co. v. Smith, supra.

Credit upon account of this loss is claimed upon the ground that Haslehurst, at the time of the acceptance of this note by Smith, his co-executor had the money in his possession, and had the right to its control and use, and that Smith did nothing that caused the loss; and further, that Smith neither put it in Haslehurst’s possession, nor had he the power to deprive him of its possession or control; and that at the time of the alleged loan, he held it as trustee and was entitled to its control without consent of his co-trustee; and beyond that, that the trustee Smith acted in entire good faith in making the loan and accepting the bond of the Troy & Albia Railroad Company, which, it is alleged, was ample security for the loan; and except for the defect in title of the bond of which Smith, it is conceded, had, in fact, no knowledge, the loan would have been amply secured. We are of the opinion that this position is unsound. True, Haslehurst had the funds in his possession, but, for the occasion, he laid aside his character of co-executor or trustee, and went to his co-executor as a borrower. He said in substance: “I need a loan of money for a brief period. I will give you my note and a $1,000 bond of the Troy & Albia H. R. R. Co. as collateral security for the loan.” In my judgment the case would not be different had Haslehurst applied in behalf of a third party engaged in like business to his own, and Smith had consented, under the same circumstances, to have made the loan, and that Haslehurst might turn over the money to him upon his furnishing his note and the bond, or any other of like".character as collateral. Such a transaction would be utterly indefensible in my opinion; and the court of appeals say, in the case of Deobold v. Oppermann, 111 N. Y., 538; 20 N. Y. State Rep., 81, per Ruger, Ch. J.: The employment and use of trust fund by the trustee in his trade or business, or as loans to persons engaged in such business, or the prosecution of commercial or manufacturing enterprises, or speculative adventures, have been" uniformly considered as illegal and as constituting a devastavit of the estate * * * authorizing the removal of the trustee. See, also, Wilmerding v. McKesson, supra.

The rule above cited condemns the knowing employment of a trust fund by the trustee in business enterprises without special consideration of the character or quality of the security taken. In this case it was a loan upon personal security, a promissory note; such a loan requires no citation of authorities for its cohdemnation. The fact that a railroad bond was given as collateral we don’t think changes the character of the transaction; even if a railroad bond might under some circumstances be a justifiable-investment for a trust fund, it does not belong to the class of which the courts approve, and the burden of showing the value and sufficiency of the security is upon the trustee before the question of its acceptance its entitled to the slightest consideration.

The bond of a horse railroad company, secured by a mortgage-upon its tracks, is not such a real estate security as will authorize trustees to invest trust funds thereon. Judd v. Warner, 2 Dem., 104; King v. Talbot, 40 N. Y., 90.

But we prefer to place our disallowance of the credit upon the-ground that the trustee, Smith, distinctly assented to the making of a temporary loan presumptively for business purposes, which brings-the case within the rule that a trustee is liable for the defaults of his co-trustefe, where he is a consenting party to the waste or neglects some duty consequent upon his knowledge of misapplication intended or in progress. Croft v. Williams, supra; see, also, Wilmerding v. McKesson, supra.

It plainly appears that the trustee Smith knew and understood that this loan was made for a temporary purpose to a person engaged in business, and was in fact for business purposes. If he-might consent to the loan of $1,000 to Haslehurst, secured by his note and collaterals of whatever character they were, he might have loaned him the entire estate and placed the trust fund at hazard, not only of the business of Haslehurst, but also of various-other enterprises represented by the collaterals.

Such investment in the language of the court cited, undoubtedly constituted a devastavit that authorizes the prompt removal of the-trustee guilty of the wrongful act. But it is claimed that as Smith did not actually have the fund in his possession, he did not give Haslehurst control of the fund, and so was not guilty of any wrongful act. But he had notice of and consented and participated in the wrongful misappropriation of this fund by Haslehurst, and under all the authorities he would be guilty if he took no steps with such knowledge to prevent the consummation of the intended wrongful act It is no answer to say that if he did not-consent Haslehurst would have probably taken the funds without his consent It is sufficient to say that he did a wrongful act in consenting to an improper investment of the trust fund, and non constat had he refused his consent and insisted upon a proper investment of the fund that it would not have been made. At any rate his refusal would have gone far towards his exoneration, although under the law as it now stands, he would have been authorized to apply to the court for a direction as to the disposition of the fund upon his refusal to accede to his request Wood v. Brown, 34 N. Y., 337; Code of Civ. Pro., § 2602.

The examination of this account has satisfied me that this fund has been managed with great laxity and disregard of the law with respect to its investment. I find from the account that loans have been made not only, to Haslehurst, with the consent of Smith, but Smith has taken loans himself, whether with Haslehurst’s consent or not does not appear, until at the date of this account, January 1, 1890, said loans to Smith have increased to $6,000; in addition, as we understand the account, the trustee holds a note of George B. Smith & Son for $1,500. It is stated in the account that the $6,000 loan has collateral security. Such investment of the fund is unlawful and utterly without excuse and demands the severest condemnation, and I direct that the said trustee (Smith) immediately invest said fund in lawful securities and make a report to me of the investment so made within five days ; in default thereof show cause why he should not be removed from his office.

Let a decree be drawn in pursuance of this opinion.


source: Caselaw Access Project

license: Public Domain

text:
    In the Matter of the Accounting of Silas D. Stark, as Trustee Under the Last Will and Testament of Charles J. Stark; Deceased.

      (Surrogate’s Court, Rensselaer County,

      Filed July 20, 1891.)

    1. Trustee—Testamentary—Care and diligence required of.
    A trustee is not only bound to make prudent investments of the trust funds, but he is still bound to be watchful, keep himself informed as to whether or not a depreciation in the value of the security is taking place from any cause, to see that the interest is paid with reasonable promptness, to keep himself informed of the pecuniary responsibility of the obligor, and, in fine, to keep himself informed and take notice of all those things affecting the investment which a man of fair judgment, care and prudence /ould take and keep in consideration in the matter of a loan of his own moneys.
    2. Trust funds—Investments.
    A mortgage upon a leasehold estate is utterly indefensible as an investment of trust funds.
    This is an application on the part of a person interested in the trust fund in the hands of the testamentary trustee for an order under §§ 2807, 2808 and 2809 of the Code of Civil Procedure, requiring the trustee to show cause why he should not render and settle his accounts.
    Upon the return of the order to show cause the trustee appeared and filed his account, to which objections were filed by the petitioner, and thereupon testimony was taken in regard to the several matters at issue. An account was filed March 4, 1890. Subsequently, and on the application of the testamentary trustee, an additional account was filed June 1, 1891.
    It is conceded that there has been a large shrinkage in the trust fund, amounting of the principal to $1,000 and over, and the claim is made also that there is a large amount of interest for which the trustee has not charged himself in his account
    The loss being conceded, the question is who should bear the loss, the trustee or the trust fund, which involves the further question whether the loss was with or without the fault of the testamentary trustee.

      B. E. Center and William Lord, for petitioner; John H. Peck, for trustee.
   Lansing, S.

—Charles J. Stark, who resided in the town of Schaghticoke in this county, died early in 1881 and on the 20th day of June of that year his will was admitted to probate. By his will he gave to his son Silas D. Stark and his son-in-law Edmund P. Chase, the sum of $6,000 in trust, to invest and reinvest the same upon bond or bonds secured by mortgage or mortgages upon real property and apply the income and profits thereof for the use and support of bis daughter Helen Stark for and during her natural life, and after her decease if she shall leave issue her surviving,, then to her issue. If more than one child, then in equal proportions. If no child survived her then the fund was to be paid to the children of the testator in equal proportions. It further appeared that Silas D. Stark who was the executor, was given a legacy in said will of $5,000 and was also one of the residuary legatees.

On the 30th of J uly, 1883, Silas D. Stark as executor of said will settled his accounts in the surrogate’s court and a decree was entered on the same day which provides as follows : “ That out of the moneys of said estate remaining in his hands, he retain and pay to himself the sum of $5,000 in mortgages secured by real estate or promissory notes or their equivalent. That he retain and pay to himself and said Edmund P. Chase or either, who will accept the trust, the sum of $6,000 as a trust fund to be invested and reinvested as often as may be necessary, in bond or bonds secured by mortgage on real estate and apply the income, interest and profits to the support and maintenance of said Helen Stark for and during the period of her natural life,” etc., as provided in said will.

It appears from the inventory that among the assets of the estate were a number of mortgages, among them the “File mortgage of $2,900, Began mortgage of $600, Cipperly mortgage of $3,500,. Dodds mortgage of $4,400, Wing mortgage, $800.”

On or about the 30th of July, 1883, said Silas D. Stark, as executor, assigned to himself for the purpose of opening the trust account with his sister, Helen Stark, the following securities : Dodds mortgage $4,688, Wing mortgage $816, Barry'note $114 and cash $382, total $6,000. It appears that on the Doddsmortgage there was $4,400 of principal due, that the balance of $288 was interest, $88 being the accumulation from the 1st of April when interest was due up to the 30th of July (four months} and the balance of $200 being interest in arrear from the previous years; that the $16 upon the Wing mortgage, which was counted as principal in this investment, was the interest due since the 1st of April, 1883. The Barry note was $100 of principal and $14 of accrued interest; and it may be stated here that there was no interest paid upon the same for five years thereafter until 1888, when the note was paid to the trustee with interest upon interest in arrears. It appears that at the same time this trust fund was made up, said Silas D. Stark took an assignment to himself in satisfaction of his legacy of $5,000 of the Cipperly mortgage and the File mortgage; that these mortgages were and are of undoubted security, and interest upon them has always been paid promptly, and the said Stark hold them to this day.

Helen Stark, the beneficiary, is of full age, and it was assumed at the hearing in this proceeding before me that she was a person of unsound mind and incompetent for the government of herself or property, although she had not been adjudged a lunatic. She was in court, and I had occasion, at the request of the parties to inquire into her knowledge of affairs and her capacity to transact business, and I found that the admission was fully warranted by the facts. She had an illegitimate child a year or two prior to the institution of these proceedings, who is the Charles J. Stark named as the petitioner herein.

It appears that the Dodds mortgage was upon a farm of about 100 acres situated in the town of Brunswick, about six miles from the city of Troy. Mr. Dodds appears not to have been a successful farmer, and was for some time before the filing of the petition a person of intemperate habits ; how long does not distinctly appear. He had suffered the farm to become dilapidated and the interest upon his mortgage had got in arrear, and there was, as stated above, at the time of the assignment of the mortgage to the trustee (July 30, 1883,) an arrearage of $200 in the interest for the year 1882. On 1st April, 1884, there was due of interest, accrued and current, $464 ($288 and $176 for the balance of the year), upon which the mortgagor only paid the sum of $155 ; the interest upon the principal alone was $264. The year following, April 1,1885, he paid $274; June 3, 1886, $133; April 1, 1887, $146; April 1, 1888, $200; April 1, 1889, $200. The interest for the whole period upon said mortgage, from 1883 up to the time of the filing of the first account, March 1, 1890, was $1,740; the amount paid was $1,108, leaving a balance of $632. It thus appears that the original arrear of. interest of $288- was never paid nor any interest upon that sum which constituted a part of the principal of the trust fund, and that an arrearage of interest was suffered to accumulate until there was on the 1st of April, 1889, $633 due.

In the fall of 1889 said trustees commenced an action for the foreclosure of said mortgage, and judgment was entered therein upon which the same was sold by order of the court. The judgment was for $5,214.01, besides $231 costs of foreclosure. Thus it appears that at the time of the sale there was $814 of interest due upon said mortgage, there having been added to the principal of $4,400 something like $1,041. The property sold at the sale for $370, and was bought by the trustee, as he claims, for the ■purposes of the fund, he being the only bidder thereat.

By a supplemental account filed June 1, 1891, it appears that, the trustee has entered upon the management of the farm and he has paid an arrearage of ground rent of $150.55; also state, county and school tax to the amount of $80, and that he has made certain disbursements for repairs upon the farm and purchased seed and has received certain small amounts as his share of the income of the farm arising from the letting of the same from the 1st of June, 1890. '

The only witnesses who testified upon this accounting were the trustee Silas D. Stark and witnesses called by him for the purpose of proving the value of the farm and the depreciation of the farm lands prior and subsequent to 1883, the time of the investment.

The principal question in this case is as to the propriety of the investment of Silas D. Stark of the trust funds in the Dodds mortgage; in that .connection also whether the trustee exercised a. reasonable degree of diligence in looking after the security after the investment had been made. The rule of responsibility of trustees is that trustees are bound to exercise the same degree of diligence and prudence in the care and management of the trust estate as in general prudent men of discretion and intelligence in such matters employ in their own like affairs. King v. Talcott, 40 N. Y., 76, 85.

It is not by a prudent investment alone that a trustee performs his whole duty in regard to a trust fund. He is still bound to be watchful, keep himself .informed as to whether or not a depreciation in the value of the security is taking place from any cause, to see that the interest is paid with reasonable degree of promptness, to keep himself informed as to the pecuniary responsibility of the obligor, and, in fine, to keep himself informed and take-notice of all those things affecting the investment, which a man of fair judgment, care and prudence would take and keep in consideration in the matter of a loan of his own moneys; and likewise to take all lawful prudent means with a fair degree of promptness to recover the debt, and prevent a loss coming to the estate. In re Butler, 1 Connolly, 59-65 (Sur. R).

I am of the opinion that the purchase of the mortgage -by the trustee was an improper investment of the trust fund; also that there was a lack of that care and watchfulness required of a trustee under the circumstances in looking after the investment after it had been made, and in taking all prudent means to prevent a loss to the estate, and that the trustee should be charged with the Dodds mortgage investment $4,688 at 5 per cent, less the amount received by him and credited in his account.

The reasons for these conclusions may be briefly stated as follows : e.

The value of the fárm in 1883, as fixed by the only witnesses whose testimony is entitled to any credit, either for their knowledge of the subject or the credibility of their statement, is placed at between $6,000 and $7,000. All concede that the land was then (1883) depreciating in value year by year, and had been for several years prior to that time. These witnesses, it must be rememberer, are the witnesses called by the trustee, and were his friends and neighbors for the most part, one of them being a relative. Several of them live very remote from the farm, and had no knowledge upon the subject. It was the privilege of the trustee to call persons from the immediate vicinity of the farm, whose knowledge would have entitled their opinion to much greater weight, if he desired to emphasize that portion of the testimony pertaining to the value of the farm at the time of the investment.

I am satisfied that the fair value of the farm at the time of the investment was not to exceed $5,000; $6,000 at the outside; and even at that time that a forced sale would not have realized the-amount of the mortgage with its arrears of interest and costs (which would have equalled $5,000) had it been sold during that year. At any rate the margin, assuming it to be worth $6,000 or $7,000, was far too narrow, considering the question of value alone where property is depreciating in value, to make it a safe and proper investment of the fund. To this must be added the fact, in considering the propriety of the investment, that the intent was in arrears $200 for the year 1882, a fact well known to the trustee, since it was one of the assets of the estate.

The trustee testifies that the mortgagor promised to pay interest upon interest, which he never did, showing an early intention to maintain an arrearage of interest. That this arrearage was not exceptional is shown by the fact that on the next April, 1884, the mortgagor only paid the sum of $155, and so continued, with one-exception only, in paying much less than the current interest, without any attempt to pay arrears or prevent additional ones.

But if it be assumed that this investment as originally made could be justified under any construction of the law applicable to the facts in this case, the next question arises is, was the conduct of the trustee subsequent to the making of the investment, such as would exonerate him from liability for the loss which it is can-ceded has occurred in this case. In other words, did he exercise that diligence and care over the investment after it has been made by inquiring into the depreciation of the property, enforcing the payment of interest inquiring into the responsibility of the mortgagor, and taking all such lawful means with reasonable promptness to recover the debt and prevent loss to the estate, which a man of fair judgment, reasonable care and prudence would take under such circumstances in the management of his own investment.

It cannot be doubted but that the trustee, knowing when he-made the investment that interest was in arrear and real estate depreciating, was called upon in the discharge of his duty to be watchful, and if a mistake had been made in making the investment to see that the estate suffered as little loss as possible through his error of judgment. Five hundred dollars was due each year upon the principal sum.

And it seems to me clear that it was the duty of the trustee-(upon ascertaining at the beginning of the year 1884 that the mortgagor was unwilling to pay more.than $155 interest) to have ascertained whether he was a man of any pecuniary responsibility so that his bond would furnish any security for the debt. And whether he was so or not, in any event, to have demanded at least the entire interest due, and such portion of the principal then due, in order that the amount might be reduced, for which the land was security, until the loan was within safe limits. He says he never asked to have the principal sum reduced, contenting himself with asking for interest and accepting less every year than the amount due during the current year, with one exception, and this with the knowledge that such property was depreciating in value constantly, and that every year the farm, from the method of farming employed, would probably bring less. A failure to take active measures under such circumstances to recover the money was culpable negligence, and it cannot, with any propriety, be said that he was taking such care of this investment as men in general of discretion and intelligence in such matters employ about their own affairs. In my judgment the loss has been occasioned by such want of care and diligence on the part of the trustee, first, in making the original investment of the fund, and second, in the failure to use such proper care, watchfulness and oversight and the adoption of such prompt means to prevent loss to the estate after the investment had been made as men in general of ordinary intelligence and prudence in such matters exercise in their own affairs; and I should fail in my duty if I suffered the loss to fall upon the fund and its beneficiary rather than upon the trustee.

There is still another consideration which has had great weight in determining the conclusion which I have reached in this matter, and that is this: Ample means were placed at the disposal of the truste'e with which to set up this trust. It was his duty as trustee to purchase as good securities as he was able, by the use of reasonable care and discretion and intelligence in the market, for the purposes of the trust. No duty devolved upon him in his character of executor to force an indifferent security upon the trust estate simply because it belonged to the decedent’s estate. Even if he felt a duty as executor to dispose of a doubtful security upon the best possible terms, it was his duty as trustee to resist the purchase for the trust estate of such doubtful security. If his two duties appeared to be conflicting, the law required him to decide promptly in favor of the trust estate; that is to say, that if any loss was likely to follow from the unmarketable condition of any of the securities of decedent’s estate, that it should fall upon that estate and not upon the trust fund.

It may be further stated that the executor had an interest as residuary legatee also, which would likely control his action and impel him to dispose of an indifferent security upon the best possible terms, since the less the depreciation occurring in the securities owned by the estate, the larger would be the residuary fund in which he was entitled to share. Besides that and the more important consideration, it appears that the executor and trustee was also a legatee in the sum of $5,000, and that he selected in payment of his legacy two securities, which were then and continued to be of undoubted value and safety, and turned over at the same time the only security which was indifferent or questionable, so far as it appears, to himself as trustee for the benefit of his unfortunate sister.

In my judgment the trustee should be held to the same responsibility as though he had gone outside of the estate and purchased the security in the market, and with full knowledge of all the facts, namely, that the interest upon the security was in arrear; that the mortgagor was an untidy farmer; that at most there was a very slender margin between the value of the property and the amount of the investment, either of which circumstances would greatly discredit it; even his own counsel testified upon the trials-that where “interest was going back it wasn’t the kind of an investment for a trust fund.” And I doubt whether if the executor, trustee and legatee had held the office of trustee alone, the security in question would ever have been seriously considered by him as an investment for the trust estate.

In addition, it appears in the supplemental account filed by the trustee that there was an arrearage of ground rent of $150 on this farm. What the amount of the rent per year was does not appear, and I shall not stop to consider now whether the lease was in effect a prior lien to the mortgage or whether the mortgage was a lien upon a leasehold estate; it is sufficient to say if it is the latter (a mortgage upon a leasehold estate) is utterly indefensible as an investment. Butler v. Jarvis, 51 Hun, 258; 21 N. Y. State Rep., 278.

And even if the ownership of the original title by another may be construed to be a prior lien or encumbrance it does not render the security less objectionable since it is an encumbrance which endangers the title and security of the mortgagee, and would be likely to result as it has done in this case in adding new burdens to the trust fund. In either event such an investment cannot be commended. I shall not stop to characterize, as I think it deserves, the general make-up and management of the investment of this trust fund, which consists of two mortgages, with accrued interest thereon, which accrued interest constitutes a part of the trust fund (and upon which it is not claimed that any interest was ever paid) in part, also of a note, on which there was two years of accrued interest, upon which note interest even was not paid until five years afterwards, and a balance, of money ($382) which was allowed to remain in the executor’s safe for a number of years without any attempt of investment, or without even depositing the same in the savings bank which he was at least temporarily authorized to do. The whole conduct of the estate in fine, has been characterized by loose, inefficient and improper management, and I shall hold for the purpose of this accounting that the trustee be charged with the sum of $6,000, which constitutes the trust fund with interest thereon from the time it was received by him, to be computed in the following manner, that he be credited with such interest as he has received on account thereof, and that he be then charged with interest for the balance of the time at five per cent. Let a decree in accordance herewith be presented.


author: Coleman, S.

text:
    In the Matter of the Judicial Settlement of the Estate of Thomas Champion, Deceased.

      (Surrogate’s Court, Orange County,

      Filed December 20, 1890.)

    I. Will—Construction—Devise.
    Testator died in 1889, his widow in 1890, and McO., legatee, in 1888. By the will the widow is given the use oí part, and the rents of the rest of the store, for her life, and then it reads: I give to D. the first refusal to rent my store at $30 per month during my wife’s life, and upon her death D. to have first opportunity to purchase said store at such an amount as will pay the mortgage on it, and legacies of $1,000 to McC., $300 to S., $500 to C. and $300 to K. In case D. should not elect to buy said store, my executor is to sell the same, and out of the proceeds pay the mortgage and legacies, and pay over the balance together with all residuary as follows: $1,000 to D., and divide the balance equally among McC., 8., C. and K. Held, that the provision that D. may purchase the property is not a devise to him of the land charged with the various sums to be paid from the proceeds of the sale, and therefore he is not entitled to the lapsed legacy of McC., but that lapsed legacies should pass under the provision relating to the “residuary,” under which D. would take $1,000, if there shall be sufficient remaining upon that settlement.
    S. Same—Interest on legacies.
    Under such will, if D. concludes to purchase the store, the sale to him must relate back to the death of the widow, and he will therefore be entitled to the rents and use from that time and ^should pay interest on the legacies from the same time.
    Thomas Champion, the testator, died August 21, 1889, his widow died in July, 1890, and Mary McCutcheon, the legatee, died October 13, 1888.
    By the will the widow was given the use of part, and the rents of the rest, of the store building during her life; the will then reads:
    “ Third. I give to John Donohue the first refusal to rent my said store, No. 120 Broadway, at thirty dollars per month during the life time of my wife and upon her death the said John Donohue is to have the first opportunity to purchase my said real estate * * * from my executor at such an amount as will pay the mortgage now existing thereon and the following legacies, viz. : $1,000 to Mary McCutcheon, wife of David McCutcheon $300 to Susan Dolan ; $500 to Richard Champion and $300 to Katie Dowd. But in case said John Donohue should not elect to buy said property on said terms or live to buy the same after the death of my wife, then my executor * * * is hereby empowered * * * to sell said property at public sale * * * and out of the proceeds pay the mortgage and legacies aforesaid and pay over and dispose of the balance together with all residuary as follows: to John Donohue the sum of $1,000, and divide the balance equally among Mary McCutcheon, Susan Dolan, Richard Champion and Katie Dowd, to whom I hereby bequeath the same.

      L. S. Sterrit, for exe’r; W. D. Dickey, for John Donohue; N. J. Fowler, for representatives of Mary McCutcheon, deceased.
   Coleman, S.

—Mary McCutcheon having died before the testator, and not being “ a child or other descendant,” the legacy of $1,000 to her lapsed. Van Beuren v. Dash, 30 N. Y., 393; Matter of Wells, 113 id., 396; 22 N. Y. State Rep., 717.

This being so, it is claimed on behalf of John Donohue, that under the will his relation to the property is that of a devisee and that the legacy to Mary McCutcheon, having lapsed, sinks into the land to his benefit.

. The provision that John Donohue may purchase the property is not a devise to him of the land charged with the various sums to be paid from the proceeds of the sale but is simply a beneficial right or privilege, which he can only receive by becoming a purchaser upon the terms prescribed by the will. By the will he is given the “first opportunity ” to purchase the property “ from my executors at such amount as will pay ” the mortgage and legacies.

In order to become the owner of the property he must take a deed for it from the executors and his title to the property will be by the deed and not by the will. As purchaser he has no connection with the disposition of the proceeds of the sale. For these reasons I do not think he takes under the will a beneficial gift of the property charged with the payment of the mortgage and legacies mentioned; if it were so then he would be entitled to the lapsed legacy to Mary McCutcheon. Matter of Smith, 33 N. Y. State Rep., 586. I therefore conclude that if he wishes to purchase the property the consideration will be the amount of the mortgage plus the total of the amounts of the four legacies. 1 am however, of the opinion that John Donohue is entitled to receive this $1,000 as a residuary legatee, if there shall be that amount in the residue upon this settlement

The testator directs a sale to be made of this property; first, to Donohue, if he wants it; if not, then at public sale. A direction to sell real estate does not always- operate as a conversion into personalty, as the expression is “out and out;”as where it is done to effect a gift of personalty where the gift of realty would have been void, Arnold v. Chapman, 1 Ves. Sr., 108, or where it is directed to be sold to produce a fund out of which to pay certain legacies, some of which lapsing, or failing for any cause, thereby, to that extent, disappointing the purpose of the will. Cruse v. Banson, 3 P. Wm., 20; Gravenor v. Hallum, 1 Amb. R., 643.

However, when the sale is made for the general purposes of the will, the residue included, the direction to sell operates as a conversion into personalty. Durour v. Motteux, 1 Ves. Sr., 320; Moncrief v. Ross, 50 N. Y., 431. I think it is fairly clear that such was the intention of the testator and that lapsed legacies, if any, should pass under the provision relating to the “residuary.” For the following reasons, this property constituted substantially the whole of the testator’s estate. Any residuary estate he would have must come in some way from this property. He clearly intended to give Donohue something more than the mere right to become the owner of the property. First he was given the use of the store at a rental which the testator -evidently considered favorable; next, at the death of the testator’s widow, lie was given the'privilege of buying on terms also evidently considered‘favorable, and finally, if he did hot buy either because he was too young or did not wish 'to, then, after the payment of the mortgage and the legacies mentioned, he was to receive $1,000, to be paid from what was left of the proceeds of the-sale, tl together with all residuary.” If anything was still left it-was to be equally divided among the persons mentioned. Donohue’s right to this $1,000 does not necessarily depend upon a sale: had in consequence of his refusal to buy, for by the terms of the-will it could not only be paid from the balance of the proceeds of such a sale, but from “ all residuary.” In other words, the testator evidently at this point in his will intended to dispose not only of the proceeds of that sale but also to make a complete and final disposition of the residue of his estate, whatever it might consist of.

As to the time from which the legacies to be paid from the sale-of the real estate draw interest, no time for their payment is expressed in the will. From the connection in which they are mentioned it is evident the testator did not intend they should be paid until after the death of his wife and after the sale of the property. Donohue has a reasonable time within which to determine whether he will purchase the property. If he concludes to buy, then the sale to him must relate back to the death of the widow, for there is no other disposition of the property in the meantime. He will, therefore, be entitled to the rents and use from that time, and should pay interest on the legacies from the same time.


text:
    In the Matter of the Collateral Tax on the Estate of Sarah M. Hulse, Deceased.

      (Surrogate’s Court, Orange County,

      Filed December 20, 1890.)

    Collateral inheritance tax—Legacy given as a payment.
    Where a testatrix by her will gives all her property to her nephew H.,. “ in consideration of a home for me at his house during my life,” and her nephew provides for her during her life, the property given to him by the will as a legacy is really in satisfaction of a claim which he might enforce as a creditor against the testatrix’s estate, and is a payment and not a gift,, and, therefore, not subject to the collateral inheritance tax.

      F. H. Cassidy, for Charles H. Tuthill, executor.
   Coleman, S.

—The testatrix, by her will, gives all her property to her nephew Jesse Hulse, “ in consideration of a home for me at his house during my life.” At the time of the execution of the will, it was agreed between them that the aunt should so make her will, and that the nephew should provide for her during her life. Both have done as they agreed, and the question now arises whether the fund, about $1,400, which he is to receive, is-subject to the collateral inheritance tax. Although the property is given to him as a legacy, he is really to receive it in satisfaction of a claim, which he might enforce as a creditor against the estate of the deceased. There was evidently no purpose by the_parties to avoid the operation of this act, and there is no question but what the property which was to be given the nephew as a consid-

eration for the obligation ássumed by him, was not more, under the circumstances, than a reasonable compensation. I, therefore, conclude that the property, to be received by Jesse Hulse, is a payment and not a gift (Matter of Rogers, 30 N. Y. State Rep., 943), and is not subject to this tax.


author: Hatch, J.

text:
    Anthony Schmidt, App’lt, v. Edward Barry, Resp’t

      (Superior Court of Buffalo, General Term,

      Filed June 16, 1891.)

    Execution—Sale—Void when notices ake imfboferly posted.
    A sale of personal property, levied under an execution, is void, where the notices of such sale are posted in one town, and the sale takes place in another, in violation of Code Civ. Pro., § 3029.
    Appeal from the municipal court of Buffalo.

      F. R March, for app’lt; no appearance for resp’t .
   Hatch, J.

—The action is replevin to recover possession of a buggy. Upon the trial it appeared that one Steinmiller had recovered a judgment in the municipal court against plaintiff, upon which execution was issued and placed in the hands of a constable. At the request of Steinmiller, the constable went with him to the residence of plaintiff in the town of Amherst and there levied upon the buggy and removed it to the house of Ambrose, at the corner of Delaware avenue and Main street, in the city of Buffalo, and advertised it for sale at that place. On the day of sale the property was bid in by Steinmiller, for the amount due upon his judgment, who thereupon took possession of the same and subsequently sold it to the defendant herein.

Plaintiff paid the amount due upon _ the execution about the time of the sale to the constable’s wife by a prior arrangement made with him, but before he saw the constable the sale had taken place and Steinmiller had left with the property. Thereafter plaintiff found the property in the possession of defendant, from whom he demanded it, and upon his refusal to deliver it, brought this action. As the case now stands plaintiff has paid the judgment and been deprived of his property. The residence of plaintiff was in the town of Amherst, and it was there that the levy was made. The command of the statute to the constable after levy made is to “immediately post conspicuously, in at least three public places of the * * * town, in which the property was taken, written or printed notices signed by him, describing the property, and specifying the place, within the same * * * town, where, and the time, not less than six days after the posting, when it will be exposed for sale.” Code Civ. Pro., § 3029.

The evidence shows that there was an utter disregard of this statute. Ho notices were posted in the town where the levy was made, nor was the property sold therein. In violation of the statute the constable proceeded to post notices in the city of Buffalo, and to sell the property therein. For this proceeding no warrant in law is found; the sale was void, and the purchaser took no title.

SteinmiUer had notice of' the levy, where and' when made, and the place of sale; consequently he was chargeable with knowledge that he took no title. Earle v. Willard, 5 N. Y. W. Dig., 155; Crocker on Sheriffs, § 1085.

There being no title to the property in SteinmiUer he could convey none.

The judgment is reversed, with costs.

Beckwith, Ch. J., and Titus, J., concur.


text:
    Joseph Bohn et al., App’lts, v. Albert C. Hatch, Resp’t

      (Superior Court of Buffalo, General Term,

      Filed June 16, 1891.)

    . 1. Equitable estate—How established—License .
    Where the owner of a lot was asked by plaintiff if he would let him “put that little house on it,” and he replied, “ yes, sir, go and put it on, and leave it there as long as you are a mind to," and the house, small and of little value, was moved upon the land and placed on piles driven in fhe ground, Held, that these circumstances wete much too frail to base a claim of equitable right upon.
    2. Same—Agent with foweb to sell—No authobity to cbeate.
    An agent having written authority to take charge of land, coupled with the power to sell, has not the right to create an equitable estate in the land. The right to give such an estate can only he inferred from clear proof, either of power delegated or of subsequent ratification.
    8. Landlobd and tenant—Denying title of landlobd—Estoppel.
    A tenant is estopped from denying the title of the landlord and those claiming under him, even though the lease itself shows, upon its face, that the landlord has no legal estate.
    4. Same—Equitable bight.
    Before a tenant can be heard to assert an equitable right existing prior to the execution of the lease he must surrender possession to the landlord.
    Appeal from a judgment entered herein in favor of defendant dismissing plaintiffs’ complaint, with costs.
    . YThen the action was brought Henry Zink was joined as defendant ; he having died, the action was continued against the present defendant as survivor.

      O. C. De Witt, for app’lts ; E. L. Parker, for resp’t.
   Hatch, J.

—This action was brought to obtain an injunction restraining defendant from the prosecution of summary proceedings for the removal of plaintiffs from certain premises occupied by them, and to also have adjudged their equitable rights therein. The complaint alleges that in 1865 Jessie Peek was the owner in fee and possessed of said premises; that in that year said Peck-gave possession and license to Joseph Bohn to enter into possession of said premises and to use and occupy the same, forever, or so long as he might desire, and to erect thereon dwellings and buildings for his use and benefit; that said Peck did then and there surrender, to said Bohn, his interest and possession to said property. Said complaint then proceeds to allege that thereafter entry was made under said license; that buildings were erected thereon of the value of $1,000; that said lot was filled up and otherwise improved, said buildings repaired from time to time, and taxes assessed thereon paid; that said Bohn has continued in the uninterrupted possession since 1866, and with his wife Catherine since 1876, of said premises. The complaint further alleges the institution of summary proceedings in the municipal court of Buffalo for the removal of plaintiffs from the premises for nonpayment of rent, the entry of judgment in favor of defendant, the entry of final order granting defendant the right of possession, also the institution of another proceeding to oust plaintiffs of possession, etc., and prays injunction, etc. So far as the allegations of the complaint are concerned, the right and title of the plaintiffs in and to the premises rests upon the license obtained from Jessie Peck; giving full force thereto it would amount to.a mere nude pact, unless the improvements made were permanent and beneficial to the estate, and were so made upon the strength, and induced by the license conferred and with the knowledge of the licensor. Under such circumstances an equitable consideration would be established, and equity will protect the license therein. Freeman v. Freeman, 43 N. Y., 34; Miller v. Ball, 64 id., 286.

The theory upon which this right is protected is that to allow the assertion of the legal claim would operate as a fraud upon the person asserting the equitable right. This power is in derogation of the common law and the Statute of Frauds, consequently the courts are cautious in its exercise and a clear case is required. It is said by Danforth, J.: “And first, the contract which equity will regard as equivalent to the grant required at common law or by the statute must be a complete and sufficient contract, founded not only on a valuable consideration, but its terms defined by satisfactory proof and accompanied by acts of part performance unequivocally referable to the supposed agreement. In such a case the application of the statute is withheld lest, by its interposition, the mischief would be encouraged which the legislature intended to prevent.” Wiseman v. Lucksinger, 84 N. Y., 38; Cronkhite v. Cronkhite, 94 id., 323 ; Fargis v. Walton, 107 id., 398; 12 N. Y. State Rep., 60.

When the entry, and acts under it, fail of complete and satisfac- ' tory establishment, it becomes a mere license and revocable at pleasure. See cases cited, and Duryee v. Mayor, 96 N. Y., 498 ; Ogsbury v. Ogsbury, 115 id., 295 ; 26 N. Y. State Rep., 351.

The facts relied upon to support plaintiff’s claim are brief. It is stated by plaintiff that he asked Jessie Peck, whom he heard was the owner of the lot, “ if he wouldn’t let me put that little house on it. He said yes, sir, go and put it on, and leaAre it there as long as you are a mind to. And I put it on.” Again being recalled he says: “At the time I moved my house over, I saw Jessie Peck ; he said right in the house, previous to going on, -fill up the hole, the rest of it; I will give you that place for nothing to live on it. He said fill it up. He said he would give it to me. _ I understood he owned it.”

Gr. W. Peck testified that his father, Jesse, gave plaintiff the privilege óf moving the house on to the lot. This is all the testimony as to the license. Taking .the first statement of plaintiff the testimony of ..Gr,* W. Peck* giving,to it the most favorable construction, and it fails to support the allegations of the- complaint At the most it was. a bare naked license, revocable at any moment It provided for no length of time; did not contemplate the making of'any improvement, and authorized, none. The house moved; on was small, of little value, and was placed ■ on piles driven in the ground. It was in no sense a permanent structure in the eye of the law. These circumstances are much too frail upon which to- base a claim of equitable right, for such right must be clear, definite and inconsistent with the theory of a mere license. Ogsbury v. Ogsbury, supra.

When plaintiff was recalled he passed far beyond' the allegation of the complaint, and the theory of a license, planting himself upon a gift, and not alone that, but a right secured by contract, coupled with a valuable consideration, for in addition to the testimony already quoted, he said Peck told him to fill up the hole. “ If you do a good job I will give you a portion of it, what you occupy now.” “ The other part was south from me.” Up to this point the theory of the trial had been in accordance with the allegation of the complaint, that plaintiff entered under the license, and although this testimony was given, such theory does not seem to have been changed, there was no amendment of the complaint, none was asked for, yet the court below, in disposing of the case, considered it, upon the basis of this testimony, and counsel for plaintiff now insist upon it. In view of the theory of the action that this right rests solely upon the statement of plaintiff, and that Jessie Peck is dead, it is extremely doubtful if this testimony alone would support a finding of equitable right in the plaintiff to the property, taking into consideration his previous testimony defining the authority under which he entered and the other circumstances. It is not necessary however in the view taken of the other facts to determine this question. A careful examination of all the testimony fails to show that Jessie Peck was ever in fact the owner of the property; indeed plaintiffs do not claim that he had the legal title. The position now taken is that Jessie Peck was the agent of Francis and Charles Peck, who resided in California, and that he had the control and management of the property, and therefore was authorized to allow the entry, and thus create the right. There is no testimony showing that Charles and Francis, or either of them, ever expressly conferred power upon Jessie to allow the entry, or that they ever in fact had notice of it or ratified it; the only basis upon which it rests is found in the circumstances, showing Jessie’s actions in connection therewith. The circumstances are that Jessie Peck had formerly owned some land adjoining that in question which he had deeded to the railroad; that he and one James Sloan had business relations together; that said Sloan was the owner of these premises, and on January 15, 1858, deeded the same to Charles and Francis Peck, who then resided, and have since continued, in the state of California; that the latter never had manual possession of the property; that said premises for a time were assessed for taxation to Jessie Peck, and that he exercised acts of control and ownership over them.

John Auchinvole, who was sworn, had heard that Jessie Peck had purchased the property about 1865; that he claimed to own it ana had bought it as. an investment. If we give due weight to all the circumstances, I think they fall short of establishing any right in Jessie Peck to diyest the real owners of title to their property or to create therein a life interest in favor of Bohn. The deed from Sloan to the Peck boys was recorded, and consequently was constructive notice to Bohn, in whom the legal title vested, and were was in fact the owners, so nó rights can be predicated upon Peck’s claiming to be owner. Ho reason is assigned or disclosed for taking title to the boys, for the benefit of Peck, there is nothing strange or unusual about it; the fact that they lived in California does not of itself prove anything, as titles .are frequently held by non-residents.

The deed should have put Bohn on inquiry as to who were the owners, and such inquiry would at once have disclosed that Jessie Peck had no title, and in consequence could create no interest in the estate without express authority. If Jessie Peck had written authority to take charge of the land, coupled with the power to sell, it would have given him no right to have created the •estate here contended for. Rossiter v. Rossiter, 8 Wend., 495; Bumstead v. Hoadley, 11 Hun, 487 ; Craighead v. Peterson, 72 N. Y., 279.

The granting of this right was the exercise of the power conferred by ownership ; to infer the existence of such power from the -circumstances now before us, would render titles to land in the hands of an agent of very uncertain tenure. The right to make the grant or give the-estate can only be inferred upon clear proof either of power delegated or of subsequent ratification. It cannot be supported upon a basis of inference, unless such inference be a necessary one and inconsistent with any other theory arising from the facts. The facts here proven are insufficient to support the claim. In addition to this, it is quite evident that Bohn thought that the title under which he held was precarious, for in 1873 he attempted to reinforce his holding by bidding the property off at a tax sale, for taxes accruing in 1871, about five years after the entry. He sought this method for the purpose of perfecting title. If he held under a license for life such act could not be defended, for by it he sought to defeat the reversion after" his estate had ceased.

Similar attempts were made subsequently to accomplish the same purpose, but it is not now claimed that they created any legal estate in Bohn; it simply characterized his possession, as will be hereafter noticed. This attempt to obtain a tax title, weakens very seriously the testimony and circumstances upon which he relies to maintain his present position. Claim is further made that the premises wore never a part of the land owned by the Pecks, but that it has been reclaimed from Scajaquada creek. This land is a part of what was formerly known as the Parish tract, and by the deed in evidence from Parish to Porter, its southerly boundary was the creek. When Bohn went into possession, such solid land as he occupied was bounded by the creek, and Bohn simply filled it in. He could obtain no greater right in the premises than the Pecks had. They had the right to fill the same portion of the creek that Bohn filled, and, when filled, it would become a part of the estate. They were then the rijrarian owners of the land, and had'the right to reclaim it from the creek. Smith v. The City of Rochester, 92 N. Y., 463; Chenango Bridge Co. v. Paige, 83 id., 178; Seneca Nation of Indians v. Knight, 23 id., 498. Plaintiffs- are, therefore, not aided by this consideration.

If, however, the claim of plaintiffs to equitable relief growing out of the license granted by Jessie Peck be conceded, there still remains an insuperable bar to granting it in this action under the facts of this case. In 1875 Bohn leased by writing, under seal, these premises of one G-. D. W. Clinton for the term of three years. In summary proceedings instituted in the municipal court of Buffalo, judgment was rendered establishing such lease as a lease between said parties. In that proceeding defendant showed himself to have succeeded to all the interest of Clinton, and to have become possessed of the legal title by conveyance and assignment from James D. Clinton, the survivor of G\’D. W. Clinton, and also the grantee named in the conveyance from Francis and Charles Peck of the premises in dispute. Judgment was entered therein adjudging plaintiffs in default for non-payment of rent, and directing warrant to issue placing defendant in possession. On appeal, that judgment was affirmed by this court. Zink v. Bohn, 3 N. Y. Supp., 4.

This judgment conclusively establishes that from 1875, plaintiffs have occupied these premises as tenants under the lease, and, in consequence, they are estopped from denying the title of the landlord, and those claiming under him. Woodruff v. Erie Ry. Co., 93 N. Y., 618; Ackley v. Westervelt, 86 id., 448; Territt v. Gowenhoven, 79 id., 400. And this result obtains, even though the lease itself shows, upon its face, that the landlord had no legal estate. Tilyou v. Reynolds, 108 N. Y., 558; 13 N. Y. State Rep., 85_ _

_ _ It is claimed that as Bohn was in possession of the premises at the time of the execution of the lease, he took no rights thereunder, and consequently is exempted from -the operation of the foregoing rule; that the lease is void for want of consideration. ¡No such distinction is recognized in the cases cited, and their reasoning excludes it; besides it has been expressly, condemned. Prevot v. Lawrence, 51 N. Y., 222; McCreary v. Marston, 56 Cal., 403 ; Hawes v. Shaw, 100 Mass., 187.

At the time of the execution of this lease Jessie Peck was alive. It was, therefore, within the power of Bohn to have established all his rights to the property. If he had refused to execute, it was equally within the power of Clinton to have taken proceedings to dispossess him and show by Peck that he had no right. Bohn at this time had attempted to make tax title to the property, and, according to the testimony of his wife, he was willing to make a lease to defendant after he had succeeded to title, but she objected. Both Peck and Clinton are now dead, and Bohn asserts this right These suggestions make clear the wisdom of the law which enforces the estoppel. Before the tenant can be heard to assert an' equitable right, existing prior to the execution of the lease, he must surrender possession to his landlord. Whiting v. Edmunds, 94 N. Y., 314.

In all the cases that have fallen under my observation, where the tenant is held to have the right to attack the lease, equities arose subsequent to the letting, as where the landlord’s title becomes extinguished, as in Hetzel v. Barber, 69 N. Y., 1-15, or where the lease, valid in form, is shown to be void by' some extraneous circumstances, as in People v. Howlett, 76 N. Y., 574. But no case is found allowing a defense of prior rights where the relation of landlord and tenant was once established, and the tenant continued to occupy thereunder. Itis also claimed that Bohn occupied under his tax deed at the time of the execution of the lease. But such deed gave him no right of property or title therein, as is conceded; consequently he could not hold possession by virtue of something which gave him no rights; besides, this right, if any existed, was prior to the execution of the lease. The only excuse for this lengthy discussion grows out of the earnest insistence that plaintiff’s equitable rights have not been protected. Care has thus been taken to examine all the points raised. We are unable to find that the trial court denied any right within its power to grant. The judgment appealed from is, therefore, affirmed.

Titus, J., concurs.


author: Titus, J.

text:
    Arthur E. Strong, by guardian ad litem, Resp’t, v. Oliver A. Jenkins, App’lt.

      (Superior Court of Buffalo, General Term,

      Filed June 16, 1891.)

    Infant plaintiff — Guardian ad litem—Proof of appointment — When objection made.
    It is not necessary to prove on a trial that a guardian ad litem has been appointed for the infant plaintiff, unless the defendant objects that no such appointment has been made, and if such objection is not then made, it cannot be afterwards raised on appeal.
    Appeal from municipal court.
    The court granted a nonsuit as to one defendant, and rendered judgment against the other, who appeals.

      Brown & Sells, for resp’t; Frank M. Loomis, for app’lt.
   Titus, J.

—This action was commenced in the municipal court by the plaintiff against Oliver A. Jenkins and Andrew J. Kurtz for unlawfully taking money belonging to the plaintiff. It appears from the undisputed testimony that the plaintiff was the owner of certain household furniture in the hotel formerly known as the “Huron House.”

That one James Willis had a chattel mortgage on a portion of the furniture and before the commencement of this action assigned his interest in the claim against the defendant to the plaintiff; the defendant Andrew J. Kurtz had obtained a judgment against Priscilla Strong, mother of the plaintiff, and an execution issued to the sheriff, Oliver A. Jenkins, in the usual form. On the 28th •day of April, 1890, the plaintiff, proceeded to sell the property at auction, apd after thp sale hacl, commenced, the sheriff, by-one of his, deputies, appeai;ed| with an execution against Priscilla Strong, in favor of the defendant, Andrew J. Kurtz, and took possession of the box in, which the proceeds of- the sale were. kept. The sale was continupd, by the auctioneer, and the proceeds put in the box, from which the, sheriff took out $208.07. The plaintiff was not present during the sale.

The, sheriff paid over, this sum to Mr. Loomis, counsel for Kuytz, and by him it was paid to Kurtz and applied on the execution against Mrs. Strong. No, evidence was. offered on behalf of the defendant. After a long direct and cross examination of the auctioneer, the defendant’s counsel offered to show all the facts apd circumstances connected with the taking of the money by the, sheriff, and the court refused to allow further examination ■on that point, After the plaintiff rested his, case the defendant moved for a nonsuit as to both defendants, Jenkins and Kurtz. The court granted the motion as to Kurtz, but denied- it as to defendant Jenkins.

It appears from the return that M. Fillmore Brown was duly .appointed guardian ad litem for the plaintiff, who was an infant, before the commencement of the action, but no formal proof of that fact was made on the trial. The defendant claims on this appeal that proof of the appointment of the guardian should have been made on the trial, and that his motion for a nonsuit should haye been granted. No objection was made on the trial -or on the motion for a nonsuit that no guardian had been appointed, except such as is implied in the motion itself.

The only interest the defendant has in the appointment of a guardian for an infant plaintiff is that he be a person able, or rather of sufficient ability to respond to him for costs, in case the infant is called upon to pay. It is not necessary to make proof ■of the appointment of- the guardian unless the defendant objects that no guardian has been appointed, who will answer- for costs. No objection was taken on the trial, and even if no guardian had been appointed and, the defendant had gone to trial without objection, it would not be ground of reversal. Schermerhorn v. Jenkins, 7 Johns., 373 ; Treadwell v. Bruder, 3 E. D. Smith, 597.

It appears from the return that a guardian was appointed, and the defendant is protected in contemplation of law, and it is now too late to raise to'raise the objection. Donohue v. Henry, 4 E. D. Smith, 162.

The defendant also claims that error was committed by the ■court in refusing to allow a further cross-examination of the auctioneer. We do not think any error was committed by the court in refusing to allow a further cross-examination upon an immaterial matter. The defendant, through his deputies, who were -called as, witnesses on the trial, admitted that he took the money, and that he paid it over to his present counsel, Mr. Loomis, in satisfaction of the Kurtz execution. The evidence is undisputed that -the property belonged to the plaintiff, and the defendant had no right to take it or the proceeds of the sale to satisfy a judgment against Mrs. Strong.

It can make no difference so far as the legal aspect of the case is concerned, how the defendant got possession of the proceeds of the sale, when, as it appears, the plaintiff was not present consenting ; it is sufficient that he took the money without any authority and applied it in satisfaction of an execution against another person.

We think the judgment should be affirmed, with costs.

Beckwith, Oh. J., and Hatch, J., concur.


text:
    Charles H. Woodard, Pl’ff, v. The Holland Medicine Company et al., Def’ts.

      (Superior Court of Buffalo, General Term,

      Filed June 16, 1891.)

    1. Corporation—Complaint in action against—Demurrer.
    In an action on a judgment against a domestic corporation, the complaint united two causes of action, the sequestration of the property of the corporation, and that the defendants, as stockholders of the company, be charged individually with the payment of the judgment. Held, that the two causes of action were properly united.
    2. Same—Limitation op action—Must be pleaded.
    The fact that such action was not brought against the defendant corporation within one year, as provided in Laws 1884 ch. 40, § 24, is matter which the defendant must plead in his answer. It is not necessary for the complaint to negative the defense.
    :3. Same—Sufficiency op allegation of complaint.
    Plaintiff alleged in his complaint “that as plaintiff is informed and verily believes, only a small portion of said stock has been paid off.” Held, a sufficient allegation that the capital stock of the corporation had not been paid off in full, within §§ 481 and 524 of the Code of Civil Procedure.
    4. Same—One creditor may bring action.
    Such an action may be maintained by one creditor of the corporation without joining other creditors as parties plaintiff or stating that it is for their benefit, under §§ 1784 and 1793 of the Code of Civil Procedure.
    5. Same—Action on judgment—Allegations of complaint.
    In such an action it is not necessary to state in the complaint the facts upon which the judgment was obtained, showing that at the time of the commencement of the action plaintiff had a cause of action against the corporation.
    Demurrer to complaint

      Le Roy Parker, for pl’ff; Charles B. Wheeler, for def’ts.
   Titus, J.

—This action is brought by the plaintiff against the defendants, as stockholders of the Holland Medicine Company, to enforce the payment of a judgment obtained by the plaintiff against that corporation.

The plaintiff asks that the property of the defendant, the Holland Medicine Company, be sequestrated and the proceeds thereof be distributed among its fair and honest creditors agreeably to law. The action appears to have been brought under § 1784 of the Code of Civil Procedure. The title in which this section is found and the following one relate to actions to dissolve corporations and to enforce individual liability of the officers and members, with or without a dissolution thereof, and is a substantial re-enactment of the provisions of the Revised Statutes relating to that subject. _ Art. 2, tit. 4, chap. 8, of part 3, Revised Statutes. Section 1784 provides: “ Where final judgment for a sum of money has been rendered against a corporation created by or under the laws of the state, and an execution issued thereupon to the sheriff of the-county where the corporation transacts its general business, or where its principal office is located, has been returned wholly or partly unsatisfied, the judgment creditor may maintain an action to procure a judgment sequestrating the property of the corporation and providing for the distribution thereof as prescribed in § 1793 of this act”

It appears from the complaint that on the 4th day of June, 1890, a judgment was rendered in the superior court of Buffalo-in favor of the plaintiff and against the defendant,- a domestic corporation duly, organized under and by virtue of chap. 40'of the Laws of 1848, and doing business in the city of Buffalo, for the sum of $778.01, damages and costs, for breach of a contract entered into between the plaintiff and said corporation; that the judgment roll was filed in the office of the clerk, and an execution issued to the sheriff of Brie county, where the business of the-corporation was transacted, and by him returned wholly unsatisfied. The plaintiff further alleges that the capital stock of the corporation is $200,000, but that a small portion of the stock of the capital has been paid in by the stockholders, the exact amount remaining unpaid being unknown to the plaintiff, and that the defendants are all stockholders of the corporation.

Thé defendants demur to the complaint, and state several grounds, among others that the plaintiff has improperly united two causes of action, asking for the sequestration of the property, and that the defendants as stockholders of the company be. charged individually with the payment of the judgment set forth in the complaint. The plaintiff does, in fact, demand both reliefs, but the form of the relief demanded in the complaint is by no means controlling as to the character of the action. He may demand any relief he deems himself entitled to, and in an action in equity the court may grant such relief as from the facts he appears to be entitled to, without reference to his demand. Under the form of action stated in the complaint, the plaintiff, if he sustains his allegations with proof, would be entitled to a judgment-of sequestration of the property of the corporation, requiring the ■ defendants who are stockholders to -pay into the fund of the corporation the balance unpaid on the amount of stock held by them respectively. The defendant also claims that the plaintiff’s complaint states no cause of action against the stockholders of the corporation, and his particular objection is that the complaint does not state that the debt for which the judgment was obtained was not one payable within one year from the time it was contracted, and that the action was not brought within the time limited by the statute.

The fact, if it be a fact, that the action was not brought against the defendant corporation within one year is matter which the defendant must plead in his answer. The liability of stockholders is created by § 10 of the manufacturing act of 1848. . Section 24 ■ creates a limitation upon the right of a party to commence an action, but. like other limitations in the commencement of actions, the defendant must plead that fact if he desires to avail himself of it. ■ It is not necessary to allege that a cause of action is not within the statute of limitations, and as the complaint does not show affirmatively that the cause of action is within the limitation of the statute, it is not demurable.

The defendant claims further that there is no allegation in the complaint that the capital stock has not been paid in full. The plaintiff alleges “that as plaintiff is informed and verily believes, only a small portion of said stock has been paid up,” etc.

The criticism which the defendant’s counsel makes to this allegation is that it is not the allegation of a fact, but of the plaintiff’s belief, and that his belief is wholly immaterial. The plaintiff is required by § 481 of the Code to state in his complaint “ a plain and concise statement of the facts constituting each cause of action without unnecessary repetition,” but such facts may be stated upon information and belief. St. John v. Beers, 24 How. Pr., 377; N. Y. M. I. Works v. Smith, 4 Duer, 263.

The criticism of the counsel does not seem to be warranted. The plaintiff does not allege his belief, but the fact “ as he is informed and believes.” It is an allegation in effect upon information and belief, and, as has been stated, such a pleading is permissible. Section 524, Code of Civ. Pro.

The defendant further claims that this action is brought for the plaintiff’s sole benefit, and that such action cannot be maintained without joining other creditors, or stating in substance that the action is brought in behalf of himself and others similarly situated. This is distinctly an equity action to charge upon the defendants a liability existing in behalf of the plaintiff by reason of their failure as stockholders to pay the amount represented by stock and held by them to the company. It does not seem to be absolutely necessary that in an action of this kind all who are interested in the result of the action or in the distribution of the fund should be made parties. The statute under which this action is brought in general gives the court the power to appoint a re-' ceiver of the property of the corporation, and to restrain it, its trustees and managers, from collecting or receiving any debt, and the court may restrain creditors from bringing a multiplicity of actions against either the corporation or its stockholders.

Section 1784 provides that a creditor may bring an action, and by § 1793, it is provided that “a final judgment in an action brought against a corporation, as prescribed in this article, either separately or in conjunction with its stockholders, trustees or other officers, must provide for a just and fair distribution of the property of the corporation, and of the proceeds thereof, among its fair and honest creditors in the order and in the proportions prescribed by law in case of the voluntary dissolution of a corporation.” When a judgment has been obtained, the final decree must provide for a just and fair distribution of the property of the corporation “among its honest creditors, when all will share in the distribution of the property of the 'corporation, while the creditor bringing the action in fact brings it for the benefit of all the creditors of the corporation.

The Code does not require it to state that it is brought for the- , benefit of other creditors, and it was so held in Bartlett v. Drew,, 57 N. Y., 587, Reynolds, J., saying that the plaintiff might, bring in0 all of the creditors, but if the defendant had any of the assets of the corporation an action could be 'maintained against him alone,.without bringing in all of the parties to settle their equities. The final decree in an action by a creditor *is a decree not only for the benefit of the complainant in the suit, but also-for the benefit of all other creditors who may come in and prove their debts under the judgment. The plaintiff may make all of the stockholders parties and compel a contribution from all equal to the amount unpaid on the stock held by them respectively and have it divided among all of the creditors. Morgan v. New York & Albany Railroad Company, 10 Paige, 290.

’And so in Mann v. Pentz, 3 N. Y., 415, it was held that all of the creditors and all of the stockholders could be brought in and the amount owing from the stockholders paid into the fund of the corporation and by the court distributed to the parties entitled to it.

It is the rule in actions of this kind that whenever it becomes necessary to effect a complete settlement of the affairs of the parties interested, the court may at anytime before or after final judgment order such parties brought in, to the end that the whole matter in controversy may be determined. Morgan v. N. Y. & A. R. R. Co., supra; § 1807, Code Civ. Pro.

The plaintiff in this case in no event can recover more than his proportionate share of the assets of the corporation. The fund belongs to all of the creditors, and after judgment the rights of the creditors may be determined, as in case of voluntary bankruptcy. The case of Mathez v. Neidig, 72 N. Y., 100, cited by the defendant’s counsel, was an action at law against a stockholder to enforce individual liability, and the court held that such an action was not proper in that case; that the action should have been in equity against all of the stockholders and for an accounting and distribution of the funds among all of the creditors.

Grffiiths v. Mangan, was an action under the Revised Statutes by a creditor of a corporation against one of the stockholders, to recover a debt due from the corporation upon which judgment had been recovered, execution issued and returned unsatisfied. It' appeared on the trial that other stockholders had not paid their stock, and it was held that the action should have been brought in equity against all of the stockholders.

This is clearly an action brought in equity by the plaintiff for the benefit of all the creditors. While the complaint does not formally state that the action is prosecuted for the benefit of all the creditors similarly situated, the plaintiff in his prayer for relief asks that the property of the corporation be sequestered, and that a fair and just distribution thereof be made among its fair and honest creditors according to law, and to this relief under the statute he is entitled if there are other creditors of "the corporation; whether they have obtained judgments or not, they will be entitled to share in the distribution of the funds of the corporation, and a proper judgment will make suitable provision for the ascertaining and “payment of such creditors. Pfohl v. Simpson, 74 N. Y., 137; 9th Abb. N. C., 162, note; Kerr Bus. Corp., 371; Christensen v. Quintard, 22 W. Dig., 95.

The defendant further insists that irrespective of the foregoing considerations the plaintiff has stated no cause of action against the defendant stockholders. He claims that in addition to setting out the judgment, the issuing and return of the execution, that he should state in his complaint the facts upon which the judgment was obtained, showing that at the time of the commencement of the action he had a cause of action against the corporation. The statute under which the action is brought certainly does not require any such statement. It is that a final judgment shall have been rendered and execution issued to the sheriff of the county where the corporation transacts its general business, and the return by the sheriff of the execution wholly or partly unsatisfied. Then the creditor may maintain an action to procure a judgment sequestering the property of the corporation.

There does not seem to be any reason for stating the facts upon which the case of action arose, as it is a debt of the corporation. The corporation alone is interested in defending the original action. This action is commenced simply to reach the funds of the-corporation in the hands of the corporation.

In Hastings v. Drew, 76 N. Y., 9, the question here considered was fully discussed. The action was brought against the stockholders of the New Jersey Steam Navigation Company, after a judgment had been obtained against it and execution returned unsatisfied, to reach the assets of the company which had been obtained by the defendants by collusion. The court held»that the action was in the nature of a creditor’s bill to reach the property of the corporation in possession of the defendants and liable for its debts; that the judgment obtained against the corporation was conclusive against it and against the stockholders, provided they appropriated the property of the corporation to their own use. “ No reason exists,” says the court, “ why, where the action is brought to reach the property of the corporation which was subject to the lien of the judgment of the plaintiff and to apply the same to its payment and satisfaction, the judgment should not be at least prima facie evidence against the stockholders.”

In Stephens v. Fox, 83 N. Y., 313, the case is quite similar to the one before us. The action was brought by the assignee of a judgment against the New York & Oswego Midland Railroad Company and the defendant, as a stockholder of" the company, to recover an amount alleged to be unpaid upop. his stock. On the trial, to prove the indebtedness, the plaintiff offered in evidence the record of a judgment against the company. The court held, Judge Rapallo writing the opinion, that the plaintiff need not allege or prove the original indebtedness; that the action was not to impose a penalty upon the stockholders or any original liability, but simply to confer upon the creditor of the corporation.the right to pursue, for the satisfaction of his claim, the indebtedness of the stockholder to the corporation for his unpaid subscription to the capital. This .liability is not created.or enlarged; it rests upon .his contract with the corporation, and the creditor is simply subrogated to the claim of the corporation against the debtor. He may show such indebtedness by evidence which is binding and conclusive upon the corporation, and the judgment is the highest evidence against the corporation of such indebtedness.”

It seems, that where the action is for the purpose of collecting a debt due the corporation from the stockholder, either by reason of his not having paid the amount of his stock or by appropriation ■of the funds of the company, that the judgment is conclusive upon the stockholder; that it is simply an effort of the corporation through a creditor, to enforce the payment of its debts against its debtors, and it is only sufficient to that end, and to establish the fact that a debt is owing from the stockholder to the corporation.

The learned counsel for the defendant has cited a number of cases, Miller v. White, 50 N. Y., 137; McMahon v. Macy, 51 id., 155, and eases of that character, to establish the proposition claimed by him. From an examination of these cases they do not appear to have any bearing upon the facts of this case. In those cases the action was sought to be maintained against the stockholders for a violation of some statute or the omission of some corporate duty, such as to make and file its annual report, for which the statute imposes upon the stockholder as a penalty the liability to pay the debts of the corporation. In that class of cases it is sought to charge him for an original liability to the stockholder, and not to pay over to the corporation that which he justly owes it.

It is said by Eapallo, J., in Stephens v. Fox, that “ this class of cases depend upon an entirely different principle. The defendant is not pursued as a debtor to the corporation or for any pre-existing liability of his own, but upon an original liability created by the statute, and it is not in the power of the corporation to admit away his case or suffer a recovery which should be binding upon him and create as against him a liability to which he was not previously subject.” In such cases the plaintiff must allege and prove his original cause of action, because, being in the nature of a penalty, he is bound to show his right in all particulars to maintain the action.

This disposes of the questions raised by the defendant except his fifth point, and as that seems to be a logical conclusion from the statement of his other points, it does not seem to be necessary to discuss it, except to say that there is no misjoinder of parties; both the corporation and the stockholders are properly the defendants under the statute, as well as by the authorities which have been cited. It follows that the demurrer should be overruled, with leave to the defendant to answer on payment of costs.

Beckwith, Oh. J., and Hatch, J., concur. ■ ■